Afrimat’s integration of Lafarge is complete (JSE: AFT)

Now they need construction activity to pick up in South Africa

As a sign of how much of the GNU exuberance has washed away (as I’ve been warning, SA Inc share prices ran far too hard ahead of earnings), Afrimat’s share price is only 2.6% up over 12 months. South Africa desperately needs infrastructure investment and construction activity to pick up. Hopefully, 2025 will see that happen.

In the meantime, Afrimat has positioned itself accordingly by completing the integration of Lafarge. We know this because Pieter de Wit moved from the CFO role to being the integration officer for the duration of the integration – and now he’s back in his old seat.

Notably, Andre Smith filled in as deputy CFO for that period and has now been permanently appointed to that role. Afrimat is building bench strength along with a better quality business.

Now, they just need the macroeconomics to play ball!

Strong overall growth at Karooooo, but as always – watch those Cartrack margins (JSE: KRO)

The share price is up a whopping 85% in the past 12 months

Karooooo has been consistently putting in strong numbers. They are a focused operation these days, owning 100% of Cartrack and 74.8% of Karooooo Logistics. Together, those businesses have produced adjusted earnings per share growth of 21% in the latest quarter.

Cartrack is still growing subscribers at a high rate, up by 17%. Revenue increased by 14% in rand or 19% in dollars, with the major move in the rand in the past year playing a role here. The metric that sometimes raises eyebrows is operating profit margin, as Cartrack’s operating profit only increased by 7%. Margins thus contracted from 32% to 30%, which investors will need to keep an eye on. Sales and marketing expense growth of 32% looks to be the main culprit, although it’s best to view these things over several quarters to see the real trend in the business playing out. Over nine months for example, Cartrack’s operating margin has actually increased from 29% to 30%.

Over at Karooooo Logistics, there’s not much margin expansion despite the low base of just 8% operating margin for the quarter. Delivery-as-a-service revenue grew 20% and operating profit was up 24%. This remains a very small part of the business, with operating profit of R9 million compared to Cartrack at R316 million for the quarter. Encouragingly, over nine months, operating margin has moved from 9% to 10%.

When Karooooo was going through a tough time in the aftermath of Covid, I reduced my stake but didn’t sell it entirely as I believed there was still optionality in the business. Although I obviously wish I hadn’t reduced at all, it was prudent at the time. Retaining a portion was the right call and a useful learning opportunity about hanging onto exposure when something can still generate great returns if a few issues are resolved.

Being able to tell the difference between long-term problems and short-term headaches is vital in the markets.

Stor-Age is sorting out a related party headache – and expanding the Parklands facility (JSE: SSS)

This facility is in a high density area and the expansion makes sense

Stor-Age has a relationship with a company named MSH that covers construction and refurbishment services. MSH is an associate of the executive directors of Stor-Age and thus a related party to the fund. This situation will be addressed soon, as the directors are disposing of their interests to the staff of MSH in a deal expected to be completed by 31 March 2025.

In the meantime, it’s still a related party, hence they’ve disclosed MSH’s involvement in the substantial expansion of the Stor-Age property in Parklands. The terms have all been confirmed as market-related, so the actual involvement of a related party isn’t a big deal here.

If anything, it’s more interesting to note that they will be investing a further R26.2 million in the Parklands property, expanding it considerably over four floors. I know the area well and there are tons of people who live on that side of Cape Town, so it makes sense to do this.

Nibbles:

• Director dealings:
  • A director of the software subsidiary of Capital Appreciation Limited (JSE: CTA) – the subsidiary that has been really struggling lately – sold share awards worth R644k. The announcement isn’t explicit on whether this is only the taxable portion, so I assume it isn’t. Also, if a director of the broken part of the business is selling shares, that’s a genuinely bearish signal in my books.
  • A director of iOCO (JSE: IOC – formerly EOH) has bought shares worth R234k.

• Vodacom (JSE: VOD) and Remgro (JSE: REM) are still keeping the dream of the Maziv fibre deal alive as they work through the regulatory hurdles. The longstop date has been extended once more from 15 January to 31 January.

• AYO Technology (JSE: AYO) has experienced yet another delay in the release of financials for the year ended August. They will now only be released by 31 January (in theory).