Sea Harvest Aquaculture (Sea Harvest) which currently owns a 54% stake in Viking Aquaculture, a vertically integrated, sustainable abalone producer is to acquire a further 28%. Viking has farms in the Western and Northern Cape and two vertically integrated oyster farming operations in South Africa and Namibia. Minority shareholders Viking Fishing Group Administration and Odin Investments, holding 18% and 10% respectively, will sell their stakes to Sea Harvest in a deal valued at R210 million.
At last Heineken International has received Competition Tribunal approval for its acquisition of JSE-listed Distell – a complex deal over several jurisdictions valued at c.R39,5 billion. The deal was first announced in November 2021. The expected termination of Distell’s listing on the JSE is 28 April 2023. The company has accordingly postponed its AGM which was due to be held on 17 March as the company will now be preparing for and implementing the various pre-scheme transactions – required to be implemented before the scheme of arrangement between Distell and its shareholders can be implemented. The AGM has been rescheduled to 18 May 2023.
The original deal to acquire the remaining shares in Premier Fishing and Brands announced in early December via a scheme of arrangement has been amended. Initially African Equity Empowerment Investments (AEEI) made the offer to acquire the remaining 6.14% stake (15,976,380 shares) at R1.60 per offer share. The Takeover Regulation Panel has agreed to the substitution of the offeror with Sekunjalo Investments which controls AEEI.
Exemplar REITail has acquired from related party McCormick Property Development, a 50% undivided share in Mamelodi Square. The consideration payable for the stake is R116,5 million.
In early December 2022, Brait, the owner of Premier, backtracked on its plans to list the food manufacturer on the main board of the JSE, giving as its main reason an unconducive capital market environment. Instead, Brait said it would sell its shares to Titan and RMB. Informing shareholders, Brait now says it has been approached by a group of institutional investors who will commit to participate in an IPO by Premier. Brait says it is considering its options.
RCL Foods has disclosed it may dispose of its Vector cold chain distribution business following engagements with a potential buyer. The company, majority-owned by Remgro, did not give any further details.
African Equity Empowerment (AEEI) is to unbundle its 49.36% stake in AYO Technologies to shareholders by way of a pro rata distribution in specie in the ratio of 1 AYO share for every 2.89 shares in AEEI in a transaction valued at c.R509,6 million.
Cashbuild received the support of its shareholders to implement an odd-lot offer to shareholders holding fewer than 100 shares. The price paid will be a 5% premium to the 30-day VWAP of a Cashbuild share at the close of business on 17 March, 2023. The company will also repurchase 1,000,000 shares from former CEO Pat Goldrick.
The reverse takeover of Shaftesbury by Capital & Counties Properties first announced in June 2022 is complete and the entity has now changed its name to Shaftesbury Capital, with effect from 7 March 2023. The JSE code will change from CCO to SHC.
Octodec Investments and Fortress Real Estate Investments are to list their securities on A2X with effect from 14 and 16 March respectively. The companies’ listings on the JSE will be unaffected by the secondary listings.
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 527,525 shares at an aggregate cost of A$2,44 million.
African Media Entertainment advised that the company had repurchased 50,000 shares during 2022. This was in addition to the announced 451,775 shares repurchased in January this year. The shares were cancelled upon repurchase.
Glencore this week repurchased 12,900,000 shares for a total consideration of £64,76 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 February to 3 March 2023, a further 3,163,968 Prosus shares were repurchased for an aggregate €219,65 million and a further 524,864 Naspers shares for a total consideration of R1,73 billion.
Two companies issued profit warnings this week: Trencor and Metair Investments.
Four companies issued or withdrew cautionary notices. The companies were: Jasco Electronics, AYO Technology, Trustco Group and Tongaat Hulett.
The “man walking his dog on a leash” analogy is often used to describe the relationship between the economy and the stock market. Over the short term, the man (the economy) and the dog (the stock market) may move in different directions for a host of reasons. However, over the long term, both are likely to follow the same path.
The truth of the analogy is evident from the impact that South Africa’s macroeconomic environment and global economic pressures have had, and continue to have, on the country’s largest stock exchange, the JSE Limited (JSE). Since the 2008/2009 global financial crisis, South Africa has experienced weak economic growth against the background of numerous continuing challenges, including loadshedding and entrenched high levels of unemployment.1 Over this period, the JSE has also faced significant headwinds, including periods of substantial net-outflows in trading by foreigners in South African equities and bonds2, as well as a slew of JSE delistings3. The JSE has been commendably active in seeking to stem the tide of delistings, to enhance the attractiveness of the JSE as a listing destination, and to improve market confidence. Initiatives undertaken by the JSE include, inter alia, its “Cutting Red Tape” project4 and the memorandum of understanding entered into between itself and the New York Stock Exchange to collaborate on the dual listing of companies on both exchanges5.
It is against this background that the JSE, in May 2022, published a consultation paper with several proposals regarding its listings framework. One such proposal was for the reintroduction6 of dual class shares for new main board listings on the JSE. Since then, the JSE has consulted with market participants and, following a positive response7, has included dual class shares in its proposed amendments to the JSE Listings Requirements (Proposed Amendments).
As the name suggests, a dual class share structure involves a listed company having two kinds of shares, one of which confers additional voting power to its holders (Weighted Voting Share) when compared to other normal shares (Ordinary Share). Typically, Weighted Voting Shares and Ordinary Shares are identical, save for the voting element. Such a dual class share structure enables certain shareholders to retain voting strength (or even control) disproportionate to their economic interest in the company.
Dual class share structures allow companies to be listed and to raise equity capital in the market, without impacting the control enjoyed by their current shareholders. Such structures also help to shield a company against opportunistic takeovers, and investors driven by short-term gains at the expense of the company’s long-term vision.
The main criticism directed at dual class share structures is that they undermine shareholder democracy (i.e. one share, one vote), thereby weakening the protection typically enjoyed by shareholders, as well as shareholders’ ability to hold company executives to account. Dual class share structures enable minority shareholders with Weighted Voting Shares to frustrate the will of the larger shareholder body, resulting in, amongst others, the entrenchment of management. In order to mitigate the governance risks associated with dual class share structures, the JSE has proposed the introduction of a set of governance safeguards (Safeguards). The Safeguards are in line with the safeguards implemented by the JSE’s global peers8 who have, in recent years, also permitted dual class share structures. Notable Safeguards include:
• capping the number of votes attached to a Weighted Voting Share at 20;
• requiring the automatic conversion of Weighted Voting Shares to Ordinary Shares (on a one- for-one basis) if such Weighted Voting Shares are sold or transferred to any person or on expiry of a maximum period of 10 years from the company’s listing date;
• an enhanced voting process for certain matters, where all shares carry one vote each regardless of class. These matters include, inter alia, the variation of rights attached to securities and the appointment or removal of independent non-executive directors; and
• mandatory disclosure of the terms of the dual class share structure in the company’s prospectus / pre-listing statement.
Provided the necessary protections are in place, the reintroduction of dual class share structures should be welcomed, as this may encourage high growth private companies to float on the JSE, thereby increasing its investable universe for both institutional and retail investors and allowing such investors to benefit from potentially valuable investment opportunities. One should not forget that mega cap companies such as Alphabet, Berkshire Hathaway, Coca-Cola, Nike and Meta have dual class share structures. If such companies had decided to remain private, millions of investors would never have benefited from their significant share price growth over time.
The willingness of the JSE to consider and follow global stock exchange trends, as well as its desire to adapt and remain competitive, should be welcomed.
1 https://theconversation.com/south-africas-economy-has-taken-some-heavy-body-blows-can-it-recover-183165 2 https://businesstech.co.za/news/finance/517618/foreigners-are-pulling-their-money-out-of-south-africa-jse-warns/ 3 https://www.businesslive.co.za/fm/opinion/editors-note/2022-08-25-rob-rose-inside-the-jses-radical-overhaul/ 4 https://bowmanslaw.com/insights/mergers-and-acquisitions/south-africa-amendments-to-the-jse-listings-requirements/ 5 https://www.jse.co.za/news/news/new-york-stock-exchange-and-johannesburg-stock-exchange-announce-collaboration-dual 6 In 1999, the JSE Listings Requirements were amended to prohibit the creation of any new high or low voting shares. Issuers who had high or low voting shares at the time were exempted and were able to maintain such share structure and continue to be listed on the JSE. 7 73% of commentators supported the JSE considering the reintroduction of dual class share structures on the JSE. 8 The London Stock Exchange, the Hong Kong Stock Exchange and the Singapore Exchange.
Johann Piek is a Director | PSG Capital
This article first appeared in DealMakers, SA’s quarterly M&A publication.
Diamonds are still forever at Anglo American (JSE: AGL)
The latest De Beers sales results are in line with expectations
In the second sales cycle for 2023, De Beers sold $495 million worth of rough diamonds. That’s higher than $454 million in the first cycle, but well down on $652 million in the second cycle last year.
The management team is unconcerned, as the expectation was for purchases to be pushed out to later in 2023 because of economic uncertainty towards the end of 2022. De Beers also highlights positive trends in client demand for diamond jewellery.
De Beers is a very helpful source of profits in Anglo American, with fundamentals that are far removed from the commodities in the group.
Cognition is cash flush after selling Private Property (JSE: CGN)
The share price is up 42% in the past year, trading at close to NAV
This was a lovely value unlock play if you got in before the Private Property transaction. Cognition Holdings managed to sell that business for a fantastic price, leading to a huge jump in cash on the balance sheet over six months of R114 million to R213 million.
With total assets of R265 million and total liabilities of R33 million, almost the entire net asset value can be attributed to cash. This is why the share price is trading at close to tangible net asset value per share.
The company is busy repositioning the remaining businesses and has seen some progress in that regard. The management team talks about “realistic prospects to unlock value to shareholders in the short term” which could well mean a large special dividend or perhaps even a sale of remaining businesses.
For now, patience is needed.
Fortress: do you believe in life after REIT? (JSE: FFA | JSE: FFB)
I bet that Cher song is now stuck in your head (unless you’re too young)
Fortress is no longer a REIT. It’s now a property company, which means that dividends are taxed differently and the company has more flexibility in capital allocation. As I wrote before this issue was finalised, that may not be a bad thing.
The company has accepted its fate, with no plans to put another proposal in front of shareholders to simplify the shareholding structure in the short term. The management team stresses that shareholders can capture the full equity value of Fortress by buying the FFA and FFB shares in equal numbers. The real problem is the dividend stalemate because of this structure, as explained quite beautifully in this table:
They may as well invest in energy solutions and reduce debt, since the profits are trapped in the company because of the distribution rules of the dual share class structure.
The 23.7% strategic interest in NEPI Rockcastle is proving useful, mainly because Central and Eastern Europe has electricity. That’s one up on the local portfolio, where Fortress is taking strain thanks to Eskom.
JSE Limited is still a cash cow, but margins are down (JSE: JSE)
And yes, the JSE is listed on its own exchange!
This always confuses market newbies. JSE Limited is the company that operates the Johannesburg Stock Exchange (JSE), so it can be listed on its own product. Before this confuses you further, remember that Microsoft runs on Microsoft systems. It’s the same principle.
The market sees the JSE as a cash cow that offers a resilient revenue stream but minimal growth. This has played out in the year ended December 2022, with HEPS growth of 4% and a 2% increase in the dividend. With a full year dividend of 769 cents per share, the trailing dividend yield is now 6.9%.
The goal is to increase revenue from non-trading activity, which sounds strange for a stock exchange group. This is to diversify and make the business more resilient.
With revenue up by 5% and expenses up by 7.5%, margins went the wrong way. Thanks to inflationary pressures and South Africa’s low growth environment (or even negative growth based on the latest GDP numbers), I wouldn’t expect a material change in that trend.
With a flat performance over the past year (admittedly with no shortage of volatility), all that investors can smile about is that dividend yield. It’s not enough when you can do better on government bonds.
Momentum at Momentum Metropolitan (JSE: MTM)
Growth in HEPS of 45% does the trick
With an improved mortality experience in the aftermath of Covid, Momentum Metropolitan delivered strong growth in the six months ended December. All but two business units put in a positive performance, with Momentum Investments struggling with new volumes and weak market performance and Non-Life Insurance dealing with a high claim ratio.
Interestingly, negative fair value movements in venture capital investments drove a 47% drop in the group’s investment return. I’m not sure that this company should be taking such risky bets to be honest.
Return on equity on an annualised basis was 18.4%, up from 15.9% in the prior period.
The interim dividend is 43% higher than the prior period, coming in at 50 cents per share which is roughly 34% of normalised headline earnings. The group expects a solid earnings performance in the second half of the year as well.
Mustek grows the top line but margins are down (JSE: MST)
The company simply had too many laptops in stock coming into this period
In an adaptation of the famous saying in golf: revenue for show, margins for dough.
Mustek managed to grow its revenue by 17.9% in the six months ended December. That happiness was blunted by gross profit margin contracting by 190 basis points to 14.1% because of discounting on entry-level laptops. The net result was a modest increase in gross profit from R677 million to R691 million.
With a jump in operating expenses of around 11.5%, profit from operations fell from R253 million to R242 million. That’s not too bad, until you see the jump in finance costs.
Companies with debt on the balance sheet in this environment are facing significant pressure on margins, as many businesses are struggling to grow operating profit at a time when funding costs have increased sharply. Mustek is no exception, with finance costs up from R31 million to R76.5 million.
With all said and done, HEPS fell by 6.5% to 221.74 cents. The share price is R16.35, so the annualised Price/Earnings multiple of 3.7x is a reminder of how low the multiple can be for small caps on the JSE. I must also caution that simply doubling interim earnings as a rough calculation is a very rough calculation. You need to do more work than that before deciding whether to buy or not.
Kudos to the management team here: Mustek is big on share buybacks and so they should be, particularly at this valuation.
Quilter puts in a relatively flat performance in 2022 (JSE: QLT)
The focus is on building distribution strength in the UK wealth industry
In this case, you need to work with adjusted profit before tax for anything to make sense. On that basis, Quilter is slightly down for the year ended December 2022, a solid performance based on broader asset values. If you use profit after tax as reported, you’ll see an 7.5x increase in earnings!
An important metric in this business is net inflows as a percentage of opening assets under management and administration. This is a way of measuring how effective the distribution network is, along with how well the products are resonating with clients. This ratio fell from 4% in 2021 to 2% in 2022, which is why the CEO believes there is work to be done in the business.
Impressively, the dividend grew by 13% in 2022 despite the broader market pressures.
In terms of the outlook, the company hopes to see an improvement in investor sentiment this year, which would lead to an improvement in net flows. There’s been an overall deterioration in market conditions, with the goal of a 25% operating margin pushed out to 2025 from the previously set goal of 2023.
That goal was established in 2021, before an interest rate hiking cycle with a severity that few expected.
Putprop maintains the dividend despite earnings falling (JSE: PPR)
The company owns 15 properties across various sectors
With a market cap of R163 million, Putprop is a rather obscure property company on the JSE. The net asset value per share is R16.14 and the share price is just R3.80, so the discount to NAV is huge in this case.
Load shedding and other pressures led to a 22.7% increase in property expenses, so this was never going to be a happy time for the company. In the six months ended December, HEPS fell sharply from 43.24 cents to 25.52 cents.
Despite this, the interim dividend was consistent at 4.25 cents. The company isn’t a REIT, so the dividend is a lot lower than HEPS.
Renergen gives detailed guidance on Phase 2 (JSE: REN)
At full production (by FY27), annual EBITDA of R5.7bn to R6.2bn is expected
This is a brave target to release into the wild, but at some point Renergen needed to give shareholders an idea of what profitability will look like. The long-term spot price assumption is $600 per MCF, although trying to form a view on that is also really hard. There’s also the currency to try and forecast and the local LNG price.
In other words, this is an educated guess at best. Still, it’s something.
To give an idea of how small Phase 1 is relative to the planned Phase 2, the current phase is designed to produce a maximum of 2,700 gigajoules of LNG and 350kg of liquid helium per day. The next phase is aiming for 34,400 gigajoules of LNG and 4,200kg of liquid helium per day.
A lot of capital will be needed to build this project – $1.16 billion of it! With Renergen’s market cap currently at less than a sixth of that number, existing shareholders are going to be heavily diluted. That’s ok, provided capital is raised at solid valuations.
Options on the table include a $750 million debt package, a 10% sale of the holding company of the local projects to the Central Energy Fund for R1 billion, a potential international IPO and other additional equity capital. There is much to be done before completion is anticipated in 2026.
In a separate announcement, the company is asking shareholders for authority to issue up to 67.5 million shares, including in the US. The price must be no more than a 10% discount to the 30-day VWAP or the price on the date of the general meeting. This is a raise of approximately R1.4 billion at current share prices.
Compared to the current market cap of R3 billion, this means that if you’re sitting with a loss of 40% in your Renergen position because you bought at the frothiest time, that loss is about to be locked in if such a large raise goes ahead at these prices.
If you want to understand more about Renergen, listen to my recent Ghost Stories podcast where I had a detailed discussion with CEO Stefano Marani about the company.
Will Royal Bafokeng’s results still justify a bidding war? (JSE: RBP)
Impala Platinum and Northam Platinum are fighting over a group with a 50.9% drop in HEPS
These are unhappy times for Royal Bafokeng Platinum. With Impala Platinum and Northam Platinum both trying to acquire the company and a stalemate playing out with regulators, Royal Bafokeng finds itself in strategic limbo. It is difficult to make capital allocation decisions and to attract or retain talent, as there is great uncertainty over what might happen depending on who the winning bidder is.
This is a dangerous situation, particularly at a time when energy is a major issue in South Africa and commodity prices aren’t playing ball. Luckily, the rand basket price per 4E ounce actually increased slightly by 1.5% for the year ended December, driven by weakness in the rand that more than offset commodity price weakness in dollars. Platinum contributed 24.8% of revenue and palladium and rhodium contributed a combined 60.1%.
With inflationary pressures in the cost base, that increase is already nowhere near enough to protect profitability. When you combine it with poor production numbers at Styldrift (down 16.1%), there’s serious trouble. A 6.8% increase in production at BRPM couldn’t save the day here.
When production numbers drop, there’s a flywheel effect on profitability (in the wrong direction) because the production cost per unit increases. With overall production of 4E ounces down by 3.9%, the net profit line never stood a chance in this environment.
EBITDA fell by 29.7% and HEPS was crushed by 50.9%. Although there is a final dividend of 535 cents per share, the risks here are clear.
Unless this impasse is resolved, there may not be much of a business left to acquire. A company cannot operate under this level of uncertainty for such an extended period without serious long-term consequences. And at some point, will the bidders eventually give up?
It’s not nice seeing a game of chess playing out with so many jobs on the line in the target company, but that’s how markets work sometimes.
Sea Harvest invests further in abalone (JSE: SHG)
Tough recent results notwithstanding, Sea Harvest is investing for growth
Sea Harvest Group already owns 54% of the shares in Viking Aquaculture, an abalone producer in the Western Cape and Northern Cape. There are also two oyster farming operations in this group.
With high-value seafood core to Sea Harvest’s growth strategy, buying more shares in this company makes sense. The stake is being increased from 54% to 82%, which will allow Sea Harvest to integrate the company into its operations and extract synergies.
To pay for the transaction, there are five equal annual instalments of R42 million, plus interest at Prime less 2% per annum. After the company made a loss of R32 million in the year ended December 2022, there’s clearly a lot of value in this business well beyond what recent results would suggest.
With a total deal value of around R210 million, this is a significant step for Sea Harvest. It’s small enough to be a Category 2 Transaction though, which means no shareholder vote will be required.
Little Bites:
Director dealings:
Adrian Gore has executed a massive hedge over a portion of his Discovery (JSE: DSY) shareholding, buying protection below R146 per share and giving away upside over R250 per share and again at R297 per share. The current share price is R145 per share, so he’s clearly worried about a drop here. He also sold R7.3 million worth of shares.
In a surprise to surely nobody, the publication of the business rescue plan for Rebosis Property Fund (JSE: REB) has been delayed once again, this time to 17th March. Watch this space for the next delay (this is now the sixth extension).
Cash shell Trencor (JSE: TRE) released a trading statement that HEPS would be between 1.5 cents and 1.8 cents per share. Nobody holding shares in this company cares much about the income statement.
Intrinsic net asset value (INAV) per share has crept upwards by 0.8%
With a market cap of just R240 million, Brimstone is a small investment vehicle that is a lot smaller than it used to be a few years ago. The passage of time hasn’t been kind to Brimstone, now trading at a huge discount to the INAV of R13.25 per share. To give you an idea, the share price closed at R6.30 on Tuesday.
Brimstone reports revenue, operating profit and other metrics, but it is an investment holding company at heart and so I only focus on INAV. The other numbers are far too impacted by whether investments are recognised as subsidiaries, associates or portfolio investments. If ever there was a company that should switch to investment company reporting, it’s this one.
The INAV is effectively the valuation by the directors of the underlying investments. With such a huge discount to INAV, the best way to unlock value would be for the directors to start selling investments for what they have put forward as the fair value, before executing share buybacks.
Will we see that happen? Probably not.
Mpact: higher earnings and plenty of investment (JSE: MPT)
The CEO’s surname is Strong and so are the earnings
The year ended December 2022 was a happy time for Mpact, despite the obvious pressures faced by businesses in South Africa. The company enjoyed great demand for its containerboard, cartonboard and converted paper products. Having been an early adopter of renewable energy investment, the operations were more resilient to load shedding than many others can say, which certainly helped in 2022 and must be helping going forward as well.
I simply have to also touch on this fascinating excerpt from the results: “Mpact’s paper mills have demand curtailment agreements with Eskom rather than being subject to load-shedding schedules.” I can’t say I’ve seen this before but it makes a world of sense, with Eskom giving less electricity all the time rather than all or nothing. Surely this is a model that other industrial groups can investigate with Eskom?
It wasn’t a perfect year, with the Plastics business achieving flat volumes overall because of the floods in KZN that impacted the Pinetown factory. It also sounds like demand took a knock in this part of the business, with the paper business more than making up for it. A strong recovery in restaurants was a driver of demand in paper, particularly delivery bags and Freshpact punnets and trays.
While many South Africans continue to spend their time researching emigration options for Australia and Canada, Mpact is investing here. I’m not talking about small numbers either, with the R1.2 billion Mkhondo Mill as a perfect example of the company’s commitment to ongoing growth in South Africa. This project is designed to meet growing virgin containerboard demand from the export fruit sector. The paper business shows how powerful this can be, after the Felixton Paper Mill achieved record production after being rebuilt back in 2017.
Looking at the numbers, revenue is up 7.1% and EBIT increased by 22.9% thanks to higher average selling prices. Return on capital employed improved from 17.8% to 18.5%. The paper business grew underlying operating profit by 26.8% and plastics achieved flat operating profit. The paper business is thankfully much larger, with profit of R1.1 billion vs. R198 million in plastics.
As we’ve seen practically everywhere, net finance costs were higher because of increased average net debt and the cost of borrowing. This came in at R183.8 million vs. R139.5 million the prior year. One way of looking at this is that the plastics division basically covers the debt costs!
With HEPS growth of 25.3%, Mpact can be proud of this result. With a total dividend of 115 cents for the year, the company is on a trailing dividend yield of roughly 3.8%.
Nedbank made the most of 2022 (JSE: NED)
The big question is: what will Eskom do to 2023’s performance?
There’s much to consider for the local banks. As confirmed by my conversation with Mike Davis after these results (CFO of Nedbank), South African banks are far more “traditional” than US counterparts that have huge reliance on investment banking revenues. Our banks are mostly focused on taking deposits and extending credit, earning interest and fees along the way. There are obviously other important activities (like cross-selling insurance), but that’s the bulk of it.
When inflation is high, balance sheets get bigger and interest rates tend to keep rising, which makes it even more profitable to extend credit. This is true for as long as the credit loss ratio holds up, something that has been the case in the aftermath of the pandemic. Even the Nedbank management team was pleasantly surprised by how everything bounced back after 2020!
The guidance for 2023 is that the credit loss ratio is likely to be flat, sticking around at the top half of the through-the-cycle range. To be fair, that guidance was given before the latest GDP numbers which certainly aren’t encouraging, though Nedbank would’ve anticipated much of the impact of load shedding I’m sure.
A useful “benefit” of load shedding for the banks is that a decentralised grid is being built in South Africa on private balance sheets. In simple terms, instead of government investing in Eskom, we have individuals and balances investing in solar. This is clearly an opportunity for the banks, with Nedbank financing these projects as part of home loans or instalment sales agreements put together by MFC, the vehicle finance business.
With much uncertainty ahead around Eskom and the credit environment, Nedbank did at least make the most of 2022. You can get more details and the full commentary at this link>>>
If you remember nothing else, remember that Nedbank grew headline earnings by 20% and improved return on equity to 14%. But with an estimated cost of equity of 14.9%, the bank still isn’t generating economic profits, so there’s much work to be done. The group will need to keep grinding out both net interest income and non-interest revenue, while continuing to bring the cost-to-income ratio down.
The full year dividend of R16.49 per share was 38% higher, putting the bank on a trailing dividend yield of 7.1%.
Sea Harvest shareholders are feeling salty (JSE: SHG)
Watching your position drop 7.4% in a day is never fun
Well, if you like seeing only good results on the market, look away now. Sea Harvest Group reported a 27% improvement in revenue and then a whole bunch of other numbers that went firmly in the wrong direction.
Firstly, gross margin contracted from 31% to 23%. EBIT margin fell from 15% to 9%, driven by a 25% nosedive in EBIT. By the time we get to net profit, HEPS fell by 33% and shareholders are crying.
The fuel price is a serious issue here, as is load shedding and the freight cost of exports. Despite a 9% drop in fixed costs in the local fishing business (an admirable effort), it was the variable costs that really broke the story here.
Although the aquaculture business managed to reduce its operating loss, it doesn’t help that there was still a loss of R40 million.
In Cape Harvest Foods, operating profit increased nicely from R52 million to R118 million. This is a smaller part of the group though, compared to South African fishing at R349 million operating profit (which was much higher at R672 million in the prior year).
In Australia, the group generated operating profit of R45 million. It would’ve been R79 million were it not for acquisition-related costs, a reminder of how expensive M&A actually is.
To add insult to extensive injury in the operations, net finance costs increased from R57 million to R124 million.
Unless fuel costs come down, profitability is likely to remain under pressure.
Shoprite resonates with every LSM, but load shedding… (JSE: SHP)
No retailer is immune from the cost horrors of Eskom
Shoprite’s share price was obliterated in early morning trade after results for the 26 weeks ended 1 January were announced, but it did catch a bid and was flat by lunchtime. The market panicked about HEPS growth of 6.4% at group level and 10.2% from continuing operations only. This is the risk of a company trading at a lofty valuation.
The crux of the investment thesis is that Shoprite has businesses that resonate with every type of consumer in South Africa. This has come through in the latest numbers, with Shoprite and Usave up by 15.1% and Checkers and Checkers Hyper up by 16.9%. These are exceptional numbers, with the group winning another 140 basis points in market share.
Gross margin took a 64 basis points knock, driven by the need to be more competitive on price (a direct result of consumer pressure) and the higher cost of diesel in the supply chain.
The diesel theme continues into operating costs, with a whopping R560 million spent to run generators in this period. In the comparable period, it was only R95 million. This led to an increase in trading profit of only 8.6% as the margin shrunk from 6.1% to 5.7%.
In my view, this sector is in for a tough year. But if you look at these top-line growth numbers for Shoprite and feel anything other than admiration, you’re missing a trick here. This is the grocery retailer in South Africa (if we took a holistic view across LSMs) and the ongoing market share gains prove it.
Does that make it a great investment? With a high valuation multiple and obvious load shedding headwinds, I’m avoiding the sector entirely this year.
Little Bites:
Director dealings:
The CEO of Discovery’s (JSE: DSY) Vitality business in the UK has sold shares worth over R8.8 million. When a stock has run 32% in six months and lost 4% over a year, I can’t blame him for that trade.
Various directors of MultiChoice (JSE: MCG) (including the chairman) have sold shares in the company worth R9.65 million.
There were several dealings in MIX Telematics (JSE: MIX) shares linked to directors and share appreciation rights, with the most notable being that the CEO kept all of his shares and will pay the costs out of his own pocket. That’s unusual, as directors usually sell at least enough shares to cover the taxes.
RBFT Investments (linked to a Salungano director) has continued mopping up shares in Salungano (JSE: SLG) belonging to shareholders looking for liquidity, adding another R1.54 million to the collection.
In a regular reminder of how much money we don’t have in comparison to Prosus (JSE: PRX) and Naspers (JSE: NPN), the companies recently bought back $233 million and R1.7 billion worth of shares respectively. Over what period of time, you ask? One week.
Use the zoom function on the block below to read the full commentary for the 2022 financial year, a period of strong financial performance by Nedbank in conditions that were favourable to banking overall:
Coal and manganese put a shine on African Rainbow Minerals (JSE: ARI)
Headline earnings is up by a juicy 40%
Mining stocks are wild things. African Rainbow Minerals has doubled in price over three years but is down around 6% over the past 12 months. “Buy and hold” generally isn’t the game here.
For the six months ended December, headline earnings increased by 40% to R26.38 per share and the dividend is 16.7% higher at R14 per share.
The net cash position has decreased from R11.2bn at the end of June 2022 to R9.5bn at the end of December, with a R3.5bn payment having been made in September to acquire the Bokoni Platinum Mine. The group is set to invest heavily in that project.
The numbers would’ve been better were it not for logistical challenges, a classic issue in South Africa. Iron ore, manganese ore and thermal coal volumes were negatively impacted. With unit costs under pressure from energy inflation, a practical constraint on volumes really isn’t helpful.
Still, ARM Ferrous grew headline earnings by 4%, including a 54% increase in the manganese division and a 12% decline in iron ore, with lower average prices for iron ore and significant volume decreases both for exports and local consumption. Manganese had the opposite experience in terms of volume and pricing.
ARM Platinum grew headline earnings by 7% and ARM Coal experienced incredible growth that saw headline earnings increase by 4x!
AVI is flat, thanks to pressure in I&J (JSE: AVI)
Margins have taken a knock
Despite an increase in group revenue of 7.2% in the six months to December, AVI could only manage a 0.6% increase in HEPS.
The problem wasn’t at gross margin level, as gross profit grew by 7.8% and hence this margin actually expanded. The group managed to offset many cost pressures through pricing initiatives, which is important. Improved profitability in the footwear and apparel business was also a positive contributor here.
If we exclude I&J, operating profit increased by 8.4%. The fishing business was hit by fuel prices, a reduced quota and an unfavourable abalone sales mix because of Chinese lockdowns. Primary agriculture (or even aquaculture) is no joke, as evidenced by a 54.9% drop in operating profit at I&J.
Although the balance sheet has also come under pressure from increased working capital requirements (a trend we are seeing across the JSE), the interim dividend is still there and has even increased by 1.2%. Keep an eye on that balance sheet though, with cash generated from operations down from R1.71 billion to R1.06 billion. Net debt has increased from R1.54 billion to R2.45 billion over the past 12 months.
As a Strawberry Whirls enthusiast myself, I wasn’t surprised to see strong demand for Bakers Choice Assorted over the festive season.
Bidvest: firing on (almost) all cylinders (JSE: BVT)
Six out of seven divisions delivered profit growth ahead of inflation
With a variety of businesses spanning several sectors, I felt that Bidvest would be a decent pick this year in the industrials sector. I was asked by the Financial Mail to contribute to the Hot Stocks edition in January and Bidvest was my choice in this sector. It seems to be working out thus far!
My bet was that Bidvest would be a beneficiary of this inflationary environment, passing on many of the costs and experiencing the joy of operating leverage (when it works in your favour). The company gave us a strong clue that this would be the case in its last trading update, when they told the market that profit growth was tracking revenue growth.
As proof of why you should read SENS carefully, here’s the excerpt from back in October:
Sure enough, for the six months to December, revenue grew by 14% and trading profit was up 14.5%. Not only did it mirror top-line, but they achieved some margin expansion as well!
HEPS increased by 15.3% and the interim dividend increased by 15%, so cash quality of earnings was high. A steady payout ratio is a great sign that the earnings are being backed up by solid cash flow generation.
As we are seeing in many companies, the balance sheet is also sucking up its fair share of cash. Bidvest generated R7.3 billion in cash from operations and invested R5.5 billion in working capital. In terms of capital expenditure, R1.5 billion was needed for maintenance capex (i.e. keeping the existing business going) and R2.3 billion was used for acquisitions.
Return on funds employed has dropped from 40.4% to 37.6% due to the growth in the balance sheet to support the operations. You can’t win at everything. Interestingly, they also measure return on invested capital, a different way of looking at the relationship between profitability and the balance sheet. On this metric, there was improvement from 15.5% to 16.3%, which is above the weighted average cost of capital. This means that Bidvest is generating economic profits, not just profits, as investors are being more than compensated for the risk involved.
Impressively, six out of seven divisions grew profits in this period at a rate ahead of inflation. Not only is Bidvest proving to be a solid inflation hedge, but the group is achieving real growth as well.
The group sounds upbeat on its prospects, including the opportunity to invest into renewable energy. Given Bidvest’s historical success in investing in entrepreneurial businesses, I wouldn’t bet against them creating a solid renewable energy operation alongside the existing operations, all of which also have opportunity for further growth.
The share price closed 15.3% higher for the day, an exceptional rally for such a large company.
Well hello, Hulamin (JSE: HLM)
A rally of nearly 10% was the reward for solid HEPS growth
In the year ended December, Hulamin reported a number that you won’t see very often: normalised EBITDA rose by 339%! I’m afraid there’s another metric that has “normalised” in front of it, this time normalised HEPS growth of 28%.
With volumes up 7%, the group managed to put pricing up to recoup input cost pressures without breaking demand.
As reported, HEPS actually fell by 46%. The normalisation adjustments refer to “metal price lag” in the business. Based on the market response to this result, it seems that investors are happy with using normalised numbers in assessing performance.
With normalised HEPS of 105 cents per share, the share price of R2.90 is a trailing Price/Earnings multiple of under 2.8x. As a cyclical business, I would encourage you to be very careful of assuming that a low multiple means a cheap share.
There’s a firm offer on the table for Jasco Electronics (JSE: JSC)
Community Investment Holdings is looking to take the company private
Jasco Electronics has been telling us for a while that Community Investment Holdings is looking to make an offer for the company. This is a really small transaction because Jasco is a tiny company, with the offer price set at 16 cents per share and a maximum offer consideration of R24.9 million.
This offer price is only a 4% premium to the 30-day volume weighted average price. A large premium might not be needed here as the stock is so illiquid, so shareholders looking to monetise their holdings may see this as the only way out.
Community Investment Holdings and its associated companies already own 55.34% of the shares in Jasco. The offer will be subject to shareholders approving the delisting of the company.
MAS grows its NAV – but not by much (JSE: MSP)
Retail properties in Central and Eastern Europe are performing well
In the six months to December, MAS achieved a 14.3% increase in adjusted distributable earnings per share. I’m afraid that “adjusted” is the word here, as there are so many once-offs and transactional distortions in these numbers that it is very hard to know where to look.
The key insight I would take from these numbers is that retail properties in the Central and Eastern European region are performing well, with footfall and tenant sales running well ahead of pre-COVID levels.
The tangible net asset value is a useful metric to focus on, increasing by 2.9% to EUR1.44 per share.
Metrofile heads sideways (JSE: MFL)
I suppose that 1% growth is better than a 1% decline!
When revenue is up by 19%, you really hope to see a great result at net profit level. Instead, we find ourselves with a scenario where profits at Metrofile went sideways, indicating significant margin compression in the business in the six months to December 2022.
The revenue growth has been flattered by the acquisition of IronTree Internet Services, which has been included for the full period under review. Without that acquisition, revenue would’ve been up 13% instead. That’s still a solid result in terms of top line growth, but it indicates the level of margin compression that has been suffered here.
The trouble at margin level is due to additional costs and a negative change in margin mix towards lower margin services. If that change in mix worsens or is sustained, that’s bad news for shareholders.
Still, operating profit increased by 5%, so this explains only some of the margin compression. The difference between operating profit and headline earnings is the cost of debt, which has gone firmly in the wrong direction. Net finance costs were 16% higher, driven by higher interest rates and growth in net debt of 10%. The debt increase is primarily because of the acquisition of IronTree, although the debtors balance has also increased.
In summary, Metrofile is clearly facing margin pressure and has executed a risky acquisition at a time when money really isn’t cheap. The company has maintained the interim dividend and even executed a share buyback programme. With an average repurchase price of R3.46 per share and a current price around R3.15, I can’t help but think that the better capital allocation decision would’ve been to reduce debt.
Uncertainty reigns supreme at Nampak (JSE: NPK)
Shareholders have been kept guessing about a possible capital raise
Let’s not beat around the bush here: Nampak is scrambling to save its balance sheet. With an exceptionally complex group structure and an array of African subsidiaries, managing the central treasury of this business is very tough. With too much debt on the balance sheet, it was a recipe for disaster.
After the initial rights offer was proposed to the market, new information emerged about potential capital options that led the company to postpone the general meeting. That adjourned meeting has now been cancelled, which has raised a few eyebrows.
If you read through the noise, the reason for the cancellation of the meeting is that the company is still negotiating with the lenders. Until that negotiation is concluded, Nampak doesn’t know how big the rights offer will need to be.
Shareholders will need to be patient here, as Nampak won’t give further details until the interim results are released in May.
Tick tock. Tick tock.
No dividend and a cautious approach at RCL Foods (JSE: RCL)
All that they can do is focus on what they can control or at least influence
Between load shedding on one hand and volatile input cost pressures on the other, it’s been a tough time for food manufacturers. RCL Foods hasn’t been spared, with the company focusing on “controlling the controllables” as highlighted in this detailed results announcement that the company has placed in Ghost Mail.
Margin pressure is the focus at the moment, with revenue in the six months ended December up by 17.6% and underlying EBITDA down by 9.2%. The net impact on HEPS is severe, taking a knock of 22.4%.
The poultry (Rainbow) and baking business units struggled, which makes for interesting reading alongside recent updates from the likes of Tiger Brands and Premier within Brait. RCL was forced to put pricing increases through in the baking business to offset input cost pressures, with a negative impact on volumes as consumers tightened their belts (perhaps literally, after cutting down on yummy baked goods).
When it comes to the poultry business, recent updates from the likes of Astral Foods and Quantum have laid bare the issues in that industry. Even a terrible pun won’t make any chicken farmers smile at the moment.
With the share price eventually closing flat after a rocky start to the day, it seems that much of this was already priced in at RCL Foods.
STADIO: slow and steady doesn’t win this race (JSE: SDO)
The valuation was pricing in far more growth than this
Growth stocks are wonderful things, provided they keep growing quickly. At some point, if the growth music stops, the share price multiple can unwind and cause pain for investors. This can be the case even if the company is still growing, as the test is whether it is growing quickly enough.
A chart of Curro vs. STADIO is just a fantastic thing over the past year:
Can that performance gap be sustained? If you enjoy pairs trading, this is one that might warrant some further digging.
Curro is dealing with substantial inflationary cost pressures, particularly in utilities. Running a portfolio of schools is expensive. STADIO is still growing its profits and reaping the rewards of its comparatively asset-light strategy, but growth is slowing. This is a classic value vs. growth debate, playing out right here on the JSE.
Down 6% by close of play, STADIO shareholders were less than thrilled to learn that first semester student growth of 11% slowed to growth of 8% in the second semester. This was still enough to drive growth in core HEPS for the year ended December of between 11% and 23%.
Although it doesn’t affect core HEPS, I also noted the impairment of certain curriculum material (R3.7 million) that the group elected to discontinue. Although I’m sure this is part of business as usual to some extent, it’s not great alongside a slowdown in student numbers. Were some elements of the business just a pandemic fad?
Trading at R4.70 at time of writing, the core HEPS range of 19.6 cents to 21.7 cents suggests a trailing Price/Earnings multiple of around 22.9x at the mid-point. That’s a lofty multiple in South Africa that is only justifiable with substantial growth.
If you want to see the bull case for STADIO, all you need to do is Google the student protests at Wits. University infrastructure is at breaking point in South Africa, leaving space for private institutions to win market share.
Trellidor locks in an 11.5% jump in the share price (JSE: TRL)
HEPS is flat though, so be careful of stocks with low liquidity and high percentage moves
Taking nothing away from Trellidor, one needs to be very careful with getting too excited about large percentage moves in companies that are thinly traded. A rally of 11.5% in Trellidor is nowhere near as important as the 15% rally in Bidvest, for example.
How do you spot this? Well, you just have to look at the daily chart. Here’s Trellidor on Monday vs. Bidvest:
One traded throughout the day, steadily gaining momentum. The other took the slamlock approach, truly on brand. That blue line isn’t something I drew to point to the dot – it’s what happens when the stock only trades during one small part of the day!
With revenue down by 3.6% in the six months ended December and HEPS up by 0.4%, there wasn’t anything to feel excited about in these numbers. The employees that the company was ordered by the Labour Appeal Court to reinstate have been onboarded, with 41 employees presenting themselves for work. 11 decided to take severance packages and 30 are now integrated into the workforce. The company will introduce new products to utilise the additional labour.
Perhaps unsurprisingly, there’s no interim dividend.
Little Bites:
Director dealings:
Neal Froneman continues to eat his own cooking, buying a further R9.95 million worth of shares in Sibanye-Stillwater (JSE: SSW).
A senior executive of Gold Fields (JSE: GFI) has sold shares in the company worth R6.9 million. Again, I can hardly blame him.
AYO Technology’s (JSE: AYO) battle to hang on to the money that the PIC invested in the company will begin in court on Tuesday. If the court rules that the subscription agreement should be set aside, then this will have a material effect on the AYO share price.
Sticking with that group, African Equity Empowerment Investments (JSE: AEE) has decided to unbundle its 49.36% shareholding in AYO Technology to shareholders. Assuming this goes ahead, it should simplify the group structure, as investors don’t look kindly on these multi-layered control structures.
It’s quite rare to see an asset manager with a large stake that could be considered strategic. This hasn’t stopped Allan Gray from increasing its stake in Sappi (JSE: SAP) to over 20% of the company. Allan Gray seems to be hedging its bets in the sector, taking its stake in Mondi (JSE: MNP) to over 6% of the company.
The merger between Capital & Counties Properties (JSE: CCO) and Shaftesbury has been completed, with the former changing its name soon on the JSE to Shaftesbury Capital with the ticker JSE: SHC. As one would expect, there are also numerous changes to the board of directors.
Cashbuild (JSE: CSB) shareholders gave overwhelming support to the company’s plan to (1) repurchase a big chunk of shares from the former CEO and (2) execute an odd-lot offer (repurchase shares from shareholders who hold fewer than 100 shares).
Focusing on the factors within its control in challenging conditions, RCL FOODS delivered a resilient set of results for the six months to December 2022.
Revenue increased 17.6% to R20,2 billion
Earnings before interest, taxes, depreciation, amortisation and impairments (EBITDA) declined by 8.9% to R1 177,7 million in difficult trading conditions
Headline earnings per share declined 22.4% to 56.4 cents
Load shedding added direct costs of R96.0 million during the period
Resilient Grocery market shares in a declining market
Good Sugar performance off a high prior-year base
Rainbow turnaround hampered by high feed input costs
Vector impacted by cost pressures
Revenue growth was driven by a combination of higher pricing to counter rising input costs, and higher volumes in the Sugar, Rainbow and Vector Logistics operations. EBITDA came under pressure as volumes and margins were impacted by high agricultural commodity input costs, rising consumer costs, significant load shedding and industrial action. With the managed separation of Rainbow and Vector Logistics from RCL FOODS still in progress, and considering the impact of ongoing external pressures, the directors have resolved not to declare an interim dividend in order to preserve cash while the Group repositions its portfolio.
“We have sought to deliver a stable Rand profit and grow market share while supporting cash-strapped consumers as far as possible, both through value innovations and responsibly-managed price increases. In so doing, our concern has been to balance the need for margin protection with the pressure on consumers’ pockets,” said RCL FOODS’ Chief Executive Officer Paul Cruickshank.
The RCL FOODS Value-added Business (comprising the Groceries, Baking and Sugar business units) delivered a resilient set of results, with revenue increasing by 16.7% while EBITDA declined 4.6% versus the prior period. Despite gaining market share in several categories, volumes were impacted by higher prices and by production challenges related to the industrial action and load shedding. The Sugar business unit produced a good set of results off a high prior-year base.
Despite a 19.2% revenue increase, Rainbow’s turnaround was hampered by high commodity input costs, poor agricultural performance and load shedding which contributed to a 110.5% EBITDA decline.
Vector Logistics’ revenue increased by 17.2% due to a post-pandemic recovery in food service volumes and higher retail revenue, aided by cost and scale benefits arising from its completed network consolidation. EBITDA was 9.1% lower as a result of cost pressures arising from load shedding and higher electricity, fuel and insurance costs.
Despite adverse conditions, we have continued our journey towards generating more consistent value for our stakeholders, with a focus on value-added brands. We remain committed to the managed separation of Vector Logistics and Rainbow from our Value-Added Business. Engagements with a potential acquiror for the Vector Logistics business have progressed well in the current period and we will update the market when more certainty exists on the outcome of a transaction. We have also taken significant steps to prepare Rainbow for a full separation from the RCL FOODS Value-Added Business when appropriate to do so. Rainbow continues to focus on improving its underlying performance in line with its turnaround strategy.
The acquisition of Sunshine Bakery Holdings Proprietary Limited was finalised in February 2023, effective 1 March 2023, to expand our Baking business unit’s reach into the strategically important KwaZulu-Natal region. We are currently focusing on accelerating internal growth by leveraging our brands and capabilities, and on distilling our core Purpose and crafting a new Sustainability Strategy.
“We are committed to maintaining a relentless focus on the factors within our control to keep moving forward in line with our strategic growth agenda, guided by our unfolding Purpose and Sustainability journey,” concluded Cruickshank.
African Media Entertainment share repurchases (JSE: AME)
For small caps, repurchases should be balanced against liquidity
There’s a double-edged sword at play when it comes to repurchases by small caps. They usually trade at modest multiples, so buybacks (literally an investment by the company in its own shares) can be highly effective. Lewis is a wonderful example of that.
The other factor that needs to be considered is liquidity in the stock. Low liquidity can really hamper the share price, as larger investors simply can’t take positions. African Media Entertainment isn’t exactly the most liquid stock around and that situation is likely to worsen, as 6.4% of issues shares have been repurchased since 31 March 2022.
The market cap is under R240 million, so this company is firmly in small cap territory.
Brait: the Premier IPO could be back! (JSE: BAT)
Virgin Active also seems to be doing betterin 2023
In a trading update covering the ten months to 31 January, Brait gave the market some news that drove a 6.2% rally in the share price: the IPO of Premier could be back on the table!
This FMCG business has a formidable reputation and was being built for a separate listing before Brait pulled the plug based on market conditions. Interim revenue and EBITDA growth was 25% and 16% respectively, with that momentum continuing over the ten-month period. Importantly, margin has been maintained without losing market share.
Pricing power is critical in this space and Premier seems to have it, helping to drive a R294 million capital repayment on its debt in January thanks to strong profitability.
Brait is in the process of selling shares in Premier to Titan and RMB, which means Christo Wiese and his bankers are currently at the front of the queue to get the business. A group of institutional investors and other parties have approached Brait with a commitment to participate in the IPO. This group is big enough to meet the JSE’s free float requirements for a new listing, so the Brait board needs to seriously weigh up this option against the existing deal that is being executed.
At Brait’s other major business, Virgin Active, memberships for the year ended December 2022 were up 18% despite a tough December in South Africa and the UK. Italy seems to have done well over that period. Thankfully, the “new year, new me” crowd are in full force in 2023, with sales and net membership growth ahead of budget.
The group’s active membership base has reached 86% of 2019 levels, so the impact from the pandemic is still being felt.
At New Look, pressure on UK consumers has led to a more promotional environment and that isn’t good news for margins, despite a decent trading performance overall. New Look has a value-focused offering, which is a good thing when economic times are difficult.
MTN subsidiaries are reporting again (JSE: MTN)
Ghana and Rwanda have given us a view on latest numbers
MTN is an interesting one, with the African subsidiaries reporting on a quarterly basis and giving us solid insights into the performance of the group in key markets outside of South Africa. Nigeria is the big one, but it’s worth keeping an eye on the smaller businesses as well.
Ghana went first, releasing results for the year ended December. Total revenue was up 28.4% and EBITDA increased by 30.9%, so there was EBITDA margin expansion. As is the theme in Africa, the investment in the network is substantial, with capital expenditure up by 44%. This means that capital intensity (the percentage of revenue invested in capital expenditure) has increased.
The economy is in serious trouble in Ghana, with the government needing to use IMF money to steady the ship. This is why the government tried to shake the tree at MTN Ghana to see what tax revenue would fall out of it, a plan they abandoned fairly quickly. MTN is still investing in the country and is confident in the medium- to long-term prospects.
In Rwanda, MTN grew its service revenue by 19.9% and EBITDA by 20.8%. Capital expenditure was up by 28%. You can see exactly the same trends in play in Rwanda as in Ghana, minus the macroeconomic turmoil for the country as a whole.
MTN’s African subsidiaries are growing quickly, but they are cash-hungry beasts.
Premier Fishing and Brands could disappear from the JSE (JSE: PFB)
Sekunjalo has made a firm offer to shareholders
The original deal structure saw the offer being made by African Equity Empowerment Investments, with that offer having now lapsed and been replaced by an offer from Sekunjalo. The Takeover Regulation Panel has agreed to the offeror being substituted in this process.
In terms of the structuring of the “offer”, this is actually a scheme of arrangement that will be proposed by the board of Premier Fishing and Brands to shareholders. The minority shareholders only hold 6.14% of the company, so it really doesn’t make sense for the company to continue being listed.
The offer price is R1.60 per share. It’s quite incredible to note a return of nearly 260% since a year ago when the markets crashed in the wake of the Ukraine invasion!
Sun International is shining once more (JSE: SUI)
Shareholders enjoyed a 4.3% rally on Friday
The year ended December saw a strong recovery from Sun International, as the pandemic faded and a new dawn arrived for the tourism and entertainment industry. A genuine new dawn I mean, not the political kind filled with empty promises.
In a trading statement, Sun International guided that HEPS will be more than double the prior year, coming in at between 213 cents and 237 cents per share. There’s an adjusted HEPS number of between 415 cents and 461 cents, with the difference relating to the SunWest put option liability.
The important thing is that the results were solid across urban casinos, SunSlots and SunBet. Sun City appears to have put in a particularly strong rebound, as tourists flocked there for the famous Sun City Burn on the back of their necks.
Little Bites
Director dealings:
The company secretary of Stor-Age (JSE: SSS) has acquired shares worth R264k
In a few days from now, searching for Capital & Counties on the JSE won’t yield any results. The company is changing its name to Shaftesbury Capital after the recent merger. The current share code is JSE: CCO and it will change to JSE: SHC.
Welcome to Ghost Wrap. It’s fast. It’s fun. It’s informative.
In this week’s episode of Ghost Wrap, we cover:
Murray & Roberts has suffered a shocking share price drop, but warning signs were there.
Aspen is proof that valuations are forward-looking, as crummy results were washed away by a positive outlook and a rally in the share price.
Cashbuild shareholders will need to be patient, as the pain in that sector seems to be far from over.
Caxton & CTP has demonstrated excellent pricing power in its latest results.
Investec Property Fund has put forward a proposed ManCo internalisation deal that lays bare the worst thing about our local property sector.
Woolworths has seen its share price come under pressure despite releasing incredible results, probably due to jitters around load shedding.
MultiChoice is making big moves in streaming, going after the African market through a new deal with Comcast (owner of NBCUniversal and Sky – which means English Premier League football!)
Sasfin is doing so badly that investors would be better off putting their money in another bank, literally.
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.
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