Monumentalist

Role: Senior Equity Analyst, JSE Desk Subject: Investment Analysis â Spear REIT Limited (SEA:SJ) Date: 12 January 2026

Here is the comprehensive investment analysis for Spear REIT Limited.

Step 1: Data Gathering & Source Verification

I have utilized the following primary sources for this analysis:

Interim Results (HY2026): Unaudited Consolidated Interim Results for the six months ended 31 August 2025.
Source: Spear REIT HY2026 Results PDF
Annual Financial Statements (FY2025): Audited Results for the year ended 28 February 2025.
Source: Spear REIT FY2025 SENS Announcement
SENS Announcements (L12M): Reviewed specifically for the "Acquisition of Consani Industrial Park" (July 2025) and recent Director Dealings (Dec 2025).
Source: JSE SENS Archive

Step 2: Metric Extraction

Market Cap: R5.12 Billion
Note: Spear has successfully graduated from "small cap" status into the mid-tier REIT space, boosting visibility.
Dividend Yield (L12M): 7.0%
Calculation: FY25 Final Dividend (41.74 cps) + HY26 Interim Dividend (41.59 cps) = 83.33 cps / Current Price (1190c).
Comment: While lower than some peers (who yield 10%+), this yield is higher quality due to the 95% payout ratio and consistent growth.
Liquidity Check: Moderate Risk
Data: Average daily value traded (3-month) is approximately R2.8m - R3.5m.
Analyst Note: While improved since their inclusion in the SAPY index, liquidity remains constrained for large institutional blocks. Retail investors should utilize limit orders.
P/E Ratio (P/DIPS): 13.6x
Metric Adjustment: For REITs, we use Price to Distributable Income Per Share (DIPS).
Calculation: Price (1190c) / TTM DIPS (~87.5c).
Net Asset Value (NAV): R12.10 (Tangible NAV)
Price-to-NAV: 0.98x (Trading at a ~2% discount to NAV).
Significance: Spear is one of the few SA REITs trading almost at parity with its NAV, signaling high market confidence in its asset valuation.

Step 3: Operational & Strategic Analysis

Business Overview

Spear is the only regionally focused REIT on the JSE, investing exclusively in the Western Cape. Their strategy is "hands-on" asset management in a specific geography (Cape Town metro, Paarl, George) rather than spreading thin nationally.

Portfolio Mix (by GLA): Heavy weighting towards Industrial (63%), followed by Commercial Office (26%) and Retail (11%).
Differentiation: They aggressively roll out solar PV (currently generating ~12MW+), reducing tenant occupancy costs and securing power supply.

Performance Trend

Growth: The trend is Positive. HY2026 DIPS grew by 5.21% year-on-year. This is inflation-beating growth in a sector where many peers are showing flat or negative earnings.
Operational Health: Collections are at 98.96% and Occupancy is stable at 95.03%.
Acquisitions: The recent R437m acquisition of Consani Industrial Park (July 2025) is accretive and reinforces their industrial dominance.

Sector Context

Macro Factor: "Semigration" & Municipal Resilience. Unlike the Gauteng-heavy REITs struggling with municipal decay and office vacancies, Spear benefits from the "Semigration" trend where businesses and families move to the Western Cape. This supports a structural floor for office rentals in Cape Town that does not exist in Sandton or Johannesburg CBD. Furthermore, the anticipated interest rate cutting cycle in 2026 will directly lower Spear's cost of debt (currently ~9.3%), widening their distributable margin.

Step 4: The Verdict

Bull Case (Why Buy)

Defensive Quality & Growth: You are buying the "Western Cape Premium." Spear avoids the municipal risks plaguing the rest of SA. With 63% industrial exposure and a management team that consistently hits guidance (4-6% growth forecasted for FY26), this is a "sleep well at night" stock.

Bear Case (Why Sell)

Valuation Ceiling: Trading at 0.98x NAV means the stock is "fully priced" relative to peers like Redefine or Growthpoint, which trade at 30-40% discounts. If the "Western Cape Premium" narrative falters, or if Cape Town office demand cools, the stock has further to fall than its cheaper peers.

Fair Value Estimate

R12.50 â R13.00

Justification: A 5-10% premium to NAV is warranted given the superior growth profile and lower risk of the Western Cape region.

Final Rating: BUY (Long Term)

Rationale: While the valuation is not "cheap," quality rarely is. Spear offers a growing income stream (7% yield + 5% growth = ~12% total return) with significantly lower downside risk than the broader SA property sector.

SPEAR REIT LIMITED