Orion Minerals has raised A$8,9 million via the placement of 593,499,999 shares at an issue price of A$0.015 (R0.18). The placement introduces Clover Alloys (SA) as a new cornerstone investor which will enable Orion to accelerate the development of both of its key base metal production hubs in the Northern Cape province.
Dipula Income Fund has reached a settlement with Breede Coalitions, following the shareholders notification to the company that it intended to exercise its Appraisal Rights. In March the company made an offer to repurchase all of the Dipula A shares for a consideration of 2.4 Dipula B shares for every Dipula A share held. In terms of section 164 of the Companies Act, shareholders of a scheme are afforded the right to demand that the company pay fair value for all DIA and DIB shares. In terms of the agreement reached, Dipula has paid an all-inclusive amount of R34 million for the 1,715,000 DIA shares and 2,000,000 DIB shares held by Breede Coalitions.
Ayo Technology Solutions has disclosed more information on its settlement with the Public Investment Corporation (PIC) following negative press around the scanty details of the agreement reached with the PIC. Ayo will repurchase 17,202,756 ordinary shares from the Government Employees Pension Fund (GEPF) for a total repurchase consideration of R619,42 million. The GEPF will retain a minimum stake of 25.01%.
NEPI Rockcastle will issue 28,830,268 new shares in terms of its scrip distribution alternative. The scrip dividend shares will be issued at R92.82 per share for an aggregate R2,68 billion. The total number of ordinary shares in the company following the issue will increase to 635,830,268.
Cashbuild has repurchased 89 164 shares in terms of its odd-lot offer to shareholders, representing 0.37% of the total issued share capital of the company for a total consideration of R17,59 million.
Shoprite is yet another blue-chip company to announce it will take a secondary listing on A2X. Currently the company’s stock trades on the JSE, the NSX and the LUSE. It will trade on A2X with effect from 11 April, 2023.
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:
South32 has increased its share repurchase programme by c. $50 million in anticipation of a stronger outlook for commodity prices in the second half of its financial year. This will enable the company to return $158 million to shareholders before September 2023. This week the company repurchased a further 1,287,351 shares at an aggregate cost of A$5,63 million.
Glencore this week repurchased 8,280,000 shares for a total consideration of £38,24 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 27 to 31 March 2023, a further 3,883,762 Prosus shares were repurchased for an aggregate €272,23 million and a further 485,830 Naspers shares for a total consideration of R1,60 billion.
Two companies issued profit warnings this week: Advanced Health and Pick n Pay.
Five companies issued or withdrew cautionary notices: Tongaat Hulett, Conduit Capital, Primeserv, Finbond and Ayo Technology Solutions.
Africa has seen an increase in the number of stock markets and the level of market capitalisation over the last two decades, with improvements to market infrastructure across the continent.
Yet, with certain exceptions, liquidity levels remain a primary concern for investors on the continent, exacerbated by factors such as inefficient trading systems, high transaction costs slowing the velocity of trade, the lack of participation of retail investors on the markets, and long-term and large holdings of pension funds.
Against this background, efforts have been made to tackle the liquidity challenge. Most noteworthy is the launch of the African Exchanges Linkage Project (AELP) on 7 December 2022, an initiative which could, over time, boost liquidity by facilitating cross-border African investment, and attract more international investors if liquidity levels increase.
The AELP, a joint initiative of the African Development Bank and the African Securities Exchanges Association, launched an e-platform (The AELP Trading Link), which allows investors in different countries to buy shares on other exchanges through a common platform. The AELP Trading Link, which is hosted on Oracle Cloud Infrastructure, has been designed to integrate with exchange and stock broker trading systems, and is available in English, French and Arabic. It aggregates live market data from the exchanges and enables stock brokers to access information and see the market depth and liquidity of the foreign market of interest. The AELP Trading Link essentially enables seamless cross-border securities trading between seven African stock exchanges, which together represents 2,000 companies with roughly US$1.5 trillion market capitalisation.
The linkage project is not the first regional linkage initiative to boost liquidity in African Stock Markets. The Bourse Régionale des Valeurs Mobilières, which links the exchanges of eight West African nations, namely Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal and Togo, is the only exchange in the world shared by several countries, and has been most successful.
In its initial phase, seven stock exchanges in fourteen African countries will be linked by the AELP. The participating exchanges include the Bourse Régionale des Valeurs Mobilières, integrating the eight West African countries: the Casablanca Stock Exchange, The Egyptian Exchange, the Johannesburg Stock Exchange, the Nairobi Securities Exchange, The Nigerian Stock Exchange and the Stock Exchange of Mauritius.
Ultimately, the AELP is expected to, among other things, promote innovations in product creation that would support the diversification needs of investors in Africa and address the lack of depth in African capital markets. It is understood that once the necessary infrastructure has been created, institutional participation is also potentially contemplated, enabling institutions to settle trades directly.
The current framework for the linkage between the exchanges is “sponsored access”. This is based on the model where a registered stockbroker or “originating broker” in one participating securities exchange takes an order from a domestic client and sends a registered stockbroker on another exchange a request to execute the trade in that market. The executing or “sponsoring broker” is responsible for ensuring compliance to the rules, settlement and practice of the market where the security is bought or sold. Therefore, the sponsoring broker will clear and settle trades in the host market, using their local currency, in compliance with the host market’s rules and practices, and the regulatory bodies in all the participating markets are apprised of the progress.
The securities are to be held in the central securities depository where the security was traded, reducing cross-border movement of securities, and streamlining settlement and clearing to comply with only one market; that being the market where the trade is executed and the security is held.
While a project to link trading on seven of Africa’s largest and most liquid stock exchanges has the capacity to boost liquidity by encouraging cross-border African investment and attract more international investors, the AELP is still in its infantile stages and still faces roadblocks on a continent with disparate regulatory regimes and trading rules, and historical capital market challenges. Nevertheless, it is a step in the right direction.
Dimitri Cavvadas is a Partner and Obakeng Phatshwane an Associate | Fasken
This article first appeared in DealMakers AFRICA.
DealMakers AFRICA is the continent’s quarterly corporate finance publication. www.dealmakersafrica.com
As the ‘L’ in Leverage Buyout becomes more expensive, we can expect to see some downward pressure on private equity deal activity. In South Africa, leverage has not been used to the same extent as in more developed markets, but using debt is still a key component of securing returns attractive enough to pull the trigger on a transaction. And with interest rates now higher than before the COVID pandemic, many experts are warning that the receding tide of cheaper capital will reveal who has gone swimming naked with their portfolio companies.
Africa-focused private equity funds appear to have enjoyed a boom year in 2021. Figures from the African Private Equity and Venture Capital Association (AVCA) show that private capital fund managers in the region raised $4,4bn in final closes and another $2,3bn in interim closes last year.
This is a drop in the global financial ocean, but it does mark a fourfold increase on the capital raised during the depths of the pandemic in 2020.
The 2021 fundraising totals were boosted by some of the continent’s largest ever fund closes. Most notably, Development Partners International’s third fund closed on $900m in October, with another $250m in co-investment capital.
Scratch beneath the surface, however, and the picture looks less rosy. Much of the capital raised in 2021 simply represents “deferred investment” from 2020.
The total volumes raised by funds holding a final close in 2020 or 2021 – $5,5bn – were considerably less than the $6,7bn raised in the two years before the pandemic. Hope that the recovery would accelerate has been dented by the worsening global macroeconomic conditions in the first half of 2022. Today, Africa-focused fund managers face a major test in persuading capital allocators that the time to put their money to work on the continent is now.
Yet, with rising inflation in advanced economies prompting central bankers to raise interest rates, emerging markets have become less attractive as investment destinations. Higher returns available in the US and Europe mean that investors are less likely to take on the real and perceived risks of allocating to Africa focused vehicles.
This will particularly disadvantage managers unable to demonstrate a track record.
Currency volatility – a longstanding thorn in the side of efforts to boost investment in Africa – is likely to become more severe in the coming months, given that the Federal Reserve’s hawkish policies are strengthening the dollar.
Several of Africa’s largest markets have already seen their currencies depreciate against the dollar this year. For instance, according to the Bank of Ghana, the Ghanaian cedi depreciated by almost 20 percent against the dollar between January and July.
An AVCA survey published in March found that 23 percent of GPs “frequently” experience delays in raising capital in Africa because of currency risks. Another 41 percent view currency fluctuations as having a “significant negative impact” on returns.
Abi Mustapha-Maduakor, the chief executive of AVCA, insists that it is possible to learn from the current situation. She believes that increasing interest from venture capitalists in African start-ups won’t diminish. She asserts that “the fundamentals are still strong.” Even now, a portion of investors will probably want to invest more aggressively in Africa.
VC firms may be better placed to attract capital in the current environment than traditional private equity players that invest in brick-and-mortar businesses. MD of Endeavor South Africa, Alison Collier says that Fintechs and other tech start-ups have “attracted a lot of international private money because those businesses are looked at as international businesses. They started in Africa, but they can scale up globally.”
On the other hand, she bemoans the enduring wariness among institutional investors of committing to Africa-focused PE funds. “The perception of risk, in general, for Africa is higher than the reality,” she says.
Perhaps more surprisingly, even asset owners with impact mandates frequently have reservations about the continent when given the chance to invest in Africa and support the Sustainable Development Goals. According to a report released by the International Finance Corporation in July 2021, only a small portion of impact capital (31 percent) is allocated to African emerging markets funds.
Mobilising local capital
Institutional investors from outside the continent may be less likely to commit to Africa-focused funds until currency and other macroeconomic headwinds have eased. But what about pools of capital from within Africa itself?
African pension funds hold assets amounting to at least $350bn, a fi¬gure that has grown substantially in recent years. But these funds overwhelmingly allocate to government securities or, in markets such as South Africa, listed equities. Private equity and pension funds should be an ideal fit but, generally, there is a lack of understanding regarding the asset class among African pension funds.
Progress is being made to reform regulations to allow institutional investors to allocate more to alternative funds. In July last year, the South African government con¬firmed that the country’s pension funds would be able to increase their allocation to private equity to 15 percent of their assets from January 2023. Until now, allocations have been limited to 10 percent.
It is worth noting, however, that South African pension funds are not in danger of breaching the current limit. In fact, South African institutional investors allocate just 0.3 percent of their AUM to private equity, according to research published last year by development agency, FSD Africa.
Development finance institutions (DFIs) are commonly cited as playing a critical role in convincing institutional investors to back Africa-focused funds. Some of them say that we absolutely need a DFI to be part of a fund, because it gives comfort around the level of due diligence and ESG processes.
There is little doubt that DFIs will remain indispensable to private equity in Africa.
As private equity law doyen, John Bellew of Bowmans says, “DFIs have, for many years, provided the backbone for private equity managers looking to raise capital to deploy in Africa. We expect them to continue to support the industry, but to encourage managers to also raise capital from commercial LPs, especially in successor funds. A number of DFIs also have an appetite for co-investment, and we expect this also to continue.”
Michael Avery, is the editor of Catalyst
This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.
Anglo takes another step towards low carbon (JSE: AGL)
The goal is to reduce emissions in the steelmaking process
Anglo American has put together a deal with H2 Green Steel in Sweden that will see the Swedish company trial Anglo’s premium quality iron ore from Kumba in South Africa and Minas-Rio in Brazil as feedstock for a direct reduced iron production process.
If H2 gets this right, they will have created a plant in Sweden that would reduce CO2 emissions by up to 95% in the process vs. traditional steelmaking!
Investec and Rathbones to create the UK’s leading discretionary wealth manager (JSE: INL | JSE: INP)
The merged entity will have £100 billion in funds under management and administration
Investec is taking a major step in its UK business that will see Investec Wealth & Investment combined with Rathbones to create the biggest discretionary wealth manager in the UK.
The structure will see Rathbones acquire the business from Investec and issue shares to pay for it, which will take Investec to an economic interest in Rathbones of 41.25% and voting rights of 29.9%. The shares are locked up for two years and Investec can partially sell the stake in years three and four. Investec is also not allowed to acquire more shares in Rathbones or make an offer for five years.
The implied equity value for Investec’s business under this transaction is £839 million.
The companies believed that annual synergies from the transaction will be £60 million. There are many other strategic benefits to the deal, including a stronger client proposition and larger distribution power.
The Rathbones brand will be retained and the Investec Wealth & Investment brand will be phased out over time.
Murray & Roberts shareholders say yes to Bombela sale (JSE: MUR)
No surprises here – the balance sheet needs help and this is a quick win
Murray & Roberts needs to sort out its balance sheet. This means that non-core assets need to go, particularly those offering a low return on capital.
Building infrastructure is what the company should be doing, not owning it. Recognising that point, Murray & Roberts agreed to sell the Bombela Consortium (Gautrain) to Intertoll International Holdings. The net proceeds to Murray & Roberts would be R1.26 billion if shareholders said yes to the deal.
They did, in fact, say yes. I am not surprised at all that it received “overwhelming” support as Murrays really needs the capital. This will be used to reduce debt, which will now be R1.39 billion after the repayment. Around 10% of that debt balance is related to leases, which is a lot friendlier than owing the bank.
The annual interest cost will drop by R95 million.
As a quick update on the business, Murray & Roberts confirmed that the Mining platform represents R14.1 billion of the R16.1 billion order book, with the remainder in the Power, Industrial & Water platform. I’m old enough to remember when Murray & Roberts arranged a fancy investor day with presentations by each platform.
That was before the business (and share price) imploded:
Nampak buys some time (JSE: NPK)
And time is money, literally
As highlighted by its recent results update, Nampak is still in serious trouble. With its earnings being crushed by forex losses, the company isn’t making any progress in reducing its debt.
The latest news is positive in terms of keeping Nampak alive, though it sure does come at a cost. There was a facility of R1.35 billion partially due on 31 March 2023 which has had its maturity date extended to 30 June 2024. There are two different structures that make up that amount and both have been moved to that date.
What does this cost? Well, there’s a fee of 0.43% payable as an extension fee (R5.8 million) and the far more onerous term is that the original funding cost of 5.25% for the US Private Placement Noteholders (going back to 2013 when rates were much lower) has been ramped up to a fixed rate of 12.00%.
Even Jerome Powell would be taken aback by that hike!
On the revolving credit facility, rates are increasing by 86 basis points.
That’s not all, folks. The restructuring is subject to Nampak executing a rights offer that will be sufficient for a R350 million debt repayment by the end of September 2023. There will also need to be asset disposals of at least R250 million by the end of December 2023.
Finally, Nampak is required to finalise term sheets for the refinancing of long-term funding by 15 June 2023.
Nampak’s market cap is R650 million, so a rights offer of sufficient magnitude will be hugely dilutive for shareholders. This announcement came out after the close of play, so we don’t know yet what the market will think of this news.
Positive news for the NEPI Rockcastle balance sheet (JSE: NRP)
The scrip dividend was well supported and a “green” facility has been raised
Scrip dividends are useful cash retention tools, with companies offering to issue additional shares in lieu of a cash dividend. To entice shareholders to choose the shares rather than the cash, they frequently sweeten the deal by making the share issue more valuable than the cash dividend.
Property funds are particular fans of this strategy, as it helps them retain cash and reduce debt. This has worked for NEPI Rockcastle, where holders of nearly 85% of the shares in the company elected to receive a scrip distribution rather than a cash distribution.
Also, the company has secured five-year “green” portfolio financing of €200 million, which will be used to pay down the revolving credit facility that was utilised for recent acquisitions. This will restore the revolving credit facility to €620 million.
NEPI Rockcastle has now reduced its gearing below 35%.
Oceana completes the sale of Commercial Cold Storage (JSE: OCE)
The deal was implemented on 4 April 2023
Oceana has concluded the transaction to sell Commercial Cold Storage Group to a consortium of buyers that includes a large infrastructure fund and various other parties. These consortiums can sometimes change during the course of deal implementation, like in this case where an entity linked to Mcebisi Jonas has replaced the previously announced B-BBEE partner.
With all conditions precedent now fulfilled or waived, the R760 million deal is effective.
Little Bites:
Director dealings:
Value Capital Partners has bought another R35.6 million worth of shares in Sun International (JSE: SUI) and shares in Metair (JSE: MTA) worth nearly R34 million.
An associate of a director of Hudaco (JSE: HDC) has sold R25.4 million worth of shares as part of a diversification plan. The shares were originally related to a sale of businesses to Hudaco.
The CEO of Standard Bank (JSE: SBK) sold all the shares received under an employee share scheme (even the shares received after tax) and then sold another almost R10 million worth of shares for good measure.
I’m not sure what the plan is at Conduit Capital (JSE: CND), but there are two new directors on the board, one of whom is part of a private investment company in the US.
One needs to be careful with bland cautionaries. In these announcements, companies tell the market that something is going on that might be material, but there are no details. It’s rare to see two in one day, with Finbond (JSE: FGL) and Primeserv (JSE: PMV) both releasing such announcements. It’s inconceivable that the companies are talking to each other, so I think the timing is a coincidence.
Richemont’s (JSE: CFR) decision to simplify its listing structure was approved by shareholders, with the depository receipt programme in South Africa being abandoned in favour of Richemont’s A shares being listed on the JSE as an inward listing.
Shoprite (JSE: SHP) has become the latest company to list on A2X, an exchange that provides a secondary venue for trading of shares. This means that the JSE remains the primary regulator of the listing, but the shares can be traded in more than one place.
The chairman of AYO Technology (JSE: AYO) – Advocate Wallace Mgoqi – has sadly passed away. This isn’t a happy time for the board of AYO, with the settlement agreement with the PIC having dominated recent headlines.
Unlock the Stock is a platform designed to let retail investors experience life as a sell-side analyst. Corporate management teams give a presentation and then we open the floor to an interactive Q&A session, facilitated by the hosts.
This year, Unlock the Stock is delivered to you in proud association with A2X, a stock exchange playing an integral part in the progression of the South African marketplace. To find out more, visit the A2X website.
In this sixteenth edition of Unlock the Stock, CA Sales Holdings returned to the platform to discuss a seriously impressive set of results. Still in its infancy as a separately listed company, CA Sales Holdings is making waves as a mid-cap group worth paying attention to. As ever, there was a management presentation and interacted Q&A session to enjoy.
Use the link below to enjoy this great event, co-hosted by yours truly, Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions:
Advanced Health needs to make SA profitable (JSE: AVL)
Losses have worsened in the South African business
Advanced Health’s business in Australia is profitable. It is also in the process of being sold for around R522 million.
This leaves the group with its South African business, a day hospital operation (see what I did there?) that could do with a few procedures itself. In the six months ended December, it lost R23.1 million vs. a loss of R21.9 million in the comparable period. Although the company attributes the negative trend to higher finance costs, the reality is that the business model is clearly not working.
There are various strategic initiatives highlighted in the earnings release to try and improve matters in the local business. Reducing group debt will help as well!
The Daily Maverick forces AYO’s hand (JSE: AYO)
Full marks to the publication for its role in the disclosure of these terms
When AYO Technology first released an announcement about the settlement with the Public Investment Corporation (PIC) and Government Employees Pension Fund (GEPF), they gave almost no details.
At the time, I wrote:
“There is now an “amicable” conclusion of a settlement agreement, but the terms are confidential. This is surprising, because AYO shareholders now have no idea what the settlement looks like and what the financial impact will be.”
Thanks to the existence of media houses like Daily Maverick who are investigative journalists rather than market commentators and analysts, AYO didn’t get away with this. Tim Cohen and Neesa Moodley published an article that was clearly painful enough for AYO that disclosure became necessary, with some pressure presumably applied by the regulators as well.
The Daily Maverick reports that a R4.3 billion investment was originally made at R43 per share for AYO shares. The company traded at R4.78 at close of play on Monday, so this hasn’t exactly been a lovely investment.
AYO will repurchase 17.2 million shares for a total amount of R619 million. That’s not too bad actually, implying a price per share of R36 that is vastly higher than where AYO is currently trading. After five years, the GEPF can sell another 5% of its stake at the higher of R20 per share or 90-day VWAP. Call me a skeptic if you must, but I would wager which of those two numbers will be higher.
The GEPF will retain a stake of 25.01% in the company. Lucky them.
The arbitrage was obvious at Cashbuild (JSE: CSB)
Theodd-lot offer ended up being more than twice the expected size
Fun fact about the market: it’s full of smart people who like making money. When there is the ability to buy an odd-lot of shares (fewer than 100) and have them bought from you a couple of weeks later at a tidy profit, many punters happily play the arbitrage and put some money in the bank. The profit per trader is obviously limited, as it can only be made on fewer than 100 shares per account, but it can add up to a lot for Cashbuild.
When the odd-lot offer circular was released, there were 40,493 shares that were held by investors who each had fewer than 100 shares. By the time the deal was concluded, Cashbuild repurchased 89,164 shares.
Goodness knows it won’t break the bank at Cashbuild, but the total value ended up being R17.6 million when it should’ve been less than half that amount. I hope their calculation on the cost savings took into account the arbitrage and the number of shareholders who would jump onto the register purely to be taken out at a premium.
There’s more good news at EOH (JSE: EOH)
The debt package with Standard Bank has been refinanced
There’s a definite shift in momentum at EOH, with the company emerging from a rights offer with a far better story than before. That doesn’t help those who held before the rights offer, but it might help those who bought afterwards.
In very encouraging news, the company has refinanced its debt package with Standard Bank and words like “normalised debt structure” are now being used. They have also “significantly lowered the cost of debt” for the group, which is more good news.
If you’re wondering what a sustainable debt structure looks like, here are the details:
R200 million 4-year amortising term loan (therefore capital and interest repaid over four years)
R250 million 3-year bullet term loan (interest paid for three years and the capital right at the end)
R250 million 4-year revolving credit facility (a bit like having an access bond)
R500 million general banking facility including working capital and ancillary banking facilities (essentially a huge overdraft)
Glencore tries to swoop in on Teck (JSE: GLN)
For now at least, the Canadian company has told Glencore where to go
Teck is one of Canada’s leading mining companies, with a focus on copper, zinc and steelmaking coal. The company is currently busy with a restructure of its operations and different classes of shares, which Glencore clearly saw as an opportunity.
Later this month, Teck shareholders will vote on a proposed spin-off of the steelmaking business and a sunset clause on the voting rights held by the super-voting Class A shares. This doesn’t leave Glencore with much time to win over the Teck board, with the initial Glencore proposal strongly rejected by Teck in this press release.
Glencore’s proposal is a merger of the companies, followed by a demerger to create two distinct groups. One would be the “dirty” business with coal and ferroalloys and the other would be the clean(er) business with transition metals like copper.
At the proposed ratio, Glencore shareholders would own 76% of the entities and Teck shareholders would own 24%.
Glencore reckons that synergies worth $4.25 billion and $5.25 billion would be achieved through this deal. This is estimated on a net present value basis.
If you want a wonderful example of corporate finance at the very top end of the market, here’s the letter sent by Teck to Glencore that politely tells them to get lost.
Hammerson sells at a discount to book value (JSE: HMN)
This won’t do much to improve sentiment
Hammerson has had some bad press recently, mainly because Resilient is upset that the company isn’t paying a dividend. In my view, that’s why listed companies shouldn’t own minority stakes in other listed companies. If you don’t have control or at least significant influence over the asset, you shouldn’t be earning a fee as a listed management team to own it.
Moving on, the latest news from Hammerson might not help matters. Although the company is making progress towards its asset disposal target to reduce debt, the latest sale is at a discount to book value – a 4% discount, to be exact. That’s a lot better than the discount that most property funds trade at, but it still calls into question the accuracy of the portfolio book value.
The latest sales are worth €164 million, taking the group closer to the target of €500 million worth of disposals by the end of 2023. Around €360 million worth of disposals have now been achieved. Headline LTV (a measure of gearing) improves to 36% as a result of this disposal.
A bonanza for shareholders in Industrials REIT (JSE: MLI)
Themother of all offers has landed from Blackstone
You won’t see a 37.5% rally in a share price very often, even when there’s a potential offer on the table. A premium in an offer is normal, but this is a particularly juicy one at Industrials REIT.
I’ve covered Sirius Real Estate (another industrials fund) in an update below, so it’s fun to plot the two on a chart:
Even with this mammoth offer for Industrials REIT, the share has lost value over the past year!
Blackstone may make an offer of 168 pence per share (yes, denominated in GBP), a premium of 40.6% to the one month volume-weighted average price (VWAP). If Blackstone pulls the trigger on the offer, the board of Industrials REIT will unsurprisingly recommend it to shareholders. A due diligence is underway as we speak, which will need to be finalised before an offer is made.
Investec amends the ManCo internalisation (JSE: IPF)
I guess that the institutional shareholders agreed with my sentiments here
I went back and read what I wrote about this Investec Property Fund ManCo deal when the news first broke. I talked about investors being fleeced of their capital and I stand by that view.
Institutions seemed to agree, putting pressure on the fund to temper its enthusiasm in paying a fortune to the ManCo. The deal isn’t much better for shareholders, but at least some of the purchase price has become an earn-out.
The fund starts off the announcement by noting strong support from investors for the strategic rationale of the deal, which isn’t the same as support for the price. Of the proposed price of R975 million, R125 million is now subject to an earn-out arrangement rather than being a guaranteed part of the price.
The measure for the earn-out is growth in assets under management, which feels like completely the wrong measure to me. All that is being encouraged here is capital raising activities, not great returns for shareholders.
There is also a note that Investec (the recipient of this wonderful amount of money) will contribute R45 million to the fund for management retention, IT systems and rebranding.
Shareholders controlling 36.2% of the voting rights in the company have agreed to vote in favour of the deal. The fund needs to achieve 50% approval for this deal to go through. Investec and its associates obviously have a conflict of interest here, so they can’t vote.
The circular should be released on 17 April or thereabouts.
Pick n Pay will need the power of Star Wars Day (JSE: PIK)
May the 4th be with shareholders when these results come out
After the close on Monday, Pick n Pay released an earnings update for the 52 weeks ended 26 February 2023.
I don’t have much good news for you here, with diluted HEPS (excluding business interruption insurance and hyperinflation in Zimbabwe) down by between 12% and 18%. Ouch.
The cost of diesel generators has had a “significant influence” on these results, which I can certainly believe based on other retailers. As a mitigating factor, the retailer managed to hold gross margins constant in a really tough environment and they seem to be happy with trading expenses.
We will only know the full story when results are released on May 4th. We will at least know what the market thinks on Tuesday morning when trade opens after the market digested these numbers.
Although not directly comparable, Shoprite managed to grow its HEPS by 10.2% (excluding the discontinued operation in the DRC) for the 26 weeks to 1 January 2023. I would argue that the Shoprite result is made more impressive by the time period, as it included an even more concentrated period of load shedding.
I wouldn’t want to own either retailer in this environment, but I don’t expect the relative underperformance of Pick n Pay over the past year to reverse:
Sirius recycles more capital above book value (JSE: SRE)
Thelatest sale is a mixed-use property in Germany
Listed property funds usually trade at discounts to net asset value (NAV) per share. There are exceptions and I’m always worried when I see them, as investors get burnt more often than not by buying above NAV.
You wouldn’t buy a house in your area for 20% more than it’s worth, so why do it with a listed fund?
I wrote about Sirius Real Estate often during the pandemic, warning about buying at such an inflated valuation. The share price chart looks like a rather exciting mountain biking race, which isn’t what you want to see as an investor:
The company is focused on justifying its NAV to the market, as evidenced by the latest announcement regarding the sale of two properties. It’s one thing for the directors to tell us what a property is worth. It’s quite another for them to demonstrate it through sale.
The latest example is a mixed-use property in Germany that was acquired by Sirius in 2007. It has been sold for €8.8 million, a price that is 5.3% above book value.
Sirius has disposed of 6 properties in the past year at an aggregate premium of 25% to the net book value. In case you’re wondering about whether there was an outlier driving this outcome, each sale was at or above book value.
The proceeds were invested in three new sites in Germany, which are generating higher revenues than the properties disposed of.
It’s a good story, which is why the share price closed 4% higher. Can these sales be extrapolated to the rest of the portfolio? Perhaps that’s the biggest question of all.
Little Bites:
Director dealings:
Value Capital Partners has bought shares in ADvTECH (JSE: ADH) worth roughly R42.5 million. They have representation on the board, hence it comes through as director dealings.
I don’t usually report on employee share option trades, unless I spot something unusual. It’s common for executives to sell shares to cover the tax obligations on these share awards. In the case of Woolworths (JSE: WHL) CEO Roy Bagattini, he only sold enough shares to cover half the tax obligation, which means he paid half the tax from his own pocket (seems to be R6 million) and kept more shares than usual. That’s a director purchase in my books.
An associate of a director of Ascendis (JSE: ASC) has bought shares worth R176k.
Here’s a fun one for you: Grindrod (JSE: GND) no longer needs a property in London as the operations in the UK have been spun-off. The Grindrods (yes, you read that correctly) are buying the residential property from Grindrod for the tidy sum of R35.6 million. What does this get you in London? Two bedrooms. Yes, two of them. I’ll continue taking my chances in Cape Town, thanks. Jokes aside, the property was only on the balance sheet for R6.6 million, so there’s a juicy profit on disposal here!
ArcelorMittal (JSE: ACL) has appointed Siphamandla Mthethwa as the company’s new CFO. He is currently the CFO of Airports Company South Africa.
The chaos continues at Pembury Lifestyle Group (JSE: PEM) where a legal letter from the firm acting as company secretary set out various allegations against the company. This led to the resignation of three independent directors in March. The company has announced their replacements, also highlighting that the allegations by the company secretary have been announced on SENS as part of the company trying to clean up its act.
Welcome to Ghost Wrap. It’s fast. It’s fun. It’s informative.
In this week’s episode of Ghost Wrap, we cover:
Absa announced a B-BBEE deal that I strongly feel is a missed opportunity, as no shares are being made available for investment by retail investors.
RCL Foods is selling vector logistics, a company that has been considered non-core for a while, to an emerging markets infrastructure fund linked to an investment house in Denmark.
Metair surely has the worst luck of any company on the JSE, with a horrible year capped off by the interim CEO being in an accident and the earnings roadshow being postponed.
York Timber needs to improve its operations and quickly, reporting poor numbers that make me question whether we might see another equity raise at some point in time.
Nampak now has a Chief Restructuring Officer and it looks as thought a rights offer will need to go ahead, although we still don’t know how big it will be.
EOH has been to hell and back, but the company may well have bottomed here based on the latest results.
Bell Equipment has released excellent results and a strong outlook, along with a depressing paragraph in the earnings about the impact of load shedding on its local manufacturing strategy.
Barloworld is enjoying strong demand in the equipment businesses (outside of Russia), but is struggling with margins in the Consumer Industries segment.
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.
After Old Mutual’s recent deal, I was quite chuffed to see the headline on SENS about a new B-BBEE deal at Absa. The investable universe of listed B-BBEE structures is tiny and offers very little in the way of industry diversification.
Disappointingly, Absa isn’t improving the situation.
A 4% stake will land in the hands of a CSI trust and 3% is going to a staff trust. This is an R11.16 billion deal that Absa says will sustainably take its Black Ownership (as defined in the Codes) above 25%.
Interestingly, 82% of the scheme will be attributable to Black staff, which gives a sense of the underlying demographics in the group. There will essentially be a “kicker” for Black staff in the form of a larger allocation than for non-Black and foreign counterparts.
The CSI trust will focus on education and youth employability, both of which are critically important to the future of our country.
The funding structure includes a sizable portion of equity linked to existing shares held by Absa that were received from the Barclays separation, as well as preference share funding of R4.5 billion at 72% of prime and mezzanine funding of R1.7 billion at 90% of prime.
With only 55% of the value of the special purpose vehicle holding the shares funded by the senior and mezzanine preference shares, the level of gearing is reasonable from the outset. Long gone are the days of 100% geared structures using external bank funding, the only beneficiary of which was usually the bank providing funding that was in any event guaranteed by the corporate doing the B-BBEE deal.
There will be a substantial IFRS 2 charge linked to the equity portion of the structure, which will drop Absa’s headline earnings by over 3%.
Widening losses at Advanced Health (JSE: AVL)
The numbers are going the wrong way
Advanced Health is in the process of selling the PresMed Australia business, having received a resounding approval from shareholders for the deal.
The group needs to achieve a turnaround in its profitability, as a trading statement confirms that the headline loss per share for the year ended December 2022 will be 27% worse than the comparable period, coming in at -4.18 cents per share.
Importantly, this is a headline loss from continuing operations, so there is much work to be done.
Bell signs off on a wonderful year (JSE: BEL)
The share price is up 170% over 3 years but is still at a modest multiple
If you can get the timing right in cyclical businesses, you can make serious money. You needed a crystal clear ball, not just a crystal ball back in 2020 in the height of Covid to know that the commodity sector (and related industries) would do well. If you had one of those (or just made a lucky guess), you would really be smiling in Bell Equipment.
In the year ended December 2022, revenue increased by 28% and HEPS was good for 61% growth. The dividend per share surpassed both those growth rates, up 80%. I wouldn’t describe Bell as a cash cow though, as HEPS was 473 cents and the dividend was 90 cents, so the payout ratio was only 19%.
The required investment in working capital is part of why Bell can’t pay huge dividends. Group inventory increased by 31% to support sales, which in absolute terms means R1.1 billion worth of shiny yellow equipment that inspires many toys at the local toy store. Full disclosure: yellow earthmoving equipment is Toddler Ghost’s absolute favourite thing in the world.
At a closing price of R17.25 per share, this puts the company on a trailing Price/Earnings multiple of just 3.65x. The dividend yield is appealing but not as high as some other JSE companies, trading at 5.2%.
There’s a paragraph linked to load shedding that really lays bare the impact of Eskom on our economy:
But to cheer you up a bit on this Monday, here’s the all-important paragraph from the outlook section:
This Bell might be ringing for a while still…
Caprec: revenue up, profits less convincing (JSE: CTA)
A long-term view is needed here on Capital Appreciation
Capital Appreciation offers products and services that are in fast-growing industries. That’s a good thing. Sometimes, this requires substantial investment to maintain a solid position in the market and to keep growing. That is hopefully only a bad thing when viewed through a short-term lens.
It’s been a wobbly of a year for Capital Appreciation, with the impairment of the GovChat loan scaring off some investors and leading to others increasing their positions in a time of market volatility. Perhaps more of this will happen when results are released in June.
In the meantime, the group has given an update on the year ended March to try and limit any surprises when detailed results come out.
In the Software division, there has been “exceptional revenue growth” but there has also been a significant increase in headcount and business development spend. This has led to some contracts being won that will only pay off in the next financial year, so there is a warning here about the impact on profits for the financial year that just ended.
There’s also a cautious update on the Payments business, which has experienced double-digit growing in terminal volumes but has seen a change in sales mix towards lower-priced terminals, which has a negative impact on profits.
The group has also reminded the market that the balance sheet has no debt and is in a strong position.
The management team has given the market ample warning here that revenue for FY23 will look good and profits will be under pressure. Despite this, there’s every chance of share price volatility when the results are eventually released.
The company recently joined us on Unlock the Stock, an incredibly useful resource for you to learn more about Capital Appreciation (and Afrimat from the same event):
Kore Potash needs to get its projects across the line (JSE: KP2)
The company needs to raise funds before the fourth quarter of 2023
Kore Potash has released its financial results for the year ended December 2022. The company’s focus is primarily on the Kola project in the Republic of Congo. You may recall that the Minister of Mines got grumpy with the company about lack of progress at the project, even leading to the address and release without charge of two senior employees.
A few visits to the Congo later and things seem to be ok on that front. That’s just as well, because the company doesn’t have sufficient working capital for the next 12 months and needs to get its project across the line. Net outflows for the year were $5.7 million and the cash balance is $5 million. You don’t need your calculator to help you see the problem here.
Thankfully, a lot of progress has been made on the project. The Engineering, Procurement and Construction (EPC) contract is being negotiated and this is a complicated piece of work. Remember, contracts can sink construction companies if they go wrong, so the counterparty (SEPCO Electric Power Construction Corporation) is taking its time to get it right. To try and reduce risk, Kore Potash has requested SEPCO’s parent company (PowerChina) to provide contract guarantees, including performance and retention bonds.
The good news is that the Summit Consortium has a lot of patience. The deal with Summit goes back to April 2021, with a plan for the consortium to provide funding for the project once the EPC is concluded. This has taken longer than expected, but Summit has confirmed that it is still very interested in the project and can provide the full construction funding within 6 weeks of the EPC being finalised.
The share price closed 5.9% lower on thin volumes, so I wouldn’t read too much into that.
This OUTsurance exec is getting something out (JSE: OUT)
OUTsurance is increasing its stake in the Aussie business
Australian corporate actions seem to be all the rage again on the JSE. It’s just a coincidence really, but it shows how many South African corporates have historically invested in the land of kangaroos and broken retail dreams.
Success has been rare, but OUTsurance seemed to get it right by starting Youi from scratch in 2008. It’s quite incredible that a business started in widowmaker Australia at the onset of the Global Financial Crisis has turned out to be a success.
So successful, in fact, that an OUTsurance executive with a 5.3% interest in the company (built up through share options during his time as CEO of the Aussie business) is selling half of that stake to the mother ship for A$36 million. OUTsurance also has a call option to buy the rest of the shares by 31 October 2023. The valuation methodology has been agreed but not the actual valuation, as earnings will vary between now and then.
OUTsurance already owns 89.8% of Youi before taking into account this stake. Full ownership surely isn’t far away.
Renergen recaps the quarter (JSE: REN)
Like in a bad relationship, the wells aren’t communicating
I learnt a new term from Renergen in this update. With the company talking about 5 successful wells within 100 metres of each other, the term is that they “aren’t communicating” i.e. aren’t connected, so each one is giving separate access to gas. This is important as the Reserve Report assumed 300 metres of distance between wells, so this suggests that more wells may be possible than initially thought.
As CEO Stefano Marani discussed on a recent podcast with me, Renergen is not exposed to load shedding. The power feed is directly from the main 132kV line. That’s a significant advantage in South Africa.
The LNG system achieved initial production in September 2022 and liquid helium (Lhe) production was achieved in January 2023. The modules for LNG and Lhe are now being integrated. Although not part of this quarter, the company noted that LNG delivery and gasification was commissioned for Ceramic Industries in October 2022 and Consol (now Ardagh Glass Bottling) in November 2022.
Of course, all eyes are on Phase 2 of Renergen’s story, which is the capital-hungry phase that will turn the company into a scale producer of helium. There are several operational milestones in this regard but the most relevant in my eyes is the debt raise with the United States Development Finance Corporation and Standard Bank. The combined debt is $750 million.
One of the risks here is completely outside of Renergen’s hands: the potential falling out of South Africa with the US government over relations with Russia. We are playing a risky political game as a country and the risk of this scuppering the debt raise isn’t zero.
The share price has come under great pressure as many retail investors learnt the hard way that junior mining requires loads of capital:
A critical time for Tongaat Hulett (JSE: TON)
There’s a lot happening between now and June
Tongaat Hulett is in business rescue and its shares are suspended from trading on the JSE because the company hasn’t released its financial statements for the year ended March. Until there is some certainty around the company’s ability to continue as a going concern, those financials can’t be released.
The post-commencement finance facility has been extended to 30 June 2023. This is the funding provided to the business rescue practitioners to enable the company to keep running while a plan is put together. Speaking of the business rescue plan, the release date has been extended to 31 May 2023. I don’t think I’ve ever seen a business rescue plan published in line with the originally communicated deadline.
Perhaps the most important news is that negotiations with existing stakeholders are expected to result in bids being received from equity partners by 26 May 2023.
In operational news, the impact of the floods in Mozambique has been estimated. Approximately 10% of the sugar cane estimated to be crushed by the Xinavane mill during the upcoming season has been lost. At Mafimbasse Estate, the impact is thankfully minimal.
Little Bites:
Director dealings:
The purchase of shares by Value Capital Partners tends to come through as director dealings because they usually have representation on the board. The latest example is a purchase of Sun International (JSE: SUI) shares worth over R65 million.
A prescribed officer of AngloGold Ashanti (JSE: ANG) sold shares worth A$920k (pay attention to the currency there).
An executive of Gold Fields (JSE: GFI) has sold shares worth R3.8 million.
Des de Beer has bought another R1.9 million worth of shares in Lighthouse Properties (JSE: LTE).
Three directors of Grand Parade Investments (JSE: GPL) accepted the mandatory offer by GMB (i.e. sold shares to GMB) worth a total of around R1.4 million.
Sabvest (JSE: SBP) bought another R1.275 million worth of shares in Transaction Capital (JSE: TCP) (this is a director dealing as Chris Seabrooke is on the board of Transaction Capital).
A non-executive director of BHP (JSE: BHG) has acquired shares worth over $58k.
An associate of a director of Astoria (JSE: ARA) bought shares worth R20.7k.
Lighthouse Properties (JSE: LTE) is offering another scrip distribution alternative to shareholders. This gives shareholders the option to receive shares in lieu of a cash dividend. The value for the scrip alternative is €0.01625 and the value for the cash distribution is €0.014625 per share. It’s been interesting to watch Des de Beer build his stake in the company through ongoing buying of shares and the scrip dividend as a kicker.
Gemfields (JSE : GML) gave such a detailed update in March that I had already covered the details in this edition of Ghost Bites. If you want to go digging for more gems in the numbers, be aware that the annual report has been released at this link.
Wesizwe Platinum (JSE: WEZ) released results for the year ended December 2022. There is no revenue yet, so there’s obviously no dividend. It’s all about cash burn, with administration expenses up by 66% to R62 million.
Telemasters (JSE: TLM) is an obscure listed company that holds a variety of networking and data centre businesses. Revenue fell by 5% in the six months ended December 2022. Expenses were also reduced, so there’s at least a tiny operating profit (and I mean tiny). There is still a headline loss per share of 1.02 cents though, an improvement from a loss of 1.68 cents in the comparable period. Weirdly, a dividend of 0.01 cents has been declared.
The circular for Ellies‘ (JSE: ELI) acquisition of Bundu Power will be distributed by 31 May 2023.
Delta Property Fund (JSE: DLT) has achieved shareholder approval for the disposal of Capital Towers in Pietermaritzburg. The price is R65.55 million and the sale is now unconditional.
Europa Metals (JSE: EUZ) released interim results for the six months ended December. The focus here is on the development of the Toral project, not the financial performance of Europa. The mining licence application is due for submission by 31 July 2023. The funding for the Toral project is coming from Canadian explorer and mine developer Denarius Metals Corp in exchange for a 51% stake in Toral project. In other words, investors need to be aware that Europa will not control that project over the long term.
In an unusual update, Sygnia (JSE: SYG) noted that the person earmarked to take the Financial Director role on 1 April can no longer do so for personal reasons. A new candidate will need to be found.
There’s a bit of musical chairs within the Heriot Properties (JSE: HET) stable in terms of where the investment in Safari Investments (JSE: SAR) is held. If you take the view of “Heriot and its concert parties” then there is no change here, as they hold 47.2% in the company before and after the latest deal.
The circular for Sekunjalo’s offer to shareholders of Premier Fishing and Brands (JSE: PFB) has been delayed and will only be distributed on 5th May 2023. Also linked to this group, there’s a delay in the circular for the unbundling of African Equity Empowerment Investment’s (JSE: AEE) stake in AYO Technology (JSE: AYO). That circular will be out on 4th May 2023.
Conduit Capital (JSE: CND) is currently suspended from trading and is in the process of finalising audits of group entities excluding Constantia Insurance Company. The board has also been a game of musical chairs in recent months, with several director changes.
In case you need a reminder of how tiny Visual International (JSE: VIS) is, the company has taken a 20% interest in a property company called Tuin Huis. Before you get excited, that company owns just two houses in Cape Town’s northern suburbs that will be developed as an “Infill Housing Project” – a fancy name for a sub-division, from what I can tell. The CEO of Visual is also a shareholder of Tuin Huis, but the deal is so small that an independent expert isn’t even needed.
London Finance & Investment Group (JSE: LNF), quite possibly the company on the JSE that gets spoken about the least in the market, released results for the six months ended December. The fair value of the portfolio increased by 8%, above the company’s benchmarks of the FTSE 100 (1.9%) and the FTSEurofirst 300 Index (5.7%). The dividend is steady year-on-year at 55 pence, with the rand amount obviously varying vs. last year because of the exchange rate. Liquidity in this stock is almost non-existent.
And finally, if you feel like reading something that will make all your problems feel better, look for the quarterly update by Afristrat Investment Holdings. I wish I could even find the company’s website to include as a link here.
This has turned out exactly the way I thought it would
When aReit came to market, I thought that even its name wasn’t the worst thing about it. The portfolio is tiny and the company was hoping to achieve pricing with reference to the NAV rather than the yield. This doesn’t work in South Africa.
Sure enough, liquidity is low and the company is trading at a vast discount to NAV. I wish the best of luck to those who bought the private placing of 20,000,000 shares at R8.00 per share during the listing process. In fact, I wish them a miracle.
The current share price is R3.90, a 58% discount to the NAV. Before you get excited, the dividend for the full year was 29.99 cents, which puts it on a yield of 7.7%.
Why on earth would anyone buy at that yield when you can buy practically every other listed property company (with much larger portfolios) at a higher yield?
Metair? Met eish. (JSE: MTA)
The bad luck just doesn’t stop for Metair
In very unfortunate news, the interim CEO of Metair (JSE: MTA), Sjoerd Douwenga, was involved in an accident this week and is thankfully recovering out of hospital. This understandably led to a postponement of the financial results presentation and roadshow.
This really does cap off a period that Metair will want to forget as quickly as possible. The results for the year ended December were horrible, with revenue up 10% as the only highlight. The company faced all kinds of headwinds, leading to HEPS dropping spectacularly from 354 cents to a loss of 17 cents.
Cash generated from operations fell from R649 million to R152 million.
The good news is that Toyota South Africa (Metair’s major local customer) recovered from the flood earlier in the year by Q4 and business interruption claims were finalised for loss of turnover. Substantial costs were incurred in preparation for the launch of the new Ford Ranger, so that coming on stream will make a big difference as well. Targeted production levels are expected to be reached from April 2023.
If it’s not flooding on one end of the business, it’s hyperinflation affecting the other. The energy storage business in Turkey has had to navigate a hyperinflationary environment and this is going to cause all kinds of headaches for Metair’s accounting. Encouragingly, a substantial portion of input costs and sales are denominated in hard currency and not directly subject to Turkish inflation.
Results like these can only end in pain on the balance sheet. It’s going to take Metair a long time to recover from this, with net debt up to R2.6 billion from R1.3 billion. Net debt to EBITDA is now 4.4x vs. 0.9x previously. The group has breached covenants and is in discussions with borrowers who have not indicated a desire to recall borrowings or even to levy penalties.
At least the earthquakes in Turkey didn’t impact the business. There’s one silver lining in all of this.
The share price is only down 20% in the past year, surprisingly.
Nampak now has a restructuring committee (JSE: NPK)
Of all the committees a company wants to see, this isn’t one of them
Things have been tough for Nampak, to say the least. The company has released an operating update covering the five months ended February 2022.
Revenue increased by 5%, with a mixed bag at operating segment level that saw a 9% increase in Metals and declines of 6% in Plastic and Paper.
The foreign currency issues just keep getting worse, which means that operating profit is running significantly below trading profit. Those losses have increased from R69 million to R436 million. Simply, this means that the profits from weak currency areas aren’t worth nearly as much in real life as they are on paper. It is really difficult to get foreign currency out of places like Nigeria, leading to the “secondary spot market” being used which has far less attractive rates.
With little ability to make a dent in the debt, net interest paid has increased 45% vs. the prior period.
There are also likely to be impairments in Angola and Nigeria as the weighted average cost of capital has increased. I doubt the market cares to be honest, as the focus is entirely on cash and the balance sheet. What is relevant is that the likely impairment in Nigeria is also being driven by lower volumes as consumer spending power comes under pressure. That’s a genuine operational concern.
The demand for large can sizes at Bevcan South Africa suggests that we may be partying a bit harder to deal with the stress of load shedding at everything else. If Nampak really wants to drive more sales, it should put pictures of the balance sheet above the beer fridge.
Metis Strategic Advisors have been appointed to help Nampak restructure the balance sheet. There’s an extensive restructuring plan on the table, including balance sheet initiatives (like refinancing the existing debt package) and strategic initiatives like the sale of non-core assets (not easy in this environment).
Yes, a rights offer is included in that plan as well and is a condition for the refinancing. The quantum is to be determined.
There is now a Chief Restructuring Officer in place, approved by the lenders. Nampak isn’t in business rescue, but there are some elements to this story that aren’t so different. At this stage, it sounds like the lenders are largely calling the shots.
The share price has lost around three quarters of its value in the past 12 months.
More drilling results at Southern Palladium (JSE: SDL)
The company sounds happy with the results
I don’t invest in junior mining because I don’t pretend to understand it. I am not a geologist and every time I read an announcement regarding drilling results, I’m reminding of why I don’t invest in what I don’t understand. At least when things go wrong in other companies, I can figure out why!
I do tend to skip to the management commentary in these announcements, simply to gauge whether the results are in line with expectations or not. With Southern Palladium having received all results for drilling completed to-date at the Bengwenyama project, the management team is happy that the latest results have continued to “confirm the consistency of the grade and continuity of the UG2 reef” – a result that correlates with the compliant Inferred Mineral Resource.
Workforce reports a 21% increase in HEPS (JSE: WKF)
There’s still no dividend, though
Revenue at Workforce Holdings increased by 24% in the year ended December 2022, taking it to an all-time high for the group of R4.3 billion. Life after Covid is a lot better for this group, with increased economic activity and a return to form for the training and education part of the business.
Although EBITDA was only 10% higher, this was good enough to drive a 21% increase in HEPS.
Despite the stronger results, there is no final dividend here. The company wants to retain cash based on current economic uncertainty and to ensure that it has capital for acquisitions.
With reference to the outlook for its divisions, the company reckons that “all businesses see better prospects for 2023” – an encouraging statement indeed.
The only good news at York is the debt reduction (JSE: YRK)
But you need to look at the working capital and especially the earnings
The first paragraph of the earnings report says it all, really. The word “difficult” is in the opening line and the second sentence talks about a need to urgently improve operating efficiencies. This is exactly the issue with York: those who are bullish (and there aren’t many of them) tend to point to the value of the forests, whereas I’ve always looked at the value generated from turning those forests into wood.
As I wrote recently when York first flagged these earnings, you can’t value a timber business like a botanical garden. They need to generate economic profits by operating, not merely existing. Ironically, the value of the biological asset has increased because of delayed harvesting!
Revenue has dropped by 7% in the six months to December and HEPS fell from 17.04 cents to 11.90 cents. There is once again no dividend.
The good news is that debt has come down, though it still sits at a very high level of 8.6x EBITDA. It’s not hard to see why the company needed a rights offer and if they don’t get this right, I wouldn’t write off the possibility of another one at some point.
Cash generated from operations is worth keeping an eye on, down from R119 million to R46 million.
I don’t think things are going to get better anytime soon, based on the management commentary in the outlook. The share price is down 25% over the past year, trading for several months in a range before breaking lower each time.
Little Bites:
Director dealings:
An associate of a director of Transaction Capital (JSE: TCP) – one who hasn’t bought shares in the recent collapse – has bought shares worth R1.4 million.
Be careful if you are a KAL Group (JSE: KAL – previously Kaap Agri) shareholder. If you own fewer than 100 shares, the odd-lot offer is aimed squarely at you. The default election is to accept the offer and the price of R40.6161352 per share will be paid to you as a dividend, which means it will be subject to dividend withholding tax of 20%. The current share price is R40.30. I’m no tax expert, but I would look carefully at your tax liability if you were to sell the shares instead of accepting the odd-lot. Of course, you can also choose to retain the shares.
Having issued a flurry of financial reports, Oando PLC (JSE: OAO) has now announced that its core shareholder (Ocean and Oil Development Partners) wants to acquire the shares held by all minority shareholders. The price is a 58% premium to the last traded price on 28 March 2023. I need to specify the year, because it’s easy to assume that there has been no trade in the share when you consider the financial reporting backlog.
Rex Trueform (JSE: RTO) is buying a property in Epping for R65 million. The company has decided to follow a strategy of investing in industrial properties, in this case acquired at a yield of 9.75%. R20.9 million is funded from existing cash and R44.1 million from a bond.
I appreciate seeing small caps execute share buybacks, as they tend to trade at modest multiples and hence an investment in their own shares is logical. Insimbi Industrial Holdings (JSE: ISB) has repurchased 3% of its shares in issue.
After the retirement of Motty Sacks as the Executive Chairman of Capital Appreciation (JSE: CTA), fellow co-founder Mike Pimstein will take over the role. Pimstein will relinquish his role as Joint CEO, leaving Bradley Sacks as the sole CEO. Whenever you see an Executive Chairman, it’s important to take note of the Lead Independent Director. Kuseni Dlamini fulfils that role at Capital Appreciation.
Visual International Holdings (JSE: VIS) has received approval from City of Cape Town for the construction of Stellendale Junction, which will consist of around 500 apartments.
The CFO of Accelerate Property Fund (JSE: APF) is retiring on 31 March and has been replaced on an interim basis by an internal appointment.
Randgold & Exploration Company (JSE: RNG) reported an operating loss of R22 million for the year ended December 2022. The net asset value per share decreased 15.9% to 122 cents.
Oando Plc has confirmed it has received an offer from its core shareholder Ocean and Oil Development Partners (OODP) to acquire the shares it does not already own in the company. Information contained in a company release in June 2022, stated that OODP held a 57.37% stake with minorities holding the remaining 42.63%. Under the scheme, shareholders will receive ₦7.07 in cash, representing a 58% premium to the last traded share price of Oando on 28 March 2023. In June 2022 a petition was filed with the Federal High Court, Lagos Division for and on behalf of Oando’s minority shareholders led by Venus Construction, requesting that the Court orders the buyout of their entire shareholding.
In accordance with its strategic review of operations, RCL FOODS has entered a binding agreement with EMIF II Investment, to dispose of Vector Logistics for a total cash consideration of R1,25 billion. Earlier this month, the Company resolved to separate its value-added branded businesses from its poultry and logistics operation in order to better position them for optimal growth as independent entities.
PBT Group subsidiary Halliard International Besloten Vennootschap is to dispose of its entire shareholding in Payapps, a global provider of construction payment management Software as a Solutions service. The acquirers, existing shareholders IFM Growth Partners, Saniel Ventures and the Jasper Foundation will pay A$14,35 million (R175,57 million) in cash for the stake. The group intends to distribute the net proceeds to shareholders in the form of a cash distribution.
Murray & Roberts United Kingdom has entered into an agreement with AvidSys Group, in terms of which the company will dispose of its 65% shareholding in Insig Technologies. The disposal consideration for the Perth-based mining technology company was A$1, with AvidSys assuming A$7 million of Insig’s liabilities.
The mandatory offer to Sable Exploration and Mining (SEAM) minority shareholders closed on 24 March with 428,233 shares tendered, representing a 9.8% equity stake in the company. PBNJ now holds 2,6 million SEAM shares representing 59,9% of its issued share capital.
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The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
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This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
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This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
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The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
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