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Ghost Stories Ep24: Investment Concepts and a Ghost in the Hot Seat (with Nico Katzke of Satrix)

The Finance Ghost
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Ghost Stories Ep24: Investment Concepts and a Ghost in the Hot Seat (with Nico Katzke of Satrix)

Nico Katzke of Satrix is a familiar voice to Ghost Mail readers and podcast enthusiasts. He’s back on Ghost Stories, with a fantastic twist halfway through the podcast where we switched roles and he started asking me questions.

Nico in the hot seat:

  • Diversification vs. “diworsification” – a topic always worth revisiting, with commentary on the impact on the market as a whole and an understanding of correlation.
  • The danger of only seeing the highlights reel of an investment journey, masking the impact of taking risky bets that don’t work out.
  • The importance of humility in the market.
  • A famous quote by Warren Buffett that is misused all the time due to it being taken out of context.

Your favourite ghost in the hot seat:

  • My approach to managing cognitive bias.
  • The importance of objectively assessing growth opportunities against the valuation, even for the world’s most exciting companies and brands.
  • Long-term vs. short-term analysis and how this impacts the weighting of price vs. industry fundamentals and management.
  • Personal stories of “the stock that got away” (including the pain of CGT vs. income tax for an individual investor) and the stock that feels like “drunk dialling” an ex.
  • My pick in a Shoprite vs. Pick n Pay debate and how to use common sense when analysing stocks.
  • Where I sit on the value – growth spectrum and the importance of both fundamental and technical analysis.
  • The danger of action bias and the usefulness of higher interest rates that pay you to wait for the right opportunities, making “payday investing” very dangerous in single stocks.
  • The three stocks that I would choose to hold forever.
  • The way to start a journey in analysing companies and making single stock exposure decisions.

There’s so much in here, underpinned by Satrix’s commitment to South African investor education. To find out more about SatrixNOW, visit this link>>>

Listen to the show here:

Disclosure

Satrix Investments (Pty) Ltd is an approved FSP in term 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.

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this podcast (“the information”), the FSP’s, its 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 disclaims 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.

Ghost Bites (Attacq | Europa Metals | Finbond | Jubilee | MTN | Octodec | Sibanye-Stillwater)

The Finance Ghost
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Ghost Bites (Attacq | Europa Metals | Finbond | Jubilee | MTN | Octodec | Sibanye-Stillwater)

Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:

Attacq updates the market on debt levels after the GEPF deal (JSE: ATT)

The GEPF investment in Waterfall closed on 27 October

If you’ve been following Attacq, you’ll know that the sale of a 30% stake in Attacq Waterfall Investment Company to the GEPF at an attractive price has been a huge boost for the share price. Simply, the price paid for the portfolio was a much lower discount to NAV than the listed share was trading at. I’m pleased to say that I caught that jump in my own portfolio.

That transaction has now closed, with Attacq receiving R2.68 billion in cash. This was used to reduce debt, which is now at R6 billion vs. R8.4 billion as at 30 June 2023. This metric is calculated as drawn and committed facilities.

The change in debt profile has taken the weighted average loan term from 4.0 years to 2.7 years, with an average cost of debt of 9.9% vs. 10.3% as at 30 June 2023.

Europa Metals reports a large loss, but that’s normal in junior mining (JSE: EUZ)

The focus is always on progress with developing the resource

For Europa Metals, the year ended June 2023 was one of drilling campaigns and the execution of a farm-in arrangement with Denarius Metals Corp. This gives Denarius the right to acquire up to an 80% ownership stake in the Toral Project. This would leave Europa Metals with a 20% stake.

The first option is for a 51% stake with an initial exercise period of three years conditional upon certain operational milestones being achieved. The second option can be exercised for a year after the exercise date of the first option, with further other conditions.

Although this de-risks the project, it also shows how dilutionary junior mining is for early-stage shareholders. The difference here is that dilution is happening at project level rather than listed level. The end result is the same.

The current numbers aren’t the focus area, but for the sake of completeness I can report that the total comprehensive loss for the year was $3.38 million vs. $2.5 million in the comparable year.

Finbond moves ahead with a large repurchase from two shareholders (JSE: FGL)

This group is making sensible decisions

There are signs of capital allocation maturity at Finbond. For example, the company has walked away from the Trustco Finance Namibia acquisition. Although the massive specific repurchase of 38.55% of total shares outstanding from two shareholders isn’t hot off the press, this feels like a much better use of capital when the share price has taken such strain.

When you combine this with the green shoots in the US part of this business, Finbond is starting to make a case for itself as a highly speculative punt. The 52-week range is R0.24 to R0.55 and the current share price is R0.29.

The share repurchase from Net1 Finance Holdings (part of JSE-listed Lesaka Technologies – JSE: LSK) and the Massachusetts Institute of Technology (yes, the MIT – it’s a long story) is priced at R0.2911 per share. That’s in line with the current price, though it’s a 19% discount to the 30-day VWAP up to Wednesday 9th August when the pricing was agreed between the parties.

This repurchase will set Finbond back R99 million and will be funded from existing cash resources.

A circular will be sent to shareholders by 8 November. It will include an opinion by Merchantec as independent expert on whether the repurchase is fair and reasonable to other shareholders.

Just one quarter into the year, Jubilee feels good about full-year guidance (JSE: JBL)

It seems to be mainly good news in this update

For the quarter ended September, which is the first quarter of Jubilee’s financial year, things are looking decent for the company. It’s encouraging when full-year guidance is maintained after the end of the first quarter, as it suggests that things are going to plan.

Although there’s some pretty dicey maths in here, like a comment that production of chrome concentrate increased from Q4’23 to Q1’24 when it clearly decreased, the overall theme is an increase in production and flat or higher commodity prices vs. the preceding quarter. It’s interesting that they use Q4’23 as the comparison for metrics rather than Q1’23. So interesting, in fact, that they appear to have confused themselves in the process.

In terms of operational margin, copper is the juiciest fruit to squeeze with a 25.5% gross margin (way up from 19.5% in Q4’23). PGM is next at 15.2%, also higher than 12.3% in Q4’23. Chrome is the lowest margin at 12.7%, down from 13.5% in Q4’23.

The group is expanding the chrome operational footprint and is in discussions to conclude further life-of-mine partnerships in this space. In Zambia, they hope to replicate the success of the model used for chrome in South Africa, which focuses on securing metal-containing ore that has been deemed as waste by current or previous operators

There’s some pretty fancy technology in this group. I don’t pretend to understand any of it, but it certainly sounds impressive and they are winning contracts.

MTN Ghana is almost keeping up with in-country inflation (JSE: MTN)

But alas, “almost” isn’t good enough

For investors in MTN, the ongoing challenges at MTN Nigeria are an excellent reminder that business in Africa is risky. These economies can have great growth rates, but it doesn’t help if the currency collapses or inflation goes through the roof.

Exhibit A: MTN Ghana. Revenue is up 36.1% and EBITDA grew 32.6%, which sounds fantastic at first blush despite EBITDA margin dropping by 150 basis points to 56%. Sadly, inflation in the September quarter was 38.1% in Ghana, so this is negative real growth.

This makes sense in the context of mobile subscriber numbers falling by 9.3% thanks to the impact of SIM re-registration. Active data subscribers increased by 2.7% at least and Active Mobile Money users increased by 16.3%.

MTN Ghana is effectively just treading water operationally, with a 51.5% increase in net finance costs not doing the net profit story any favours.

MTN Ghana is 24.1% locally owned, with the rest held by MTN Group.

Octodec increases the dividend payout ratio (JSE: OCT)

This approach is becoming increasingly common in an effort to show distribution growth

Like most things right now, the property sector is taking a lot of strain. Distributable income is down at many funds, with inflationary pressures on operating costs and higher finance costs than before. Even though we’ve seen a decent post-pandemic recovery across most property types, there are now other reasons why things aren’t easy.

Most investors focus on the distribution per share, but you can’t view that in isolation. If the payout ratio has been increased, you can easily have a scenario where the distribution is higher but the income off which it is based has decreased. This is the case at Octodec, where distributable income per share has fallen from 175.1 cents to 171.2 cents for the year ended August 2023 and the dividend has increased from 130 cents to 135 cents per share.

The net asset value (NAV) has increased from R23.28 per share to R24.24. The current share price is around R9, so that tells you what the market thinks of the NAV. The current share price implies a yield of 15%. The yield would be ridiculously low if this fund actually traded at NAV, which is exactly why the market has little interest in that number.

In terms of prospects, Octodec anticipates between 3% and 5% growth in the distribution for the six months ending February 2024. If you read carefully, they expect flat distributable income per share. In other words, ongoing growth in the cash distribution remains a function of an increasing payout ratio.

Sibanye-Stillwater says yes to copper in Australia, plus there’s a local PGM deal with Amplats (JSE: SSW)

Finally, some positive news from the company – but not enough to move the dial

Sibanye-Stillwater is in the middle of a very painful labour process in its South African operations. The share price has been smashed this year as the price of Platinum Group Metals (PGMs) has dropped. Although the company is involved in other metals as well, that’s the bulk of the business.

Despite the pressure in PGMs, Sibanye is still open to deals in that space. A deal announced in January 2022 with Anglo American Platinum (JSE: AMP) has been brought forward, with Sibanye acquiring a 50% share in the Kroondal pool and share agreement and taking full ownership of the Kroondal operation. There are a number of complicated terms linked to the deal that have been amended as part of bringing it forward.

Both companies are happy with the transaction, which just shows how two groups can have different views on the same asset, often informed by the circumstances in the rest of their businesses.

Sibanye is also trying to build revenue streams in so-called future metals, with investment in metals like lithium. The latest announcement is a copper deal in Australia, so that’s another deal in something other than PGMs and gold.

It’s not a new opportunity, as Sibanye obtained the option to acquire the Mt Lyell copper mine as part of the deal for New Century Resources. Mt Lyell is a previously operated underground copper mine (with gold by-products) that operated from 1894 until it was put on care and maintenance in 2014. That’s quite a lifespan!

A feasibility study regarding re-establishment of the operation is underway. Sibanye must be feeling good about that study as the option to acquire the mine has now been exercised. It looks like the price is $10 million, with Sibanye giving loan funding to New Century Resources to execute the deal.

It’s nice to read something positive from the company, although it would take a change in fortunes in the PGM industry to start reversing the 49% drop in the share price this year.

Little Bites:

  • Aspen (JSE: APN) has announced that the acquisition of a portfolio of products in Latin America from Viatris (you surely recall the announcement about the rights to Viagra…) has now closed. In case any of these other names mean anything to you, the portfolio also includes commercialisation rights for Lipitor, Lyrica, Zoloft, Norvasc and Celebrex.
  • AH-Vest Limited (JSE: AHL) has joined the naughty corner of companies that are late with their annual reports. Others at the moment are Rex Trueform (JSE: RTO), African & Overseas Enterprises (JSE: AOO) and Sasfin (JSE: SFN), though these three companies have communicated with the market about the issue already.
  • Anglo American (JSE: AGL) announced that Stephen Pearce will step down as Finance Director and resign from the board. He’s been in the role since April 2017 and will remain with the group until the end of February 2024 to assist with the transition. It’s a pretty weird announcement, as they give absolutely no information about his replacement, John Heasley.
  • Visual International (JSE: VIS) has a market cap of just R8.2 million, which must be one of the lowest on the JSE. The property development company is making losses and has a negative asset value per share. Somehow, the accounts are still prepared on a going concern basis. Notwithstanding the rezoning of one of the properties and the impact this has on the balance sheet, it sounds more like an ongoing concern to me.

Ghost Bites (AB InBev | Astral | BHP | Impala Platinum | Renergen | Sable Exploration and Mining | Sasfin | Woolworths)

The Finance Ghost
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Ghost Bites (AB InBev | Astral | BHP | Impala Platinum | Renergen | Sable Exploration and Mining | Sasfin | Woolworths)

Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:

AB InBev offers a sip of growth (JSE: ANH)

But not so much that you’ll need to take an Uber home

In the third quarter of the 2023 financial year, AB InBev grew revenue by 5%. If you look over the nine-month period, revenue is up 8.3%. This is all coming from pricing increases, as volume growth is down despite the heroics of my dad in trying to prop up the beer story. Total volumes fell by 3.4% in the third quarter and they are down 1.4% over the nine months.

Interestingly, beer volumes fell 4% this quarter and non-beer volumes were up 1.4%.

This isn’t exactly high-growth stuff. To make it works, EBITDA margin contracted by 29 basis points to 34.9% in this quarter. Over nine months, it’s down 31 basis points to 33.6%. This sentence, however, is beyond me:

“Normalized EBITDA figures of 9M22 include an impact of 201 million USD from tax credits in Brazil.”

The “T” in EBITDA stands for Tax. EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortisation. I therefore have no idea why the impact of tax credits would be in normalised EBITDA, but perhaps I’m just not smart enough to understand the intricacies of normalised EBITDA.

Underlying earnings per share is $0.86 vs. $0.84 a year ago. Over nine months, they’ve come in at $2.23 this year vs. $2.16 in the comparable period.

For the full year, EBITDA (whatever that means these days) should be up by between 4% and 8%.

As a fun additional fact, the South African business grew volumes and revenue strongly, so perhaps my dad’s efforts aren’t going to waste. He’s certainly not playing any role in the strong growth in Corona and Stella Artois though. He’s the type of guy who believes that Castle Lite is nonsense.

Only Castle will do.

Astral tells the market just how badly it hurts (JSE: ARL)

The answer: a lot

In case you haven’t been following the markets closely lately, there are three things you need to know about the poultry sector.

Firstly, the margins suck. They have less meat on them than a budget chicken wing.

Secondly, load shedding is a disaster. The only way to make any money at all on chickens is to stick to a strict schedule with raising and slaughtering them. The only schedule that Eskom understands is that one you’ll find on the Eskom-se-you-know-what app.

Thirdly, avian flu has been a huge problem this year. Chickens have been slaughtered left and right and you can’t eat them afterwards, so the financial losses are severe and the meat goes to waste.

Against this backdrop, it should make sense to you that Astral’s profits have collapsed. After reporting HEPS of R27.62 per share in the comparable financial year, the loss in the year ended September is expected to be between -R12.43 and -R15.19 per share.

If the Astral execs are out of ideas for Halloween costumes, they could just go dressed as this trading statement.

The level of gearing on the balance sheet is a focus area, with a debt ratio of 26%. Thankfully, the banking facilities don’t have any covenants.

BHP invests further in the Jansen potash project (JSE: BHG)

This will transform Jansen into one of the world’s largest potash mines

BHP announced that it will invest $4.9 billion in stage 2 of the Jansen potash project. This follows the $5.7 billion investment in stage 1 and the $4.5 billion pre-Jansen stage 1 investment.

Management believes that this will position BHP as one of the leaders in the global potash industry. In case you aren’t familiar with the product, potash is used in fertilisers. The project is in Canada, so the company is investing in a stable jurisdiction.

This is a long-term investment, with stage 1 currently 32% complete and expected to deliver first production in 2026. Stage 2 is expected to take six years but can start now it seems, as first production is expected in 2029.

The expected EBITDA margin of 65% to 70% leads to a forecast internal rate of return of 15% to 18% and an elevated payback period of around six years.

After acquiring Royal Bafokeng, production is obviously much higher at Impala Platinum (JSE: IMP)

Thankfully, the like-for-like results are showing improvement

Impala Platinum released a production report for the quarter ended September 2023. This period is the first time that Royal Bafokeng Platinum (now Impala Bafokeng) is being included in the numbers, so it’s not a surprise that group production looks much higher on a year-on-year basis (up 34% in total 6E production and 25% in refined and saleable production volumes).

Digging deeper, we find that Impala 6E refined production was up 2.7% and IRS 6E refined was up 15.4%. Impala Canada increased production by 8.4%. Of group 6E refined and saleable production of 885,000oz, Impala Bafokeng was 113,000oz.

With PGM prices falling through the floor this year, the share price has tanked 64.5% year-to-date.

Renergen releases its interim results (JSE: REN)

Technical issues are plaguing Phase 1 of the Virginia Gas Project

Renergen has been at the centre of a storm on Twitter / X with Albie Cilliers, an outspoken local investor. Many questions have been asked about the business and although some formal responses have been given on SENS, there are many investors watching this story more closely than ever before.

The six months to August 2023 were affected by a leak in the helium cold box, which isn’t doing Renergen any favours in dispelling the negative views around the quality of the installed equipment. To try and mitigate the pain, Renergen has brought forward some planned maintenance to coincide with the repairs.

Despite the production of LNG that was lower than planned, only 92% of that production was sold to the group’s two local customers. Importantly, an off-take agreement was achieved in this period with Time Link that will see the logistics firm transition their fleet from diesel to dual-fuel.

Phase 1 is clearly suffering from teething problems that need to be addressed as quickly as possible to quell the noise around the share price. Work on Phase 2 continues regardless, with a total planned capex spend of up to $1.2 billion and $750 million of debt already secured from two lenders: the US DFC and Standard Bank.

Two equity raises are anticipated to plug the gap, with the eventual goal of EBITDA of between R5.7 billion and R6.2 billion per annum by FY2027.

Although this is early in Renergen’s journey and I don’t think the current profitability figures are the best explanation of the current market cap, it’s still worth noting that the headline loss per share worsened from 19.31 cents to 29.91 cents in this period.

An interesting rights offer structure at Sable Exploration and Mining (JSE: SXM)

The underwriters want to get as much of the offer as possible

Whenever you see a rights offer, you need to realise that there are various different ways to structure these offers. Although the basic premise is the same (all shareholders can subscribe for more shares), there are various structuring tricks.

In a highly discounted rights offer, the intention is to make it is so painful for shareholders not to follow their rights that they basically have no choice. An underwritten offer essentially guarantees the amount that will be raised, with underwriting fees usually payable to the underwriter. Where there is no underwriter fee, it’s because the underwriter actually wants to get hold of the shares.

In the Sable Exploration and Mining rights offer for R52.2 million, this is fully co-underwritten (there are two underwriters) and they aren’t accepting a fee. This is because they want to get their hands on the shares, further evidenced by no excess applications being allowed (shareholders asking for more shares than they are entitled to, which reduces the amount going to the underwriters).

Sable’s market cap is under R500k, so this is effectively just a takeover of the vehicle by the underwriters.

Here’s how the funds will be used:

Sasfin just keeps getting worse (JSE: SFN)

Return on equity is lower than you’ll earn on a decent deposit at the bank

If you’ve been paying attention to Ghost Mail recently, you’ll know that I was worried that African Bank had overpaid for the acquisition of business units from Sasfin. The CEO of African Bank, Kennedy Bungane, subsequently joined me on a podcast to explain the rationale in more detail.

Whether or not that acquisition works out for African Bank remains to be seen. I maintain that it was a get out of jail card for Sasfin and the latest results from that bank seem to prove it.

Headline earnings fell by 19.4% for the year ended June, with a massive cost to income ratio of 85.38%. Most other banks are running in the 50% – 60% range. This is why Sasfin’s return on equity is so incredibly poor at 6.8%, which is less than you’ll get on a fixed deposit at the bank!

The company deserves to trade at a large discount to net asset value. The share price recently jumped because African Bank is willing to buy two major business units from Sasfin at a price roughly equal to net asset value, which is far better than the valuation that the market was putting on those assets.

Going forward, Sasfin will consist of only the Wealth, Rental Finance and more focused Banking businesses. The Wealth business is showing a lot of promise, with headline earnings up from R45.5 million to R94.2 million. The same cannot be said for Business and Commercial Banking, which reported a headline loss of R104.3 million (much higher than the R40.3 million loss in the comparable period). Costs and impairments are running away from them. Part of the Rental Finance business is being sold to African Bank, so we will have to wait and see what the remaining part of that business looks like.

On top of all of this, Sasfin also dismissed employees linked to alleged fraud in the foreign exchange business unit going back to 2014.

Before the big jump from the African Bank announcement, Sasfin was trading at roughly R22 and the net asset value per share is R51.22.

Woolworths wags its tail and shareholders approve (JSE: WHL)

This is a Shoprite-esque move to take a stab at a new retail category

Absolute Pets has over 150 stores nationwide. That’s quite the success story, with the business having been established in 2005. It’s currently owned by the management team and Sanlam Private Equity, but not for much longer.

Woolworths is acquiring a 93.45% stake in Absolute Pets and the remaining management shareholding will be acquired over a period of time. This makes Absolute Sense to me, as the average Woolworths shopper has several mouths to feed at home and not all of them are human.

Organic Belgian dog food, anyone?

We don’t know what the pricing of the transaction is, as it falls below the threshold for categorisation under JSE rules. The market liked it regardless, with the share price closing 2% higher.

Personally, I like it too. A lot of progress has been made in fixing the Fashion, Beauty and Home segment. Looking for additional growth areas (preferably not in Australia) sounds sensible. We are seeing very similar behaviour from sector stalwart Shoprite in terms of entering new retail categories.

Little Bites:

  • Director dealings:
    • You have to read the Truworths (JSE: TRU) director dealings announcement carefully, as CEO Michael Mark has sold another R16.4 million worth of shares. This is linked to shares awarded back in February 2020 and due to expire in May 2025. He exercised the options and sold shares to cover the tax and the strike price on the shares, with the rest of the shares being retained.
    • A prescribed officer of ADvTECH (JSE: ADH) has sold shares worth just over R3m.
    • Des de Beer has scooped up another R825k worth of shares in Lighthouse Properties (JSE: LTE)
    • A prescribed officer of Old Mutual (JSE: OMU) has bought shares worth R298k.
  • Finbond (JSE: FGL) announced that the deal to acquire 49% of Trustco Finance Namibia is off the table, at least for the time being.
  • Kore Potash (JSE: KP2) has raised $2.5 million through the issuance of new ordinary shares. The Chairman put $750k of the raise into the pot and the rest of the money came from existing large shareholders. As has previously been announced, this funding is necessary in working towards an Engineering, Procurement and Construction (EPC) contract at the Kola Potash Project. The worrying news is that the CEO of the company has resigned to pursue other business interests, which is exactly what you don’t want to see at a critical time like this. The Chairman is stepping is as CEO.
  • It’s rather odd that the ex-CFO of AECI (JSE: AFE) and current Managing Director of AECI Mining has stepped down from that role (and the board of AECI) with immediate effect by mutual agreement. The Group CEO will act in that role on an interim basis. After 15 years with the group, that’s a strange and very sudden departure.
  • Orion Minerals (JSE: ORN) is in the all-important process of transitioning into an operating copper mining company. The quarter ended June was all about fund raising, so the quarter ended September has been about pushing forward with development activities. The near-term focus is Prieska, with the Okiep Copper Project at a very early stage.
  • MC Mining (JSE: MCZ) released its activities report for the quarter ended September. The turnaround activities at Uitkomst seem to be helping, with run-of-mine production up 10% year-on-year. The export marketing agreement expired at the end of June, so high-grade coal has been sold domestically. The concern is that revenue per tonne has fallen by 31% year-on-year in dollars or 24% in rand. The available cash balance of $5.1 million is down from $8.8 million at the end of the last quarter.
  • Southern Palladium (JSE: SPD) released a quarterly update that recaps the drilling results and the current cash position of $9.98 million, down from $11.55 million at the end of June. The Total Mineral Resource has increased by 34% since drilling began.
  • Sabvest Capital (JSE: SBP) has elected to adopt net asset value per share as its metric for trading statements going forward. Remember, a trading statement needs to be released when the metric differs by more than 20% vs. the comparable period. It makes way more sense for Sabvest to use net asset value per share rather than HEPS, as it is an investment holding company.
  • Liberty Two Degrees (JSE: L2D) announced that the clean-out dividend will be in shareholder bank accounts by 13 November and that the listing will be terminated on 14 November as a result of the take-private of the company by Liberty Group (part of Standard Bank).
  • aReit Prop (JSE: APO) is still aJoke. The company released a trading statement at 17:30 and then interim results at 17:40, indication that they either don’t understand the JSE rules about trading statements or simply don’t care. It hardly matters, with the share price languishing at R3.20 vs. a net asset value per share of R9.338. Best of all, there is no longer a dividend even though this is a property company. I tried very hard to warn you when the IPO happened that this was a rubbish listing. Sadly, I was proven correct.
  • Another company on the JSE that I remain extremely weary of is Labat Africa (JSE: LAB). The listing has now been suspended because results have been delayed. The delay is due to the new auditors performing deep audit work on the claim against SARS (which has somehow been ongoing for over 20 years) and impairment testing around the acquisition of Sweetwaters Aquaponics. I will be very interested to see what the outcome of the audit is.
  • Efora Energy (JSE: EEL) has been suspended from trading since October 2020. A whopping three years later, the company is still trying to play catch-up on its financials. Operationally, the company is renting a fuel depot in Gauteng and is looking at opportunities to trade oil and other niche products.
  • Rex Trueform (JSE: RTO) and African and Overseas Enterprises Limited (JSE: AOE) have experienced a delay in the release of the reporting suite for the year ended June 2023. It looks to be rectified very soon though, with a planned release date of 3 November.
  • The release of the amended business rescue plan by Tongaat Hulett (JSE: TON) has been extended to 24 November. The meeting to decide the future of the company will be held no later than 30 November. The company also released its 2022 financial statements. They are now way out of date, but they do show how profits collapsed in that period.
  • PSV Holdings (JSE: PSV) has renewed its cautionary announcement related to a potential recapitalisation that would enable the audits of the 2020 – 2023 years to take place. There has been a LOT of up and down between the potential investor and the business rescue practitioners, including a couple of trips to the high court. I can’t even find a website to link you to.

Ghost Bites (Adcorp | enX | Glencore | MTN | OUTsurance)

The Finance Ghost
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Ghost Bites (Adcorp | enX | Glencore | MTN | OUTsurance)

Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:

Adcorp is facing margin pressure (JSE: ADR)

And there isn’t much in the way of margin to go around in the first place

The revenue performance at Adcorp is the best number you’ll read in this result, with revenue up 10.2% for the six months ended August 2023. Both South Africa and Australia were positive contributors in the contingent staffing divisions.

This brings us neatly to the end of the good news. Well, mostly.

The gross profit margin has fallen from 10.7% to 9.7%. Although operating expenses were up by just 2.8% (a solid example of cost control) the gross margin pressure meant that operating margin fell from 1.2% to 0.9%.

The margins here are enough to make chicken farmers feel better about themselves in an average year, which is why small movements in margin can cause significant movements in net profit. Sadly, net profit went the wrong way with a drop of 8.8%.

A glimmer of happiness is that because the overall level of debt in the group has dropped, net finance costs reduced from R23.8 million to R18.1 million. For context, operating profit was R59.5 million.

If you’re hoping to make yourself feel better by taking a peak at the statement of cash flows, you’ll be disappointed. After generating cash from operations of R89 million in the comparable period, this year you’re looking at negative R57.7 million after a massive increase in trade receivables of R152 million.

The special dividend in this period took the total dividend paid to R111.1 million. That’s starting to look like it was a brave decision.

enX Group reports Eqstra as a discontinued operation (JSE: ENX)

The board believes that a transaction is likely in the next 12 months

enX Group has released a trading statement for the year ended August 2023. It reflects growth in HEPS from continuing operations of between 11% and 21%. From total operations though, HEPS is expected to drop by between 34% and 43%.

The main difference is Eqstra, the group’s leasing and fleet management business. This has now been recognised as a discontinued operation, as the group’s view is that a disposal transaction for Eqstra is likely to be executed in the next 12 months.

There have been other disposals in the prior period that also skew the total group numbers.

Within continuing operations, the performance is being driven by revenue growth of 26% and profit before tax growth of between 29% and 33%.

Glencore affirms FY23 production guidance, except for nickel and ferrochrome (JSE: GLN)

Meeting guidance and increasing production aren’t the same thing

When a mining company talks about “meeting guidance”, this simply refers to the guidance that was previously given to the market. It tells you absolutely nothing about year-on-year growth (or lack thereof). Although it is good news that full year 2023 production guidance has been affirmed by Glencore for all but two of the commodities it produces, that doesn’t mean that production has increased.

In fact, it hasn’t:

As you can see in the percentage change column, everything but gold and coal is down year-on-year. These are third quarter year-to-date numbers, so there are only three months left in this financial year.

Mining is a tough game. Guidance has been reduced for nickel due to a longer than expected recovery period following a strike and maintenance issues at a smelter, among other issues. Ferrochrome is down because of curtailment in response to ferrochrome market conditions. Remember, JSE-listed Merafe (JSE: MRF) is Glencore’s partner in ferrochrome production.

In Glencore’s Marketing segment, the likely outcome for full year adjusted EBIT is between $3.5 and $4.0 billion. This is well above the long-term guidance range of $2.2 billion to $3.2 billion per annum.

MTN is going from bad to worse (JSE: MTN)

The share price is heading into no man’s land

52-week lows are not ideal. They are even less ideal when it’s easy to see reasons for the stock to keep dropping from a combination of fundamental and technical weakness.

This chart isn’t pretty:

Nigeria is once again proving to be a serious headache for MTN, with results for the quarter and nine months ended September reflecting not just operational pressure, but also a major error in forex accounting.

I’ll start with the most important part: the underlying operations. Margins continue to compress, with revenue growth of 21.76% only translating into operating profit growth of 13.16% for the nine-month period. That number is before “finance costs”, which shot up in this period. At net profit level, there’s a drop of 45%.

The reason for the inverted commas is that foreign exchange losses have been lumped in with finance costs. The losses are vastly higher than in the June 2023 reporting, as an error was discovered in the accounting for trade lines related to capex investments and the associated cover given to banks.

The main thing to remember is simply that the ongoing depreciation of the naira in Nigeria is a serious problem and the accounting is complicated. With this error corrected, the results for the six months to June for MTN Group would’ve been a nasty 12.2% lower on the HEPS line than what was reported. This doesn’t give the market a good feeling and certainly doesn’t help the falling share price.

To add insult to injury, the Tax Appeal Tribunal in Nigeria upheld a $47.8 million VAT liability. The interest and penalty charges of $87.9 million were at least set aside. MTN Nigeria is appealing anyway in the hope of getting rid of the capital amount.

Shareholders are sadly also successfully getting rid of their capital amounts at the moment.

OUTsurance now holds 94.64% in Youi in Australia (JSE: OUT)

The deal to acquire half of Willem Roos’ stake has been completed

OUTsurance has completed the acquisition of half of the stake held by Willem Roos in Youi Holdings, the Australian insurance business. The deal is worth A$42.5 million, so the Roos family bank account is looking rather lovely, especially now that the conditions precedent for the transaction have been met.

This increases OUTsurance’s equity stake in Youi to 94.64%.

This is a rare example of a South African success story in Australia. The in-country management incentivisation to build this up and become wealthy in the process was a core part of the success. In well-structured corporate growth stories, there are always several people who make a great deal of money.

Little Bites:

  • Director dealings:
    • If I’m reading the announcement correctly, it looks like the CEO of AVI (JSE: AVI) held onto R2 million worth of shares awarded under a bonus plan. Usually, executives sell a portion to cover the tax. In contrast, a director of a subsidiary sold all the shares received (worth R117k).
    • An entity associated with the CEO of Pan African Resources (JSE: PAN) bought shares worth R489k. The Financial Director also bought shares worth R494k. That’s a pretty strong signal.
    • Des de Beer has bought another R86k worth of shares in Lighthouse Properties (JSE: LTE).
  • If you’re keeping an eye on the MiX Telematics (JSE: MIX) deal with PowerFleet, then diarise November 16th at 2pm Eastern time. There will be a corporate event where the management teams will discuss the strategic rationale for the deal. The webcast will be available on the company’s website.
  • Astoria Investments (JSE: ARA) has released quarterly results. As Astoria has its primary listing in Mauritius, results are released every quarter. The company policy is to only update the valuations of unlisted investments in June and December, so the September quarter only reflects price changes in listed investments and currencies. Over the first 9 months of the year, the NAV per share is down 9.95% in US dollars and up 0.15% in rands.
  • RECM & Calibre (JSE: RACP) released results for the six months to September 2023. The core investment is a 58.8% stake in Goldrush, which contributes 97.3% of total assets. The NAV per share has decreased by 16.6% in the first six months of the financial year, with load shedding as a major concern given the electronic nature of the gaming machines and venues. Sports betting and online grew revenue by 32%, which is well ahead of the total Goldrush revenue performance of 6% year-on-year. EBITDA reduced by 9% due to cost pressures.

Ghost Stories #23: Unpacking the African Bank Strategy (with CEO Kennedy Bungane)

The Finance Ghost
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Ghost Stories #23: Unpacking the African Bank Strategy (with CEO Kennedy Bungane)

After I wrote critically about the pricing of African Bank’s deal to acquire two businesses out of Sasfin, the company contacted me to discuss the thinking behind the deal in more detail. I was highly impressed with the willingness to engage, especially as African Bank graciously recognised that Ghost Mail’s free-to-read format is only made possible by partners.

The bank opted to sponsor a podcast appearance by African Bank CEO Kennedy Bungane, who has been in the banking industry for over two decades. As with everything I do, a paid appearance doesn’t impact the independence of my questions and the overall approach to the show.

With the important disclosures now out of the way, I can give you a taste of what we discussed:

  • The important history of African Bank, particularly in the South African context.
  • An overview of what the bank does differently today vs. the previous chapter in African Bank’s life that ended in curatorship.
  • Examples of how the bank is adding customers through partnerships, with an expanded product suite to service these customers.
  • African Bank’s framework for successful acquisitions, ranging from strategic fit through to earnings accretion, execution difficulty, cultural fit and longevity.
  • An overview of the Grindrod Bank and Ubank acquisitions.
  • The client ecosystem strengthened through the Sasfin acquisitions and the synergies with the rest of the group.
  • The extent of talent and systems acquired as part of these deals.
  • The strategy of lowering the cost of equity to unlock more lucrative returns in these businesses.
  • The branding strategy with these acquisitions.

Of course, the proof of these acquisitions will be in the pudding. I’m grateful to be able to bring you this podcast that gives insights into how corporate M&A works and the type of thinking that goes into these transactions.

Listen to the discussion here:

Ghost Bites (Renergen | Sasfin)

The Finance Ghost
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Ghost Bites (Renergen | Sasfin)

Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:

The Renergen rollercoaster (JSE: REN)

The market is now overreacting to every piece of news

Renergen is a junior mining company, so the current profitability has very little bearing on the long-term investment thesis. Usually, the announcement of results barely moves the price. With so much recent focus on Renergen though, the market is now ready to jump into action at the smallest sign of news.

The share was down nearly 18% intraday on Friday before finishing the day 5.7% lower. That’s serious volatility and not on tiny volumes either, at least not by mid-cap standards.

The announcement that caused all this activity was a trading statement dealing with the six months to August 2023. Although increased production volumes from Phase 1 of the Virginia Gas Project have helped with revenue, the reality is that the startup stage is unlikely to be profitable.

There are other factors as well, like borrowing costs and a shift in the accounting of construction costs that are no longer being capitalised.

Long story short, the headline loss per share is expected to be between 28.9 cents and 30.9 cents. This is between 50% and 60% worse than the comparable period.

For reference, the share price closed at R14.43.

Perennial disappointment Sasfin strikes again (JSE: SFN)

A trading statement reveals that earnings have fallen for the year

In case you think I’m being harsh in my introduction to this section on Sasfin, here’s a really long-term chart to show you what Sasfin shareholders have been through:

As an investor, you don’t want the share price chart to look like an exciting mountain bike race profile.

Things aren’t getting any better, with HEPS down by between 15.72% and 31.12% for the year ended June 2023. This implies a range of 313 cents to 383 cents. The share price of R29.50 has been boosted by the deal with African Bank to dispose of two major business units at a much higher multiple than Sasfin has been trading at recently.

African Bank seems to have a plan for those assets being acquired. Does Sasfin have a plan for its remaining assets?

Little Bites:

  • Director dealings:
    • The company secretary of Truworths (JSE: TRU) has sold shares worth R1.87 million. Although part of this is to settle the tax on vested shares, there’s also a note about rebalancing of his personal portfolio and that suggests that this is a sale that the market should take into account.
    • A director of a major subsidiary of Bell Equipment (JSE: BEL) has bought shares worth R249k.
    • Des de Beer must be feeling a bit tight, as his latest purchase of Lighthouse Properties (JSE: LTE) shares is only worth R38k.
  • Astoria (JSE: ARA) has renewed the cautionary announcement related to a potential acquisition. No further details have been given.
  • I am struggling to see anything at EOH (JSE: EOH) to get excited about. With key strategic shareholder Lebashe decreasing its stake from 20.06% to 19.04%, I guess I’m not the only one who thinks EOH is more likely to bore you to death than anything else over the next few years.

Ghost Wrap #51 (Santova | Spear REIT | Bytes Technology | Super Group | Clicks)

The Finance Ghost
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Ghost Wrap #51 (Santova | Spear REIT | Bytes Technology | Super Group | Clicks)

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

In this episode of Ghost Wrap, I recapped five important stories on the local market:

  • Santova is a reminder that even the best cyclical companies are still subject to big moves in these markets.
  • Spear REIT is one of the most respected property funds on the local market, but debt costs are biting.
  • Bytes Technology is an excellent example of how you can give your money a passport right here on the JSE.
  • Super Group has had a really successful debt raise on the JSE, which is good news for shareholders as the cost of debt directly impacts equity returns.
  • Clicks has put in a decent performance in this financial year, but I remain weary of paying top dollar for a business that can still be disrupted.

Ghost Bites (Afrimat | Balwin | Clicks | Kibo Energy | Mantengu | Nu-World | Oceana)

The Finance Ghost
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Ghost Bites (Afrimat | Balwin | Clicks | Kibo Energy | Mantengu | Nu-World | Oceana)

Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:

Afrimat bucks the mining trend (JSE: AFT)

Diversification helps reduce the impact of cycles

At a time when most mining houses are heading in the wrong direction thanks to lower commodity prices and a difficult production environment, Afrimat is still managing to be in the green. It’s not easy, with revenue growth of 9.6% in the six months to August translating into only a 4.3% increase in operating profit. HEPS growth was similar at 4.4%.

Afrimat’s balance sheet remains solid, with a net cash position of R278.7 million. The debt : equity position of 6.2% is up from 4.7% at the end of February, but remains modest overall.

In the Bulk Commodities business, local iron ore sales carried the story with international sales taking strain thanks to rail limitations. Yes, even Afrimat isn’t safe from the joys of Transnet. The anthracite business is focused on the local market, providing an alternative to importer anthracite.

The Industrial Minerals business suffered the downstream impact of load shedding at its customers. Volumes dropped as customers curtailed their operations and operating profit fell 13.1% as a result.

The big win from a profitability perspective was the Construction Materials segment, where operating profit jumped from R73.1 million to R156.1 million. An increase of 26.5% in revenue combined with cost saving initiatives was enough for profit to more than double.

The Future Materials and Mining segment achieved revenue of R9 million and start-up losses of R8.5 million. The Glenover mine is in a ramp-up phase.

Diversification has always been core to the Afrimat strategy, achieved through a solid track record of acquisitions. The substantial deal to acquire Lafarge seems to be coming at the right time, with the Construction Materials segment performing well and ready to grow further. This is a critical deal, with the CFO temporarily seconded as the integration officer.

The share price closed 6.5% higher based on these results.

I’m not surprised to see revenue dropping at Balwin (JSE: BWN)

The current macroeconomic situation does no favours for property developers

To sell properties, you need confident consumers who have access to credit. The current environment is rather low on those people, which is why I’m not surprised to see revenue down by 25% at Balwin for the six months to August.

Where I am surprised is on the HEPS line, which increased by 4% despite the drop in revenue.

The revenue outcome could’ve been a lot worse, as volumes in terms of apartments recognised in revenue fell by 39%. This means that the focus was on getting improved pricing per unit, which also helped with a substantial gross margin uplift from 26% in the corresponding period to 33% in this period. That’s also ahead of the last full-year result of 29%. On apartments specifically, gross margin increased from 24% to 28%.

The annuity business is up to 4.7% of group revenue vs. 2.5% in the comparable period. This is basically the hustler segment, with everything from fibre networks through to estate support and even mortgage origination. Think of it as Balwin’s side gigs!

I do have a concern about the level of debt, coming in at a loan-to-value of 42% and 3.3 times interest cover. Although within bank covenants, that’s still a lot of debt in this environment. The board seems to agree, with no dividend in this period due to a desire to improve the balance sheet.

The share price is down around 20% this year and has almost halved in value over three years. I can’t see a reason to choose it over Calgro M3 in this sector.

The market liked the Clicks results (JSE: CLS)

Double-digit HEPS growth seems like enough for investors to be happy

Clicks has caused many a local professional investor to scratch his or her head, as the company seems to trade on an impossibly high valuation when you consider the South African backdrop. The share register is well known for having a large proportion of international shareholders, so it makes it even more surprising that Clicks can command a premium valuation.

There was more head scratching on Thursday, with the share price closing 6% higher at R261.75 based on adjusted diluted HEPS growth of 11.5%. Diluted HEPS was R10.45, so that’s a Price/Earnings multiple of 25x. Put differently, this is an earnings yield of just 4%! You don’t even get a particularly high payout ratio, with a dividend of 679 cents per share representing a dividend yield of 2.6%.

In case you’re wondering, the adjusted HEPS growth of 11.5% is based on adjusting for insurance recoveries in the prior year. Without that adjustment, HEPS would only be up 0.8%. Adjusting for insurance is perfectly reasonable though as that’s clearly a once-off.

To deliver this result, Clicks grew group turnover by 8.2%. Retail turnover was up 12.2%, so pressure in the wholesale business remains with distribution turnover at UPD up by just 1.5% because of systems implementation issues in the first half of the year. Nevertheless, operating margin moved 30 basis points higher to 8.7%. An improved product mix in terms of higher margin items helped drive the operating margin performance.

If you’re wondering why the dividend payout ratio isn’t higher, you can look to the extent of capital expenditure (a record this year at R930 million) and strategic acquisitions (R320 million). For context, dividends were R1.6 billion and share buybacks were R704 million.

Capital expenditure is expected to slow down a bit in the new financial year, with R880 million planned across new stores and pharmacies, store refurbishments, supply chain, technology and other infrastructure. R487 million is going into stores and the rest sits in supporting the business.

Is it a good result? Sure. Does the company offer meaningful returns to shareholders at this valuation? Not really. I struggle to see why international investors bother with a roughly 33% return over 5 years in rand terms. Convert that to dollars and they aren’t being rewarded for taking risk on South Africa.

Kibo Energy sells some MED shares to keep it going (JSE: KBO)

It sounds like alternative sources of funding are thin on the ground

Kibo Energy is a penny stock of note, usually trading at 1 or 2 cents per share. This is basically a call option now, because if there is any degree of success from this point onwards then the current punters will be sitting on what is lovingly referred to as a “multibagger” – a position which gives multiple times the original investment as the return.

Much still needs to happen to achieve that outcome.

After receiving further shares in Mast Energy Development (MED) in lieu of cash for partial settlement of the outstanding loan due by that entity, Kibo sold nearly £260k worth of those shares to fund ongoing group expenses and reduction of debt. The total shares received in settlement were worth £469k at the time. Kibo now holds 48.35% in MED.

Mantengu locks in a complicated equity funding line (JSE: MTU)

An investor has committed to invest up to R500 million

Mantengu Mining has put together a complicated deal with an international investor called GEM Global Yield. This is part of the Global Emerging Markets (GEM) group, an alternative investment group with operations in Paris, New York and the Bahamas. This group has completed over 500 transactions in 70 countries.

The short version of this story is that the company has committed to invest R500 million in Mantengu over time. GEM Global Yield has also been issued warrants for 20 million shares (options to subscribe for shares) and will be paid a commitment fee of R10 million, which can be settled in cash or shares.

The commitment period is three years. During that time, Mantengu can give notice to GEM Global Yield of an intention to issue shares. The pricing for any such subscription is a complicated calculation, best described as a 15-day average with the exclusion of a “knockout day” which is a day on which the closing bid price is less than 90% of the minimum floor price at which the company is prepared to issue shares. If I understand it correctly, this protects Mantengu against the kind of crazy moves that can plague illiquid shares.

The warrants also aren’t straightforward. The strike price is R4.00 per share, which is miles above the current price of R1.41. Before you think that the warrants are therefore useless, there’s a clause that if the market price on the first anniversary is less than 90% of the strike price, then the strike price is changed to be 105% of the current market price. There is also a mechanism for GEM to be paid out based on the option value of the warrants using a Black Scholes model, which is a commonly used methodology for valuing options.

As a final sting in the tail, Mantengu won’t be able to deliver a subscription notice (i.e. a request for money) if the issuance of shares would result in GEM holding more than 29.9% of shares in issue, excluding warrants. With a market cap of only R217 million, they are clearly hoping for a share price miracle to avoid a R500 million subscription over 3 years being less than 29.9% of the market cap.

Nu-World, same old South African pressures (JSE: NWL)

Consumer discretionary in South Africa isn’t where you want to be

Nu-World has released results for the year ended August. They aren’t pretty, with the company referred to a “severely distressed South African economy” and a “slowly recovering global economy” – not what you want when operating in discretionary consumer goods.

South African revenue fell by 23.1% due to weak volume growth and a dip in selling price inflation. As a silver lining, the group notes that the second half of the year was significantly better than the first half.

In the offshore business, revenue was up 25%. Some of this is rand weakness, of course.

Overall, revenue fell 11.6% and HEPS was 16.3% lower, with the dividend per share dropping by 16.4% to 125.3 cents. On a Price/Earnings multiple of 7.7x, it feels like there are better opportunities out there.

Oceana counts its lucky stars (JSE: OCE)

The group has released an encouraging trading statement

Oceana Group has released an updated trading statement for the year ended September 2023. The good news is that HEPS is expected to be between 24% and 34% higher, which suggests a range of 751.6 cents to 812.3 cents. At a closing price of R69.95, this means that the company isn’t exactly at a bargain Price/Earnings multiple, especially given how risky the fishing game is.

The performance this year was driven by higher volumes in Lucky Star canned pilchards and improved global pricing for fish oil. The group also came into this year with higher opening inventory levels than usual, which allowed it to respond to increased demand.

As a final note, the profit on disposal of Commercial Cold Storage was recognised in this period. The gain is excluded from HEPS though (and is instead recognised in EPS), which is why I only ever focus on the former and ignore the latter.

Little Bites:

  • Director dealings:
    • An executive director of Santova (JSE: SNV) sold shares worth R2.8 million.
    • The company secretary of Sasol (JSE: SOL) sold shares worth R377k.
  • City Lodge (JSE: CLH) is implementing an odd-lot offer to clean up the shareholder register and significantly reduce costs. On a share price of only R4.16, a holder of 100 shares is sitting with a position that barely buys dinner for two in a restaurant. There are a whopping 20,947 shareholders with positions this size, which is 58.22% of the total shareholder base when measured by shareholder numbers rather than value of holding. You can see why cleaning this up is worth the 5% premium to 30-day VWAP that the company is offering.
  • Zeder (JSE: ZED) has received SARB approval for the special dividend, with a payment date of 13 November.
  • Tjaart Kruger has resigned from the board of Nampak (JSE: NPK) to take up the role of CEO at Tiger Brands (JSE: TBS). You may recall that the change of management at Tiger Brands was announced a week or so ago.

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?

The week was very quiet on the mergers and acquisitions front.

Exchange-Listed Companies

Alternative investment firm New York-based Stonepeak has made an offer to Textainer shareholders to acquire 100% of the company at US$50.00 per ordinary share. The cash offer has been approved by the Textainer Board and represents a premium of 46% over the closing share price on October 20, 2023. The deal is valued at $2,1 billion. The transaction, which represents an enterprise value of c.$7,4 billion, is expected to close in the first quarter of 2024.

Famous Brands disclosed in its financial statements this week that it had acquired with effect from October 16, 2023, an interest in Munch Software. The business is a recent entrant to the Point-of-Sale software industry, offering a cloud-based platform. The new partnership will enable Famous Brands to achieve its ambitions to digitise the restaurant management technology ecosystem.

RMB Corvest (FirstRand) has, in partnership with Shalamuka Capital, acquired a 30% stake in Switch Telecom, a VoIP telecommunications service provider. Financial details were undisclosed.

Unlisted Companies

Aviapartner, a leading Airport Ground Services group in Europe, has entered into a joint venture with South African company Nas Colossal Aviation Services (NCAS). Aviapartner will hold a 51% stake in the joint venture with NCAS owning the remainder. NCAS employees some 2,400 people and operates at six South African airports of which Johannesburg and Cape Town, respectively are the first and third largest airports on the African continent. Its customer portfolio includes airlines such as Airlink, British Airways, Emirates, Ethiopian Airlines, Lufthansa and South African Airways. Financial details of the transaction were not disclosed.

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

The total number of shares held by odd-lot holders in City Lodge Hotels is 336,044, representing just 0.06% of the total issued shares in the company. As a result, the company has proposed an odd-lot offer to the 20,947 shareholders holding these shares at a 5% premium to the 30-day volume weighted average price of a share as at the close of business on Monday 4 December 2023. The repurchase will be funded from City Lodge’s existing cash resources.

Liberty Two Degrees (L2D) has declared a Clean-Out distribution from income of 8.42 cents per L2D share. The company has 908,443,334 shares in issue, inclusive of 42,791,106 treasury shares.

Transcend Residential Property Fund has finalised the Clean-out Distribution to shareholders at 29.44 cents per Transcend share.

The offer price in terms of the odd-lot offer to Quilter shareholders has been finalised at 88.10 pence/2,008.91 cents (ZAR) per share, representing a 5% premium to the VWAP price over the five trading days prior to 20 October, 2023.

Several listed companies reported repurchasing shares this week. They were:

Gemfields has completed its $10 million shareholder approved share buyback programme. In total, 58,423,901 ordinary shares were repurchased, representing 4.83% of the issued share capital on 30 November 2022. The shares will be cancelled in due course.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 16 – 20 October 2023, a further 4,022,308 Prosus shares were repurchased for an aggregate €108,43 million and a further 249,044 Naspers shares for a total consideration of R745,5 million.

Glencore intends to complete its programme to repurchase the company’s ordinary shares on the open market for an aggregate value of $1,2 billion by February 2024. This week the company repurchased a further 10,010,000 shares for a total consideration of £43,79 million.

Labat Africa has had the listing of its securities suspended on the JSE for failure to comply with the Listing Requirements by not publishing its financial statements for the year-ending 31 May 2023 within the prescribed period.

Three companies issued profit warnings this week: Santova, Tiger Brands and Life Healthcare.

Three companies issued or withdrew a cautionary notice: Chrometco, Clientele and Steinhoff Investment.

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

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