- Transaction Capital has released interim results for the six months to March 2022. Core headline earnings per share (HEPS) is up 28% and WeBuyCars continues to shine a light on the group’s prospects. I love this company and hold it in my portfolio. I’ve written a feature article here to give more details.
- Santova has been riding the wave of supply chain shortages and pricing increases in the aftermath of the pandemic. In the year ended February 2022, HEPS increased by a massive 169.4% to 126.81 cents. No dividend has been declared as the group is focused on reinvesting in the business, a strong sign of the opportunities it is seeing. Santova also bought back 4 million shares in this period, contributing 19.9% to the increase in HEPS. Offshore operations contributed 82.6% of earnings in this period, significantly lower than 91% in the prior period as the local operations recovered. Santova’s share price has rallied over 42% this year, a really strong showing for this interesting company.
- RFG Holdings (Rhodes Food Group) took a 19% knock on the market after releasing a trading statement for the six months to March (well, technically the 3rd of April). At first blush, it’s not clear why as HEPS was 30% to 35% higher. Normalised HEPS strips out restructuring costs and (more importantly) the insurance settlement for lost profits in lockdown. Normalised diluted HEPS only inched upwards by between 1% and 6% as input cost pressures hit the business. Cans, raw materials and logistics costs are increasing sharply and the group was unable to fully recover this impact through price increases to customers.
- Indluplace Properties closed 11.9% lower after releasing results for the six months to March 2022. The residential-focused REIT reported a 4% drop in revenue and 18.2% drop in HEPS. Net asset value (NAV) per share fell by 10.8% to 698.51 cents, so the closing price of 275 cents is a discount of around 60% to the NAV. The positive element of the result is that the interim dividend has made a return, with 13.16350 cents per share declared. This puts the group on an annualised yield of 9.6% at the current share price, which should immediately tell you why there is such a large discount to the NAV. If it traded at NAV, the yield would be unacceptably low.
- Shoprite has announced a B-BBEE employee trust transaction that will increase effective Black Ownership in Shoprite Checkers from 13.5% to 19.2%. There’s an important nuance here that you may have noticed: the group is talking about ownership in Shoprite Checkers (the SA subsidiary), not Shoprite Holdings (the listed group). This is typical in such empowerment structures, as there is usually no value to the group in effectively subsidising Black Ownership as defined in its businesses outside of SA’s borders. Interestingly though, employees in the group outside of SA will receive a cash bonus payment equivalent to that received by local staff under this scheme and based on similar rules. Distributions to beneficiaries will be based on minimum years of service and the position held. As 97% of employees are Black and 66% are Black Women, it seems as though all employees will qualify i.e. not just Black employees as defined in the Codes. The only exclusion is employees who receive share-based compensation as part of their packages. This deal comes at a significant cost, estimated to be 2.7% of group headline earnings on an annual basis. Although this is pitched as a B-BBEE deal, that is a function of the staff demographics rather than the structuring of the deal.
- Nampak’s share price had a rollercoaster day where it traded as high as R3.22 in the morning and eventually closed at R2.76, flat for the day. An early-morning trading statement drove the activity, with an expectation of HEPS growth of between 88% and 107% to between 33.0 cents and 36.5 cents for the six months ended March 2022. This is an annualised Price/Earnings multiple of around 4x but I would tread very carefully here, as you need to do deep digging into the balance sheet and the debt covenants before having a punt at Nampak. The share price is down 28% year-to-date and is flat over the past 12 months.
- Ninety One fell 3.7% after releasing results for the year ended March 2022. Although the asset management firm achieved record earnings and assets under management (AUM), the announcement noted that conditions worsened in the final quarter. When global markets are taking pain, asset managers take pain along with them as fees are based on AUM and those assets are worth what the market says they are worth. Net inflows of GBP5 million were achieved in this period, which is a key measure of how clients perceive Ninety One and how the funds are performing vs. the relevant benchmarks. HEPS increased by 27% and the dividend per share increased by 16%. The share price is down 20% this year.
- Furniture retail group Lewis has released a trading statement for the year ended March 2022 that tells a good story. HEPS is expected to be between 30% and 40% higher, demonstrating the value creation potential of a share buyback programme when a company has traded at low multiples. Effectively, the company buys its own shares back at a great price and creates value for remaining shareholders by turbocharging earnings growth. Operating profit before impairments and capital items was only 2% – 6% higher.
- Diamonds could be an investor’s best friend this year, with Anglo American announcing Cycle 4 diamond sales by De Beers of $604 million. This compares favourably to Cycle 3 at $566 million and is much higher than Cycle 4 in 2021 at $385 million.
- In case you’ve always wondered what big ships cost, Grindrod Shipping announced the sale of Matuku (a 2016-built medium range product tanker) for $30 million. In a neat little trade, Grindrod will first exercise the option to buy the tanker for $25.4 million under the existing lease. The company is also buying 2015-built supramax bulk carrier IVS Pinehurst for $18 million. The charter on 2014-built supramax bulk carrier IVS Crimson Creek has been extended at a rate of $26,276 per day. So there we have it – now you know what they cost!
- Deneb Investments released a trading statement for the year ended March 2022. HEPS is expected to be 30% to 50% higher, coming in at between 30.22 cents and 34.86 cents. The stock closed 25% higher at R2.50 per share, a Price/Earnings multiple of around 7.7x at the mid-point of the earnings guidance.
- eMedia Holdings, the owner of e.tv, eNCA, Openview and YFM amongst other assets, has reported a strong result that saw increased share of the prime time market and 29% growth in television advertising revenue in the year ended March 2022. All those Anaconda reruns are clearly paying off, with HEPS from continuing operations approximately tripling to between 63 cents and 67 cents. The share price closed more than 15% higher on the back of this update.
- NEPI Rockcastle released a business update covering the recent months of operations. The group will invest EUR37 million in solar PV at 30 shopping centres, reducing the carbon footprint and stabilising energy costs. Although the fund operates in Central and Eastern Europe, the war in Ukraine hasn’t impacted operations as there are no properties in the fund in either Ukraine or Russia. Sales in malls in February and March exceeded pre-pandemic levels and net operating income in the three months to March was up 32% year-on-year. Of concern is property operating expenses which jumped 47% as a result of much higher energy costs, necessitating the investment in solar. Liquidity is strong and the loan-to-value ratio was 32.5% at the end of March. Previous earnings guidance for 2022 has been maintained.
- Investec Property Fund has released results for the year ended March 2022. Distributable income per share increased by 10.8% and the final dividend is up 10%. Loan-to-value has improved from 40.5% to 38.2%. Net asset value per share is up by a modest 2% and values of SA properties have stabilised. The fund expects low-to-mid-single-digit growth in distributable income per share in FY23. Notably, the CFO is leaving the group to spend more time with her family and the previous CFO as been appointed as interim CFO while a successor is found.
- Newpark REIT is a small property fund that owns four buildings, including the JSE Building and 24 Central, an adjacent mixed-use property in Sandton where I spent many a Friday evening after work in my banking days. In the year ended February 2022, revenue fell 1.6%, funds from operations increased 16.8% and the dividend increased by 17.63%. The loan-to-value ratio is 33.6% which is healthy. The share price of R3.79 is a discount of 55% to the net asset value per share of R8.45. As the portfolio has considerable office exposure, the value went the wrong way in the current environment. The total dividend for the year was 46.91 cents, so Newpark is trading on a yield of 12.4%.
- Emira has agreed to dispose of its 49.9% stake in Enyuka Prop Holdings for R638.6 million. This is a joint venture that owns 24 retail centres in lower-LSM (i.e. lower income) areas in South Africa. To help facilitate the deal, Emira will provide a R100 million vendor loan that bears interest at prime plus 3% for 36 months. The rate goes up if the debt isn’t repaid by then. The asset was carried in Emira’s books at a value of R624.15 million at the end of December 2021. The deal is too small to trigger shareholder approval.
- Master Drilling deferred its dividend declaration in March based on uncertainty around the impact of the war in Ukraine. Clearly feeling more confident, the company has declared a dividend of 32.5 cents per share.
- Mining group Tharisa has exercised its farm-in option to acquire a controlling interest in Karo Mining Holdings. As this is a small related party deal, an independent expert needed to opine on it. Mazars Corporate Finance has given its view that the deal is fair to shareholders of Tharisa.
- Property mogul and Lighthouse Properties director Des de Beer has bought more shares in the company via one of his associated entities. The total value of the purchase was R728k.
- Stefanutti Stocks is implementing a restructuring plan in a fight for its survival. The construction company is disposing of certain operations and is hoping to conclude the sales in the next 12 months. For the year ended February 2022, the headline loss per share for continuing operations was between -60 and -90 cents i.e. related to the businesses it plans to keep. The group headline loss per share is between -80 and -110 cents. In the civil claim by City of Cape Town related to Green Point Stadium, each construction party has agreed to make an annual payment of R10.5 million for the next three years, along with a commitment to social investment projects in the Cape Town district. This group’s share price collapsed shortly before the pandemic and has been clawing back a recovery since then.
- Premier Fishing and Brands Limited as well as African Equity Empowerment Investments Limited are fighting to keep their bank accounts open with Nedbank. With Sekunjalo (Iqbal Surve) as the common link, the companies had to go to the Equality Court to try and stop Nedbank from cutting ties with them. I’ve never heard of an interim-interim interdict before, but that is what the companies have achieved to keep the accounts open pending the outcome of the interdict hearing that took place on 19th April 2022. For now at least, the bank accounts are still open.
Hi there. Thank you for this exciting publication. Can you please give me your view on the SA cannabis industry and Labat Africa as a prospect in this industry as they made a lot of strategic aquisitions of late
This is excellent briefing… may we please also receive this via email daily, similar to the spiced up Ghost Mail please. Alternatively, a “standing link” to this in the Ghost Mail will do.
Hi Phil – Ghost Bites is a regular inclusion in the daily email – there will always be a “standing link” to click and view the full Bite on the website (plus access to the archive of those published before)
I would like to get your view on long-term growth of Orion Minerals and Purple Group
Hi Daniel! On Purple, I think the long term view on the business is promising. With a large user base, the team has the opportunity to increase adoption of financial products as well as volumes through the business. Of course, it’s easy to say this stuff and implementation is what will matter! I personally don’t hold Purple shares as I find the valuation too demanding in this environment. On Orion, I’m afraid exploratory mining just isn’t an area of expertise for me. From what I’ve read and understand, there seems to be a lot of positive momentum in the company.