mashonaland holdings limited
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Imara Investors’ Conference28th May 2014
Mashonaland Holdings Limited
Presentation Outline
A. Property Market Overview
B. Mashonaland Holdings Ltd
C. Financial Highlights
D. Property Market
E. Market Outlook and Our Prospects
Mashonaland Holdings Ltd
Zimbabwe Real Estate( 1898)
Real Estate - Overview
Zimbabwe Real Estate – Today
Mashonaland Holdings Ltd
Real Estate - Overview
Liquidity challenges and lack of access to capital High interest rates on mortgage finance Increasing land prices High costs of servicing and construction Depressed rental markets and capital values Consequently, we have not had significant supply
of new stock for over 15 yrs
Mashonaland Holdings Ltd
Challenging environment
We are not afraid……
Mashonaland Holdings Ltd
Company History
Incorporated in July 1966
Listed on the ZSE 1969 The first property company
Purchased vast tracts of land in Ruwa in 1987
Rationalisation of Group operations – unbundling -2000
Reconstruction 2003
Mashonaland Holdings Ltd
We are a property development and investment company
We hold and internally manage a substantial property portfolioin terms of GLA and value by local standards
Mash spearheaded the Ruwa development, a sprawling settlement about 25km from Harare amongst other developments
Who we are…..
Mashonaland Holdings Ltd
Mashonaland Holdings Ltd
Top Five Shareholders
ZB Life Assurance 28.56% Africa Enterprise Network 18.77% Mashonaland Holdings Ltd 8.58% Roy Turner 7.72% Fed Nominees (Pvt) Ltd 6.66%
Total 70.29%
Mashonaland Holdings Ltd
Shareholder Classification
40.16%
23.36%
9.29%
10.59%
6.08%
9.88% 0.64%
Pension funds
Other corporate bodies
Investment, Trust & PropertyCompaniesNominee Companies
Non‐residents
Resident individuals
Insurance
Financial Review
2013 2012 2011 2010
Revenue ($000) 7 692 7 396 5 626 4 059
% Growth 4% 27% 38% 69%
Fair Value Adj. 6 034 13 893 20 202 10 819
Profit before tax 11 738 19 362 23 788 13 177
Mashonaland Holdings Ltd
Investment Properties
Market Values – Trend Analysis
Mashonaland Holdings Ltd
Year2013 2012 2011 2010 2009
Market Value (USD) 103.5m 95.6m 81.4m 61.3m 50.1m
% Movement 8% 17% 33% 22% ‐
Investment Properties
Mashonaland Holdings Ltd
Category M.V. ($000s) Percentage G.L.A. Percentage
Office/retail 75 770 73 48 850 46
Specialized 2 200 2 2 100 2
Industrial 10 330 10 47 200 45
Residential 3 650 4 3 150 3
Retail 6 085 6 3 878 4
Development Land 5 447 5 - -
Totals 103 482 100 105 178 100
Cash flows
Mashonaland Holdings Ltd
2013 2012 2011 2010
Cash & cash equivalents ($000s)
5 248 4 719 2 183 920
Ratio Analysis
2013 2012 2011 2010 Market
Operating profit to revenue 63% 68% 64% 58% 45%
Growth in Investment 8% 17% 33% 22%
EPS – cents 0.58 1.00 1.97 0.35
Net Asset Value -cents 6.20 5.63 4.66 2.57
Debtors to revenue 11% 9% 8% 9% 12%
Voids 15% 8% 8% 10% 22%
Rental Yields 8% 9% 7.3% 8.5% 8%
Mashonaland Holdings Ltd
The Real Estate Markets
The Rental Market
The Developments Market
Developments Outlook
Our Strategy and Business Risks
Mashonaland Holdings Ltd
Rental Market Challenges
The rental market is depressed with downward rent reviews for the first time since the economy dollarised
High vacancy levels – averaging 22% for a typical institutional portfolio
Defaulting tenants
Mashonaland Holdings Ltd
Values are falling off – For now..
Property values threatened.
Mashonaland Holdings Ltd
Office Sector
This sector has the highest level of vacancies. Over the past few years, companies have been progressively
downsizing. Some companies have been forced to close shop Service Charges are one of the biggest challenges, accounting
around 30 – 45% of net income, largely as a result of utility charges Rental Yields are around 8%
Mashonaland Holdings Ltd
Industrial Vacancies are lower for the industrial sector, especially for small
industrial bays and for locations close to the CBD.
The demand for industrial space has been more from small enterprises than from traditional industrial giants, a reflection of changing industry patterns.
There has also been more demand for warehousing than for manufacturing, an indication of the rising dependency on imported goods.
Yields are higher for this sector, around 12% for well located units.
Mashonaland Holdings Ltd
Retail Vacancies are relatively lower for small retail units and for retail
space on office towers located in CBD although even these tenants are increasingly under pressure
Whilst retail has underperformed in some locations, well located retail units with turnover based rentals have seen significant growth
National retailers, with superior stocking and marketing strategies have led this growth in rent
Rents for these large retailers are usually based on Gross Turnover Demand for new strategic sites by large retailers is testimony to the
existence of unsatisfied demand in this sector
Mashonaland Holdings Ltd
Development Markets
Costs of construction per unit have been converging with market values giving stronger argument for developments and re-development projects.
Activity has been most in the residential sector with servicing of land and individuals’ home development mostly prevalent.
Resurgence in institutional property development although on a small scale
A few speculative developments – a good sign We still need to see cranes dot the skylines of our cities!
Mashonaland Holdings Ltd
Where are the Cranes?
Development Markets – Supply Side Constraints
Low savings for organic growth by the traditional developers Lack of adequate offsite infrastructure High servicing costs for land
Mashonaland Holdings Ltd
High Costs of Funding Projects
Abandoned/Protracted Projects Reverse Yield Gap
Mashonaland Holdings Ltd
Development Markets –Demand Side Constraints
Low demand for business premises Lack of clarity on expectations Restrictive mortgage rates for prospective homeowners High occupancy costs for premises against deteriorating margins. It
all begins in the rental market subsectors.
Mashonaland Holdings Ltd
Market Outlook Even in the face of these challenges we think growth will still come forthe economyAnticipated economic growth (4.2% for 2014 and 4.5% for 2015) will
come from the following factors; Pro-Investment policies
-This will boost investor confidence- Capital inflow (Long term finance with less risk premium)
Infrastructure renewal and expansion. Innovative funding techniques for real estate investments and
infrastructure New opportunities in untapped specialist markets e.g. storage and
health Decentralisation as office developments in the suburban areas
increase
Mashonaland Holdings Ltd
Our Prospects
Mash has over the years acquired a diverse land bank and we are atdifferent stages of the development lifecycle for the various projects
Our land bank measures 58.5ha of prime land. The land bank covers our growth areas; Office parks Residential for on selling Industrial with high initial yields We are also positioned to exponentially expand this land bank for
selected projects through our strategic partnerships and openmarket acquisitions
Mashonaland Holdings Ltd
Funding Options for Developments
Debt
New Equity Arrangements
Internal Resources
Joint Ventures
PPP for infrastructure projects
Mashonaland Holdings Ltd
Key Portfolio Risks (Current Business)
Event Risk
Tax and Legislation
Investment quality
Tenant risk
Valuation risk
Building Location
Depreciation and Obsolescence
Mashonaland Holdings Ltd
Key Risks (Development Portfolio)
Building Costs
Changes in rental yields
Changes in interest rates
Time
Mashonaland Holdings Ltd
Recollection..
Whence we come
Mashonaland Holdings Ltd
Where We Are
Destiny Beckons…… Harare in a couple of years?
Infrastructure We will build bridges we will build rivers, we will build oceans…….
We Dare To Dream!
Our Contact Details
Our Contact DetailsPhysical Address12th Floor ZB Life Towers77 Jason MoyoHarare
PostalPO Box 717HarareZimbabwe
Telephone+263 4 253600/1 +263 4 705806/7
Fax+263 4 705269
For more information on us please go to www.masholdings.co.zw
Mashonaland Holdings Ltd
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