Calgro M3 takes steps to raise its sustainability

JSE-LISTED residential property and memorial parks developer Calgro M3 has embarked on a series of actions designed to raise its sustainability, the group said in a statement yesterday.

The most recent of these were the sale on February 25 of a non-core project for R49 million and the conclusion of a share repurchase earlier in the month, with 4.6 percent of its shares repurchased at R2.10 each.

Calgo M3’s shares were up 0.45 percent to R2.06 yesterday morning, after falling steadily from R12.45 over three years.

Its asset base of large projects in various stages of development includes a pipeline of 36 127 available stands, 2 920 of which were under construction at the end of August last year, with many more commenced, and 6 596 were serviced opportunities.

Across the five memorial parks that the group administers, growth had come from being busier than usual due to the pandemic.

“We have gone above and beyond to support grieving families in these unusual times,” chief executive Wikus Lategan said yesterday.

He said proceeds from the sale of non core-projects would be applied to projects that were further progressed and where a better return could be achieved.

“Proceeds will also be used to reduce debt, and/or for possible further share buy-back transactions. It is well known Calgro M3 currently trades at a substantial discount to net asset value,” he said.

Management was working hard to ensure there was sufficient capital to have the necessary infrastructure in place at development projects, rather than to rely on the government for this.

“This ends up being a win-win situation for all concerned, for those buying homes, for Calgro M3 and for government, as Calgro M3 assists to reduce the housing backlog,” said Lategan. He said the firm continued to experience good demand for the housing units that it builds.

The business had been substantially de-risked with long-term infrastructure funding options from development finance institutions, he said.

With respect to the share repurchase, Lategan said the undervalued share price was disappointing given that the group services a high demand sector in South Africa. He said net asset value was close to R6.43 per share, excluding Treasury shares.

“We believe that repurchasing shares at a material discount to intrinsic value is a good opportunity to create value for our shareholders.” The repurchase comprised 4.6 percent of issued share capital, with the repurchased shares subsequently cancelled.

Executive management had personally acquired more than 2 percent of the shares in support of the group’s strategy. Calgro M3 had been able to settle and restructure debt with a net decrease of R111m and with minimal short-term maturities remaining. Additional long-term facilities had been secured.

Lategan said 2020 had been a difficult operating year, given the impact of Covid-19. This was in addition to other problems related to doing business in South Africa, such as invasions of partially built blocks at some developments.

Calgro’s shares closed 2.44 percent lower at R2 on the JSE yesterday.