Reetsang Willie Mokgatlhe, Independent non-executive chairman
Lists 14,994,390 new linked units
Six developments are currently being built in Botswana and Zambia
Imara Capital Securities has issued an "Accumulate" recommendation for Far Property Stock, following the listing of 14,994,390 new linked units on the Botswana Stock Exchange (BSE) after its script dividend distribution.
Imara's recommendation advises investors to accumulate or build a position in the stock gradually. While it indicates a positive outlook, it is less strong than a "buy" or "strong buy" rating.
Far, which closed trading on Tuesday, 12th November 2024, at P1.80, has increased its total number of issued linked units to 489,097,893, up from 474,103,503 as of the previous trading session. The company’s unit price has declined by 24.7% between January and September of this year.
The company had offered its unitholders the option to receive part or all of their earnings—dividends and interest—in the form of new linked units, rather than cash payments.
It was not the first time Far came to the market offering its shares as dividends. A similar offer was made in 2020. Equity analysts say a script is laudable if the company is undervalued. This is because when a counter is undervalued, shareholders will realise more when the actual value comes up.
If a shareholder sees value in holding the share at the current price, then they should see value in taking up the scrip dividend.
The board issued a scrip dividend at a price of P1.80 per linked unit, which is at the current trading price.
The company created and listed additional linked units based on unitholders' choices to receive their earnings in linked units instead of cash.
Unitholders with 123,495 linked units (just a small percentage, 0.026% of all linked units) chose to receive 100% of their distribution as new linked units instead of cash.
Unitholders with 473,980,008 linked units (almost everyone else, 99.974% of all linked units) chose the default option: to receive 50% of their distribution as linked units, and the other 50% in cash.
Far Property is primarily owned by its founders Ramachandran Ottapathu and Farouk Ismail. Ottapathu holds a 29.95% stake, while Ismail owns 28.96% of the company.
Source: Far Property
Platinum Compass (Proprietary) Limited, a company also founded by Ottapathu, controls a 21.95% share. Institutional investors include the Botswana Public Officers Pension Fund (BPOPF), which holds 11.22%, and Botswana Insurance Fund Management (Bifm), with a 4.15% stake.
For its full year ended 30 June 2024, Far declared a distribution of 12.40 thebe per linked unit comprising a gross dividend of 0.11 thebe per share and gross interest of 12.29 thebe per debenture.
“Unitholders will receive 50% of the net distribution amount as scrip distribution in the form of linked units (credited as fully paid), and the balance of 50% as cash,” Chairman Reetsang Mokgatlhe said.
Typically, a company may resort to this option if it faces cash constraints that prevent it from paying a dividend or if its balance sheet is showing signs of weakness.
But Far’s profit for the year attributable to linked unitholders increased to P159 million (2023: P125 million).
Mokgatlhe explained that the decision is in line with “our strategy to grow the portfolio and ensure the right balance of cash available to the business”.
The Group is planning expansion in Zambia with a mix of industrial and commercial centres with the intention of optimising returns and addressing single-country dependencies. Six developments are currently being built in Botswana and Zambia.
“There are currently four major projects ongoing, including the distribution centre project in the Lusaka Economic Freezone, which indicates our commitment to expanding in these new markets,” the company said.
Comments