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Ghost Bites (Accelerate Property Fund | Calgro M3 | Eastern Platinum | Orion | Redefine | Renergen)

The Finance Ghost
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Ghost Bites (Accelerate Property Fund | Calgro M3 | Eastern Platinum | Orion | Redefine | Renergen)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Some good news for Accelerate’s insurance claim (JSE: APF)

The company is pursuing a business interruption claim going back to COVID lockdowns

Accelerate Property Fund is in a court battle with various insurance companies related to its COVID business interruption insurance claim. Accelerate holds 50% of Fourways Mall and the claim is for loss of rental income at that property due to lockdown restrictions.

Juicy stuff.

Of course, any such legal debate starts with the most basic stuff of all, like “was there a valid insurance policy in place?” and other such first principle questions. To this end, the Gauteng High Court has delivered judgment on three separated matters, dealing with the final form of the insurance contract and the premium paid by the plaintiffs. In all three matters, the judgment was delivered in favour of the joint owners of Fourways Mall, with all costs to be paid by the defendants.

Personally, I have very little love for insurance companies that tried every trick in the book to wriggle out of COVID-related claims. People take out insurance to save them in terrible circumstances. Whilst I appreciate the existence of fraud and other problems in the market, I don’t think too many people will side with insurers rather than businesses in examples like this.

Accelerate Property Fund’s balance sheet is in a tough spot and they could certainly do with an insurance payout. I suspect that there is still a long road to travel in court with this.

Calgro M3 flags strong growth in HEPS (JSE: CGR)

Share repurchases help tremendously with this

There are only two ways for headline earnings per share (HEPS) to get bigger. The clue is in the name. Either earnings must go up, or the number of shares must go down. In a perfect world, a company achieves both. This really turbocharges HEPS growth, which is why profitable companies love share buybacks.

Calgro M3 is a perfect example of share buybacks done right, with the company having taken advantage of a share price that was trading at incredibly low multiples. This is a textbook case for using share buybacks rather than paying cash dividends.

The result? Growth in HEPS of between 20.2% and 27.7% for the year ended February 2024. When full results come out on 13th May, shareholders will want to really dig into the numbers to understand the drivers of performance beyond just the recent share repurchases.

The share price has more than doubled in the past 12 months, proving once more that you can make money on the local market if you know where to look.

Eastern Platinum publishes its financials – finally (JSE: EPS)

2023 was a record year of revenue for the group

The 2023 financial results at Eastern Platinum were delayed due to the company needing to thoroughly investigate whistleblower allegations regarding undisclosed related party transactions. The claims were found to be unsubstantiated, but by then the damage was done in terms of delaying the audit and thus the results.

The delay is now behind them, with results for the full year released to the market. They reflect record revenue of $106.9 million, way up on the restated 2022 number of $53.9 million. Mine operating income jumped from $7.6 million to $31.6 million. Net income attributable to shareholders was $13.8 million vs. an attributable net loss of $0.9 million.

This was obviously a much better period, reducing the working capital deficit at the end of December (current assets minus current liabilities) from $37.8 million in the prior year to $15.5 million. Although the auditors have not modified their opinion in this regard, it does create uncertainty related to the company’s ability to continue as a going concern.

2024 is a very big year for the company, with the original CRM tailings from the tailings storage facility expected to be fully processed by late 2024. The restart of the Zandfontein underground section has been initiatives and is expected to process underground run-of-mine ore by June this year. As the company still needs to confirm its funding plans related to a full reopening of Zandfontein, I would tread very carefully here.

Orion completes the Okiep Copper Project acquisition (JSE: ORN)

The all-important approvals by the IDC have been obtained

Orion Minerals announced that it is able to complete the acquisition of a controlling interest in the Okiep Copper Project in the Northern Cape. The IDC as strategic funding partner has given its approval for the deal, including for R43.75 million in additional funding for its proportional share of ongoing drilling and operating costs.

The closing of the transaction is expected this week, with payment of R46 million (R11 million in cash and R35 million by issuing shares in Orion) to the sellers.

The company is firmly still in drilling phase, with a diamond drilling program underway. The next batch of results is due this month. The goal is to complete the feasibility study by July this year.

Redefine takes a cautious approach with the interim dividend (JSE: RDF)

Despite growth in income, the dividend is slightly down year-on-year

In the property sector, investors pay close attention to dividends. Most major investors in REITs are primarily looking for yield, with capital growth as a second prize. When there are question marks around the dividend, investors get nervous very quickly.

Redefine has released results for the six months to February 2024 and the dividend is a talking point. Despite distributable income per share having increased by 6%, the dividend per share has come in 0.2% lower. The payout ratio for the interim dividend has decreased from 85% to 80%, which puts it right at the bottom of the group’s guided range for the full-year payout ratio (80% to 90%).

Of course, they can play catch-up with the final dividend to take the full-year payout ratio higher if they so desire. Based on the guidance, they could just as easily keep it at 80% and play it safe. With commentary around elevated levels of inflation and the likelihood of interest rate relief only coming in the next financial year, there’s enough macroeconomic noise to suggest that the lower end of the guidance could well be where they end up.

Full-year distributable income is expected to be between 48.0 and 52.0 cents per share. If the 80% ratio sticks and they only hit the lower end of that guided range for income, that’s a full year distribution of 38.4 cents. Based on the current share price, that’s a six-month forward yield of 9.8%.

In terms of other key stats, Redefine earned 78% of its net property income for the period from South Africa and 22% from Poland. With 35% of the South African portfolio in office properties, they are still struggling with rental reversions, coming in at -6% for this interim period vs. -7.5% for the comparable period. The renewal success rate was only 65.3% for this period in South Africa vs. 80.3% in the comparable period.

And if you’re looking for another reason why the distribution this year might be disappointing, the SA REIT loan-to-value metric has increased from 40.9% to 42.6%. This is above their medium-term target range and debt isn’t cheap right now, so they will prioritise bringing this back down.

Some good news from Renergen – at least (JSE: REN)

This is the kind of stuff that investors want to hear

Renergen has announced that the helium cold box has been brought to the appropriate temperature to liquify helium in batches from its wells. The OEM has been intricately involved here after there were a few hiccups with commissioning the system.

The company still isn’t quite there yet, with performance tests as the next step and then the really important stage: continuous operation mode.

Bulls will happily latch onto the good news story here. Bears will point out that there is still some way to go, with the company needing to still establish a proper track record as an operator. If we didn’t have both bulls and bears in the market, then we wouldn’t have a market to begin with!

The company also noted that LNG production hasn’t ceased at any stage during this process.

Little Bites:

  • Ascendis (JSE: ASC) announced that because its transaction is not yet unconditional, the timetable in the supplementary circular will need to be revised. No indication of revised timing has been given at this stage. The big story in the background here is of course the Takeover Regulation Panel investigation into the various complaints received regarding the deal.
  • As a junior mining house, Copper 360 (JSE: CPR) is likely to make regular announcements that will range from fairly mundane to highly relevant. Sometimes, one announcement will have both elements. In the latest such example, the less exciting part is that the company has entered into instalment sale agreements for the financing of underground equipment for the Rietberg Mine. The more exciting bit is that first development underground at the mine is expected to commence 3 months ahead of schedule. These things are linked of course, but it shows how every milestone is important for a junior mining. You wouldn’t normally see a company announcing that it had bought some equipment!

Ghost Stories #36: Using Bond ETFs in a Portfolio

The Finance Ghost
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Ghost Stories #36: Using Bond ETFs in a Portfolio

Listen to the show using this podcast player:

When planning your wealth creation journey, it helps to understand all the tools available in the toolbox. Bond ETFs remain poorly understood by many investors, leading to portfolio strategies that don’t include fixed income investments.

In this podcast with Siyabulela Nomoyi of Satrix*, we put the spotlight on bond ETFs. We covered topics like the relationship between interest rates and capital values, the way in which these ETFs add value to a portfolio and the macroeconomic conditions that can lead to good outcomes here.

There’s so much to listen to in this podcast, underpinned by Satrix’s commitment to South African investor education. To find out more about SatrixNOW, visit this link>>>

*Satrix is a division of Sanlam Investment Management

(this article was first published here)

Indexation: Anything but Passive.Take control of what you're investing in by incorporating indexation into your portfolio. Satrix - Own the market

Disclosure

Satrix Investments (Pty) Ltd is an approved FSP in term of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this podcast (“the information”), the FSP’s, its shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.

Ghost Wrap #68 (MTN Nigeria | Datatec | Capital & Regional | Harmony Gold | Astral Foods + Quantum Foods)

The Finance Ghost
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Ghost Wrap #68 (MTN Nigeria | Datatec | Capital & Regional | Harmony Gold | Astral Foods + Quantum Foods)

Listen to the show here:

The Ghost Wrap podcast is proudly brought to you by Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Mazars website for more information.

In just a few minutes, you can get the latest news and my views on MTN Nigeria, Datatec, Capital & Regional, Harmony Gold as well as Astral Foods and Quantum Foods in the poultry sector. Use the podcast player above to listen to the show.

Ghost Bites (Mondi | MTN | Netcare)

The Finance Ghost
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Ghost Bites (Mondi | MTN | Netcare)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Mondi’s Q1 was in line with company expectations (JSE: MNP)

The benefit of price increases will only truly be felt in the next quarter though

Mondi has released an update on trading for the three months to March, representing the first quarter of Mondi’s financial year. They compare this to Q4 of 2023 i.e. the immediately preceding three months, as they are focused more on the trend than the year-on-year numbers. Welcome to cyclical businesses.

EBITDA came in at €214 million vs. €260 million in Q4 2023. This includes a once-off €32 million loss from the devaluation of the Egyptian pound. The overall story is that costs were broadly in line with the preceding quarter and although average selling prices were lower, price increases have been announced and that will come through as a boost to Q2 numbers. The major driver of this result was thus an increase in sales volumes, seen across Corrugated Packaging and Flexible Packaging.

The company also reminded the market that it paid a €1.60 per share special dividend to shareholders from the net proceeds of the Russian asset disposal.

MTN Nigeria has a lot of work to do (JSE: MTN)

For now, there’s breathing room for initiatives to fix the business

If you followed the recent updates on MTN, you would know that MTN Nigeria is in a negative equity position thanks to massive forex losses in the group and other operating pressures. The company held an extraordinary general meeting to explain its plan to rectify this to shareholders.

Firstly, MTN Nigeria needs regulated tariff increases. This is a matter of lobbying the relevant regulators to put through the increases to support ongoing investment in the industry. Relationships with regulators aren’t always easy as they work to balance the needs of services providers and consumers.

Within the business, MTN Nigeria will focus on improving margins through stricter cost control. They will also optimise capex, which is a nice way of saying that it will be reduced over time without compromising network quality (in theory).

Perhaps most importantly, they will reduce exposure to the US dollar. This goes hand-in-hand with the plan to slow down on capex, as the letters of credit obligations are related to capex and add to the forex problem.

Finally, they will review tower lease contracts. It’s not exactly clear what this will entail, but they make reference to forex exposure as well, so perhaps some of the leases are priced with reference to the US dollar.

It’s a good plan and hopefully one that will work. Breathing room to implement it will be important here, with MTN Nigeria’s lenders being supportive for the time being.

At least Netcare’s margins are going the right way (JSE: NTC)

Return on capital metrics remain unexciting for me

Hospital groups are capex-intensive businesses that struggle to generate appealing returns on capital.

They are seen as defensive stocks, but my view remains that there are many discretionary services in the business model and the juicy stuff isn’t as defensive as people think. This is similar to a grocery store, where the defensive categories aren’t what deliver the best returns to shareholders. Within any hospital group, there are higher margin and lower margin services, with the proportion of each type creating the final return to shareholders.

Even though Netcare’s normalised EBITDA margin has improved from 17.5% to between 17.8% and 18.2% for the six months to end March 2024, return on invested capital (ROIC) is only 10.9%. It’s going the right way at least (up from 10.6%), but is that a remotely strong enough return to justify equity risk in an environment where there are many ways to get yield? The market is saying no, with the share price down 29% in the past year.

At least Netcare is showing positive operating leverage, with EBITDA up by 7.3% to 7.7% thanks to revenue growing between 4.2% and 4.4%. There are hospital groups that can’t even get margins going in the right direction, let alone return on capital.

Group net debt is up from R5.0 billion to R5.8 billion (excluding IFRS 16 lease liabilities), with Netcare sending cash in the direction of shareholders (dividends and buybacks) instead of paying down debt. The net debt to annualised EBITDA ratio was 1.3 times for this period, up from 1.2 times in the comparable period.

And here are two pieces of information that tell you so much about modern society: maternity cases are in decline and mental health demand is strong.

Little Bites:

  • Director dealings:
    • The chairperson of Mondi (JSE: MNP) bought shares in the company worth £77.3k.
    • A director of Italtile (JSE: ITE) has sold shares worth just under R24k.
  • Harmony Gold (JSE: HAR) announced its second loss-of-life incident in just one week, after a rock drill operator lost his life at Doornkop after a fall of ground incident. This is being investigated internally and by the regulator.
  • Zeder Investments (JSE: ZED) has obtained SARB approval for it special dividend of 10 cents per share. It will be paid on 20th May to shareholders.
  • Numeral (JSE: XII), the renamed Go Life International, announced that it has bought the South African shared services and management company. This is really just a structural thing. They also announced that they are the 210th company in South Africa to be awarded Google Partner status, which seems like an odd thing to be excited about given how many other partners there are. Then again, this is a group that describes itself as follows on the website in the about us section: “Numeral XII is not just a company; it’s an exploration of the boundless possibilities that arise when creativity meets resilience. We thrive on the delicate dance between chaos and order, seamlessly blending innovation with timeless principles. Our commitment is to harness the energy within these opposing forces, transforming challenges into opportunities.” As a rule, I don’t invest in fluff like that.

What tiny pineapples can tell us about our future

Dominique Olivier
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What tiny pineapples can tell us about our future

Fresh Del Monte, a global producer of fruits and vegetables, launched a new product in March of this year. Weighing in at an average of 600g, the Precious Honeyglow pineapple is the smallest pineapple they’ve ever created. And it’s telling you everything you need to know about humanity’s trajectory. 

A 600g pineapple doesn’t sound like a big deal at all, until you take into consideration that a standard pineapple averages in weight around 1kg. That means that Precious Honeyglow is about half the size and weight of its full-size sibling. Coming in at $20.99 versus the $11.79 you’ll pay for a regular-sized pineapple from the same producer, “precious” certainly seems to be an apt description. 

Why is there even a market for half-sized pineapples? Now that’s where the story gets interesting. 

The empty seats at the table

Solo living is becoming increasingly common in the US, with over 28% of American households now inhabited by just one person. For context, that’s the second largest portion of the US population (there are various categories of people living together). With fewer young people getting married or having children, the trend towards solo households is playing a role in the mounting issue of food waste, particularly through spoilage. When there are less people in the house to help eat the leftovers, a lot more food goes to the bin. 

According to the USDA’s Economic Research Service, this translates to a staggering 133 billion pounds of food wasted annually, valued at around $161 billion. Fresh Del Monte’s own internal surveys reveal that individuals living alone are notably less inclined than those in multi-person households to opt for full-size whole pineapples, mainly to minimise fruit wastage. Their elegant solution to this challenge is to create smaller pineapples that produce less leftovers and therefore less food waste. 

The singleton household phenomenon is not native to the US either. According to the United Nations, the proportion of single-person households worldwide increased from 23% in 1985 to 28% in 2018. By 2050, this number is projected to reach 35%.

That’s a lot of individuals – a few billion people – eating alone, sleeping alone, travelling alone and watching TV alone in 2050. 

For many businesses, this presents a fantastic opportunity for increased sales. Consider that for each married household sharing a Netflix account, Netflix could have the chance to sell two subscriptions to two separate solo households. Other businesses are already jumping at the opportunity to cater to this growing market. In 2019, P&G introduced the Forever Roll, a giant toilet paper roll that could (theoretically) see a single-consumer household through an entire month, thereby reducing the household storage space usually required to store extra rolls. Food brands like Kellogg’s, Bisto and Tabasco have already introduced single-serving products to target households with individuals living alone, while appliance manufacturers like Bosch are releasing miniaturised versions of appliances like dishwashers and washing machines, ideal for single households with limited floorspace. 

It’s sounding like a future that’s ripe with potential for brands who understand their target markets. But what about humanity as a whole? 

Lonely planet

I’m sure we don’t have to go into too much detail around the specifics here (after all, most of us attended biology class in high school), but it’s obvious that a rise in single households today leads to a drop in the birth rate tomorrow. 

If you’ve spent any time at all on social media, you’ll know that opinions vary wildly on whether having fewer babies is a good or a bad thing. For every Elon Musk advocating for his 11 children, there are numbers of environmentally or economically concerned men and women getting voluntarily sterilised before marriage. I won’t weigh in on where I stand on this personally, but I will share with you some of the potential outcomes of a slowly shrinking population. 

Japan is a very good case study for this. In 2023, the birth rate in Japan was the lowest it had been since the 19th century and seniors in Japan are living longer than ever before. Japan has one of the world’s oldest populations, with almost 30% of Japanese citizens aged 65 or older. Last year, the proportion of those aged above 80 surpassed 10% of the population for the first time in history.

Here’s a statistic that shows you exactly how skewed the Japanese population age is: for the last decade, sales of adult diapers in Japan have exceeded sales of diapers for babies. In a statement, Oji Holdings said its subsidiary, Oji Nepia, currently manufactures 400 million infant nappies annually. Production has been falling since 2001, when the company hit its peak of 700 million infant nappies.

Japan is grappling with a critical issue: a diminishing population due to both ageing and declining birth rates, posing a significant challenge for one of the world’s largest economies. The Japanese government has launched various efforts to tackle these issues, but they have seen little success thus far. The older the population, the more pressure is put on younger taxpayers to make up for the gap left by the ever-growing community of retirees. As the workforce rapidly diminishes, the demand for social and medical services continues to rise.   

Despite increased investment in child-related programs and subsidies aimed at supporting young couples or parents, birth rates have not seen a significant boost. Experts attribute this to various factors, including declining marriage rates, greater female participation in the workforce and the rising costs associated with raising children.

Prime Minister Fumio Kishida warned last year that Japan stands at a pivotal juncture which will impact its ability to sustain its societal functions. He emphasised the urgency of the situation, labelling it as a “now or never” scenario.

Of course, declining marriage rates, greater female participation in the workforce and the rising cost of raising children are not unique to Japan at all – in fact, these are trends that impact practically every country in the world. For whatever reason, Japan just appears to be two decades ahead of the curve, a cautionary tale playing out in real time right in front of our eyes. 

Will AI solve it?

As I see it (remember, this is still an opinion column at the end of the day), there are a variety of ways that the involvement of AI could affect the declining birth rate and the global economy. 

Here’s one way: as the birth rate comes down and the working population begins to decrease on a global scale, AI-enhanced software and machines rapidly scale up productivity. This fills in the gaps in the workflow and allows a smaller group of workers to maintain the same outputs as the more populous generations that came before, thereby supporting older and younger generations despite having fewer hands on deck.

Here’s another, much darker scenario: as AI technology advances, more jobs disappear from the market. Although the workforce is also getting smaller, it is being outpaced by AI, which means that workers have to compete in an ultra-competitive job market while shouldering the burden of a growing senior demographic that no longer pays taxes. 

These hypotheses represent opposite extremes, which means it is likely that the actual outcome will be somewhere in the middle. One thing is for sure though: pineapples are getting smaller.

And more expensive. 

About the author:

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

Ghost Bites (Datatec | Life Healthcare | MTN | Quantum Foods | Sasol)

The Finance Ghost
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Ghost Bites (Datatec | Life Healthcare | MTN | Quantum Foods | Sasol)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Datatec’s earnings are growing – and in hard currency (JSE: DTC)

Revenue and earnings have moved higher

Datatec has published a trading statement for the year ended February 2024. Aside from Logicalis Latin America where things seem to still be tricky in Argentina and Brazil, the underlying segments have a positive story to tell and enjoyed a particularly good second half of the year.

Group revenue has come in 6% higher than the prior year. Remember, this is measured in dollars, so that’s a hard currency growth rate. It’s enough to do wonders for earnings, with underlying earnings per share expected to be between 19.0 and 21.0 US cents – a massive increase from 7.9 cents in FY23.

In case you’re wondering, underlying earnings per share is indeed the better metric here as it excludes a number of significant distortions that go well beyond the definition of headline earnings. In particular, it takes out the impact of large share based payment expenses in the comparable year, as well as the profit on sale of Analysys Mason.

Margin pressure is clear at Life Healthcare (JSE: LHC)

I continue to struggle with the appeal of hospital stocks

Life Healthcare closed 6.7% lower after releasing an operational update and trading statement for the six months to March. Before you draw a share price chart and nearly fall off your chair, just remember that the group recently paid out a special dividend of R8.8 billion from the net proceeds of the disposal of Alliance Medical Group. That doesn’t explain the overall flavour of this share price, but it does explain the recent precipitous drop as a big chunk of cash was paid to shareholders:

Despite growth in group revenue of between 7% and 8%, group normalised EBITDA fell by between 2.3% and 3.3%. They note that this was due to lower than expected occupancies (despite the revenue increase) and the costs of running the business, which is a painfully generic explanation for a serious problem. They also note that “numerous initiatives” are underway to improve EBITDA margin for the second half of the year, yet no details are given.

Despite the drop in EBITDA, the story looks very different when we get to HEPS from continuing operations, which is 26.8% to 31.8% higher. A major factor here is the interest saving from the disposal of Alliance Medical Group and the associated reduction in debt. Normalised earnings per share is expected to be 5.4% to 10.3% higher and I would wait for full details of these numbers before getting excited.

When EBITDA margin is under this much pressure and there’s little in the way of concrete explanations why, it almost doesn’t matter what happens further down the income statement.

MTN Ghana: a lot healthier than Nigeria (JSE: MTN)

Although EBITDA margin contracted slightly, this still looks very healthy

After the horror movie that was MTN Nigeria’s quarterly update, the good news is that MTN Ghana looks vastly better. Service revenue grew 32.4% for the first quarter of the year and EBITDA increased 31.6%. This means that there was minor EBITDA margin contraction of 0.4 percentage points to 55.9%. A contraction is never good when it comes to margins, but that’s still an incredibly juicy margin overall and the growth rate is also strong.

Profit after tax is up 49.3%, so that’s another good news story even compared to the inflation rate in Ghana of 25.8%. There are macroeconomic concerns in Ghana, but for now at least MTN is doing a great job of achieving real growth despite the challenges. The same can’t be said for Nigeria.

There’s also a decent chance of the macroeconomic picture in Ghana improving over the course of the year, with the government forecasting inflation for the year of between 13.0% and 17.0%. That’s a long way down from current levels.

Encouragingly, capital expenditure was 23.3% lower, so that’s a great help for free cash flow generation.

A quantum leap at Quantum Foods (JSE: QFH)

Another example of a massive recovery in the poultry sector

Hot on the heels of the trading statement released by Astral Foods this week, Quantum Foods has announced that HEPS will jump massively from 2.9 cents to between 21.4 cents and 21.9 cents for the six months to March 2024.

As with Astral the other day in Ghost Bites, I dug through the archives to see what profitability has done over the past four years:

  • March 2024: 21.4 cents to 21.9 cents
  • March 2023: 2.9 cents
  • March 2022: 15.8 cents
  • March 2021: 26.9 cents

It’s interesting to note how different the pattern in profitability is to Astral. Where Astral’s latest numbers are well ahead of 2021 but below 2022, Quantum is the other way around.

Either way, things have clearly improved in the poultry sector and that is excellent news when you consider how critical this source of protein is to our country.

Sasol’s CFO steps down after just two years (JSE: SOL)

This really isn’t the news that investors want to see

Sasol shareholders have been going through a lot of pain recently. With the latest news, there’s even more to consider, particularly as top executives generally stay with a company for several years before moving on.

It doesn’t look good that Sasol CFO Hanré Rossouw has resigned from the role after just two years. He will stick around to finish off this financial year, which concludes in June 2024. A successor will be announced in due course.

Sasol could really do with some positive momentum in the share price and this won’t help.

Little Bites:

  • Director dealings:
    • Des de Beer has bought shares in Lighthouse (JSE: LTE) worth R21 million.
    • An associate of Piet Mouton (a name you’ll recognise from the PSG Group) bought shares in Curro (JSE: COH) worth R2.2 million.
    • A director of Remgro (JSE: REM) has bought shares worth R550k.
    • A director of Woolworths (JSE: WHL) has sold shares in the company worth R357k.
    • A prescribed officer of Wesizwe Platinum (JSE: WEZ) has sold shares worth R85k.
    • An associate of the company secretary of Cashbuild (JSE: CSB) has sold shares in the company worth nearly R30k.
  • Harmony (JSE: HAR) released the very sad news that a construction employee lost his life at the Mponeng mine near Carletonville. Investigations are still underway and the affected area has been closed.
  • Based on ongoing buying of MultiChoice (JSE: MCG) shares in the market since the announcement of the terms of the mandatory offer, Canal+ is up to a stake of 42.47%. The company will obviously buy up as much as possible in the market at prices below the mandatory offer price. The highest price paid for recent purchases was R120, which is still well below the mandatory offer price of R125. Separately, MultiChoice announced that the date for the release of the mandatory offer circular has been pushed out to 4th June with the consent of the TRP.
  • Deutsche Konsum (JSE: DKR), which just about never trades on the JSE, announced that negotiations to extend the maturity of its 2024 unsecured bonds are ongoing. Talk about a last minute situation, as one of the bonds matures on 3 May and the other on 31 May.
  • At Ellies (JSE: ELI), the notice of motion to discontinue business rescue proceedings and place Ellies Holdings into liquidation was filed with the court on 2 May. As a reminder, subsidiary Ellies Electronics is still operating and the business rescue process is ongoing, as there is a reasonable prospect of saving that company. The Ellies brand might survive, even if the holding company doesn’t.

Who’s doing what this week in the South African M&A space?

Marylou Greig
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Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

In a restructure of its aftermarket heavy-duty diesel engine parts supplier, Afrimat has disposed of KMP to Kian Ann Engineering (KA) in which Invicta holds a 48.81%. The rationale for the £12,6 million (R299,7 million) disposal is the belief that businesses of KMP and KA Group, combined, will create an entity with strategic focus, better able to leverage off Invicta’s strong management capabilities and KA Group’s strong procurement, network and manufacturing capabilities.

Ibex Investment intends to repurchase all outstanding non-redeemable, non-cumulative, non-participating preference shares through an offer to shareholders to acquire the shares for a cash consideration of R93.50 per scheme share. In addition, shareholders will receive a preference dividend bringing the total scheme consideration to R98.17 per share. Preference shareholders collectively holding 81.96% of the preference shares in issue, have provided irrevocable undertaking to vote in favour of the scheme. If the scheme is successful, the shares will be suspended on 19th June with the termination of listing on 25th June 2024.

The JSE has signed a memorandum of understanding with Saudi Tadawul Group, aimed at exploring dual-listing opportunities and broader market participation, aligning with the JSE’s strategic goal to diversify and deepen its investor base. The Riyadh-headquartered group is the holding company of a portfolio of four integrated subsidiaries: the Saudi Exchange, the Securities Clearing Centre, the Securities Depository Centre and Wamid, an innovative applied technology services business.

Unlisted Companies

GrubMarket, an AI-powered technology enabler and digital transformer of the American food supply chain industry, has acquired Cape-based Global Produce, a fresh produce business that sources and distributes a wide range of local fresh fruits to outlets across 44 countries. The South African acquisition forms part of GrubMarket’s physical presence expansion internationally. Financial details were undisclosed.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
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Weekly corporate finance activity by SA exchange-listed companies

Canal+ has notified shareholders that it has, this week, acquired a further 3,868,391 MultiChoice shares in open/off market transactions. The shares were acquired at an average price per share of R119.16, below the mandatory offer price of R125.00 per share, for an aggregate R461 million. Canal+ now holds an aggregate of c.42.47% of the MultiChoice shares in issue. Having jointly requested that the Takeover Regulation Panel grant an extension to the date by which the parties must release a combined circular to MultiChoice shareholders, the TRP has granted an extension to 4 June 2024.

To reduce the compliance burden of small shareholders, Putprop has announced it will proceed with the implementation of an Odd-lot Offer to 403 shareholders. These shareholders comprise 52% of the total number of shareholders in the company holding just 5,959 shares representing 0.01% of total share in issue. The offer price will represent a 5% premium to the 30-day VWAP at the close of business on 3 June 2024.

Sibanye-Stillwater is looking to shareholders to approve the conversion of its US$500 million senior unsecured guaranteed convertible bonds, due in 2028, into ordinary shares. The convertible bonds are currently classified as cash-settled instruments which will be subject to a cash settlement if shareholders to not approve the issuance of additional Sibanye-Stillwater shares.

The JSE has warned shareholders of aReit Prop that the company may face suspension of its listing on the bourse if the company fails to submit its annual report before 31 May 2024.

A number of companies announced the repurchase of shares:

Sephaku repurchased 6,911,175 shares during the period 21 December 2023 to 25 April 2024. The shares were repurchased for an aggregate R7,16 million and will be retained as treasury shares.

In line with its share buyback programme announced in March, British American Tobacco this week repurchased a further 1,213,074 shares at an average price of £23.47 per share for an aggregate £2,85 million. On 1 May 2024, the company cancelled 87 million treasury shares held, reducing the number of shares held in treasury to 133,28 million.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 22 to 26 April 2024, a further 5,502,741 Prosus shares were repurchased for an aggregate €170,69 million and a further 368,303 Naspers shares for a total consideration of R1,32 billion.

Two companies issued profit warnings this week: We Buy Cars and Renergen.

Three companies either issued, renewed, or withdrew cautionary notices this week: Ellies, Ibex Investment and Conduit Capital.

DealMakers is SA’s M&A publication
www.dealmakerssouthafrica.com

Who’s doing what in the African M&A space?

Vanessa Aitken
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Who’s doing what in the African M&A space?

DealMakers AFRICA

Nigerian food delivery service, Chowdeck has raised US$2,5 million in seed funding. Investors included Y Combinator, Goodwater Capital, FounderX Ventures, HoaQ Fund, Levare Ventures, True Culture Funds, Haleakala Ventures, Simon Borrero, Juan Pablo Ortega, Shola Akinlade and Ezra Olubi.

Ethiopian plastic upcycling startup, Kubik, has raised US$1,9 million in a seed extension round. This latest funding was secured from African Renaissance Partners, Endgame Capital and King Philanthropies. Kubik turns hard-to-recycle plastic waste into low-cost, low-carbon, interlocking building materials and is looking at pan-African growth in 2025.

Specialist agriculture investor AgDevCo has taken a significant minority stake in Agris, the agricultural division of early-stage investment group Maris. Agris has three operating companies – Evergreen Fresh, Evergreen Herbs and Evergreen Avocados. Financial terms were not disclosed.

Australian Bitcoin exchange Igot, has acquired Kenyan crypto exchange and remittance gateway, TagPesa for an undisclosed sum. The company has also been granted access to M-Pesa, giving users the ability to cash out directly from the mobile payment system.

Renda, a Nigerian order fulfilment specialist that provides end-to-end fulfilments solutions for businesses across Africa, has secured US$1,9 million in debt and equity pre-seed funding. Ingressive Capital, Techstars Toronto, Founders Factory Africa, Magic Fund, Golden Palm Investments, Reflect Ventures, and Vastly Valuable Ventures provided the $1,3 million in equity funding, while the debt funding investment of $600,000 was provided by Founders Factory Africa and SeedFi.

Kenyan travel booking platform, BuuPass has announced the acquisition of Nigerian and South African based, QuickBus. Financial terms were not disclosed. BuuPass, backed by investors such as Founders Factory Africa and FrontEnd Ventures, raised US$1,3 million in 2023 and is looking to expand into other African countries.

Ignite Power has announced the acquisition of West African Distributed Renewable Energy solutions provider, Oolu. Headquartered in Senegal, Oolu is a Y Combinator accelerator graduate that operates across West Africa. Financial terms of the deal were not disclosed.

DealMakers AFRICA is the Continent’s M&A publication
www.dealmakersafrica.com

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