As Buffett would say, look for Value, Value, Value! And, Value abounds in our SA listed property sector right now.
What I’m getting at is the market has cut more than a R100 billion in value from the property sector. Calling it a complete bust. Thanks to margin pressure and rental reductions in office space. But that’s not the full picture. There’s plenty of properties performing well and making good money.
I’ve considered these three key measures and there are three property companies that come up trumps in each one…
1. Discount to Real value
2. It’s dividend yield
3. Its debt – loan to value ratio
Here’s a snapshot of the listed property I’m already buying and plan to buy more of when the time is right
Property Stock #1 – Octodec
There’s not a lot of companies that specifically invest in inner city properties. But Octodec (JSE:OCT) is one, and probably the largest one in South Africa.
The company’s portfolio totals at 1.5 million square meters of lettable area with a split between residential, office, retail and industrial. The company provides housing to students, government employees, bank and corporate employees in the two city CBDs.
Everywhere you have people living – they need to work, eat and shop as well. And that’s where the rest of Octodec’s property portfolio comes in. Plus, there’s the company’s ‘specialised’ properties – such as the Louis Pasteur Medical building, City Lodge and Anew hotels, auto dealerships, educational facilities and parking complexes.
But it’s the company’s numbers that make this opportunity so attractive!
Remember the value I talked about…
Octodec’s share price is at 953c – yet it paid 135c a share in dividends for 2023. That means a dividend yield of 14.16%! Imagine that! A nearly 15% return on a stock on dividends alone.
The company’s properties also have a net asset value of R24.24 per share – that means its share price trades at a discount to its real value of 60.68%.
Then there’s how much debt it has compared to the value of its properties: this has reduced from 39.2% in 2022 to 37.7% today. Lower debt means less interest, and more profits in the future!
Want to know when I’ll be buying this company, then make sure you’re reading Red Hot Penny Shares.
Property Stock #2 – SA Corporate Real Estate
SA Corporate Real Estate (JSE: SAC) is a relatively unknown property company on the JSE. While it has a R5 billion market cap, its 264c share price puts it in penny stock territory.
Historically, the stock’s price was in line with its net asset value. However today the share price is 264c while the net asset value is 417cps. That’s a whopping 37% discount to its real value.
The company’s rolling twelve month dividends also equal 22.57cps – meaning its dividend yield is 8.55%. It also paid dividends through the pandemic, despite many other real estate investment trusts opting to skip dividends to shareholders.
Currently the company’s Loan to Value ratio sits at 36.9%, down from 38.1% and well below the industry benchmark of around 40%. That means the company’s debt levels are conservative.
Property Stock #3 – Calgro M3
Calgro is like the Uber of real estate. It doesn’t have thousands of builders on its payroll. It doesn’t own a fleet of construction equipment that it needs to maintain. Yet it develops thousands of homes a year – on demand. And now it’s latest business venture – Memorial parks – is paying off.
The company’s memorial parks business is impressive. It sells a ‘final resting place’ for R36,000 – with an eight person ‘family plot’ going for as much as R370,000!
The stock currently trades at a PE ratio of only 2.48, and it has a net asset value per share of 950c – which is more than DOUBLE its current share price.
My Top listed property in 2024 – XXX
To get details on my #1 SA listed property, you’ll have to get my latest research report.
I’ve already sent it to my readers, so if you want the details, you need to act fast. This property company saw foot traffic at its shopping malls improve 10% year on year. It trades at a nearly 50% discount to the value of its properties and it pays a dividend of around 7%!
I expect its share price could easily recover to its high which means upside for you is 170%
Find out more about this opportunity before it’s too late. Get my latest report here.
The power of OPM revealed:
True, I’ve ignored rental, expenses and interest costs for this example. But you can still CLEARLY see that the smaller the amount of your own money you use when buying a property, the larger your overall return on investment will be.
In the next chapters I detail:
Four property investing strategies to suit your pocket.
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The above article is an excerpt from our free MoneyMorning report, How to start your own property empire with just R10,000 down.
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