REIZ – Seeking a Dominant Build in Zambia
Real Estate, Real Estate investments Zambia (REIZ)

With national growth projected at between 3-4%in 2017, REIZ will be pursing premium offerings on their property and a continued strategy of operating cost reduction. However, competition in the industry is becoming bloody with new players on the retail and commercial office space market. Off note are the projects on the “golden mile” signaling multiple rivals in the vicinity of REIZ’s cash cows. Therefore, their intent to develop land banks in Solwezi and south of Lusaka (target = mixed use commercial office/retail offering) as well as the Arcades face lift will be where the company will be placing its bet for the near to long term. We will keep a close eye on this economies of scale (at a national level) strategy when they publish their half year results for 2017 as we believe that the tenants of value will reside in the numbers.The origins of Real Estate Investments Zambia (REIZ) Plc make interesting reading in their 2016 annual report. From the 1920s, they came from being originally fashioned to be a collection centre for farming produce (then called Northern Rhodesia Farmers Co-operative) to now becoming one of the most quintessential property developers in Zambia.  There current mission is to be Zambia’s leading property investment and development company through the ownership of high quality properties that are well constructed and managed. So far, their evolution has been consistent. 1996 IPO on LuSE. 1999 they issued first LuSE listed corporate bond which saw them raise dollar 1 million to develop phase 3 of Central Park. As far as pedigree on the local stock exchange goes, the rest is history. If ever in search of an extant player with knowledge of raising capital on LuSE, look no further as REIZ are here for the long term.

Kenny Makala (Chairman) is proud of their 2016 performance.Rightly so. He believes they reported a satisfactory year in spite of the economic and political challenges that pledged 2016 locally and abroad. The macro factors on the local front are analogous to many of the ones cited by many premier companies: inflation, interest rates, and exchange rates. Kenny believes that the impact of fiscal policy will come to bear in 2017.

On performance, the Chairman’s statement boasts of 66%improvement in operating profit (K56.7m) with revenue increase of 32%. In addition, operational efficiency streamlining was effected through the termination of a 16 year relationship with a property management services company.  However, Sydney Popota (CEO)laments the reduction in investment property value that led to a loss after tax of K20.7 million compared to a profit of K433.5 million in 2015 due to the appreciation of the kwacha at the tail end of the year under review.

The debt position improved by 10.1% while the company maintained a factor 7 acid test. Liquidity solid although gearing only fell by 1% to an industry out performance level of 15%. Working capital management saw an increase of 212 on payable days confirming Sydney’s position of tenants struggling to meet dues due to macro factors. Labour productivity ratio that pits count of employees against revenues fell by 52%. Not alarming though for a company that now currently employs only 17 in 2016 (from 8 in 2015). Conversely,a sharp staff increment could signal organic property management in light of the aforementioned 16 year “love affair”that ended.  Lastly, their total assets and liabilities marginally went south to 4.3% and 7.2% respectively.

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