Wednesday, March 19, 2025
Subscribe
Home Blog Page 100

Power Battle: How SA’s Retail Giants Spent Billions to Defeat Loadshedding’s Wrath

Trive South Africa
-
1
Power Battle: How SA’s Retail Giants Spent Billions to Defeat Loadshedding’s Wrath

South Africa’s retail giants have spared no expense, shelling out a staggering R2.4 billion to battle the disruptive force of loadshedding.

This phenomenon, characterised by sporadic power outages, has plagued the nation for several months, reaching unprecedented intensity levels, curtailing productivity, cutting retailers’ profits, and depressing market sentiment.
 
The repercussions of heightened power outages, which intensified in the latter half of 2022, have been dire for retailers nationwide. The mounting costs incurred range from diesel purchases to keeping generators running to substantial investments in backup power systems.

Take Food Lover’s Market, for example, which poured R50 million into securing reliable backup power systems within the past six months.

Acknowledging that these costs, particularly for food retailers, are ultimately transferred to the consumers is crucial.

South Africans are feeling the weight of this predicament as the prices of everyday goods continue to surge.

  • Despite annual consumer price inflation (CPI) ticking down somewhat, arriving at 6.3% in May 2023, down from 6.8% in April 2023, food and non-alcoholic beverages remain a primary catalyst in keeping prices higher for longer.
  • The most significant contributor to May’s 6.3% annual inflation rate was food and non-alcoholic beverages, which increased by 11.8% year-on-year, contributing 2.1 percentage points to the annual rate.
  • Food prices surged 12% year-on-year in May, with vegetable prices rising by an eye-watering 20.8% year-on-year, while bread and cereals experienced an annual price increase of 18.1%, with milk, eggs and cheese increasing by 14.2% year-on-year.
  • Non-alcoholic beverages experienced an annual price increase of 10%.

When analysing the contributions of different groups to the annual percentage change in headline inflation, food and non-alcoholic beverages remained the most significant contributor to the all-items index.

In April, food and non-alcoholic beverages contributed 2.4 percentage points to the headline figure of 6.8%, while, in May, the line item contributed 2.1 percentage points. This trend highlights the significant impact that loadshedding has had on keeping food prices elevated, subsequently contributing to the sticky headline inflation figure.

Peaking at 7.8% in July 2022, headline CPI has ticked down somewhat, coming in at 6.9% in January 2023, rising slightly higher in February and March, and lowering to 6.3% in May, down from 6.8% in April. Interestingly, annual headline inflation increased steadily in February and March when loadshedding was especially rife and power disruptions intensified to unparalleled levels, which implies that loadshedding is a direct catalyst towards sticky inflation in South Africa. 

South Africa’s most prominent food retailers – Spar (JSE: SPP), Shoprite (JSE: SHP), Pick ‘n Pay (JSE: PIK) and Woolworths (JSE: WHL) – collectively splurged an astronomical R1.87 billion on direct costs associated with load shedding.

Between December 2022 and March 2023, Spar spent R700 million on direct costs associated with loadshedding, while Shoprite, Pick ‘n Pay and Woolworths, spent R560 million, R522 million and R90 million, respectively, to combat the devastating effects associated with constant power outages.

Across four food retailers, the cumulative direct costs associated with load shedding totalled R1.87 billion between December 2022 and March 2023, where headline inflation ticked up. This trend implies the possibility of a relatively strong correlation between loadshedding concerning the costs involved in mitigating the energy crisis and price levels, specifically food and non-alcoholic prices. 

While backup power solutions like solar energy have helped alleviate the impact of load shedding, they come with their exorbitant costs for retailers. Despite some relief from power disruptions this winter, Shoprite anticipates that diesel prices will remain steep throughout 2023. While loadshedding has been less severe in June, one cannot discount the distinct possibility of its intensification beyond stage 6 as winter progresses. 

Analysing Share Price Performance: Comparing South African Food Retailers 

  • Over the most recent five-year time horizon, Woolworths (JSE: WHL) has prevailed as the winner in share price performance, returning close to 60% to shareholders (yellow line), with Shoprite (JSE: SHP) returning a cumulative return of just over 15% to shareholders (orange line) over the same five-year period.
  • On the other hand, Spar (JSE: SPP) and Pick ‘n Pay (JSE: PIK) have prevailed as the ultimate losers concerning cumulative five-year share price performance, returning -32% (green line) and -38% (blue line) to shareholders, respectively. 

Over the most recent twelve-month period, Woolworths has returned close to 42% to shareholders (yellow line), with Shoprite returning just under 16% to shareholders (orange line). Spar and Pick ‘n Pay have returned -21% (green line) and -28% (blue line) to shareholders over the last year. 

Sources: Bloomberg, Business Tech, Stats SA, Trading View

Ghost Bites (Attacq | Invicta | RMB Holdings | Sappi | Wesizwe)

The Finance Ghost
-
1
Ghost Bites (Attacq | Invicta | RMB Holdings | Sappi | Wesizwe)

Attacq’s deal with the GEPF has been agreed (JSE: ATT)

This is great news for shareholders – like me!

In February 2023, Attacq announced that the Government Employees’ Pension Fund (GEPF), represented by the PIC, had reached a non-binding agreement with Attacq to take a 30% stake in Attacq Waterfall Investment Company.

A deal isn’t a deal until it’s actually a deal. Thankfully, this is now a deal, with a binding term sheet now agreed.

The GEPF will acquire 30% of the shares and shareholder loans in the Attacq Waterfall portfolio from Attacq for R2.388 billion in cash. The price has been calculated with reference to NAV and some adjustments, with a 15% discount then applied. That’s still a lot less than the traded discount in most property funds, which is why the Attacq share price benefitted from this.

Additionally, the GEPF will inject R300 million into Attacq Waterfall as a shareholder loan. Attacq will put another R700 million into Attacq Waterfall to keep the loans in line with relative shareholdings.

Attacq will retain 70% in Attacq Waterfall and will continue to provide asset, property, development and fund management services to the business at market-related fees. That’s good news for return on equity, as asset-light income is the holy grail in property funds.

There will be a substantial decrease in group gearing from 38% to 26.3%. The hope is to negotiate with debt providers to refinance the remaining debt in the group on more beneficial terms.

This is a Category 1 transaction, so a circular will be released to shareholders and they will be asked to vote.

For more from Attacq, be sure to watch the recent recording of the Unlock the Stock event that featured Attacq and Tharisa.

Invicta’s shareholders approve the odd-lot offer (JSE: IVT)

This can be an opportunity for retail investors, but probably not this time

An odd-lot offer can give retail investors an arbitrage opportunity. Once the price is set, then buying up 99 shares in the market (to be safe) at anything less than that price gives you a risk-free profit. Obviously, the difference between the market price and the odd-lot price needs to be big enough to justify (1) the trading costs and (2) the time.

As an odd-lot offer is always based on fewer than 100 shares, the share price is what determines the opportunity. Although Invicta Holdings shareholders have approved an odd-lot offer at 5% premium to the 30-day VWAP calculated on 24 July, the problem is that the current share price is only R28.80.

This gives you a value of R2,880 on which to earn an arbitrage profit, which probably won’t even buy you anything interesting at McDonald’s.

RMB Holdings and Atterbury are still fighting (JSE: RMH)

Arbitration isn’t the way forward, apparently

This is starting to sound a bit like a bad divorce. Efforts to resolve the impasse between RMB Holdings and key investment Atterbury have been unsuccessful. The parties agreed in principle to arbitrate, but couldn’t agree on the terms of the arbitration.

That’s like agreeing to go to a seafood restaurant, then arguing about the fact that fish is on the menu.

The problem is that Atterbury is expected to issue a conversion notice to RMB (the bank – nothing to do with the legacy RMB Holdings vehicle anymore) that would see RMB Holdings’ stake in Atterbury be diluted. The key is that RMB Holdings has the right to decline the conversion notice being issued, so the impasse continues.

The parties have been trying to sort this out over the past six months. Like in basically every important soccer game ever, perhaps they should try a penalty shootout?

Sappi is talking to the Wirtschaftsausschuss (JSE: SAP)

Time to brush up on your German

In April 2023, Sappi announced that negotiations to sell three mills, including the Stockstadt Mill in Germany, had fallen through. Sappi is hanging onto the other two mills and needs to take action on the Stockstadt Mill, as it is unlikely to be sold as a going concern.

Sappi is consulting on the future of the mill with relevant parties, including the Wirtschaftsausschuss. As your curiosity must be peaking by now, that’s the Economic Works Council. And since this is Germany, it probably does work.

It looks like the mill will close and the site will be sold, so the pulp mill and paper machine will close. This pulp was being used in the production of woodfree paper for the European print market. These decisions are part of Sappi’s strategic shift in Europe.

What’s up at Wesizwe? (JSE: WEZ)

Hot commissioning is getting people hot under the collar

Wesizwe Platinum is trying to get to a point where it can commission the concentrator plant at the Bakubung Platinum Mine. But alas, there have been “several defects” during the testing process, ranging from lube systems to hydraulic failures. These are being resolved as quickly as possible.

This also isn’t exactly the best timing for a director to have resigned, even if it is only a non-executive director.

Little Bites:

  • Director dealings:
    • A director of a major subsidiary of PSG Konsult (JSE: KST) has sold shares worth R5.28 million.
    • An associate of a director of Afrimat (JSE: AFT) has sold shares worth R1.4 million.
    • In a whoopsie, a director dealings announcement hadn’t been released by Orion Minerals (JSE: ORN) in relation to a further acquisition of shares in the company by Clover Alloys Copper Investments. The director in question is a director of both Orion and Clover Alloys. This isn’t a director dealing in its purest form, but the important point is that Clover Alloys is increasing its stake.
    • While we are dealing with companies increasing their stakes, the news from Heriot REIT (JSE: HET) is that the company has acquired more shares in Safari Investments (JSE: SAR). Along with its concert parties (Reya Gola Investments and Heriot Investments), the stake has increased from 56.8% to 57.0%. It’s a small move, but the focus here is that the stake is being increased.
  • In case you wondered whether the Bob and Basil show at Naspers / Prosus (JSE: NPN / JSE: PRX) has calmed down in terms of how much money they are making, here’s confirmation that it hasn’t:
  • Investec Property Fund (JSE: IPF) has completed the transaction to internalise its management company (ManCo), a deal that is great news for the ManCo and very expensive for shareholders.
  • The game of musical chairs continues at the nightmare that is Pembury Lifestyle Group (JSE: PEM), with the announcement of multiple changes to the board of directors, including the resignation of the chairman and the company secretary.

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

Marylou Greig
-
0
Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

AVI subsidiary Irvin & Johnson has announced a new B-BBEE transaction following the maturation on 1 July 2023 of its 2004 deal with Main Street 198. In terms of the new deal, Twincitiesworld, a 100% black-owned company will acquire 18.75% of the issued share capital in Irvin & Johnson. I&J employees currently own 6.25%. Following the transaction, 25% of the issued share capital of I&J will be owned by previously disadvantaged shareholders. The new deal is not a categorised transaction in terms of the Listing Requirements of the JSE.

In February, Attacq informed the market that it was in discussions to dispose of a 30% stake in Attacq Waterfall Investment Company (AWIC) to the Government Employees Pension Fund (GEPF) represented by the Public Investment Corporation. This week the company announced it had concluded binding agreements and would, following shareholder approval, implement the transaction in exchange for R2,388 billion in cash. In addition, the GEPF will inject a further R300 million into AWIC as a shareholder loan. Attacq will retain control of AWIC and continue to provide asset management and administration services to AWIC at market-related fees.

Following the implementation of the Distell transaction in April 2023 and further subsequent off-market transactions, Remgro has informed shareholders that its final shareholding position in Heineken Beverages and Capevin is 18.80% and 55.93% respectively.

De Beers, 85% held by Anglo American, has negotiated a new 10-year diamond sales agreement with the Botswana government. Previously De Beers kept 75% of the diamonds mined through Debswana, a joint venture held equally with the state. Under the terms of the new agreement, Botswana will receive 30% of diamonds mined from the four mines, increasing to a maximum of 50% in the next decade. The parties have also agreed to extend the mining licenses (up for renewal in 2029) for a further 25 years to 2054.

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

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
-
0
Weekly corporate finance activity by SA exchange-listed companies

As part of its capital optimisation strategy, Investec Ltd acquired on the open market a further 1,097,217 Investec Plc shares at an average price of 435.9 pence per share (LSE and BATS Europe) and 472,489 Investec Plc shares at an average price of R103.58 per share (JSE).

Choppies Enterprises has successfully raised P300 million (R429 million) in a rights offer. Shareholders subscribed for 267,5 million shares representing 51.36% of the offer shares with the remaining shares taken up by Ivygrove [196,1m shares (37.65%)] and Export Marketing [57,2m shares (10.98%)] as partial underwriters to the offer.

Remgro has disclosed its final shareholding in Heineken Beverages and Capevin following the implementation of the Distell transaction (first announced in November 2021) and subsequent off-market transactions. Prior to the deal, Remgro held 15.5% stake in Heineken Beverages. In a series of off-market transactions this stake was increased to 18.80% – 13,218,475 shares were acquired for an aggregate R926 million. Remgro’s shareholding in Capevin comprises a 31.36% stake in Capevin ordinary shares with a voting interest of 20.13% and a 35.8% voting interest in Capevin’s B shares, translating into an aggregate voting interest in Capevin of 55.93%

PBT Group has declared a capital reduction distribution to shareholders of R0.165 per share for an aggregate R17,26 million.

Nedbank has repurchased 2,723,917 Nedbank Group shares in terms of its odd-lot offer. The repurchased shares, which represent 0.55% of the total issued ordinary share capital of company were repurchased for a total consideration of R637,58 million.

Heriot REIT through its subsidiary Heriot Properties has disposed of 1,571,645 Safari Investments RSA shares, on market, to majority shareholder Heriot Investments at a disposal price of R5.60 for an aggregate R8,8 million. In a separate on-market block trade, Heriot REIT acquired an additional 385,237 Safari shares at a purchase price per share of R5.75 for an aggregate R2,22 million.

The JSE has flagged the following companies for late submission of their Annual Financial Statements: Acsion, African Dawn Capital and Copper 360. Companies need to submit their annual reports on or before 31 July 2023, or face possible suspension.

A number of companies listed on one of South Africa’s Stock Exchanges have initiated share buyback programmes and each week update shareholders. They are:

Investec’s share repurchase programme has been renewed and commenced on May 30. The programme will end on or before September 29. Over the period 26-30 June 2023, 341,049 shares were repurchased at an average price per share of R103.22. Since November 21 ,2022, the company has repurchased 12,244,378 shares at a cost of R1,31 billion.

This week Glencore repurchased a further 11,220,000 shares for a total consideration of £51,06 million. The share repurchases form part of the second phase of the company’s existing buy-back programme.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 26-30 June 2023, a further 1,961,211 Prosus shares were repurchased for an aggregate €130,4 million and a further 515,464 Naspers shares for a total consideration of R1,69 billion.

One company issued a profit warning this week: RCL Foods.

Five companies issued or withdrew a cautionary notice: Ayo Technologies, Tongaat Hulett, RMB Holdings, Conduit Capital and Attacq.

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

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

Vanessa Aitken
-
0
Who’s doing what in the African M&A space?

DealMakers AFRICA

In Kenya, online retail distribution specialist, Kyosk has acquired KwikBasket for an undisclosed sum. The digital platform raised an undisclosed amount of funding from Japan’s Mitsui & Co earlier this year.

Verod-Kepple Africa Ventures has invested US$1,5 million in Morocco’s Chari. The B2B e-commerce startup for FMCG products, will use the funding to support its growth plans.

Fintech startup Masroofi has raised $1,5 million from undisclosed investors. Founded in 2022, the Egyptian startup provides electronic payment services for children, including a bank card system.

Morocco’s first online real estate estimation platform, Agenz.ma has raised MAD13 million (US$1,3 million) in a pre-Series A financing round. Investors in the round included among others, Azur Innovation Fund, Maroc Numeric Fund II and Beenok.

Nuru, a DRC renewable energy-powered metrogrid company, has closed a US$40 million Series B equity funding round to enable it to start construction on 13,7 MWp of projects. Investors included the IFC, the Global Energy Alliance for People and Planet, the Renewable Energy Performance Platform, Proparco, E3 Capital, Voltalia, the Schmidt Family Foundation, GAIA Impact Fund and the Jospeh Family Foundation.

TLG Capital has led a US$4,58 million funding round into Nigeria’s invoice financing startup, Zuvy Technologies. The funding was split between $4 million in debt in $580,000 in equity.

Kenya’s Revivo raised US$635,000 to expand operations from Raba Partnership, Village Global, Musha Ventures, Satgana and strategic business angels. Founded in 2022, Revivo provides a B2B marketplace for electronic repairs.

This week marked the signing of subscription agreements and letters of intent by African and global institutional investors in preparation for the first close of the Africa50 Infrastructure Acceleration Fund, a 23-year close ended private equity fund. The fund has been set up to catalyse further investment flows in the development of critical infrastructure across the continent.

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

Ghost Global: the dark side of consistency

The Finance Ghost
-
1
Ghost Global: the dark side of consistency

More of the same. It can be good. It can be bad. Using examples from the Magic Markets Premium research library, I explain this further.

Imagine this: you visit a new coffee shop for the first time and have the best cappuccino of your entire life. The next day, you revisit the coffee shop, hoping for a similarly good experience, only to find that the entire menu has been changed.

“Keep on keeping on”: a business strategy 

The cappuccino is still there and is just as good, but now it’s called an “extra-tall espresso with foam” and it costs R1 more than before. Alright, you might think, it’s a little strange but at least the product is still good.

You return the next day to find that all of the waiters have been replaced by AI-enhanced serving trolleys. The coffee is still excellent though, so you come back on the fourth day, only to discover that the coffee shop is now a mobile cart and they only accept payment in Bitcoin. 

Would you go back to see what surprises await you on the fifth day?

Running a business means eternally see-sawing between keeping your customer base engaged and interested, and offering something that they can rely on. Consistency is more than a buzzword here: it’s one of the most basic things that your business needs to master in order to gain the trust of its customers (not to mention investors and shareholders). Nobody likes a rollercoaster. Well, except swing traders.

Does that mean that consistency is the opposite of innovation? It doesn’t have to be. As with all things in business, success is often found in those tricky grey areas between two extremes. 

Our Magic Markets Premium research library is full of examples of businesses that have innovated themselves out of the game – but there are also those who have stagnated beyond relevance. Consistency is as important to a business as water is to human being’s survival.

Just remember that too much water can still drown you. 

If it ain’t broke, don’t fix it

One example of consistency done right comes from our very recent recap report on Visa. 

Visa goes beyond being just a card in your pocket. Behind the scenes, it operates a massive global payments network, enabling the card to function worldwide. The farther the money travels, the more revenue the network generates. This is why Visa benefits greatly from cross-border travel and has been likened to having a royalty on global trade.

Its robust business model is widely recognised, and its valuation reflects that strength.

Here a strong case is made for consistency. Visa has a focused management team, a strong brand and most importantly, a product that addresses a need that consumers will always have. So while innovations are coming down the pipeline – think AI and the clever Visa+ concept – there’s really not that much left for the Visa team to do other than to keep this ship on course. This is what they do best, unlike Hasbro (covered in the same recap show) that is in the midst of a turnaround strategy.

The dangers of falling asleep at the wheel

Of course, there’s always the danger of being too consistent, as illustrated particularly well by our recent report on Tupperware.

The ultimate irony is that it is the longevity of the Tupperware brand that is working against it here. The older a company gets, the more challenging it becomes to think creatively and adapt. Keeping up with the changing times requires constant innovation, and once a company falls behind the curve, it seems almost impossible that they will catch up. 

The pandemic presented a prime opportunity for Tupperware to innovate. Its traditional distribution model – those iconic Tupperware parties – came to an abrupt halt, as even the most determined sales representatives would struggle to get people to attend socially distanced Tupperware parties while wearing masks. The brand needed to embrace digital platforms swiftly, a move that should have been made at least a decade ago. 

And that is exactly the point where the slow-acting chickens came home to roost. 

The brand’s failure to innovate earlier has left it struggling to navigate the digital landscape and compete effectively with newer, more agile companies. Tupperware’s longevity and adherence to its traditional methods have become significant obstacles in an era where rapid change and innovation are key.

To regain relevance and capture new markets, Tupperware must now make a concerted effort to overhaul its business model. This means leveraging digital platforms, investing in e-commerce capabilities, and adopting a more dynamic approach to marketing and sales.

Sadly, it also means hiring advisors to help it survive. The brand is good. The business model isn’t.

With well over 80 research reports on global stocks available in the library, a subscription to Magic Markets Premium for just R99/month gives you access to an exceptional knowledge base that has been built since we launched in 2021. Now that’s what we call the right kind of consistency!

There is no minimum monthly commitment and you can choose to access the reports in written or podcast format – whatever floats your boat. Sign up here and get ready to learn about global companies>>> 

Ghost Bites (Sibanye-Stillwater | Spear REIT | Tongaat Hulett)

The Finance Ghost
-
0
Ghost Bites (Sibanye-Stillwater | Spear REIT | Tongaat Hulett)

Sibanye’s subsidiary has improved its balance sheet (JSE: SSW)

Unfortunately, the update is very light on details

In May 2023, Sibanye-Stillwater acquired a 100% stake in New Century Resources, having owned 19.99% in the company since October 2021. This is a tailings management and rehabilitation company with a zinc operation in Queensland, Australia.

The company has restructured its environmental bond and trading facilities on improved terms, which means that banks are viewing the company more favourably than before. The announcement is vague though, so we don’t know if the improved terms relate to the cost of debt or just the repayment terms. Remember, there are many elements of a debt package.

A large part of why the terms have improved is probably the guarantee that Sibanye has given for the company’s debt. This is the benefit for a smaller mining house of being part of a larger group.

Spear REIT reports encouraging first quarter metrics (JSE: SEA)

This is one of the more solid property funds on the JSE

Spear REIT is an exercise in simplicity. The group doesn’t try and own properties all around the world through intricate structures. In fact, they don’t even bother with properties outside of the Western Cape!

Although share price growth has been modest in recent years, you simply have to include the dividends in an analysis of shareholder returns. The current trailing dividend yield is 10.5% and the portfolio is seen by the market as being robust.

But even the Western Cape isn’t insulated from South Africa’s troubles, obviously. The lights still go off and businesses still face pressure. This has a knock-on effect for property funds.

The three months to May represent the first quarter of this financial year. Portfolio vacancies fell from 7.82% in FY23 (the previous full financial year) to 6.80% in this quarter. Among other drivers, the fund notes an uptick in demand for office space, an asset class that has been battered in the past couple of years.

The average escalation rate in the portfolio is 7.4% and the rental reversion rate in this quarter was +4.17%, up from +3.69% in FY23 and on the right side of zero, which is more than many other property funds can say.

Looking deeper, the industrial portfolio has benefitted from curtailment agreements with City of Cape Town that have improved the availability of electricity supply. Rental reversion was a lovely +10.73% this quarter and the average escalation on existing leases is 7.63%. The vacancy rate is down from 2.23% to 1.50%.

The retail portfolio is fully focused on convenience retail, delivering a vacancy rate of just over 0.5% which has been consistent. The bad news is negative reversions of -5.57%, which shows that even the Western Cape is hit by macroeconomic conditions. 41% of the portfolio is occupied by national tenants on long-dated leases.

The commercial (i.e. office) portfolio is still finding things difficult, but Spear specifically highlights the importance of the local and international business process outsourcing sector and the positive impact this has had on vacancies in the Cape metropole. The vacancy rate is still high at 15.42% but at least reversions were positive at +4.73%.

The loan-to-value ratio has increased from 36.30% at the end of FY23 to 39.06% at the end of this quarter. Combined with the weighted average cost of debt increasing from 8.66% to 9.16%, this puts pressure on distributable income. The sale of the Liberty Life building in Century City will help, with that deal closing after the end of the quarter covered by this update.

In this quarter, distributable income of R43.15 million is down from the quarterly run-rate that would’ve achieved distributable income of R188.4 million in the prior year. As solid as Spear is, there’s no escaping the pressure in the system.

Tongaat Hulett gets a funding extension (JSE: TON)

RCL Foods must be wishing that it gets used for sugar levies

I found yesterday’s update from RCL Foods about the sugar levies fascinating. Due to Tongaat’s non-payment of these levies, the entire sugar industry has been hit with a special levy for the shortfall. I don’t know much about the industry at all, but it seems bizarre.

It’s certainly in South Africa’s best interests for Tongaat-Hulett to continue operating. The business rescue practitioners have reached an agreement with the current funders to extend the post-commencement funding facility from 30 June to 21 July 2023. It shows how tough this process is that the funding is agreed for just a few weeks at a time.

The approval process for longer-term funding is underway.

Little Bites:

  • Director dealings:
    • A director of Afine Investments (JSE: ANI) has bought R1.5k worth of shares on EasyEquities, which is probably a function of low liquidity rather than lack of desire to own more!

Ghost Bites (Copper 360 | Murray & Roberts | RCL Foods)

The Finance Ghost
-
2
Ghost Bites (Copper 360 | Murray & Roberts | RCL Foods)

Copper 360 releases encouraging metallurgical results (JSE: CPR)

Results have exceeded company expectations

Drill core samples from the Rietberg Copper Mine have been subjected to metallurgical tests and the results are promising. When measured against Copper 360’s expectations, the good news is that more copper with less energy can be recovered, which is great for the bottom line.

I always find the actual results interesting, even though I barely understand anything that I’m reading. At least they use a “DOW200 frother” so the cappuccinos at head office must be good. Or perhaps, the copper just gets cleaned well. I can’t be sure.

Murray & Roberts can’t catch a break in Australia (JSE: MUR)

The attempt to regain control of RUC Cementation has fallen through

Murray & Roberts has been trying to navigate a legal minefield in Australia where Clough is in administration. RUC Cementation also got caught up in this, with Murray & Roberts attempting to pluck it out of the process and regain control of the business.

Certain conditions precedent in the term sheet were not satisfied in time, so the attempt to do this has fallen through.

The group now hopes to provide engineering and contracting services to mining clients in the Asia Pacific division through the recently established Cementation APAC business. Talk about calling all pockets and hoping that something works.

No rainbows at RCL Foods (JSE: RCL)

There is an unexpected contagion impact from Tongaat-Hulett

This trading statement came out early in the morning and hardly tells a great story, yet the share price closed 2.5% higher on the day. Clearly, major holders had a good idea that this was coming.

HEPS for the year ended June 2023 at RCL Foods will be at least 30% lower than in the comparable period. This has mainly been driven by a special levy raised by the South African Sugar Association (SASA), the impact of load shedding and unrecovered feed costs in Rainbow.

Before you feel too bad about special levies in your complex, be thankful that you aren’t in the sugar industry. The business rescue practitioners at Tongaat Hulett have decided not to pay the company’s statutory obligations to SASA, necessitating a special levy that the rest of the industry has had to bear. The pre-tax impact on RCL Foods is R234 million.

Litigation is underway regarding the lawfulness of the decision by the appointed business rescue practitioners to suspend compliance with statutory obligations at Tongaat Hulett.

Shareholders should also note that Vector Logistics will be reported as an asset held for sale in these financials, as the transaction is still being implemented.

Little Bites:

  • Director dealings:
    • A director of a major subsidiary of Marshall Monteagle (JSE: MMP) has bought shares in the company worth R11.2 million.
    • An associate of a director of Afrimat (JSE: AFT) has sold shares worth over R8 million.
    • Associates of two directors of Ascendis Health (JSE: ASC) have each acquired shares worth R218k.
    • A director of a subsidiary of Nu-World (JSE: NWL) has sold shares worth R23.6k.
  • British American Tobacco (JSE: BTI) pays quarterly dividends, which is pretty much the only reason why anyone buys the stock. The dividend to be paid in August is R13.8000439 per share. That’s an annualised yield of around 8.8% on the current share price.
  • The Datatec (JSE: DTC) scrip dividend alternative has been calculated with reference to the 30-day VWAP of around R36.42 per share. The current price is R39 per share, so accepting scrip instead of cash may be appealing to shareholders.

Ghost Bites (Anglo American | AVI | Brikor | Mondi | Montauk | Remgro | Salungano | Texton)

The Finance Ghost
-
0
Ghost Bites (Anglo American | AVI | Brikor | Mondi | Montauk | Remgro | Salungano | Texton)

It turns out that diamonds aren’t necessarily forever (JSE: AGL)

Mining licences in Botswana need to be renewed – but luckily not very often

Anglo American announced that important subsidiary De Beers has reached an agreement with the Botswana government for a new 10-year sales agreement for rough diamond production at Debswana, as well as a 25-year extension of the mining licences through to 2054.

Before you think you just woke up from a coma, I know that 2054 – 25 = 2029. The current licence presumably expires in 2029 and extension negotiations are very proactive.

Debswana operates four diamond mines in Botswana and is a 50-50 joint venture between De Beers and the Botswana government.

AVI announces a new B-BBEE deal in I&J (JSE: AVI)

Significant value was created in the previous partnership

The B-BBEE structure in I&J (part of AVI) goes back to 2004. It was extended three times, with the 19-year partnership generating R202 million in net cash to the B-BBEE partner.

The old deal matured on 1 July 2023 and a new deal has now been announced, with Twincitiesworld acquiring 18.75% of the shares in I&J. Alongside I&J employees with 6.25%, this takes the total Black shareholding in I&J to 25%.

There isn’t much information available on Twincitiesworld, other than a note in the announcement that it has historic links to I&J and strong community ties. That makes it sound like a broad-based structure.

As the name implies, Brikor is now focused on bricks (JSE: BIK)

Brikor is completely changing its strategy with its coal assets

This wasn’t the simplest announcement to understand, I’ll tell you that much. In summary, Brikor has recognised that trying to row its own boat with its coal assets is a mistake, as the most important thing is actually to secure a supply of clay for the core business of brick-making. Beyond that, just making a profit from the coal operations would be nice.

To achieve that, Brikor has entered into a contract mining and coal purchase agreement with TCQ Mining. There’s quite a spider web here, as Brikor holds a stake in TCQ via a subsidiary, plus one of the other shareholders in TCQ is also a material shareholder in Brikor.

TCQ is going to buy all the coal mined in the defined areas from Brikor (and other owners of the mining rights) for a price equal to all contract mining costs plus R20 per ton. Clay is a by-product of the mining of coal and TCQ will deliver it to the existing rights holders on a monthly basis at no additional cost.

All of the details will be included in a Category 1 circular, so Brikor shareholders can fully understand the economics here. The summary is that the coal mining operations will now be profitable and cashflow positive for Brikor, with the supply of clay as a critical part of the deal.

While the deal goes through the motions, there is a three-month interim consulting agreement with TCQ at a cost of R13.7 million for the purposes of advising Brikor on improving current mining operations and getting them ready for a large upscaling after the transaction. This is expected to improve output by 80,000 tons over the three-month period.

Mondi: one step closer to bye-buy, babushkas (JSE: HET)

The sale of three Russian packaging converting operations has been completed

Back in December 2022, Mondi announced that it had reached an agreement to sell three Russian packaging converting operations to Gotek Group for RUB1.6 billion. In a currency that will be a lot more familiar to you, this has equated to €30.4 million landing in the Mondi bank account.

The group will distribute the proceeds to shareholders once the full exit from Russia has been completed. This implies that there’s no special dividend until the disposal of Syktyvkar, the most significant facility in Russia owned by Mondi. Selling this asset has proven to be difficult.

It’s been a pretty wild ride for this stock, with a catastrophic drop when war broke out in Ukraine and some fun trading opportunities since then:

Montauk has been busy this year (JSE: MKR)

The latest project is at a landfill in California

Through its subsidiary Bowerman Power LFG, Montauk Renewables is planning to develop a renewable natural gas project at the Frank R. Bowerman Landfill in California. The target commissioning date is 2026 and the capital investment is expected to be between $85 million and $95 million.

As my dad would likely point out: it’s a dirty job, but somebody has to do it.

Remgro confirms its stake in Heineken and Capevin (JSE: REM)

Unsurprisingly, Remgro has been mopping up unlisted shares in Heineken Beverages

After the Distell buyout and delisting was completed in April, Remgro was left with a stake in Heineken Beverages and Capevin. The group has now confirmed the extent of the shareholding in both companies.

Remgro initially held 15.50% in Heineken Beverages, but increased this to 18.80% through a series of off-market transactions with a cash cost of R926 million. This was based on R165 per share.

In Capevin, Remgro holds 31.46% of ordinary shares in issue and all of the B shares. The aggregate voting interest is 55.93%.

What’s going on at Salungano? (JSE: SLG)

A delay in publishing results is one thing, but this is quite another

Among the scrappier companies on the JSE, it’s not unusual to see a delay in the publishing of results. The market doesn’t like it, but deals with it. Hot on the heels of that delay at Salungano came far worse news, with the share price taking a 21% knock in response.

Three independent directors have resigned in one go, including the lead independent director and chairperson of the audit, risk and compliance committee. That is a picture perfect example of exactly the kind of thing that makes shareholders panic.

The company neglected to give a reason for the resignations.

Texton shareholders say yes to the PIC buyback (JSE: TEX)

The first thing to do is check the buyback price against the NAV per share

Local property funds tend to trade at a significant discount to the net asset value (NAV) per share. Texton is hardly a market darling, so the NAV from December 2022 of 609.51 cents is a whole lot higher than the current share price of R2.28.

The gap to the price at which the PIC is exiting is even bigger, with a repurchase price of R2.15 per share. It’s no wonder that shareholders said yes to this repurchase with an emphatic 99.98% approval at the general meeting. 19.8% of issued shares will be repurchased at a huge discount to NAV, which is theoretically good news for all other shareholders.

The bigger question is: does the market believe the NAV, or is the discount simply going to stay as large as it is now?

Little Bites:

  • Director dealings:
    • An independent director of Curro (JSE: COH) has bought shares worth R86k.
    • An associate of the chairperson of Nictus (JSE: NCS) has sold shares worth R65k in an off-market trade.
    • A prescribed officer of Gold Fields (JSE: GFI) has sold shares worth R26k.
    • The spouse of a director of Afine Investments (JSE: ANI) has been doing some small-scale trading on EasyEquities, acquiring shares worth R4.5k.
  • With no impact on any of the other terms of the debt, Northam Platinum (JSE: NPH) settled an existing term loan facility and extended the revolving credit facility. Total available facilities are now R11 billion, so the group is sitting on plenty of undrawn firepower.
  • Although the announcement doesn’t make it quite as clear as I would’ve liked, it looks like the complaints by Northam Platinum (JSE: NPH) against Royal Bafokeng Platinum (JSE: RBP) regarding alleged frustrating actions related to executive remuneration have been sorted out. The compliance certificate required to make the Impala Platinum (JSE: IMP) offer unconditional has been issued, so we know the investigation is over. The announcement makes it sound like there was no further action against RB Platinum.
  • Kibo Energy (JSE: KBO) has released a quarterly update dealing with the various projects in the group. The strange scenario around shareholders being unable to vote at the extraordinary general meeting caused delays to the funding activities for certain projects.
  • Nedbank (JSE: NED) repurchased 0.55% of its total issued ordinary shares for R638 million, delivering a small risk-free profit to those who watched carefully and banked the difference between the market price and the odd-lot offer price. Most people simply don’t pay attention, with 2.375 million of the 2.72 million repurchased shares being repurchased by default due to shareholders not taking any action.
  • DRA Global (JSE: DRA) has announced the appointment of Charles Pettit to the board, the CEO of largest shareholder Apex Partners. Charles was founder and CEO of Torre Industries and Stellar Capital, both of which aren’t listed anymore.
  • AfroCentric (JSE: ACT) has announced a number of executive management changes now that the Sanlam (JSE: SLM) acquisition of a controlling stake has been concluded. This includes Gerald van Wyk as CEO Designate, due to take the reins from 1 November when current CEO Ahmed Banderker’s five-year term ends.
  • In the naughty corner for late submission of financial statements, we find Acsion Limited (JSE: ACS), African Dawn Capital (JSE: ADW) and Copper 360 (JSE: CPR).
  • Right at the bottom of the JSE dustbin, we find Afristrat (JSE: ATI) and its quarterly update. This company is so broken that they can’t even find an auditor willing to accept the appointment, as judgment was reserved in a recent liquidation application in the High Court. Aside from numerous other issues, another creditor has also launched a liquidation application.

Ghost Stories #16: Investing For Your Kids with Thembeka Khumalo (Senior Client Experience Manager at Satrix)

The Finance Ghost
-
0
Ghost Stories #16: Investing For Your Kids with Thembeka Khumalo (Senior Client Experience Manager at Satrix)

As we head into National Savings Month in July, Thembeka Khumalo of Satrix joined The Finance Ghost to talk about an incredibly important element of personal finance: investing for minor children.

Minor children tend to have major expenses, making it difficult for parents to strike a balance between monthly expenses and the need to save.

Thembeka has three-year-old twins and the Ghost also has a three-year-old, so this podcast comes from the heart.

Topics included:

  • The importance of diligent investing on behalf of your children
  • Why the power of compounding could be the best gift you ever give your children
  • The concept of risk and how starting earlier helps in mitigating this issue
  • The use of tax-free savings accounts as an investment vehicle for minors and the pros and cons thereof
  • The SatrixNOW platform as a tool for parents to save for their kids (and themselves!)

To find out more about SatrixNOW, visit this link>>>

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.

For more from the Satrix – Ghost Mail partnership, visit this link to find various podcasts and articles.

1...99100101...191Page 100 of 191

Focuses on making market news and investment concepts accessible, understandable and fun!

Ghost Mail is free to read

SUBSCRIBE TODAY

Partner with Ghost Mail

CONTACT US

© Ghost Mail

Verified by MonsterInsights