Our opinion on the current state of COLLINS(CPP)

Collins, previously known as Tradehold, boasts a portfolio of over 140 properties with a total gross lettable area of 1.6 million square meters. Most of these properties are industrial, including major distribution centers and industrial complexes let on long-term triple-net leases to leading corporate clients. Additionally, Collins manages Tradehold’s Namibian portfolio, which includes a number of sought-after properties in major towns such as Windhoek, Walvis Bay, and Gobabis.

Originally, Tradehold was a real estate investment company in Southern Africa, 48% owned by Christo Wiese. More than 40% of its assets were in the UK, managed through its 100% holding of the Moorgarth Group, which owned 23 properties in the UK and 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. Tradehold has spun off its financial services business interests into a separately listed entity, Mettle, now listed on the Alt-X of the JSE.

The South African economy has faced significant challenges, including the repercussions of 10 years of state capture and corruption, the impact of COVID-19, and recent civil unrest. In a report on the unrest, the company disclosed that a total of 21 of Tradehold’s properties in KwaZulu-Natal were damaged, with the estimated cost of damage at 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 R581 million, up from R570 million in the previous period, and an attributable profit of R108 million compared with a loss of R958 million. The company noted, "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."

In a trading statement for the year to 29th February 2024, the company estimated that the distribution per share (DPS) would increase by between 33.33% and 53.33%. Technically, the share has been in a downward trend since April 2016 and is now trading at a significant discount to its net asset value (NAV) 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 also selling off its Mozambique properties. While it is cheap at current prices, and volumes are around R80,000 of shares changing hands each day, making it just practical for private investors.