Texaf Unlocking Hidden Value In Congolese Real Estate, Mining & Technology

Ahead of Texaf's Q3 FY23 trading update (10th November, 2023), we performed a full review of our investment case and re-modelled Texaf as a holding company. After having completed the exercise, we are confident that despite a bleak economic outlook, Texaf will continue to perform strongly due to its dominant position in the high-quality residential and office rental market in Kinshasa, highly stable tenant-mix, very low debt and net debt ratio of just 8.9% and 6.0% respectively (as of H1 FY23), and strong/rising dividend and dividend yield. Texaf's revenues from its real estate activities is expected to keep rising steadily due to the rental of new developments and an increase in the number of rentable units. Over the medium to long-term, initiation of work on the ‘Kinsuka Garden City' project will be a major catalyst for the stock should Texaf be able to partner up with large-scale developers either domestic or international. Added to this, the sandstone quarry should benefit from rising prices and the future infrastructural development to take place in the DRC. Finally, Texaf's investments in the Partech Africa Fund I & II have sown the seeds for a potential long-term relationship that Texaf could use to better understand the African VC space, gain access to the best-in-class investment ideas in the African continent, and co-invest alongside the GP in potential future African unicorns. We currently estimate NAVps and TEVps to be €60.1 and €49.8 thus implying a discount of 45.4% and 34.1% compared to the last close price. After having applied a 10.0% group-level discount to our TEVps, we reiterate our BUY rating and raise our TP from €44.0 to €45.0.