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Ghost Bites (Altron | Famous Brands | Kumba Iron Ore | Sappi | Sirius)

The Finance Ghost
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Ghost Bites (Altron | Famous Brands | Kumba Iron Ore | Sappi | Sirius)

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Altron reports a big jump in HEPS

The operations seem to be performing well

For the six months to August, headline earnings per share (HEPS) for the continuing operations will be between 40 and 42 cents. In the prior comparative year, HEPS was just 11 cents.

Altron’s operations have performed well, with Altron noting solid performances from Altron Managed Solutions, Altron Karabina, Altron FinTech and Altron Arrow. It’s also important to note that Lawtrust was acquired in October 2021 and so the full impact of that acquisition is sitting in these numbers and not in the comparable period. Another critical point to note that Altron Arrow was reclassified as a continuing operation, so it is not in the base period either.

This means that the year-on-year growth rate of HEPS isn’t particularly helpful. It’s more useful to focus on the earnings range.

Altron is trading at R8.60 and the market didn’t have time to react to this announcement, as it came out just before the close. Let’s see how the market reacts once the numbers have been digested.

A famous recovery

King Steer burgers and Debonairs pizzas are flying out the door again

In a trading statement for the six months ended August, Famous Brands confirmed that headline earnings per share (HEPS) will be up by between 99% and 143%.

Of course, there is a huge base effect here from the pandemic. To really understand this situation, we need to look further back.

I’m too lazy to type it all out again, so I’ll just refer to my tweet on the matter (and invite you to follow me on Twitter if you don’t do so already):

Famous Brands has lost two thirds of its value since the peaks of 2016 and is down 30% this year.

Force manure

The Transnet strike is negatively impacting Kumba Iron Ore (and the whole country)

Force majeure is a legal construct in which a party claims that a contract cannot be fulfilled due to unforeseeable circumstances. Whether or not strike action in South Africa is “unforeseeable” is a debate for another day.

The brilliance of “force manure” is attributed to Capital Sigma on Twitter. I just loved that clever twist the moment I saw it.

The economy will shortly be in the manure if this strike doesn’t get resolved. Mineral exports saved us during the pandemic and we really can’t afford to lose out on this critical source of revenue as a country.

After Thungela downplayed the impact of the strike by noting the extent of its stockpiles in Richards Bay, Kumba Iron Ore has come out with a less favourable story.

Kumba owns just over 76% in Sishen Iron Ore and the updates refer to Sishen’s production and export numbers, so one can argue that only three quarters of the impact is attributed to Kumba. Still, a production impact of 50,000 tonnes per day for the first seven days and 90,000 tonnes per day thereafter is serious. Of greater concern is that export sales will be impacted by 120,000 tonnes per day.

The share price fell nearly 4% in morning trade and partially recovered to close 3.5% down. If this strike continues, a lot more manure will stick to the share price.

Sappi keeps it short and sweet

It took just one paragraph to drive the share price nearly 8% higher at the close

When it comes to SENS announcements, there’s often a lot of fluff on the JSE that needs to be worked through to find the key messages. Sappi certainly wasn’t guilty of that as it provided the outlook for the fourth quarter.

Back in August, management guided a strong fourth quarter notwithstanding inflationary pressures. At the time, the expectation was for EBITDA to be below the record levels in the third quarter. The excitement in the market is because management now expects fourth quarter EBITDA to beat the third quarter i.e. to be a new record.

The company notes that market conditions were stronger than expected and European energy prices (especially gas) were lower than expected.

The share price has been on a bumpy ride, with this rally only taking it back to levels seen in early August. For the year, the share price is up less than 5%.

Sirius puts out a positive message

With a share price down more than 50% this year, shareholders need good news

The Sirius Real Estate share price is a victim of a crazy valuation coming into this year. As I always say, you need to be extremely careful of property funds trading at a premium to book. There’s no better example of that risk than Sirius.

Sirius is trying hard to own the narrative here, with a SENS headline that screams “Trading update: in line with expectations, with continued rental growth and a strong balance sheet” – that’s when you know that the company is sensitive to what has happened to the share price.

Let’s take a closer look.

In Germany, the like-for-like annualised rent roll is up 2.4% and the rate per square metre is up 3.3%. In the UK, the annualised rent roll is 4.1% higher and the rate per square foot has increased by 8.4%. Although disposals and acquisitions would skew the relationship between total rent and the rate per metre or foot, my immediate reaction was to think that occupancies must be lower if the pricing has increased more than total rent.

Sure enough, group occupancy is down from 85.3% to 84.4%. That’s not exactly the story that shareholders want to hear from an industrials-focused group that is supposed to be experiencing high demand for properties. The group plays this down by noting that the historical trend has been for tenants to vacate properties in the first half of the financial year. Over the next six months, we will get more clarity on the demand dynamics for these properties.

It’s fascinating to note that German converted 78.1% of enquiries into viewings and 11.5% into sales. In the UK, just 17.3% were converted into viewings and 4.7% into sales. Perhaps the Germans really are more precise with what they want?

Keep a close eye on the balance sheet. A facility of €170 million was refinanced with a fixed rate of 4.26%, taking the group’s weighted average cost of debt from 1.4% to 1.9%. The weighted average debt expiry has increased to 5 years from 3.8 years. If you are investing in this sector, you need to do proper analysis of the balance sheet and assume that any expiring debt will be replaced at a cost in line with current market rates.

Sirius believes that the portfolio valuation will increase at the end of September, as values in March were at “relatively high gross yields” according to the company: 7% in Germany and nearly 12% in the UK. Remember, a higher yield means a lower value. Shareholders want to see these yields come down so that property values go up.

Finally, Sirius used the announcement to reassure investors about the gas situation in Germany, where gas reserves are more than 90% of capacity. Sirius doesn’t believe that there will be any material changes to its fixed rate agreements for gas supply.

Little Bites

  • Des de Beer is still buying shares in Lighthouse Properties, this time to the value of R4.7 million.
  • In an interesting board appointment, James Formby (the ex-CEO of Rand Merchant Bank) has agreed to join the Pick n Pay board. It’s unusual to see an investment banker go to a group that isn’t exactly known for its dealmaking habits. Is this a sign of future potential activity?
  • Bruce Cleaver is stepping back from his role as the CEO of De Beers to become the diamond miner’s Co-Chairman (an unusual role). Al Cook has been appointed as the new CEO of De Beers, bringing with him 25 years of experience mainly at BP and Equinor. Petrol is now so expensive that oil & gas executives are being promoted to run diamond mines!
  • There’s also a change in top leadership at Quilter plc, where CEO Paul Feeney will step down from his role as CEO at the end of October. Steven Levin will take over as CEO. He currently runs the Affluent division at Quilter, having been with the group since 1998. Feeney served in the role for 10 years and the long innings of Levin at the group is a tick in the box for succession planning. Perhaps Truworths should take some notes here.
  • Grindrod’s disposal of Grindrod Bank has become unconditional. This means that the effective date of the disposal is 1 November. David Polkinghorne has resigned from the Grindrod board and will continue to serve on the board of Grindrod Bank.
  • Salungano Group has announced that Arnot OpCo has been placed under business rescue proceedings. The parties who opposed the business rescue application were ordered to pay costs. Salungano’s investment in this entity was already fully impaired. The supply of coal to the Arnot power station will continue for now.
  • After a delay attributed to Covid lockdowns in China, SEPCO Electric Power Construction Corporation has presented an Engineering, Procurement and Construction (EPC) contract proposal to Kore Potash for the Kola project in the Republic of Congo. Kore Potash is now finalising terms with SEPCO, as there is obviously a negotiation process underway (nobody ever accepts the first draft of a contract). The Summit Consortium is waiting for the outcome of this contract negotiation before presenting its royalty and debt financing proposal for the construction cost.

The dollar blows them all away

Chris Gilmour
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The dollar blows them all away

This week, Chris Gilmour turns his gaze to the strength of the dollar and the significant issues in Europe and the UK.

During the past few months, as US inflation and interest rates have risen, the US dollar has become the safe haven of choice for most global speculators. And that trend is likely to continue for the foreseeable future due to TINA (There Is No Alternative).

But this is playing havoc with currency markets and US exporters. Anyone who has US dollar-denominated debt is really struggling now, with some emerging economics with that exposure facing a debt crisis.

So, how long will that last and when the US dollar eventually weakens, where will be the best places to invest?

Typically, at this point in a currency cycle, US dollar strength would have subsided by now and speculators would already be piling into other currencies. There are two main reasons why that hasn’t happened.

Firstly, the US economy (while in the grips of high inflation) is still perceived as being relatively strong, even although it is technically in recession. This is because its unemployment rate is still very low and the number of job vacancies remains very high. US inflation has been less affected by energy price increases than many other economies such as the UK and Europe, thanks mainly to its reliance on internally-generated energy supplies, including cheap gas from fracking sources.

Secondly, but related to the first factor, is that the US is not nearly as badly affected as Europe and many other parts of the world by the war in Ukraine. European energy has been choked by Russia cutting off its natural gas supplies via the Nord Stream pipeline under the Baltic and this situation is likely to persist for as long as Russia maintains its illegal war in Ukraine.

Load shedding: a proudly South African export?

So looking more closely at Europe, one sees that its manufacturing base is in danger of being strangled due to lack of energy. As cheap Russian gas supplies are switched off, many European governments are desperately scurrying around attempting to revive old mothballed fossil-fuel power plants or nuclear plants and nationalising utility companies to prevent them going bankrupt.

There is talk in Europe of the distinct likelihood of their version of “load shedding” and already certain regions and municipalities have ordered the banning of street and office lights at night to conserve power. And the start of winter proper is still a few weeks away and will last, effectively, until well into January and perhaps into February.

Heavy industries in Europe would be worst hit, such as steel and glass making for example and in a worst-case scenario, they would have to close, with a concomitant rise in unemployment and danger of prolonged recession. So, no joy in Europe for the time being.

And then there’s the UK.

Reeling under the backwash from an incredibly ill-conceived mini-budget of two weeks ago, the UK economy is likely to endure a 5-quarter recession, according to the Bank of England. And that forecast was made before new Chancellor of the Exchequer Kwasi Kwarteng delivered his now infamous budget speech on Friday September 23. Liz Truss’s new administration has already had to make an incredibly embarrassing U-turn on tax cuts for the wealthy, designed to “trickle down” and kick-start the moribund UK economy.

The other parts of the mini-budget are still in place, with their energy price caps for example, but any good that may accrue to consumers because of that will likely be more than nullified by the impending massive rises in interest rates and specifically in mortgage rates.  A typical two-year fixed mortgage rate in the UK is now more expensive than at any time since the Global Financial Crisis of 2008, at just over 6%. It’s entirely possible that Liz Truss will lead the Conservative Party into the next UK general election in 2024 with the UK still in recession. That would most likely result in the Labour Party winning a majority in the House of Commons, a move that would likely not be welcomed by financial markets.

And to rub salt into the wound, the UK’s National Grid warned the Brits on October 6 about the possibility of rolling blackouts during peak hours in January if gas supplies become even tighter than they are now.

The troubles in the UK didn’t happen overnight

Britain’s problem isn’t just a momentary thing, caused by Truss and Kwarteng’s lack of judgement. It goes far deeper than that. For 150 years until the end of the second world war, Britain ruled the greatest empire the world has ever seen and it was also the world’s biggest trading empire.

But that all changed post-1945, when Britain found itself having to pay back crippling war debts to the new masters of the universe (the USA) and reluctantly had to acknowledge that it was no longer the world’s biggest economy. It went steadily downhill from there, even though prime minister Harold MacMillan in the 1950s told the Brits that they’d “never had it so good”. The country got a second stab at greatness when it joined the European Economic Community (now the EU) in 1973, but foolishly in my honest opinion, left it with the Brexit Leave vote in 2016. That move has further reduced London to a position of lesser importance in global financial markets and has made life more difficult for British traders in all goods.

Meanwhile, other competing financial markets such as Dubai have taken away a lot of London’s lustre. Already, Euronext Paris has overtaken the London Stock Exchange in terms of total market capitalisation.

Bottom line, what has happened in the past five years since Brexit is that the world has finally spoken, metaphorically, about what Britain really is post Brexit: a middle-power in the world. Of course the Brits hate this, as many of them still yearn for the grand old days of empire, not realising they are long gone and not returning. So unless the Truss administration can manage to work out some kind of really elegant trade and other deals with its largest trading partner the EU, it is probably destined to continue its dismal decline.  The pound sterling will, in all likelihood, reach parity with the US dollar in the next few days and weeks, unless Truss and Kwarteng can pull some kind of rabbit out of the hat. But this seems unlikely.

We can never ignore China (and India?)

So if neither the EU nor the UK are looking attractive, what about China?

Well, for as long as it fails to get on top of the coronavirus pandemic and get its house in order with respect to dodgy real estate loans, the Chinese economy will remain unattractive. Because it has failed demonstrably to transform from being an export-led industrial base into a consumer economy, it will be highly vulnerable to the impact of global recession. That’s before one factors in the Chinese demographic time bomb that the country can do little or nothing about!

The World Bank is currently forecasting Chinese GDP growth of less than 3% this year. While that is going to be considerably better than most developed countries, it’s nowhere near where China needs to be at this point in time.

The Chinese yuan has weakened considerably vs the US dollar this year, despite Beijing’s best efforts to shore it up. Having said that, the fact that the People’s Bank of China keeps on cutting interest rates during a time when just about all other countries are increasing rates makes it a lot easier for currency speculators to bet against the yuan.

Although this really just leaves India as the only large economy that may buck the global trend to an extent, the World Bank and other bodies have recently slashed their GDP forecasts to 5.7% for India for 2022. However, it should be remembered that India is largely a domestic demand-driven economy, based on consumption, so is far more insulated from the impact of a global recession than China for example. It may be worth having a look at the iShares MSCI India ETF, which gives broad exposure to Indian equities.

The trend (as usual) is your friend

The answer for most people appears to be that the trend is your friend, for the time being. The US dollar is likely to remain strong, at least while the US Federal Reserve is in tightening mode. The Fed has recently come in for some criticism for allowing rates to rise so rapidly but chair Jerome Powell and his FOMC appear to be sticking to their guns on this one.

Only if and when it becomes clearer that the US economy is headed for a deep recession will Powell and his advisors likely take their foot off the interest rate pedal.

So, get used to the harsh effects of a sustainably strong US dollar.

For equity research on South African retail and other stocks, go to www.gilmour-research.co.za.

Ghost Bites (Emira Transcend deal | Finbond | Mpact vs. Caxton)

The Finance Ghost
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Ghost Bites (Emira Transcend deal | Finbond | Mpact vs. Caxton)

If you enjoy Ghost Bites, then make sure you’re on the mailing list for a daily dose of market insights in Ghost Mail. It’s free! SIGN UP >>>

Unconditional, unfair and unreasonable

Emira’s offer for Transcend has received regulatory approval

As noted in Ghost Bites a few days ago, the board of Transcend Residential Property Fund believes that the offer for the company from Emira is unfair and unreasonable. This is based on advice received from the independent expert. On that basis, the board has recommended that shareholders vote against the offer.

This is because the independent expert has suggested a fair value range of R6.00 to R6.60 for the shares. Emira’s offer is R5.38 plus a distribution accrual of R0.0599 per share. This takes the total to R5.4399, almost 10% below the bottom end of the fair value range.

Importantly, an unfair and unreasonable offer (as defined) can still go ahead. The shareholders need to decide for themselves whether to accept it or not. With Competition Commission approval and a Takeover Regulation Panel certificate both now in place, the deal is unconditional.

Unconditional, unfair and unreasonable. Over to you, Transcend shareholders.

Finbond’s losses deepen

The US adventure is proving to be costly to the group

With a share price that has more than halved in value this year (and lost nearly 90% of its value in the past five years), Finbond isn’t exactly a hall of famer.

The latest trading update doesn’t look great either, with a headline loss per share for the six months to August expected to be in the range of 7.6 cents to 8.8 cents. The comparable period was a headline loss of 6 cents per share, so (1) there is still a loss and (2) it is getting worse.

Finbond controls Finbond Mutual Bank in South Africa and owns various payday lending businesses in the Americas. A major challenge has been regulatory changes in Illinois (a critical region for the group) that cap annual interest and fees on payday loans at 36%. That sounds like (and is) a ridiculously high number, yet it isn’t high enough for the business to be profitable.

I’ve done some advisory work for a similar business in Australia in my previous life. One of the issues is that the cost of distribution is incredibly high, with many such lenders competing for advertising space on platforms like Google Ads. The interest rates may be high but the absolute value earned per client isn’t exciting vs. the cost of acquiring a customer. This might be the issue in the US, though I’m just speculating here.

The Savings Account Instalment loan (SAIL) operation in the US is pushing forward regardless, securing $50 million in external funding with potential access to a further $50 million. The loan book at the end of this reporting period was $29.3 million.

The sad thing is that the South African business is running ahead of budget and has exceeded the pre-Covid comparative year. This is yet another case of a South African corporate suffering losses overseas.

This situation is going to take a long time to come right (assuming it ever does), as the interest on SAIL loans is earned over 24 months and accounting rules require an expected credit loss to be recognised in the first month. This means that every new loan actually loses money initially.

Mpact responds to Caxton

They won’t be exchanging Christmas cards this year

After such a long announcement by Caxton the prior day (covered in Ghost Bites here), Mpact kept it short and (relatively) sweet.

Mpact’s view is that Caxton’s announcement includes “further incorrect and misleading statements” which isn’t surprising, as the parties don’t seem to be able to find any common ground.

A more detailed response from Mpact is coming. The company has noted that it intends to release a detailed announcement in the near future. The company also cautions shareholders against placing reliance on comments in the media or the Caxton announcement.

Little Bites

  • Director dealings:
    • Herman Bosman (CEO of Rand Merchant Investment Holdings) has bought nearly R5.7 million worth of shares in the company. This is the group that is effectively becoming OUTsurance.
    • In an unusual transaction, directors and key personnel of Gemfields exercised share options (at a very juicy price) and then sold most of them to Assore International Holdings at a price above the current market price, reflecting the low liquidity in the stock.
    • Directors of Anglo American bought shares in the company worth just over R250k.
  • Putprop released results for the year ended June 2022. The group owns 15 properties, mainly in Gauteng. A final dividend of 6 cents per share has been declared, taking the total for the year to 10.25 cents.

Unlock the Stock: Growthpoint

The Finance Ghost
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Unlock the Stock: Growthpoint

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.

With several of these events under our belts, we are thrilled with the corporate access that we are bringing to retail investors in association with our sponsor Kuda, a specialist insurance and forex services provider.

I co-host these events with Mark Tobin, a highly experienced markets analyst who has worked in several global markets, as well as the team from Keyter Rech Investor Solutions who help numerous JSE-listed companies with investor relations services. The South African team from Lumi Global looks after the webinar technology for us.

You can find all the previous events on the YouTube channel at this link.

The latest event saw us welcome property stalwart Growthpoint to the platform. This real estate behemoth has investments in multiple regions and boasts a market cap of over R41 billion. As the world emerges from the pandemic, there is a great deal of uncertainty (and thus opportunity) around the impact on the various types of properties.

It’s therefore not surprising that this was a well attended session with a great Q&A session after the presentation. You can watch the recording here:

Schools haven’t been A+ investments

Kayla Soni and Kreeti Panday
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Schools haven’t been A+ investments

Education is big business and there are three major listed education groups on the JSE. Ghost Grads Kayla Soni and Kreeti Panday are here to make it easier for you to learn about Curro, ADvTECH and Stadio.

The education groups are fascinating, even though they haven’t been great long-term investments. They are perfect examples of the importance of valuation multiples, as logic would certainly dictate that these companies should generate strong returns in South Africa.

Let’s start with Curro, the poster child for a growth story that the market got WAY too excited about.

Curro: a rare AltX success story that has had tough times

Curro was formed in 1988 and listed on the JSE (AltX) in 2011, moving to the JSE main board in 2012. Not only is this a rare example of a company that managed to grow beyond the AltX, but in 2017 it gave us another listed company: Stadio.

The PSG Group has a history of incubating and unbundling businesses, with the final step in that dance recently taking place with the unbundling of (almost) all of its assets and the removal of the listed structure.

Let’s not get distracted here, as PSG is a topic all on its own.

Curro deserves to stand on its own feet, operating more than 180 schools across 77 campuses. Even at this scale, Curro was far from immune to the impact of the pandemic. Ancillary income took a significant knock, as extramural activities were shut down.

With that base effect in mind, take note that revenue for the 6 months ended June 2022 rose by 15% to almost R2.1 billion. This has been attributed to learner growth (average numbers up 7% to just over 70,500) as well as fee increases. Recurring HEPS (which excludes R25 million once-off income) rose by 42% to 27.5 cents.

Clearly, the end of Covid-19 restrictions was great news for Curro, as the school once more has numerous ways to take parents’ money besides academics. A key driver of revenue growth was ancillary income from sources such as bus income, aftercare fees and boarding school fees, which saw an increase of 21% from the comparable period.

Importantly, gross receivables are lower and the loss provision looks a lot better, so parents are in a better position to pay the fees that are due.

Interestingly, the increase in ancillary income trails the increase in learner growth. There was a 25% increase in average learners from the first half of 2019 (pre-Covid) to the first half of 2022, yet only a 13.7% increase in ancillary income over this period. Unless you think that the school system has changed forever for some reason, this implies that there is runway for more revenue growth in this regard.

The ancillary income also comes at a cost, though. Extramural activities are back, which is partly why operating costs increased by 14.2%. Another driver of cost growth was investment in digital and vocational programmes. Staff costs increased by 11%, with more staff required to support learner numbers and a March salary increase of approximately 5%.

The investment thesis for Curro rests on the operating leverage that is inherent in the business model. Once the schools are built, the marginal cost of adding another student is relatively low, so the primary goal is to increase capacity utilisation of current facilities.

This doesn’t mean that Curro isn’t growing the footprint, mind you. Recent acquisitions include HeronBridge College and a new building for DigiEd Foreshore.

ADvTECH on the up and up

ADvTECH, owner of brands such as Crawford International, Trinityhouse, Abbott’s College and Pinnacle College, was founded in 1978 and today operates over 100 schools across Africa and over 30 tertiary institutions.

This is the first major difference to Curro: ADvTECH has a tertiary business in the same group as the primary and secondary schools.

The group also recently released results for the six months ended June 2022, landing on its feet post-Covid. Group revenue was up 18% and operating profit increased by 19%. At the bottom of the income statement, HEPS increased by 23%.

Gross trade receivables rose by 5% to over R750 million. Credit losses increased by 41.8% to over R110 million despite the provision as a % of receivables dropping, which suggests a significant number of write-offs in this period. Perhaps these were legacy debtors from the pandemic?

The group has focused its capital expenditure on increasing capacity to meet demand. This includes R98.5 million on additions to existing sites, a new school and one new tertiary site. The group expects to reach between R600 and R700 million on capital expenditure by the end of the year.

In schools specifically, revenue rose by 27% and operating profit increased by 70%.

In the group’s tertiary division, including Varsity College, Rosebank College and MSA, revenue grew by 9% and operating profit by 13%. The group has highlighted an advantage in its multi-channel modes of delivery, offering on-campus, blended and online learning options.

In the group’s interim results presentation, ADvTECH emphasised the roles of a weakening public education system and a fall in university subsidies in boosting demand for private education in South Africa. The group noted the difference between matric pass rates in 2021 of 76% for DBE students, 98.4% for IEB students and 98.3% for ADvTECH IEB students.

This positive sentiment towards private schools is reflected in ADvTECH’s enrolments. From February 2021 to February 2022, the group’s school enrolments increased by 9% to 36 802 and full qualification tertiary enrolments rose by 4% to 47 539.

Stadio’s successful streak

If you were wondering where Curro’s tertiary business went, you’re about to find out. If you combine Stadio and Curro, you have a group that is somewhat comparable to ADvTECH in terms of business model.

Stadio Holdings was unbundled by Curro in October 2017, unleashing an investment company that would hold various higher education businesses. The idea behind the unbundling was to give investors an opportunity to choose whether they wanted Curro or Stadio exposure, a classic attempt at a value unlock strategy.

With backing from PSG, Stadio moved quickly to acquire Milpark Education and AFDA. When combined with the other businesses in the group, Stadio offers a spread of accredited qualifications across nine campuses to more than 30,000 students.

To give context to the recent interim results, the year ended December 2021 saw Stadio achieve growth in core earnings, higher student enrolments and the declaration of its maiden dividend to shareholders. This is a significant step for a growth company, as it shows that the acquisitions are cash generative and that management is acting in a mature fashion as the custodians of shareholder capital.

As a final note on that full financial year, HEPS was up by 24% based on revenue growth of 18%, so there is operating leverage in the model. With Stadio tending to execute acquisitions by issuing shares, it’s also important to see HEPS growth as it gives an indication of a successful inorganic growth strategy.

In the latest numbers (the six months ended June 2022), student enrolment is up 11% to 38,348 students. There was an 18% increase in new students, attributable to site extensions and measures to optimize its existing campuses (like the introduction of a new law faculty at one of the campuses that led to an 84% increase in students at that campus alone).

Revenue growth of 13% to R617 million and EBITDA growth of 19% to R192 million reflect the improved performance and success of Stadio, as margins are clearly increasing.

How have shareholders done?

Of course, what really matters to us as investors is the share price performance. Here’s a look at the relative performance over one year:

This is clearly a volatile sector, even though you might assume that education is a slow and steady investment! If there’s one thing you’ve hopefully learnt in Ghost Mail, it’s that the valuation of each company is what really counts.

There is also evidence in this chart of markets doing what markets do: weird things. When the conflict in Ukraine broke out, Curro suffered a much larger drop than the others. Considering South Africa is thankfully very far away from the conflict, this makes little sense. As Anthony Clark correctly reminded us on Twitter after this article was first published, PSG announced the unbundling of Curro at the beginning of March and this drove a significant overhang in the stock.

Before you get too excited and execute a “perfect” hedge by putting your kid’s college fund into Stadio, take a look at the five-year chart:

Curro and Stadio are both the victim of silly starting valuations here, as investors were still giving far too much credit to both growth stories back in 2017 (just as Stadio was unbundled). ADvTECH is the “winner” here, although that’s also given poor returns.

Stadio is on a P/E of 26x, Curro is at 18.5x and ADvTECH is far more modest at 13.5x. To maintain this share price performance, Stadio will need to keep delivering substantial returns.

The largest in the sector is ADvTECH with a market cap of R9.8 billion. Stadio (R3.7 billion) and Curro (R5.4 billion) are still collectively smaller than ADvTECH. This explains why ADvTECH isn’t priced as aggressively for growth as the other two companies (and especially Stadio).

Do you own shares in one of these companies? Tell us in the comments!

Rhodium, a rose by another name?

Greg Salter
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Rhodium, a rose by another name?

Ghost Mail reader Greg Salter has written this opinion piece on what may have been the unsung hero of the South African economy during the pandemic.

Like with 9/11, the release of Nelson Mandela and the outbreak of the Gulf War, I remember where I was when I heard the news that half of South Africa’s economy had been destroyed by the Covid pandemic.

Convention struggles with catastrophe

It was just over two years ago, on 8 September 2020, when Stats SA released second quarter GDP figures1. Within minutes, my Twitter timeline lit up with news reports that South Africa’s economy had contracted by 51%.

That’s half the economy gone. Decimated.

A closer examination (who even does that?) would reveal that the damage was actually 16% in the quarter and the remainder of the pain was the result of the normal process of annualising the quarterly change to get an annual estimate. Convention does not handle catastrophe very easily.

Nonetheless, 16% was a tremendous blow. With our economy growing around 2% in recent times, it represented 8 years of economic growth wiped out in a single quarter.

The full extent of the impact would be revealed a month later when Finance Minister Mboweni presented his budget update2 in October 2020. South Africa’s debt-to-GDP ratio, a crucial measure of our ongoing financial viability as a nation, was expected to blowout to 95% within 5 years. This is a level which is generally regarded as wholly unmanageable for an emerging market country, and which would almost certainly have forced us to seek assistance from the International Monetary Fund (“IMF”).

Reserve Bank Governor Kganyago was warning that we were heading into an economic abyss and were dangerously close to becoming like Argentina3, where sovereign defaults, hyperinflation and currency devaluation have become the norm.

Still standing

Yet, two years on, we have not been knocked out. Instead, recent headlines are rather encouraging:

  • Moodys has upgraded our sovereign ratings outlook from negative to stable4;
  • The IMF has just raised its estimate of South Africa’s economic growth5;
  • The latest estimate from National Treasury is that debt-to-GDP will stabilise at 75% in 2025, an incredible 20% lower than was originally feared6.

How did this happen? What was the cause? Has our daily news diet of power cuts, potholes, petrol prices, pilfery, pillage, politics and pain blinded us to the possibility of good news?

What of the existence of a rose among the thorns? A miracle in our midst?

This is not a South African phenomenon but it is exacerbated in the South African context. Morgan Housel captures the essence of the issue in his incredible blogpost “Lots of Overnight Tragedies, No Overnight Miracles”7. It’s worth reading.

In summary:

“Good news always takes time, often too much to even notice it happened. But bad news? Bad news is not shy or subtle. It comes instantly, so fast that it overwhelms your attention and you can’t look away.”

Morgan Housel

The media has rightly attributed our change in fortune to a robust trade performance and higher than anticipated corporate tax receipts, both of which primarily trace back to our mineral resource companies in general (and platinum companies in particular). Yet, when we drill into the performance of these platinum companies, a big surprise awaits.

It’s not because of platinum!

Take a look at the revenue split at Amplats, SA’s largest PGM miner:8

Rhodium is the 45th element on the Periodic table. It derives its name from the Greek word “rhodon” meaning rose.

With platinum and palladium, it is one of six Platinum Group Metals. The others are osmium, iridium and somethingelseium!

It is a by-product of the platinum mining process and, like platinum and palladium, is mostly used in catalytic converters for motor vehicles9. These are devices which are incorporated in the exhaust system of the vehicle and change (or catalyse) harmful emissions into their unharmful constituent parts.

The table above reveals that at Amplats, rhodium was attributable for almost three times more revenue than platinum in 2021.  Rhodium revenue has grown by 2,100% over 5 years (vs 20% for platinum)! This extraordinary result is corroborated by our export data. Allan Gray presents this excellently10 in the chart below:

Rhodium has risen from nowhere to be South Africa’s largest mineral export in 2021. It is by far the biggest contributor to the surge in export revenue.

The driver of this result has been the rhodium price which has positively exploded in recent years. When last did you see a commodity price grow by 4,000% in a short period of time?

These charts appear in the Quarterly Bulletin from the Reserve Bank11. The performance of the rhodium price is so extraordinary that it necessitated the creation of its own chart (with a vertical axis that is 10 times larger than the ordinary chart used for most other metals).

Amplats to be renamed Amrhodes?

The platinum belt in the North West Province has arguably become the rhodium belt.

Financial media, who focus daily updates on the gold and platinum prices, aren’t telling you the most important story. (Editor’s note: I’ll assume present company excluded.)

Names stick. Habits endure. But the world changes.

Of course, this all leads to the question of what caused the rhodium price to take off.  Here, things get both murky and intriguing. Let’s start though with important context.

Rhodium is effective against harmful nitrogen oxide emissions

Nitrogen oxides (NOx) are a collection of harmful gases including nitric oxide (NO), nitrogen dioxide (NO2) and nitrous oxide (N20). They are emitted from the exhausts of combustion engine motor vehicles and contribute to smog, acid rain and global warming12.

Rhodium is a catalyst that is effective at separating the nitrogen and oxygen elements, which then enter the atmosphere harmlessly.

Rhodium has unique properties and is not easily substitutable

Bottom line, if a motor vehicle manufacturer wants to remove nitrogen oxides from its emissions, it needs rhodium. Nothing else is as efficient. Unlike platinum and palladium, rhodium is not easily substitutable.13

Rhodium is found mostly in South Africa

Amplats report that over 80% of primary rhodium supply came from South Africa in 2021. Not quite a monopoly, but not far from it.

The regulation of nitrogen oxide emissions is not new, but likely escalating

China in particular is reported to have tightened emission standards in recent times14.

Where the story becomes speculative is in relation to emission standards in Europe. It’s hard to discern whether there were changes to the emission standards which contributed to the rhodium price change.  But something big did happen around the same time.

In September 2015, Volkswagen were caught cheating on their compliance with emission standards15.  They had built sophisticated software to dupe regulators into believing their emissions were far lower than they actually were. When correctly measured, their emissions of nitrogen oxides were found to be as much as 40 times higher than they pretended them to be. This led to the adoption, in September 2017, of Real Driving Emissions tests.16

Was rhodium needed by motor vehicle manufacturers to actually reduce their nitrogen oxide emissions because they could no longer cheat?  It’s a sensational possibility.

Where do the benefits go?

The benefits of rhodium’s rally will obviously have accrued most directly to employees of platinum companies and shareholders of these businesses. Millions of South Africans have pension funds or unit trusts with ownership interests in the platinum sector. Most sobering though is the realisation that the R350 monthly Covid relief grant, which supported 10 million unemployed fellow citizens through the pandemic, was fiscally unaffordable absent the commodity price cycle (i.e. mostly rhodium as we’ve seen).

Finance Minister Godongwana did not mince his words on this in his first budget update17 in November 2021, declaring: “Madam Speaker, the additional revenue due to the commodity price rally, created space for government to provide additional support for poverty and employment programmes this year, without negatively impacting the fiscal position.”

The rhodium price has come off somewhat in 2022. And the long-term outlook for rhodium is not positive as electric vehicles do not need catalytic converters. At the same time, emission standards are only heading in one direction in the interim. Even the United States is now passing climate legislation, albeit under the guise of inflation protection.

Could the good times roll on for a while?

Whatever happens next, nothing can take back rhodium’s recent run or the buffering which rhodium provided in South Africa against the savage economic damage of the Covid pandemic. It accounted for around R300bn and counting of unexpected export revenues and a decent chunk of that helpfully flowed into the coffers of the National Treasury.

Rhodium. South Africa’s rose by another name?

Twitter: @gregsalterjhb

Sources:

1 – e.g. Daily Maverick here, Reuters here, eNCA here

2 – 2020 Medium Term Budget Policy Statement here

3 – Public Lecture by Lesetja Kganyago, Governor of the South African Reserve Bank, at the Wits School of Governance, 18 June 2020 here

4 – e.g. SA News here

5 – IMF sees light in darkness for SA as it raises GDP forecast, Business Day, 26 July 2022, here

6 – Budget speech 2022, here

7 – Collaborative Fund, “Lots of Overnight Tragedies, No Overnight Miracles”, by Morgan Housel, here

8 – Amplats Integrated reports, 2017 -2021, available here

9 – Catalytic converters explained here

10 – Allan Gray Quarterly Commentary, “On the commodity boom and other South African fables (and foibles)”, Thalia Petousis, 28 July 2022, here

11 – South African Reserve Bank quarterly bulletin, No 303, March 2022, Quarterly Economic Review, pg. 46, here

12 – Wikipedia on NOx here

13 – “Clean-air legislation fuels breathtaking rally in rhodium”, Financial Times, 6 Jan 2021, here

14 – “While platinum loses luster, byproduct rhodium shines bright”, NikkeiAsia, 1 Feb 2022, here

15 – Wikipedia on VW emissions scandal here

16 – European regulation of nitrogen oxides discussed here

17 – Minister Enoch Godongwana: 2021 Medium-Term Budget Policy Statement here

Ghost Bites (Harmony Gold | Life Healthcare | Mpact vs. Caxton | Thungela)

The Finance Ghost
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Ghost Bites (Harmony Gold | Life Healthcare | Mpact vs. Caxton | Thungela)

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Harmony Gold, or Harmony Copper?

Harmony is acquiring an Australian copper project for up to R4.1 billion

If your gold operations have been giving you a hard time, then what do you do? Apparently, you buy copper.

This is a big one. I mean, “gold” is literally in Harmony’s full name. Despite this, the company is looking to diversify its revenue by moving into copper. To settle some jitters you might already have, the deal is being funded with existing cash resources and net debt : EBITDA remains below 1x even after this transaction.

There’s some gold involved here. The target is the Eva copper project in Australia, which adds 1.718 billion pounds of copper and 200,000 ounces of gold to Harmony’s mineral reserves.

Harmony will acquire Eva in full from Copper Mountain Mining corporation. The price is an upfront payment of R3 billion plus a contingent consideration of up to R1.1 billion. It seems as though the price is in US dollars, so there’s a good chance of the rand amounts fluctuating. The contingent payments will be based on the declaration of the copper resources and a share of net revenue.

The construction period for the project is two to three years, which is quick by mining standards. This is an open pit mine with a simple process plant and low overall execution risks. The estimated requirement for development capital is $597 million. The expected life of mine is 15 years.

Life Healthcare emerges from the pandemic

EBITDA is flat or slightly down, as Life isn’t quite like the other healthcare groups

Life Healthcare is the latest hospital group to give us an update on post-Covid trading conditions. In a trading update for the year ended September, the group has indicated a modest improvement in revenue and a decline in EBITDA. That’s not great.

When you see an unusual result like this, you always need to dig deeper to figure out if there’s really a problem or if there’s a good explanation for this. In this case, you’ll discover that the UK business was a major beneficiary of Covid, in stark contrast to most other hospital groups. As the pandemic has eased, this has negatively impacted Life’s earnings from Alliance Medical Group (AMG), which saw revenue growth of between 1% and 4% but a decline in EBITDA of between 10% and 13%. Leaving aside the Covid contracts, AMG’s scan volumes were higher in all three major geographies (the UK, Italy and Ireland).

The Southern African operations have produced the type of result one would expect to see in a post-Covid environment, with revenue growth of between 3% and 6% and normalised EBITDA growth of between 3% and 8%. This implies an EBITDA margin of 17% to 18% vs. 17.1% last year. Interestingly, acquisitions have been mainly in the imaging market (i.e. radiology).

The impact at group level is revenue growth of between 3% and 6%, with normalised EBITDA lower by between 0% and 3%. The numbers were also impacted by the introduction of an employee share scheme this year.

I’m always nervous of “adjusted earnings” as management tends to just paper over the cracks in the business. In this case, they note that EBITDA would be between 6% and 9% higher were it not for the share scheme and the ending of Covid contracts. Sounds good, except that number also conveniently forgets that Covid in the base was negative for the South African business and so the growth rate looks better locally.

There’s no way to truly strip Covid out of this result.

Net debt to normalised EBITDA has increased from 1.82x to 2x over the past year. That’s a number that I would keep an eye on.

The wrong kind of Mpact

The public feud between Mpact and Caxton is just warming up

Here’s the good news: Caxton is writing SENS announcements that sound like an adult was involved in them as opposed to an angry teenager.

Here’s the bad news: it’s also quite clear that a lawyer is involved.

Yes, the fight between Caxton and Mpact is far from over. It gets weirder with every announcement, with plenty of mud being slung in both directions.

I’m going to try hard to get this summary right:

  • Caxton wanted to file a Rule 28 merger application (a separate filing) which is the case when a joint filing is not possible, for example where there is a hostile takeover.
  • According to Caxton, the application was refused because Mpact claimed that a major customer would be lost if a merger application was lodged (a highly unusual “poison pill” in this particular deal – though such pills can take many forms).
  • Mpact’s largest customer is Golden Era, which also happens to have a 10% shareholding in Mpact – this is the customer that Mpact alleged would be lost (and Caxton notes that confidential submissions were made by Mpact and Golden Era in this regard). This is because Golden Era and Caxton are hardcore competitors.
  • Caxton is arguing that this flight risk (the possibility of losing Golden Era) is price sensitive information, which should be disclosed and which directors of Mpact were aware of when trading in shares. Caxton notes that Mpact “apparently” defends this position by saying that the flight risk isn’t certain, which Caxton argues isn’t in line with the filings at the Competition Commission.
  • Mpact also alleges that Caxton is seeking to disclose this information in an attempt to get the share price to drop. Caxton strongly denies this (though it doesn’t take a rocket scientist to understand that a heavily depressed Mpact share price makes it an easier takeover target for Caxton).

There are various other fights underway, not least of all Caxton’s opposition to remuneration being paid to non-executive board members of Mpact. In response, Mpact appointed the non-execs to the board of the operating company and is paying them there.

There are other little daggers in the announcement, like Caxton claiming that Golden Era buys nearly half of the carton board output of Mpact’s Springs mill, as well as tens of thousands of tons of corrugated board. There’s also a claim that “independent sources confirm that Golden Era is already seeking alternative imported carton board sources of supply” – something that won’t do the Mpact share price any favours (whether true or not).

It is worth noting that Mpact has previously admitted to cartel conduct with Golden Era and has received conditional corporate leniency from the Commission. Golden Era has denied its participation. If any cartel activity is continuing, Mpact could face a fine of up to 10% of its turnover.

As you can see, there’s a lot going on here. Caxton holds 34% in Mpact and whilst any short-term negative effect on Mpact’s share price would hit the value of that stake, it would also make the remaining 66% a lot cheaper. There are very serious accusations flying around from both parties and Competition Law is no joke whatsoever.

The most significant step would be a Rule 28 application and Caxton is hoping for a positive outcome based on the Tribunal’s reconsideration thereof. This would test the theory of whether Golden Era will find other suppliers.

Get the popcorn!

Thungela can mitigate the Transnet strike

This tells you how useless Transnet is at the best of times

Just when you thought Transnet couldn’t possibly do more harm to our local mining industry, there’s now a strike by the United National Transport Union. The good news is that because Transnet is so useless, Thungela has already implemented various risk mitigation strategies for the inconsistent rail service.

Although railing to the Richards Bay Coal Terminal is now interrupted, Thungela has high stockpile levels in its operations. The business can manage seven days of interruptions without a significant impact on production, which tells you everything about the usual level of service from Transnet. If the strike lasts for two weeks, Thungela will need to curtail production and this will hurt export volumes.

The trick here is that the coal terminal can keep loading vessels, so Thungela can survive off its stockpile that is already at the port.

In a final example of how “easy” it is to do business in South Africa, Thungela is working with Transnet to deploy additional security measures on the coal corridor. This includes helicopter surveillance, amongst other measures.

Maybe Tom Cruise should’ve stuck around longer in South Africa to shoot the next Mission Impossible movie.

Little Bites

  • Zeder released a trading statement that seems concerning unless you read carefully. As an investment holding company, the measure is net asset value (NAV) per share. This is expected to be between 41.7% and 42.8% lower than the prior year. There are two good reasons for this: Zeder unbundled the stake in Kaap Agri in April and paid a large special dividend in May. The group has become a lot smaller as a result of the value unlock strategy. To assess the total return to shareholders, one would need to include the value of the Kaap Agri stake and the special dividend. In a silly missed opportunity, the announcement doesn’t give that calculation.
  • If you are a shareholder in Novus, you will want to be aware that the company has released the circular for the proposed acquisition of Pearson South Africa. This publishing house has a focus on textbooks and achieved revenue of R960 million and operating profit of R368 million in the year ended December. I had no idea that margins like this are achieved by publishers! You’ll find the full circular at this link.
  • Sirius Real Estate has achieved the early refinancing of the company’s next major debt expiry (a €170 million facility) approximately a year ahead of schedule. The refinanced facility is the same value and is priced at 4.26% over a seven year term. At group level, the impact is that the weighted average debt expiry moves from 3.8 years to 5.0 years and the weighted average cost of debt moves from 1.4% to 1.9%.
  • Pan African Resources has closed the transaction to acquire the Mintails SA assets for R50 million. The assets were bought out of liquidation and have the potential to increase Pan African’s gold production by 25%. To fund the project, a debt package of $80 million has already been negotiated with RMB. Further capital will be needed and the company is considering various options.
  • Vunani has released results for the six months ended August. Although revenue and premiums were up by 17%, profit after tax was flat (and thus margins contracted). Headline earnings per share (HEPS) decreased from 21.7 cents to 20.3 cents. Despite this, the interim dividend has been increased from 6.5 cents per share to 9 cents per share. This is a highly illiquid stock that is currently trading (occasionally) at R2.97 per share.

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

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

Exchange Listed Companies

Harmony Gold Mining has acquired Eva Copper Project and the surrounding exploration tenements in Australia from TSX-listed Copper Mountain Mining. The deal, which sees Harmony paying an upfront cash consideration of US$170 million (c.R3 billion) plus a contingent payment of up to a maximum of US$60 million (c.R1,1 billion), will lower the company’s risk profile. The acquisition will add 1.7818 billion pounds of copper and 260,000 ounces of gold to Harmony’s Mineral Reserves and will extend its diversification into copper – a future-facing metal critical to the energy transition.

Motus has released further details on the proposed acquisition by its UK-based subsidiary of family-owned business Motor Parts Direct for a purchase consideration of £182 million (R3,64 billion). The acquisition is aligned to Motus’ international growth strategy to reduce dependency on vehicle sales and strengthen its integrated business model by focusing on the aftermarket parts business.

Anglo American is to form a renewable energy partnership in South Africa with EDF Renewables, a subsidiary of the French utility group. The new jointly owned company, Envusa Energy, will develop a regional renewable energy ecosystem designed to meet Anglo’s operational power requirements in South Africa and support the country’s broader just energy transition.

Vunani Capital (Vunani) is to acquire a 50% stake in Verso Group, a financial services company specialising in wealth management and Section 13B retirement fund administration. Verso, predominantly Western Cape based, also has offices in Pretoria, Johannesburg, Gqeberha and East London. The acquisition is in line with Vunani’s strategy to expand its financial services activities, particularly in niche markets both in South Africa and across the continent.

Aveng has, via subsidiary Aveng Africa, disposed of Trident Steel to a consortium for R700 million. Trident Steel Africa, a vehicle established for the purpose of the acquisition is owned by consortium members Ambassador Enterprises, a US-based private equity firm, Joseph Investments, Arbor Capital Investments and Trident Steel management. Aveng will provide R210 million in the way of funding to a separate company in order to subscribe for 30% of the equity in the purchaser, thereby retaining a 30% stake in the business, which will be specifically reserved for B-BBEE participation for a period of one year post closing. The business was seen as falling outside the ambits of infrastructure development, resources and contract mining which, going forward will underpin Aveng’s long-term strategy.

+OneX (Reunert) has acquired South African Azure solutions provider EUCafrica as part of its strategy to build end-to-end digital transformation solutions for enterprise clients.

Consortium parties, Old Mutual Life and African Infrastructure Fund 4 (managed by Old Mutual’s African Infrastructure Investment Managers), Bauta Logistics and Mokobela Shakati are to acquire Oceana’s Commercial Cold Storage Group – trading as CCS Logistics. The purchase consideration payable for the Southern African cold storage provider is R760 million. The transaction will enable Oceana to allocate capital to opportunities aligned to its strategic objectives in the global fish protein sector.

Grand Parade Investments (GPI) has acquired and on sold two properties in relation to the settlement of a dispute with Gumboot Investments. The properties, based in Cape Town and Gauteng were acquired from Gumboot Investments for a transaction consideration of R66,5 million. These were on sold to Karez Trading for R44 million, generating a loss of R22,5 million for GPI – the cost attributed to the indemnity provided by GPI on behalf of its subsidiary Mac Brothers which was placed under voluntary liquidation in April 2022.

Europa Metals has announced the signing of a letter of intent for an option and joint venture arrangement with Denarius Metals, in terms of which, Denarius will have the right to acquire up to an 80% ownership interest in Europa Metals’ wholly owned Toral Zn-Pb-Ag Project in Leon Province in Northern Spain. The farm-in transaction involves the granting of a two-stage option (to acquire 51% and 29%) in return for funding of certain planned expenditure for an aggregate consideration of up to US$6 million.

Pan African Resources has announced the closing of the deal in which it acquired the Mogale Gold and Mintails SA Soweto Cluster assets out of provisional liquidation. The R50 million deal was first announced in November 2020.

Two companies reported the termination of deals announced

The US$4,7 billion deal announced in August 2021 between Prosus and Indian digital payment provider BillDesk failed to fulfil certain conditions precedent by the long stop date of 30th September 2022.

Conduit Capital’s intention to acquire 51,769,633 Trustco shares for N$93,7 million, first announce in August 2021, did not fulfil the conditions precedent resulting in the lapse of the share sale agreement.

Unlisted Companies

Cape Town-based venture capital firm HAVAÍC has concluded its third investment in Kenyan fintech company Tanda. The investment will enable Tanda to invest in key strategic partners, accelerate product development and scale in Kenya and East Africa over the next 15 months.

Cars.co.za, the local online car marketplace, has entered into agreement with Sun Exchange to buy into an off-grid solar power project providing off-grid solar power plus battery storage for Karoo Fresh, a commercial farm in SA’s Karoo district.

Talk360, an international voice calling app which is building a single payment platform to be launched in 2023 combining all local African currencies and payment methods, has raised a further US$3 million in seed round funding adding to the US$7 million raised in May 2022. Investors in the round include Allan Gray E2 Ventures, Kalon Venture Partners, E4E Africa, Endeavor and existing lead investor HAVAÍC.

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

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

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

DealMakers AFRICA

Development Partners International (DPI) has, through its ADP II fund, exited from Egyptian retail group B.TECH. The 33.4% interest was sold for an undisclosed sum to the Saudi Egyptian Investment Company (SEIC), a wholly owned subsidiary of the Saudi Public Investment Fund. B.TECH represents the largest integrated omnichannel retailing and consumer finance platform in Egypt, selling consumer electronics and household appliances.

Access Holdings plc, via its Lagos-based subsidiary Access Bank, is to acquire a 51% stake in Finibanco Angola from Portuguese Montepio Holdings. The deal is in line with the bank’s strategy to be Africa’s payment gateway to the world.

Ascent Rift Valley Fund has exited its investment in Medpharm Holdings Africa, a provider of medical diagnostic laboratory services in Ethiopia. The stake was sold for an undisclosed sum to Cerba Lancet Africa, a network of clinical pathology and medical diagnosis sites in Africa.

Helios Investment Partners, a UK-based private equity fund, has sold back its 60% stake in Telkom Kenya to the Kenyan Government for Ksh6,09 billion.

Britannia Industries, a leading Indian food company, has acquired a 51% stake in Nairobi-based Kenafric Biscuits. In addition, Britannia Industries has acquired all the shares in Kenayan Catalyst Britania Brands.

Venture capital firm HAVAÍC has concluded its third investment in Kenyan fintech company Tanda. The investment will enable Tanda to invest in key strategic partners, accelerate product development and scale in Kenya and East Africa in the short term.

Easy Matatu, a Ugandan minibus ridesharing services platform, has received an undisclosed investment from the Renew Capital Angels. Funding will be used to expand Easy Matatu’s end-to-end technological platform, which will double its monthly trip capacity, and to expand the fleet of cars.

Cowtribe, a last-mile veterinary delivery company in Ghana coordinating deliveries of veterinary vaccines and other animal health products to rural and underserved communities, has received an investment and non-financial support from the Boehringer Ingelheim Social Engagement initiative.

Nigerian proptech startup Spleet, has raised US$2,6 million in a seed round led by MaC Venture Capital. Other investors included Noemis Ventures, Plug and Play Ventures, Metaprop VC among others. Funds will be used to expand its property management product offering and expand across Africa

CardoO an Egypt-based IoT devices manufacturer has raised US$660,000 in a seed funding round led by The Alexandria Angels with participation from Sofico Investments, the European Bank for Reconstruction and Development and angel investors. Funds will be used to improve products, enable local manufacturers to produce consumer electronics for IoT under the brand name CardoO.

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

Weekly corporate finance activity by SA exchange-listed companies

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

This week was all about the repurchase of shares on the open market

Argent Industrial has repurchased 37,000 ordinary shares representing 0.07% of the issued share capital. The shares were repurchased at R13.00 per share for an aggregate value of R481 million.

Glencore this week repurchased 8,759,982 shares for a total consideration of £42,80 million. The share purchases form part of the second part of the Company’s existing buy-back programme which is expected to be completed over the period from August 4, 2022, to February 14, 2023.

South32 has this week repurchased a further 2,744,745 shares at an aggregate cost of A$10,14 million.

Prosus continued with its open-ended share repurchase programme. This week the company announced the repurchase of 3,625,070 Prosus shares for an aggregate €196,88 million.

British American Tobacco repurchased a further 692,108 shares this week for a total of £22,53 million. Following the purchase of these shares, the company holds 212,015,769 of its shares in Treasury.

Investec ltd is to embark on a purchase programme as part of its capital optimisation strategy. Investec will conduct an on-market purchase of Investec plc ordinary shares to a maximum aggregate market value equivalent of R1,2 billion. The purchase programme commenced on 3rd October 2022 and will end on or before 17th November 2022.

Five companies issued or withdrew cautionary notices. The companies were: PSV Holdings, Nutritional Holdings, Telkom, Sebata Holdings and Aveng.

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

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