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Ghost Bites (AEEI | RMB Holdings | Sea Harvest | Thungela)

The Finance Ghost
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Ghost Bites (AEEI | RMB Holdings | Sea Harvest | Thungela)

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

AEEI is dragged into the red by AYO Technology (JSE: AEE | JSE: AYO)

The highlight is definitely the Fishing and Brands segment

African Equity Empowerment Investments (AEEI) released results for the year ended August 2023. They are complicated, as they include discontinued operations (AYO Technology) and the reporting of normalised headline earnings, which always needs to be treated with caution.

The AYO results have once again put the group in the red, but that is being unbundled to shareholders (lucky them) and so this is now a discontinued operation from the perspective of AEEI. It should be noted that this isn’t the only blemish in the numbers, as there’s also a large impairment in the biotechnology business.

The business that is worth focusing on is Fishing and Brands, with that segment delivering profit before tax of nearly R78 million in this period. The Technology segment (not AYO, but rather one other business) made profit before tax of R13 million. The Health and Beauty segment made a small loss off a revenue base of R49 million. Events and Tourism managed to lose R15.7 million off revenue of R24.9 million.

You probably know this already, but AEEI is a scrappy group of businesses with the embedded poison pill that is AYO Technology. The unbundling will at least take AYO out of the mix.

RMB Holdings releases interim results (JSE: RMH)

It’s important to adjust for the special dividend when looking at the NAV move

RMB Holdings is busy with a classic value unlock strategy, which means managing existing assets as efficiently as possible and returning capital to shareholders along the way. This is why it’s important to look beyond the year-on-year move in net asset value (NAV) per share of -56%. The group is intentionally becoming smaller.

Instead, the right metric is to look at NAV per share excluding the impact of the special dividend. On that basis, the group has actually grown by 5% to 104 cents per share.

There’s another special dividend coming of 23.5 cents per share, payable in December. This is being funded by the cash received for the settlement of the Atterbury base loan, as well as the cash generated by ongoing operations.

The current share price is 63 cents a share.

Sea Harvest is fishing for an acquisition (JSE: SHG | JSE: BRT)

The company has released a cautionary announcement

Sea Harvest released a cautionary announcement regarding a potential acquisition of certain businesses and assets of Terrasan. Although we don’t know exactly what is up for grabs, a quick look at the Terrasan website shows that the group has business interests in abalone, pilchards and aquafeed.

Discussions are clearly a long way down the road, as the companies are obtaining the various regulatory approvals and are filing a merger applications with the Competition Commission

As Sea Harvest is a 54%-held subsidiary of Brimstone, that company also released a cautionary announcement regarding this potential acquisition.

Transnet issues continue to plague Thungela (JSE: TGA)

Export saleable production by the South African operations have fallen year-on-year

Thungela released a pre-close update dealing with the year ending December 2023. It’s been a tough year for the entire coal industry, with prices way down vs. last year. Whether you look at the Richards Bay Benchmark or Newcastle Benchmark coal prices, they have more than halved year-on-year in dollars. Interestingly, each of the major operations can end up selling coal at a discount or a premium to the benchmark price, depending on the specific underlying contracts.

Sadly, export saleable production in South Africa is down by 7.6% due to a deliberate reduction in response to poor Transnet performance. Export sales in South Africa are flat year-on-year, so production was effectively adjusted downwards to the realistic level that Transnet can support. There’s certainly no shortage of demand. We just have to get the stuff to the ports.

The security issues at Transnet, as well as locomotive breakdowns, seem to be problems that just cannot be solved. Luckily, Thungela has certain operational attributes that allow it to be flexible in terms of getting the coal onto trucks. Even then, production had to be curtailed.

The Ensham acquisition in Australia has a different story to tell, with export production ahead of expectations. It’s nice to have working infrastructure! There were many critics of the Ensham deal when Thungela first announced it, but perhaps it is the right long-term play in the context of Transnet. It also helps that the eventual price paid for Ensham was R3.2 billion, not R4.1 billion as expected. This was due to closing adjustments and the lock-box structure with a date of 1 January 2023, which allowed Thungela to benefit from the performance from that date until completion.

Thungela’s net cash position at the end of 2023 is expected to be R9.6 billion.

Little Bites:

  • Director dealings:
    • Here’s a big one: the CEO of BHP (JSE: BHG) has sold more than half of his stake in the company for a total of nearly AUD 19 million. The announcement specifically notes that this is due to a divorce, so it’s more a reminder of how big divorces can get than a view on the share price itself. It’s also an important reminder to read SENS announcements carefully, especially about director dealings and any reasons given!
    • Sabvest Capital (JSE: SBP) has director representation on the board of Metrofile (JSE: MFL) in the form of Chris Seabrooke. Sabvest is an institutional investor, but it still counts as a director dealing that the company bought R2.7 million worth of shares in Metrofile.
    • A non-executive director of Richemont (JSE: CFR) has bought shares worth R177k.
    • The wife of a director of Afine Investments (JSE: ANI) has bought shares worth R10k.
    • An associate of a director of Huge Group (JSE: HUG) bought shares worth nearly R8k.
  • Sasfin (JSE: SFN) needs to send its shareholders a circular dealing with the disposal of the Capital Equipment Finance and Commercial Property Finance businesses to African Bank. A dispensation has been obtained for the 60-day rule. Sasfin hasn’t committed to a date for the release of the circular.
  • In an awkward update for Marshall Monteagle (JSE: MMP), the company corrected what was said in the results announcement regarding the potential sale of its California property for $26.5 million. The initial disclosure was that contracts have been exchanged. Instead, the company is only at heads of terms stage, which means negotiations on smaller points are still underway.
  • For those interested in environmental reporting and how mining groups are responding to climate change, Glencore (JSE: GLN) announced that it has concluded engagements with shareholders who voted against its climate plan. An update plan will be released in March 2024, incorporating the important acquisition of 77% of Teck’s Elk Valley Resources (EVR) steel making coal assets.
  • Orion Minerals (JSE: ORN) has beefed up its board with the appointment of two experienced mining executives as non-executive directors.
  • The ex-CFO of Astral Foods (JSE: ARL), Daan Ferreira, has been appointed as a non-executive director on the board on Premier Group (JSE: PMR).
  • There’s another resignation from the board of AYO Technology (JSE: AYO), this time in the form of non-executive director Valentine Dzvova. She is the CEO of African Equity Empowerment Investments (JSE: AEE), so this is part of the overall separation of these two companies.

Ghost Bites (enX | Jubilee Metals | Marshall Monteagle | Trustco)

The Finance Ghost
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Ghost Bites (enX | Jubilee Metals | Marshall Monteagle | Trustco)

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

enX is offloading Eqstra to Nedbank (JSE: ENX | JSE: NED)

The banking group is bulking up its vehicle leasing business

Back in June, enX alerted the market to a potential transaction to divest Eqstra. The group feels that it isn’t the right owner for Eqstra because the latter needs capital to scale and enX doesn’t have access to capital at the same rates that banks do. This makes it difficult for Eqstra to compete with the fleet solutions of banking groups.

The solution here is that if you can’t beat them, join them. Eqstra will be acquired by Nedbank, thereby solving the funding problem for the business and giving Nedbank a much bigger footprint in this space. For enX, this takes the pressure of Eqstra off its balance sheet, which also removes the majority of enX’s interest-bearing debt.

This is a very big step for enX, as it represents the disposal of a majority of its assets or undertaking. This puts it into s112 territory from a Companies Act perspective. It’s also a Category 1 transaction under JSE rules.

The structure is that Nedbank will subscribe for a 50.2% stake in Eqstra. The company will then use those subscription proceeds to repurchase all the shares held by enX. Nedbank will also put in money for Eqstra to repay loan accounts to enX. The valuation of the equity is based on NAV plus a modest premium of R16 million, less transaction costs.

The minimum subscription price is R379 million, but it could be a lot higher depending on changes in NAV of Eqstra. Had the deal closed on 31 August for example, the subscription price would’ve been R534 million.

Assuming the minimum of R379 million applies, then the gross proceeds (equity and loan repayments) to enX will be R890 million.

Either way, it looks like a significant special distribution is on the cards here. enX needs to keep R100 million in escrow for a period of three years and also wants to retain some capital for “general corporate purposes” – no estimate for that amount is given. The rest will be a return of capital to enX shareholders.

There are loads of regulatory (and shareholder) approvals still to come here. There’s also a material adverse change clause. It’s no guarantee that the deal will close, but it’s usually the case that these requirements are met unless a really nasty surprise comes up. Holders of 49.93% of enX shares in issue have already pledged their support for the deal, so there’s quite some way to go to meet the necessary approval threshold.

For context, the enX market cap is around R1.55 billion.

Jubilee takes a big step forward with its copper story (JSE: JBL)

This deal also marks the start of a new strategic relationship with a major global partner

Jubilee Metals regularly makes a song and dance about its technical capabilities. Talk is cheap, but luckily there’s a lot more than talk here. The latest news is that International Resources Holding RSC Limited (based in Abu Dhabi and part of the most valuable listed holding company in the UAE) is acquiring one of the largest copper waste rock assets on the surface in Zambia. Jubilee Metals is being appointed to design, implement and operate the copper processing solution.

The project cost is likely to be around $50 million and Jubilee has the capability to construct and commission all modular copper units within a 12-month period, with a planned commencement in the first quarter of 2024.

This partnership is important to Jubilee and its shareholders because the company can focus on providing technical solutions to partners who have large balance sheets. This is essentially a capex-light approach to growing the copper business.

Marshall Monteagle turns profitable despite lower revenue (JSE: MMP)

This small cap is not widely followed by the market

Marshall Monteagle is a collection of businesses that includes a mix of FMCG and property investments. This immediately makes it tricky for investors to understand, which is why many of them don’t bother. Liquidity is hard to come by for small caps on the JSE. It’s even trickier for companies that aren’t easy to unpack.

In the six months to September 2023, the company reported a drop in revenue from continuing operations of 19%. Operating profit before tax fell by 66%. Although cost-cutting initiatives in the FMCG business helped, the reality is that the South African retail landscape is anything but favourable right now.

Despite this, profit after tax from continuing operations swung from a loss of $2.7 million to profit of $674k. This all happened on the other expenses line, with a significant negative fair value move last year that didn’t repeat in this period.

Cash and cash equivalents are down by 3%, which isn’t much when you consider the drop in operating profit. The interim dividend is consistent at 1.9 US cents per share.

Lots of pretty writing at Trustco and a big drop in NAV (JSE: TTO)

Credit to whoever wrote this SENS announcement: it gets full marks for use of language

Trustco released a trading statement that would make a decent entry for an English writing competition. It talks about things like a “constellation of challenges” and the “burgeoning cost-of-living conundrum” – all very fancy stuff.

After a few flowery paragraphs, they get to the meat of the thing. In an environment of higher discount rates, the value of a portfolio of businesses comes under pressure because the future cash flows are discounted to today at a higher rate. On top of this, there were issues related to loan-to-value limitations placed on the Namibian property market by the Bank of Namibia, although Trustco seems to have successfully challenged those limitations in court. The challenge was only after year-end though, so the impact of a drop in property valuations is being felt in these numbers.

Long story short, the net asset value (NAV) per share for the year ended August 2023 is expected to be between 98 and 136 cents. It was 181 cents a year ago.

The market gave the share price a 45% smack in response, taking it down to 27 cents (still a heavy discount to NAV).

Little Bites:

  • Director dealings:
    • Value Capital Partners – which has director representation on the board of Tiger Brands (JSE: TBS) – has bought shares in that company worth around R95 million. This is an institutional investor so the quantum isn’t a fair comparison to other director dealings, but the direction of travel matters.
    • The chairman of FirstRand (JSE: FSR) exercised a put option and sold shares worth R59 million. The strike price on the option was similar to the current spot price, which is interesting. It was part of a collar hedge transaction related to a loan.
    • An executive director of Santam (JSE: SNT) has bought shares worth R610k.
    • A director of OUTsurance Group (JSE: OGL) has bought shares worth R103k.
    • Protea Asset Management (an associate of Sean Riskowitz) bought shares in Finbond (JSE: FGL) worth R27k.
  • In case you find sustainability-linked financing interesting, Barloworld (JSE: BAW) managed to shave 3 basis points off two of its loans thanks to meeting targets. Simply, these loans get cheaper if borrowers meet agreed conditions.
  • After 12 years at Shaftesbury Capital (JSE: SHC), Chris Ward is stepping down from his current role as COO. He formerly served as CFO of the group. It sounds like they are splitting on very good terms and his role won’t be replaced on the board.
  • The drama at Tongaat Hulett (JSE: TON) continues. One of the potential rescuers, RGS Group Holdings, has made an application to court regarding certain procedural elements of the planned meetings and other applications currently in court. I’m certainly no lawyer, but it looks like RGS is basically demanding that its deal should be voted on before the other one. The business rescue practitioners are opposing this application.
  • Labat Africa (JSE: LAB) is still busy with the audit for the year ended May 2023. This result is obviously very late now and the annual report can’t be released until the audit is complete. No timeline has been given by the company for completion.
  • The court battles around PSV Holdings (JSE: PSV) continue, with DNG Energy promising that it has the funds and that a formal offer for the business is coming.

Snapshot: photography and the art of disruption

Dominique Olivier
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Snapshot: photography and the art of disruption

Before the 1840s, visual artists had a complete monopoly on the business of making pictures. Then the camera was invented, and the world as we knew it was turned on its head. Back then, it was called the death of art. Today, we know it was really a rebirth.

Have you ever gone on a Tinder date with someone who looked nothing like the pictures on their profile? If so, you might have a bit of sympathy for Henry VIII, who is reported to have grumbled “She is nothing so fair as she hath been reported” when he met his fourth wife, Anne of Cleves, for the first time in 1539. 

You see, poor Henry had been led astray by an over-diligent artist’s hand when he became engaged to Anne. Having never met her in person (he was in England at the time and she was in Germany), the only way to know what she looked like was to study a portrait of her that had been painted by Hans Holbein the Younger. The calm, pale visage depicted in the portrait was apparently a far cry from the face that Henry saw for the first time when Anne arrived in England. Legend has it that he was so incensed by the artist’s deception that he tried to stop the marriage, but political ties with Germany took precedence. The wedding took place, but the marriage was annulled just six months later – unconsummated. 

As citizens of the modern age (who carry powerful cameras around in our smartphones as standard), it seems ludicrous to imagine a time in the world where the only way to know what someone looked like was to rely on an artist’s depiction. To this day, we don’t know what it was about Anne’s looks that upset Henry so much. All we have of her are portraits and Henry’s scornful comments. 

The day the art world stood still

In 1839, Louis Daguerre created the first successful photographic process, called the daguerreotype, which allowed him to use light to capture an image on silver-coated copper plates. Just three years later, the first professional photography studios started to appear in Europe, using technology that condensed Daguerre’s thirty-minute-long photographic process into twenty seconds. 

In 1884, George Eastman developed photosensitive film, eliminating the need for photographers to carry around plates and toxic chemicals. Four years later, Eastman’s Kodak camera went on the market, taking photography out of the hands of professionals and making it accessible to the man on the street. By 1901, every person who could afford a Kodak Brownie camera could photograph whatever they wanted. 

Business owners will no doubt read this little summary of the history of photography and shake their heads in sympathy. Regardless of your industry, disruption comes at you fast. In the span of just one lifetime, photography evolved from scene fiction to everyday fact. 

Rage against the machine

As you can rightly imagine, no-one was more upset by the invention of photography than the great painters of the 19th century. 

From the earliest cave drawings to the most magnificent masterpieces of the Renaissance, art had always been used as a tool to copy what the human eye could see. The job of the artist was to create a believable replica of an object, landscape or person, and the more accurate the depiction, the better (just ask Henry VIII). Artists spent centuries developing techniques, materials and colours that would allow them to capture life by the work of their own hands. The most successful artists of each era had throngs of adoring patrons who considered their talents practically godlike and were willing to pay exorbitant prices for their works. 

And then along comes Louis Daguerre with a mechanism that can capture an exact copy of anything in the world in a fraction of the time or effort that it took to create a painting. Democracy was coming to overthrow the monarchy of the art world, and the royals in charge were not impressed. 

Disruption invites invention

When Daguerre demonstrated his new process for the French Academy in August 1840, Paul Delaroche, the celebrated history painter, proclaimed: “From today, painting is dead!”

In some ways, he was right. Art’s function as a way of illustrating the world around us was rendered moot from the moment that the first photograph was taken. But did that mean that it had no functions left at all?

While there was initial hostility and derision from artists, once emotions cooled down, many viewed photography as a tool that could be used to enhance and elevate their art. Of course there were those hardheaded individuals who derided the invention of the camera and stuck to their painterly guns in the vague hope that photography was a fad and that their patrons would return to them eventually. For the most part, they have been written out of history, left behind when the curve of invention rolled past them. 

More flexible artists saw the photograph as a way to expand upon the shadow boxes that they had been using for hundreds of years prior. Since one of the greatest challenges of painting from life is translating a three-dimensional object onto a two-dimensional surface, the work of the camera in creating a two-dimensional reference image that an artist could work from allowed them to render scenes and figures with a greater degree of accuracy than ever before.

Others questioned why accuracy in painting was needed at all. If the work of the camera was satisfying the need for images that looked exactly like what they depicted, then what else was left for an image to do? An artistic movement called Impressionism answered this question by shifting focus from everything that a camera could capture to everything that it couldn’t. Fleeting moments of light and shadow, movement and emotion became their subject matter. 

One indelible impression 

Impressionist painters such as Claude Monet, Pierre-Auguste Renoir and Edgar Degas moved away from detailed, realistic depictions and instead embraced a more subjective and interpretative approach. Their works often featured loose brushstrokes, vibrant colors, and a focus on the atmosphere and mood rather than precise representation. By deliberately blurring the lines and creating a sense of ambiguity, they aimed to convey the immediacy and evanescence of the scenes they painted.

Impressionism challenged the traditional purpose of art by suggesting that an image’s value lay not in its faithfulness to reality but in its ability to evoke emotion, capture the essence of a moment, and provide a unique perspective that transcended mere replication. 

The movement marked a significant shift in artistic philosophy, encouraging artists to explore the boundaries of perception and redefine the purpose of visual representation. In the wake of Impressionism, less figurative forms of art followed and flourished: Abstraction illustrated how much we could interpret from colour and shape alone, while Surrealism illustrated our wildest and most incoherent dreams. 

If the Impressionists hadn’t led the charge and innovated their way out of disruption, it’s very possible that Paul Delaroche’s exclamation about the death of art would ring true. Fortunately, all artists are essentially self-employed entrepreneurs, which means that they have always had the tools to problem-solve their way out of a tough spot. So instead of the death of art, the camera brought about a stunning rebirth that freed artists from the shackles of representation and allowed them to peer beneath the surface, looking deeper into the things that make us human than ever before. 

How is a business like a work of art?

There are two important lessons for businesses to take out of the history of the photograph. 

Firstly, disruption is inevitable. Regardless of your industry, it will find you and it will try to end you. If you deny the disruption and wait for it to blow over, you run the risk of becoming like those artists who couldn’t adapt to the use of the camera – left behind in the previous century. Expect disruption – in fact, welcome it with open arms when it comes, because disruption is the fertile soil in which innovation takes the strongest root. 

Secondly, never stop adapting. Here I need to mention the original disruptor in this story, Kodak, which found itself at the crest of the wave of innovation in the early 1900s. It’s all well and good to be innovative, but you can’t be innovative once and then call it a day. The wave keeps moving forward, and if you don’t stay at that forefront, there’s a very real chance that it will roll over you. Kodak was too slow to adapt to the disruption caused by digital cameras (ironically their own invention, which they backburnered in favour of film) in the late 1990s, and as a result, they have become almost as irrelevant as the film cameras that they sell. 

As AI-generated art moves from experimental joke to serious contender in the art world, I for one can’t wait to see how this generation’s artists will reshape what art is amid the disruption.

About the author:

Dominique Olivier is a fine arts graduate who recently learnt what HEPS means. Although she’s really enjoying learning about the markets, she still doesn’t regret studying art instead.

She brings her love of storytelling and trivia to Ghost Mail, with The Finance Ghost adding a sprinkling of investment knowledge to her work.

Dominique is a freelance writer at Wordy Girl Writes and can be reached on LinkedIn here.

Ghost Bites (African Rainbow Capital | Eastern Platinum | Grindrod Shipping | Harmony | Italtile | MAS | RMB Holdings)

The Finance Ghost
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Ghost Bites (African Rainbow Capital | Eastern Platinum | Grindrod Shipping | Harmony | Italtile | MAS | RMB Holdings)

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

ARC completes its rights offer (JSE: AIL)

The underwriter got a big chunk of shares, which isn’t a shock

I’ve written extensively about this rights offer and some of the mechanics that I felt made it painful for minority shareholders. I won’t delve into that again here.

The latest news is that the rights offer by African Rainbow Capital has been completed and holders of roughly 65% of shares in issue followed their rights. This means that the underwriter got around 35% of the shares being issued in this capital raise.

For those who didn’t follow their rights and ended up with those shares going to the underwriter, this was a significant loss of value because of the pricing of the rights issue.

Eastern Platinum announces the whistleblower findings (JSE: EPS)

The good news is that they were unsubstantiated

The special committee of independent directors has worked through the investigation of the whistleblower allegations at Eastern Platinum. The allegations related to undisclosed related party transactions for the sale of chrome concentrate at discounted prices.

The good news is that the committee has found that the allegations are unsubstantiated, so this can be put to bed now.

Shipping rates look flat at Grindrod Shipping (JSE: GSH)

Grindrod Shipping’s holding company has given updated disclosure on shipping rates

You have to be careful in taking the disclosure by Taylor Maritime Investments and applying it directly to Grindrod Shipping. Taylor discloses the shipping rates for the combined fleets, so it gives insight into the direction of shipping rates but isn’t a perfect indication of quantum at Grindrod Shipping.

For the six months to September 2023, the time charter equivalent (TCE) was $11,550 per day. Looking ahead to the period ending 31 March 2024, the booked rate is an average of $11,634 per day. We aren’t seeing much of an uptick in shipping rates at the moment, but they aren’t dropping either.

Harmony looks to up its B-BBEE ownership (JSE: HAR)

The company envisages the issuance of convertible preference shares to two holders

Harmony Gold wants to top up its B-BBEE ownership through the issuance of convertible preference shares to the Harmony Gold Community Trust and the Harmony ESOP Trust.

Upon conversion, the shares would represent 0.4% and 2.0% of issued ordinary shares respectively.

The pro-forma effect of these transactions is a 5% decrease in HEPS.

Italtile’s sales are going backwards (JSE: ITE)

Consumer discretionary spending remains very tight

Italtile released a sales update for the five months to November. As you might expect, it notes all the different sources of consumer pressure and the problem of overstocked retailers. On top of this, competition is strong in the sector and margins are under pressure to try respond to the poor demand.

System-wide retail turnover fell by 2.9% in this period and the integrated import supply chain business was also negatively impacted by weaker retail sales. Group manufacturing sales to both group and third-party customers fell 5.9%.

Manufacturing businesses really struggle when sales go backwards, the operating leverage starts to work against you rather than with you. The company has warned that profitability will be negatively affected, but further details aren’t given.

MAS still might not pay dividends until 2026 (JSE: MSP)

This is an ultra-cautious approach to the balance sheet

MAS has released a pre-close update for the six months ending December 2023. Operationally, things sound good. For the four months to October, like-for-like footfall is up 8% year-on-year and trading density increased 7%. Occupancy cost ratios are good and so are collections.

Why, then, is there still no sign of a dividend? MAS recently suspended its dividend because of an incredibly cautious approach to the balance sheet. The company doesn’t like what is going on in the bond market, so they are working towards reducing bond refinancing risk in 2026. Now, looking that far ahead is admirable, but perhaps it really is too conservative here.

With the completion of a tender offer for those bonds, the exposure to the 2026 refinancing has been reduced. The group has repurchased €80.7million of notes at a 9.3% discount to par.

The best forecast is that €76million in debt will need to be raised by May 2026 to achieve the balance sheet objectives. Although the group is well placed for this, they believe that dividend payments cannot be resumed before June 2026 if existing bond conditions persist.

RMB Holdings gives an update on NAV per share (JSE: RMH)

Comparability is limited here due to a change in year end and a special dividend

If it wasn’t for the change in financial reporting period and the special dividend, RMB Holdings wouldn’t have needed to release a trading statement as earnings would’ve differed by less than 20%. This is why the percentage change is misleading.

Instead, the important update is that the net asset value range is between 95 cents and 115 cents. The share price is 57 cents.

Little Bites:

  • Director dealings:
    • Tjaart Kruger has bought another R1.2 million worth of shares in Tiger Brands (JSE: TBS).
    • A director of a major subsidiary of Netcare (JSE: NTC) has sold shares worth nearly R1.7 million and a different director sold shares worth R1.2 million.
    • The chairman of Sibanye-Stillwater (JSE: SSW) has bought shares worth R426k. An independent non-executive director also bought shares worth R109k.
    • Although I’m sure that more announcements of this nature will come through, two directors of African Rainbow Capital (JSE: AIL) have subscribed for shares worth just over R200k in the rights issue.
    • An executive director of Libstar (JSE: LBR) has bought shares worth R101k.
  • There’s some good news at Wesizwe Platinum (JSE: WEZ), with the employees who were staging a “sit-in” protest having returned to the surface at the Bakubung Platinum Mine.
  • Sebata Holdings (JSE: SEB) released a trading statement for the six months ended September 2023. The headline loss per share has deteriorated from -5.27 cents to a range of -9.39 cents and -10.44 cents.
  • African Equity Empowerment Investments (JSE: AEE) has classified its investment in AYO Technology as a discontinued operation. But even with that adjustment made, a trading statement for the year ended August 2023 reflects HEPS from continuing operations of between 0.50 and -0.08 cents, so this could be loss-making even with discontinued operations removed. HEPS from continuing operations was 2.93 cents in the comparable period.
  • Kibo Energy (JSE: KBO) is still trying desperately to get the joint venture for Mast Energy Developments (MED) across the line. After multiple delays, the joint venture partner (Proventure Holdings) has committed to pay the remaining amount between 15 and 20 December. An extension has been granted to allow for this. It really will be a disaster if the joint venture fails to go through after all this effort and so many extensions.
  • Spar (JSE: SPP) has announced the appointment of two non-executive directors. One has a lot of experience in FMCG and marketing and the other is a specialist in big data and artificial intelligence. Although it’s good to see a data push here, they definitely need to just get the basics right.
  • The acting CFO of Kore Potash (JSE: KP2) has resigned. Andrey Maruta has come back into the role, which he previously held between 2019 and 2021 before pursuing another opportunity.
  • Europa Metals (JSE: EUZ) has issued performance shares to directors that represent roughly 3.7% of shares in issue. It’s a pity that the website doesn’t seem to be working!

Simple, but Effective, Investing

The Finance Ghost
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Simple, but Effective, Investing

By Nico Katzke, Head of Portfolio Solutions at Satrix*

Diversification is an often-cited concept. The virtues of not tying one’s fortunes to a single event have been known for centuries – as Shakespeare eloquently states in the Merchant of Venice:

“My ventures are not in one bottom trusted, … therefore, my merchandise makes me not sad.”

But there is more to diversification than simply being an effective sleep aid. Below, we highlight five important features of diversification to keep in mind when investing.

1. Diversification is more than just shuffling eggs between baskets…

Most would answer that diversification simply means placing your eggs in different baskets. But if your eggs are in different baskets that are all on the same vehicle, and that vehicle overturns – all your eggs might be broken. This means, the key to diversification is not simply holding many assets, but rather holding different types of assets. An index that holds 1,000 equities might not be diversified at all if equity markets experience a coordinated downturn (as seen in 2008 and 2022). This makes carefully considered portfolio construction a key step in building long-term wealth. It is wise to keep in mind that N-diversification (holding many assets) is not the same as risk-diversification.

2. Investing is not just about holding the best assets

This might seem like a very strange statement, but similar to picking the best players for their positions in sport (and not just the 15 quickest or largest players) – building a well-diversified portfolio may mean holding seemingly inferior assets too. These assets can offer important hedging features to your portfolio, shielding against large periodic losses. Although equities offer significantly more upside over the long term than fixed income instruments, holding alternative assets with lower correlations ensures a smoother long-term investment journey. This feeds into the next point:

3. Avoiding downside is (far) more important than capturing upside.

A smoother return profile through diversification has both health and wealth benefits – specifically by helping to better manage downside risk. The impact of losses is far more severe than similar gains. The graph below shows initial price moves on the X-axis, and the subsequent required moves to get back to parity. Notice how steep the required gains are following losses (left) compared to required losses following gains (right).

Asymmetric return illustration graph

This means that losing 60% requires a gain of 150% to get back to parity, while a gain of 60% is fully offset by a mere loss of 37.5%. The cumulative impact of large losses is therefore felt for long periods – something investors may not fully appreciate. This feeds into the next point:

4. Entry and exit points matter.

Timing entry and exit points can be a precarious exercise. To show this, we plot the peak-to-trough variation for listed local stocks (split between large-, mid- and small caps) per year. The coloured box shows the 20th and 80th percentiles, with the horizontal line in the middle being the average. From this we see that individual share prices on the FTSE/JSE All Share Index commonly deviate between 30% – 40% per year. This means that even if you take a correct long-term view on a company, the timing of entry and exit points matter greatly. This makes the act of stock picking, by both individuals and even professional fund managers, a high-risk strategy. Contrast this to investing in a simple vanilla index, such as the FTSE/JSE Capped SWIX Index, which is made up of a diversified combination of listed stocks. The index typically deviates between 10% – 15% (the orange bar), meaning the timing of entry and exit points matter far less than when trading individual stocks. And as stressed above, the importance of avoiding large swings is very important for long-term wealth creation.

Peak to Trough Dispersion" FTSE/JSE all-Share Equity Constituents

5. Diversification is thankless.

As the benefits of diversification are not directly observed, its value in your wealth creation journey is often underappreciated. This means we have to consciously accept the virtues of a diversified approach to building wealth. But this is easier said than done.

We are often confronted by stories of great investment decisions, such as that one friend at a braai reminding you about her recommendation to buy that stock at the beginning of the year that is now 90% up; or the uncle who told you to buy Sasol at R25 per share; or the relative that suggested buying bitcoin when it dipped. We then instinctively do mental accounting and get frustrated at missing out on said opportunities – painfully aware of the comparatively pedestrian returns that our long-term diversified strategies delivered over that period. Unfortunately, the desire to share poor investment decisions as cautionary tales is not as strong, so we receive a misrepresentation of the reality of taking concentrated bets.

But hindsight is a fiendish mistress – and it is tempting to grow impatient and act in order to chase the next big payoff opportunity. In those times of great temptation, it may be wise to remind yourself of the short poem written by Ambrose Bierce called A Lacking Factor:

‘You acted unwisely,’ I cried, ‘as you can see by the outcome!’
He calmly eyed me:
‘When choosing the course of my action… I had not the outcome to guide me.

The simple insight offered is to never judge decisions based on uncertain outcomes, as it may teach us bad lessons. We should instead focus on that which we can control: avoiding concentrated risks and the large swings (positive and negative) it entails. Fortunately, indexation vehicles can be easily accessed through, e.g., ETF, or exchanged-traded fund, vehicles where diversification is a built-in feature. It should also be sought through holding diverse asset classes and seeking intermediated help in building a portfolio that can withstand periods of instability. Thereafter, it becomes a psychological game of fighting the urge to change course and chase the high returns that look so easy after the fact.

After all, a diversified approach can be thankless and not very exciting, with few highlights. But it sure has gold at the end of the road.

*Satrix, a division of Sanlam Investment Management

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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. Satrix Managers is a registered Manager in terms of the Collective Investment Schemes Control Act, 2002.

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, 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 Wrap #57 (British American Tobacco | Absa + Nedbank | Transaction Capital | Spur | Murray & Roberts)

The Finance Ghost
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Ghost Wrap #57 (British American Tobacco | Absa + Nedbank | Transaction Capital | Spur | Murray & Roberts)

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:

  • British American Tobacco is seen as a defensive stock, but I have a different view on it.
  • Absa and Nedbank released updates this week and although Absa’s return on equity is likely still ahead of Nedbank, the share price performance this year shows what happens when expectations aren’t met.
  • Transaction Capital is now behaving more like an investment holding company than the integrated, one-team-one-dream business of a few years ago.
  • Spur is ready to go Italian, with the acquisition of 60% of Doppio Zero having closed and some interesting prospects already on the table.
  • Murray & Roberts has made great strides in repairing the balance sheet, with an encouraging update that takes a rights issue off the table (for now at least).

Ghost Bites (Absa | Anglo American | Anglo American Platinum | Kumba Iron Ore | Murray & Roberts)

The Finance Ghost
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Ghost Bites (Absa | Anglo American | Anglo American Platinum | Kumba Iron Ore | Murray & Roberts)

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

Absa’s share price is as red as its branding (JSE: ABG)

A voluntary trading update resulted in a 6% drop in the share price

The market really didn’t like this one. When a company updates its guidance to reflect return on equity “somewhat lower” than last year, that’s not great.

Starting at the top, revenue growth in 2023 at Absa is expected to be high single digits, driven by net interest income as we’ve seen at the other banks as well. The second half of the year has been slower due to base effects, which is also in line with what we’ve seen elsewhere.

The credit loss ratio is expected to exceed the through-the-cycle target range of 75 to 100 basis points. It’s better in the second half of the year, but is still above target.

Operating expenses are up by high single digits, which means the cost-to-income ratio has deteriorated from 51.2% last year. This is negative jaws, which isn’t what we’ve seen at the other banks where margin is improving. I’m sure this is one of the major reasons for the drop in the share price.

Pre-provision profit will only increase by mid-single digits.

The group’s B-BBEE deal became effective on 1 September and will reduce 2023 earnings by 1%.

When all of this is combined, return on equity (the key metric for banks) is lower than 16.4% last year but above the cost of equity of 14.5%. As mentioned earlier, the wording “somewhat lower” suggests that it has moved quite a bit towards the cost of equity, which isn’t great.

The overall flavour here is that South African earnings have decreased and the African earnings have increased, despite the tough situation in Ghana. This is why a bank like Standard Bank is doing so well, as it earns nearly half of its earnings in Africa.

Absa expects to maintain a full year dividend payout ratio of at least 52%.

Anglo American’s SENS announcement talks about unlocking value (JSE: AGL)

The market had a different idea, slashing the share price by over 13%

When a company tries to drive the narrative in the heading of a SENS announcement, you know they are expecting a tough response. This isn’t just an “operational update” from Anglo American. No, this is “Anglo American unlocks value through operational, cost and capital discipline” – except the market is smarter than that, even if many media houses are too lazy to read past the headline.

The CEO of Anglo American kicks off the announcement by claiming that the prospects for mined products have rarely looked better. That’s a rather interesting introduction to a story that features cyclical weakness in PGMs and diamonds, forcing Anglo American to cut its business support costs.

The group gives high-level guidance all the way out to 2026, expecting production to fall in 2024 and 2025 before picking up again in 2026. The guidance for capex is also lower than before, which doesn’t exactly tie in with the prospects looking so great.

It’s sad to see them talking about “aligning to logistics” at Kumba. That simply means that they are having to adjust production based on how utterly useless Transnet is. Refer to the specific update on Kumba in Ghost Bites for more details.

They do make the point that PGM prices reflect an “aggressive consensus” on the pace of decline in internal combustion engines. Although not referenced in this report, I know that Ford is slowing down its global investment in EVs based on worries about demand. Comments like that from the automotive manufacturers don’t seem to be reflected in PGM prices, which suggests some upside for the local mining houses.

At De Beers, they are scrambling to reposition mined diamond to fight the onslaught of lab-grown diamonds. I’ve written extensively on this topic and I quite liked these adverts from the Anglo presentation (which you’ll find at this link).

Much of the good news at Anglo American lies in the copper business and crop nutrients, believe it or not. These are both focus areas going forward.

Anglo American Platinum reduces its production and capex outlook (JSE: AMS)

This is how mining cycles work

When commodity prices drop, the producers of those commodities must respond to the drop by pulling back on production. Over time, the lower supply should lead to higher prices, which in turn drives a period of investment to meet demand at better prices. This is why mines are always referred to as being cyclical businesses and why you have to time your entry very carefully to avoid buying at the top of the cycle when it’s all sunshine, rainbows and dividends.

We definitely aren’t in sunshine and rainbow territory in PGMs at the moment. Prices are depressed and so are shareholders. In response to the price pressures, Anglo American Platinum has announced that production over the next few years will be lower than previously guided. Capital expenditure will also be lower, accompanied by a plan to reduce costs. It should be noted that part of the reduction in refined PGM production is because some relationships will transition to toll arrangements.

Refined production in 2024 was previously guided to be 3.6 to 4.0 million ounces. It’s now between 3.3 and 3.7 million ounces. In 2025, guidance has dropped from 3.3 – 3.7 million ounces to between 3.0 and 3.4 million ounces. Production is 2026 is expected to remain flat vs. 2025.

As noted, capex guidance has dipped by roughly R3.5 billion in 2024, but actually moves higher than guidance in 2025.

The cash operating unit cost per PGM ounce is expected to be R17,800 in 2023 and is anticipated to drop to between R16,500 and R17,500 in 2024.

Kumba continues to be hurt by Transnet (JSE: KIO)

It’s all going wrong “beyond the mine gate”

In case you’ve been living under a rock for goodness knows how long now, infrastructure in South Africa is crumbling all around us. Our economy is heavily influenced by commodity exports, so this is a disaster. Most worryingly, it’s a disaster that just doesn’t seem to be going away.

In Kumba Iron Ore’s update, the company talks about stock levels at the mines increasing to unsustainable levels because the transport infrastructure just doesn’t allow for it to be taken away quickly enough. The only possible outcome is a drop in production, with 2023 production down by roughly 1 million tonnes vs. previous guidance. That might only be around a 3.8% decrease at Sishen, but it has a substantial impact on unit costs per tonne at that mine (up from between R540 – R570 per tonne to R570 – R590 per tonne). As a mitigating factor, unit costs at Kolomela have improved from guidance of R510 – R540 per tonne to R480 – R500 per tonne because of improved production metrics and because production guidance at that mine is unchanged.

The bigger problem for South Africa is lower production in years to come. The production outlook is dropping from 37 – 39 million tonnes in 2024 to between 35 and 37 million tonnes. In 2025, they hoped to increase to 39 to 41 million tonnes, but now the plan is to keep production flat.

Thanks to cost reduction plans, the unit cost is forecast to improve over the next three years despite the flat production. If we actually had a working railway network, they might be talking about creating jobs rather than reducing costs. They also probably wouldn’t be talking about a reduction in capex spend, which certainly doesn’t help our GDP.

There has been a 15% decrease since 2019 in the amount of ore that is being railed. If Transnet doesn’t figure this out, then it’s hard not to have a bearish outlook on the South African economy.

Some good news from Murray & Roberts (JSE: MUR)

The board has given a strong update that a rights issue is not being considered at the moment

Murray & Roberts has been firmly in survival mode, with a broken balance sheet and all kinds of troubles. The market has been concerned that an equity raise might be needed to get it on a sustainable footing. In response to the news that “meaningful progress” has been made on the balance sheet, the share price closed 13.6% higher on Friday!

When something is priced for failure, any good news is cause for a share price celebration. Welcome to speculative investing. Or having a good ol’ punt, as I like to call it.

A big help was the sale of the 50% shareholding in the Bombela Concession Company, which halved South African debt to R1 billion. With the sale of a non-strategic investment in Aarden Solar and the agreement of new commercial terms on one of the group’s largest mining projects in South Africa, debt was further reduced to R770 million over the past three months.

Finally, Cementation Canada has renewed its banking facility with a Canadian bank and will thus pay a dividend of roughly R550 million (excluding withholding taxes) to Murray & Roberts over the next six months to June 2024. This is a classic case of shifting debt from the holding company into a subsidiary. This will take the South African debt down to R350 million.

Based on this, the board does not believe that a rights issue is necessary. The intention is to refinance the remaining South African debt by June 2024. A further bit of good news is that operational costs and overheads have been significantly reduced.

Little Bites:

  • Director dealings:
    • The CEO of Datatec (JSE: DTC) loaded up on shares in a big way, buying a whopping R46 million in shares on the open market. This takes his total shareholding to 15.5% of the shares in the company.
    • The CEO of Invicta (JSE: IVT) and Dr Christo Wiese are still playing matchy-matchy, each buying shares to the value of R88k in the company. These are on-market trades, so I’m not sure what’s going on with these identical orders in the market from these two. Perhaps there’s a bet going on?
    • An associate of a director of Huge Group (JSE: HUG) has bought shares worth R36.5k.
  • The Tongaat Hulett (JSE: TON) soap opera continues, with three “affected persons” (including the Industrial Development Corporation) giving notice of their intention to oppose the urgent applications that were launched to try and stop the current business rescue plans.
  • Astoria Investments (JSE: ARA) has renewed the cautionary announcement related to a potential acquisition. The first cautionary announced was released back in July 2023.
  • The joy of being a successful listed company is that you can issue shares to pay for acquisitions. This is exactly what CA&S Holdings (JSE: CAA) has done to acquire a further 5% in Smithshine, one of the existing subsidiaries of the company. The seller is the minority shareholder in that company and that seller was happy to be paid in shares. The issuance is only for around 0.1% of existing shares in issue in CA&S.
  • Tiny listed group Nictus (JSE: NCS) released results for the six months ended September. They reflect a significant improvement in profits from a loss of R0.4 million to profit of R3.7 million. No dividend was declared for this period.

Ghost Bites (Accelerate Property Fund | African Rainbow Capital | Mondi | Southern Palladium | Spur | Wesizwe Platinum)

The Finance Ghost
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Ghost Bites (Accelerate Property Fund | African Rainbow Capital | Mondi | Southern Palladium | Spur | Wesizwe Platinum)

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

Accelerate pops its Cherry (Lane) (JSE: APF)

The property in Pretoria is being sold

Accelerate Property Fund is still offloading properties to help get the balance sheet back to a sustainable level. The newest sale is Cherry Lane Shopping Centre in Pretoria. The buyer is Chrysoula Sourlis, who is not a related party to the fund.

The sale is priced at R60 million. The property was valued at R65 million as at 31 March 2023, so that’s quite the discount. The vacancy rate has spiked from 32.3% to 47.8% since March, so a drop in the valuation is understandable.

I decided to dig back into the archives to see what the property was worth when Accelerate bought it. I found the abridged pre-listing statement for Accelerate in 2013, reflecting a value for the property of R102 million.

A lost decade, indeed.

African Rainbow Capital gives a portfolio update (JSE: AIL)

There are many companies in the portfolio, so they focus on the most important and interesting ones

African Rainbow Capital Investments has a diverse portfolio of assets ranging from boring financial services businesses through to exciting startups. I’ve been vocal with my views on how they treat shareholder capital and how the fee structure historically worked, with the market sharing many of my concerns – as evidenced by the share price. This is no reflection on the underlying portfolio, which includes some very good businesses.

The announcement starts with rain, which continues to meet its monthly financial targets. They also mention that take-up of rainOne (the all-in-one connectivity package) is increasing steadily.

The news is less positive at Kropz, where the Elandsfontein project faced localised flooding due to heavy rains. Rain is clearly a theme at African Rainbow Capital. The fund injected another R290 million worth of capital into this project in the period between 30 June and 30 September.

I’m going to jump to the financial services portfolio now, as TymeBank is too important to push further down. There is now an annual revenue run rate of R1.8 billion in TymeBank and R100 million in GoTyme. Across South Africa and the Philippines, the business is growing at 450,000 new customers a month, with 200,000 being in TymeBank South Africa. The local business now has 8 million customers since launching in February 2019. GoTyme in the Philippines has a customer base of 1.6 million customers and is growing at 250,000 customers per month (in case your maths is letting you down based on the numbers given earlier).

A Series C capital raise is currently underway at Tyme. The business seems to be marching on towards a separate listing at some point.

At Bluespec, the company is on track to meet the growth budget. It also sounds like they are doing a good job of managing costs while scaling, which is important.

At ooba, performance is tracking budget and conversions into mortgages are going well despite the economic difficulties and higher interest rates.

The efforts in the agri portfolio are progressing well, with the RSA Group highlighted as achieving strong performance in this period.

The operations at Upstream Group tell us about the state of play for South African consumers. Creditors are lending to the same pool of consumers and those consumers are entering the debt review process a lot sooner than in previous years.

At Crossfin, transaction value has come under pressure along with consumer spending. The company has made an early-stage investment in something called Mypinpad.

Capital Legacy group was enlarged by the acquisition of the Sanlam Trust business, with a 26% stake in Capital Legacy going to Sanlam. The management team has been focused on integrating the offerings.

And finally, GoSolr saw a slowdown in the rollout of residential solar in this quarter. This is because load shedding dipped vs. the first half of the year, although perhaps the recent jump to level 6 will remind people that the Eskom show is far from over. Management is working on increasing the run-rate of installations in this business. My viewpoint is that this is a highly competitive space with no obvious moat for GoSolr.

In case this section didn’t make it clear, the most exciting part of the group right now is TymeBank and GoTyme. With management of African Rainbow Capital making various disgruntled comments in the media about the realities of being listed, one wonders if they will maintain the group listing for long enough for investors to get a proper value unlock from a separate listing of Tyme.

A collective sigh of relief at Mondi (JSE: MNP)

The final payments for the Syktyvkar asset have been received

When selling a business to Russian investors at a time like this in the world, I think nerves are unavoidable. Do you really want to launch a court bid as a Western firm to get your money in Russia? No, definitely not.

The good news is that Mondi has been paid for Syktyvkar, with the total cash consideration of RUB 80 billion in the bank (converted to euros, of course).

The net proceeds from the sale of this asset and other Russian assets come to €775 million. This amount is earmarked for distribution to Mondi shareholders, which is a mature capital allocation decision. There will also be a share consolidation to try and make the post-distribution share price as comparable as possible to the pre-distribution share price. That’s unusual and interesting. In fact, it’s a rather clever way to avoid confusion around share price performance!

Southern Palladium released a Mineral Resource update (JSE: SDL)

In junior mining, it’s all about hitting these milestones

If you’re going to try and read these mining exploration updates in detail, then you better have a degree in geology. Without that, you’re going to struggle to understand what is going on.

I certainly have no such qualification, so I always look to the management commentary to see whether things are going to plan.

I do at least understand the importance of Southern Palladium noting that its UG2 Indicated Mineral Resource has doubled, so that’s clearly good news. This obviously doesn’t mean that there are more minerals than before. It means that ongoing drilling work has confirmed that the status of Inferred Mineral Sources can be upgraded to Indicated Mineral Resources. These terms mean something in the world of junior mining, especially when speaking to funders.

The next significant milestone is the planned release of a Scoping Study in January 2024.

Spur is ready to take you to Italy (JSE: SUR)

The acquisition of Doppio Group has now closed

Back in July 2023, Spur announced the acquisition of a 60% stake in restaurant group Doppio Zero, giving access to a portfolio of 37 franchised and company-owned restaurants. I really like this deal, as this is a solid operation. The deal is now unconditional and has been implemented with effect from 1 December.

The Doppio Zero group hasn’t sat still in the meantime, which is the benefit of buying a controlling stake rather than a 100% stake. The sellers are still motivated to keep growing it. They have opened Ciccio, a sub-brand of Piza e Vino, with the first one at Melrose Arch. The group also owns an Indian-inspired concept called Modern Tailors, with the second restaurant scheduled to open in 2024.

I am a big fan of everything that Spur is doing right now. I keep wishing that the share price would crack so that I can buy at a better valuation, but it seems to be holding onto the recent gains:

No Christmas holiday for Tongaat Hulett’s lawyers (JSE: TON)

The year is ending with a bang

In yesterday’s Ghost Bites, I explained the significant court blow dealt to Tongaat Hulett regarding the company’s attempts not to pay sugar levies while in business rescue. News also broke of two separate court actions that aimed to scupper the upcoming meeting of creditors. The applicants are RCL Foods and the South African Sugar Association.

Unsurprisingly, Tongaat Hulett has announced that it will oppose both court applications. The parties have agreed that pleadings will be exchanged on an urgent basis, such that the urgent application will be heard on 13 December.

To allow for this hearing, the court has ordered the adjournment of the creditor meeting from 8 December to 14 December.

One thing is for sure: any attorneys and advocates who work for these groups and who had booked leave for the next week or so are about to have disappointed families. It’s easy to be jealous of what these people earn, but life as a high-end professional is also filled with sacrifice and tough trade-offs. Been there, done that.

From bad to worse for Wesizwe Platinum (JSE: WEZ)

Employees embarked on an “illegal sit-in”

Things are going really badly for Wesizwe Platinum at the moment, with employees now on an illegal sit-in at the Bakubung Platinum Mine. Essentially, this means that employees chose not to return to the surface at the end of their shift on Wednesday morning.

The employees participating in this labour action have made demands and management is trying to persuade them to return to the surface.

It feels like the platinum sector in South African is gently imploding all over again.

Little Bites:

  • Director dealings:
    • There’s a very important share purchase by Phil Roux, who has been brought in to achieve a turnaround at Nampak (JSE: NPK). He has bought shares worth just under R4 million. That will definitely help calm some of the nerves in the market – for now, at least!
    • Calibre Investment Holdings (related to director Theunis de Bruyn) has bought shares in Ascendis (JSE: ASC) worth R3.5 million.
    • As part of the mandatory offer for Brikor (JSE: BIK), a director of the company has sold shares worth R347k.
    • Des de Beer has bought another R206k worth of shares in Lighthouse Properties (JSE: LTE).
    • A director of Mantengu Mining (JSE: MTU) has bought shares worth R1.2k. I don’t think that’s going to cause too much excitement in the market!
  • BHP Group (JSE: BHG) has announced important leadership changes. Vandita Pant is moving from Chief Commercial Officer to the CFO role, having joined BHP back in 2016. The current CFO (David Lamont) will remain in the group until February 2025 in an advisory and projects capacity, reporting to the CEO. Rag Udd is the new Chief Commercial Officer (another internal appointment), Brandon Craig has been appointed to run the Americas business and Johan van Jaarsveld is the new Chief Technical Officer. Those three appointments are also all internal appointments. It always says a lot about a group when new executive-level appointments are internal.
  • Shareholders of Kore Potash (JSE: KP2) passed the resolution required for the issuance of shares. The chairman and CEO of the company supported $750k of this capital raise to help get the company to finalisation of its all-important project.
  • Buka Investments (JSE: BKI) is taking a long time to close the potential acquisition of Socrati Footwear. The deal was first announced in February 2023. The company has released a further announcement that the deal is still underway. No estimated timing for completion was given.

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

Aspen Pharmacare has concluded two interdependent agreements with Swiss headquartered Sandoz. Aspen, via its subsidiary Aspen Global Incorporated (AGI), will acquire the Sandoz business in China for up to €92,6 million, with €18,5 million contingent on the sales performance of the Pipeline Products. In terms of the second transaction for which it will receive €55,5 million, AGI will dispose of the rights and IP of four anaesthetic products sold by Aspen in the European Economic Area. Of this, €9,3 million is contingent on sales performance. AGI will fund the net upfront cash consideration from existing debt facilities.

Sanlam Investments Sustainable Infrastructure Fund (Sanlam) is to invest R46 million in the Mkomazi Alienfuel joint venture. The biomass-to-energy project, a joint venture with energy company Alien Fuel Group and Sappi, will provide crucial baseload renewable energy derived from biomass to Sappi’s dissolving pulp manufacturing plant in Umkomaas.

Datatec has increased its equity stake in UK-based digital and technology consultancy Mason Advisory by 40% to 80%. The purchase consideration for the stake acquired from management was undisclosed but will be paid from existing cash resources.

Accelerate Property Fund has disposed of Cherry Lane Shopping Centre in Pretoria to Alma Trading CC for R60 million. The proceeds will be used to reduce debt and reinvestment into its core property portfolio.

In February Buka halted the acquisition of Caralli Leather Works and Socrati Footwear from B&B Media (a material shareholder in Buka) and Moltera Group following a request from B&B Media. B&B Media had acquired local shoe manufacturer Eddels Shoes during February 2023 and wanted sufficient time to thoroughly assess the synergies between the Socrati Group and Eddels. By placing the transaction on hold, Buka failed to comply with the JSE Listings Requirements for a cash shell and consequently Buka’s listing was suspended with effect from 24 February 2023. The company has been finalising a strategy to reverse viable assets into the Buka listed cash shell as required for the lifting of its suspension. The company announced this week that the final transaction is progressing, and shareholders will be updated with any progress.

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

In connection with the continued implementation of its repurchase programme, Prosus has sold 513,500 ordinary shares in Tencent on the open market, bringing its total ownership in Tencent to 24.99%.

Texton Property Fund is to raise R85 million by way of a fully underwritten, non-renounceable rights offer of 38,636,364 Texton shares at a price of R2.20 per share. The offer price represents a 10% discount to the 30-day VWAP of the shares as at 23 November 2023. The offer will open on Tuesday 2 January and will close on Friday 5 January. Oak Tech Properties and Rex Trueform have underwritten the offer for which they will receive an amount of R274,784, representing 1% of the underwritten shares value. The circular will be available on 21 December 2023.

Lighthouse Properties has disposed of a further 145,509,646 Hammerson plc shares on the open market for an aggregate cash consideration of R936,3 million.

The price for City Lodge’s Odd-lot offer has been announced. The price, at R4.70, is a 5% premium to the 30-day VWAP of the share as at 1 December 2023. The results of the offer will be announced on 18 December 2023.

Having received the final payments from the sale of Syktyvakar, Mondi has announced it will distribute the net proceeds to shareholders by way of a special dividend. If approved the special dividend is expected to be paid in the first quarter of 2024.

Atterbury Property (APH) has settled the balance of the loan owed to RMB Holdings through the issue of 17,876,140 APH shares. RMH now owns 38.5% of APH.

During the period 8 August to 4 December 2023, Calgro M3 repurchased 3,690,342 shares for an aggregate R14,56 million. The shares have been delisted and cancelled. Calgro may repurchase a further 16,7 million shares.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 27 November to 1 December 2023, a further 4,438,373 Prosus shares were repurchased for an aggregate €134,39 million and a further 228,464 Naspers shares for a total consideration of R995,4 million.

Following the announcement in October of its share buy-back programme, AB InBev has repurchased a further 782,924 shares at an average price of €57.44 per share for an aggregate €44,98 million. The shares were repurchased in the period 27 November to 1 December 2023.

Glencore intends to complete its programme to repurchase the company’s ordinary shares on the open market for an aggregate value of US$1,2 billion by February 2024. This week the company repurchased a further 9,650,000 shares for a total consideration of £43,14 million.

Two companies issued profit warnings this week: Ayo Technology Solutions and Tharisa plc and two companies issued or withdrew a cautionary notice: Chrometco and Ellies.

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

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