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Ghost Wrap #52 (MTN | Woolworths | Pepkor | Octodec | AB InBev)

The Finance Ghost
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Ghost Wrap #52 (MTN | Woolworths | Pepkor | Octodec | AB InBev)

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:

  • MTN’s African subsidiaries are causing headaches right now, with Uganda as the silver lining but too small to make up for the concerns in the others.
  • Woolworths is acquiring Absolute Pets and it’s a deal that makes a lot of strategic sense to me.
  • Pepkor is seen as a defensive retailer in South Africa, but does that thesis hold these days?
  • Octodec has growth its distribution per share despite a drop in distributable income – what does this tell us about REITs at the moment?
  • AB InBev must be cheering on the Springbok celebrations, as beer volumes have been under pressure this year.

Ghost Bites (Collins | MC Mining | MTN | Murray & Roberts | Pepkor | Sibanye-Stillwater | Textainer)

The Finance Ghost
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Ghost Bites (Collins | MC Mining | MTN | Murray & Roberts | Pepkor | Sibanye-Stillwater | Textainer)

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

Collins should become a REIT this year (JSE: CPP)

This will trigger the declaration of a dividend

Collins Property Group (previously Tradehold) released results for the six months to August. The net asset value (NAV) per share has increased from R12.40 at 28 February 2023 to R12.62, with the share price closing at R6.97 and reflecting a significant discount to NAV that is common on the JSE.

Strategically, the group is focused on offshore expansion, particularly in the Netherlands. They are also looking at Germany. The group already owns six assets in Austria. To fund this, properties in South Africa are being sold, although the group is happy to increase its exposure to the Western Cape.

Concerningly for the economy at large, vacant space in the portfolio of mainly industrial warehouses increased from 3% in February 2023 to 4.04%. This was due to smaller tenants downsizing or closing up shop entirely. Not good.

The group is currently trying to convert to a REIT. Once that process is completed, they intend to declare a dividend.

There might be a takeover on the table for MC Mining (JSE: MCZ)

Also, there might not be

MC Mining is also listed in Australia. If you know anything about Australians, you’ll know that they are very strict when it comes to rules. Their takeover code has some differences to South Africa and you don’t want to get on the wrong side of it, so you’ll sometimes see unusual terminology in announcements related to Aussie-listed companies.

This is why you’ll see “take no action” in the heading of the latest SENS announcement by MC Mining. This is because although MC Mining has received a proposal letter from Senosi Group and Dendocept, there are certainly regulatory dispensations being sought that make the offer conditional at best.

The letter is described as being on behalf of shareholders and associates representing in aggregate 64.5% of the issued capital in the company. Further down, Senosi is noted as owning 23.4% and Dendocept holds 6.9% of shares outstanding. The maths isn’t mathing here and I’m not 100% sure what the reason for the difference is.

The point is that these two parties want to form a consortium to make an off-market cash offer for all the shares not currently held by the consortium. A letter had been previously sent to the board in September about an indicative offer, but it was an incomplete proposal. A pricing range of A$0.20 to A$0.23 per share was given in that letter. The latest letter doesn’t give an idea of pricing, but the previous range is obviously an interesting anchor.

The market latched onto it, with the share price jumping over 17% after the release of the announcement.

For now, the board has advised the market to take no action in regard to this proposal until further guidance has been received from the independent board committee.

If only MTN Uganda was bigger… (JSE: MTN)

Here’s some strong growth ahead of inflation

After MTN Nigeria released a very worrying update and MTN Ghana put out big growth numbers that are sadly below in-country inflation (and thus reflect negative real growth), it was good to see MTN Uganda grow EBITDA by 15.6% in a country where inflation is only 3.3%.

It looks good on literally all metrics, with subscribers numbers up and service revenue growing by 15.2%. while data revenue grew 22% and fintech revenue grew 18.1%. EBITDA margin was stable at 50.6%, which is also quite a big deal in this environment. Another important number is capital expenditure, which only increased by 4.7%.

MTN Uganda is also declaring cash dividends.

Is this the jewel in MTN’s African crown? It just might be. For MTN shareholders, the pity is that this is one of the smaller jewels, even though it might be the brightest.

Murray & Roberts reflects on the year that was (JSE: MUR)

There’s also news on the balance sheet

Murray & Roberts has lost three quarters of its value this year. There have been some ugly performances on the market, but Murrays makes a strong case for itself as one of the biggest disappointments.

At the AGM, the company reflected on some of the major points in the last financial year. Essentially, the balance sheet broke and couldn’t sustain the Australian business, so they put that side of things into voluntary administration and focused on keeping the rest of the group alive.

The balance sheet as at 30 June 2023 holds an important lesson. Net debt is only R300 million, but international groups are more complicated than simply a “net debt” number – and the clue is in the first part of that name. This is gross debt net of cash, but what if the gross debt and the cash are in two different places?

Murray & Roberts has R1 billion in debt in South Africa and its cash is predominantly offshore. To address this issue, the North American business units have revised their debt facility with their bankers and they will pay dividends to Murrays in January and June 2024. Other initiatives will add another R180 million to the pot for debt reduction, with the hope that South African debt will reduce from the current level to R300 million by June 2024.

It was R2 billion in March 2023, so that would be a massive improvement.

There’s a particularly interesting comment that the board is not considering a rights issue to reduce debt, but it is working towards a “sustainable capital structure” over the next six months, including a refinancing of debt. My view is that the risk is never gone until the balance sheet is completely fixed.

In other news, the Mining platform has grown its order book since June 2023. Sadly, the Power, Industrial & Water platform still has no “near orders” on the books. Finally, as previously announced, the company will still target opportunities in Australia on a selected basis.

It’s a smaller group now. Within the next year, it might even be a sustainable group. That won’t help shareholders recoup their losses in the near-term, but at least people will keep their jobs.

Pepkor’s like-for-like growth is still problematic (JSE: PPH)

There’s improvement at Ackermans, but HEPS for the year is in the red

Pepkor’s group revenue for the year ended September was 7.7% higher, but of course we need to dig a lot deeper than that. The first adjustment is for the 53rd trading week in this period. If we exclude that, revenue was up 6.5%.

It was firmly a tale of two halves, with growth of only 4.3% in the first half and a better performance in the second half.

Avenida in Brazil is working out well, now contributing 4.3% to group revenue vs. 2.4% in the prior year (as it was only acquired during that year). Most importantly, this is in line with guidance and well ahead of the original envisaged performance. I liked the thought of a South American expansion when that deal was first announced, as it feels like a more natural market for South Africans to enter.

Like-for-like sales growth is such an important metric, as it shows the underlying performance in the business. PEP managed 4.5% like-for-like growth for the full year, which means negative volumes because inflation was 7.3%. This is a direct result of pressure on local consumers. I must also point out that 4% of PEP’s sales are now on credit, vs. 0% historically.

Although Ackermans had a better second half after a disastrous first half, it could still only manage a like-for-like sales decline of 5.1%.

JD Group experienced a 2.1% decline in like-for-like sales and The Building Company was down 0.8%.

Due to impairments, there is going to be a collapse in reported earnings and Pepkor will report a loss. This is a function of underlying business performance and higher discount rates. Based on headline earnings from continuing operations, the expected drop is 5.2% to 15.2%.

The share price is down around 10% year-to-date.

Sibanye-Stillwater published a novel on SENS (JSE: SSW)

This quarterly update is huge

For the quarter ended September, Sibanye-Stillwater’s EBITDA was just over R3 billion. In the quarter ended June, it was R6.4 billion. In the quarter ended September 2022, it was R8.5 billion. Hopefully you now understand why (1) the share price broke and (2) this quarterly update is practically a published novel on the underlying performance.

In fact, it’s so huge that it has a table of contents!

You are welcome to go read the entire thing. The key points for the purposes of Ghost Bites are as follows:

  • EBITDA has gotten worse in all major operations, with the exception of zinc in Australia
  • The average basket price for the commodities has gone in the wrong direction (again, other than for zinc)
  • Against this backdrop of price pressure for commodities, all-in sustaining cost has increased because of inflationary pressure in costs
  • Restructuring activities are underway in the South African gold and PGM operations to try and address the slide in profitability

Sibanye’s share price has fallen 49% this year.

Textainer releases third quarter results (JSE: TXT)

Remember, the company is currently the subject of a takeover bid

Textainer has released numbers for the third quarter of 2023. Unfortunately, they also include this number:

Leaving aside the Dezemba levels of proofreading going on here, net income for the third quarter was $1.07 per share, down from $1.20 per share in the second quarter. Although the share repurchase program has been suspended in light of the potential transaction with Stonepeak, a dividend of $0.30 per share has been declared.

Little Bites:

  • British American Tobacco (JSE: BTI) announced that Soraya Benchikh will join the company as CFO from 1 May 2024. She is currently President, Europe at Diageo, one of the largest alcoholic beverage groups in the world.
  • They won’t win any corporate governance awards for this one, but Primary Health Properties (JSE: PHP) has announced the founder and CEO as the new non-executive chairman. Harry Hyman is stepping down as CEO, so he is moving straight into the chairman role. To make up for it, the company will beef up the independent non-executive directors.

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

Woolworths has announced its intention to acquire 93.45% of the shares in Absolute Pets from Sanlam Private Equity and Absolute Pets management. The remaining management-retained shareholding will be acquired by Woolworths over an agreed period post the completion of the transaction. While financial details were not disclosed as the deal value falls below the threshold for categorisation in terms of the JSE Listing requirements, the company did report that the purchase consideration would be settled in cash.

In September Senosi Group Investment and Dendocept, each substantial shareholders in MC Mining (23.4% and 6.9% respectively) made a confidential and incomplete, non-binding conditional and indicative offer to acquire the shares of the company for a cash offer in the range of A$0.20 – A$0.23 per share. The company this week received a letter signalling an intention to make an off-market cash takeover offer for the remaining shares in the company by the consortium comprising Senosi, Dendocept and shareholders and associates representing an aggregate 64.5% of the issued share capital of the company. The letter however did not provide a definitive offer price for the shares.

OUTsurance Holdings, an 89.7% owned subsidiary of OUTsurance Group, has acquired a further 2.64% stake in Australian insurance operation Youi from former CEO and founder of Youi for A$42,5 million. In March, the company acquired an initial 54,6 million shares. OUTsurance’s stake in Youi now sits at 94.64%.

Sibanye-Stillwater has exercised the option (due to expire on 5 November 2023) to acquire the Mt Lyell copper mine in Tasmania. Sibanye gained the option through its 2021 acquisition of New Century Resources. The mining group paid $10 million to Vedanta for the copper mine which was placed on care and maintenance in 2014. A feasibility study will be conducted to consider the re-establishment of the operation. Sibanye also announced the closing of its acquisition, from joint venture partner Anglo American Platinum, of the 50% stake in Kroondal and Marikana pool-and-share agreement, announced in early 2022.

The proposed R60 million disposal by Trustco of a 49% stake in Trustco Finance Namibia to Finbond has been terminated. The parties have, without giving reasons, agreed not to continue with the transaction but have indicated that they may revisit the deal in the future.

Unlisted Companies

Bushveld Minerals, the AIM-listed vanadium producer and energy storage solutions provider with vanadium mines and processing facilities in South Africa, has entered into a conditional agreement to acquire the remaining 26% stake in Bushveld Vametco. The minority stake is held by a BEE consortium which will receive 232,836,255 million Bushveld Mineral shares for the stake representing 13% of its enlarged share capital. 70% of the consideration shares will be subject to a six-month lock-in period.

Hollard International, SA’s largest privately-owned insurance group, has entered into an agreement to acquire a significant stake in Apollo Investments, the holding company APA Insurance which is headquartered in Kenya. Financial details of the deal were undisclosed. Hollard has an existing presence in the following African countries – Namibia, Mozambique, Zambia, Lesotho, Botswana and Ghana.

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

Kore Potash has announced the successful completion of a share subscription which has raised $2,5 million through the proposed issue of 542,250,000 new ordinary shares at a price of 0.38 pence. The funds, raised via a private placement, will for the most part be used to further advance work expected to lead to the delivery of an EOC contract for the Kola Potash Project announced in August.

The details of a proposed rights offer announced in February by Sable Exploration and Mining will now proceed with the offer of 52,213,608 shares at R1 per share. The offer will open on 13 November 2023.

Finbond is to go ahead with the proposed specific repurchase of 340,523,358 ordinary shares, representing c.38.55% of the total issued share capital as announced in August. The shares will be repurchased from Net1 Finance and Massachusetts Institute of Technology at 29.11 cents per share, representing a 19% discount to the 30-business-day VWAP on 9 August 2023.

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

Old Mutual announced in May it would commence with a share repurchase programme. The company has now confirmed that on October 16, 2023, it concluded the repurchase of 122,974,063 shares. The price at which the shares were repurchased, and the total amount paid were undisclosed other than to say that the company remained within the value specified in its announcement in May of R1,5 billion.

According to the Q3 results, Textainer repurchased 996,403 shares at an average price of $40.12 per share during the third quarter. The company has, however, suspended its share repurchase programme pending the transaction with Stonepeak announced last week. The deal is expected to close in the first quarter of 2024.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 23 – 27 October 2023, a further 4,646,244 Prosus shares were repurchased for an aggregate €121,7 million and a further 304,926 Naspers shares for a total consideration of R891,95 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 9,830,000 shares for a total consideration of £43,5 million.

The JSE has advised that AH-Vest, Sasfin and Rex Trueform have failed to submit their annual reports within the four-month period as stipulated in the JSE’s Listings Requirements. If the companies fail to produce their annual reports on or before 30 November 2023, then their listing may be suspended.

The failure by Lux Holdings to remedy the various listing non-compliances since its suspension on 5 August 2022, has resulted in the removal of its listing from the JSE. The company listing will be removed from the commencement of business on 6 November 2023.

Following the fulfilment of the scheme conditions, the listing of Liberty Two Degrees will terminate at commencement of trade on 14 November 2023.

Six companies issued profit warnings this week: Sasfin, Renergen, enX, Astral Foods, aReit Prop and Pepkor.

Three companies issued or withdrew a cautionary notice: Astoria Investments, PSV and Tongaat Hulett.

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

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

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

DealMakers AFRICA

AT Ghana (formerly AirtelTigo Ghana) has sign a joint venture agreement with UK private equity firm, Hannam Investments. Financial terms were not disclosed, but under the agreement, Hannam will, among other things, invest in state-of-the-art technology and infrastructure upgrades to create a leading 4G mobile telecommunications network.

Africa Finance Corporation (AFC) has sold its 35% stake in Atlantic Terminal Services (ATS) to Yilport Holdings. ATS is the concessionaire for the expansion of Ghana’s Takoradi Port. The transaction results in AFC exiting its equity investment, however it will remain a lender to the project. Financial terms of the exit were not disclosed.

Hollard International has acquired a significant interest in Apollo Investments, the holding company of Kenya’s APA Insurance. Financial terms were not disclosed. Hollard’s existing footprint in Africa covers South Africa, Namibia, Mozambique, Zambia, Lesotho, Botswana and Ghana.

ASX-listed Belararox has signed a non-binding term sheet with Chemopharm Limited to acquire the Solwezi East and Chantente exploration licences in the Zambian Copperbelt. The tenements consist of over 17,800 hectares in the Central African Copper belt. The purchase price consists of cash, shares and unlisted options. Upon completion of the deal, Chemopharm would hold a 7.49% stake in Belararox.

Ghanaian fintech, Zeepay Ghana, has secured a US$2 million equity investment from Injaro Investment Advisors. The inaugural investment by the Injaro Ghana Venture Capital Fund (IGVCF) forms part of Zeepay’s current Series A.5 funding round.

Chapel Hill Denham’s Nigeria Infrastructure Debt Fund has agreed to provide solar-based internet service provider, Tizeti Network, with an undisclosed long-term senior debt facility. Tizeti currently serves over three million subscribers in Nigeria. The debt funding will be utilised to build new internet infrastructure and purchase additional equipment to expand its services.

British International Investment has committed US$26,5 million to AFEX, a leading commodities platform. AFEX currently operates over 200 warehouses in Nigeria, Kenya and Uganda and serves over 450,000 farmers. The investment will be used to build 20 additional modern warehouses in the three countries.

African Development Bank has approved a US$196,43 million loan to Namibia to implement the second phase of its Transport Infrastructure Improvement Project. The loan will cover 51.8% of the total project cost, with the Namibian government covering the remaining 48.2%. The project consists of, among other things, 207 kms of new rail track using concrete railway sleepers and new rails, the construction of 16 bridges and renovations to two existing stations.

Global Ventures, the Bridge Fund (Proparco and Digital Africa), Wrightwood Investments (UK) and other international funds have invested in Egyptian healthtech, Almouneer. The seed funding, totalling US$3,6 million, will primarily support the development and expansion of DRU-MEA’s first patient-centric, digitally-enabled lifestyle and diabetes management platform.

My Easy Transfer, a Tunisian fintech, has raised €400,000 from 216 Capital. The fintech was started in 2022 and aims to evolve its platform to meet all the payment needs of the diaspora in a single mobile app.

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

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:

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