Turnstar beats economic slowdown
Turnstar Managing Director, Gulaam Husain Abdoola has reported that the property market has remained relatively strong despite the recent economic slowdown. But a drop in the demand of residential houses is a major concern in the industry.
Abdoola has said the Botswana property market experienced varied challenges with some sectors performing better than the others. Reporting on the performance of Turnstar during the year 2016, the Managign Director said during the past year, the industrial sector continued to be stronger than the other market segments.
He indicated that the commercial office space has been the most challenged with a high number of commercial properties being introduced to the market, especially in the Central Business District (CBD) during the past years. “The drop in demand for residential housing is a major concern,” he emphasised.
Abdoola says many new retail malls are in the pipeline and it will be a challenge for existing malls and the new entrants to share the same “pie”. However, he points out that Turstar’s property portfolio shows attractive future prospects supported by strong underlying contractual cash flows, escalations and a healthy lease expiry profile.
“Turnstar’s portfolio has limited exposure to the Botswana office sector, which is currently in a state of oversupply. The group has exposure of 75% by value, and 72% by GLA, to the retail sector which is mainly comprised of large listed or large national companies,”he writes in his report. He says the portfolio has a healthy lease expiry profile. Approx. 53% of leases expire in 2019 and beyond (by GLA). The leases expiring in 2017 and 2018 are routine renewals and the vast majority of them will be renewed at current market terms.
Abdoola reflects on 2016 and points out “This has been both, a sad and prosperous year for Turnstar. On the 27th November 2015, our Chairman, Mr Cuthbert Moshe Lekaukau passed away. Mr Lekaukau was the Chairman of Turnstar from its inception. His dedication and wise counsel was invaluable and his passing has left a void. He is missed by the entire Turnstar team. The Board is currently evaluating various options to fill the Chairman’s position.”
The Turnstar Managing Director is however pleased that the Company performed extremely well as is evidenced by the results. He points out that the Tanzanian subsidiary, Mlimani Holdings is becoming more significant each year, in terms of contribution to the Group. The BWP/USD exchange rate is also a favourable factor. “At Mlimani, the bulk land has appreciated significantly, and this is reflected in fair value gains.”
Turning to one of their star malls in Gaborone, Abdoola says the construction work at Game City is nearing completion. He observes that it has been extremely difficult to construct and carry out renovations to an operating mall. “We have and continue to do everything possible to minimise the disturbance and inconvenience and are thankful for the cooperation of tenants and customers. However, we assure you that the improvements will be well worth the wait and inconvenience. Mlimani City construction is also well underway and is scheduled to be completed by the end of this year,” he says.
Turnstar is currently in the process of carrying out a feasibility exercise on the hotel project at Mlimani and will reach a decision on its viability, shortly. Turnstar intends issuing a USD 30 million, 7 year convertible bond in the market. These funds will be raised to fund the construction of the Mlimani City developments. This form of funding should boost the profitability and cash flow of Turnstar.
Abdoola says Africa still remains to be further explored for opportunity, and they are very keen to look at countries they believe they can do business in. “Several Organisations and Governments are in discussions with us to consider various developments. Mlimani Holdings has a proven track record and has turned out to be a successful story in terms of profitable partnerships. However, we maintain a conservative approach and will undertake projects which are within the capacity of Turstar.”
The Group continued to post pleasing results for the year, despite challenging market conditions. “The share price has performed beyond expectations and we are very pleased that the value in Turnstar is now being recognised.” According to Abdoola, Turnstar remained the most diversified property Company on the BSE with property assets valued at over P2 bn. The Group’s Tanzanian subsidiary, Mlimani Holdings Limited, generates US Dollar revenue. Turnstar is a fully integrated internally managed property company, employing 125 staff.
Group revenue increased by 5% from the prior year, to P247.6M. The rental income from the Company’s Botswana portfolio decreased by 4.2% due to the sale of Fairgrounds office park property, whilst the rental income from the Tanzanian portfolio increased by 16.7%. Approx. 49% of the Group’s total rental income, is in US Dollars.
TANZANIA
Tanzania continues to be one of the fastest growing economies in sub Saharan Africa. The economic growth is spearheaded in the Gas, petroleum, mining, tourism, agriculture and manufacturing sectors. The retail and industrial property sectors in particular are flourishing. The Government is focussed on growing the economy and welcomes foreign investment.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.