- Sun International had such a tough time during the pandemic. Casinos are places for bad decisions and good memories, which isn’t the mood that anyone was in while wearing masks. There are already strong signs of life in the numbers for the first five months of this year. With things back to normal and people frothing to get out there and have some fun, the future looks bright for Sun. I dedicated this feature article to the company’s capital markets update.
- Grindrod is proof that every dog has its day. The share price has shot the lights out this year, having done almost nothing in the prior year. The value unlock strategy is part of it, but so is the incredible growth being seen in the port and terminals business in Mozambique. To learn more about why Grindrod wins when Transnet loses, read this feature article.
- Nedbank is doing a great job of keeping the market updated with its performance. After releasing an update covering the four-month period ended April 2022, there’s now a pre-close update that adds the performance from May into the mix. You may be interested (or saddened) to learn that the bank’s interest rate forecast is a 100bps increase to a prime rate of 9.25% by the end of the year. Average interest earning assets increased by low-to-mid single digits, with retail and business banking growing faster than corporate and investment banking, which has seen moderate loan demand. The important thing is that the credit loss ratio is expected to be within the 80bps to 100bps range this year, which means the bank can enjoy the net benefit of higher interest rates. Non-interest revenue is up by “early double digits” which is a strong driver of return on equity (ROE). Expense growth is under control, which means positive JAWS i.e. expansion in operating margin, as income growth is faster than expense growth. Nedbank’s share price is up around 23% this year.
- Hot on the heels of the optimisation study related to the Kola asset in the Republic of Congo, Kore Potash has announced that it has signed a heads of agreement for the construction of the project. A heads of agreement (sometimes called a heads of terms) simply sets out the most important elements of a relationship, allowing the parties to reach consensus before moving to the detailed legal drafting stage. Lawyers just love it, as it means they get paid even more for the same deal. SEPCO Electric Power Construction will build Kola, allowing it to produce Muriate of Potash over an initial 31-year life. I realise that this sounds like something from Snape’s class in Harry Potter. It will take 40 months to build at a capital cost of $1.83 billion. The Summit Consortium has reaffirmed their commitment to pay for this wizardry.
- Motus is strategically expanding its aftermarket parts business and the best way to do this quickly is through acquisitions. The company is now trading under a cautionary, after notifying the market that it has made an offer to acquire 100% of an aftermarket parts operation. There’s no certainty at this stage of a deal and no indication of transaction size either. The company does note a potentially “material effect” on the share price, so this suggests that it is a meaty deal.
- Hudaco Industries has published a trading statement for the six months ended May 2022. Headline earnings per share (HEPS) will be between 845 and 870 cents, which is between 23% and 27% higher than the comparable period last year. The share price is R145.65 so this is an annualised Price/Earnings multiple of around 8.5x.
- Spear REIT has given a quarterly update for the three months ended May 2022. The fund is focused on the Western Cape, which is the province you currently want to be investing in. Rental reversions have improved slightly to -4.31%, a number that many can only dream of right now. Importantly, Spear is seeing an uptake of vacant office space amid a general return to offices by businesses. The loan-to-value (LTV) ratio of 38.33% is far lower than 45.34% 12 months ago, demonstrating Spear’s steps taken to achieve a solid balance sheet. Around 68.6% of debt is fixed in nature, so there is exposure to rising interest rates that investors need to consider. Spear deserves its reputation as a solid operator.
- Etion Limited is selling its Etion Connect business in what is effectively a management buyout, as the acquirer is a new entity funded by a third party with the executive management of Etion Connect as shareholders. The value for the deal has been announced as R71.5 million. Remember, the group is also in the process of selling Etion Create. It is effectively selling off all assets and shutting down, giving excellent returns to value investors along the way who spotted the opportunity. The profits after tax in this business were R32.6 million in the last financial year, so management is paying a multiple of barely 2.2x for the business. There’s also up to R13.5 million in cash and receivables (mainly VAT) being retained by Etion.
- In good news for the mining sector, Impala Platinum has signed a five-year wage deal with AMCU. The deal is effective from 1 July 2022 and gives an annual increase of 6.5%, which seems fair under the current inflationary environment. The deal was achieved without any mediation by third parties, which is encouraging. Certainty is good for everyone involved, as the company can build this into its financial planning and the workers know that they don’t need to go through the difficulties of potential labour action.
- As I’ve covered previously in this article, Orion Minerals is in the process of an extensive capital raising plan with institutional and retail investors. The latter can participate via the company’s Share Purchase Plan, which opened on Tuesday and will close on 5th August. It’s great to see a company using our local exchange in the way it was actually intended: as a capital raising platform!
- Accelerate Property Fund is best known for trading at a spectacular discount to net asset value, not least of all because of related party transactions with the directors. In the year ended March 2022, the fund had to stomach a negative fair value adjustment of R429 million after a negative adjustment of R660 million in the prior year. Covid hasn’t been kind to the flashy buildings owned by Accelerate! Debt has reduced from R6 billion to R4.5 billion and the loan-to-value has dropped from 48.5% to 42.8%. A dividend of 21.98 cents per share has been declared, a huge yield of 18.6% on Tuesday’s closing share price. The fact that the share only closed 6.3% higher despite the dividend tells you everything you need to know about market sentiment towards this fund.
- In a scenario that was just a few days off from delivering the perfect Christmas in July pun, Thungela CEO July Ndlovu sold R50.6 million in shares to pay the tax on vested shares. I wish that this was my tax bill, as that’s just a portion of the value he has received. Timing is everything in mining and the Thungela employees have been in the right place at the right time!
- ESG enthusiasts will be interested to know that mining giant BHP has released a “social value” report that focuses on the six pillars of BHP’s framework and its 2030 scorecard. This covers concepts ranging from decarbonisation to communities and supply chains. If you would like to read the full report, you’ll find it here.
- Sebata Holdings has experienced a delay in the finalisation of results for the year ended March 2022, as there are major valuations that need to be concluded for B-BBEE deals. They will be released in mid-July.
Thank you for your daily reports.I do appreciate these as they keep me fairly well informed.
I wonder if you could quote the share prices when writing on each other a particular share?