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Growthpoint wants you to watch Top Gun

The Finance Ghost
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Growthpoint wants you to watch Top Gun

When it comes to property updates, Growthpoint is the most important of them all. With a market cap of R46 billion, Growthpoint is a massive fund that touches practically every type of property in the country. Every investor in the sector follows Growthpoint’s updates closely.

The latest news from the company is an update for the nine months ended March 2022. With the share price down around 13% this year, the property recovery has taken a knock and this update demonstrates why.

It starts off with something you won’t read about every day: Growthpoint’s credit rating is higher than the South African sovereign rating i.e. our government. This sounds silly at first blush, as most of us would invest in the private sector in this country long before the public sector. That’s not how credit ratings work though, as the agencies take a view that the company cannot be better off than the government in a high stress scenario. The companies are a function of the environment they operate in.

The nuance for Growthpoint is that it has significant foreign currency earnings that more than cover foreign debt payments, so the group becomes less risky than the South African government overall. Whilst the credit rating isn’t an indication of equity returns, it’s worth highlighting these points.

The foreign exposure is a theme that is carried into the strategic priorities of the group: international expansion, “streamlining and optimising” the South African portfolio and generating returns from the funds management business.

The three international businesses are listed separately, so investors can check them out for more details. Growthpoint Properties Australia is listed on the Australian Stock Exchange (ASX), Globalworth Real Estate Investments is listed on the London Stock Exchange (LSE) and Capital & Regional Plc is listed right here on the JSE.

The Growthpoint announcement focuses on the South African portfolio., in which total vacancies increased from 10.5% at the end of December to 10.9% at the end of March. That’s at least better than 11.6% at the end of June 2021 but has clearly gone the wrong way.

The fund talks about a “perfect storm” for rent reversions, which means leases are still being renewed at a lower rate than the expired lease. The bargaining power is still in the hands of tenants.

Office sector

In the office sector, the vacancies are just getting worse. They were 19.9% at June 2021, 21.2% at December 2021 and 22.4% at March 2022. Where Growthpoint has managed to secure new leases, the average lease renewal term has decreased to 2.8 years from 4.4 years. Tenants are making full use of the flexibility available to them in this market.

Office reversions of -17.3% reflect the oversupply in this market.

Growthpoint highlights Claremont and Illovo as having achieved good letting. That makes sense to me – these are smaller buildings in prime areas, which makes them perfect for companies that are sticking to hybrid working arrangements.

Larger buildings in traditional office areas are the biggest issue and Growthpoint has huge exposure to Sandton, which is exactly what you don’t want right now. A whopping 21.7% of Growthpoint’s gross lettable area (GLA) in the office portfolio is in Sandton.

Growthpoint has sold seven office assets for R320 million and another four sales worth a total of R546.8 million are awaiting transfer. There are a further nine properties worth R600 million that have been earmarked for disposal.

Retail sector

This is a happier story, with shopping centres reporting turnover growth and smaller neighbourhood centres doing particularly well. In my view, this is a direct result of people returning to their daily lives and quickly popping in at the shops for regular grocery trips.

Footfall has neared pre-pandemic levels and increased basket sizes are still the norm, as people do fewer trips than before Covid.

As Growthpoint has all the data on retailer performance, it’s useful to note that the apparel segment continues to be driven by value fashion (affordable clothing) and that athleisure is trading strongly. The hybrid working trend has been great news for yoga pants and not such great news for formal pants.

The fund also highlights that on-demand shopping has driven business through the malls, positively impacting trading densities (sales per square metre). I scratched my head a bit on that one, I must be honest. Fulfilment of an online order at the local grocery store would count towards turnover clauses but I don’t see how that is any better for densities than someone going to the mall instead.

Rental reversions at -14.5% are at least better than -15.6% in the prior financial year. It’s still ugly out there for property funds but it is becoming less ugly in retail.

Vacancies deteriorated slightly from 4.7% at December 2021 to 4.9% at March 2022. There are major issues at Bayside Mall in the Western Cape which Growthpoint note could create a significant increase in vacancies. That’s my neck of the woods and a beautiful new mall has been built right across the road from Bayside (a really unappealing place), so I’m not shocked by what’s happening there but I am surprised that it can have a material impact on a group this size.

95% of the portfolio is concentrated in 26 of the 42 retail assets, so there is more concentration than I expected. Growthpoint wants to de-risk the portfolio and plans to sell properties in excess of R1 billion that no longer meet the investment criteria.

The highest arrears amount is R43.4 million owed by Ster-Kinekor. Growthpoint would very much like you to go watch Top Gun, if you don’t mind.

Industrial sector

Industrial properties have been the relative winners in the pandemic. Still, whilst some funds enjoy zero vacancies in the industrial book, Growthpoint is dealing with 6.2% vacancies. That’s at least better than 9.4% at the end of June 2021.

The reason for the vacancies is that Growthpoint has a large and geographically diversified portfolio, whereas smaller funds often have a handful of properties with blue-chip tenants. This makes Growthpoint vulnerable to issues like business rescue processes at smaller tenants. 40 tenants have concluded business rescue proceedings in this period and terminated their leases.

Rental reversions of -8.1% have improved from -10.9% in the prior financial year.

The good news is that selling industrial assets is rather easy at the moment. Assets worth R353 million were sold and transferred, another R400 million in properties are awaiting transfer and R650 million worth of properties have been identified for disposal.

V&A Waterfront

The Waterfront is such an important property that Growthpoint reports it separately. By the end of March, international tourist arrivals in Cape Town reached over 70% of pre-Covid levels, so there’s still room for further rebound.

Vacancies at the iconic property are just 1.85%, with even the offices enjoying almost no vacancies. In this world, you want to own the very best properties you can.

In exciting news for the tourism sector and my beloved Cape Town, the V&A has confirmed more than 100 cruise arrivals for the next season, starting in October 2022.

The Waterfront should return to normalised performance or better within the next financial year.

Trading and Development

Growthpoint has reduced its speculative development activity. Still, the division earned revenue of over R130 million and sold properties worth R855.4 million in this period.

Growthpoint Investment Partners

In this segment of the business, Growthpoint co-invests in and co-manages specialist alternative real estate portfolios. There are three funds with total assets under management of R15 billion, which Growthpoint hopes to double in the next five years.

Growthpoint Healthcare REIT owns hospitals and medical centres. It has a pipeline of development and acquisition projects has raised funding from the International Finance Corporation. The focus is on raising further capital from development finance and institutional investors.

Growthpoint Student Accommodation REIT enjoys a R2 billion portfolio of seven properties that are 99% let. Student accommodation is an important asset class and two further properties are being developed. Like in the healthcare portfolio, specialist financing is available. A great example is the R550 million social loan from Standard Bank for funding for students from lower-income communities.

Lango Real Estate is focused on assets in Nigeria and is a successful, dividend-paying operation. It is busy with its second fundraising round and is even targeting a listing on the London Stock Exchange in the next three years.

Other stuff you should know

Growthpoint’s weighted average interest rate on local debt is 7.9%. After including cross-currency interest rate swaps and foreign-denominated loans, it decreases to 6.0%. Both those numbers are slightly higher than at the end of December 2021, reflecting the higher yield environment.

On the renewable energy front, Growthpoint is targeting 32MW of solar power by the end of FY23. 12.9MW has already been achieved across 19 sites.

Outlook

South African retail and industrial properties are mostly on the mend but things are still difficult. The office portfolio is in serious trouble. The V&A Waterfront is a gem that is set to bounce back as tourism returns to our beautiful country.

In the international listed groups, Capital & Regional is on track to resume dividend payments. Growthpoint Properties Australia is described as a “standout performer” which is obviously good. Globalworth is paying lower dividends than Growthpoint would like as the fund is retaining surplus cash on the balance sheet. Growthpoint wants to “unlock value” from that investment which could mean anything, really.

Growthpoint’s FY22 results will be released on 14 September and the fund pays dividends twice a year of 75% of distributable income. As you consider your investments in this sector, keep in mind what Growthpoint is telling you. This is the broadest possible look at local property conditions.

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

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

Exchange Listed Companies

African Infrastructure Investment Managers (Old Mutual), as part of a consortium which includes Royal Bafokeng Holdings and SUEZ SA, has acquired EnviroServ from Rockwood Private Equity for an undisclosed sum. EnviroServ is the largest private waste management business operating in sub-Saharan Africa.

The results of the mandatory offer to Bauba Resources minorities show the offer was accepted in respect of 79,412,185 shares, constituting 10.59% of the company’s total issued share capital. The R0.42 per share offer was a joint firm intention by Raubex acting in concert with Pelagic.

Texton Property Fund via its 50% held joint venture Inception Reading, has entered into an agreement to dispose of Broad Street Mall in Reading, UK for a headline consideration of £57,5 million (R1,11 billion) in cash.

Afine Investments has acquired Glomor Three, a holding company for two petrol station properties. Glomor is owned equally by Petroland and Terra Optimus who will receive in aggregate 8,54 million Afine shares and R2 million in cash. The properties are in Randfontein and White River and have long leases with Engen and Sasol respectively.

Belvedere Resources has acquired a majority stake (347,945,097 shares) in Buffalo Coal at $0.001552 per share from exiting private equity fund Resource Capital Fund V. In addition to the $540,000 paid for the stake, Belvedere will also assumed a US$27 million convertible loan with the maturity date of June 2023.

Aveng this week issued a cautionary announcement to shareholders informing them that it was in advanced negotiations to dispose of Trident Steel, a division of Aveng Africa. The disposal is in line with Aveng’s 2018 strategy of disposing assets which are deemed non-core to the company. The proceeds from the transaction will be utilised to settle remaining external debt in South Africa, create further liquidity and strengthen the financial position of Aveng.

Unlisted Companies

UK-headquartered Woven Solutions has scaled its presence in South Africa with the acquisition of a majority stake in SA Commercial, a BPO provider based in Cape Town.

Kasada, the South African-based investment platform, has announced the acquisition of the Umubano Hotel in Kigali, Rwanda. The hotel will be rebranded and redeveloped into a 100-key Mövenpick hotel.

MFS Africa, a pan-African digital payment company, headquartered in Johannesburg, has raised US$100 million in equity and debt funding in a series-C extension round led by Admaius Capital Partners with participation from Vitruvian Partners and AXA Investment Managers, among others.

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

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

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

DealMakers AFRICA

AIM-listed Wentworth Resources, the Tanzania-focused natural gas production company has reached an agreement to acquire a 25% interest in the Ruvuma gas project in Tanzania. Scirocco Energy will sell the stake for an initial cash payment of US$3 million due on completion with further deferred and contingent cash payments of up to $13 million dependent on certain development and production milestones.

Egybelg (Egyptian Belgian Co.) a Cairo-based consumer goods firm manufacturing and distributing bakery goods, has been acquired by Savola Foods, a subsidiary of Saudi-listed Savola Group. The EGP622 million deal is part of Savola plans to invest EGP1,7 billion in Egypt over the next few years.

Kasada, the South African-based investment platform, has announced the acquisition of the Umubano Hotel in Kigali, Rwanda. The hotel will be rebranded and redeveloped into a 100-key Mövenpick hotel.

Chari, a Moroccan-based FMCG and financial services platform, has acquired Diago, a retail app operating in Abidjan, Côte d’Ivoire. The deal is part of Chari’s plan to digitise the retail value chain in Francophone Africa.

Nigerian fintech CredPal has received an undisclosed investment from Egypt-based VC fund The Cairo Angels Syndicate. CredPal provides a platform for users to buy anything and pay for it in instalments across online and offline merchants by providing them with instant access to credit at the point of checkout.

Egypt-based DXwand, a conversational AI tool assisting businesses turn conversations into growth insights, has closed a pre-series A investment round of US$1 million. The round was led by Huashan Capital with commitments from angel investors. The funds will be used to accelerate growth across the region, scale its market share and accelerate its AI research.

British International Investment and Symbiotics, have partnered to launch a US$75 million Green Basket Bond which will accelerate the origination and funding of green projects through MSME banks. The green lending programme is structured to support small-scale green projects across Africa, South and Southeast Asia.

d.light, a global innovator of solar-powered projects, and Solar Frontier Capital have jointly established a US$238 million financing vehicle Brighter Life Kenya. The off-balance sheet vehicle will provide d.light with flexible working capital, enabling it to provide finance to customers for a range of affordable and transformative products that drive quality-of-life improvements.

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

Weekly corporate finance activity by SA exchange-listed companies

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

Castleview Property Fund has issued 3,631,378 new company shares in terms of its scrip distribution alternative retaining R16,74 million in new equity. The company’s total issued share capital now consists of 41,042,547 ordinary shares.

The JSE published the names of companies who have failed to submit provisional reports within the three-month period as stipulated in the JSE’s listing requirements. They are: Visual International, Chrometco, Sable Exploration and Mining, Luxe and African Dawn Capital. If provisional reports are not submitted before June 30, 2022, their listing may be suspended.

A number of companies listed on one of South Africa’s Stock Exchanges have initiated share buyback programmes and each week update shareholders. They are:

South32 this week repurchased 836,073 shares at an aggregate cost of A$3,76 million.

This week British American Tobacco repurchased 2,130,000 shares for a total of £74,35 million. The purchased shares will be held in treasury with the number of shares permitted to be repurchased set at 229,400,000.

Glencore this week repurchased 6,970,000 shares for a total consideration of £34,76 million in terms of its existing buyback programme which is expected to end in August 2022.

Three companies issued or withdrew cautionary notices to shareholders this week. The companies were: Aveng, Chrometco and Onelogix.

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

Thorts: Corporate Income Tax: A bittersweet reduction

Lance Collop
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Thorts: Corporate Income Tax: A bittersweet reduction

The long awaited and much anticipated decrease in the corporate income tax (CIT) rate from 28% to 27% was confirmed by Minister of Finance Enoch Godongwana in the 2022 Budget Speech. This decrease is long overdue and comes into effect for years of assessment ending on or after 31 March 2023. Ironically, now that it has finally arrived, this reduction in CIT may end up doing more harm than good for the growth of the economy.

The reduction in CIT is accompanied by a host of other proposals that remove or otherwise restrict tax incentives and deductions available to companies. The most pervasive of these changes is the limitation on the use of assessed losses, which allows a company to shield only the higher of R1 million or 80% of taxable income arising in a year of an assessed loss. This is demonstrated in the following example:

Company A has an assessed loss brought forward of R2 000 000 and makes taxable income of R1 100 000 for the relevant tax year. Before the limitation kicks in, Company A would have no tax liability as the full balance of the assessed loss could be used to shield the taxable income of R1 100 000. However, once the limitation on the use of assessed losses kicks in for Company A, it can only offset the higher of R1 000 000 or R880 000 (80% of R1 100 000) by the assessed loss brought forward, giving rise to a cash tax liability for the relevant year.

One can only wonder how many companies out there are in a similar position to Company A, suddenly being expected to pay tax when they are still trying to recover from the devastation that the pandemic and the associated State of Disaster had on the economy. Would this money not be put to better use by these companies to settle debilitating debt, re-invest in the business, or most crucially, employ people?

The proposed limitation will also adversely affect companies operating in industries that are inherently cyclical, agriculture being a good example. And what is perhaps most concerning is the negative impact that this limitation will have on the potential for investment into critical infrastructure and energy projects, at a time when the government should be doing all it can to grow the renewable energy sector.

Renewable energy industry players already feel hard done by because of the fact that the fiscal regime for renewable energy companies in South Africa is inferior to that of countries where this industry’s growth has been successful, notably in the European Union and the United States of America. In this regard, the only major tax incentive for renewable energy companies in South Africa is the ability to claim the cost of the renewable energy assets in the first three years of trading. This, in turn, creates a significant assessed loss and, consequently, these companies only start paying CIT after they have traded for a number of years. This makes sense, as these projects typically assume significant amounts of debt, and the tax deferred is put to good use by settling this debt as soon as possible. With the limitation now in play, prospective renewable energy companies will be expected to pay significant amounts of tax from their second year of trading, which decreases their financial viability. This, in turn, will result in a need to propose a higher tariff, and there will undoubtedly be renewable energy projects that are declined by the Department of Mineral Resources which would otherwise have been approved, resulting in critical energy and jobs lost.

It is unfortunate that the government waited so long to reduce the CIT rate, when CIT rates globally had been steadily declining for at least a decade. In any event, there may already be a reversal of this trend, with countries under pressure to fund the significant cost of the pandemic. The United Kingdom, for example, recently announced that its headline CIT rate will increase from 19% to 25% in 2023.

CDH recently assisted a client with an investment into Uruguay, and it was noteworthy that the investment would not pay CIT in Uruguay for some 15 years after trading commenced. The investment was not capex intensive or critical for that country, but the rather generous tax incentive arose as a direct consequence of the number of jobs that would be created.

It should be that simple, and leads one to wonder if the policymakers should perhaps go back and start at the very beginning, a very good place to start.

Lance Collop is a Director in the Tax & Exchange Control practice | Cliffe Dekker Hofmeyr.

This article first appeared in DealMakers, SA’s quarterly M&A publication

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

Swimming in a sea of red

Andre Botha
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Swimming in a sea of red

Andre Botha, Senior Dealer at TreasuryONE, updates us on the rand and market sentiment in a critical week of FOMC minutes and a public holiday in South Africa.

Last week, we saw two distinct tales of the rand and risk sentiment in general.

The rand started off the week on the front foot, with the local unit breaking below the R15.20 level as expectations were that US inflation was plateauing and that by any metric, the US Fed’s hiking cycle was set in stone.

That was the case until Thursday last week, until the market found out that the US inflation number printed higher than the previous month at 8.6% YoY. That has sent markets spiraling with the US Fed meeting this week shining like a beacon in the data calendar.

Since then, we have seen the rand breaking above R16.00 against the US dollar and losing over R1.00 in three trading days.

This chart highlights the US Inflation story: 

inflationUSA

The question then is, what happened to markets after the release of the US CPI number?

Well, for lack of a better term, it has been panic stations, with US equity markets losing ground, emerging markets currencies coming under pressure as the US dollar has gone from 1.07 against the euro to 1.04 and commodity markets taking a beating on the prospect of lower demand due to economic downturns and slower demand.

The reality is that the world economy is most likely heading for a recession, and the fear of stagflation is circling above that fear of recession.

Here’s a chart of the EUR/USD:

eurusd14jun

The common saying is that the cure for high prices is high prices, and with the current Central Bank policies we can expect the fight against inflation to boil down to curbing demand. The destruction of demand will force prices lower.

One way to curb demand is by hiking interest rates. This leads us to the Fed announcement due today.

The expectations in the market are that the Fed will raise rates by 75 basis points. Still, the real crux of the matter will be the press conference after the announcement, where Fed Governor Jerome Powell will get to explain the Fed’s vision for reducing inflation and their interest rate outlook going forward.

We can expect some volatility in the market in the evening of the announcement.

As for the rand, we expect the local unit to be under pressure as there has been a fundamental sentiment shift against emerging markets in the short term. We would not be surprised if the rand tested the highs of a few weeks ago around the R16.30 level. One problem the rand has is the public holiday on 16 June, which could see the rand moving wildly due to the lack of liquidity.

Emerging markets currencies and risky assets could come under severe pressure in the short term.

To finish, here is a chart of USD/ZAR:

usdzar14june

For more information on TreasuryONE’s market risk and other offerings, visit the website.

Ghost Bites Vol 28 (22)

The Finance Ghost
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Ghost Bites Vol 28 (22)
  • Standard Bank has provided a voluntary trading update for the five months ended May 2022 and a trading statement for the six months ending June 2022. In the five-month period, the group achieved low double digit revenue growth. Costs grew high single digits, which means that operating margin has increased. This scenario is described as “positive JAWS” – revenue growth exceeding expense growth. The credit loss ratio is at the lower end of the through-the-cycle target range of 70bps – 100bps. Liberty has been 100% consolidated since 1 February 2022 and has made a marginally negative contribution to group earnings due to treasury share adjustments. I wouldn’t see this as reflective of the underlying operational performance. Return on equity was described as being close to cost of equity, which is 14.7%. The trading statement notes that HEPS for the six-month period will be at least 20% higher than the comparable period, which means at least 865 cents. More specific guidance will be provided once there is greater certainty over earnings. The share price closed 2.4% higher.
  • Telkom released annual results for the year ended March 2022. The share price fell 9.5%, which tells you most of what you need to know. Revenue is down 1.1% and underlying headline earnings per share (HEPS) is up just 2.5% if you exclude retrenchment costs from the base year. The growth in the mobile business isn’t happening quickly enough to offset the decline in the fixed and IT businesses. Here’s the really nasty number: free cash flow was negative R2 billion, mainly (but not entirely) attributed to investment of R1.1 billion in spectrum. Ouch.
  • Sibanye-Stillwater is dealing with water that is anything but still. A flood has impacted the PGM operations in Montana, USA. Operations have been suspended and thankfully no injuries have been reported. The share price fell over 5% in response to the news.
  • Investors in Remgro should take note that the company held its inaugural capital markets day. The CEO gave a presentation on the portfolio and focused on its fibre investments (Dark Fibre Africa and Vumatel) held through Community Investment Ventures Holdings. As a reminder, this business is executing a substantial strategic transaction with Vodacom that is subject to regulatory approval. If it goes ahead, Remgro will hold 57% of the enlarged entity. For more details, you can download the presentation at this link.
  • Exxaro’s wholly-owned subsidiary Cennergi Holdings has announced that its 80MW Lephalale Solar Project has been registered by the National Energy Regulator of South Africa (NERSA). This is the first phase of the decarbonisation of Exxaro’s flagship operations in the Limpopo province. Exxaro has developed a significant pipeline of multi-technology solutions (wind, solar and storage) that will decarbonise the group and provide energy security in a country that struggles to keep the lights on. Over time, there are also cost reduction benefits. These types of projects are music to my ears.
  • Harmony Gold has obtained regulatory approvals to allow the company to proceed with the Kareerand expansion project. This will ensure the continued retreatment of surface depositions at Mine Waste Solutions, which Harmony acquired in October 2020. This will produce 100,000 ounces of gold per annum and add 16 years’ life of mine at an all-in sustaining cost of around R572,000/kg over the life of the mine.
  • Christo Wiese has sold put options in Shoprite with a strike price of R204.25 per share, which means the buyer of the contract can force him to buy the shares at that price. He has also bought call options with a strike price of R223.83 per share, which means he profits to the extent that the share price moves above that level. With the current price at R209, this means that Wiese has effectively taken a positive view on the upside and has helped pay for it using the premium earned from selling the put option. If the share price drops below the strike price on the put, it can become a painful trade. The maturity date is 15 December 2022.
  • The CFO of Famous Brands is having a solid punt at the shares. There’s no management alignment quite like leveraged alignment. By buying CFDs on the stock, he has taken a position that is worth much more than the cash he has put down for the shares. The total value of exposure is nearly R1.4 million.
  • When it comes to director dealings, Des de Beer doesn’t play games. Entities associated with him have been buying up shares in Lighthouse Properties. The latest acquisition is worth R21.9 million, which we can all agree is a proper pile of cash.
  • The Spar share price has been under pressure recently, as I detailed in my feature article about my position in the company that didn’t work out as planned. The company secretary of the company has also sold shares worth just over R270k. It’s a small number but still isn’t a great market signal when a stock is already taking strain.
  • While many Thungela shareholders shake their heads in sadness at recent price action (down 21% in the past month), the company secretary of the business bought the dip. Well, one of the dips at least. The purchase price was R230 and the share price closed yesterday at R212.28 – on the plus side, it was a small trade of R43.7k.
  • A director of MiX Telematics has bought shares in the company worth around $138.5k. I did some research and the director in question (Ian Jacobs) used to work for Berkshire Hathaway – yes, the famous investment firm run by Warren Buffett and Charlie Munger!
  • Buffalo Coal has announced that Belvedere Resources has acquired a whopping 82.58% partially diluted stake in the company through a single transaction with Resource Capital Fund V as the seller. The “partially diluted” description is because Belvedere has acquired shares and a convertible loan, so the equity stake of 82.58% is based on the assumption that the loan is converted to shares.
  • The directors of a material subsidiary of Chrometco, Black Chrome Mine (Pty) Ltd, have resolved to place the company under business rescue. Chrometco is a penny stock, closing at 6 cents per share yesterday. The share price has lost nearly 70% of its value in the past five years.
  • Onelogix has renewed the cautionary announcement related to the potential delisting of the company. The process may have been derailed by the floods and the company is still assessing the impact of this disaster and other prevailing economic conditions. Shareholders have been reminded that any outcome is still possible from here.
  • The CEO of Choppies has bought shares in the company worth around R450k.
  • An associate of the Chairman of Pick n Pay has bought shares in the company worth R399k.

Ghost Stories Ep1: Charles Savage (EasyEquities)

The Finance Ghost
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Ghost Stories Ep1: Charles Savage (EasyEquities)

Ghost Stories is a long-form podcast that gives me the opportunity to have deeper conversations with founders, executives and market participants who have a great story to tell.

In the inaugural episode, I welcome a founder who has literally reshaped the way people in South African invest in the market. EasyEquities has opened doors that were previously closed, enabling retail investors to build wealth in a cost-effective manner.

In a conversation with Charles Savage lasting over an hour, we covered numerous points related to the story of EasyEquities, the purpose of the business, the use of partnerships, the product roadmap, the total addressable market and more.

This show is for every entrepreneur who wants to learn from a great founder and every EasyEquities investor who wants to get closer to the business. Get ready to learn from Charles about:

  • Spotting a market opportunity
  • Taking the plunge to build a business that was guaranteed to lose money unless it became the biggest in the market
  • The discipline required to build a differentiated product
  • The culture at EasyEquities and why it delivers a sustainable competitive advantage
  • The decision to stay in South Africa and build a business here despite the obvious challenges we all face in this country
  • The quality of investors using the platform and how they have defied the naysayers who believed they would lose money and run away during a bear market – the data tells a very different story
  • The way EasyEquities think about launching new financial products to the user base
  • The thinking behind equity partnerships (like Sanlam) and route to market partnerships (like Capitec and Discovery)
  • The global total addressable market for EasyEquities and how the management team assesses new international markets for expansion

 We ended off with a fun question to Charles about three local and three global stocks that are in his portfolio. The local choices are focused on energy and the global picks are focused on tech, which isn’t a surprise!

This podcast is for every South African investor. We hope you enjoy it!

Listen to the show using the podcast player below:

DISCLAIMER: EasyEquities is a product of First World Trader (Pty) Ltd t/a EasyEquities which is an authorised Financial Services Provider. FSP number: 22588. This material is not intended as and does not constitute financial advice or any other advice and is neither exhaustive nor prescriptive. The views expressed by the contributor are his or her own (as an independently registered financial services provider, financial adviser or other independent capacity), and not necessarily endorsed by EasyEquities (as a separate financial services provider).

Easy Does It Podcast: Cooking up a Great Portfolio with The Finance Ghost

The Finance Ghost
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Easy Does It Podcast: Cooking up a Great Portfolio with The Finance Ghost

After Mohammed Nalla and I had tons of fun on the Easy Does It podcast by going head-to-head with our stock picks, host DJ@Large invited us back separately to record a two-part series with him on cooking up a great portfolio.

In the episodes I was on, we talked about all kinds of things! The discussion points ranged from opportunities I missed out on in 2020 and some of the riskier positions I took through to my investment style and views on 2022.

It was a great chat as always on this podcast. Even though it was recorded several weeks ago, the insights remain relevant.

I’ve included both episodes below to make it easier for you:

Part One

Part Two

 

 

DISCLAIMER: EasyEquities is a product of First World Trader (Pty) Ltd t/a EasyEquities which is an authorised Financial Services Provider. FSP number: 22588. This material is not intended as and does not constitute financial advice or any other advice and is neither exhaustive nor prescriptive. The views expressed by the contributor are his or her own (as an independently registered financial services provider, financial adviser or other independent capacity), and not necessarily endorsed by EasyEquities (as a separate financial services provider).

Ghost Bites Vol 27 (22)

The Finance Ghost
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Ghost Bites Vol 27 (22)

Your daily market overview delivered in bite-sized bullets:

  • Sirius Real Estate released results for the year ended March 2022. The company has performed well yet again, as the logistics and industrial property sector has been a great place to play. The dividend has increased by 16.1%. Despite this, the share price has lost around 31% of its value this year. In this feature article, I explain what happened.
  • Coal mining group Thungela has generated incredible returns over the past year, having been unbundled from Anglo American as the unloved ESG-offending stepchild. The company has released a trading statement and pre-close update, which set a few tongues wagging about the potential dividend in August. Here’s the catch though: Thungela needs Transnet to achieve a meaningful improvement in its freight rail performance. Read all about it here.
  • Aveng released a cautionary announcement regarding the potential disposal of Trident Steel to a “credible buyer” – and really, that’s the best kind of buyer. After Aveng disposed of assets worth over R1 billion since 2018, Trident Steel is the last remaining asset that needs to be sold under the strategy to repair the group balance sheet. The proceeds are expected to exceed Trident Steel’s net asset value and would be used to settle remaining external debt in South Africa. Of course, a deal is a deal when the money lands in the bank. There are still several hurdles to get over in this potential transaction, which is why detailed terms haven’t been announced yet. The share price closed 8.7% higher on the day.
  • Equites Property Fund is in the process of selling land to Lidl Great Britain and land and turnkey developments to Arrow Capital Partners. This requires the approval of the local council for a warehouse development on the properties. A committee of the council has refused the application based on landscape and visual impact implications. Equites is appealing the decision and expects a decision in late 2022 or early 2023. The transaction agreements have a long-stop date of 31 December 2023, as delays are not uncommon. This will not impact Equites’ guidance for distributions per share but it would impact the net asset value per share uplift and the timing of development profits.
  • Sibanye-Stillwater has signed a three-year wage agreement for the South African gold operations, bringing the strike to an end. The average annual increase is 6.3% over three years, though it varies depending on the category of employees. There’s also a “hardship allowance” of R3,000 to help workers with the financial impact of the strike. R1,200 is payable in cash and up to R1,800 will be used to reduce employee loans owed to the company, as Sibanye continued with medical aid contributions and risk benefits during the strike. The operational start-up after the strike will be phased over 2 – 3 months to ensure safety in operations.
  • Novus Holdings has released a trading statement which shows a major swing into the green. The headline loss per share in the comparable period of 5.40 cents is a distant memory, with headline earnings per share (HEPS) of between 52.61 and 53.69 cents in the year ended March 2022. In separate news, Novus has also confirmed it is part of a consortium that has won the contract from the Department of Basic Education to print, store, package and distribute workbooks for three years, with an option to renew for a further two years. Importantly, Novus notes that this is a useful offset for macroeconomic conditions that will hurt the business in 2023. Paper price increases, high logistics costs and general availability of paper are concerns for the group.
  • Afine Investments is a specialist REIT focusing on ownership of petrol stations. After listing recently, the company has now announced an acquisition of two properties. The properties are partially owned by a trust linked to the CEO of Afine, so this is a related party transaction under JSE Listings Requirements. Such deals have higher compliance hurdles in order to protect minority shareholders. The properties would be paid for with a combination of cash and shares. The properties are worth R59.6 million collectively. AcaciaCap has been appointed to opine on whether the transaction is fair to shareholders of Afine. Shareholder approval is only needed if the independent expert determines that the terms are unfair.
  • Gemfields has been on an incredible run recently. With operations in countries like Mozambique, there’s always the risk of something going wrong. There’s been another insurgency in Mozambique, this time around 65kms away from Gemfields’ ruby mining operations. Previously, the activity was more than 150kms away. The attacks included the killing of two employees at a graphite project owned by Australian company Triton Minerals. For now, the ruby operations are unaffected. This is a concerning piece of news.
  • Kore Potash has issued shares to a service provider in lieu of fees payable under a technical services agreement. The service provider is Sociedad Quimica y Minera de Chile S.A. a name that just rolls off the tongue. That party has increased its shareholding in Kore Potash from 14.64% to 15.74% as a result of the share issuance.
  • Chrometco Limited has released a cautionary announcement regarding “circumstances relating to a material subsidiary which are being assessed” – there’s nothing worse than a cautionary with no detailed information or even an idea of whether it is positive or negative news.
  • The mandatory offer by Raubex for the shares of Bauba Resources has closed. The offer price was R0.42 per share. The offer was accepted by holders of 10.62% of total shares in issue and 39.46% of total shares held by minority shareholders, which is a better measure of the results of the offer.
  • Castleview Property Fund’s dividend reinvestment alternative led to an increase in issued shares of nearly 10%. The fund retained R16.7 million that would otherwise have been paid out to shareholders.
  • Directors of Santova subsidiaries have bought and sold shares in Santova recently. The market still sees this as a positive. The old adage is this: directors may sell for many reasons, but they only buy for one reason. This is why I write about every share purchase by directors and only the sales that seem to be quite large.
  • A non-executive director of Jubilee Metals has sold around R4.4 million worth of shares in the company.
  • The Chief Compliance Officer of Choppies Enterprises has bought shares in the group worth around R670k.
  • An executive director of construction group WBHO has acquired shares in the company worth nearly R1.4 million.
  • Associates of directors of RFG Holdings have acquired shares worth nearly R850k.
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