Our opinion on the current state of CPP

3 Nov 2023

Collins (previously Tradehold) has "...a portfolio of more than 140 properties with a total gross lettable area of 1.6 million square metres. Of these properties, most are industrial, among them a number of major distribution centres and industrial complexes let on long-term triple-net leases to leading corporate clients. Collins also manages Tradehold’s Namibian portfolio consisting of a number of sought-after properties in that country’s main towns such as Windhoek, Walvis Bay and Gobabis". Tradehold was a real estate investment company in Southern Africa which is 48% owned by Christo Wiese. More than 40% of its assets were in the UK and held through its 100% holding of the Moorgarth Group which owns 23 properties in the UK which has now been sold. It owns 100% of Tradehold Africa which owns properties in Africa outside of South Africa and 100% of the Collins Group which owns 153 properties inside South Africa. It has spun off its financial services business interests into a separately listed entity, Mettle, which is now listed on the Alt-X of the JSE. The South African economy is in difficulties with the cost of 10 years of state capture and corruption coming to light, followed by the impact of COVID19 and now the civil unrest. In a report on the unrest the company said, "...a total of 21 of Tradehold’s properties in KwaZulu-Natal were damaged during the recent unrest in South Africa. The estimated cost of damage is R41 million, excluding loss of rental. This represents approximately 0,5% by value of Tradehold’s property portfolio in South Africa". In its results for the six months to 31st August 2023 the company reported revenue of R581m up from R570m in the previous period and an attributable profit of R108m compared with a loss of R958m. The company said, "The disposal of the Company's UK assets in the second half of 2022 formed part of an extensive restructuring of the business over the past six months". Technically, the share has been in a downward trend since April 2016 and it is now trading at a significant discount to its net asset value (NAV) of 1262c per share. In our view this share is mostly a local property play which will probably perform better as the SA economy recovers, but we do not see it as an exciting investment prospect. The company is selling off its Mozambique properties. It is cheap at current prices and volumes have improved sharply in recent weeks to over R280 000 of shares changing hands each day. This probably means that institutions are beginning to take an interest - and it becomes practical for private investors.