UK-based power company Bboxx has acquired PEG Africa, a pay-as-you-go solar energy company in West Africa. Via its financing model, it enables customers to replace polluting fuels spend with solar energy spend. PEG has recently expanded its financing deployment capabilities to include solar water irrigation and bigger solar power systems for SMEs. The acquisition consolidates Bboxx’s position as a leading source of clean energy solutions in Africa with over 35 MW of installed solar capacity.
Eni, the Italian energy company, has acquired from BP, its upstream business including its interests in the gas-producing In Amenas and In Salah concessions in Algeria. Financial details were undisclosed.
Pwani Oil Products, a Mombasa-based manufacturer, has acquired Kartasi Industries, a manufacturer of stationery products based in Nairobi, through a newly created entity called Kartasi Products. The deal, the value of which was undisclosed, represents a strategic move by Pwani to diversify its business.
Enppi, a provider of fully integrated engineering, procurement, construction supervision and project management services, and Petrojet, a state-owned construction arm of the Egyptian Petroleum sector, have acquired Star Gas’ 50% stake in the International Company for Drilling (ICD) for US$117,6 million. The ICD manufactures, assembles and maintains covers and conducts which regulates pipes. Following the closure of the deal, Enppi and Petrojet will each hold a 40% equity stake in ICD with the remaining 20% owned by existing shareholder South Valley petroleum.
Nigerian Metaverse Magna, a crypto gaming platform, has secured US$3,2 million in seed funding from investors Wemade, Gumi Cryptos Capital, HashKey, Tess Ventures among others. The funding will be used for expansion of the WEMIX ecosystem in Africa.
NowNow, a fintech platform based in Lagos, has raised US$13 million in a seed round led by NeoVision Ventures, and India-based DLF Family Office. The funds will be used to grow its platform, team and marketing capabilities.
el-dokan, a specialist in enterprise e-commerce solutions in MENA, has successfully secured US$550,000 in a pre-seed round led by local and regional investors including Flat6Labs, EFG EV, Hala Ventures and 500 Global. The investment will be used to increase market share.
3atlana, an Egypt-based car service app, has closed a six-figure seed round from Ghabbour Auto, a local automotive company. Funds will be used to strengthen its AI system.
Carzami, an online retailer for quality used cars and vehicle financing, has closed a pre-seed round led by Contact Financial Holding. Together with an inventory financing facility, Carzami will use the funding to launch its innovative model for a digital car dealership which provides transparency and convenience.
Leading Edtech platform in the MENA region, Emonovo, has raised an undisclosed bridge round by strategic angel investors from the US, Europe and MENA and a follow-on investment from Flat6Labs. The investment will be used to boost the new brand strategy and fuel growth in university onboarding and student recruitment through the platform.
Duplo, a Lagos-based platform digitising payment flows for African B2B enterprises, has raised US$4,3 million in a seed funding round. The capital injection from Liquid2 Ventures, Tribe Capital, Y Combinator among others, will be used to launch new products and expand into new business verticals in Nigeria.
All On, an impact investment company has invested £1 million in Mobile Power, a Nigerian alternative power company. The funds will be used to increase growth of All On’s pay-per-use battery sharing platform MOPO. The MOPO offering removes the product acquisition challenge from the equation for underserved homes and micro businesses in Nigeria by empowering them to secure the energy only when needed by renting 50Wh-1000Wh lithium-ion batteries for 24-hour periods.
The first half of 2022 has brought with it a significant divergence from the global M&A activity that we saw in 2021. The main indicator of this change is deal values which, according to data compiled by Bloomberg, have fallen by 17% year-on-year to $2,1trn. Unfortunately, there appears to be little light at the end of this gloomy tunnel.
Global macroeconomic volatility is set to continue, if not increase, heading into the second half of the year, on the back of rising inflation, escalating interest rates and the protracted Russia-Ukraine conflict. This is likely to sustain the downward trend in global M&A activity for the foreseeable future.
In its latest annual report, the Bank for International Settlements (BIS) warns that leading economies are dangerously close to tipping into a high-inflation scenario that will prove difficult to reverse. The fears expressed by BIS appear founded when you consider that the inflation baskets of more than 60% of advanced economies and just over 40% of emerging economies are now reading higher than 5%.
As a result, central banks around the world face an impossible decision. Do they continue to combat inflation via aggressive interest rate hikes, and risk the possibility of recession as a result? Or do they accept higher inflation as a new reality, which may cause financial instability in the medium to long term.
While energy prices have soared as European nations scramble to find alternatives to Russian gas supplies, South Africa’s power utility, Eskom, has been left relatively unscathed by the energy impacts of the war, thanks to its primary reliance on coal to generate most of its power. Of course, this is of little comfort to South Africans who have had to endure record levels of load shedding as Eskom’s power plants continue to deteriorate at an alarming pace, thereby placing additional strain on the economy.
The steady deterioration in the value of the rand over the past number of months is fuelling this challenging situation. In the first half of the year, the rand benefited from high commodity prices that lifted the current account into a surplus, with inflation rates supported by a particularly hawkish stance by the South African Reserve Bank. While the national currency had been fairly resilient during the first two quarters of the year, recent sharp declines point to the likelihood that it is finally beginning to succumb to the fears of a US recession.
South Africa also remains highly exposed to any decline in demand for the country’s raw-material exports, which would curb a vital source of foreign exchange. One can observe a positive correlation between the value of the rand and the price of industrial metals.
On the slightly more positive side, the prospect of a global recession may result in downward pressure on oil prices, which may help control inflationary increases. However, the consequence of lower oil prices would be a stronger US dollar, which would then put additional pressure on emerging-market currencies, not to mention having the effect of increasing funding costs.
All of this makes for a very challenging backdrop for M&A activity in the coming months, and possibly years. With projections for further rate increases in the second half of 2022, going into 2023, and the local currency forecast to hit R17.50 against the US dollar by the end of 2022, it’s likely that companies will continue to find it challenging to pursue large, strategic acquisitions in the coming months.
Of course, challenges often bring with them at least some opportunities. There is a possibility that all the macroeconomic pressures outlined here may serve to fuel the market consolidation trends that have been seen in certain industries and sectors of late. If so, some companies may be prompted to seek out merger and acquisition opportunities rather than avoiding them. Despite the economic headwinds, most organisations recognise the need to adapt to fast-changing consumer behaviours and preferences, bolster the resilience of their supply chains and align with the global sustainable development imperative; and for many businesses, one of the most effective and efficient ways of doing so remains mergers or acquisitions.
So, while the slowdown in M&A is likely to continue for some time, the deal market certainly hasn’t ground to a complete halt. However, we can expect to see a far more cautious and measured M&A sector during the remainder of 2022.
Deshan Pillay is an Analyst: Corporate Finance | Nedbank Corporate and Investment Banking.
This article first appeared in DealMakers, SA’s quarterly M&A publication.
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There was a time in this market when you literally couldn’t give your mining stocks away. It wasn’t even that long ago really, as the industry that South Africa was built around was on the brink of collapse. With depressed commodity prices, ongoing labour disputes and of course the tragic events at Marikana, there were truly tough times in the industry in the past decade.
Thankfully, things are now looking a lot better. Commodity prices have spiked in the aftermath of the pandemic, driving an inflationary cycle across the world. South Africa has been a beneficiary of this, helping to reignite our economy after Covid.
Ok, “ignite” is perhaps a strong word after the latest tepid GDP growth number was released. Still, where would we be as a country if this industry wasn’t performing well again?
The team at Who Owns Whom has released two recent reports on the mining sector. As they point out, mining output exceeded R1tn for the first time in 2021 on the back of record commodity prices. There has been a significant related increase in employment numbers. Of course, there’s always a frustration when it comes to doing business in South Africa, in this case the poor performance of rail and port infrastructure that has plagued our exporters. Transnet’s challenges are well documented.
In the South African Mining Industry Trends Report, the researchers highlighted the following SWOT analysis while noting a favourable overall outlook for the sector:
In the more recent Service Activities Incidental to Mining of Minerals in South Africa Report (hot off the press – released in August 2022), the researchers reiterated the favourable conditions in the sector. Companies like Stefanutti Stocks and Murray & Roberts were quoted in this report, so there are important insights in here for investors in this sector.
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There’s big news from Orion Minerals, with the IDC coming on board to fund 43.75% of the pre-development costs at Okiep. The total budgeted pre-development costs of the New Okiep Mining Company are just over R49 million, with Orion on the hook for R44.5 million and the IDC providing the rest. The IDC will then facilitate B-BBEE ownership by selling 22.22% to a B-BBEE Entrepreneur entity led by Lulamile Xate. Thereafter, Community and Employee Trusts will each acquire a 5% economic participation interest in the company, taking B-BBEE ownership above 30% in line with the objectives of the Mining Charter. When all is said and done, my understanding is that Orion will hold 50.63% economic participation in the asset, the IDC will hold 19.38%, the entity led by Xate will hold 20% and the trusts will hold 5% each. The plan is to finalise the agreements for draw-down on the IDC funding by the end of October.
Mpact released an important announcement in the context of its sour relationship with Caxton. I must say, Caxton really hasn’t behaved well in my view, releasing all kinds of inflammatory or odd announcements along the way. Mpact complained to the TRP about elements of Caxton’s conduct and the regulator ruled in favour of Mpact. This means that Caxton is prohibited from making further public announcements in any form about a potential acquisition of Caxton.
Etion Limited has released an update on its process of unlocking shareholder value, i.e. selling assets for more than the market price suggested they were worth and then returning that cash to shareholders. For example, the disposal of Etion Connect for R71.5 million has now been finalised. Another disposal underway is the sale of Etion Create to Reunert, for which Competition Commission approval has now been obtained. The sale is still subject to shareholder approval at a general meeting to be held on 21 September. Assuming that goes ahead, proceeds of between R197 million and R210 million should be received in October. Etion has also sold its investment in the Etion Create building for an equity amount of R6.91 million (i.e. net of debt associated with the building). A dividend of R1.5 million was received from the property company before the sale. There’s also a deal to exit the lease for the Etion head office building that expires in October 2027, for which a once-off exit fee of R12 million is payable. The value unlock strategy has been extremely profitable for shareholders thus far.
RMB Holdings (unrelated these days to the bank with a similar name) has announced that all conditions have been met for the disposal of the stake in Atterbury Europe to Brightbridge Real Estate for R1.75 billion. The transactions will now be implemented in line with the timetable in the circular. This is a classic example of a managed wind-down of a legacy listed structure that still had solid assets in it.
Financial updates
Discovery has released results for the year ended June 2022. The share price closed 10.1% lower, so that gives you an indication of how the market felt about the lack of a final dividend. The year-on-year growth rates are all very high of course, as the base period was impacted severely by Covid. Annualised new premium growth was 6%, which sounds tame compared to growth in normalised headline earnings of 71%. This is because profits in Discovery Life were up by 200% as the mortalities normalised and existing provisions were found to be adequate, so the magic happened further down the income statement. Discovery Insure slipped into the red from the floods in KZN, but this is thankfully a relatively small part of the group. Looking at the more exciting side of the business, Discovery wants spending on new initiatives (Discovery Bank / Amplify Health) to revert to 10% of operating profit. In this period, the rest of the group made R11.5 billion in operating profit and new initiatives posted R2.1 billion in operating losses, so that’s way above the long-term target. Discovery Bank’s loss was R990 million in this period. The bank now has over 470k clients and grew deposits by 30% and advances by 14%. They are working towards having 1 million clients by 2026. The focus is on high quality clients, bringing strong levels of non-interest revenue and a low credit loss ratio of 1.56%. I also want to highlight that Vitality is now in 35 global markets, a truly remarkable export of South African intellectual property. Finally, something to keep in mind is that Discovery is looking to raise equity capital for the Ping An Health Insurance business, an overhang for the stock that is also raising question marks around the dividend prospects. The share price is down more than 22% this year.
The Foschini Group has released a trading update for the first 23 weeks of the 2023 financial year. This covers the period from 27 March to 3 September. Group turnover is up 21.6%, with a solid performance in TFG Africa (14.7%), a strong result in TFG London (up 23.5%) and incredibly high growth of 42.3% in TFG Australia. At group level, online sales grew 5.1% and contributed 9.2% of total turnover. Notably, these results exclude the Tapestry Home Brands acquisition. Growth looks really strong in the core TFG Africa categories of clothing (up 17.3%) and homeware (up 15.7%), which contribute a combined 83.8% to TFG Africa turnover. Cellphones only grew by 0.8%, which isn’t great as this category contributes 9.1% to turnover (more than homeware). Cash turnover is 70% of TFG Africa’s total turnover and grew by 13.6% vs. 17% growth in credit turnover. Acceptance rates for credit turnover are lower due to overall economic conditions i.e. the group is being more cautious with credit. Online turnover grew by 19.8% and contributes 3.2% to TFG Africa turnover. This online growth rate is much higher than in the UK and Australia which have a much higher base of online sales participation (37% and 6.7% respectively). The share price is up around 10.5% this year.
The show is practically over at Conduit Capital, as the company will not be opposing the liquidation of Constantia Insurance Company Limited. The prohibition on writing of new business and the adverse publicity associated with the provisional curatorship led to brokers and underwriting managers taking the insurance portfolios elsewhere, which has effectively killed off the business. This subsidiary represents 94.4% of Conduit Capital’s revenue. The market cap of the group is now just R46 million and the share price was down 50% by afternoon trade. If there is anything left here for shareholders, it will be tiny.
SA Corporate Real Estate released a trading statement for the six months ended June 2022. The group has mostly sold off its office exposure, leaving a portfolio with a focus on convenience-oriented retail centres, logistics and “quality residential” properties. Although distributable income per share is only up 5% vs. the prior period, the improved financial position and operating environment means that the distribution per share will be between 17% and 27% higher.
Chrometco Limited released an update on the business rescue process at the Black Chrome Mine, a material subsidiary of the company. The business plan is expected to be published by 14 October, an extension of around six weeks vs. the previously communicated deadline.
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Operational updates
Capital Appreciation Group released a business update for the five months to 31 August 2022. The release was driven by the AGM being held on Wednesday. The group notes strong demand from local and international customers for the products and services in the Software division. The digital offering was enhanced by the acquisition of Responsive, with those financial results to be included in full for the first time in the reporting period covering for the six months to September. Headcount in the Software division is up 50% year-on-year including a number of recently qualified graduates, so that gives an indication of growth. In the point-of-sale terminals business, the comparable period saw growth of 68% as the economy emerged from Covid and that level won’t be repeated in this period. Still, growth is expected on a full-year basis. The Android devices offer solid functionality at attractive price points, so economic challenges are driving sales mix in favour of these terminals. The group describes the balance sheet as “very strong” and the divisions are highly cash generative. The share price is down around 20% this year as valuation multiples have cooled off, even though it trades at a modest multiple by tech company standards.
I would normally put this in the “unusual things” section but these disasters happen so regularly at Tiger Brands that I’ve started treating them as operational risks. The latest problem is a recall of Purity Essentials Baby Powder after trace levels of asbestos were detected. The share price closed more than 6% lower, bringing to an end a recent rally in the price. The best thing about this is that Tiger Brands is in the JSE Responsible Investing Index, further proof that ESG as it exists today is absolute garbage that gives almost no indication of good corporate citizenship.
Clientele Limited’s company secretary has resigned after 17 years of service. The current Head of Group Legal has been appointed to replace her.
Director dealings
A couple of directors of Woolworths sold shares to cover the tax on vested share incentives, which I usually ignore as this is ordinary course of business stuff. As I worked further down the announcement, I noticed that there were other chunky sales. The CFO of Woolworths South Africa sold R1.48 million in shares, the interim CEO of David Jones sold a whopping R5.3 million in shares and the CFO of Country Road Group banked R1.09 million from selling shares.
Unusual things
MAS Plc is the latest company to list on A2X, offering an alternative place to trade to the JSE. The primary listing on the JSE is unaffected by this secondary listing.
Ghost Grads Karel Zowitsky and Sinawo Bikitsha joined forces during a busy week of varsity exams to pull off an excellent edition of Ghost Global.
Lululemon: manifesting returns
Yoga moms, rejoice! Lululemon recently released results for the second quarter of the financial year, proving once again that despite roaring inflation affecting consumers, not all consumers are affected equally. With the right products targeting a high-end niche, inflation is but a small bump in the road.
Lululemon essentially developed the athleisure clothing industry. This has been a hugely popular category in the new reality of working from home and dressing down. The products aren’t Louis Vuitton but aren’t at Nike levels either, creating an interesting price point that is premium enough to be resilient but also not out of reach for many consumers.
The other key element of the model is the direct-to-consumer strategy. Lululemon got this right before people realized how powerful it was, with the likes of Nike now playing catch up. The Finance Ghost and Mohammed Nalla explored this extensively in their report and podcast on Lululemon in Magic Markets Premium:
Source: Magic Markets Premium report on Lululemon, April 2022
The results for Q2’22 revealed a 29% increase in revenue to $1.9 billion, up 28% in North America and 35% internationally. Online sales contributed nearly 42% of net revenue. Although gross margin decreased by 160 basis points to 56.5%, that’s still a very healthy margin.
One of the most important things about this business is that it’s not just the yoga moms who should be rejoicing. The company’s growth strategy is to double revenue from 2021 to 2026, which requires significant growth in men’s clothing as well. The group plans to quadruple its international revenue, so opening new stores in Spain and regional eCommerce platforms is in line with that.
Lululemon’s share price is down nearly 19% this year, a reminder that even the best businesses at the wrong valuation multiple are still bad investments.
Best Buy. Or not.
In stark contrast to its name, Best Buy’s share price is down nearly 30% this year. Ouch.
With a focus on the sale of consumer electronics, this is a classic case of a general merchandise dealer feeling the pinch of consumer demand. As demand for digital goods normalized after the pandemic and stimulus cheques became a distant memory, US revenue fell by 13.1%. International revenue didn’t do much better, down 9.3%.
The impact on non-GAAP diluted earnings per share was particularly severe, dropping by nearly 50% to $1.54 per share for the quarter.
Although a share buyback programme was underway to take advantage of the decline, this was halted in Q2. The cash dividend stuck around though, with $0.88 per share for the quarter. For context, year-to-date dividends are $397 million vs. $465 million in share buybacks.
Weirdly, the CFO sold a tiny portion of his shareholding just a few days before the release of earnings. This wouldn’t be allowed in the South African market, as this would be considered a closed period. With only 890 shares sold and a shareholding of 59,513 shares remaining, perhaps he was just trying to afford lunch in an inflationary economy.
The biggest shock of all at Bed Bath & Beyond
This is sad news: the CFO of Bed Bath & Beyond (Gustavo Arnal, 52 years of age) passed away on Thursday after jumping from the 18th floor of an iconic building in Manhattan. The Jenga Building is perhaps a cruel example of dramatic irony in the context of the company’s operations, which are close to collapse.
Prior to the event, Arnal and activist investor Ryan Cohen were sued under a class action lawsuit for allegedly taking part in a “pump and dump” scheme that would falsely inflate the company’s value. Refer to the previous edition of Ghost Global to learn about Ryan Cohen’s relationship with the company. It’s worth noting that JPMorgan is also on the wrong end of this lawsuit.
This is a scheme that involves fraudsters and market manipulators spreading misleading and false information in an effort to send the share price into a frenzy, profiting along the way by selling the stock at an inflated price. This is not what you want to be accused of in life.
The lawsuit alleges that Cohen initially approached Arnal about a plan to profit from the stock. Over a couple of days in August, Arnal sold shares worth $1.4 million. That’s nothing compared to Cohen, who is believed to have made a profit of around $68 million on his trades after buying nearly 12% of the company in the first quarter of 2022.
The pain just keeps on coming at Bed Bath & Beyond, with the stock down 52% this year and more than 15% after the news of the CFO’s death hit the market. This comes off the back of strategic moves to strengthen the financial position, closing down around 150 stores (out of a footprint of 700+) and laying off 20% of its 32,000 employees. On the plus side, the company announced financial commitments of more than $500 million of new funding.
The company is preparing for a potential offering of up to twelve million shares of common stock, with the proceeds used to reduce debt.
Dial 911: Porsche is coming to the market
In lighter and certainly faster news, Volkswagen AG (VW) announced that the initial public offering (IPO) of Porsche is underway. This is a bold move against a bearish backdrop in global markets, particularly in Europe where the energy crisis is escalating.
To be fair, VW started preparing for this IPO back in February, before all hell literally broke loose in Europe.
Group CFO Arno Antlitz noted that the proceeds from listing Porsche will give the company more financial flexibility. With Porsche valued at $85 million or more, VW only intends to list 12.5% of the stock in the company.
This is an exceptionally complicated shareholding structure, with the Porsche family expected to acquire more than 25% of the carmaker closer to the IPO. Figuring out the VW group’s corporate structure is arguably trickier than designing the next generation 911!
Although car sales are under pressure, the VW group is making good progress in its electric vehicle strategy. There are other very exciting brands in the portfolio as well, including Lamborghini, Bentley and Audi. If you aren’t at the point yet of ordering your new GT3RS, you can at least add some Porsche shares to your portfolio.
Interested in global stocks? Not sure how to do your own research, or looking to supplement your own process? The Finance Ghost and Mohammed Nalla release a weekly podcast and report on global stocks, available for R99/month or R990/year in Magic Markets Premium. The full library is available, giving you over 40 reports to enjoy!
Emira Property Fund has previously offered to acquire 100% of the shares in Transcend Residential Property Fund and Emira has now released its offer circular. This is a general offer rather than a scheme of arrangement, so the circular is sent out by the offeror (Emira). The offer price is R5.38 based on a “clean price” i.e. excluding distributions, which is a 10.5% premium to the 90-day volume weighted average price. Transcend is utterly illiquid, with Emira reminding shareholders that less than 0.44% of Transcends shares have traded in the last six months. The premium is relatively low because large shareholders have no other obvious ways to realise their investments. Based on irrevocable undertakings received by Emira, it should achieve a stake of least 63.46% in Transcend. The offer closes at midday on Friday 4 November.
Due to Northam Platinum’s intervention in the Competition Tribunal process regarding Impala Platinum’s offer for Royal Bafokeng Platinum, there is yet another delay to the process. The previous longstop date of 26 September has been written off and Implats hasn’t provided another date. This is because the Competition Appeal Court has clarified the scope of Northam’s participation as an intervening party, leading to Implats requesting a pre-hearing to determine the further conduct of the merger hearing. This is a perfect example of how long an acquisition can really take, particularly when it becomes ugly among competitors.
Although there’s no deal just yet, Dipula Income Fund is preparing for action. After simplifying the dual-share capital structure, the board now wants to replace the memorandum of incorporation (MOI) and increase the authorised share capital.
A major shareholder of Telemasters (L Pieton) has reduced his stake to 8.96%. The announcement was triggered as he moved through the threshold of 10%.
Financial updates
The biggest news of the day was the release of financial results by Shoprite for the 52 weeks to 3 July 2022. Although the announcement kicked it off by saying that they are proud of the result, the market still gave Shoprite a proper klap – down 7.5% on the day! This is despite the dividend increasing by 10.3%, a strong reminder of the dangers of a stock being priced for perfection i.e. trading on a high multiple. On a comparable 52-week basis, the South African supermarkets grew sales by 12.6%. Selling price inflation was 3.9% for the year in South Africa and 5% in the second half of the year. Shoprite and Usave make up 52.8% of the segment and grew by 7.2%. Checkers and Checkers Hyper grew sales by 9.1% despite two Hypers remaining closed after the riots. The LiquorShop business contributes 7.2% of sales and increased by 44.5% vs. a base period with many restrictions. The Xtra Savings loyalty programme became a monster in record time, now boasting 24.7 million members. No growth percentage was provided for Checkers Sixty60, other than confirmation that it is still growing. Looking beyond the core Supermarkets RSA segment, the Supermarkets non-RSA segment grew by 12.9% and Furniture was only 0.7% higher, both on a 52-week comparable basis. The OK Franchise was up 7.5% and the pharmacy businesses both grew by an undisclosed percentage. Gross margins were maintained at 24.5%, an impressive outcome in this period. Expense growth was 10.7% which is why I think the market got a fright. We aren’t used to seeing a negative trend in operating margins at Shoprite, with trading profit margin down from 6.1% to 6.0%. HEPS was 7.8% higher, which doesn’t adjust for the extra week of trading in the comparable period.
Metair Investments released a trading statement for the six months ended June 2022. It really has been a tough time for the company, with hyperinflation accounting applied to the business in Turkey (an exceptionally complicated framework) and operational challenges in South Africa like the floods. When added together, HEPS is expected to decrease by between 71% and 76%. The good news is that the energy storage segment is still doing ok, although volumes were lower in Romania and South Africa. The bad news was in the automotive components vertical, with the semiconductor shortages hurting Ford as a key customer and the floods literally shutting down Toyota South Africa’s operations for months. A business interruption claim of R360 million has been accrued and R150 million has been received thus far. Somehow, the share price is only slightly down this year.
Attacq has released a trading statement for the year ended June 2021 and the share price closed 9% higher in appreciation, though I must point out that the bid-offer spread is wider than the entrance to Mall of Africa. Distributable income per share is expected to be between 61.8 cents and 63.6 cents, an increase of between 32% and 36% vs. the prior year. This is significantly higher than the guidance given when interim results were released, thanks to generally improved trading conditions and lower costs associated with the offshore investment holding structure. The payout ratio is expected to be between 75% and 85%. The share price closed at R6.37. This is one of the property recovery plays in my own portfolio.
Bowler Metcalf has released financial results for the year ended June 2022. Although revenue grew by 6% with flat volumes (i.e. the full uptick was based on price increases), operating profit fell by 10% and HEPS was 9% lower. The company attributes this to an incredibly difficult trading period and is looking to the future, like with the relocated Cape Blowmoulding plant and the acquisition of the SkyePlastics business. The final dividend of 27 cents per share is 16% lower than last year.
Advanced Health has released a trading statement for the year ended June 2022. The headline loss per share improved from 6.82 cents to 5.89 cents, an improvement of 13.6%.
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Operational updates
NEPI Rockcastle has officially concluded its journey of migrating into the EU. It was quite a process and plenty of lawyers made money along the way, as the company first had to migrate to Luxembourg before moving to the Netherlands. A new director has been appointed who is familiar with Dutch law.
Share buybacks and dividends
Between 29 August and 2 September, Prosus repurchased shares worth $214 million.
Based on the general authority granted in September 2021, Invicta has repurchased shares worth over R108 million at an average price of around R27 per share. This represents 3.6% of shares in issue at the time the authority was given, so the remaining authority is for 16.4% of share capital. The current share price also happens to be R27!
Lighthouse Properties is paying a cash dividend of R0.2492111 per share with a scrip dividend alternative that works out more favourably for shareholders than the cash dividend based on my calculations. This is typically the case, as companies prefer shareholders to accept the scrip dividend so that cash can be retained in the entity.
Capital & Regional will be paying a dividend of R0.49425 per share, which comes to R0.3706875 after UK withholding tax and SA dividends tax based on the double tax agreement. There is a scrip dividend alternative that enjoys a less onerous tax calculation.
Reinet has confirmed that its gross dividend will be R4.7656 per share, payable on 21 September.
The Chairman of Tharisa has bought shares in the company worth R1.47 million and the CEO followed suit with a purchase of almost identical value.
Directors of Old Mutual have climbed into the shares in a big way. The CEO was good for more than R3.25 million and four other directors put more than R3.57 million in the pot in aggregate.
A director of a subsidiary of Stadio (AFDA – the film school, in case you were curious) has sold shares in the company worth R1.06 million.
A director of Thungela Resources has acquired shares in the company worth nearly R300k.
Three directors of a subsidiary of Blue Label Telecoms have sold shares in the company worth R1.77 million, R1 million and R273k respectively.
Unusual things
I honestly don’t know when last I saw one of these: a company announcing a lease renewal that is also a related party transaction. A division of Hudaco (Dosco Precision Hydraulics) has renewed a lease in Edenvale for a property that is held by a company called Dufomo, in which the CEO of Hudaco has an 82% stake. The company has been in these premises for over 18 years. Merchantec Capital was appointed as the independent expert to conclude whether the lease renewal is fair. I’m sure they spoke to a few property experts, as most corporate financiers (myself included) have no idea whether a lease would be considered fair or not! In any event, the determination is that it is indeed fair to shareholders of Hudaco.
Based on a question at the most recent TreasuryONE webinar, Andre Botha (Senior Dealer at TreasuryONE) took a closer look at why diesel and petrol prices have diverged.
In recent months, the petrol and diesel markets have seen an unusual development. In South Africa, petrol and diesel prices are normally closely aligned when it comes to adjustments at month-end to the various prices – although not exactly the same, it usually is within the same realm.
That is until recent developments in the oil market had a direct impact on the difference we will see in the adjustments in the various fuel prices in September – petrol decreasing by 204 cents per litre and diesel by between 46 cents and 56 cents.
Oil prices have come down from highs of $140 per barrel, hovering just below the $100 per barrel mark. The rand has also lost some value due to a flight to the US dollar by investors. Despite the currency losing value, we are still looking at a reduction, although it is less than expected due to an adjustment to the slate levy.
Where does the disparity come from?
The graph illustrates the US Dollar per litre for Diesel (orange) and Petrol (white). It is clear to see that normally these are in sync, but there is a clear divergence at the moment.
The reason for this is not refining cost or any input cost – it boils down to the simplest form of economics: supply and demand. Many market players have bought diesel in the short term due to the lack of supply, as well as the current energy crisis in the eurozone as the winter approaches.
Diesel is used in generating electricity as well as being the preferred fuel for machinery for production. With the market scrambling for diesel surety, supply is king and suppliers are selling diesel at a premium due to the high demand.
The question then becomes: how long would this anomaly still be in the market? Should the crisis in the Eurozone continue and supply not increase from oil-producing countries, we could see this going on for a while.
In short, we either need a resolution in Russia, or an increase of supply from other countries. While alternatives are being explored, they will take a while to manifest in the market.
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Castleview Property Fund is in the process of a reverse takeover by I Group, a related party. This means that so many assets are being injected into the entity in exchange for shares that it materially changes the business of the listed company, which necessitates the release of detailed documentation, known as revised listing particulars. If you’re curious about this documentation, you’ll find it all at this link.
Old Mutual Insure (a subsidiary of Old Mutual) is acquiring 100% of Genric Insurance Company, a non-life insurer that owns equity interests in various specialist underwriting management agencies and other entities. This includes all sorts of insurance like equine, marine, cash in transit and even shack insurance! I didn’t even know that such a product exists, though it makes sense as any property can technically be insured. RH Bophelo is one of the sellers, with a 30% stake in Genric. That 30% stake will improve RH Bophelo’s bank account by just under R90 million, which means that Genric has been valued at R300 million. The business made a profit after tax of R27.8 million in the year ended June 2022. Importantly, RH Bophelo has a 60% stake in Wesmart, an underwriting business that Genric holds the other 40% in, so the parties will still work alongside each other going forward. The proceeds from this sale will be used to continue RH Bophelo’s strategy in the healthcare sector. As RH Bophelo is classified as an investment entity under JSE rules and this disposal is in line with the investment policy, no shareholder approval is needed.
Ascendis Health has received a further dispensation regarding the timing of the circular for the Pharma-Q / Imperial Pharma disposal and the Austell Pharma disposal. The circular must be issued before 30 September, though the company hopes to issue it by 13 September.
Keep an eye on Salungano Group – in a revised AGM notice, the company added a special resolution to double the authorised share capital, to allow for possible acquisitions and capital raisings. It could be nothing, or it could be something.
Financial updates
Trellidor’s terrible financial results were explained in detail in a trading update, so the market was well aware of the collapse in headline earnings per share (HEPS). It has fallen by 99% to nearly breakeven, with a Labour Court judgement and operational pressures almost equally to blame. Unsurprisingly, there’s no final dividend. The share price has lost over 30% this year. There are some good news stories here despite the overall horror show. For example, Trellidor UK grew revenue by 26.2% and Trellidor’s branches only saw sales drop by 1.3% after growing by 46% in the prior year. The gross margin decrease in Trellidor from 48.4% to 44.2% ruined the result. The Taylor segment saw revenue decrease by 8.3% and gross margin drop from 32.7% to 28.2%. The business was cash flow negative, a nasty swing from positive cash generation of R15.6 million in the prior year. The senior management team at Taylor has been restructured “in response to continued underperformance of the business” – I guess the blind were leading the blinds. If you are thinking about a punt at Trellidor, keep an eye on input costs like steel. Along with other cost pressures, this is where the gross margin problems came from.
Bidvest released results for the year ended June 2022. Revenue was up 13%, trading profit jumped by 23% and HEPS was 22% higher. The total dividend of 744 cents is 24% higher, so the cash return to shareholders followed the earnings. The company notes that it has reached the same level of profitability as in 2016 before it unbundled the food service business, Bidcorp. Cash flows are actually R0.5 billion higher than those levels. The announcement talks about this being a “remarkable achievement” and I certainly can’t argue that point. Bidvest operates an array of businesses with exposure to numerous sectors. The disappointment was in the financial services division, which means there is room for the group result to get even better! The share price is up more than 14% this year.
RCL Foods released its results for the year ended June 2022. The business has worked hard to diversify away being a poultry business, thereby giving shareholders a smoother ride. Although revenue is up 10.2%, EBITDA only increased by 7.7%. Underlying EBITDA (which excludes material once-offs and accounting adjustments) only increased by 2%. Commodity input cost pressures have clearly hurt margins. Sugar achieved its second higher profit ever (take that, health enthusiasts) and Rainbow (the poultry business) has returned to profitability. The Grocery result was strong but the Baking business suffered from elevated wheat and fuel costs. Vector Logistics did well as the food service industry saw a return in volume to almost pre-Covid levels. HEPS increased by 9.9% and the dividend was consistent with the prior year. RCL closed 9.5% higher, taking the year-to-date drop in share price to 15%.
AVI Limited released results for the year to June 2022 and they were in line with what the market is used to seeing from this company: tepid revenue growth (just 4.3%) and HEPS growth of 6.1% – a positive earnings result despite little to get excited about on the top line. The dividend is 6.2% higher, so the payout ratio is consistent. I&J was a drag on earnings, as operating profit would’ve increased by 8% without I&J vs. 5.4% as reported. You may find it interesting that rooibos revenue was lower this year but black tea performed well! As I’m firmly Team Coffee, I noted that coffee increased by 5% whereas tea was down 0.4% overall. Biscuits were up 9.9%, so people are clearly eating their troubles away.
CA Sales Holdings is the FMCG business that was recently unbundled from PSG and migrated to the JSE. It focuses on route-to-market services, which means helping brands achieve shelf space. That sounds easy until you know a thing or two about retail buying and supply chain considerations. Revenue was up 20% and operating profit increased by an enormous 47%, driving HEPS growth of 44%. There’s no dividend, as the company only declares full-year dividends. The share price closed more than 11% higher, though I must note that it is highly illiquid.
MTN has dropped all the way down to R128 per share and my trigger finger to buy this dip is itching. In August, MTN invited holders of the $750 million 4.755% notes due 11 November 2024 to tender their notes for purchase by MTN. In other words, the company wanted to reduce its non-rand debt and was willing to do so up to a value of $250 million. As the response was so strong ($482.7 million in valid tenders), the company increased the acceptance amount to $300 million. This is funded through existing cash balances, so it doesn’t change the leverage calculation (net debt – debt minus cash – hasn’t changed). What has changed is the ratio of non-rand to rand denominated debt, which will improve to 35:65 after this settlement.
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Operational updates
Renergen has finally flicked The Big Switch at the Virginia Gas Project. The group is officially a producer rather than an explorer, operating South Africa’s first commercial liquefied natural gas plant. The share price closed over 4% higher in appreciation.
Europa Metals released drilling results from the 100% owned Toral led, zinc and silver project. Although I’ll never understand all the geological jargon, I do understand the chairman and acting CEO commenting that “the high-grade nature…is hugely pleasing” – this is good news, giving the team “confidence in the deposit’s tenor and continuity at depth.”
In another junior mining update, Jubilee Metals announced that the Project Roan copper project has achieved “nameplate capacity” – I Googled this and learn that it means the rated output of a facility i.e. what it was built to achieve. In other words, the copper concentrator has been ramped up to its design throughput rate. This has been a £40 million investment to deliver 12,000 tonnes per annum of copper cathode production capacity, an investment which the CEO describes as being a “fraction of the industry norm” in terms of investment per unit of copper.
Southern Palladium joined a busy day of mining updates with news of its PGM drilling programme intersecting the first UG2 reef. You’ll be thrilled to know that drillhole E062 has a downhole length of 87cm, with a pegmatoidal pyroxenite as footwall underlain by a poikilitic pyroxenite. You know, that’s always been my favourite kind of footwall. Jokes aside, the management team seems to be happy with the outcome.
Have you ever wondered what a governance report looks like? Well, wonder no more. At this link, you’ll find a presentation from Exxaro that deals with everything from ESG through to remuneration policies.
Share buybacks and dividends
Naspers has received approval from the SARB to embark on the sale of Prosus shares to fund repurchases of Naspers shares. This is apparently going to help in reducing the traded discount to underlying net asset value. Essentially, Naspers is going to unwind some of the cross-holding that was put in place for supposedly the same purpose – reducing that discount. If this confuses you, I assure you that you aren’t the only one.
BHP has confirmed the exchange rates applicable to its final dividend. Shareholders on the JSE will receive R29.7094875 per share.
Notable shuffling of (expensive) chairs
After 24 years of service, Brian Frost has resigned from the board of Bowler Metcalf. He will be replaced by Debbie van Duyn.
Director dealings
Here’s one to take note of: David Kneale (ex-CEO of Clicks and currently a non-executive director of Woolworths) has bought R512k worth of shares in Woolworths. Kneale is largely credited with building Clicks into the business that it is today, making use of his prior experience at Boots in the UK. This is a significant show of faith in Woolworths.
At the same time that Naspers has been buying back its own shares in the market (a sign to investors that the shares are undervalued), CEO Bob van Dijk has been dumping enormous amounts of Naspers shares (which suggests the exact opposite). To add to the recent sale of over R1 billion in shares, there’s another R370 million that has found its way into his bank account.
Sirius Real Estate CEO Andrew Coombs has acquired £15.6k worth of shares in a family trust.
A trust linked to a non-executive director of NEPI Rockcastle has acquired shares in the company worth over R1.76 million.
Three well-known South African retailers released results to the end of June last week: Woolworths and Truworths with their year-end figures and Massmart with their interim results. Chris Gilmour digs in.
All three companies used to be part of the same grouping (the greater Wooltru group) in the 1990s, but have operated as separate entities for many years now. Massmart is a retailing conglomerate, with an emphasis on general merchandise. Truworths is the leading credit-oriented clothing retailer in South Africa. Woolworths is a hybrid of upmarket food and quasi department-store clothing in South Africa and with significant investments in Australia.
The results differed markedly, from the downright shocking at Massmart, through what is seemingly a turnaround at Woolies to the record results from Truworths. And yet in all of these results, it was what WASN’T said at the presentations that was far more interesting than the actual content itself.
Walmart springs a surprise
The poor Massmart results had been widely telegraphed in a trading update some weeks earlier, so they came as no surprise. What did shock the market, however, was the announcement that controlling shareholder Walwart was making an offer to buy out the minorities at a significant premium to the prevailing share price.
What happens to Massmart after it has been delisted is anyone’s guess. Walmart may decide to keep it in unlisted form and make the necessary changes to effect the turnaround strategy. Alternatively, it may get sold off in whole or in part.
WalMart doesn’t have a great track record of investment outside of north America. It persevered with Asda in the UK before limping away from it after being paid roughly what they paid for it twenty years earlier. It never managed to gain critical mass in Brazil or Germany and has also exited South Korea and Japan in recent times.
To maintain a presence in South Africa makes little sense, in my opinion. Long gone are the days when Massmart was set to become the largest retailer in Africa, using SA as its base. Like many other SA retailers, Massmart has progressively been reducing its non-RSA footprint on the continent. Having a physical presence in SA is likely to just be a distraction for Walmart management and any revenues and profits it might make in future wouldn’t amount to more than rounding errors in Walmart’s grand scheme of things.
Woolworths is clawing its way back
Woolies came out with their full year results on August 31 and, like the curate’s egg, it was good in parts. But not good enough to really make the market sit up and take notice. Woolies has been damaged in the past 25 years by successive forays into Australia and especially its acquisition of department store chain David Jones.
Its first acquisition, in 1997, was the thirty-something chain called Country Road. This was a quintessentially Australian operation that sold relatively high-quality merchandise at relatively elevated price points. It was in quite a different niche to Woolies in SA, but it was also a chain in transition. Country Road’s customer base was changing and Country Road wasn’t changing with it. The company went through a lot of pain until a Scotto/Australian by the name of Ian Moir rescued it.
For his efforts, Moir was rewarded with the top job as CEO of Woolies and to begin with, he hardly put a foot wrong. But then, as is often the case, he got too big for his boots and decided it would be a good idea for Woolies to become the pre-eminent department store chain in the southern hemisphere. Because of Moir’s success with Country Road, the Woolies board backed him fully with the acquisition of David Jones. He had grandiose plans for the chain, including selling Woolies Foods through the department stores. Of course it all came to nought, Woolies got themselves into big trouble and Moir did a leopard crawl out of the organisation in 2019.
It was left to present incumbent Roy Bagattini, formerly an SAB Miller and Levi Strauss executive, to pull the fat out of the fire with David Jones. And to be fair to Bagattini and CFO Reeza Isaacs, much has been achieved since Moir left. The balance sheet is in much better shape, R1.5 billion has been repatriated from David Jones to South Africa and Australia appears to have been stabilised.
But the real jewel in the crown – Woolies Foods – is taking major strain and is losing market share to arch-rival Checkers. Bagattini went to great lengths in the presentation to emphasise that Woolies Foods isn’t just about price; it’s about value. And he’s right. This isn’t just semantics. Almost 2/3 of Woolies Foods’ offering is fresh and/or convenience, rather than dry groceries. It’s a very different universe of goods from that offered in the main by Shoprite/Checkers and Pick n Pay. Woolies is obsessed with quality and that is reflected in the shelf life of its products. I talk from personal experience with simple things such as bananas; Woolies bananas stay fresh for the best part of a week or more while the others struggle with much more than two to three days.
But there comes a limit in such a cash-strapped environment as the South African economy as to what can reasonably be charged for products. Woolies is aware of this and is trying where it can to reduce prices. But it’s not easy and will require relentless campaigning in the media to draw people’s attention to their efforts.
Listening to management at the results presentation last week, the casual observer might be forgiven for thinking that Australia has come right. After all, it appears to have turned around after another strict lockdown in H1 of last year and over R1 billion has been repatriated to South Africa. But the question has to be asked, if David Jones was looked at as dispassionately as possible right now, would Woolies invest in it?
Of course not.
It has been a distraction over the years and although it is being tidied up, it is never likely to amount to very much. It isn’t a growth vector by any stretch of the imagination. Department stores are dead in most parts of the world and Australia is no exception. Country Road is better, admittedly but it has also taken a long time to settle down.
But nothing was mentioned about a possible sale of Woolies’ Australian assets. South African investors have probably got used to the usual response from management that it isn’t considering a sale of Australia, in whole or in part. And yet, the Australian media keeps publishing tantalising titbits about a sale of Australian assets. The latest, in a publication called Smart Company, suggests that not only has Woolies appointed Goldman Sachs to find a buyer for David Jones but that Andrew “Twiggy” Forrest, Australia’s second wealthiest man, has expressed interest via his Tatterang private equity group. Presumably all will be revealed in time.
My view is very simple. I believe Woolies made a mistake in acquiring David Jones and should exit this company. I suspect it is being prettied up for a sale. The Woolworths share price is where it was in 2013. The PE is 15.2x, which is quite steep for a company with a pedestrian growth outlook. Much now depends on the prospects for a sale of the Australian operations. If David Jones and/or Country Road can be disposed of for a reasonable price, then the share may well react positively. If not, it will more likely remain in the doldrums.
Truworths: better results but unanswered questions
Which just leaves Truworths. On the face of it, this should have been CEO Michael Mark’s swansong. At the helm for 33 years, Mark was scheduled to pass the CEO’s baton to either CFO Manny Cristaudo or Truworths SA Deputy MD Sarah Proudfoot. At the results presentation, Mark made mention of succession but gave no specific date, noting only that it might be later this year or even slightly later. And he didn’t mention his successor by name. Perhaps Cristaudo and Proudfoot will share the responsibility?
The other item that was left in an unsatisfactory manner was Primark. Truworths won a court case against British/Irish retailer Primark in the Supreme Court of Appeal (SCA) which allowed them to use the Primark label in SA, as the British parent had not used the trademark since registering it many years ago. When questioned at presentations about the legalities of using the Primark label, Mark became visibly agitated and declined to enter into argument about the issue. After establishing a store base of 11 stores in the past year, Truworths has now abruptly terminated the use of the Primark label and will instead convert all of its Primark stores to the Sync label. Mark noted that the decision to terminate the use of the Primark label was taken in consultation with the British/Irish parent and was “very amicable”-whatever that means. He refused to elaborate on it.
Although Primark was tiny in the overall scheme of things, it was an indication that Truworths was prepared to examine the possibility of entering the low-end of the market. The only winners out of this long-running saga have been the lawyers. It will be instructive to see if the British parent company eventually decides to set up shop in SA in its own right.
One area that Truworths has got very right in recent times has been its UK subsidiary, Office. Three years ago it was struggling and apparently had a “for sale” sign on it. But Truworths has persevered with it and it has at long last delivered the goods. I asked Mark at last week’s presentation if, knowing what he now knows about the UK retail market and about Office specifically, he would still have made the decision to buy Office. Without hesitation, he responded in the affirmative. In fact, he was almost gushing n his praise of Office.
Truworths trades on a relatively undemanding PE of 9.4x. Growth has been elusive for this company for a number of years, especially top line growth. With a background of higher interest rates and languid economic growth in South Africa, it’s difficult to see where strong growth is coming from next year and beyond. And the UK is forecast to experience a five-quarter recession next year, according to the Bank of England. So no respite there either.
Buffalo Coal Corporation sold convertible debt of $27 million to Belvedere Resources for $2 million. Investec needed to consent to the assignment of the loan, which was supposed to happen before 31 August. As the bank is still negotiating with the parties around a settlement of all amounts owing, the date has been extended to 31 October. In the meantime, monthly repayment of principal and interest amounts remains effective.
The sale by Datatec of its stake in Analysys Mason was given a resounding approval by shareholders, so the deal is now expected to be completed by the end of September.
Heriot’s offer to Safari shareholders is still being discussed with the Takeover Regulation Panel (TRP), as there are some complex elements to the offer. Heriot needs to post a circular by 30 September.
Financial updates
Cognition Holdings, the company selling its stake in Private Property for a wonderful price, has released results for the year ended 30 June 2022. Despite the price being achieved, the group has recognised an impairment charge of R41.6 million for this asset. EBITDA was R9.2 million vs. R33.3 million in the prior year, so the operating performance has been poor due to a nearly 35% increase in operating expenses, most of which relate to Private Property. That stake is being sold for R150 million and Cognition has a further R114 million in cash. Trade receivables and payables are of similar value, so the only other liability is “third party prize money” of R17 million. This implies a value of R247 million even if everything else in the group is considered to be worthless. The market cap is only R176.5 million! It’s a real pity that there is no liquidity in the stock. The only way to participate in this value unlock to a meaningful level is indirectly through Caxton.
Fortress REIT is becoming really interesting to follow, as we will finally see what happens when a property fund loses its REIT status. I may sound crazy, but I think that Fortress might look back on this one day and be thankful, as the balance sheet flexibility from not being a REIT is really useful. Here’s a slide from the investor presentation that highlights key considerations:
Here’s one for your diary – Bowler Metcalf will be releasing results on 6 September and the analyst presentation will be on 9 September.
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Operational updates
Although Transnet doesn’t have an equity listing on the JSE, it makes use of the debt market and I always include updates in Ghost Bites as it has such relevance to the mining sector. Transnet and CRRC E-Loco have reached an in-principle agreement to resolve legal disputes, which should help Transnet Freight Rail address customer demand on an urgent basis. The agreement gives immediate access to components and spares and paves the way for a return to service of long-standing locomotes. The parties also hope to expedite further delivery of locomotives.
Stephen Roper, an independent non-executive director of African Dawn Capital, has resigned from his role on the board.
A rotation of independent directors at Shoprite Holdings will take place in November, which is part of good governance. Dr Anna Mokgokong, Joseph Rock and Johan Basson will all be retiring as directors in November. Executive director Ram Harisunker will also be retiring in November.
William Bassie Maisela has joined the board of Purple Group as an independent non-executive director. He is the CEO of NBC Holdings, the first Black-Owned employee benefits company in South Africa. This gives us some indication of the type of strategic partnerships that the group might be looking for going forward.
Director dealings
Entities related to Des de Beer continue to make significant investments in Lighthouse Properties shares, this time for almost R6.5 million.
A non-executive director of Stadio Holdings has acquired shares in the company worth R256.
A shareholder with a 43.1% stake in Globe Trade Centre has appointed a director to the board.
An associate of the company secretary of Stor-Age has acquired shares worth nearly R523k.
Unusual things
The Takeover Regulation Panel (TRP) is currently investigating Extract Group Limited, EnX Group Limited, Zarclear Holdings Limited, African Phoenix Investments Limited and others. Interested parties were given until 1 September to make submissions. The TRP has now extended the submission deadline to 9 September as there was some confusion around the timing of announcements.
There’s another update on a TRP investigation, this time involving the previous findings made by the panel regarding Magister Investments and its concert parties, which include Gold Leaf Tobacco Corporation and its directors, Simon Rudland and Ebrahim Adamjee. You may recall that this was related to a proposed rights issue to recapitalise the business of Tongaat Hulett. Unless you’ve been living under a rock recently, you would’ve read about the proceedings that SARS has brought against Gold Leaf and its directors in the High Court, alleging that they went to great efforts to avoid paying tax to SARS. Although the TRP has no jurisdiction over tax, it does “jealously guard its regulatory mandate” and will be assessing whether this conduct of Rudland may contradict information that was previously provided under oath by both Rudland and Adamjee. Long story short, these guys are in serious trouble.
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