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Calgro M3 builds on housing supply gaps

CALGRO M3, the best-performing stock on the JSE over the past five years, expects revenue and earnings growth until at least 2018 as demand for lower-priced houses outpaces supply.

The housing developer had a R19bn project pipeline over the next decade, and was in talks to as much as double the size of some developments under construction, CEO Ben Pierre Malherbe said this week. The company's annual profit has gained every year since 2011.

Calgro M3 is benefiting from government efforts to subsidise housing for poorer families, while demand for affordable homes is rising from families newly eligible for mortgages.

The company operated in a "huge" market with little competition, Mr Malherbe said. "For the next three years, there's no let-up, we'll keep growing."

The stock has advanced more than 4,900% since June 2010, the best performer on the JSE in that period. It is up 23% this year. Calgro M3 is valued at R2.3bn. The company prefers to own the land it develops, and controls costs by employing its own town planners and architects, Mr Malherbe said.

Infrastructure was paid for and owned by local authorities and the firm would not build anything that had not been sold in advance. Projects generally broke even after 50% completion. Existing residential projects could be funded from cash flow, Mr Malherbe said. Demand was probably strong enough to double the pipeline in a year if the company chose to, yet Calgro M3 was wary of "uncontrollable growth", he said. "We must make sure that whatever we take on, we can do."