[TOP STORY] Calgro's shifting asset portfolio and housing developments

Simon Brown (0:02)

MoneywebNOW, on the money.

This podcast is brought to you by Stanlib Asset Management. Invest in more certainty to navigate volatile market conditions. Chatting with Ben Pierre Malherbe, he's CEO at Calgro M3. Disclaimer upfront, I hold shares in Calgro M3. Results for six months ending August, revenue up 1.2%, hips down 4.6%. Ben Pierre, we've been chatting very much a transitionary period to a degree for Calgro. Part of that is disposing of non-core assets. That's a key strategic priority. It's going to take some time though. Talk us through how that's going.

Ben Pierre Malherbe (0:37)

Thank you, Simon. I think there's two sides to that. So firstly, it is the sale of the non-core assets, but it's also a hand in hand with that it's trading out the non-core projects. So there's two sides of this equation. The selling off of the non-core assets will take a little bit longer. We said we'll take a five year view. We know the value of these projects. We don't want to give them away.

We know what they're worth, but the trading out of non-core projects, we're making good progress with that, although you can't see that in the numbers as yet. Looking forward to the full year results.

Simon Brown (1:07)

I imagine, I mean, the trading out, and you say you've got stock in excess of about what, around 1500, you're sort of doing so, that construction, but this is a tough economy to be selling property. I mean, fuel, inflation, interest rates. I mean, this is not an easy time to be operating and doing even lower cost housing.

Ben Pierre Malherbe (1:24)

No, no, you're 100% right, Simon. It's not an easy operating environment. And what we did see is the consumer is under pressure, and we expect them to be under pressure for a while still.

But the rental market recovered quite a lot faster than that market. And currently, we're leaning towards those, what we call the bulk sales, where we sell them off to people specializing in the rental market. And that market has been good to us in the six months.

Simon Brown (1:47)

Gotcha, gotcha. And that solves, as you say, the problem, particularly around banks and the like. The key strategic shift here is, and you talk around it in these results as well, five large-scale developments, geographic diversification, Western Cape and Hauteing, and you can kind of see this sort of starting to come into place. You do mention you're looking for a Western Cape project, perhaps.

Ben Pierre Malherbe (2:08)

Yes, I think, Simon, we definitely, the Western Cape was extremely good to us in the six months, actually the last 12 months. There's a lot of uncertainty in the Hauteing environment and working with the city. And we said we're not going to chase hips at all costs. We don't want to build for the sake of building. It doesn't make sense building units if you're not sure where they're going. So like I said, we're focusing on these bigger takeoff agreements. We're carrying about 1,500 units under construction or in stock. We've got enough service opportunities. So we didn't feel the pressure to just build for the sake of building.

Simon Brown (2:44)

We've got an election next month. I know in not the previous, the five year ago election, I think it was, you had some real challenges with sites being occupied and the like under your predecessor.

Is that a concern for this election or is the concern more that there's going to be changing of gods and we don't know who's going to be the person to speak to come the 5th of November?

Ben Pierre Malherbe (3:02)

Yes, I think that is the challenge we're currently facing with. There will be a change of god, whether it's internal or external doesn't make a difference. With the change of god, the one thing that we may just keep in mind, the election is not that golden one that fix everything. That's a transition period we're going in.

Even listening to some of the interviews, what happened in Cape Town with the change of god there, it takes longer than you think. We're comfortable that we've got sufficient service opportunities. That means services in the ground that will allow us to build. We've got sufficient stock to sell.

We're taking a view on investing in strategic infrastructure like the Bunkerfield Project, where we're currently putting in big road infrastructure, and that's a long-term investment. Because one thing we must be very careful, just trading out of non-core projects or just selling these projects is not the solution. We need to balance that trading out of the non-core with investing in our core business. We need to keep on going in core business. And we've selected that the bulk infrastructure, those big strategic infrastructure, is where we prefer to spend our money on currently.