Friday, April 4, 2025
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Ghost Bites (Bell | Discovery | Gemfields | Grand Parade Investments | Investec | MC Mining | Renergen | Schroder Real Estate | Sibanye | South32 | South Ocean | Telkom | Transaction Capital | Workforce)

The Finance Ghost
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Ghost Bites (Bell | Discovery | Gemfields | Grand Parade Investments | Investec | MC Mining | Renergen | Schroder Real Estate | Sibanye | South32 | South Ocean | Telkom | Transaction Capital | Workforce)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Bell goes from strength to strength (JSE: BEL)

A further trading statement tells an even better story

Bell Equipment’s share price is up more than 53% in the past six months. It’s up 155% over five years. You can make money on the local market, provided you know where to look (and what to pay).

In the initial trading statement released in November 2023, Bell indicated that HEPS would be up at least 59% for the year ended December 2023. In a further trading statement, we now know that the increase is actually between 65% and 73%, thanks to stronger market conditions than anticipated at the end of the year.

This is an incredibly strong result.

Normalised earnings grew double digits at Discovery (JSE: DSY)

The offshore operations were a strong contributor

If you focus on headline earnings as reported, then you’ll find that Discovery has no growth whatsoever to report for the six months to December 2023. If you’re willing to use normalised headline earnings, you’ll find growth of 11% instead. The difference? A prior period fair value gain from a UK interest rate derivative.

Fancy financial footwork aside, the good news is that new business annualised premium income grew by a juicy 28%. Embedded value was up 12%, which is a useful metric for those trying to value Discovery. Annualised return on embedded value fell from 14.4% to 12.1% though.

Basic embedded value per share is R156.29 and the share price is R127.21, so Discovery trades at a discount to embedded value that reflects the inadequate return on embedded value vs. what the market is looking for.

Cash is a language we all understand, with an interim dividend of 65 cents per share. There was no interim dividend in the comparable period, so that’s a significant improvement.

If you’re wondering where the growth came from, then you’ll be interested to know that South Africa generated normalised profit growth of 9% vs. the UK at 13% (assisted by the weaker rand). Vitality Global was also helped along by the weaker rand and the low base effect, up 71%.

Gemfields’ profits took a serious knock in 2023 (JSE: GML)

Costs ramped up and shareholders haven’t seen the benefits yet

Gemfields achieved its second highest annual revenues in 2023. There were record prices achieved for gemstones sold at auction. Against that backdrop, you would expect a strong result.

Instead, you have a weaker production result vs. 2022 (which even led to the withdrawal of an auction from the schedule) and the negative impact on profits of a period of heightened investment in the operations. For example, a second processing plant is being built at the ruby operations.

It’s also important to understand just how big the gap is to 2022’s revenue result. Kagem (the emeralds) achieved revenue of $89.9 million vs. $148.6 million the prior year. Montepuez (the rubies) achieved $151.4 million vs. $166.7 million the prior year, which is a far less severe drop than in emeralds. Fabergé reported revenue of $15.7 million vs. $17.6 million the year before as the luxury market slowed down.

So although 2023 was still a strong revenue result vs. historical averages, it was a substantial come-down from 2022. This is why adjusted HEPS (which excludes Sedibelo’s fair value loss) was 26.8 cents vs. 85.5 cents in the prior year.

If you include the massive write-down of $28 million to PGM investment Sedibelo Resources, then there would be a headline loss per share of 16 cents.

The Gemfields share price is down 21% over the past year.

Grand Parade Investments: read carefully (JSE: GPL)

The increase in profit is from a very unusual source

Grand Parade Investments has been through quite the purge in recent years, changing its portfolio significantly. Although it describes itself as an investment holding company, they still focus on HEPS as the primary measure. It’s more appropriate I think to switch to NAV per share.

Headline earnings from continuing operations increased by 20% but you have to read far more deeply than that.

Firstly, the Gaming & Leisure portfolio (the core investments) saw headline earnings fall by 4% for the six months to December 2023. Then, if you don’t read carefully, it looks like corporate costs actually dropped from R12 million to R8 million. The important nuance is that there was a write-back of prescribed dividends of R11 million, which comes through as revenue in the central costs segment.

In other words, corporate costs actually moved higher.

If it wasn’t for the write-back of dividends, headline earnings would’ve dipped slightly. The gaming sector (especially slot machines) didn’t have a great time in 2023 with load shedding and other challenges, so I would expect to see this.

Solid growth at Investec (JSE: INL)

Return on equity is above the mid-point of the group’s target range

Investec reports in GBP, so you have to remember that growth percentages are in hard currency. This is different to growth in ZAR, as there seem to be only three certainties in life: death, taxes and the depreciation of our currency.

So, with HEPS growth for the year ending 31 March expected to be between 4.8% and 10.6% in GBP, that’s a solid outcome.

There were a number of important corporate activities this year, including the combination of Investec Wealth & Investment with the Rathbones Group, as well as the disposal of the property management companies to Investec Property Fund (now called Burstone).

The net interest income side of the business benefitted from the combination of larger balance sheets and higher rates, something I’ve written about many times here. The non-interest revenue line was positively impacted by client activity levels and higher trading income, as well as the first-time consolidation of Capitalmind in Continental Europe.

The credit loss ratio is expected to be at the mid-point of the through-the-cycle range of 25 basis points to 35 basis points. The UK ratio is above the upper end of the target range and the South African ratio is below the target range.

For those following Investec closely, it’s important to note that Investec’s exit from The Bud Group Holdings will be assisted greatly by the disposal of Assupol to Sanlam by that group.

Return on equity for the year is expected to be above the mid-point of the group’s target range of 12% to 16%. Again, remember that this is in GBP and therefore not directly comparable to local banks reporting in ZAR. You need a higher return in ZAR to reward you for local country risk.

MC Mining responds to Goldway (JSE: MCZ)

With the independent expert report in circulation, the board has the wind in its sails

For those who have been following the MC Mining saga, it’s important to know that the company has now responded to Goldway’s recent statements. Aside from responding to the allegations of lateness around the independent expert report, the board has also systematically responded to Goldway’s various claims about the assets.

The language is much less “shouty” and antagonistic than what Goldway has been putting out there.

Goldway’s offer price is well below the range suggested by the independent expert. This remains the basis for the board recommending that shareholders do not accept the offer.

In a separate announcement, Goldway has reminded the market that acceptances need to be received from holders of at least 50.1% of shares that it does not already own in order for the offer to be declared unconditional. This needs to be achieved by 5 April 202

Renergen attracts further funding (JSE: REN)

An Italian investment group has subscribed for more convertible debentures

Renergen announced that Airsol, part of the SOL group that was founded in Italy in 1927, has subscribed for a further $4 million worth of convertible debentures. This takes the total investment by SOL to $7 million.

This tranche was subject to Renergen implementing the deal with Mahlako Gas Energy, with that deal having been completed now.

The unsecured convertible debentures are convertible into Renergen shares upon the execution of the planned IPO on the Nasdaq. A structure like this gives the investor a debt position in the capital stack for now, with the ability to switch into equity if Renergen achieves its primary corporate goal of listing on the Nasdaq.

Schroder signs off on a disappointing quarter (JSE: SCD)

The NAV fell due to property valuation pressures

Property valuations had a tough time in 2023. The yield curve (off which properties are valued) wasn’t favourable, leading to Schroder’s net asset value dropping by 3.2% for the twelve months to December 2023.

The loan-to-value ratio finished the quarter at 24% net of cash or 33% gross of cash.

The group has decent dividend cover (comparing earnings to the dividend) and the first interim dividend reflects an annualised yield of around 7.8%. It’s quite unusual to see a property fund make reference to the yield on the share price.

A production issue at Sibanye – but thankfully no injuries (JSE: SSW)

There’s damage to the surface infrastructure at the Siphumelele shaft in local PGM operations

It doesn’t seem like Sibanye’s luck is turning positive just yet, with news of an accident at the Siphumelele shaft in Rustenburg where the group mines PGMs. The very good news is that there were no injuries. The bad news is that surface infrastructure was damaged, leading to suspension of production at the shaft. It accounts for 3.5% of annual PGM production from the SA operations. There’s no timeline for it to come back online yet.

Separately, the company announced the appointment of an executive to head up the uranium business. Greg Cochran has loads of industry experience and will hopefully help Sibanye achieve a solid outcome in that space.

South32 withdraws guidance for Australia Manganese (JSE: S32)

Tropical Cyclone Megan has damaged the infrastructure

Mining is a tough gig even when the weather behaves itself. When it doesn’t, things can get ugly. South32 is the latest victim of this, with Tropical Cyclone Megan having damaged the manganese operations in Australia.

At this stage, the company has identified flooding in the mining pits, damage to a critical road bridge and structural damage to the wharf and port infrastructure. At this stage, there’s not much indication of just how bad it is. All we know is that it’s bad.

Given the uncertainty, guidance for Australia Manganese has been withdrawn.

South Ocean released detailed results (JSE: SOH)

HEPS doubled in the year ended December 2023

For the year ended December 2023, South Ocean grew revenue by 26%. When a manufacturing company pulls off a top-line performance like that, things normally get exciting further down the income statement.

Indeed, electric cable manufacturing turned out to be far more lucrative in 2023 than in 2022, with HEPS up by 99%! The dividend per share was 83% higher at 11 cents per share.

As South Ocean is a tiny company with a market cap of just R300 million, liquidity is hard to come by in the stock. The share price is only 19% higher over 12 months at R1.47. Based on HEPS of 43.60 cents, that’s a Price/Earnings multiple of 3.4x.

Telkom agrees to sell its masts and towers business (JSE: TKG)

The buyers are Actis and Royal Bafokeng Holdings

Telkom has finally announced details of the disposal of the masts and towers business in Swiftnet. We now know that the bidder consortium is led by an infrastructure fund managed by Actis, with Royal Bafokeng Holdings as the B-BBEE partner. These are heavy hitters.

This is a category 1 transaction for Telkom, as the disposal price is more than 30% of Telkom’s market cap. This is a hugely important deal that allows Telkom to focus on growth in Openserve and its consumer business, while managing the ongoing challenges in the legacy businesses.

The enterprise value for the towers has been calculated as R6.75 billion. This is a debt free cash free number, which is then adjusted for the balance sheet items to arrive at the equity value. It’s quite unusual to see a shareholder loan not transferring to the buyer, with Telkom’s loan to Swiftnet of R225 million remaining outstanding i.e. still owed by Swiftnet to Telkom after the deal.

EBITDA (net of lease payments) for the 12 months to March 2023 was R896 million. It was R488 million for the six months to September 2023. If we annualise that interim number, the towers and masts have been priced on an EV/EBITDA multiple of just below 7x. That feels like a pretty good disposal price for Telkom.

There will be many approvals along the way before this deal closes. Still, the share price closed 4.8% higher in a show of appreciation.

Transaction Capital sells Nutun Australia (JSE: TCP)

The clean-up of the Transaction Capital “rump” continues

Transaction Capital has agreed to sell Nutun Australia Holdings to a wholly owned subsidiary of Allegro Funds, an alternative investments company with A$4 billion under management.

Nutun Australia Holdings has a 60% stake in Recoveries Corporation Holdings and a minority stake in Revive Financial Group. The business has various structures across Australia, New Zealand and Fiji. The South African operations of Nutun help to service the businesses with engagement support services and associated technologies.

Interestingly, aside from the deal to sell the equity, Nutun has entered into a long-term strategic partnership to continue providing support services to the offshore business. Nutun will be restricted from directly offering its services into the Australia and New Zealand markets for up to five years.

After adjusting for net debt and minority shareholders etc. the gross sales proceeds to Nutun will be up to A$58.3 million. A$54.4 million will be received up-front and the remaining A$3.9 million will be payable in April 2026 subject to potential warranty and indemnity claims.

The proceeds will go a long way towards giving Nutun a stronger balance sheet.

Workforce Holdings had a torrid time in 2023 (JSE: WKF)

The group has swung sharply into a headline loss

Workforce Holdings has released a trading statement dealing with the year ended December 2023. It wasn’t a happy time, that’s for sure.

After reporting HEPS of 46.8 cents in the comparable period, the headline loss per share for this period is estimated at between 11.36 cents and 16.04 cents. Ouch.

Aside from adverse trading conditions, the group has also attributed this pain to substantial credit losses that were responsible for 35 cents per share worth of losses.

Little Bites:

  • Director dealings:
    • A non-executive director of British American Tobacco (JSE: BTI) has bought shares in the company worth $153k.
    • The CEO Designate of Primary Health Properties (JSE: PHP) bought shares worth £137k.
    • Although a director of a major subsidiary of Vodacom (JSE: VOD) bought shares worth R305k, I must point out that it was due to needing to meet the minimum shareholding requirement for the forfeitable share plan. It’s therefore not a purchase in the way we usually like to see, but I’m including it here to show you the different types of purchases.
    • A prescribed officer of Thungela (JSE: TGA) sold shares worth R147k.
  • If you are a Fortress (JSE: FFB) shareholder, then be aware that the cash dividend of 81.44308 cents per share has a scrip dividend alternative at a 5% discount to the five day VWAP ending 28 March. You can also choose to receive it partly in cash and partly in shares.
  • Kore Potash (JSE: KP2) has raised $530k through the issuance of five separate convertible loan notes. The net proceeds will be used to work towards the signing of an EPC contract for the Kola Potash Project. The company is currently in a closed period and the conversion of the notes is subject to the release of the annual report. The chairman of the company has indicated an intention to subscribe for $150k of shares on the same terms as this fund raising once results are released.
  • AB InBev (JSE: ANH) has completed the $200 million repurchase of shares from Altria, at a price per share of $59.9625. This is roughly in line with the current traded price on the market. The combined effect of the buyback and Altria’s offer of shares in AB InBev to the market is a reduction of Altria’s stake in AB InBev from 10.0% to 8.1%. It could reduce further if underwriters exercise their options. Importantly, AB InBev hasn’t issued any new shares here. In fact, it’s quite the opposite, as treasury shares went up after the buyback!
  • Rex Trueform (JSE: RTO) is acquiring a portfolio of Joburg-based properties for R51.5 million. Telemedia (a subsidiary of the group) is partly occupying these properties already and will now earn the rental income from other tenants. Only R7 million is being funded by Telemedia’s existing cash, with the rest raised as a mortgage bond. The acquisition yield is 9.1%. It’s beyond me why companies do this, unless there’s an exceptionally good reason why Telemedia needs to occupy these properties into perpetuity.
  • Tiny little Telemasters (JSE: TLM) released a further trading statement showing an improvement in HEPS by 160% to 0.61 cents vs. a loss of 1.02 cents in the comparable period.
  • Gavin Griffiths, the current Chief Strategy Officer and Interim CFO of ArcelorMittal (JSE: ACL) has been appointed as the permanent CFO. That certainly isn’t an easy job.

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

Following the completion of a four-month due diligence process, Copper 360 has provided an update to shareholders on its November 2023, R200 million acquisition of Nama Copper Resources. The Nama Copper plant has exceeded expectations vis-à-vis structure, integrity and performance and a management team appointed. Copper 360 has paid a total of R140,5 million to Mazule Resources with a further R9,5 million due to be paid in the next two weeks. It will no longer pay a further R50 million to Mazule as it has concluded a new offtake agreement with Fujax UK.

MC Mining’s independent board committee continues to advise shareholders not to accept the A$0,16 per share cash offer from Goldway Capital Investment. It draws shareholders’ attention to the independent expert’s report which has found that the offer to be neither fair nor reasonable suggesting rather, a range of between $0.214 and $0.356.

Unlisted Companies

NCino is a financial technology company headquartered in Wilmington, North Carolina, has acquired DocFox in a deal valued at US$75 million. DocFox, based in Johannesburg, automates the process of onboarding and account opening for banks. The software will be integrated into nCino’s tech stack offering financial institutions a wider range of services to offer clients.

Local liquor retailer Norman Goodfellows has acquired a substantial interest in Port2Port.wine, an online fine wine marketplace. Norman Goodfellows brings to the table its logistics network, warehousing capabilities, and a broad product range, particularly in spirits. Port2Port.wine will continue to operate as an independent brand under its current management team.

Under business rescue since 2022, Baywest Mall in Nelson Mandela Bay and Hemingways Mall in Buffalo City have been acquired by Hangar 18. The properties acquired in September 2023 were each purchased for R1,3 billion.

DealMakers is SA’s 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

Transaction Capital and WeBuyCars (WBC) have raised R902,7 million ahead of WBC’s listing in April in an oversubscribed bookbuild. In terms of the capital raise, 40 million WBC shares were issued, and Transaction Capital disposed of 8,15 million shares at a placement price of R18.75 per share. The shares represent 11.5% of the total issued shares of WBC. Based on the total of 417,2 million WBC shares in issue as at the listing date, the placement price of R18.75 implies a total market capitalisation for WBC of R7,82 billion.

As part of the WeBuyCars listing, Coronation Asset Management has subscribed for 9,12 million shares for an aggregate value of R171 million.

Brait has, via an accelerated bookbuild, placed 15 million Premier Group shares at R60 per share, raising gross proceeds of R900 million – up from the R750 million first announced thanks to strong market support. The placing shares represent 11.6% of the total Premier shares in issue and will reduce Brait’s interest in Premier from 47.1% to c.35.4%. The free float of Premier will increase from c.22% to 33.6%. The proceeds of the placing will be used for general working capital requirements and to reduce debt.

Grand Parade Investments has disclosed that during February 2024, the Group disposed of part of its investment in the Spur Corporation, divesting of 264,550 shares on the open market. The total sale proceeds amounted to R7,9 million.

Pepkor will take a secondary listing on A2X with effect from 2 April 2024. The listing will bring the number of instruments listed on A2X to 181 with a combined market capitalisation of c.R9,1 trillion.

A number of companies announced the repurchase of shares.

British American Tobacco has commenced its programme to buyback ordinary shares using the £1,57 billion net proceeds from its sale of ITC shares. The company will buy back £1,60 billion of its ordinary shares – £700 million in 2024 and the remaining £900 million in 2025. This week the company repurchased a further 300,000 shares at an average price of £24.16 per share for an aggregate £7,25 million.

AB InBev completed the specific repurchase of 3,335,417 of its shares from Altria. The aggregate repurchase price for the Direct Share Buyback was US$200 million at a price per share of $59.96. The shares will be held in treasury to fulfil share delivery commitments.

Thungela Resources has implemented a share repurchase programme ending 3 June 2024. The aggregate purchase price of all shares repurchased will be no greater than R500 million.

Hammerson, in accordance with the terms of its share repurchase programme announced on 12 March 2024, the company has, this week, purchased a further 2,664,939 shares at a volume weighted average price of 26,50 pence, for an aggregate £706,718.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 11 to 15 March 2024, a further 3,894,006 Prosus shares were repurchased for an aggregate €106,44 million and a further 247 646 Naspers shares, for a total consideration of R755,8 million.

Following the successful completion of the buyout of MiX Telematics minorities by PowerFleet, the company’s listing on the JSE will be terminated on 3 April 2024.

Three companies issued profit warnings this week: York Timber, Sasfin and Workforce.

One company either issued, renewed, or withdrew a cautionary notice this week: Ibex Investment.

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

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

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

DealMakers AFRICA

Adenia Partners has announced the acquisition of 12 Air Liquide subsidiaries in West and Central Africa. The entities and employees in Benin, Burkina Faso, Cameroon, Congo, Ivory Coast, Gabon, Ghana, Madagascar, Mali, Democratic Republic of Congo, Senegal and Togo will form a new, independent, pan-African industrial gases group. Financial terms were not disclosed.

Kenyan insurtech mTek has raised $1,25 million. The funding was secured from Verod-Kepple Africa Ventures and Founders Factory Africa and will allow the company to expand in both Kenya and the East African insurance market.

Mobility fintech Moove, has raised US$100 million in a Series B funding round led by Uber with participation from sovereign wealth fund Mubadala and several other investors. Mubadala led the $550 million debt and equity round announced in August last year. Moove plans to utilise the funds to expand its existing markets from 13 to 16. This latest funding values the fintech at $750 million.

Savannah Energy has consolidated it position in the Stubb Creek oil and gas field. The company has signed share purchase agreements with Sinopec International Petroleum Exploration and Production Services and Jagal Ventures to acquire 100% of Sinopec International Petroleum Exploration and Production Company Nigeria, which has a 49% non-operated interest in Stubb Creek, located in Akwa Ibom State. Universal Energy Resources, a Savannah Energy affiliate, is the 51% owner and operator.

Nigerian fintech Zone (previously Appzone) has raised $8,5 million in seed funding. The round was led by Flourish Ventures and TLcom Capital. The funding will be used to scale the fintech’s decentralised payment infrastructure.

Namibia Critical Metals has sold four non-material gold properties in Namibia to Sylla Gold Corp. Sylla will acquire the company’s 95% stake in its Namibian subsidiaries that own the rights, title and interest to the Grootfontein, Erongo, Otjiwarongo and Kaoko licences plus certain associated assets, Financial terms include 3 million Stylla common shares and a cash payment of US$100,000.

Acasia Ventures has led a six-figure bridge round in Egyptian healthtech, Pharmacy Marts. The Cairo-based digital marketplace aims to digitise the pharmaceutical industry’s supply chain to improve patient access to medication. The company currently covers 12,000 pharmacies across Egypt with over 200 suppliers on its platform.

Kenya’s NCBA Group has signed a $50 million facility with Proparco to help facilitate green financing and Women Economic Empowerment in Kenya. The funding will help NCBA deliver on its “Change the Story” sustainability agenda.

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

Thumbs up for emojis

Brian Jennings and Storm Arends
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Thumbs up for emojis

The digital pictogram we know as the “emoji” was invented by Japanese artist, Shigetaka Kurita nearly 25 years ago. Its creation and subsequent acceptance by Unicode caused it to gain popularity and develop into a modern-day form of communication. The “face with tears of joy” emoji even won the Oxford Dictionaries’ 2015 Word of the Year Award. Having already crossed the boundary of what we understand language to be, it has now collided with the law of contract.

Canadian case law

In June 2023, the Canadian King’s Bench for Saskatchewan considered whether a valid contract was entered into when the “thumbs up” emoji was used. In other words, was there a meeting of the minds and a certainty of terms. Following various correspondence, in March 2021, a representative of South West Terminal Ltd (the buyer) sent a text message to the owner and operator of Achter Land & Cattle Ltd (the seller) in respect of its purchase of flax. The buyer drafted a contract, applied his ink signature to it, took a photo of the contract with his mobile phone and asked the seller to “please confirm [the] flax contract”, to which the seller replied with a “thumbs up” emoji. A dispute arose when the flax was not delivered in November 2021.

The court, after considering all the facts, took the view that there was a pattern in how the buyer and the seller entered into prior agreements and, therefore, was satisfied on a balance of probabilities that the seller did not just acknowledge receipt of the contract, but approved of it, like he had done on numerous occasions – except that, this time, he used an emoji to do so. The emoji that he used is also known to signify acceptance and approval. Further, the court found that a reasonable bystander, knowing all of the background, would have come to the objective understanding that there was consensus ad idem, a meeting of the minds. In respect of the requirement of there being a certainty of terms, the court found that, given the buyer and seller’s long history of doing business together, there was no uncertainty in respect of the terms of the agreement.

South African law

Considering the Canadian judgment above, one wonders whether this may be applied in South Africa. Section 13 of the Electronic Communications and Transactions Act 25 of 2002 (ECTA) provides for three scenarios:

  1. If a signature is required by law and the law does not specify the type of signature, the requirement is only met if, in relation to a data message, an advanced electronic signature is used.
  2. Where an electronic signature is required by the parties to an electronic transaction (which may be a transaction of a commercial or non-commercial nature) and the parties have not agreed on the type of electronic signature to be used, that requirement is met if (i) a method is used to identify the person and to indicate the person’s approval of the information communicated; and (ii) having regard to all the relevant circumstances at the time that the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.
  3. Where an electronic signature is not required by the parties to an electronic transaction, an expression of intent or other statement is not without legal force and effect merely on the grounds that (i) it is in the form of a data message; or (ii) it is not evidenced by an electronic signature, but is evidenced by other means from which the person’s intent or other statement can be inferred.

Given the definition of “data” in the ECTA as “electronic representation in any form”, and that an “electronic signature” is “data attached to, incorporated in, or logically associated with other data and which is intended by the use to serve as a signature”, an emoji may, in our view, fall within the definition of “data”. If the emoji is attached to, incorporated in, or logically associated with other data, it could constitute an electronic signature if intended to serve as a signature, provided that a signature is not required by law.

Therefore, the first hurdle to pass under the ECTA is intent – both as to the use of the emoji as a signature, and, naturally, as a consequence, the intent to be bound by the contract. The ECTA does not prescribe that the intent must be actual intent – it can be evidenced by other means from which the person’s intent or other statement can be inferred.

Obviously, the use of, say, the “crying face” emoji could not, in any sensible understanding, constitute evidence of intent to serve as a signature. But the “thumbs up” emoji may be. It is clear that in the Canadian case, Justice Keen investigated the background to the parties’ conduct and how they usually conducted business, and concluded in paragraph 18 that:

“The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37). The courts, when considering this question, are not restricted to the four corners of the purported agreement, but can consider the surrounding circumstances (Aga at para 37). The nature and relationship of the parties and the interests at stake help inform the question of an intention to create a legal contractual relationship (Aga at para 38).”

This is similar to our reliance theory, which requires a party to create a belief held by the other contracting party and for the other contracting party’s reliance on such belief to be reasonable in the circumstances. Taking into account all factors, the use of a “thumbs up” emoji (or even the “fist bump” emoji, which is also a sign of agreement) can constitute an intent to serve as a signature, if this can be inferred from such conduct and, therefore, constitute intent to enter into the resulting contract.

Until the South African legal system has to decide on a matter with similar facts, we may not have a clear answer on whether an emoji could replace signatures as we know them. Therefore, be mindful when contracting via messaging platforms like WhatsApp, as an emoji – depending on which one is used – may create a valid and binding contract. Much will depend, we believe, on the facts of the matter and whether reliance on the emoji could be said to be reasonable.

Brian Jennings was a Director (at the time of writing) and Storm Arends an Associate in Corporate and Commercial | 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

Unlocking Africa’s economic potential by growing the continent’s trade volumes

Oluseyi Kumapayi
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Unlocking Africa’s economic potential by growing the continent’s trade volumes

In recent years, mergers and acquisitions (M&A) have emerged as a significant avenue for investment in Africa, attracting attention from both global and local market participants. Importantly, M&A has reshaped the banking industry’s dynamics and prompted debates on the implications for financial stability, competition and economic development. While there may be critics of M&A as it relates to consolidation, it is crucial to recognise the benefits that well-executed M&A can bring to the continent’s banking sector and economic fortunes.

Access Bank has been working tirelessly to execute our vision to be the world’s most respected African Bank. Through disciplined and carefully considered dealmaking, we have made great strides in building a strong global franchise, focused on serving as a gateway and support for investment and trade within key markets in Africa – as well as between Africa and the rest of the world – by leveraging the power of technology and a robust network of relationships across the countries in which we operate.

In the past 12 months alone, we have announced nine transactions in seven countries across the continent, including Uganda, Zambia, Angola, Tanzania, the Gambia, Sierra Leone and Cameroon. This has increased our reach and enabled us to establish operations across 14 African countries (with plans to expand to 20, in line with our 2027 strategy). While the main objective of every transaction has been to build the scale needed to become a major player in each of our markets, we continue to be guided by the belief that prosperity is cultivated through inclusive growth and economic development. The Bank has leveraged its propositions for Small and Medium Enterprises (SMEs), Women and Youth, and recognised their pivotal role as the backbone of a thriving economy. Our acquisitions, therefore, seek to enhance the capability of human capital in prospective countries, building their economic prosperity and creating positive impact in our host communities.

Our approach to M&A has also emphasised regional integration as a strategic imperative. In a continent marked by asymmetrical markets and economies, the African Development Bank (AfDB) has noted that regional economic integration is essential for Africa to realise its full growth potential, to participate in the global economy, and to share the benefits of an increasingly connected global marketplace. Having 54 individual countries, often without the physical and economic machinery to act in tandem, seriously limits this possibility. M&A is key to this integration, as it facilitates cross-border expansion, enabling banking institutions to play a significant role in fostering economic development.

The breadth of Access Bank’s operations across 20 markets globally will enable it to become Africa’s payment gateway to the world, creating a globally connected community, inspired by Africa. By building this multi-jurisdictional footprint, committing over US$680 million through greenfield initiatives and inorganic growth facilitated by targeted M&A activities, we have ensured that the continent’s most impactful customers are able to benefit from a larger combined balance sheet. Customers now also benefit from a broader international footprint – with increased access to trade finance, treasury, international payments and loans via Access Bank’s wider distribution network – and presence in the key trade corridors which connect Africa with Dubai, China, Lebanon, Paris, Mumbai, the UK and Hong Kong, as well as other key markets.

Access Bank has continued its impressive growth trajectory, both organically and by acquisition. Our most recent large-scale transaction was the acquisition of Standard Chartered Bank’s (SCB) operations across Angola, Cameroon, the Gambia and Sierra Leone, and its Consumer, Private & Business Banking business in Tanzania. Access Bank’s acquisition in these five markets aligns with its disciplined approach to expansion, representing a key step in its journey to build a strong global franchise, focused on serving as a gateway for payments, investment and trade within Africa, and between Africa and the rest of the world. Access Bank’s strategic global presence allows for enhanced cross-border transactions, correspondent banking services, and smoother remittance processes. This seamless global connectivity ensures that customers can conduct business efficiently, and access international markets with ease.

Moving further down south to Zambia, we have recently completed our acquisition of African Banking Corporation Zambia Limited, trading as Atlas Mara Zambia (Atlas Mara), after obtaining all requisite regulatory approvals. This transaction will propel the combined entity into the top five banks by revenue in the Zambian market, with prospects to be in the top three by 2027. We also expect to create a larger platform to access the COMESA banking opportunity, supporting customers within the region through the Access Bank network.

But these transactions only paint part of the picture, serving to confirm that an uptick in M&A in African banking should be viewed as a channel for investment, and a strategic move towards unlocking the continent’s immense banking potential. By fostering technological innovation, financial inclusion, regulatory compliance, regional integration, risk mitigation and international competitiveness, M&A emerges as a catalyst for sustainable economic growth and development in Africa. These advantages contribute to the industry’s adaptability, resilience, and ability to provide enhanced services to customers in an evolving economic landscape. As this transformative journey is navigated, it is imperative to recognise the long-term benefits that strategic consolidation can bring to the continent’s banking landscape, and its broader economy.

Access Bank’s vision for growth and expansion in Africa is a promising one that seeks to roll out initiatives that will further develop the African continent and, more importantly, reshape the global perception of Africa and African businesses.

Oluseyi Kumapayi is Executive Director | African Subsidiaries, Access Bank Plc

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication.
www.dealmakersafrica.com

Dive into your DIY investing Adventure

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Dive into your DIY investing Adventure

By Duma Mxenge, Business Development Manager at Satrix

You’ve DIY-ed your kitchen counters, spruced up your bedroom and beautified the bathroom. Now, maybe it’s time to turn your DIY talents to something else: your finances. DIY investing means managing your investments yourself. It means taking control, plotting a plan, gathering your tools and team, and staying the course to reach your investment goals.

That could mean making an investment via SatrixNOW, or managing a real estate asset, for example.

Here are some top tips for DIY investing:

1. You Don’t Need a Finance Degree to DIY

Curiosity and a willingness to learn are the two greatest attributes needed to master DIY investing. Don’t be afraid to ask questions, seek help from your financial adviser, and leverage learnings from free and online resources. Ultimately, DIY investing means being an active participant in your investment plans and owning any decision-making. You don’t need any qualifications to have ownership over your finances; these are your assets, and it’s your responsibility to make the right decisions to live with financial confidence, now and in the future.

2. What are the Benefits of DIY Investing?

This biggest benefit is that you’re in the driving seat; you make the decisions and have greater control over your investments. Doing it yourself can also reduce fees, although it’s always wise to invest in sage advice from a trusted adviser to set yourself up for success.

3. What are the Potential Pitfalls of DIY Investing?

Choosing an asset that doesn’t align with your risk tolerance and timelines could be a potential pitfall. For example, investing the bulk of your retirement savings in cryptocurrencies the year before you retire could bring a lot of uncertainty and prospective losses, given the massive swings in value that this asset class could experience. Risk means the uncertainty and swings in value related to a particular investment or fund.

Generally, riskier assets may yield greater returns, but more conservative assets come with less volatility. You need to understand yourself and how much risk you’re willing to tolerate. You also need to know your goals and their timelines. The magic of compound interest, for example, can only really be capitalised on over a longer investment horizon. Finally, it’s important to understand any fees you’re paying; these can be a performance drag, so try to keep them to a minimum.

4. How to Mitigate Risk and Make the Most Out of Self-Directed Investing

Know your risk tolerance: introspection is key to investing as it’s critical to understand yourself. It’s also vital to know and understand what you’re invested in – and why. This requires your investment partner or platform to be transparent with you, coupled with proactivity on your side as you seek to know more.

Lastly, don’t be in a rush to start big in the hopes of winning big. Once you’ve done your research and have a plan, it’s okay to start small. Investing is a long game and even the smallest amounts add up. Question anything that sounds too good to be true: it probably is. To make the most of self-directed investing, you need to have a genuine curiosity for it. Sometimes information won’t come to you, so you need to go and find it. Seek guidance when you need to; investing by way of intermediaries is a great option as well.

5. What to Do Before You Take the DIY Plunge

Consider chatting to a financial adviser or do as much self-directed research as possible before diving into your DIY adventure. The markets are always evolving, so you can never know everything, but you can know enough to have the confidence to start the process and learn as you (and your investments) grow.

Many people adopt a ‘hybrid model’ and do some of the investing themselves and some through a brokerage. It all depends on your goals, personality and affordability. There’s no one-size-fits-all-formula; it’s all about you – how you prefer to learn and invest and what you’re willing to do to make it work. Make it your own, have confidence in yourself, and just start the journey.

Disclaimer
Satrix is a division of Sanlam Investment Management
Satrix Investments (Pty) Ltd is an approved FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.
Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities.
While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information. 

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SatrixNOW is a no-minimum online investing platform from Satrix that allows you to buy and sell ETFs directly.

Unlock the Stock: WeBuyCars

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Unlock the Stock: WeBuyCars

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.

In the 31st edition of Unlock the Stock, we welcomed WeBuyCars to the platform for the first time. With much excitement ahead of the listing of this group on the JSE in April, the management team gave current and prospective investors an opportunity to ask questions about the business model and financial performance.

As usual, I co-hosted the event with Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions. Watch the recording here:

Ghost Bites (Brait | Copper 360 | Remgro | Sabvest | Transaction Capital – WeBuyCars)

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Ghost Bites (Brait | Copper 360 | Remgro | Sabvest | Transaction Capital – WeBuyCars)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Brait placed R900 million worth of shares in Premier (JSE: BAT)

This represents 11.6% of total Premier shares in issue

When Brait initially told the market that it wanted to reduce its stake in Premier to raise cash, the intention was to unlock R750 million through the placement. Thanks to strong demand for the shares, Brait subsequently increased the placement size to R900 million. Even at that level, it was significantly oversubscribed.

The price at which the shares were placed was a 6.7% discount to the 30-day VWAP, which under the circumstances is quite good I think. You have to remember that a whopping 11.6% of Premier shares in issue were sold through this process. Doing that through the order book on the JSE would almost certainly have been a far worse outcome.

Brait’s stake in Premier reduces from 47.1% to 35.4% as a result. The free float of Premier increases from 22.0% to 33.6%.

Brait’s share price closed 4.5% higher on the news. When a company is trading at a deep discount to underlying assets, turning those assets into cash inevitably helps to close the discount.

Copper 360 moves ahead with Nama Copper (JSE: CPR)

The due diligence has been successful

Copper 360 announced the acquisition of Nama Copper Resources in November 2023. The envisaged price was R200 million, subject to a four-month due diligence process.

The due diligence went well, with R140.5 million paid to date under the deal and a management team having been appointed. A further R9.5 million is payable in the next two weeks.

The change to the deal is that Mazule, the seller, is no longer the offtake partner. The final R50 million owed to them will therefore be paid in cash across three monthly instalments over March to May 2024. Prepayments from the new offtake partner (Fujax UK) will fund these payments. The prepayments over the next few months will be subtracted from amounts due by Fujax over five years, with interest on the remaining balance applied monthly.

Remgro: firmly in the wrong direction of travel (JSE: REM)

What has gone wrong at Heineken Beverages since the Distell deal?

Remgro released results for the six months ended December 2023. It really hasn’t been a happy time, with the intrinsic net asset value (INAV) per share down by 4.6% to R236.95 in the space of just six months.

The share price? That’s at R130.98, a discount of 45% to the INAV. You can compare this to Sabvest below, trading at a discount of roughly 37%. There’s no way of escaping a discount to INAV for these groups; it’s just the extent of the discount that varies.

Unlike at Sabvest, Remgro accounts for some of its investments on a consolidated basis. The group reports headline earnings, but I just don’t think that’s very helpful for an investment holding company, unless you’re digging into the earnings of the underlying portfolio companies.

Speaking of which, there’s trouble at Heineken Beverages. In the comparable period, Distell’s contribution was R517 million in headline earnings. After the deal, Heineken Beverages managed to contribute a spectacular loss of R208 million, while Capevin contributed R57 million. That’s really bad. Remgro has now impaired the investment in Heineken Beverages by R3.5 billion.

There are other reasons for concern as well, like the entirely uninspiring performance of Mediclinic and the pressure on earnings at CIVH due to higher finance costs. TotalEnergies also recognised a negative fair value adjustment on its Natref stock in this period, with Remgro suffering a portion of that.

This is an awkward set of numbers for Remgro that gives the market very little (if any) confidence about the recent dealmaking track record.

Sabvest Capital releases its financials (JSE: SBP)

This is the first drop in NAV on a one year basis in twenty years

Sabvest is seen as one of the better investment holding companies on the JSE. It still trades at a discount to net asset value (NAV) per share though, with the share price at R69.00 vs. NAV per share of R109.36 as at the end of December 2023. This is despite having a portfolio of thirteen unlisted vs. three listed investments. Generally, having assets with no other access points on the market drives a lower discount to NAV. Even then, it’s tough for these types of structures on the local market.

The company accounts for its investments at fair value, which means growth in NAV per share is the measure of success. The 15-year compound annual growth rate (CAGR) in NAV per share is 17.2%, excluding reinvestment of dividends. Including reinvestment, it comes in at 18.5%. This is a strong track record.

Over 3 years and 5 years, the CAGR in NAV per share is 13.7% and 13.3% respectively.

Aside from being caught out by the pain at Transaction Capital (in which Sabvest has an important stake), the other significant knock was felt in ITL. This is the Intelligent Labelling Solutions business, which saw disappointing retail demand in the northern hemisphere among various other challenges.

These problems (along with the broader macroeconomic challenges in South Africa) led to a poor year for NAV growth, coming in at a 0.7% decrease. This is the first drop in NAV per share in a single period for over 20 years! It won’t do the CAGR track record any favours and they will certainly hope that this won’t be repeated. They expect to “resume satisfactory growth in NAV per share” in 2024.

The total dividend for the year of 90 cents was in line with the prior year. Share buybacks for the year came in at R11.8 million vs. R9.5 million the prior year.

The market has spoken re: WeBuyCars (JSE: TCP)

Transaction Capital’s pre-capital raise is complete

Transaction Capital had a tough day on the market, closing 7% lower after announcing the results of the pre-listing capital raise for WeBuyCars. R902.7 million was raised and the placement was priced at R18.75 per share in WeBuyCars.

The market probably didn’t like this because Transaction Capital offered shares at between R21.08 and R24.54 per share and investors weren’t interested at this price. The bookbuild was oversubscribed at R18.75 per share, but Transaction Capital elected not to accept all bids, so the amount raised was at the bottom end of guidance.

The implied market cap based on this pricing is R7.82 billion for WeBuyCars. I must be honest that I’m not sure how they expected to get up to 30% more than that in terms of valuation, which was implied by the upper end of the pricing range in the initial announcement.

A R7.8 billion valuation looks decent to me!

You can watch the recording of the recent Unlock the Stock event featuring the management team of WeBuyCars here:

Little Bites:

  • Director dealings:
    • An associate of a director of Quantum Foods (JSE: QFH) has bought shares worth R5.44 million. The price paid was R10 per share and this was an off-market trade.
    • Des de Beer has bought another R1.66 million worth of shares in Lighthouse Properties (JSE: LTE).
    • A director of Standard Bank (JSE: SBK) bought shares worth R187.5k.
    • An associate of a director of Libstar (JSE: LBR) bought shares worth R144.5k.
  • Shareholders in Marshall Monteagle (JSE: MMP) voted unanimously in favour of the disposal of Stromesa Court.

The tax-free performance you deserve

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The tax-free performance you deserve

Few things in life are sure bets and that’s as true in the world of cycling as it is in the world of investments.

Ask sprint champion, Mark Cavendish, who spectacularly crashed out of the Tour de France in 2021, just as he was about to overtake Eddie Merckx’s legendary record of 34 stage wins. (Ouch.)

That said, there are rare instances in which the golden goose does lay a golden egg (or yellow jersey) and the government’s R500 000 tax-free savings allowance is one of them.

Introduced in 2015 to help stimulate a savings culture, it provides South Africans with an opportunity to invest up to R36 000 a year in a Tax-Free Savings product up to a lifetime maximum of half a million rand.

Since helping investors to achieve financial security is what gets the Fedgroup team up in the morning, we’re big fans of any initiative that incentivises South Africans to save. Especially one that carries no tax. Yet oddly, the Tax-Free Savings Account (TFSA) seems to be perceived as a starter product for novice investors or young professionals rather than the gift it is for anyone with an investment portfolio.

Investment gold

However, let’s be clear: a golden egg is not necessarily a golden ticket to awesome returns.

Not all tax-free products are created equal, and, like all investments, it takes some homework to understand the different structures and costs associated with the different TFSAs out there.

If the objective is to achieve the highest net return, then an investor’s challenge is to find the sweet spot between higher-risk equity products that are susceptible to market volatility and fixed-rate TFSAs that offer lower, but more stable, returns.

They also need to be watchful that their tax savings aren’t being eaten (in some cases, devoured) by product fees, which can have a significant cumulative impact on a TFSA’s value over time.

It’s the climb

Time is one of the many things we think about differently at Fedgroup. Most TFSAs are marketed as stand-alone investments to fund some of life’s short and medium-term expenses, like that big fat Plett wedding or mid-life Harley Davidson. And, though they certainly can do that, we’d argue there are more suitable investment products out there to meet those milestone moments.

To realise the full potential of a TFSA, it needs to be viewed as a long-term investment, as the government presumably intended. Particularly since even those who can put away the full R36 000 every year will take at least 13-odd years to reach the R500 000 threshold. And, more likely, it’ll take a couple of decades or more to hit the max. So, it makes sense for investors to recognise they’re in it for the long haul and sit back to enjoy the full tax break and benefits of compounding returns.

That’s why we developed a TFSA that’s geared, not for rainy days, but to grow wealth over the long term – as part of a properly diverse portfolio – and give our investors financial peace of mind for life.

Pushing the envelope

Stability is always our North Star and, in this instance, we opted for a specialist endowment-based product with zero fees, that has a couple of significant advantages.

  • First, because its underlying assets are not tied to market sentiment, it is counter-cyclical and able to deliver consistent, market-beating returns. (In fact, current returns on our product don’t just beat the prevailing bear market, they have delivered over 11% net of everything over the past year.)
  • Second, we’ve developed a product that charges no investor fees as we believe there should be no unnecessary erosion of either the tax-free benefits or investor returns.

To simplify things further, thanks to its endowment structure, our TFSA doesn’t form part of an investor’s estate so, if the worst happens, beneficiaries receive the proceeds faster. This will give them access to funds to cover costs and ongoing expenses much quicker in the immediate aftermath.

Just as Tour de France fans have their favourite cycle legends, investors have their preferred TFSAs. In both cases, they are free to back a different winner at any time, particularly as they see advances in performance.

So, whether you already have a TFSA in your portfolio, or are thinking about investing in one, you might want to check which ones are sprinting ahead.

For more information, visit the Fedgroup website.

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Fedgroup is a specialist financial services provider with a legacy of putting people before short-term profit. For over 30 years, we’ve delivered market-leading financial solutions that not only enhance value for our clients, but remain straightforward, transparent and easy to understand.

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