Sunday, April 20, 2025
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GHOST BITES (Astoria | Lewis | Vukile)

Astoria announces the sale of ISA Carstens (JSE: ARA)

The selling price is slightly below the carrying value in the accounts

Astoria, like basically every other investment holding company on the JSE, is struggling with a share price that trades at a heavy discount to the disclosed underlying value of the portfolio. We’ve also seen this issue at certain times in the cycle in the REIT sector as well. The cure is the same in both cases: recycling capital at or close to book value, demonstrating the credibility of the value to the market and suggesting that perhaps the discount isn’t warranted.

Of course, the best cure is to then use the proceeds for share buybacks at the deeply discounted value. All eyes in the market are on Reinet and whether we will see this in the aftermath of the British American Tobacco disposal. The same principle applies at the Astoria now that the disposal of ISA Carstens has been announced, albeit at much smaller scale!

ISA Carstens is the tertiary education business that focuses on the health and skincare industry through campuses in Stellenbosch and Pretoria. They are the leader in this space, with a track record of 45 years. Given the popularity of private tertiary education at the moment, the business seems to be well placed.

Speaking of private education, the buyer is NetEd, an investor in various education groups with EXEO Capital as its shareholder of reference. This is therefore not a related party deal.

Astoria paid R28.7 million for the 49% equity stake back in December 2020 and R14.9 million for a shareholder loan. Having received most of the loan back in repayments, the selling price is R4.2 million for the loan and R66.8 million for the equity. Calculating the internal rate of return (IRR) is made complicated by the timing of loan repayments etc. but it’s still a tidy return. The fact that capital was tied up in the loan just means that you can’t look at purely the equity purchase price and subsequent disposal price to work out the return. In reality, it looks like an IRR in the teens was likely achieved.

The carrying value of the investment as at 30 September 2024 was R69.3 million for the equity and R4.2 million as the remaining balance on the loan. The price is therefore below the carrying value, but not by much.

There are still important conditions precedent here, not least of all the conclusion of a share purchase agreement between NetEd and the 51% holder of ISA. Getting the founding family across the line is core to the deal. There is also a due diligence coming, so that also leaves some uncertainty on the table.

Astoria’s market cap is R528 million, so this is an important deal as a percentage of the NAV. If it closes, shareholders will focus on what the cash will be used for: buybacks, a special dividend or more transactions.


Plenty of momentum for Lewis – and not just at Ferrari (JSE: LEW)

The non-Hamilton variety is also getting more and more attention

Revenue growth of 13.6% for the nine months to December – not bad for a “boring” furniture shop that has relied on excellent use of share buybacks to help drive HEPS in recent years!

Lewis is taking full advantage of improved conditions in South Africa and the share price reflects this. After closing 3.5% higher yesterday, the 12-month return is a massive 87%.

Sustaining a rally like that requires strong numbers. Thankfully, Lewis is achieving this. Merchandise sales are the core of the business and they grew 9.9% in the third quarter, representing an acceleration from 7.7% in Q1 and 9.3% in Q2. Interest income and ancillary services income did the rest of the hard work, up 19.6% in Q3. Admittedly, that’s actually lower than the 20.1% growth for the nine months!

One of the big surprises was the trend in cash sales in the quarter to December 2024. We saw powerful numbers at Mr Price in that metric and we’ve now seen it at Lewis as well, with cash sales up a huge 14.4% for the quarter. For context to how big that shift is, the nine-month number is only 1.5%!

Collection rates on the book are down slightly, but not to a level that would cause concern. Overall, this is a really strong result and it looks increasingly as though the proceeds of the two-pot withdrawals landed in household goods and perhaps clothing. See Vukile below for more on that.


Vukile’s township centres had a strong festive season (JSE: VKE)

The two-pot money seems to have flowed into cash purchases at retailers

Here’s another data point that will help you figure out where the two-pot money went: festive sales data at Vukile. The South African portfolio managed 6.1% growth in trading density (sales per square metre) across November and December. Within that performance, we find township centres as the best performing segment with growth of 9.6%. Now compare this to the update from Lewis above and Mr Price a few days ago, both of which reported strong cash sales. The conclusion we can safely reach is that cash-strapped South Africans got their two-pot payouts and spent them on clothes, furniture and other basic household needs.

Need more proof? Within the retail categories, unisex wear was up 7.7%, ahead of groceries at 7.2%. Even home furnishing managed growth of 6.0%! This performance wasn’t just a food story, that’s for sure.

It’s less depressing if we don’t talk about what that means for retirement one day for the average South African. Let’s rather hope that ongoing economic improvement will improve those prospects and give people a better chance of saving each month. People are doing what they can, when they can.

It’s also interesting to note that footfall at Vukile’s South African malls was consistent year-on-year. The lower-income areas are better places for malls these days in my view, as they are far less vulnerable to disruption from online shopping.

Looking abroad to the Castellana portfolio, turnover in Spain was up 4.9% in November and 4.8% in December. Discretionary categories seemed to do particularly well, so that bodes well for underlying retailer margins and hence their ability to pay the rent. Fascinatingly, despite Spain being a developed market, footfall increased markedly for Black November and the period as a whole.

Portugal echoed this trend, with footfall higher and discretionary categories leading the way. November sales increased 8.5% and December was softer, up 2.8%.

In terms of corporate activity, Vukile recently announced that the acquisition of Bonaire Shopping Centre may still happen after the flood damage, provided that the centre is reinstated. A deal that has now closed is the acquisition of 50% of Alegro Sintra in Lisbon on a first year net initial yield of 8%. The supermarket in the centre was excluded from the transaction as that GLA is actually owned by the supermarket that occupies it. Vukile hopes that the relationship with the new partners in that centre could open up other opportunities in the region.

On the disposal front, December saw Castellana close the sale of 28.8% in Lar Espana for EUR 200 million in proceeds. This gives them a strong balance sheet to deploy into other opportunities.

Vukile’s share price is up 14% in the past year and has dipped 5.8% in January. It trades on a trailing dividend yield of 7.5% at the moment, so the high quality nature of this asset isn’t a secret to the market.


Nibbles:

  • Director dealings:
    • The wife of the CEO of Purple Group (JSE: PPE) bought shares worth around R150k.
  • Grindrod (JSE: GND) has announced an update to the conditions precedent for the acquisition of the remaining 35% in Terminal De Carvao Da Matola Limitada. There are still some important outstanding regulatory approvals in Mozambique, so the long-stop date for the deal has been extended to 17 March 2025. Extensions are pretty common in deals like these, although it’s important that they don’t get out of hand.
  • There’s never a dull moment at Sibanye-Stillwater (JSE: SSW). With the resignation of the Chief Commercial and Development Officer, the headlines were full of views around how this signals a need for optimisation at Sibanye rather than acquisitions. Given the state of play in PGMs, that’s probably accurate, but the signals will get confusing if someone is appointed as a replacement. In the meantime, the CFO is acting in that position on an interim basis.
  • Labat Africa (JSE: LAB) has released a cautionary announcement around discussions that could have a material effect on the share price. There are huge changes to the business model there, so they must be busy with trying to piece together the next chapter of this company’s life.
  • With Trencor (JSE: TRE), moving ever closer to being unwound, the recent substantial changes to the share register have continued. We now know that M&G Investment Managers has reduced its stake from 8.54% to 3.57%.

Short Stories v.05: Ideas for good

Every so often, I come across a story that I think would work well for this audience, only to find that it is actually just too light to justify a full article. Never one to deny you informative (and interesting) content, I’ve decided to intersperse my usual long writing format with the occasional collection of short stories, tied together by a central thread but otherwise distinct from each other.

A few months ago, I wrote a collection of Short Stories about big-name businesses who were doing all sorts of shady things in order to make more money. In case you missed it, you can catch up here. Today’s article is essentially the opposite of that; an optimistic palette-cleanser highlighting how big brands are using their funds, power and influence to tackle real-world problems and make a real difference.

At their core, businesses exist to solve problems. Whether it’s providing consumers with a product or service, making life more convenient, or helping address gaps in the market, every business is in the business of offering solutions. But sometimes, in the rush for profit, it’s easy to forget that businesses also have the power to solve problems beyond the ones tied to their products. They can also address broader societal and environmental challenges – problems that affect the planet, communities, and future generations.

Savlon: soapy chalk

Handwashing with soap might seem like a simple, universal habit, but for many children in rural communities, it’s anything but routine. Soap is often considered a luxury, and the belief that water alone is enough to clean hands remains widespread.

The implications of this gap in hygiene are sobering. According to the World Health Organisation (WHO), India has the second-highest child mortality rate in South-East Asia for children under five, much of which is attributed to poor hygiene, sanitation, and environmental factors.

In many rural Indian schools, children rely on chalk and slates for their lessons. When lunchtime rolls around, they’re sent to wash their hands at communal taps. But soap isn’t always available, and even when it is, children often skip using it—simply rinsing off the chalk dust with water before drying their hands on their clothes.

Savlon, in collaboration with Ogilvy Mather India, saw an opportunity to tackle this issue in a way that was both practical and engaging. Enter Healthy Hands Chalk Sticks: chalk infused with powdered soap. The idea was ingenious. As children wrote with the chalk, a fine layer of soap powder coated their hands. When they washed up at lunchtime, the powder turned into soap upon contact with water, encouraging proper handwashing while also surprising and delighting the students, who loved watching the chalk dust transform into foam.

This wasn’t just a cute idea – it was meticulously developed. The chalk underwent rigorous safety testing to ensure it was completely safe for young hands. And when the initiative rolled out to over 100 schools, it became more than a classroom innovation – it sparked a nationwide conversation.

The campaign’s success caught the attention of the Food Safety and Standards Authority of India (FSSAI), which endorsed the initiative. It also led to a collaboration with Akshaya Patra, the world’s largest provider of midday meals. Together, they distributed soap-infused chalk to over a million children across India, embedding better hygiene habits in classrooms and homes alike.

Honda: vibrating shoes

In 2017, Honda launched IGNITION, an in-house initiative aimed at addressing social challenges by harnessing the creativity, technology, and design expertise of its employees. Since its inception, the program has delivered some impressive innovations, but one standout idea has left a particularly meaningful mark: Ashirase.

Ashirase is a navigation system designed to help visually impaired individuals walk safely and confidently. It’s a simple yet ingenious solution – a smartphone app pairs with a vibration device tucked into any pair of shoes. Inside the device is a motion sensor that works seamlessly with the app to guide users step-by-step.

Gentle vibrations inside the wearer’s shoes communicate directional cues. A buzz at the front of the foot signals the user to walk straight, while vibrations on the left or right indicate when to turn. This design lets users focus on their surroundings without needing to look at a screen or juggle additional tools, keeping their hands free for a cane and their ears open to ambient sounds.

But Ashirase is more than just a navigation aid – it’s about making the journey as stress-free as possible. Honda’s goal was to create a system that felt intuitive, almost second nature. By simplifying the process of navigation, Ashirase restores a sense of ease and natural flow to walking.

Originally planned for release by March 2023, Ashirase hit some delays during real-world testing. Instead of rushing to market, Honda took the opportunity to refine the device, incorporating valuable feedback from users to ensure the final product would be as effective as possible.

The good news? The wait is nearly over. With updates underway, Ashirase is now expected to make its official debut later this year, marking a significant step forward in accessible innovation.

Energizer: bitter batteries

Ask any parent and they’ll tell you: babyproofing a home is no joke. As babies grow, their combination of increased mobility and relentless curiosity means that parents are constantly scanning for potential hazards – especially the small objects that babies and toddlers are so magnetically drawn to put in their mouths.

Among the most dangerous household culprits are lithium coin batteries, commonly known as button batteries. These tiny power sources are commonly found in household items like remotes, clocks and even toys, and they can cause catastrophic damage if swallowed. Within hours, the acid in these batteries can burn through the esophagus, often with fatal consequences if left untreated. According to the Consumer Product Safety Commission (CPSC) tens of thousands of young children have been hospitalised over the course of the last decade due to button battery ingestion.

Energizer understood this problem and decided they didn’t want their products to be a contributing factor. Their solution? The 3-in-1 Shield battery.

These batteries look and function exactly like regular button batteries, but with three layers of childproofing built in. The first line of defense is child-resistant packaging which is impossible to open without a pair of scissors. The second layer takes a more sensory approach – a bitter coating on the batteries themselves. Made from bitrex, the world’s bitterest substance, the coating is completely non-toxic and offers a repulsive, bitter taste to encourage kids to spit the battery out. The third layer of protection is Energizer’s Color Alert technology. If the battery touches saliva, it releases a non-toxic dye that turns the child’s mouth bright blue almost instantly. This provides an immediate visual signal to caregivers to act fast and access emergency medical care.

As part of their campaign, Energizer partnered with Reese’s Purpose, a nonprofit dedicated to identifying and addressing child safety risks. Together, they’re working to raise awareness and advocate for change, hoping to protect more families from these preventable tragedies.

See it in action here:

@keepingupwiththekorzons

Make sure you’re helping keep your home safer especially after the holiday season with the @Energizer 3-in-1 Child Shield™ batteries. Start your year off right with Energizer and the link in my bio! 🫶🏻 #EnergizerAd #holidays #babyproofing #childsafety #fyp

♬ 轻快愉悦 享受生活 – HD235( 音乐)


Phillips: old stuff new

We all love receiving gifts, but not every present is a keeper – and that’s OK. Returns exist for a reason. However, what’s less obvious is the environmental impact of those returned items. Every year, around 10 million returned gifts are discarded instead of being resold or reused. Why? Because for many companies, it’s simply cheaper to produce new products than to process and reintroduce returns into the market. This wasteful practice contributes to an alarming amount of landfill waste, particularly following the festive season.

Philips decided this status quo wasn’t acceptable. Aware that their products are designed for durability and longevity, the company shifted its approach for the last holiday season. Instead of promoting new inventory, they chose to exclusively sell refurbished and returned products. These items were offered at lower prices and backed by upgraded warranties, ensuring that customers felt confident in their purchases.

To drive home the importance of this initiative, Philips also launched an augmented reality installation that illustrated the environmental cost of returns in real time. This visual representation highlighted just how significant the problem is and why solutions like theirs are urgently needed.

The results were significant. Philips sold out of their refurbished inventory and, in the process, diverted an estimated 185 tonnes of e-waste from landfills. The success of this campaign shows that consumers are open to sustainable shopping options when they’re presented as a viable and trustworthy alternative. As someone who’s supported the thrifting and repairing economies for years now, I can tell you that this comes as no surprise.

This move by Philips isn’t just a one-off success: it’s a blueprint for how businesses can rethink their approach to returns and waste. By proving that refurbished products can be just as valuable as new ones, Philips has set a precedent for industries looking to address the growing environmental challenges tied to overproduction and waste.

Renault: borrowed wheels

Living in a big city shouldn’t be a job requirement, but, unfortunately, too often, it is. This isn’t a problem that’s unique to South Africa. Take France, for instance: 40% of the population lives in areas without public transport, yet just 5% of commutes are possible without it for those outside city centres. And then there’s the reality that one in five job seekers can only find opportunities over 50 km from where they live, which leads to 54% of them dropping out of the job market due to mobility issues. It’s a real mess.

But Renault wasn’t about to let this problem go unnoticed. Realising that job markets in France can be brutal – especially when new employees face three-month trial periods where they can be let go at any time, and no access to loans to buy a car – Renault decided to step in. In a move that was tailor-made for the challenge, they offered 6,000 cars to those working these trial periods, letting them pay in instalments only once the job was permanent and the pay secured. The kicker? This was all rolled out through 50 dealerships strategically placed in areas with no easy access to mobility.

The result was nothing short of life-changing for many who would otherwise have been stuck, unable to reach work and forced to miss out on opportunities. Renault’s solution is a masterclass in building meaningful connections between brands and consumers, all while driving business forward.

About the author: Dominique Olivier

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

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

Dominique can be reached on LinkedIn here.

GHOST BITES (Blue Label Telecoms | Reinet | The Foschini Group | York Timber)

Blue Label Telecoms takes another step towards taking control of Cell C (JSE: BLU)

Getting regulatory approvals out of way is always worth celebrating

Blue Label has announced that Cell C has obtained approval from ICASA for the transfer of telecommunications licences held by Cell C to The Prepaid Company, a wholly-owned subsidiary of Blue Label.

Now, the plan isn’t actually to transfer the licences. They will still be held by Cell C. Instead, they are clearing the way for a change in control of Cell C, which has the same overall effect in terms of ownership of the licence. Blue Label’s plans are for The Prepaid Company to own more than 50% of Cell C, so they are getting the regulatory approval done in the meantime.

This tells you a lot about how tricky these approvals can be.


Reinet had a strong finish to 2024 (JSE: RNI)

Of course, the market is focused on the British American Tobacco sale

Reinet has reported its net asset value (NAV) as at December 2024. They do this every quarter, so one of the metrics they include is the percentage growth between September and December. In this case, they managed growth of 5.1% in that quarter, so it was a great finish to the year.

Reinet also makes a point of reminding the market that the compound annual growth rate (CAGR) is 9.2% since March 2009, including dividends. British American Tobacco has been the underpin of that journey and the big change going forwards is that Reinet has sold all its remaining shares in that company.

A smaller disposal happened in the quarter and therefore impacted the NAV growth in that period. The big clean out happened in January though, so British American Tobacco is still part of Reinet’s NAV as at December 2024 – for the very last time!

In case you’re wondering about the traded discount, the NAV as at December 2024 was EUR 38.12, or around R737 at current exchange rates. Reinet is trading at R453, so there’s a hefty discount here for a company that just turned a big chunk of NAV into cash. The market doesn’t seem to be expecting a special dividend or large buyback here. If Rupert springs a surprise and takes that route, the share price could do some exciting things.


Bash seems to be doing the heavy lifting at The Foschini Group (JSE: TFG)

These numbers don’t look good alongside Mr Price

The Foschini Group (TFG) has released an update for the quarter ended December, which also gives us nine-month year-to-date numbers. Although the third quarter was a positive swing in momentum (group sales growth of 8.4%), the first half was so poor that the year-to-date numbers are still uninspiring with sales growth of 1.6%.

A silver lining is that gross profit is up 5.7% over nine months. That’s still nothing special by any means, but at least gross margin went the right way – especially in TFG Africa.

The gold lining (if you’ll allow me to invent such a thing) is the growth in Bash, the online platform that aggregates the entire TFG offering into a single platform. This approach clearly works, with sales up 47.2% for the quarter and 20.8% year-to-date. Astonishingly, there are still naysayers out there about eCommerce. Online sales are now 11.3% of total retail sales for the group. You really need to have your head in the sand to think that this isn’t relevant.

When we look at the regions, the cracks really start to show. TFG London sales fell 0.1% for the quarter if you exclude the acquisition of White Stuff – and of course, that’s a very important adjustment to make. White Stuff grew sales 18.3% year-on-year, so perhaps that deal will inject some energy into TFG London. TFG Australia was down 3.0% for the quarter.

In terms of category level insights, I was surprised to see that Homeware in TFG Africa grew 5.5%, ahead of Clothing at 5.3%. Given the success of the apparel business in Mr Price at the moment, TFG seems to have a pretty serious problem there. Another negative surprise was a 2.6% decline in cellphones, which is also at odds with what we saw from Mr Price. Beauty is the highlight of the TFG offering, up 19% for the quarter. It’s not a fluke, as the year-to-date performance in Beauty is 14.7%.

This performance did nothing to improve the negative sentiment in the sector that has plagued share prices this month, with TFG closing 3.8% lower for the day. The market didn’t even get excited about sales growth in TFG Africa of 14.6% for the three weeks to 18 January, which is clearly a strong start to the year.

TFG is planning a substantial expansion of the footprint this year. Given the underperformance of the bricks-and-mortar offering, I’m not convinced that more is more. It feels like they need to focus on sorting out what they already have and getting the growth up to scratch vs. peers.


York has raised the funding for the Stevens Lumber Mills deal (JSE: YRK)

An increase to an existing term facility got it across the line

Back in June 2024, York Timbers announced the acquisition of several properties (and the trees on them) from Stevens Lumber Mills. One of the conditions related to financing, naturally.

Thankfully, in April 2024, York had entered into a term loan facility with Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (just rolls off the tongue, doesn’t it?) of R350 million. This facility turned out to be the key that unlocks the finalisation of the deal with Stevens Lumber Mills, with an increase in the facility of R75 million.

The York Timbers share price benefitted from the general improvement in sentiment in 2024, with a 12-month performance of 22.2%.


Nibbles:

  • Director dealings:
    • An executive at Richemont (JSE: CFR) sold shares worth R9 million. Separately, another executive sold shares worth R13 million linked to share options.
    • Acting through Titan Premier Investments, Christo Wiese has bought R415k worth of shares in Brait (JSE: BAT).
    • A director of Mantengu Mining (JSE: MTU) has bought shares worth R89k.
    • As you might expect, various directors of Sirius Real Estate (JSE: SRE) have accepted shares in lieu of dividends under the dividend reinvestment programme.
  • I don’t usually comment on changes to major shareholders, but I think it’s worth highlighting that All Weather Capital has rapidly increased its stake in Trencor (JSE: TRE) from 6.66% to 13.29% between 19 December and 22 January. I’m not sure if they held shares before that but it hardly matters – the direction of travel is clear here. Trencor is a cash shell that is due to be wound up in the near future. Perhaps that future isn’t far away now?
  • African Dawn Capital (JSE: ADW) announced a deal back in October 2024 that would see EXG Partners invest R5 million in wholly-owned subsidiary Elite group for a 50% stake in that company. They would also provide a loan of R15 million to Elite. The commercial terms seem to have stayed the same, but there’s been a change of ownership in EXG Partners that turns this into a related party transaction as the CEO of African Dawn Capital and his son have now become beneficial indirect holders of EXG Partners. This means that the Category 1 circular will need to be a related party circular and will include all the protections that are needed for minority shareholders, like a fairness opinion by an independent professional expert.
  • The latest in the Trustco (JSE: TTO) saga is that the listing has been suspended as Trustco hasn’t released financial statements for the year ended August 2024 in time. Then again, they are currently “trading” under cautionary because they might drop all their listings. This is also the same company that has made noise about wanting to be on the Nasdaq, but can’t get financials out in time. It’s a soap opera.
  • AYO Technology (JSE: AYO) finds itself involved in another court action, this time after a minority shareholder with a stake of 0.13% lodged a notice of motion in the High Court to wind up AYO. At this stage, the board believes that this isn’t a price sensitive development, with the company’s legal advisors having considered the claim and its probability of success. Of course, anything is possible. There really is never a dull moment with this company.

GHOST BITES (Cashbuild | Sasol | Super Group)

Positive momentum continues at Cashbuild (JSE: CSB)

I remain happy with my long position here

I take an approach of selective exposure on the JSE. Cashbuild is one such example, as I think this is an appealing way to play the South African recovery story. They don’t have the manufacturing capacity issues that Italtile has, hence they are my choice in the sector. So far, so good.

The latest quarterly update is also encouraging, with revenue in the second quarter up 6%. The existing stores were responsible for 5% growth and new stores contributed 1%. For the six months, this means group growth was 5%. It’s no rocketship of course, but my expectation is for more of a steady grind.

With volumes up 8% for the second quarter, it seems as though there may have been deflationary effects over the quarter. Inflation was just 1.5% at the end of December 2024, but that sounds like a snapshot view rather than the percentage that applied over the period.

Even P&L Hardware is posting consistently positive results these days and Cashbuild Common Monetary Areas also swung positive, so the momentum is building.

It’s also good to see discipline in the footprint strategy, with 3 new stores and 6 closures of underperforming stores. They refurbished 11 stores. Growth for the sake of growth isn’t helpful to shareholders. It’s more important to optimise the business.


Are things ever going to improve at Sasol? (JSE: SOL)

The latest update has done no favours for the share price

Sasol dished out a tough start to the day for its investors, with an early morning update that was filled with disappointing news. The share price reacted sharply, down over 4% in early trade and eventually closing 4.7% lower.

The coal quality at Secunda Operations (SO) remains a problem, with production for the six months down 5% year-on-year. This has led to a deterioration in production guidance for the facility.

Despite a strong quarter at Natref, 2025 got off to a terrible start with a fire at the refinery on 4 January. Supporting piping and infrastructure was damaged, with repairs anticipated to be completed before the end of February. This means that production for FY25 is expected to be 5% – 10% lower than FY24, a major downgrade vs. previous guidance of growth of 0% – 10%. If Sasol has insurance for the lost profits, they are keeping very quiet about it – I didn’t see any mention of insurance in the report.

These issues set the scene for a report that also includes uninspiring numbers in the chemicals business, yet again. The average basket price fell during the quarter, so the half-year result is now an uptick in revenue of just 1% year-on-year in both the African and American segments of the chemicals business and 2% higher in Eurasia. Sales volume guidance for international chemicals has been adjusted downward.

Any silver linings? Well, they believe they have a solution to enhance the coal quality supplied to SO, with the benefits only expected to be felt in H1 FY26. They’ve also left the market guidance for both mining and gas unchanged.

The announcement includes references to “Final Investment Decision (FID)” all over the place. I worry about the level of bureaucracy in a company when they start inventing their own terms and then capitalising them to make them sound important. It’s just a decision. That’s all.

Speaking of decisions, the decision by the market has been pretty clear:


Super Group had a very tough interim period (JSE: SPG)

The exposure to the automotive retail industry isn’t helping

Super Group has released a trading statement dealing with the six months to December. You need a strong stomach for this one, with HEPS down by between 19.7% and 29.9%. Ouch!

Let’s start with the automotive dealerships businesses, which are suffering from the disruption to the sector by Chinese brands. Although Super Group is improving its representation of these brands, the legacy showroom footprint is the challenge. The South African business seems to have been more resilient than in the UK, with Ford really struggling in that market.

It also doesn’t help that the UK (like most of Europe) is obsessed with regulation. The Vehicle Emissions Testing and Standards (VETS) legislation requires original equipment manufacturers to ensure that 22% of new car sales are battery electric vehicles, otherwise there are financial penalties. This will increase to 28% by 2025. As Ford isn’t managing this very well in their passenger car business, Super Group will look to consolidate (i.e. cut back on) its dealership footprint in the UK.

Remember when Europe forced diesel vehicles down everyone’s throats until the emissions scandal broke? I really don’t understand why highly efficient petrol engines are so evil, but then again I’m not incentivised somewhere in the EV value chain like so many political lobbyists are. Sadly, companies like Super Group have to deal with the fall-out.

Against this backdrop, one would hope that the other businesses are doing well. Alas, Supply Chain Africa has to deal with pressures like coal export volumes and turnaround times at South African ports, along with the exposure to political unrest in Mozambique and the impact on coal export volumes through Maputo in the final quarter of 2024. You may recall reading about the Maputo port in the recent Grindrod update, as Grindrod and Super Group sit at different parts of that value chain. Copper exports are also being rerouted from Durban to Dar es Salaam and Walvis Bay, so the problems with our ports are really hurting the business.

The only other continuing operation is Fleet Africa, which earned itself a small paragraph in the announcement that talks to decent performance. It’s nowhere near big enough to carry the can by itself.

In the discontinued operations, SG Fleet in Australia is in the process of being sold. This is about the only thing that saved the Super Group share price in the past year, as the market liked the price on the deal. This will do wonders for the balance sheet, although Super Group expects to pay a R16.30 special dividend to shareholders so much of the cash will flow out of the group.

The other discontinued operation is Supply Chain Europe, which is also taking huge strain from the state of the automotive sector. They will try and find a buyer for this business. I doubt they will get great offers, as this is the exact opposite of selling when things are good.

After the special dividend, what is really left in Super Group that is structurally appealing? They are in a tough space right now and they really need a turnaround in South African infrastructure, as I can’t see things getting much better on the automotive side.


Nibbles:

  • Director dealings:
    • A director of a major subsidiary of Southern Sun (JSE: SSU) sold shares worth R2.7 million.
  • Labat Africa (JSE: LAB) has lamented the slow pace of regulatory change and has blamed this for the difficulties being felt in the South African cannabis market. For this reason, they are now looking at FinTech opportunities. This explains why the new CEO, Irfaan Mohammed, has a background in the ICT sector. The acquisition of Classic International for R16.275 million has been settled through the issuance of Labat Africa shares. Hopefully the new chapter for the company sees far more success than before.
  • Oando (JSE: OAO) announced that Oando Energy Resources (OER) has been awarded operatorship of Block KON 13 in Angola’s Onshore Kwanza Basin. OER will have a 45% participating interest and will lead the development as operator alongside its partners. This is the entry point for Oando into the Angolan oil and gas market and is part of the long-term strategy for its upstream operations.

GHOST BITES (Coronation | Mr Price | Quilter | Vukile)

Coronation’s AUM has moved sharply higher (JSE: CML)

To their credit, the lazy disclosure format is also used when they have a good news story

As you would expect after the year that we had in the markets in 2024, assets under management (AUM) at Coronation has moved higher. It came in at R676 billion as at the end of December 2024, a long way up from R629 billion as at the end of 2023.

For some reason, Coronation never discloses the comparable number in the SENS announcement, forcing investors to dig through the SENS archive to find it. I genuinely have no idea why they do this, but at least they didn’t magically change that approach now that they have a positive story to tell.

The share price is up 24% over 12 months, but is 28% lower over 3 years. In the sector, my preference is still the companies that have built their own distribution channels. You can look at PSG Financial Services (JSE: KST) to see what I mean, or Quilter (JSE: QLT) further down in this update.


Mr Price just keeps winning (JSE: MRP)

It’s incredible how wrong I was on this one

Early last year, when the Mr Price share price started running, I wasn’t convinced by the rally. In fact, I thought it would sizzle out and possibly head lower.

Here’s a chart of how spectacularly wrong I was:

There are a few lessons here worth sharing, all of which I apply with my own money. (1) Going short is much braver than going long, not least of all because you’re betting against inflation when you’re short. I prefer to just avoid things that I feel could go down, rather than short them in the hope of a profit. I leave that for the hedge funds and traders! (2) It’s impossible to get everything right in the market (no matter who you are), so position sizing is key. I avoid a highly concentrated portfolio. (3) Momentum is a very powerful thing and the South African market loves it when a business is doing decently, so much so that getting to a P/E of over 20x is possible.

Today, Mr Price is on a P/E of 19.6x. For context, you can buy Nike on 22.6x. Do with that information what you will.

What is supporting the Mr Price story? To be fair, some really solid recent growth. In an update for the 13 weeks to 28 December 2024, they achieved double-digit sales growth and won market share as well. They managed this at a higher gross margin than in the comparable period, so it wasn’t achieving by slashing prices either. In retail, this sort of narrative is precisely what you want to see.

The two-year compound annual growth rate (CAGR) at group level is 10.3% and the latest growth is 10.6%, so that’s remarkably consistent. They’ve won market share for six consecutive quarters!

There are a bunch of other interesting nuggets in the update. For example, online sales grew 21.9% year-on-year in December, so more and more people are choosing to do their festive shopping online. This hasn’t stopped Mr Price from expanding the store footprint, with trading space growth of 4.9%.

It also seems as though people have money again, with cash sales up 11.1% and credit sales up just 5.7%. This trend is helping the entire business of course and is contributing to strong performance by recently acquired chains like Studio 88 and Power Fashion. When it comes to acquisitions though, Yuppiechef looks like the superstar. It has achieved a two-year CAGR of 18.4% and achieved its best-ever market share in December – all while increasing its gross profit margin!

This bucks the broader trend in Homeware, which was the slowest growing category at 7.9%. Although that’s a decent number in isolation, it’s much lower than 10.9% in Apparel and a really strong 16.5% in Telecoms.

Strong sales continued in January, albeit against a really tough base in which load shedding was running rampant. The performance in most of 2024 sets a difficult base off which to grow in 2025. The trailing P/E multiple is also very high, so that’s another headwind for the share price this year.

I was horribly wrong in 2024 about the share price but that doesn’t mean that I don’t still have a view on it. As always, my view is one of many you should be considering – including the most important view of all, being your own!

Personally, this isn’t a chart I want to own right now:

The fact that Mr Price closed over 3% lower despite releasing such strong numbers tells me that the market is now pricing in miracles, not just strong performance. That’s a dangerous situation.


A strong finish to 2024 for Quilter (JSE: QLT)

The momentum in net inflows is excellent

I’ve written many times about the value of building out a distribution angle to an asset and wealth management business. You need to go out there and fight for assets, as it’s too hard to hope that just sitting back and managing them will get the job done. Quilter is a great example of this and the results are clear to see.

2024 saw record core net inflows of £5.2 billion. The momentum into the end of the year was extremely encouraging, with the fourth quarter contributing net inflows of £2 billion. Most of the uptick came from the Affluent segment, boosted by Quilter’s platform business that enjoyed strong flows from both Quilter channels and independent financial advisor channels.

The combination of positive market performance in 2024 and solid inflows took assets under management and administration from £106.7 billion as at the end of 2023 to £119.4 billion by the end of 2024. That’s a particularly good performance in a year that was characterised by elections and uncertainty around tax changes for wealthy clients.

The Quilter share price closed 3% higher and is up 54% over 12 months.


Vukile’s Spanish acquisition is still on the table (JSE: VKE)

Repairs from the flood damage are going well

Last year, Vukile announced the possible acquisition of Bonaire Shopping Centre in Spain. The rain in Spain may fall mainly on the plain as the old movie goes, but in 2024 it fell basically everywhere. The torrential flash flooding caused havoc and this shopping centre wasn’t spared from the impact.

This is why every single acquisition always includes a material adverse change clause. Before a deal closes, you need to make sure you’ve got wriggle room in case something crazy happens.

The deal was delayed for a full assessment of the damage to be made. In good news, the deal is still on the table and the exclusivity arrangement that Vukile’s subsidiary Castellana has on the deal is still in force. The current owners are making progress towards fixing up and reopening the centre.

Will this affect the pricing on the deal? At this stage, we don’t know. We don’t even know if it will definitely go ahead. We do at least know that it still has a strong possibility of happening.


Nibbles:

  • Reinet (JSE: RNI) has given a strong clue as to the direction of travel of its balance sheet. The company always releases the net asset value (NAV) of the Reinet Fund ahead of releasing full results. This represents most, but not all of the group balance sheet. The fund saw its NAV per share increase by 5.1% from September 2024 to December 2024, which is a strong end to the year. As at that date, the stake in British American tobacco was still included in the fund.
  • Copper 360 (JSE: CPR) has acquired 100% of Mulilo Springbok Wind Power, a wind energy generation facility in the Springbok area in the Northern Cape. The project is at an advanced stage in terms of feasibility studies and engineering plans, along with fully authorised environmental impact assessments. The initial cash payment is R5 million and there are deferred cash payments of R1 million per MW of installed capacity. This obviously ticks two boxes for Copper 360: energy security and renewable energy.
  • After closing the acquisition of 11.35% in Legal Shield Holdings, Trustco (JSE: TTO) has confirmed that the first tranche of 200 million shares have been issued to Riskowitz Value Fund. This increases the total issued share capital by around 20%.
  • The deal between Europa Metals (JSE: EUZ) and Viridian Metals still hangs in the balance, as negotiations around funding for the deal haven’t yet resulted in anything concrete. The term sheet signed in September gives 150 days of exclusivity for the deal, so there is still time. The company has simply noted that the festive season led to delays in negotiations. Let’s hope they hit the ground running this year and get it done!
  • In case anyone is keeping score, recent trades in Brait (JSE: BAT) by Christo Wiese’s investment companies (in this case Titan Premier Investments) have led to a situation in which Titan’s beneficial interest in Premier Group (JSE: PMR) has increased to 45.04%. I know it’s confusing, but Premier Group (the listed food company) and Titan Premier Investments (one of Wiese’s many private investment entities) are two completely different things.

GHOST BITES (BHP | Clicks | Grindrod | Jubilee Metals | MTN)

BHP looks to be on track to achieve guidance this year (JSE: BHP)

At the halfway point, they are optimistic about hitting the upper half of production guidance

BHP has released its operational review for the six months to December. This is the precursor to the release of interim financial results.

Unsurprisingly, the focus of the announcement is on copper, BHP’s pride and joy at the moment. Copper production increased 10%, with Escondida doing the hard work (up 22%) as Copper SA suffered power outages related to the weather. This is the benefit of diversification at a company the size of BHP. This diversification will be further enhanced by the recently completed Filo del Sol and Josemaria deals in Argentina.

Other operational milestones included the signing of the settlement agreement for the Samarco dam failure, as well as moving the WA Nickel operations into a period of temporary suspension.

Overall, BHP is on track to deliver full-year production guidance. In fact, they reckon they could hit the upper half of guidance at a number of facilities. For now, they’ve left FY25 guidance unchanged other than at Copper SA where they have had to lower guidance based on the first-half weather impact.

They also expect to deliver unit cost guidance across all assets.

In terms of pricing, copper prices increased 9% year-on-year and that’s pretty much where the highlights end. Iron ore and steelmaking coal fell 22% and 23% respectively, while nickel continued its problematic trajectory with a 12% decrease. Thermal coal increased by just 1%.

For now, the focus on copper is paying off.


For some reason, it seems that the market has now decided that Clicks is growing too slowly (JSE: CLS)

Keep an eye on this share price

The Clicks share price has a reputation on the local market for trading at stubbornly high valuations. Despite the high valuation base coming into 2024, the stock benefitted from the general improvement in SA sentiment and delivered a 12-month chart that looks like this:

Now, take note of how things have started washing away this year. Clicks fell 3.7% on Tuesday after releasing a trading update. In case you’re wondering, the JSE ended the day flat, so we can’t attribute this to a broader sell-off. No, in this case, it seems that the market is nervous about growth.

Clicks is still growing, but only by high single-digits. For the 20 weeks to 12 January, group turnover was up 8.1%. That’s very similar to the 8.0% in the comparable period, so it’s odd that the market suddenly doesn’t like that number.

The retail stores (Clicks / The Body Shop / Sorbet) grew 8.7% overall and 5.9% on a comparable basis. That might be where the worry lies, as comparable store growth was 8.4% in the comparable period. Inflation has come off significantly, down at 3.5% vs. 7.5% last year. The increase in volumes (2.4% vs. 0.9% last year) wasn’t enough to make up for the slower increase in prices.

There’s also a sign that gross margins might be under some pressure, as commentary in the announcement points to stronger growth in promotional sales than in non-promotional sales.

On the wholesale side of the business, UPD has a positive story to tell with wholesale turnover up by 9.5%. That’s much better than a drop of 0.8% in the comparable period.

Interim results are only due for release in April. Until then, that share price is looking vulnerable to me.


Grindrod’s Port of Maputo saw a slight reduction in volumes in 2024 (JSE: GND)

Under the circumstances, that’s pretty good

Doing business in the rest of Africa is no joke. Sure, there are good news stories like Jubilee and MTN today (you’ll see them further down), but in both cases those stories are actually just improvements on really bad situations that probably shouldn’t have happened in the first place.

Over at Grindrod, their particular challenge is that there has been major political unrest in Mozambique. Naturally, this has impacted the safety of road travel – not that the country is exactly famous for hassle-free road trips on a good day!

Despite this, when we look at the full year numbers for 2024, the Maputo Port Development Company suffered only a 1% decline in volumes. That’s encouraging for 2025, which will hopefully be a far less disrupted year.

I must also note the tone of the press release, which is basically a love letter to the Mozambique government that is dripping with please-don’t-hurt-us energy. Why? Because property rights are a fluid concept in many frontier markets, so companies operating in that space need to walk a tightrope with government and constantly point out the value flowing to those in power.

Also note that the wording is always about the benefits to “government” rather than the people of the country. It’s sad how different those concepts tend to be in practice.

Why should investors pay attention to this? Simply, because it’s a risk. A major risk, in fact. The JSE is littered with sad stories about companies that got hurt by African risks like post-election conflicts and crazy regulatory moves. Investing is about balancing risk and reward. Always ask yourself whether the rewards are sufficient to compensate you for taking the risk.


Great news for Jubilee – they’ve secured power for Roan (JSE: JBL)

At least this uncertainty has been taken off the table

Jubilee Metals‘ last set of results were a cautionary tale of the many challenges of doing business in frontier markets, such as the rest of Africa. Power availability has been a major challenge, impacting the ability of the Roan facility to operate and thus negatively affecting production.

Investors were left hanging after the results, with no obvious timeline regarding a dependable power supply and thus a restart of Roan. The happy news is that they didn’t have to wait very long for an update, as Jubilee has now announced that regulatory approval has been granted for the power supply agreement and that power delivery commenced on 20 January.

That must feel even better than when the TV used to work again after 6 hours of load shedding!

Importantly, the new deal sources power from multiple sources, so reliance on a single source has been mitigated. The cost of the power is comparable to the existing power agreement, so there isn’t even a cost downside to offset the reliability upside.

The company is now preparing to flick the big switch on Roan to get it up and running again. The share price closed 7% higher in appreciation.


MTN finally has some luck in Nigeria (JSE: MTN)

Now they just need to solve the other major problems

After much pain suffered by telecoms companies in Nigeria (of which MTN is most relevant to us in South Africa), the Nigerian Communications Commission has finally approved a 50% tariff adjustment. That’s a huge jump, which calls into question why they didn’t just do smaller increases each year? Anyway.

This won’t be popular with consumers of course, but it helps the telecoms sector be more sustainable. At the end of the day, if companies cannot operate profitably in the country, then consumers lose over the long-term anyway and to a far greater extent.


Nibbles:

  • Director dealings:
    • An executive of Richemont (JSE: CFR) sold share awards worth R44 million. Again, it’s not clear whether this is the taxable portion or not.
    • An associate of the CEO of Invicta (JSE: IVT) bought shares worth R9.4 million.
    • Acting through Titan Fincap Solutions, Christo Wiese bought R8.2 million worth of shares in Collins Property Group (JSE: CPP).
    • An independent non-executive director of Bytes Technology (JSE: BYI) and his associate bought roughly R740k worth of shares.
    • An associate of an independent non-executive director of iOCO (JSE: IOC) – formerly EOH – bought shares worth R130k.
    • An associate of the CEO of Purple Group (JSE: PPE) bought shares worth just under R100k.
    • The CEO of Spear REIT (JSE: SEA) bought shares worth R27k for members of his family.
  • The CEO of Thungela (JSE: TGA), July Ndlovu, is retiring soon. In fact, he’s retiring in July this year, surely one of the easier facts to remember! Moses Madondo has been appointed as CEO designate. He is currently the CEO of De Beers Group Managed Operations. Frankly, I would also jump at the opportunity to move from diamonds to coal.
  • Trematon Capital (JSE: TMT) is one of the many companies that has moved its listing to the General Segment of the Main Board of the JSE.

MIC Khulisani Ventures: A Game-Changer for Black-Owned Businesses in South Africa

Raising equity funding remains one of the most significant challenges for small businesses in South Africa. Many entrepreneurs with high-growth potential struggle to access the capital needed to scale their businesses. Recognizing this gap, the Mineworkers Investment Company (MIC) has introduced Khulisani Ventures, an initiative designed to provide much-needed funding to innovative, Black-Owned businesses.

This early-stage funding vehicle focuses on businesses with high scalability and a commitment to growth. With applications now open until 31 January 2025, Khulisani Ventures presents a golden opportunity for entrepreneurs ready to take their businesses to the next level. Funds are expected to be disbursed as early as March 2025, giving selected businesses the support they need to fuel their growth.

What Is MIC Khulisani Ventures?

Khulisani Ventures is part of the broader mission of the Mineworkers Investment Company, which was established nearly 30 years ago by the National Union of Mineworkers (NUM). As the Chief Investment Officer of MIC, Nchaupe Khaole explains, the company’s primary purpose is to create a sustainable capital base that benefits NUM members, their families, and the broader community.

Over the years, MIC has built a diverse portfolio, investing across various sectors in South Africa. Khulisani Ventures represents MIC’s commitment to nurturing Black-Owned businesses by offering risk capital to help them scale. This initiative seeks to identify businesses that bring innovative solutions to the market and have the potential to make a lasting impact on the South African economy.

This is MIC’s third funding window and they’re excited to receive applications from businesses that will blow their socks off in terms of the solutions they offer and the growth they envision.

Who Should Apply?

Khulisani Ventures is specifically tailored for Black-Owned businesses in South Africa that demonstrate:

  • High growth potential
  • Innovative solutions
  • A commitment to scaling aggressively

Whether your business operates in technology, manufacturing, services, or other industries, Khulisani Ventures could provide the funding you need to achieve your goals.

If your business meets the criteria, it’s crucial to act quickly. Applications close on 31st January 2025, leaving just a few weeks to prepare your submission. The process is competitive, so ensure your application highlights the unique value proposition and scalability of your business.

What Makes This Opportunity Unique?

The Khulisani Ventures initiative isn’t just about providing funding – it’s about empowering entrepreneurs to build sustainable businesses that contribute to South Africa’s economic growth. By focusing on Black-Owned businesses, MIC is directly addressing systemic inequalities and creating opportunities for underrepresented entrepreneurs.

The fund applications are managed by I AM AN ENTREPRENEUR (“IAAE”), a company which specialises in enterprise and supplier development programmes that help entrepreneurs build and grow their businesses. IAAE is excited about this project as they understand the importance of such initiatives as the South African entrepreneurial ecosystem thrives when businesses have access to both funding and strategic support.

Insights from the Ghost Stories Podcast

In the recent Ghost Stories podcast episode, hosted by The Finance Ghost, both Keitumetse Lekaba (Managing Director of IAAE) and Nchaupe Khaole shared valuable insights into the challenges and opportunities facing South African entrepreneurs.

Lekaba described the work of I AM AN ENTREPRENEUR, a company that lives and breathes entrepreneurship. “On a day-to-day basis, we help entrepreneurs build and grow their businesses,” she explained. The organisation collaborates with multinational and national corporates to implement programmes that support small businesses in achieving sustainable growth.

Khaole provided an overview of MIC’s history and mission, emphasising the importance of creating a sustainable capital base for communities. He also highlighted the unique aspects of Khulisani Ventures, describing it as an early-stage investment platform that supports highly scalable businesses with innovative solutions.

For more information, you can find the full transcript for the podcast here.

How to Apply

If you believe your business meets the criteria for Khulisani Ventures, the time to act is now. The application process is straightforward, but competition is fierce. Here are the steps to apply:

  1. Visit the MIC website to review the eligibility criteria and access the application form.
  2. Prepare your submission, ensuring it highlights the unique aspects of your business and its growth potential.
  3. Submit your application by 31 January 2025.

Selected businesses will be notified shortly after the closing date, with funds expected to be disbursed in March 2025.

Why This Matters

South Africa’s economic growth relies heavily on the success of small and medium sized businesses. Initiatives like Khulisani Ventures play a critical role in providing the funding and support needed to unlock the potential of such businesses.

If your business is innovative, scalable, and prepared to take the next step, don’t miss this opportunity. Visit the MIC Khulisani website to apply.

GHOST BITES (Hudaco | Murray & Roberts | South32 | Trustco)

Hudaco kicks the year off with an acquisition in South Africa (JSE: HUD)

There are potential synergies with other Hudaco businesses in terms of route to market

Hudaco has announced the acquisition of Isotec, a provider of insulation materials and solutions in South Africa. It’s a big business, with 119 employees in five locations and revenue of R500 million per year.

Although Hudaco doesn’t currently operate in this space, the group sees opportunities to find stronger routes to market in the electrical power transmission sector, as Hudaco has existing businesses servicing that sector. Another benefit is the improvement to Isotec’s B-BBEE rating through the deal, which could open more opportunities. Overall, this is an attempt by Hudaco to diversify its operations rather than just do a bolt-on acquisition for an existing business line. The synergies are helpful, but I doubt they are the driving force behind the transaction.

The exact valuation for the deal isn’t entirely clear from the announcement. We know that the purchase price is a maximum of R709 million, with between R250 million and R287 million payable up-front. The rest is based on profit warranties, but they don’t indicate how the formula will work over three years.

The other data point we have is that Isotec achieved profit after tax of R90 million for the year ended February 2024. This is after adjusting for elements that aren’t part of the deal, which is typical in private company deals. We can’t just calculate the P/E based on R709 million / R90 million = 7.9x, as the R709 million only applies if profits grow over three years. You hopefully see the problem here in trying to understand the multiple on this deal.

It’s a category 2 transaction, so this is as much disclosure as we are going to get.


Murray & Roberts expects to release a business rescue plan by March 2025 (JSE: MUR)

I must caution that such plans are often delayed

Murray & Roberts’ South African subsidiary and its trading division OptiPower are currently in business rescue. This led to the voluntary suspension of trading in listed Murray & Roberts shares, so those unfortunate investors who held shares at the time of suspension now have to watch from the sidelines and hope that there’s some value left at the end of all this.

The underground mining businesses are still going concerns, but the fall-out from the business rescue process is impacting them negatively. I’m sure this is partly due to reputational worries in the market (would you place a large order with a group that is fighting for its life?) and partly based on funding being tied up in broken businesses.

Speaking of funding, post-commencement funding (the way in which a business rescue is funded) of R130 million has been raised “from the capital markets” – whatever that means. There are unnamed investors but they are apparently well capitalised. It would’ve been nice to have more details here.

They’ve also raised an additional R120 million in loan funding. This kind of thing is why shareholders sometimes walk away empty-handed from a business rescue process. Just because the business is rescued doesn’t mean that there wasn’t a full transfer of value from equity holders to debt holders.

The business rescue practitioners expect to submit a plan for approval by creditors by the end of March 2025. I’ll believe it when I see it, as these things are frequently delayed.


South32 maintains production guidance – except in Mozambique (JSE: S32)

Civil unrest negatively impacted Mozal Aluminium

South32 has released a quarterly update covering the three months to December 2024. They came into that quarter with a strong balance sheet, having sold Illawarra Metallurgical Coal in the three months to September.

South32 has many different operations and there’s always a lot of exploration activity taking place across projects linked to metals like copper, manganese, zinc, lead and silver. Naturally, this means that there’s also a steep capex bill at any point in time.

In terms of production guidance, they’ve maintained guidance for FY25 for all operations except Mozal Aluminium, where they withdrew guidance in December 2024 based on civil unrest in Mozambique.

At the halfway mark in the financial year, production numbers are largely in the red on a year-on-year basis. There are some highlights, like payable copper production, but most of the rest is negative. The good news is that commodity prices are much higher year-on-year almost across the board, with coal as the main exception.

The share price is flat vs. 12 months ago (although there’s been plenty of volatility along the way), so that gives an indication of what the net earnings move is likely to be for the first half of the financial year when detailed results are released.


What is Trustco up to now? (JSE: TTO)

Out of nowhere, there’s a possible delisting from all current exchanges

I used to own a classic Italian car. Even that glorious red creation was less erratic than Trustco, with the latest being that the group is considering a delisting from all the exchanges it is currently listed on. This means the JSE, the Namibian Stock Exchange and the over-the-counter market in the US.

This is the same company that was recently telling us about a plan to add a Nasdaq listing to this complicated cocktail. Now, things are going completely the other way. And by the way, they note that there could be an announcement coming with details on the planned Nasdaq listing, so that might not even be off the table!

At this stage, they’ve only released a cautionary announcement about the potential delistings. If they decide to go ahead, it would require a formal offer to shareholders, supported by a fairness opinion by an independent expert. They will also engage the JSE to suspend the listing in the meantime, although there is such little interest in this company in the market that it still had a day of minimal volumes despite this major announcement before the close of trade.

Goodness knows what the next step will be on this adventure.


Nibbles:

  • Director dealings:
    • An executive director of Richemont (JSE: CFR) sold shares worth around R43 million. Separately, an executive director sold shares related to share awards worth R12.4 million and another executed a similar sale worth R8.8 million. It’s not clear whether that was just the taxable portion on those smaller sales.
    • A non-executive director of Supermarket Income REIT (JSE: SRI) bought shares worth £69.9k
    • The CEO of RH Bophelo (JSE: RHB) bought shares worth R19.9k.
  • Here’s some unusual disclosure for you: Kore Potash (JSE: KP2) released an announcement showing the names and shareholding percentage of all shareholders who own 3% or more in the company. There are eight such shareholders, in case you’re curious. The company is also listed on the AIM in London (the development board on the London Stock Exchange), so I presume this is a requirement on that side.
  • African Media Entertainment (JSE: AME) has transferred its listing to the General Segment of the JSE. This is an example of a company already listed on the Main Board transferring its listing, as opposed to moving to the General Segment from the AltX.
  • In case you’ve been wondering, the implementation of the business rescue plan for Tongaat Hulett (JSE: TON) is still ongoing. The latest step is the sale of the business in Botswana.

GHOST BITES (Alphamin | Merafe | Ninety One)

EBITDA more than doubled at Alphamin (JSE: APH)

This is what happens when mining groups deliver on promises

Alphamin has been an interesting growth story. The tin mining house had to deal with some of the usual infrastructure challenges in Africa, but has come through them strongly. The impact of rainfall in Q4 is particularly relevant, creating a backlog that generally gets cleared in Q1 of the following year.

Weather aside, they’ve been expanding capacity and delivering on what they need to do. The result of all this? EBITDA more than doubled from FY23 to FY24 with an increase of 102%.

Production was up 38% and sales were up 57% for the year. This increase in production and sales was accompanied by a 17% increase in the average tin price and only an 8% increase in all-in sustaining costs per tonne sold. With numbers like that, the EBITDA jump makes sense now.

Production guidance for FY25 is 20,000 tonnes of tin, an increase of 15.4%. The rate of growth has slowed as Mpama South’s numbers were a contributor to FY24 as well, so they are now growing off a more challenging base number. This doesn’t mean that long-term production jumps are not an option. One of the important parts of the investment thesis is that Alphamin has a busy exploration strategy for Mpama South and Mpama North, as well as other opportunities.

The share price is up a spectacular 472% over five years. The return in the past year is 18%, as the market was aware of the expected production increase based on the work to increase capacity and had already priced much of this in.

When it comes to mining in the rest of Africa, you have to pick your fighter very carefully:


Flat production for the year at Merafe (JSE: MRF)

And a dip in the final quarter

Each quarter, Merafe releases a production report for ferrochrome from the Glencore Merafe Chrome Venture.

In the quarter ended December, they saw a dip in production of 6.7%. This resulted in an increase of just 0.3% for full-year production from 300kt to 301kt. No information was given on why the final quarter of the year was disappointing.

In case you’re wondering why the image for this edition of Ghost Bites included a stainless steel kitchen, it’s because ferrochrome is the most important raw material for the production of stainless steel.


Ninety One’s AUM has moved higher (JSE: N91)

This is a key driver of earnings

Asset management groups live and die based on assets under management (AUM). The clue is kinda in the name, isn’t it? Fees are earned based on AUM, so higher AUM means higher fees.

There are only two ways to grow AUM. The first is based on the whims of the market: simply, this is the change in value of the underlying portfolios. If markets go up, AUM goes up and so do fees. It’s therefore important for asset management firms to have appealing underlying funds that go up in value, not just because this wins more clients, but also because it makes more money.

The second is based on net inflows, which means attracting new investment in the fund that exceeds any withdrawals. This is hard for pure asset management players that don’t necessarily have an army of salespeople out there. The likes of PSG and Quilter have taken the route of focusing on inflows by building out a distribution side to the business.

The worst position to be in is to be focused on South African funds (as they have heavily underperformed offshore) and to be doing it without strong distribution. Coronation, I’m afraid I’m looking at you.

As for Ninety One, they are strongly focused on offshore funds and they do have some benefit from the association with Investec, along with strong relationships elsewhere in the market. For example, Nedbank just replaced Abax with Ninety One as the managers of the R6.3 billion Nedgroup Investments Rainmaker fund. Talk about making kings and paupers with the swish of a pen!

Still, Ninety One is so huge that even R6.3 billion won’t make a huge difference to them. The company has confirmed that it had £130.2 billion in AUM as at the end of December 2024. Yes, you read that currency correctly. That’s up from £127.4 million as at the end of September 2024 and £124.2 billion as at the end of December 2023.

Here’s a chart showing you the five-year performance of Ninety One and some of its competitors. See what I mean about Coronation? They are in strategic no man’s land in this sector:


Nibbles:

  • Director dealings:
    • It looks like the CEO of HCI (JSE: HCI) happily picked up some shares from a fellow director and also from someone else. A director sold shares in an off-market trade for R9.3 million and an entity associated with Johnny Copelyn bought shares worth R12 million.
    • Entities related to the CEO of Deutsche Konsum (JSE: DKR) increased their stake in the group from 25.26% to 29.78%
  • 4Sight (JSE: 4SI) will follow in the footsteps of a number of other small- and mid-caps that have moved their listing to the General Segment of the JSE Main Board. The nuance here is that they are moving from the AltX, as opposed to an existing Main Board listing.
  • Numeral Limited (JSE: XII) really is an example of a corporate that is calling all pockets in the hope that something will go in. They have expressed interest in financial services, being an official Google Partner for marketing and looking for biotechnology assets. Yes, I know – what a strange combo! In the meantime, revenue for the 9 months to November was $449k and operating profit was $411k. They’ve obviously found ways to put revenue streams through the business that come with little in the way of costs, while they look to get the biotech stuff off the ground.
  • Sebata Holdings (JSE: SEB) announced a further delay to the release of results for the six months to September 2024. They are now scheduled for release on Friday 24 January.

IKEA: The wisdom of the meatball

The best salesperson in Swedish business IKEA’s history isn’t Sven or Astrid or even Nils – it’s the meatball. Since 1985, the flatpack-furniture giant has sold more than a billion of its trademark Swedish meatballs every year. But how did a furniture company come to rely on meatballs to sell couches? The answer lies in consumer psychology.

Every now and then, you encounter a business that has its feet in two seemingly unrelated yet equally lucrative markets. Yamaha is one of my favourite examples: they are as well-known for their motorcycles as they are for their musical instruments, particularly keyboards. Another is the Virgin Group, famous for its airlines and gyms. 3M manufactures Post-It Notes and specialty dental equipment. What do these pairs have in common with each other? Almost nothing, except for the fact that each pair comes from the same company. 

Whenever I encounter a business like this, I can’t help but wonder about the trajectory that led to such an outcome. The business majors in the audience will probably tell me the less interesting story, which is that some of these divergences are the result of company acquisitions or a time in the world when conglomerates were popular – and that’s probably true. But once in a while, you hear a story about a business that turned a sidequest into a fully-fledged source of income, and then some. 

Such is the story of IKEA and the meatball. 

Enter the labyrinth

We don’t have IKEA in South Africa (yet), but many of us know the name, either from hearing it mentioned in TV shows and films, or from visiting an IKEA store overseas. Now, in a typical furniture store, you’d walk straight to the section you need, find your item, and leave. At IKEA, it’s more of a meander; somewhat of a carefully engineered labyrinth designed to keep you browsing, dreaming, and inevitably leaving with way more than you came for.

At the heart of this strategy is the “one-way layout,” a winding path that guides you through each section of the store in a set order. You don’t just stumble into the living room section; you’re led there after walking through the bedrooms, kitchens, and bathrooms. And while you could technically take one of the sneaky shortcuts sprinkled throughout the store, the layout is designed to keep you on the main route as long as possible. Each section you pass through feels like stepping into a fully realised home, with perfectly styled spaces that make it easy to imagine products in your own life.

The idea is not to buy anything off the floor. Instead, you make a note of the items you want and then collect them, flatpacked, from the warehouse, which is usually found on a level under the showrooms. It comes as no surprise, then, that the average IKEA shopper spends two and a half to three hours in the store every time they visit. 

Foreseeing the inevitable, IKEA founder Ingvar Kamprad launched his very first store with an in-store café included. Back then, it was all coffee and cake – just enough to keep shoppers caffeinated for the maze ahead. This brings us to where these little cafés are located – always halfway through the store, never too close to the entrance or the exit. It’s all part of a carefully calculated plan, says Alison Jing Xu, an associate professor of marketing at the University of Minnesota. Xu studies consumer behaviour, particularly how hunger impacts decision-making, and she notes that IKEA has a clever system in place.  

The goal isn’t to feed you right away; it’s to let you build up an appetite as you wander through the first half of the showrooms. Once you’re feeling peckish, you’re encouraged to pause for a snack or meal before heading back onto the path. Hunger, Xu explains, focuses the mind on acquiring food, but that desire often spills over into other kinds of shopping. Her research shows that hungry shoppers spend 64% more money than their well-fed counterparts.  

But now you’ve eaten in-store, so surely that 64% increase in shopping desire wears off, right? Wrong. The intention behind IKEAs cafeterias was to give shoppers an opportunity to sit, rest and (most importantly) plan how they would decorate their spaces using the things they’d seen up until that point – and it was very effective. 

Operation meatball

As IKEA grew, so did its menu, from pastries to Swedish staples like mashed potatoes and sausages. But founder Kamprad wasn’t exactly thrilled with the state of the company’s dining experience. He called the restaurants a “mess,” grumbling that they lacked both quality and a polished image.  

By that point, IKEA had around 50 stores worldwide, and Kamprad was worried about a bigger problem: hungry customers leaving the store to eat elsewhere because the cafeterias weren’t alluring enough. Sören Hullberg, an IKEA store manager at the time, had formed a close working relationship with Kamprad, so when Kamprad decided IKEA’s restaurants needed a complete overhaul, he chose Hullberg to lead the effort. 

With typical IKEA stores welcoming up to 5,000 customers a day, the menu had to be simple and streamlined to keep operations manageable and costs low. Since the plan was to roll out a standardised menu across different countries, Hullberg and his team sought dishes with universal appeal. That’s when they landed on meatballs. The choice was both cultural and practical. Meatballs are easy to freeze, transport, and prepare quickly in IKEA kitchens – an essential factor given the volume of customers.

The famous IKEA meatball was launched in 1985, and since then, the company has sold over 1.7 billion meatballs every year. For reference: that’s more meatballs annually than their best-selling furniture product, the Billy bookcase. Today, IKEA’s meatball lineup has expanded beyond the classic original to include chicken, salmon, vegetarian, and a newer plant-based option. They’re still served in quintessential IKEA fashion, alongside mashed potatoes, cream sauce, lingonberry jam, and vegetables. For fans who just can’t get enough, frozen versions are available to buy and cook at home.

Like all good things, the meatballs have weathered their share of challenges, including a major recall in 2013 when traces of horse meat were discovered in a European batch. Despite the setback, they remained a core menu item. During the Covid-19 pandemic, when IKEA temporarily closed its restaurants, the brand shared its meatball recipe online, allowing customers to recreate the experience in their own kitchens.

A well-rounded impact

In the four decades since their introduction, IKEA’s meatballs have gone from a cafeteria item to a cultural phenomenon. They’ve achieved global recognition, with countless online recipes, variations, and even dedicated fan communities. In a complete turn about-face, many customers now travel to their nearest IKEA for the meatballs, and look at the furniture on their way out the door. 

It makes sense too, if you consider that IKEA deliberately prices their cafeteria items lower than meals at restaurants in their vicinity. For shoppers, this is an opportunity to snag a cheap yet filling meal, albeit in an unconventional setting. As for IKEA… well, even if they make a small loss on the meatballs themselves, they’re still luring thousands of people into having a meal in the middle of their showroom every day.

Ever heard of Costco’s hotdogs? Same WhatsApp group. Those coffee shops at your local WeBuyCars branch suddenly make more sense, don’t they?

About the author: Dominique Olivier

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

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

Dominique can be reached on LinkedIn here.

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