Monday, March 31, 2025
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GHOST BITES (Astoria | Barloworld | Fairvest | Master Drilling | Oceana | Pepkor | Remgro | Santova)

The Finance Ghost
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GHOST BITES (Astoria | Barloworld | Fairvest | Master Drilling | Oceana | Pepkor | Remgro | Santova)

Congratulations to Forvis Mazars in South Africa, my brand partner that makes the Ghost Wrap podcast possible, on their appointment as the new external auditor of Argent Industrial (JSE: ART).

A tough year for Astoria (JSE: ARA)

And especially in the diamond business

Astoria has released its results for the year ended December 2024. There won’t be many smiles about these numbers, with the NAV in down by 22% in USD or 19.5% in ZAR.

The largest individual investment is the 40.2% stake in Outdoor Investment Holdings, which contributed 57.4% of net asset value (NAV). This also happened to be one of the better performing assets in the group, with the value up by 7.5% in ZAR thanks to decent underlying trading in the retail business in particular.

The next largest asset is ISA Carstens, contributing 9.9% of NAV and up 5% year-on-year. Astoria is busy selling this asset, with the buyer’s due diligence underway. Leatt Corporation is 9.6% of the NAV, with sales at that business having stabilised. Although the fair value of the investment is higher than a year ago, this is because Astoria bought more shares rather than because the share price went down. Leatt’s share price has been under significant pressure and they will be hoping for a recovery there.

This brings us neatly to Trans Hex, which can be combined with Marine Diamond Operations to get the full view on the diamond exposure in the group. Both businesses are being severely hurt by diamond prices and the disruption by lab-grown diamonds. The impact on the value of the marine operations is far more severe than the land operations due to differences in the quality of stones and the operating costs. Marine Diamond Operations took a particularly nasty knock, with the value down by a whopping 87% vs. the prior year.

The other investments in the group include gaming group Goldrush (which has been impacted by the relative strength in online gaming at the expense of physical alternatives) and Flexi Mobility Group (previously Vehicle Care Group) where a more conservative approach is being taken on provisions into the motor dealership industry.

Overall, it was clearly a difficult period for the company. The NAV per share is R11.71 and the share price is R8.00. With a couple of asset disposals in process and a likely increase in the cash balance as a result, it will be interesting to see whether management takes action based on that discount.

Mongolia remains the highlight at Barloworld – but watch that order book (JSE: BAW)

The share price is remaining stubbornly close to the failed offer bid

The Barloworld share price is going to be fascinating to watch. The offer of R120 per share was voted down by shareholders who were looking for a better number of R130 per share. This offer is the reason why the share price is up 80% in the past year, as this substantial upward move has come at a time when the underlying business is struggling. Sure, the underlying fair value might be R120 – R130, but someone actually has to pay you that. At R108 per share, the market is hoping that the bidders (or someone else) will come back with a better offer. If they don’t, then there’s real risk of the share share dropping way back down.

This is especially true when you consider the trading update for the five months to February, which shows that group revenue fell 4.9% and EBITDA was down 12.9%. Operating profit from core trading activities took a nasty 20.5% knock. The Russian business is causing most of the problem, although excluding that operation still leaves you with a group that saw revenue down 2% and EBITDA up 3%, with flat operating profit.

If we look deeper, we find that Equipment Southern Africa was impacted by the state of the local mining sector and the unrest in Mozambique. Revenue fell 9.2% and although they managed to get expenses down by 3.7%, this wasn’t enough to mitigate the pain. EBITDA was 6.1% lower. Note that this means that EBITDA margin actually improved from 10.4% to 10.8% thanks to the cost control! The share of profit from the Bartrac joint venture in the DRC also went the wrong way. The only highlight is that the firm order book for the business increased by 13%.

Barloworld Mongolia is definitely the bright spot. Revenue grew by 49.5%, which is obviously excellent, but EBITDA was “only” 24.2% higher thanks to pressure on gross margins. This means that EBITDA margin fell from 25.9% to 21.5%. Sadly, said bright spot does have a rather gloomy cloud over it going forwards: the order book in this part of the business has plummeted from $117.8 million to $27.8 million. Sure, they had a great period of deliveries, but it looks like things are slowing down dramatically and that the aftermarket parts business will become a larger component of revenue. As I wrote at the time when everyone was quick to shout down the R120/share offer: Barloworld is a cyclical business. It might take years to get earnings back to strong levels.

Russia is of course the biggest problem, with Vostochnaya Technica (VT) suffering a 25.3% drop in revenue. EBITDA tanked by 83%. Although VT is self-sufficient in terms of funding requirements, they expect it to operate at roughly breakeven levels. The independent investigation into potential export control violations is ongoing and the narrative account of voluntary self-disclosure is due by 2 June 2025.

Moving along from the equipment side of the group, we find ourselves at consumer industries business Ingrain. Although revenue was flat, EBITDA increased by 11.4% and thus EBITDA margin expanded from 12.0% to 13.3%. This was thanks to a favourable product mix, particularly in the domestic market.

I will be rather surprised if Barloworld finishes 2025 on the right side of R100 per share. Time will tell.

No surprises here: the Fairvest capital raise was well supported (JSE: FTA | JSE: FTB)

As expected, the accelerated book build was oversubscribed

In the Nibbles section on Monday evening, I referenced the announcement by Fairvest that they would be raising R400 million via an accelerated bookbuild process. Thanks to deep capital pools on the JSE, the word “accelerated” really is applicable here.

As we’ve seen many times before in the sector, there was no problem in raising this capital from institutional property sector investors. The book was oversubscribed and the R400 million was raised at a paltry discount of just 1.05% to the 30-day VWAP per Fairvest B share. I must say, that discount is really small by any standard.

Part of me wonders why they didn’t raise more at such a narrow discount!

Will Master Drilling’s dividend growth distract investors from the impairments? (JSE: MDI)

The recent share price performance suggests that it might

Master Drilling has released results for the year ended December 2024. Revenue came in at a record high (in USD) and they grew HEPS by 22.1% (also in USD). In ZAR, HEPS was up 21.2%, so that’s hardly a difference to the USD results.

Sounds great, except looking at earnings per share (EPS) – which includes impairments – shows a drop of 15.4% in USD or 16.0% in ZAR. This is the blemish on the numbers, as some major equipment has been written down in value based on market dynamics.

Investors seem to be glossing over these risks, focusing instead on the juicy 24% growth in the dividend per share and the solid pipeline of work. To some extent at least, that’s the right approach. There might be some bumps in the road along the way, but at least earnings have moved higher. Still, when you’re taking about $7.8 million in impairments on one item of machinery in a single period, there are clearly some significant risks in the business around obsolescence of expensive equipment. In case you think it’s an isolated example, an impairment of $5.4 million was raised on the Shaft Reverse Circulation Equipment.

Master Drilling’s share price is up 2.3% year-to-date and 12% over the past 12 months.

Against a tough base, Oceana’s results are “significantly lower” (JSE: OCE)

The comparable interim period was incredibly strong

Oceana had a difficult end to the previous financial year, so there was always a risk of those challenges continuing into the new one, particularly when viewed against such a strong interim period for comparative purposes. Indeed, for the five months to 23 February 2025 (yes, one week short of the full month), results are “significantly lower” than in the comparable period.

Lucky Star has lived up to its name, being the highlight in this result with better production volumes and the benefits coming through of cannery upgrades. Sales volumes were up 5% and margins also headed in the right direction. This did come at the cost of higher inventory levels and short-term borrowing requirements due to frozen fish market dynamics, so this financing cost has offset some of the benefits of volumes and margins.

Fishmeal and Fish Oil (Africa) was hit by lower prices for its products. This more than offset the benefits of better fish landings and higher oil yields. In the business in the US, Daybrook, the same impact of a decrease in global fish oil pricing was relevant. There was only one month of activities in this period due to how the fishing seasons work, so I’m not sure how much we can read into a 17% decline in sales volumes. That could just be a weird timing thing. In both businesses, inventory levels were much higher than in the comparative period, so watch out for the impact on working capital.

In Wild Caught Seafood, catch rates for hake and mackerel improved in the second quarter. The first quarter sounds like it was rough though, so they will hope that the momentum over the period continues. Ditto for squid catches, although pricing is down on that product.

Much like on Netflix, this Squid Game is treacherous. Fishing is a difficult industry with many external factors at play, so the only real certainty is that there will be uncertainty along the way.

Separately, Oceana has decided to wind up the Oceana Stakeholder Empowerment Trust. This was created in 2021 and it only holds 0.5% of the listed shares. Very little value was created in the trust, with Oceana having repurchased shares for just R6.5k. The employee trust that was also created in 2021 will stick around.

Pepkor wants a bigger share of the adultwear market (JSE: PPH)

They are making an important acquisition to make that happen

When you’re happy to go slowly and build something up from scratch, like Shoprite Holdings has been doing recently with businesses like Petshop Science, it’s ok to work up from zero stores to a meaningful footprint. But when you want to go much faster, there’s only one way to do it: a large acquisition.

In one fell swoop, Pepkor is acquiring 462 stores from Retailability. These operate under the Legit, Swagga and Style banners. The Boardmans online business is also part of the deal. This leaves Retailability with Edgars, Edgars Beauty, Red Square, Kelso and Keedo.

The rationale here is that Pepkor is “overindexed” on market share in categories like babies and school wear and “underindexed” on adultwear. This is fancy retail speak for saying that their market share is much higher in younger categories than in adultwear. This is of course a direct result of having businesses like Pep and Ackermans in the stable.

The acquired businesses are focused on adults and will be housed in the Pepkor Speciality business unit. Pepkor hopes to unlock synergies related to the usual areas like sourcing, supply chain and back office costs. Scale is your friend in this game and Pepkor certainly has plenty of scale – and even more so after this deal.

They don’t make a big thing of it in the announcement, but the credit strategy is also clearly at play here. Pepkor is pushing hard on its “credit interoperability strategy” and the more retail outlets they can spread this over, the better.

It’s a small transaction for Pepkor, representing less than 2% of the group’s market cap. This gives you an idea of just how huge and valuable Pepkor actually is. They expect the deal to close in the first quarter of 2026, with Competition Commission approval underway.

A better period for Remgro (JSE: REM)

This is more like it – but the separately listed assets are the highlight

Remgro has released results for the six months ended December 2024. As I wrote when the trading statement came out, the HEPS guidance is useless other than to give us a clue that the direction of travel in the intrinsic net asset value (INAV) per share was probably the right one. Indeed, INAV (which is what counts) was higher, but only by 10.3% despite HEPS being 38.6% higher. Still a solid result obviously, but nowhere near as exciting as HEPS would suggest. Notably, the interim dividend is up 20%.

The positive contributors to the story include Rainbow Chicken, RCL Foods, OUTsurance and even Mediclinic. All but one of those are separately listed, so you don’t need to buy Remgro to get access to them. This is a major reason why Remgro trades at a discount to INAV. Heineken Beverages has at least returned to profitability, but that hasn’t exactly been an asset that you would have wanted to own recently. On the negative side, we find TotalEnergies South Africa (higher negative stock revaluations) and Community Investment Ventures (a victim of higher borrowing costs).

Further boosts to the earnings came from a decrease in finance costs thanks to preference share redemptions, as well as a much lighter impact from IFRS 3 charges and transaction costs based on the timing of transactions.

The broader question is why the dividend has moved higher despite the INAV being at R276.89 while the share price is languishing at R161. It would surely make infinitely more sense to undertake a large share buyback programme?

Some details finally emerged on why Santova is trading under cautionary (JSE: SNV)

Not many details, mind you

When the first cautionary announcement came out on 11 February, Santova didn’t give the market many details. They simply referenced “negotiations” and “potential strategic transactions” – this can mean literally anything.

In the renewal of the announcement, they’ve given the market some additional details. We now know that Santova is considering an acquisition in Europe, specifically a company that provides a variety of logistics services in the UK and Netherlands.

It’s been a choppy few months for the share price, trading in a range between roughly R7 and R8. If a deal goes ahead here and if the pricing looks good, it might catalyse some share price action. Of course, if the market doesn’t like the deal, it’s worth remembering that a catalyst can work in either direction.

Nibbles:

  • Director dealings:
    • The ex-CEO of Calgro M3 (JSE: CGR), Wikus Lategan, has sold down his stake to the extent that he now only has 1.48% in the company.
    • A senior executive of Investec (JSE: INP | JSE: INL) sold shares worth around R1.5 million. The announcement isn’t explicit on whether this is only the taxable portion of the share award, so I assume that it isn’t.
    • A non-executive director of Anglo American (JSE: AGL) bought approximately R700k worth of shares.
    • Des de Beer bought another R515k worth of shares in Lighthouse Properties (JSE: LTE).
    • The COO of Spar (JSE: SPP) bought shares worth R197k.
    • The CEO of Libstar (JSE: LBR) bought shares worth R64k and the CFO bought shares worth R96k.
  • If you are a shareholder in Lighthouse Properties (JSE: LTE), take note that the scrip dividend circular has been distributed. The default election is a cash dividend, so if you want the scrip dividend instead then you need to specifically make that choice.
  • Trencor (JSE: TRE) is in the process of distributing its cash to shareholders, so it isn’t an operating company in the traditional sense and hence I’ll just give the financials a passing mention down here. As at the end of December 2024, the net asset value (NAV) per share was 843 cents. The share price is currently 108 cents. Before you jump out of your chair to hit the buy button, there was a dividend paid in January of 730 cents. In other words, assuming no other changes, the current NAV that is comparable to the share price is actually 113 cents. The modest discount to NAV reflects the time value of money, as the cash isn’t being received straight away.
  • Anglo American (JSE: AGL) announced that its Sakatti copper project in Finland has been designated as a Strategic Project by the European Union. This means that the government sees it as being in the public interest, which means easier processing of permitting applications etc. Given how regulated the EU is though, one wonders whether the difference between “easier” and “easy” is still very large.
  • Telemasters (JSE: TLM) has renewed the cautionary announcement related to a potential acquisition. The company is in discussions with potential funders for the deal, including equity investors. When they say you should exercise caution, they really mean it – this sounds like a biggie. There’s also the noise around a potential acquisition of the shares held by the two largest shareholders by a B-BBEE investor, so be alert to that deal as well. One wonders if said B-BBEE investor isn’t perhaps the equity funding partner that they are currently talking to? That would certainly make sense to me.
  • Like many other JSE-listed companies, Omnia (JSE: OMN) is taking part in the Bank of America Global Research Sun City conference – the 26th edition of that conference, to be precise! The company has made its presentation available at this link. It gives a helpful overview of the company and its strategy.
  • Here’s something interesting: Metrofile (JSE: MFL) announced that Mary Bomela will now be classified as an independent non-executive director. This is because she left the employment of Mineworkers Investment Company (MIC), which hold 39.2% of Metrofile. Given that Mary has been on the board for 14 years, the company would like her to stay on as a director. MIC will nominate a new representative to serve on the board, so the board is expanding by one director.

GHOST BITES (ADvTECH | Ascendis | Astral Foods | Burstone | Gold Fields | Grand Parade Investments | Premier | Raubex | Southern Sun | STADIO)

The Finance Ghost
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GHOST BITES (ADvTECH | Ascendis | Astral Foods | Burstone | Gold Fields | Grand Parade Investments | Premier | Raubex | Southern Sun | STADIO)

ADvTECH had a great year in 2024 (JSE: ADH)

Enrolments are driving excellent results

ADvTECH is seeing strong growth at the moment, with results for the year ended December reflecting 16% growth in the full year dividend. Return on funds employed has moved up to 21.4%, having increased every year since the pandemic year.

Importantly, all the education businesses are growing. Schools in South Africa grew revenue by 11% and operating profit by 12%, so they aren’t dealing with the same issues that Curro is facing with its mid-market model. ADvTECH schools are more upmarket and the strategy works, with 83% utilisation of current capacity. Schools in the Rest of Africa grew operating profit by 28% and are now running at a spectacular operating margin of 32.4%, showing how lucrative that business is. The Tertiary segment grew operating profit by 15% and is also running at a juicy margin.

Unsurprisingly, the ugly duckling is the Resourcing business. Revenue fell 8% and operating profit was down 4%. They really, really need to get rid of that business. It continues to drag down the group performance and there’s no logical reason why that situation will change.

Despite such strong numbers, the share price is up just 7.5% over 12 months. This shows you that the market already prices in a solid performance from the group, evidenced by the Price/Earnings multiple in the mid-teens.

Ascendis Health’s numbers will be hard to interpret this financial year (JSE: ASC)

The change to investment entity accounting is a major shift

At one point, it seemed that there were headlines about Ascendis Health on almost a daily basis. After the potential take-private deal eventually collapsed, the news simmered down. Of course, the show goes on at Ascendis and management needs to achieve growth in the business.

This growth will be measured differently going forwards, with Ascendis taking the route of investment entity accounting. This means carrying its investments at fair value, rather than consolidating its subsidiaries. Metrics like net asset value (NAV) per share will therefore be the focus area rather than headline earnings per share (HEPS). To add to the complexities here, they’ve restated December earnings based on the technical accounting treatment of Surgical Innovations. This is another good reason why the NAV is the right thing to look at, rather than earnings.

The trading statement dealing with the six months to December indicates that growth in the tangible NAV per share was between 8.2% and 27.1% year-on-year. That’s a wide range. It looks like the Medical portfolio did the heavy lifting here, consisting of five investee entities. Other than Surgical Innovations which is out of business rescue but still under pressure, the rest did well. The Consumer portfolio had a pretty flat period, with subdued demand and little ability to increase prices.

Despite the shift to investment entity accounting, the narrative around the outlook focuses more on organic growth opportunities in the existing businesses rather than a desire to execute acquisitions.

The share price of 82 cents is actually above the 80 cents per share offer that was on the table in late 2023. The tangible NAV per share is between 101.7 cents and 119.4 cents, so it’s still trading at a significant discount to those levels.

Astral Foods is a reminder that the only certainty in the chicken business is uncertainty (JSE: ARL)

And you can now add cybersecurity to the list of risks they face

The poultry industry always feels like it is standing near the edge of a cliff. In a period where there are no major problems, it can be quite lucrative. As soon as something goes wrong, those thin margins come into play and earnings take a gentle stroll right over the edge.

In a trading statement dealing with the six months ending March 2025, Astral Foods has alerted the market to an expected drop in HEPS of up to 60%. This implies HEPS of at least 354 cents for the interim period vs. 884 cents in the comparable period.

The share price is actually 12% higher over the past 12 months, so the P/E multiple at this company is more volatile than a South American football stadium during a penalty shootout.

What were the reasons for the drop? Aside from pressure on selling prices for frozen chicken thanks to consumers who continue to struggle to make ends meet, Astral had to contend with the usual suspects of higher feed input costs and maize prices. Remember what I said about thin margins that are vulnerable?

The unusual issue faced in this period is a cybersecurity incident that took place on 16 March. The related disruption to group systems has cost them R20 million in profits, measured based on lost revenue and the costs to catch up on the production backlog.

There’s truly never a dull moment in this sector.

Burstone’s fee income is up, but the same can’t be said for overall earnings (JSE: BTN)

A pre-close call has the details

Burstone has released a pre-close update for the year ending March 2025. Through various corporate actions, the group has gotten to the point where fee income is now 11% of earnings. That’s way up on 7.3% in the comparable year, achieved through significant growth in third-party assets under management. A perfect example of the strategy to grow this source of revenue can be found in the recent Blackstone deal, in which Burstone retained 20% of the Pan European Logistics portfolio and will continue to manage it. There are similar strategies being implemented in their Australian business at the moment.

Burstone also hopes to build a South African platform along similar lines, with due diligence completed by a cornerstone investor. The deal is now going through various investment approval processes. The idea is to seed the platform with existing South African assets in Burstone, with the proportional interest reducing over time as Burstone focuses on managing the platform and earning fees.

Over time, you can see that Burstone is slowly moving more towards an asset management model rather than a property ownership model. Make no mistake though, they are still firmly a property company at the moment, evidenced by metrics like the loan-to-value ratio being between 34% and 36% for FY25.

In line with guidance, distributable income per share is expected to be 2% to 4% lower than the comparable year. The announcement could certainly be a lot clearer and simpler in terms of the drivers of underlying performance. If you read through all the details, it looks like the South African portfolio is struggling compared to Europe and Australia. Notably, the office sector is still dealing with large negative reversions and vacancies. Reversions were also negative in the industrial sector.

The release of year-end results is scheduled for 28 May.

Gold Fields wants to buy Gold Road (JSE: GFI)

These gold companies need to get more creative with their names

Gold Fields has put in a non-binding, indicative proposal to the board of Gold Road. They want to buy 100% of the group via a scheme of arrangement, with a proposed price of A$3.05 per share. This would be structured as a fixed portion of A$2.27 per share, plus a variable portion linked to De Grey Mining, which is already the subject of a potential acquisition by Northern Star Resources that Gold Fields would want to support.

The companies already know each other, as Gold Fields operates the Gruyere Mine in Western Australia and Gold Road has a non-operating joint venture interest in that mine. Familiarity doesn’t appear to have helped here, as the Gold Road board told Gold Fields to get lost. It’s pretty funny that the response included a counter proposal to buy Gold Fields out of the Gruyere Mine, funded by a combination of cash and other sources. Returning the favour, Gold Fields also told them to get lost!

So it’s going well, then.

Gold Fields isn’t giving up. The announcement notes the benefits to Gold Road shareholders of a potential deal, including the desire to support the Northern Star Resources deal related to De Grey, as well as the 44% premium to the see-through valuation for Gold Road after adjusting for the value of the De Grey shares held by Gold Road.

I thoroughly enjoyed a comment in the announcement that another benefit of the deal would be to “eliminate dis-synergies” in the joint venture as opposed to delivering on synergies. The PR people really had fun here.

At this point, Gold Fields must be hoping that large shareholders will put pressure on the Gold Road board to take the proposal more seriously. At an extreme, they might even go hostile with an offer directly to shareholders. We aren’t at that point yet, though.

Grand Parade impacted by its gaming exposure (JSE: GPL)

Being a pure-play gaming business ain’t what it used to be

Regular readers who have been following the results of the major gaming groups will know that all isn’t well in that sector. Online alternatives like sports betting are disrupting this space, with casinos in particular losing their shine.

Grand Parade Investments always seems to be on the wrong side of the trend. No sooner had they disposed of their non-gaming assets (like in the food sector) than disruption came through. Grand Parade now finds itself with a share price down 14% this year and a set of numbers for the six months to December 2025 that reflect a drop in HEPS of 9.2%.

Interestingly, the SunWest business (GrandWest Casino as its main asset) was actually 4% up in terms of headline earnings, with Cape Town therefore bucking the national trend. Sun Slots fell 16% and Worcester Casino was still loss making, so don’t get too excited.

They will need to do something here, as I can’t see the situation improving in the gaming sector.

An excellent financial year at Premier (JSE: PMR)

Here’s a good example of how to make shareholders happy

When you hear about a company growing its revenue by mid-single digits, you wouldn’t expect to then see a spectacular increase in HEPS. Some companies are especially good at translating fairly modest revenue growth into excellent shareholder returns. It seems that Premier is firmly part of that crew.

The growth in HEPS of between 20% and 30% for the year ended March 2025 is thanks to a strong focus on margins and costs, which of course is the only way to leverage that revenue growth up into much more exciting profit growth.

For whatever reason, it seems as though the FMCG sector in South Africa has perfected the art of extracting value from revenue growth that is barely ahead of inflation. Perhaps it’s time to put an FMCG executive in the role of finance minister?

Another strong period for Raubex (JSE: RBX)

This group consistently delivers

Raubex has released a trading statement dealing with the year ended February 2025. With HEPS up by between 15% and 25%, this is yet another another strong performance by the group. When you consider the nature of the business that Raubex is in and how cyclical it should probably be, it’s quite remarkable how they just keep growing.

They are doing a great job of winning SANRAL projects, with the Roads and Earthworks Division also working on diversifying its customer base, just in case.

Over in Construction Materials, the asphalt business was ahead of expectations, with supply to major projects like the N3 and N2 running smoothly. Within that segment, the commercial quarry operations got off to a slow start, but have picked up recently.

In the Infrastructure Division, some substantial renewable energy projects have been helpful sources of revenue. They are also involved in projects like wastewater treatment and affordable housing, as well as the upgrade of the parliament buildings in Cape Town! And unlike so many other companies, they are even making solid projects in Western Australia. In fact, the business in Australia is 19% of the group’s operating profit.

The Materials Handling and Mining Division is the only division that went backwards this year. The deterioration of the chrome price in the second half was the major issue. This segment is a bit of a strange fit in the group from a strategic perspective, introducing a completely different set of risks of what you’ll see elsewhere in the group.

Although Raubex hasn’t been immune to the local market pressure this year with a 12.5% decline, the share price remains 44% higher over 12 months. It’s a solid business.

Southern Sun is shining (JSE: SSU)

Occupancy and pricing both headed in the right direction

Southern Sun has released a trading update for the year ending March 2025. It’s been a goodie, with occupancy for the 11 months to February up by 240 basis points to 60.7%, while the average room rate has increased by 5.1%. When both volumes and pricing move higher, it’s likely that earnings will do well. Indeed, HEPS is expected to be at least 20% higher for the year.

HEPS was 35% higher in the interim period, so it’s likely that the full year will be much better than 20% higher. This is where the words “at least” are really important, with the minimum required disclosure under JSE rules being an indication of “at least 20% higher” – even where a stronger move is possible.

Unsurprisingly, the Western Cape has had a positive impact on the numbers. Thanks to refurbishments in Gauteng, growth in this period was solid vs. a low base. Unfortunately, the same happy tune isn’t being sung by the KZN business, mainly due to a lack of demand for events at the Durban International Convention Centre. The Mozambique business has also had a tough time, impacted by political unrest.

You win some, you lose some. Overall, they are winning where it counts. At group level, the strong performance and associated cash flows led to a reduction in interest bearing debt. Along with the impact of the share buyback, this has boosted HEPS.

Detailed results are due for release on 21 May.

STADIO pulled off pretty spectacular growth (JSE: SDO)

This tertiary education model is working beautifully

STADIO has released results for the year ended December 2024. The company was previously spun out of Curro and the results couldn’t be more different if they tried. This share price chart looks like the two of them had a fight and deleted each other off Facebook:

It’s even worse over 5 years, with Curro up 52% from the pandemic lows and STADIO up a massive 481%. It’s not hard to spot which business model is more lucrative.

For the year ended December, STADIO grew revenue by 14%. This was supported by fee increases and an uptick in student numbers of 10% in Semester 1 and 8% in Semester 2. This drove EBITDA growth of 17%, which in turn led to core headline earnings increasing by 28%. The icing on the cake is that the dividend came in 51% higher!

The growth is set to continue. Having achieved the milestone of 50,000 students in Semester 2, the group believes it can reach its original pre-listing forecast of 56,000 students by 2026. They expect to grow to 80,000 students by 2030. The targeted mix is 80% distance learning and 20% contact learning.

And in case you’re wondering, the new Durbanville Campus is scheduled to open in January 2026. With 7 faculties and even some sports facilities as well, this is a major step into private university education in a way that could really disrupt traditional universities. Watch this space.

Nibbles:

  • Director dealings:
    • An executive (but not a director) at Richemont (JSE: CFR) sold shares worth R13.5 million.
    • Des de Beer bought more shares in Lighthouse Properties (JSE: LTE), this time to the value of R3.97 million.
    • A non-executive director of Glencore (JSE: GLN) bought shares worth R3.5 million.
    • Various associates related to directors of Brimstone (JSE: BRN) bought N ordinary shares worth a total of R1.06 million.
    • A director of Libstar (JSE: LBR) bought shares worth R185k. Given the recent direction of travel in the share price after the release of poor numbers, that’s an interesting message to the market.
  • Sun International (JSE: SUI) announced that CEO Anthony Leeming will retire with effect from 31 December 2025. He’s been with the group since 1999 and was CFO from 2013 until his appointment as CEO in 2017. His replacement is Ulrik Bengtsson, a Swedish executive with deep experience in the gaming sector. This includes experience in online gaming, which is proving to be quite a disruptive force in this sector. The changing of the guard at CEO level takes place in July this year, with Leeming sticking around until December to help with the transition.
  • Fairvest (JSE: FTA | JSE: FTB) is about to demonstrate just how deep the JSE capital pools are, particularly for property funds. An accelerated book build process will look to raise R400 million through the issue of new Fairvest B shares. I can almost guarantee that an announcement will come out early on Tuesday morning to say that the raise was completed and was oversubscribed. In fact, they may even increase the size of the raise if demand is strong enough.
  • Kore Potash (JSE: KP2) is looking to raise a meaty $10.6 million to help things move forward with the all-important Kola project. They need to pay PowerChina $800k for the optimisation work in 2022 and 2023, as well as $5 million under the early works agreement. There are various other requirements for capital, including general corporate purposes. Once the company exits the closed period, the chairman plans to subscribe for $0.5 million in shares. Another existing investor will put in $0.3 million. The two largest existing shareholders have been asked whether they wish to subscribe for shares and an answer is due within 20 business days. Any such subscription would be subject to shareholder approval. In case you’re wondering, the Summit Consortium has committed to deliver a non-binding financing term sheet by 31 March. This will be subject to finalisation of legal documentation, so there needs to be a capital raise in the meantime to tide the group over. Although they have appointed a South African broker to be involved in the raise, it looks as though the main bookrunners are focused on the UK market.
  • Prosus (JSE: PRX) gave an update to the market on the timing of the Just Eat Takeaway.com offer. There are obviously some major regulatory hoops that they need to jump through, with the offer memorandum in the approval process before it can be issued to the market. They expect the offer to commence in the second quarter of 2025 and to be concluded by the end of the year. This is of importance to Naspers (JSE: NPN) shareholders as well.
  • Anglo American Platinum (JSE: AMS) released a capital markets day presentation to the market. It’s a detailed document that gives a great overview of the business and the key drivers of performance. You won’t be surprised to learn that the presentation makes the point that demand for electric vehicles hasn’t met expectations, suggesting better demand dynamics for PGMs going forwards. Check out the full presentation
  • Datatec (JSE: DTC) has also made an investor conference presentation available, so investors have been given quite a bit to chew on recently as the company also recently did a roadshow related to its Logicalis International business. If you would like to learn more about the group as a whole, you’ll find the presentation here>>>
  • Telkom (JSE: TKG) announced that the disposal of Swiftnet to a consortium of Actis and Royal Bafokeng Holdings has met all the suspensive conditions required for the closing process to begin. This is good news, as it means that there are no further potential hiccups in getting the deal finalised.
  • You won’t see AGM votes that are this close all too often, but then again Quantum Foods (JSE: QFH) doesn’t exactly have a normal relationship between the board and the shareholders on the register. With plenty of corporate activity and possible permutations of what could happen there, the directors narrowly survived the AGM with most votes ending up at just 51% in favour of appointments.
  • Sygnia (JSE: SYG) released the results of the odd-lot offer. They repurchased 0.03% of total shares in issue for R1.05 million. In the process, they got 2,887 shareholders off the register, significantly reducing the admin burden along the way.
  • Tiny AH-Vest (JSE: AHL – with a market cap of just R14.3 million!) released a trading statement for the six months ended December 2024. HEPS collapsed to just 0.17 cents, a drop of 93.4% year-on-year.

UNLOCK THE STOCK: Homechoice International

The Finance Ghost
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UNLOCK THE STOCK: Homechoice International

Unlock the Stock is a platform designed to let retail investors experience life as a sell-side analyst. Corporate management teams give a presentation and then we open the floor to an interactive Q&A session, facilitated by the hosts.

We are grateful to the South African team from Lumi Global, who look after the webinar technology for us, as well as EasyEquities who have partnered with us to take these insights to a wider base of shareholders.

In the 49th edition of Unlock the Stock, Homechoice International joined the platform for the first time to talk about the recent performance and strategic focus areas for the group. The Finance Ghost co-hosted this event with Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions.

Watch the recording here:

Temu Teslas no more: how China won the EV race

Dominique Olivier
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Temu Teslas no more: how China won the EV race

If you’ve been to a car expo lately, you’ve probably seen it firsthand: Chinese EVs have evolved from being a curiosity to a force to be reckoned with. And with their sleek designs, competitive pricing, and tech-loaded features, they’re proving that the future of electric cars might not belong to the brands we once expected.

Once the undisputed leader of the EV world, Tesla is now slipping – and hard. Sales took a hit across the US, China, and major European markets in February this year, and its stock price has nosedived nearly 50% from its mid-December peak. Part of that slump is directly tied to controversy (consider that Tesla sales in Germany have collapsed by 76% since Elon Musk’s famous “Roman salute” in January). But beyond the dodgy politics lies a bigger problem: an Eastern competitor decades in the making. 

With rivals gaining ground and sentiment shifting, Tesla’s reign isn’t looking as secure as it once was. In China, where local giant BYD continues its unstoppable rise, Tesla’s numbers fell by 49%. Beyond their homeground advantage, Chinese automakers are also dominating emerging markets (hello, South Africa), and it’s not hard to see why. Chinese brands just keep pushing the envelope on everything from aesthetics to pricing. Just this week, BYD unveiled a new lineup of EVs that can charge almost as fast as filling up a petrol tank. Meanwhile, Tesla is fiddling around with a re-release of the Model Y. 

To most of us here on the Southern tip of Africa, it feels like the Chinese vehicle tsunami came out of nowhere – but in reality, this wave has been building up momentum since before Tesla released its first electric Roadster. So what’s the secret behind Chinese success?

You guessed it – it’s the government

Back in the early 2000s, China’s car industry was having a bit of an identity crisis. It was a manufacturing giant, sure, but they couldn’t hold a candle to the German, Japanese, or American automakers ruling the roads. Competing in the internal-combustion engine (ICE) game was clearly a lost cause. Those legacy brands had decades of R&D and motorsport heritage behind them. Even hybrids were already Japan’s domain, leaving China without an obvious lane to dominate.

So, instead of trying to play catch-up, China swerved entirely. The government bet big on a technology that, at the time, was more of a futuristic fantasy than a viable market: fully electric vehicles.

It was a massive risk. Back then, EVs were little more than niche science projects; GM had already scrapped its early attempt, Toyota’s EVs were short-lived, and Tesla was still a tiny startup. But for China, the potential payoff was too good to ignore. EVs weren’t just a way to stake a claim in the auto industry, they were also a solution to some of China’s biggest problems: choking air pollution, dependence on foreign oil, and the need for an economic boost post-2008 financial crisis.

In 2001, EVs became a priority project in China’s Five-Year Plan, the country’s most important economic playbook. Another key turning point came in 2007, when Wan Gang, a former Audi engineer and an early EV evangelist, became China’s minister of science and technology. He was an early and outspoken fan of Tesla’s first Roadster, and insiders now credit him with China’s decision to go all-in on electric cars.

One thing about the Chinese government: it does not do half-measures. It threw everything at making EVs work, handing out massive subsidies and pouring over 200 billion RMB ($29 billion) into tax breaks and direct incentives between 2009 and 2022. It even rigged the registration system for new cars in favour of EV buyers. If you want a petrol car in Beijing, you’re in for a battle for a licence plate in an expensive, years-long lottery. Want an EV? No problem – here’s your plate immediately – no wait, no fuss.

And when private buyers took longer than expected to bite, the government made sure EV companies had a market anyway. Public transport fleets became a testing ground for China’s first EVs, with cities buying up electric buses and taxis before consumer adoption took off. Shenzhen, home to BYD, became the first city in the world to electrify its entire bus fleet.

Fast forward to today, and the results of the Chinese government’s investment speak for themselves. From just 500 EVs sold in 2009, China hit nearly 11 million EVs in 2024. For reference, that’s more than half of all EVs sold worldwide. The subsidies have officially ended, but that seems to be OK in markets like China. The government’s early push gave Chinese automakers the momentum to go toe-to-toe with the biggest names in the business. Now they’re thriving, while legacy carmakers and erstwhile innovators are shrinking in the rearview mirror. Notably, not all markets have achieved the level of EV adoption seen in China, so subsidies remain an important factor elsewhere in the world.

Where’s the juice?

If there’s one thing that makes or breaks an EV, it’s the battery (obviously). It accounts for around 40% of the cost of the car, which means the challenge has always been the same: how do you make a battery that’s powerful, reliable, and still affordable?

While the West was focusing on lithium nickel manganese cobalt (NMC) batteries, China started its EV journey with lithium iron phosphate (LFP) batteries. These were cheaper and safer, but back then, they had some serious downsides, including low energy density and poor cold-weather performance. Instead of giving up on LFP, a few Chinese battery giants (like CATL) spent a decade fine-tuning the technology. Fast forward to today, and they’ve basically closed the gap, and the EV industry is catching on. 

By 2022, roughly a third of all EV batteries were LFPs. That’s a direct result of China’s relentless innovation – but battery tech is just half the story. China also controls a huge chunk of the global supply chain for critical battery-making materials like cobalt, nickel sulfate, lithium hydroxide, and graphite. While other manufacturers are scrambling to lock in deals for raw materials with the likes of Chile and Australia, China had the foresight to dominate refining capacity years ago.

As a result, Chinese EV batteries are not only cheaper, but also more widely available, and that’s why China’s battery makers are now sitting at the top of the global supply chain. For rival EV makers, you can imagine that this is like trying to outdo Italy in espresso-making – if Italy also controlled the best coffee beans, the top roasting facilities, and the finest espresso machines in the world.

Temu Teslas for the win

The rise of these EV brands has gone hand in hand with a new generation of car buyers who don’t see Chinese brands as second-rate or inferior to foreign ones. These buyers grew up with Alibaba, SHEIN and Tencent, so they’re far more comfortable with Chinese brands than their parents, who still instinctively lean toward a German or Japanese badge. And remember, those same parents were once wary of anything made in Japan!

Millennial and Gen Z car owners put more value on affordability and a smaller debt commitment than on brand prestige or heritage (a lesson that Jaguar’s marketing department had to learn the hard way). 

So, what happens next? Even if Tesla could somehow disentangle itself from the professional stick-poker that is Elon Musk, it still faces the challenge of falling behind a country that does everything at double speed, from innovating to manufacturing. It’s the classic tortoise-and-hare story – except in this version, the tortoise took the time to build itself a jetpack.

About the author: Dominique Olivier

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

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting. She now also writes a regular column for Daily Maverick.

Dominique can be reached on LinkedIn here.

GHOST BITES (Choppies | Investec | Momentum | Shaftesbury | South Ocean Holdings)

The Finance Ghost
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GHOST BITES (Choppies | Investec | Momentum | Shaftesbury | South Ocean Holdings)

Solid earnings at Choppies, but a flat dividend (JSE: CHP)

It’s somewhat hilarious that this has been the pick of the retailers in 2025

I’m not sure what you had on your bingo card coming into this year, but I certainly didn’t have an expectation for Choppies to be massively outperforming the South African retailers. Yet here we are, with a year-to-date move of 26% at a time when most local retailers are firmly in the red!

The results for the six months to December 2024 give some support to this move. Revenue was up by 19.4%, with sales in like-for-like stores up by 15.1%. Although gross profit margin came under some pressure with a decline of 10 basis points due to promotional behaviour by competitors, they still saw a strong increase in gross profit of 18.7%.

The shine does come off once we take expenses into account, with a 22.9% increase driven by a number of factors including forex losses on lease liabilities and the loss on sale of the Zimbabwe segment. Some of this sounds non-recurring in nature.

Operating profit was up just 6.1% due to the jump in expenses, with operating margin down 50 basis points to 4.06%. In terms of HEPS, which reverses out those irritating impairments and other non-recurring issues, they were up 32.7%.

Tempting as it may be to focus on the HEPS number, it’s worth pointing out that net cash from operating activities fell by 6% and the dividend was flat at 1.6 thebe per share. Still, the market is clearly pricing in growth for this business!

Investec’s UK business has negatively impacted their latest numbers (JSE: INL | JSE: INP)

To be fair, they faced a demanding base period in the UK

Investec has released a pre-close update dealing with the year ending 31 March 2025. This is designed to update the market on performance before heading into a closed period which only ends when results are released. Not all companies do this, but it’s always good to see more disclosure rather than less.

The group’s pre-provision operating profit is between 5% and 12% higher than the prior year. That sounds great, yet HEPS is between 8% lower and just 1% higher. Impairments had a significant impact on the numbers, even though the credit loss ratio is still within the through-the-cycle range of 25 basis points to 45 basis points.

If you dig deeper, you’ll see that the South African business expects a credit loss ratio around the lower end of their through-the-cycle range of 15 basis points to 35 basis points. In the UK, the expected credit loss ratio is at the upper end of the guided range of 50 basis points to 60 basis points. The impact of specific impairments in the UK business has hurt them, although the Specialist Bank segment was also trying to grow against a base year in which operating profit had increased 33.9%. When you consider that the latest performance is a move of -4% to +4% in the UK, the two-year view is still strong in that business.

Notably, the cost-to-income ratio improved, so cost control was decent. This confirms that it was firmly an impairments story that took the shine off the growth numbers. Another highlight worth mentioning is the 14.5% increase in funds under management in Southern Africa, boosted by net inflows.

Group return on equity is between 13% and 14%, which is at the lower end of the medium-term target range of 13% to 17%.

Momentum shows what happens when everything goes right (JSE: MTM)

The share price closed almost 11% higher on the day of results

Momentum has released results for the six months to December. They are certainly living up to their name, as the group enjoyed a period in which its key business units delivered strong growth.

Normalised headline earnings per share increased by a delicious 48%, followed closely by the interim dividend with 42% growth. Those are exceptional numbers, leading to return on embedded value per share jumping from 11.6% to 16.8%.

With underlying drivers of performance like improved persistency in life insurance, better underwriting profits in the short-term business and favourable market returns, there’s a lot to smile about here. Even the operating loss in India was reduced!

Despite this, the embedded value per share of R39.29 is significantly higher than the share price of R32.68. This suggests that there might be more room for this share price to run, even though its up 58% over 12 months. Alternatively, you could argue that the market is worried about how maintainable these returns are.

The group has affirmed its financial ambitions for 2027, which include return on equity of 20%. Considering they just banked a return on equity of 24.6%, this perhaps suggests that conditions in this period were just unsustainably good. The share price trading at such a discount to embedded value would support this view. South African investors do tend to have a “it’s too good to be true” mentality, given the last decade or so on our market.

Shaftesbury is allowing a minority shareholder into Covent Garden (JSE: SHC)

The order of events on SENS was rather funny

Before the market opened on Thursday, Shaftesbury released a “response to market speculation” that confirmed that discussions with underway with Norges Bank Investment Management (NBIM) regarding a potential sale of 25% of Covent Garden. That announcement went on to say that there’s no certainty of a transaction being agreed.

Certainty came rather quickly, as just two hours later there was an announcement of the full terms of the deal!

So, onto the deal we go. Shaftesbury will sell 25% of Covent Garden to NBIM for £570 million, which values the asset in line with its balance sheet value as at December 2024. This is an iconic property in the West End of London, which has to be one of the best places in the world to have property. This is why the net initial yield is just 3.6%, which tells you how low a return investors are willing to accept for the underlying risk – or perceived lack thereof.

This is a NAV-neutral deal, as they are selling the stake based on current book value i.e. they are just exchanging an equity investment for cash. But from an earnings perspective, they note that this is accretive as they are unlocking capital through selling down the stake and still earning fee income based on the management of the property.

Shaftesbury has a solid balance sheet, but they will still use the proceeds to reduce debt. The remaining cash will be deployed as opportunities arise for acquisitions and portfolio refurbishment and improvement projects.

South Ocean Holdings had a horrible time in 2024 (JSE: SOH)

Revenue is pretty much the only thing that went up

When a set of results starts with a 9% increase in revenue, you would expect to see the rest of the income statement looking good as well. Alas, South Ocean Holdings suffered an ugly drop in HEPS of 62%. The dividend was 50% down. Clearly, the year to December 2024 didn’t go well.

Things went wrong right near the top of the income statement, as gross profit margin plummeted from 9.7% to 5.8%. This is a low margin business that just got a whole lot lower. Despite revenue increasing, gross profit itself was down 35% and the rest of the numbers didn’t stand much of a chance from there.

The pressure is being caused by imported goods in the market. That’s really bad news, as it suggests that this isn’t a temporary issue. To add to the worries, the overdraft facility has ballooned from R224 million to R417 million and is due for renewal during July 2025. Ongoing support from the bankers is required here.

The group is still profitable at least, so that should hopefully keep the bankers at bay. As for shareholders though, it’s a rough situation. This sounds like a structural problem rather than a temporary one.

Nibbles:

  • Director dealings:
    • The former CEO of Standard Bank (JSE: SBK) sold non-redeemable preference shares in the bank worth R2.4 million.
    • The company secretary of Impala Platinum (JSE: IMP) sold shares worth R1.2 million.
    • The CEO of Putprop (JSE: PPR) bought shares worth R212k.
    • Des de Beer bought shares in Lighthouse Properties (JSE: LTE) worth R183k.
  • Libstar (JSE: LBR), which has indicated to the market that they are considering various strategic options, announced the appointment of ex-Pioneer Foods CEO Tertius Carstens to the board as a non-executive director.
  • AngloGold Ashanti (JSE: ANG) is busy with site tours for analysts. After releasing a presentation earlier in the week dealing with the Obuasi mine, there’s now one on Sukari. If you enjoy (and understand) the more technical elements of mining, you’ll find them on the home page of the AngloGold website.
  • Anglo American Platinum (JSE: AMS) is planning a change of name, so they are trying to make it as clear as possible to the market that they are splitting from Anglo American (JSE: AGL). The proposed new name is Valterra Platinum.
  • Wesizwe Platinum (JSE: WEZ) is suffering a delay in the publication of its 2024 financials. This is due to a cyber attack towards the end of 2024, which impacted the financial systems of the company.
  • In the incredibly unlikely event that you are itching for Globe Trade Centre (JSE: GTC) to release the 2024 annual report, you’ll have to wait a bit longer as it’s scheduled for 29 April. The Q1 2025 release has been pushed out to 29 May.

GHOST BITES (ArcelorMittal | Sabvest)

The Finance Ghost
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GHOST BITES (ArcelorMittal | Sabvest)

ArcelorMittal is still winding down the long steel business (JSE: ACL)

Thus far, nothing has emerged that could stop the process

ArcelorMittal is very begrudgingly winding down their long steel business. They fully understand the social impact that this has. The only way to stop this process would be through a funding package and agreement with stakeholders (including government) on measures to improve the economics.

In the meantime, the company has received various offers regarding the longs business and even the group as a whole. At this stage, nothing is a firm intention to make an offer as defined in the Companies Act.

Of course, this didn’t stop the share price from closing 7.7% higher on Wednesday as speculative punters took a stab at the thought of an offer coming through for the group.

Sabvest had an excellent year in 2024 (JSE: SBP)

NAV per share growth was well above recent averages

Investment holding company Sabvest had a particularly good time in 2024. The net asset value (NAV) per share grew by 20.8%. This is the right metric for an investment holding company to use. The dividend per share increased by 16.7% and I think we can agree that cash is a language that we all understand.

They have a long-term mindset at Sabvest, which means you’ll usually see them referencing things like the 15-year compound annual growth rate (CAGR) in the NAV per share. Sitting at 18.1% without reinvesting dividends, I would also make a noise about that number!

Things have been tougher post-pandemic, with the 3-year CAGR for NAV at 12.1% (still a solid number). You can therefore see that 2024 was significantly better than recent years. Importantly, this is due to growth in earnings in the underlying portfolio companies, as the multiples used to value the companies are unchanged vs. 2023 with the exception of two investments. In other words, the NAV growth isn’t thanks to valuation trickery.

The thing that makes Sabvest interesting is that most of the portfolio sits in unlisted assets that the market can’t get access to any other way. This is exactly what investment holding companies should do.

There were a number of underlying transactions in the portfolio in 2024, with one of the notable ones being the sale of the WeBuyCars shares received from Transaction Capital through the unbundling. Along with other sales, this led to a material decrease in debt during the period.

The NAV per share is R132.13 and the share price is R87.50, so there’s a material discount to NAV as per usual for investment holding companies.

Nibbles:

  • Director dealings:
    • A non-executive director of Discovery (JSE: DSY) sold shares worth R986k.
    • Des de Beer bought more shares in Lighthouse Properties (JSE: LTE), this time to the value of R434k.
    • A director of OUTsurance (JSE: OGL) bought shares worth R99k.
  • Sappi (JSE: SPP) successfully closed the raise of €300 million worth of 4.5% sustainability-linked senior notes due 2032, They will use the net proceeds to redeem €240 million in notes due 2026, with the remainder for general corporate purposes.
  • Sephaku Holdings (JSE: SEP) has followed in the footsteps of many other small- and mid-caps in moving its listing to the General Segment of the JSE. The idea is that this is a less onerous regulatory environment for smaller listed companies.

GHOST WRAP – Q1 winners on the JSE

The Finance Ghost
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GHOST WRAP – Q1 winners on the JSE

Earnings season is drawing to a close and it feels like we’ve all earned a holiday. In considering how the first few months of the year have played out, some surprising winners have emerged.

The performance in gold is simply a case of the sector carrying on where it left off in 2024, but what about platinum? And where did that telecoms rally come from? Also, have retail stocks continued their slide since the previous episode of Ghost Wrap that focused on that issue?

This podcast gives you great context to the year-to-date performance on the JSE. 

The Ghost Wrap podcast is proudly brought to you by Forvis Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Forvis Mazars website for more information.

Listen to the podcast here:

Transcript:

Where have the local wins been in 2025?

It feels like earnings season is nearly over. Well done – we survived! Personally, I feel like I need a holiday.

In the previous edition of Ghost Wrap, I looked at how the retailers really struggled in the first month or so of the new calendar year, so I suspect many of them felt like they needed a holiday as well. In literally the past couple of days, the stocks have finally stopped dropping and have turned higher. Still, some of these retailers are down more than 20% year-to-date, so the consumer-facing stuff has been ugly for local investors.

But what have the winners been? Where could you have really made money on the JSE thus far in 2025? Bearing in mind that we are roughly three months in, a reasonable annual return expectation means you should be smiling if you’re up 3% or so this year. But then why is a Top 40 ETF up 9.3% year-to-date? And how can this performance be so different to buying the S&P 500 as a local ETF, in which case you would be down 7% year-to-date in rand?

The answer lies in the constituents of the index of course, as well as the rotation away from US stocks this year. On that note, we better start with mining. After all, that’s where the action has been on the local market.

Gold is glittering

Gold. We simply have to start there. The glittering has continued this year, with the yellow metal going over $3,000 an ounce for the first time. This has allowed the gold miners to continue their run from 2024, with the likes of Gold Fields up 50%. It almost doesn’t matter where you look, as Harmony is up 41% and AngloGold Ashanti has done 43%.

But what of Pan African Resources? Why is that “only” up 17%? I think this is a particularly interesting one, as this is the long position that I added in the past few weeks. The company had a disappointing period in the six months to December 2024, with production coming in below expectations. Obviously, when the gold price is doing well, investors want to see production being as efficient as possible to really take advantage of that price. Now, whilst I agree that poor numbers need to be punished in a share price, the reality is that production guidance for 2025 was maintained by Pan African. In other words, they expect to claw back the issues in the second half of the year. Looking ahead to FY26, there are major projects coming on stream to boost production. To add to my bull case, there’s a gold derivative that expired at the end of February, so they are now seeing the full benefit of the gold price, and yet the share price reacted so negatively to news of production in the first six months – I just couldn’t help but put on a position on the basis of that sell-off.

Watch this one closely. I wouldn’t be surprised if by the end of this year, Pan African Resources is top of the pile if we use that post sell-off base for comparative purposes – and that was my in-price. Hopefully, it works out.

Platinum – is that you?

By now, reading about a supply deficit in the platinum market is nothing new. It feels like this is the same story over and over again, usually accompanied by a chart showing how EV demand isn’t living up to expectations and thus demand for platinum in Internal Combustion Engine (ICE) cars must continue. Now, at some point, the supply and demand dynamics come true and there is a deficit. If prices stay depressed for a long time, investment in mining capacity is low or non-existent and hence supply shrinks. If you do then see an uptick in demand, inevitably the price spikes and this encourages investment in capacity, which then solves the supply issue and hence prices come down. This is why these are called cyclical industries. Platinum just has particularly tricky cycles to manage – and there’s a worry about structural decline in the market.

Thus far in 2025, the market seems to be believing something about the platinum story other than a structural decline. The price of Platinum Futures is up 9.5% year-to-date. Before you get too excited, it’s only up 12% in the past year and it’s been really range-bound over the period. Still, with prices of the commodity having gone in the right direction, we’ve seen quite a rally in the sector. Impala Platinum is up 37%, Northam Platinum is up 35% and Amplats has done 27%.

By the way, Sibanye-Stillwater is so downtrodden that the share price is up only 25%, below the platinum peers and the gold peers even though those are the major commodities at the group. Still, 25% up is a lot better than punters are used to seeing recently.

The variance over 12 months within the sector is astonishing though, showing how marginal the economics have been in this industry. It really does separate the better-quality companies from the ones that are struggling. Where companies are producing efficiently and lower down the cost curve, there’s performance to be enjoyed. For example, Impala Platinum is up 83% over 12 months, while Amplats is up just 7.6%! Timing and base effects make a difference here, but it’s very different to gold, where basically everything is up and by substantial margins. Platinum is far more volatile and riskier.

What about the rest of the market?

I’ve gotta tell you that things haven’t been great outside of the mining sector. For context, the Resource 10 index is up 27% year-to-date, so clearly the rest of the market isn’t shooting the lights out if overall JSE returns are in the single digits. If you look at the Small Cap index, you’ll clearly see the impact of the risk-off environment in equities that we’ve seen in the US, as that’s down 7.5% year-to-date. The mid-cap index is down 1.5%. The Financial 15 index is down 1%. This really leaves us with the industrials index to look at, which is basically the polony of the JSE – the index where they put everything that doesn’t have an obvious home anywhere else. And it has been doing well, which means we need to look at the constituents.

A good example of what’s in here would be Naspers, which has the largest contribution to the capped industrial index. Thanks to a resurgence in belief in China, it’s up 19% year-to-date. Prosus is up even more, with a 22% return. I’m invested in Prosus, a position I picked up in January when there was sell-off that didn’t make sense to me. Happily, that means I’m up 31%! I just wish it was a bigger proportion of my portfolio.

An area where I have no exposure at all is the telecoms space. Most of the time, I don’t feel like I’m missing out, as it hasn’t been a great performer over a long time period. But this year, that’s been another growth area on the JSE. MTN is up 26% year-to-date, Vodacom is up 14% and Telkom is up nearly 6%, well below the other two but still really good when you annualise that return. But the winner by far is Blue Label Telecom, up 34% this year as the market puts more belief in the Cell C strategy.

Why is the telecoms sector doing well this year? Some of it is probably related to a general outlook that 2025 will be a better year for African currencies. Honestly, they deserve a break, as recent times have been incredibly bad and have really hurt these businesses. A lot of it is also some of the recent growth in South Africa, which has been pretty decent by telecom standards. Of course, when you see moves like these, what it really tells you is that the valuation was so depressed that even a small amount of good news makes a difference.

What am I watching?

A lot of things – but what I will highlight on the local market is that some of the banking moves are worth keeping an eye on. For example, does it make sense that Standard Bank is up 8.4% this year, yet Absa – which also has major Africa exposure – is down over 2%? Absa is now on a trailing dividend yield of 7.9%. Sure, it’s certainly no rocket ship from a growth perspective and we do have the interest rate cycle to worry about, but that’s just one of the names that I’m keeping an eye on. They also have a new CEO coming on board, which is interesting.

The great thing about the markets is that they keep dishing up volatility and thus opportunity. Stay disciplined and stay alert to silly moves especially, like the gift that the market delivered in Prosus in January.

It’s going to be particularly interesting this year to see whether there’s follow-through in the mining and telecoms industries. They’ve both had a hard time for a long time. Maybe this is their year? Time will tell.

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

Gaia Renewables 1 has acquired stakes in three renewable energy plants from the IDEAS Renewable Energy Fund which is managed by African Infrastructure Investment Managers (Old Mutual). The deal, funded with debt and equity, will see the Gaia fund acquiring a 10% stake in each of the Linde and Kalkbult solar photovoltaic plants in the Northern Cape as well as a 21% stake in the Jeffreys Bay Wind Farm in the Eastern Cape. The aggregate value of the transactions is said to be more than R700 million.

Patrice Motsepe’s Ubuntu-Botho Investments, the majority shareholder of JSE-listed African Rainbow Capital Investments (ARCI), has made an offer to minority shareholders valued at c.R5,9 billion following a drawn-out decision to delist the company and move the entity’s domicle from Mauritius to South Africa. The offer of R9.75 per share is a 21% premium to the 30-day VWAP and represents a discount of 22.8% to its announced NAV. ARCI’s stated business has an intrinsic value of R12.78 per share, translating into a valuation of R19,4 billion. The offer for the 40% outstanding stake values the fund at R14,8 billion. Shareholders will need to approve the delisting and re-domiciliation.

Thungela Resources has acquired the remaining stake in the Ensham Business via the acquisition of a 25% stake in Sungela from co-investors Audley Energy and Mayfair Corporations Group. Sungela’s only asset is an 85% stake in Australian Ensham coal mine. The aggregate purchase consideration paid is A$82,8 million – made up in the main of loans of $82 million and a cash payment of $862,500. There is a deferred amount of $7,8 million. In December 2024, Thungela Resources Australia acquired a 15% stake in the mine for A$48 million from Bowen Investment.

Saldanha Steel, a wholly owned subsidiary of ArcelorMittal South Africa, has entered into an agreement to sell two properties in Saldanha, Western Cape for an aggregate R134 million as the struggling steel and mining company looks to dispose of non-core assets.

In its interim results released this week, OUTsurance notified shareholders that the company will dispose of its investment in Merchant Capital. The sale, by way of a company share buyback, will be tranched over a period of 15 months with total proceeds amounting to R92 million.

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

The JSE has approved the transfer of the listing of Sephaku to the General Segment of Main Board with effect from commencement of trade on 24 March 2025. The listing requirements in this segment are less onerous for the smaller cap firms.

This week the following companies repurchased shares:

Thungela Resources will implement a share repurchase programme commencing 18 March and ending on 4 of June 2025. The repurchase of shares will take place on the JSE with the aggregate purchase price not exceeding R300 million.

On March 6, 2025, Ninety One plc announced that it would undertake a repurchase programme of up to £30 million. The shares will be purchased in the open market and cancelled to reduce the Company’s ordinary share capital. This week the company repurchased 1,964 of its ordinary shares at an average price of 145 pence.

In its annual financial statements released in August 2024, South32 announced that it would increase its capital management programme by US$200 million, to be returned via an on-market share buy-back. This week 352,304 shares were repurchased at an aggregate cost of A$1,27 million.

On 19 February 2025, Glencore plc announced the commencement of a new US$1 billion share buyback programme, with the intended completion by the time of the Group’s interim results announcement in August 2025. This week the company repurchased 11,500,000 shares at an average price per share of £3.19.

In October 2024, Anheuser-Busch InBev announced a US$2 billion share buy-back programme to be executed within the next 12 months which will result in the repurchase of c.31,7 million shares. The shares acquired will be kept as treasury shares to fulfil future share delivery commitments under the group’s stock ownership plans. During the period 10 – 14 March 2025, the group repurchased 842,367 shares for €48,43 million.

Hammerson plc continued with its programme to purchase its ordinary shares up to a maximum consideration of £140 million. The sole purpose of the buyback programme is to reduce the company’s share capital. This week the company repurchased 320,987 shares at an average price per share of 249 pence.

In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 430,381 shares at an average price of £31.75 per share for an aggregate £13,67 million.

During the period February 10 to 14 March 2025, Prosus repurchased a further 6,551,068 Prosus shares for an aggregate €281,74 million and Naspers, a further 370,294 Naspers shares for a total consideration of R1,73 billion.

One company issued a profit warning this week: Astoria Investments.

During the week two companies issued cautionary notices: Tongaat Hulett and ArcelorMittal South Africa.

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

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

Vanessa Aitken
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Who’s doing what in the African M&A and debt financing space?

DealMakers AFRICA

Leta, a Nairobi-based logistics software-as-a-service provider has raised US$5 million in seed funding from Speedinvest, Google’s Africa Investment Fund and Equator. Leta is looking to double revenue in the coming months as it expands into more countries across Africa and the Middle East with clients such as KFC and Diageo, both of whom are existing clients.

Woodside Energy has elected not to exercise its option to farm-in to the Petroleum Exploration License 87 (PEL 87) project. PEL 87 governs the 2713A 2713B blocks in Namibia’s Orange Basin and is operated by Pancontinental Orange which has a 75% stake. Custos Investments holds 15% and the National Petroleum Corporation of Namibia holds the remaining 10%.

Egyptian healthcare and pharmaceutical solutions company, Grinta, has acquired primary healthcare service chain, Citi Clinic for an undisclosed sum. At the same time, Grinta announced a strategic investment in the company in a funding round led by Beltone Venture Capital and Raed Ventures. The size of the round was not disclosed.

Mirova Gigaton Fund has provided Kenyan climate technology firm, KOKO, with a carbon finance debt facility to scale up a new type of residential energy utility across Kenya and Rwanda.

Go Big Partners and 216 Capital Ventures have invested in Juridoc, a Tunisian legaltech company. The investment will support Juridoc’s expansion into the OHADA (Organisation for the Harmonisation of Business Law in Africa) region – a consortium of 17 West and Central African countries.

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

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