Trematon Capital’s Arnold Shapiro expects impressive growth ahead
Trematon Capital Investments MD Arnold Shapiro on Monday welcomed the group’s strong annual results, attribuing the nearly 1,094% jump in headline earnings per share to strategic shedding of mature assets and diversifying into education and property.
Shapiro said the group, which has been listed for 20 years, has developed from a small, value-focused investment business into a large, diversified company.
The Western Cape-focused company released financial results for the twelve months to August 2017 that showed profit up to R291.8m compared with R49.5m for the year to August 2016, resulting in an increase of 488% in earnings per share to 134c, or a 1,094% increase in headline earnings per share to 20.3c.
Its net asset value per share increased 53% to 391c and intrinsic net asset value per share increased 17% to 431c, said Shapiro.
"We are very pleased by the results which reflect increased profits across the group supported by the consistent performance of our core operations and focused management. The last few years have been transformative for Trematon.
"We have aggressively recycled capital by realising some of our mature assets and investing in assets with better growth potential. Strategic initiatives such as disposing of some of our Club Mykonos assets, diversifying into education through Generation Education and expanding internationally with our recent investment in ASK Partners have the potential to dramatically reshape Trematon’s net asset value and growth trajectory over the next few years," he said.
He said three of the company’s businesses were promising very strong growth. These were Aria Property Group, Generation Education and Resi Investment Group.
Aria Property has focused on improving the quality of its portfolio by purchasing institutional grade assets mostly located in the Western Cape. During the year, Aria concluded the purchase of a R614.1m portfolio of commercial, retail and industrial properties from Redefine Properties. One of the properties, Pier Place, located in the Cape Town CBD, was purchased vacant for R170m and was 78% let at the end of the period.
Aria contributed R180.8m, up from R38.4m in 2016, to group profit, largely due to improved operations and fair value adjustments.
Generation Education acquired six school sites of which four will be operating by January 2018. The Sunningdale and Hermanus campuses have been expanded to include a middle school. It achieved a small profit despite employing new teachers and investment in training and preparation for the 2018 school year.
"Generation Education commenced operations in January 2016 and the model has already proven to be successful. We are on track to meet our targets of 10 school sites by the end of 2018 and 2,400 pupils within three years through the purchase or development of new schools," said Shapiro.
Resi Investment shifted its focus to new-build developments or redevelopments. This has enabled it to continue to perform well, contributing R28.3m to group profit. Its latest development, a joint venture, is in Sanddrift, Western Cape.
Resi’s portfolio comprises more than 600 residential units in the Western Cape. It has accumulated significant bulk in key nodes which will, in time, be developed into high-density, safe, comfortable and efficient housing units in the high-demand market sector. Resi’s business includes the selective sale of investment units to optimise overall returns.
Trematon also invested in ASK Partners in the UK. ASK aims to provide innovative structured financing to property developers in the UK. Trematon invested R72.4m in the business.
ASK refinances each transaction via a syndication process whereby 90% of the loan value is syndicated to high net worth individuals and 10% is retained by ASK, which ensures efficient recycling of capital. As the investment was made towards the end of Trematon’s financial year a small net profit of R0.4m was earned for the period.