Ghost Bites (Alphamin | Balwin | Hammerson | Jubilee Metals | Telemasters | Vukile)

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Records tumble at Alphamin (JSE: APH)

Mpama South has had a major impact here

Alphamin has released results for the quarter ended September. They tell a great story, with record quarterly tin production (up 22% vs. the preceding quarter, let alone year-on-year) thanks to Mpama South making a full contribution for this quarter vs. only a portion of the preceding quarter.

EBITDA looks to be coming in at $91.5 million, which is a 69% increase on the preceding quarter. Before you wonder how this is possible with only a 22% increase in production, the key is that sales were up 71% as the group caught up on sales disruptions.

Distortions aside, it’s obviously a lovely set of numbers. The production increase came at the right time, as the average tin price achieved actually fell by 2% vs. the preceding quarter. Combined with a 1% increase in all-in sustaining costs per tonne, it could’ve been a very different set of numbers without the production and sales volume uplift.

The interim dividend of CAD$0.06 per share is double the previous level.

The Alphamin share price is up 30% in the past year and the market liked these numbers, as you’ll see in this chart:

Balwin will want to erase the memory of this period (JSE: BWN)

Perhaps things will improve going forward

The six months to August 2024 were an unhappy time for Balwin. To be fair to them, I don’t think an election period is ever good for durable asset sales – and especially property. Combined with the prevailing high interest rates, I’m not shocked that Balwin’s HEPS fell by between 54% and 59%.

The second half of the year will hopefully be given a boost by the recent reduction in interest rates. More cuts are surely to come, giving further assistance to prospective homeowners (and thus Balwin).

It says a lot that the annuity business portfolio contributed 8% to revenue in this period vs. 4.7% in the comparable period. That says less about the annuity business and more about the ugly drop in apartment sales, with a decrease from 834 to 640 apartments for the period.

Balwin hilariously blames this on a “conservative construction approach” as though they are a Ferrari-esque business that deliberately withholds supply. The reality is that demand simply wasn’t there and the group would do better to just accept that issue rather than coming up with flawed arguments to explain the performance.

All this does is detract from some of the genuine highlights, like a 5% drop in group overhead costs and 15% operating profit growth in the annuity side of the business.

I’ve been bearish on this thing since 2021 and I haven’t been wrong on it yet, with this chart putting the GNU-inspired rally in context:

Hammerson gives us a data point on the cost of UK money (JSE: HMN)

This is an issuance of 12-year bonds to the value of £400 million

Bond issuances are nothing unusual, especially in the property sector. The funding ladder has instruments with various maturities, ranging from shorter-dated notes through to bonds that mature in several years. Still, a 12-year bond is quite an unusual thing to see at a corporate. It might be a UK vs. SA thing, with corporates able to issue longer-term debt in a developed market vs. an emerging market.

Either way, Hammerson has managed an issuance of £400 million worth of bonds that mature in 12 years from now. In the same way that a fixed deposit for a longer period of time gives you a higher return at your bank, the cost of debt for a longer-term bond is higher for a corporate. Hammerson has priced the bonds at 5.875%. Remember, that’s a GBP-denominated rate.

The proceeds will be used to redeem various other bonds that mature in the next few years. The company recently announced a tender offer to facilitate this, which is an invitation to holders of those bonds to ask Hammerson to redeem them. Encouragingly, the issuance of the new bonds was 7x oversubscribed, so there’s no shortage of investor interest. Pun intended.

Jubilee Metals focused on chrome and copper as the PGM market fell away (JSE: JBL)

Even then, they couldn’t save this result

Jubilee Metals has released reports for the year ended June 2024. They reflect growth in revenue of 20.2%, yet a decline in EBITDA of 7.1%. It gets much worse by the bottom of the income statement, where HEPS has crashed by 86%. Although an increase in the weighted average shares in issue of 6.3% didn’t help there, it was the jump in finance costs that caused the major deterioration between EBITDA and HEPS.

They had a really tough time in terms of the underlying commodity exposure, with the PGM price down by 20.1% per ounce. Copper was down 6.5%, but at least they could ramp up production of that metal. Chrome was the pick of the litter and by a long way, with the price up 26.3% and production up by 20%. Their focus has been on getting the best out of the chrome business at a time when PGMs are really struggling. Copper is in the process of being ramped up in Zambia, so there should be a major jump in production there.

Telemasters reports a sharp drop in earnings (JSE: TLM)

When margins are thin, the group can’t afford a decrease in revenue

Telemasters consists of a variety of IT businesses, some of which are in the ICT space where margins really are incredibly thin. Last year, they managed operating profit of nearly R2.3 million off revenue of R64.2 million. It’s even worse this year, thanks to a 6.7% decrease in revenue driving a 42% drop in operating profit.

By the time we reach HEPS level, the drop is 16%. It’s a lot worse for the dividend, which has fallen by 88%.

Vukile unlocks capital in Spain (JSE: VKE)

The sale of Lar Espana by Vukile subsidiary Castellana is at a better price than anticipated

Vukile told us back in July that its Spanish subsidiary Castellana had received an offer for its 28.8% stake in Lar Espana. The initial price on the table was EUR 8.10 per share. After a couple of months of negotiations, the price is up to EUR 8.30. It’s worth noting that the net asset value (NAV) per share for Lar Espana is EUR 10.22, so the buyer is still getting it at a discount to NAV.

This unlocks just under EUR 200 million in cash for Castellana. Most impressively, it also means they achieved an internal rate of return of 45% per year since January 2022 (in ZAR terms) on that investment – impressive stuff!

The capital will be most helpful for the Iberian peninsula strategy, with Vukile (through Castellana) investing in Portugal as well as Spain.

There are various conditions that still need to be met before the cash will flow, including a minimum number of acceptances from other Lar Espana shareholders as well.

Nibbles:

• Director dealings:
  • A prescribed officer of Capitec (JSE: CPI) sold shares worth nearly R7.5 million and the company secretary sold shares worth R634k.

• Spar (JSE: SPP) could really do with an experienced hand right now and they seem to have found one in the form of Moegamat Reeza Isaacs, the ex-CFO of Woolworths. Having spent a decade on the board of Woolworths until 2023, he’s ready for a new challenge it seems. And a challenge it will be – taking the CFO role at Spar is no joke at the moment, thanks to the offshore challenges and the SAP rollout into the remaining distribution centres. Good luck to him in the new role!

• Eastern Platinum (JSE: EPS) has commissioned the PGM processing facility at the crocodile river mine. The plant has begun processing run-of-mine ore, delivering concentrate that is being delivered to Impala Platinum under the existing offtake agreement. The chrome retreatment project is expected to wind down in the early part of 2025, so this PGM facility is the focus going forward.

• Primary Health Properties (JSE: PHP) will pay its fourth quarterly dividend of 1.725 pence per share on 22 November 2024.

• Choppies (JSE: CHP) is set to pay a dividend of 1.862 cents per share on 28 October 2024.

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