REIZ | Annual Nedbank Capital African Investment Conference
FARMERS HOUSE PLCAnnual Nedbank Capital African Investment Conference 3-4 October 2011, Sandton, South Africa Robin Miller – Managing Director
FARMERS HOUSE PLCPlease note that on the 3rd February 2012Farmers House plc changed its name to Real Estate Investments Zambia Plc (“REIZ”)
FARMERS HOUSE PLC • Background to the company • Development Activity• Farmers House Financial Performance • Zambian Economic Outlook
FARMERS HOUSE PLC Corporate Background• Originally a Farmers’ Co-op in the 1920’s;• Property investment company formed in 1981;• The only listed property company on the LuSE since 1996;• Continues to focus on a growth orientated strategy, in order to establish itself as the leading property investment, development and management company in Zambia;• The development of various properties in Lusaka has resulted in a more aggressive strategy; and• Intends to remain listed on the LuSE and form the common entry point for all Zambian institutional investors & international investors into the high yielding, up-market Zambian property sector on a diversified basis.
FARMERS HOUSE PLCLong Term Strategy• Create strategic partnerships• Develop Central Park on Cairo Road as Zambia’s premier business park in down-town Lusaka• Secure incremental capital• Develop existing assets• Acquire &/or develop new properties• Expand shareholder base• Increase liquidity of stock
FARMERS HOUSE PLCDate Capital Market Milestones1996 Listed on the LuSE1999 Issued first LuSE listed corporate bond and raised US$1 million to develop phase II of Central Park; all converted into Equity2001 Raised US$1.98 million via a preference share rights issue for the purpose of developing phase III of Central Park2003 Raised Zambia’s first bank loan (US$2.6 million) specifically for a property development – The Lusaka Stock Exchange building - secured on its’ own cash flows; fully repaid Raised US$10 million via a rights issue for the development of the Celtel/Zain Head2004 Office – completed and operational2008 Joint Venture formed for the development of the Stanbic Head Office Issued a short-term Commercial Paper of US$10m for the purpose of raising bridging finance to secure certain properties2009 Issued a short-term Commercial Paper of US$10m for the purpose of raising bridging finance to secure certain properties2010 Issued a 12 year US$ Corporate Bond tradable on the LuSE
Farmers House construction milestones Central Park - Developed Phases I to VIPhase I & II First ever Corporate Bond Issue in 2000 - Raised US$1 million, and used existing capitalPhase III & IV First ever Zambia/LuSE’s Preference Share issue – in 2001 - Raised US$2 million - US$ denominated, Traded on the LuSE;Phase V- Upgraded Central Park reticulation & parking.Phase VI – Lusaka Stock Exchange Building – in 2004 - Secured $2.6 million of debt - US$ denominated - 1st Bank facility secured directly on the property development
FARMERS HOUSE PLC Central Park TenantsTenants include• Lusaka Stock Exchange• Industrial Credit Company - ICC• Barclays Bank• Stanbic Bank• Standard Chartered Bank• Intermarket Banking Corporation• Blue Financial Services• Dunavant• Zambia Revenue Authority• Stockbrokers Zambia• Pangaea Renaissance Securities… amongst others
FARMERS HOUSE PLC Developed Celtel/Zain/Airtel headquarters• Ordinary share issue – Rights Issue 2006 – Kwacha denominated rights issue; – Ratio 3:1; – Issued 32,059,434 shares @ K1,350; – Gross Subscription of K43.28 billion; – Occupied by Airtel; and – 15 year renewable lease.
FARMERS HOUSE PLCCeltel/Zain Head Office completed
Further FH property acquisitions• Secured a further 1 Ha. of land adjacent to Celtel/Zain/Airtel site;• JV with Standard Bank Properties (Pty) Limited;• Financed by debt and equity contributions• Secured Stanbic Bank Zambia as a tenant on long term lease;• Practical Completion given – 30th September 2011• Tenant fit-out almost complete
Corporate Bond rights offer transactionUS$15 million Corporate Bond Rights Offer• Priced at US$1.00 per Corporate Bond;• 12 year term• Coupon at a fixed yield of 8.75% per annum payable semi annually in arrears.• Tradable on LuSEBond finance used to secure and develop additional properties– Counting House Square, Abacus Square, Eureka ParksecuredFurther properties under consideration
Counting House SquareTenants: BDO, Spar Zambia, Ericsson, CIDRZ
FARMERS HOUSE PLC Transaction assessment – Abacus Square Unit Tenant Area Monthly Monthly rental (m2) rental in US$ per m² - US$Ground Floor Deloitte 904.20 20.00 18,084.001st Floor Konkola Copper 488.30 20.00 9,766.00 Mines1st Floor TBC 498 20.00 9,960.00Total p.m. 37,810.00Total p.a. US$453,720.40Board approved ValuationHurdle rate @ 12%Total Valuation US$3,781,000Actual anticipated 12.49%CaprateTotal Cost (incl. US$3,631,697 10% allow.)
Future property acquisitionsFarmers House has approved a property acquisition strategy that focuses on the following 5development nodes, as well as considering individual opportunities outside Lusaka: • Lusaka (Central Node) - development of properties subject to availability of firm tenants; • Lusaka (Addis Ababa Node) - demarcated by existing Zain/Stanbic properties, and potential acquisitions in that node; • Lusaka (Thabo Mbeki Node) - demarcated by the acquisition of Counting House Square, and Abacus Square; • Lusaka (Eastern Node) - demarcated by Chelston, Roma and Ibex Hill; and • Lusaka (Southern Node) -, demarcated by Baobab, Lilayi and Lusaka South multi facility economic zone. with acquisition of Eureka Park property purchase • Other properties outside Lusaka that provide the requisite return.
Farmers House market statistics Farmers LuSE market House Market cap (Mar 2011) US$’ 26.89 7,465 m Share price (Mar 2011) K 2,950 Earnings per share K 419.31 “Headline” EPS K 303.43 Price earnings ratio 7.04 12.97 “Headline” PE ratio 9.72 NBV per share K 5,464 Price to Book value 0.54 5.02 Dividend yield (at % 3.90 3.24 K2,950)Note: Per Stockbrokers Zambiabased on the FH Audited Financial Statements as at 31 March 2011
Farmers House market statistics LuSE Farmers Small Large ALSI House caps capsTotal market cap US$’m 26.89 64.54 1,624 7,465PE ratio Weighted average 7.04 8.62 10.56 12.97PBV ratio Weighted average 0.54 2.62 3.90 4.52Dividend yield Weighted average % 3.90 1.55 2.97 3.2 Note: Per Stockbrokers Zambia Small caps The 5 LuSE listed companies with the smallest market caps (Investrust; Cavmont; Bata; Pamodzi & AEL); and Large caps 5 largest market cap – Zain; Zambia Sugar; Lafarge, Standard Chartered & Zambrew (excludes Shoprite).
Farmers House Plc Audited Financial Performance Summary Income statement for periods 2008 2009 2010 2011 ended 31 March (US$’000) Average rate K/$ K3,950 K3,950 K4,120 K4,690 Income 1,742 3,065 4,258 4,785 Annual Income increase 21.6% 75.9% 38.9% 12.7% 5 year Income increase 3 fold Expenditure (986) (1,687) (1,823) (2.019) Net Operating Income 756 1,378 2,435 2,766 Annual Operating Income increase 102% 82% 76% 14% 5 year Operating Income Increase 7 fold Revaluation of investment properties 4,796 15,444 9,485 3,133 (IAS40)Net financing costs (incl. foreign exchange (455) 10,643 (7,473) (1,927) movements)Profit/Loss from equity accounted Investee (120) 342 69 Taxation (163) (633) (591) (219) Profit after tax 4 934 26 712 4 198 3 822
FARMERS HOUSE PLC Balance Sheet SummaryBalance Sheet forperiods ended 31 March 2008 2009 2010 2011(US$’000) Investment Properties 19,710 35,941 47,479 54,476 Inv. Prop under 5,343 0 0 127 construction Fixed Assets 702 1,156 1,135 1,021 Current Assets 3,878 1,785 9,036 5,859Other Long Term Assets 110 973 1,538 2,995 Total Assets 29,745 39,855 59,188 64,478Annual Increase in Assets 40% 34% 48% 9%5 year increase in Assets 3 fold Capital & Reserves 26,623 36,751 46,585 49,803 Non-Current Liabilities 2,133 1,853 2,304 13,156 Current Liabilities 989 1,251 10,299 1,519 Total Equity/Liabilities 29,745 39,855 59,188 64,478
Future property acquisitionsFarmers House has approved a property acquisition strategy that focuses on thefollowing 5 development nodes, as well as considering individual opportunities outsideLusaka: • Lusaka (Central Node) - development of buildings in the Cairo Road area subject to availability of firm tenants; • Lusaka (Addis Ababa Node) - demarcated by existing Airtel/Stanbic properties, and potential acquisitions in that node; • Lusaka (Thabo Mbeki Node) - demarcated by the acquisition of Counting House Square and Abacus Square, and potential acquisitions in that area • Lusaka (Eastern Node) - demarcated by Chelston, Roma and Ibex Hill; and • Lusaka (Southern Node) - with Eureka Park property purchase, demarcated by Baobab, Lilayi and Lusaka South multi facility economic zone. • Other properties outside Lusaka that provide the requisite return.
ZAMBIA – BRIEF BACKGROUND PRE – DEMOCRACY ERA:• Up until the early 1990s, the Zambian economy was described as a “Basket Case” by many commentators; World Bank and IMF had withdrawn support• Inflation had run away to well over 150%, and was still climbing• Foreign debt was approximated US $7 Billion (local debt was alarmingly high too!)• Foreign Exchange was in dire supply• Production of main export, Copper, had declined to below 200,000 MT per annum• Serious shortages of essential commodities
ZAMBIA – BRIEF BACKGROUND POST-DEMOCRACY ERA:• The early 1990s saw the introduction of plural politics (major players being UNIP, MMD, UPND, FDD)• Introduction of Institutional and Regulatory Reforms, Liberalisation of the economy, and the Privatisation of State Owned Enterprises followed the 1991 elections• Resurgence in the economy with GDP average annual growth of 6.5% in recent times• Copper production expected at 1,000,000 MT at the end of 2011• The MMD Government in power from 1991-2011• Patriotic Front’s (PF) Michael Sata inaugurated President of the 5th Republic on 23rd September 2011
ZAMBIA – BRIEF BACKGROUNDPF is expected to continue with KEY economicpolicies with a focus on:• No Exchange Controls• Encouragement of FDI, as well as local investments• Firmer Institutional and Regulatory Reforms• Tighter and better management of State Owned Enterprises• Renewed fight against corruption• Likely review of the operations of certain key industries – agro, mining, energy, tourism etc.,• Firmer application of labour laws• Improved application of public resources• Initiation of national development projects• Creation of jobs for the youth and further citizen economic empowerment
FARMERS HOUSE PLC ConclusionThe Board and management of Farmers House PLC thank you for your time and attention. We look forward to your support in the further development of Farmers House PLC.