Kamogelo Mowaneng, Letlole La Rona CEO
May leverage JTTM for debt financing amid LTV concerns
Letlole La Rona is seeking to raise capital through an equity offering in the current financial to supplement its existing debt and operational cash.
Management said the funds will be utilised to advance the conversion of its pipeline projects against the concerns of high loan-to-value LTV which currently sits at 39%.
The company may also look to leverage its JTTM asset, which boasts a lower LTV of 18%. According to Kamogelo Mowaneng, the company's CEO, the recent acquisition of JTTM opens additional debt capacity for the group, allowing for further investment in yield-accretive assets.
Letlole has primarily funded its growth through operational cash and, to a greater extent, debt.
“We would like to diversify our funding,” said Mowaneng during the presentation of results for the full year ended 30 June 2024.
Management stated they are still finalising the pipeline. The amount to be raised will be aligned with this pipeline. They revealed that the projects include both acquisitions and developments across various sectors.
“There is a need for us to come up with a detailed funding strategy to make sure that by the time that we do go to market, we're aligned in terms of what are our long-term or medium to long-term funding plans for the company,” Mowaneng said.
Each year, the group actively works to expand its investment portfolio with yield-accretive assets. After performance monitoring, Mowaneng noted that Moedi House and Red Square were not meeting the targeted returns of 9-11%. As a result, the group decided to dispose of both properties. In August 2023, Moedi House was sold, effectively eliminating the group’s exposure to the office sector.
During the current reporting period, a significant number of units at Red Square Apartments were sold. The proceeds from these sales have been used to acquire the stake in JTTM, with some funds also allocated to reduce the current debt on the portfolio as it was partly funded through debt.
The group increased its stake in JTTM by 25% during the reporting period, investing P140 million following its stellar performance. This move resulted in JTTM becoming a subsidiary of Letlole. Letlole then assumed responsibility for the property and asset management services of the center.
“Naturally, when you have an investment, you want to be able to control and manage it yourself,” Mowaneng said.
This marked the first time Letlole is managing a portfolio or property that it does not own entirely.
Graphics by Letlole
Letlole’s investment portfolio is valued at P1.9 billion. The group’s sector exposure includes 55% retail, 44% industrial, and 1% residential, with the residential portion comprising only a few remaining units at Red Square.
Graphics by Letlole
Value has been created through the merger with JTTM, said Mowaneng. She noted that JTTM, as a single asset, is lowly geared at approximately 18% LTV), adding that there is still access to debt capital through the asset which the company does not have at the company level.
“It actually opened up more debt headroom for us,” she said.
Letlole’s revenue increased by an impressive 69% (P71 million) from P102.2 million in the prior year to P173.2 million mainly due to the consolidation of JTTM, which contributed P63 million (89%) to the growth while organic growth from the company contributed P8 million (11%).
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