New JSE listing gives investors access to middle-income property market
Visual International is, despite what its name might evoke, a property company that specialises in developing residential properties for sale to South Africa's growing middle-income market. Visual's primary customers are people who earn R15-20,000 a month and can afford a R400,000 or so townhouse unit, although the company is also involved in commercial development. Visual is planning to list on the JSE's AltX market, hoping to raise some funds, raise its profile, and, of course, incentivise management and staff with the promise of a share ownership stake. Investing in a company like Visual can be a bit of a gamble. While it has performed very well over the last few years, interest rates are starting to rise, which doesn't ever bode well for the property business, and there is always some risk in targeting middle-income people – those people usually live closer to the bone than their wealthier peers, and their spending can be less reliable. Nevertheless, Visual is an interesting company, and will make a good addition to the AltX. – FD
ALEC HOGG: On Friday, Visual International announced its plans to list on the JSE AltX. That will happen later this month. Charles Robertson, who is Visual International's Founder and Managing Director, joins us from Cape Town for a close look at the planned listing. Charles, I'm sure you must have been a little disappointed when Gill Marcus announced – it's only a slight increase – but it still is the first increase in interest rates since 2009. Has it made it more difficult to raise money ahead of the listing?
CHARLES ROBERTSON: Thank you, Alec. Yes, low interest rates certainly work in the property industry. Half a percent is certainly not going to break the camel's back. What generally happens is that costs increase because interest rates increase, but we don't think it will make a huge difference in our middle-income market.
ALEC HOGG: Now as someone who has been there and done that – admittedly, many years ago – I often shake my head when I see people come into the stock market because of the treadmill it puts you on, and the way your freedom is actually constricted. You must have thought about this and spoken to many people about it. I need to ask you, why have you decided to list at all?
CHARLES ROBERTSON: Alec, there are a number of reasons. We're obviously listing because we want some investor funds to help us develop faster, to speed up our development process, to retain/keep more of what we develop, and to create more of an annuity income, but it also has other benefits. It has the benefits of involving more of our management and our team. It creates a bigger profile for the company. It creates more opportunities, so there are a number of positives for us. The disciplines, we realise, come with it but we just have to take the disciplines that go with listing – yes.
GUGULETHU MFUPHI: Well, Charles then what's your USP, for increasing shareholder value?
CHARLES ROBERTSON: We own a lot of land, and we want to speed up the development process. We don't have any unsold stock at the moment, we see an improvement in the market, and so we feel that this is the right time to speed up the development process to extend, and also to retain more of what we develop ourselves.
ALEC HOGG: But just to follow up on what Gugu was asking there, why should an investor go with Visual International rather than any of the many other options that are available in the property board? What is your unique selling proposition?
CHARLES ROBERTSON: We're in the middle-income market. We're in the same market where companies as Shoprite/Checkers, Pep, Capitec Bank, and Spur. We're in that same marketplace. Our clients typically earn R15, 000.00 to R25/R30, 000.00 per month, we provide accommodation to them, and this is by far the fastest growing market in South Africa. Our house prices – houses and apartments – range from R400, 000.00 to R700, 000.00. We feel comfortable with this market. This is a broadening market. We think the growth will continue in this market, and there are just great opportunities.
ALEC HOGG: It does in theory, and everything you tell us looks great, but you would also remember that there was Glen Anhault in the past who had a similar value proposition – I'm going back 30 years or 40 years, even – and it isn't a slam-dunk. Sometimes something that looks good can go off the rails by maybe, management taking the wrong options. What is it that you can tell investors that they are confident that you're going to be around, you're going to be sustainable, and you're not going to overreach?
CHARLES ROBERTSON: Alec, we have a good board, good non-executive that came on-stream, very good management, a very good team of people, and a long track record of successfully operating in this marketplace. We have been able to weather the storm, especially in the property market over the last five years. The investors have the benefit that our 2014 profits/results have been achieved. We have a February year-end, so we are there, so we think that there is a lot of upside for investors. We're coming to the market with low price earnings ratio, and a big demand for what we want to do. On top of that, we want to grow what we own. At the moment, we own about 50. We retain about 15 percent of what we develop, and we want to increase that over the next five or so years to about a third, and maybe even 50 percent in time to come.
GUGULETHU MFUPHI: Charles, on your website it also says that you're involved in renewable energy space – how, exactly?
CHARLES ROBERTSON: You know, renewable energy is something that's very important to all of us as individuals, and in the business world. We therefore have to find ways of saving energy, and saving costs over the medium to long term, so we are continually working on improving for our customers and also for our investors, the value proposition in terms of what it is that we offer
ALEC HOGG: You have many operations or businesses in the Cape. What developments are you looking to move outside of the Cape near term? I suppose a listing means that you do want to expand.
CHARLES ROBERTSON: Yes, we certainly do. We are not asking investors for funds to go on a buying spree to go and buy more land, but we plan to do joint ventures, and Gauteng certainly is on a fairly short…I wouldn't say immediate, but fairly short-term horizon for us. We are talking with people about expanding to Gauteng and elsewhere in the country – yes.
GUGULETHU MFUPHI: Well, interesting insight. Thanks so much to Charles Robertson who is from Visual International – that's the property group. He is the Founder as well as the Managing Director there.