Our opinion on the current state of SEA

Spear (SEA) is a real estate investment trust (REIT) focused on properties in and around Cape Town, benefiting from the expertise of its founders and management team in the local property market. Since its inception, Spear has demonstrated consistent growth in its property portfolio, currently valued at around R4.5 billion, despite its market capitalization remaining below that level.

The company's strategic initiatives, such as debt settlement and property acquisitions, are aimed at enhancing its portfolio quality and driving future growth. The recent sale of its Century City office block further underscores its commitment to optimizing its asset base.

In its financial results for the six months ending August 31, 2023, Spear reported a slight decrease in distributable income per share, attributed to tenant arrears and bad debt provisions. However, the company maintained a strong occupancy rate of 94.19%, reflecting the resilience of its property portfolio.

Spear's prudent management is evident in its proactive approach to reviewing tenant arrears and maintaining a healthy balance sheet. With a loan-to-value (LTV) ratio of 40.7% and a tangible net asset value (NAV) of 1146c per share, the company is well-positioned to weather market challenges and capitalize on growth opportunities.

In its operational updates, Spear highlighted its rental reversion rate and portfolio escalation rate, indicating stable performance and positive trends in rental income. The company's low LTV ratio further enhances its financial flexibility and resilience.

Overall, Spear represents a compelling investment opportunity, trading at around 70% of its NAV. With its strong track record, strategic focus on the Cape Town property market, and sound financial position, Spear is well-positioned to deliver value to investors in the long term.