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TEXTON PROPERTY FUND LIMITED

TEX JSE Listed
Market Cap
~R1.32 Billion

Investment Analysis: Texton Property Fund Limited (JSE: TEX)

Date: 14 January 2026 Analyst: Senior Equity Desk, JSE

Step 1: Data Gathering & Source Verification

I have utilized the most recent financial disclosures available as of January 2026.

  • Annual Financial Results (Year Ended 30 June 2025): Released 26 September 2025.
  • Source File: Audited Financial Results & Dividend Declaration 2025

  • SENS Announcement: Annual Results Announcement

  • Key SENS Activity (L12M):

  • 26 Sep 2025: Declaration of Return of Contributed Tax Capital (CTC) of 63.74 cents per share.
  • May 2025: Payment of Special Dividend (20.13 cents) and Return of CTC.
  • Strategic Action: Ongoing disposal of non-core assets in the UK and South Africa to fund capital returns and debt reduction.

Step 2: Metric Extraction

  • Market Cap: ~R1.32 Billion
  • Calculated as: ~330m shares in issue × R4.01 share price (Last Traded Price).

  • Note: The price can be volatile on low volume; it traded at 356c just days ago.

  • Dividend Yield (L12M): >20% (Distorted by Capital Returns)

  • Recent Distributions: Texton is actively returning capital to shareholders. In the last 12 months, it declared a Final distribution (CTC) of 63.74 cents (Sep 2025) and a Special Dividend of 20.13 cents (May 2025).
  • Effective Yield: On a price of ~400c, the 63.74c distribution alone represents a ~16% yield.

  • Crucial Context: These are largely Returns of Capital derived from asset sales, not sustainable operating income.

  • Liquidity Check: HIGH RISK (Fail)

  • Average Daily Volume: Extremely low. Frequently records Zero Volume days.

  • Status: Illiquid. This stock is a "roach motel" for large investors—easy to get in, very hard to get out without moving the price.

  • P/E Ratio: N/A (Metric Distorted)

  • HEPS: Reported Headline Earnings Per Share was only 0.61 cents (down 75%), heavily impacted by fair value adjustments and disposal accounting. A P/E calculation here (approx 650x) is meaningless.

  • Net Asset Value (NAV): 574.61 cents per share

  • Reported: As of 30 June 2025.
  • Price-to-Book: 0.70x (Trading at a ~30% discount to NAV).

Step 3: Operational & Strategic Analysis

Business Overview Texton is a diversified REIT with a portfolio split between South Africa (Commercial/Retail) and the USA/UK (Indirect investments).

  • Strategy Shift: The company has pivoted from being a traditional property holder to a "Capital Opportunity" fund. It is aggressively selling direct properties (especially in the UK) and reinvesting into high-yield credit, indirect offshore vehicles (like Blackstone REIT), or returning the cash to shareholders.

Performance Trend (FY2025 vs FY2024)

  • Revenue: Contracting. Property revenue fell 4.8% to R259.9 million as assets were sold.
  • Distributable Earnings: Down. Distributable income per share dropped 7.6% to 24.76 cents.
  • Balance Sheet: Strengthening. The disposals are being used to pay down debt. LTV (Loan-to-Value) improved to 25.3% (from 27.4%), making it one of the most conservatively geared funds in the sector.

Sector Context

  • Macro Factor: The "Discount to NAV" Trap. Small-cap property funds in SA trade at massive discounts to NAV because they lack liquidity. To unlock this value, funds like Texton are effectively liquidating themselves slowly—selling buildings at ~100c on the Rand and buying back their own shares (or paying dividends) at ~70c on the Rand.

Step 4: The Verdict

Bull Case (Buy Rationale) The Arbitrage Play. Texton is a value unlock story. You are buying R5.74 of assets for R4.00. Management is proving they are willing to sell assets and hand the cash back to you tax-efficiently (via Capital Reductions). If they liquidate the entire portfolio at reported book value, you make a 43% return from current levels.

Bear Case (Sell Rationale) The "Melting Ice Cube." As Texton sells its best assets to pay these massive dividends, the remaining portfolio ("the stub") may be of lower quality or harder to sell. Furthermore, the extreme illiquidity means that if the market turns, you cannot exit. You are locked in for the ride until management decides to sell the next building.

Fair Value Estimate R4.60 – R5.00

  • Methodology: Target price based on narrowing the discount to NAV to 15% (giving credit for the high cash returns).

Final Rating: SPECULATIVE BUY Strictly for patient retail investors who understand liquidity risk. Do not allocate capital you might need in a hurry. The "Buy" is predicated entirely on the continued return of capital through special dividends.

AI Generated Analysis Last Updated: 2026-01-14