There are moments in markets when a perfectly good business gets repriced for reasons only loosely connected to its underlying worth. It feels like Calgro M3 is having one of those moments.
Trading at just under 500c a share, with a market capitalisation of about R550m and on about three times trailing earnings, the stock is still priced as though the company were in distress. One look at the balance sheet makes clear that it is not. It is, by most honest measures, in a period of deliberate transition, building for a future the market is yet to credit.
Late 2024 brought a notable boardroom change. Wikus Lategan stepped down as CEO with effect from December 31 2024, while co-founder Ben Pierre Malherbe had already been appointed CEO designate and board member effective September 16 2024 to ensure a smooth transition. This was an internal handover to someone deeply familiar with the business. Even so, markets often punish uncertainty first and assess substance later.
The interim results for 2026, covering the six months to August 31 2025, came in soft on the headline income line. Earnings fell 17.7% to 83c per share, while headline earnings per share fell 17.9% to 82.86c from 100.87c in the prior comparable period. At face value, that looks like a business going backwards.
This is where context matters. The earnings decline is largely a function of capital front-loading into the Bankenveld District City project, a joint venture with Eris Property Group on a strategic land parcel near Sandton and Waterfall. Bankenveld is expected to yield more than 20,000 residential opportunities. Revenue recognition linked to parts of that infrastructure work is deferred, pending public sector agreements and phasing. The spend is now; the income comes later. It is not an ideal working capital dynamic, but that is how the industry works.
Below the headline, construction contracts rose 11.2% to R1.86bn. Gross profit margin held at 29.43%, still above the group’s historical target band of 20%-25%. NAV grew 6.41% to R15.82 per share. The liquidity ratio stood at 2.02. That is not the balance sheet of a company in trouble. The company’s NAV stands at R1.5bn, against a market capitalisation of about R550m. That is what a margin of safety looks like.
At a share price of just below 500c, Calgro is trading at about 0.32 times NAV on a growing book and at about 3.3 times trailing earnings on numbers that already reflect a softer interim period. The residential development pipeline remains extensive. Management has previously guided to a future pipeline in excess of 38,000 units, while the latest interim results show 2,589 serviced opportunities available for development and 871 residential opportunities under construction.
Western Cape projects such as Belhar and Scottsdene are positioned to contribute strongly in the second half, while bulk and link installations in Fleurhof and Jabulani are nearing completion. The pipeline breadth is real, and the contribution phasing is visible.
Calgro’s memorial parks division deserves more attention. For the interim period, the segment delivered cash collections of R51.64m, with lay-by cash collections increasing 22.27% to R14.9m. Platinum City Memorial Park has cleared approvals and is expected to provide more than 28,000 burial opportunities, with burials expected to commence in the last quarter of the 2026 financial year. The segment’s interim gross margin was 50.39%. It generates cash through property cycles and helps smooth the lumpier cash flows of large-scale residential development.
At current prices, management should view share repurchases as one of the highest-return uses of capital available. During the last reporting period, the group bought back more than 1.3-million shares at an average price of 500c per share for about R6.6m. In a thinly traded small cap, that matters both mechanically and symbolically. Recent executive share purchases suggest that insiders, too, see the value on offer. At about one-third of NAV, buybacks look like an unusually compelling capital allocation decision. Every rand deployed at these levels creates substantial value per remaining share.
South Africa’s interest rate is 6.75%, with prime at 10.25%, well below the tightening-cycle peak, and housing activity has begun to respond. BetterBond reported that home loan applications rose 14.6% year on year in the third quarter of 2025, the highest level since early 2022, helped by five consecutive repo rate cuts.
For Calgro’s core customer base in the affordable and grassroots affordable people’s housing segments, this really matters. As credit conditions improve, demand elasticity should work in the group’s favour, particularly in Gauteng and the Western Cape, where its pipeline is concentrated.
The investment case here is not complicated: a profitable, disciplined business with a growing NAV, to which it trades at a considerable discount, a substantial secured pipeline, above-target margins and a diversifying cash-generative annuity stream. The macro tide is improving.
What’s more, the buyback programme, modest so far, is placing some support beneath a share that, in IM’s view, deserves a materially higher rating. Patience is the price of admission, but on this evidence, it seems a reasonable one to pay.