Magnus Heystek shares bullish view on SA property, US tech and Sygnia’s world-beating fund
Independent financial advisor Magnus Heystek has adjusted his once pessimistic view on all things South African – and is decidedly excited about pockets of the local investment landscape. He explains his latest thinking to BizNews editor Alec Hogg.
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Edited transcript of the interview ___STEADY_PAYWALL___
Alec Hogg (00:15.534)
Magnus Heystek joins us now, Chief Investment Officer and founder of Brenthurst Wealth. Magnus, good to be with you and to actually chew the fat again, as we have done many times in the past. You're an active member of the BizNews Premium WhatsApp groups, and you posted something there talking about a 50% increase in the property sector in South Africa over the year to date. That's an extraordinary rebound.
Magnus Heystek (00:51.758)
Yes, good afternoon, Alec. Indeed, we're chewing the fat in different places and at different times, but it's still enjoyable. About a year ago, the listed property sector was not a great place to be in South Africa. It was battling with high interest rates, increased vacancies, the COVID lockdowns, and the maladministration of the big cities in the country—rates, taxes, electricity, solar panels—it was a perfect storm against the property owners.
About seven or eight months ago, Killyan Ndlovu, who's a good friend of mine and used to be a property expert at Stanlib, went on sabbatical and became a consultant. He started whispering in my ear, "Magnus, you need to look at the listed property sector." I said, "I can't, Killyan, I'm not interested, it's all negative." But he quietly convinced me that there's substantial value in our big listed stocks. Over time, I started tracking those funds and investing cautiously, though I wasn't fully convinced it was a big turnaround.
Now, here we are six to eight months later, and the returns are in excess of 50%. It's one of those almost hidden, underreported stories about significant returns. Suddenly, those investors are 50% wealthier than they were eight months ago. It's a lesson in financial markets—don't always follow the headlines if you want good returns. Sometimes, you have to dig a little deeper for value. The same goes for gold, which is also up 50% in rand terms.
The listed property space is very intriguing. If vacancies start rising, particularly in office spaces, and if electricity costs stabilize and interest rates come down, we could see further value in the sector.
Alec Hogg (03:21.826)
Some of the great fortunes in history have been made through property. Many wealthy people I know, including yourself, Magnus, have built their wealth through property investments. You've been a big property investor for a long time, though not necessarily recently in South Africa. Are you now looking again here? I know you mentioned buying a couple of properties in the Western Cape. Are you looking elsewhere in the country?
Magnus Heystek (03:56.568)
No, not yet, Alec. As you pointed out, I've always liked property as an asset class, primarily for diversification. My business is about 80% to 90% exposed to equity markets, so it wouldn't be wise to have all my personal assets in the same market. If you get hit in one, you get hit in both. So, I like property not only in South Africa but also in places like Mauritius and London.
My wife and I are steadily buying small properties—offices in Cape Town, Tygervalley, and the Paarl area of Val de Vie. We're fortunate to have a nice property portfolio, and maybe one day we'll be able to afford a property in Hermanus, but we're not there yet. Still, the Western Cape is not a bad place to be. Vacancies are filling up. A year and a half ago, there was ample office space on the Atlantic Seaboard, but today it's all gone. Tygervalley, gone—nothing available.
That's due to several factors, but the work-from-home trend is starting to shift. Big companies are calling people back to the office. If that trend picks up in Johannesburg and Pretoria, those half-empty office buildings could fill up quickly, and values would increase. So, if you're a property speculator looking to invest, places like Sandton, Fourways, and Sunninghill could offer good opportunities.
Alec Hogg (06:00.468)
You've always kept your finger on the pulse of global geopolitics and local politics. Gauteng's political situation doesn't look very good right now. Are you seeing beyond that when you suggest there could be opportunities in the property sector there?
Magnus Heystek (06:17.904)
It all depends on the administration and management of those municipalities—Tshwane and Johannesburg. That's the risk factor. As R.W. Johnson wrote recently, Johannesburg could become like Kinshasa over time. John Endres from the IRR expressed similar concerns. There's a real risk of property value collapse in the big cities, and you have to take that into account.
You have to be selective and consider who's running the municipality. The risk isn't in the bricks and mortar themselves; you're buying office space at a vast discount to what it would cost to build new offices. But the risk lies in what's happening around you, the environment, and governance.
Alec Hogg (07:18.794)
Let's shift to a different topic—share buybacks. I spoke to Vikas Lategan from Calgro M3 recently. They've bought back 26% of their equity over the past couple of years. This is a company trading at R6.60 with a net asset value of R14. We're also seeing big mining companies like South32 and tech giants like Naspers and Prosus doing large share buybacks. Is this a tip for investors? When companies buy back their shares, does it indicate great value?
Magnus Heystek (08:24.538)
Yes, that's a good observation. When companies have surplus cash and don't see great opportunities for expansion or new ventures, they often buy back their own shares, especially from short-term investors. By doing so, they reduce the number of shares in circulation, which increases the value of the remaining shares, dividends, and earnings.
This strategy is influenced by the interest rate cycle. We've had very high interest rates for a long time, but if rates normalize and start decreasing, asset values—especially property and land—will rise, and the cost of holding these assets will go down. I suspect that's part of Calgro's strategy—they see better returns from buying back shares than from other investments at the moment.
Alec Hogg (09:57.9)
Exactly. At R6.60 with net assets of R14, it doesn't take a genius to see where to allocate extra cash. There were also a few company results today. Robbie Fenton, who recently passed away, helped externalize Bytes Technology Group, which is now a UK company. Their results are impressive—headline earnings in pounds up 20%, dividends up 15%. It's a great example of South Africans succeeding internationally.
Magnus Heystek (11:10.404)
Yes, South Africans have a long history of excelling internationally, especially in the UK and the US. One standout example is Monster Beverage, founded by two Wits accountants. There are many other examples, including Gail Kelly, who ran the largest bank in Australia. South Africans often leave, make their mark overseas, and sometimes return to invest locally.
Alec Hogg (12:39.926)
It's a reminder that if we can create a country worth staying in, we could unleash a lot of entrepreneurial potential. Another company doing well internationally is Karooooo, listed on the NASDAQ. Their subscriber numbers are up 17%, with nearly 89,000 new subscribers in the last quarter.
Magnus Heystek (13:10.692)
I've been following Zak Calisto, the founder of Karooooo, for a long time. To impress the world, they had to get a NASDAQ listing because South Africa tends to focus on more traditional sectors like banking, insurance, and retail. But companies like Nvidia, which is now one of the largest in the world, are examples of how much potential tech companies have. South African investors have largely missed out on the IT and AI booms because we don't have the same culture of investing in high-growth sectors.
Alec Hogg (15:14.574)
Maybe we're reluctant to embrace exponential growth companies. It's hard to value businesses growing at 30% or 40% per year. But perhaps the next Karooooo will get the appreciation it deserves.
Magnus Heystek (15:38.928)
Yes, you're right. I was looking at the five-year returns for the Sygnia FAANG Fund today—30% per annum. Yet, I struggle to find many people talking about it here. In the US, those kinds of returns would be front-page news every day. Unfortunately, we lack that culture in South Africa.
Alec Hogg (17:56.91)
It's an extraordinary story, especially with big companies like Google and Microsoft investing in new energy solutions to power their AI operations. Speaking of energy, we've had over 200 days without load-shedding. Are people starting to believe this could be a permanent change?
Magnus Heystek (18:28.836)
I hope so, but I'm not convinced. I think the reduced demand for electricity is partly due to businesses and industries installing solar power. That's been a game changer. It's nice not to have power cuts, but now we're facing a potential water crisis, which could be the next big challenge.
Alec Hogg (19:14.722)
Water is indeed another critical issue. Magnus, thank you for your time. It's always great catching up with you.
Magnus Heystek (19:23.684)
Thank you, Alec.
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