Real Estate Investments Zambia PLC (REIZ, of the Farmers House fame) has a plethora of properties that has ensured a bottom-line that is impressive amidst numerous headwinds in the macro environment that range from a devaluing currency, an inflation jump from 7% to 21.1%, and depreciated growth in the economy. Kenny Makula its Chairman, remains bullish over the prospects of the group company.
A deeper look at their 2014 and 2015 results shows a company that has an impressive management of its working capital. Furthermore, they have grown value organically from their lineup of properties. As indicated by the Chairman, continued management of milking their assets remains key to the group company’s performance and shedding off those assets that don’t give it a good return.
At present financial risk is not an issue has they manage their debt well with gearing between 15 and 17%. This implies that they are able to maintain a good return on capital employed at around 14% in 2014 albeit followed by the super normal growth to well over 50% in 2015. Furthermore, the group has a positive liquidity profile that sees it covering it current liabilities 7 times over.
Stricter management will be required on its operating cash flow as volatility would be lead to problematic EBITDA in the near term. However, with ROCE north of 10% over the last 2 financial years, this stock makes for a good buy for any looking for long term growth.