Anglo American looks to sell 6% of Anglo American Platinum (JSE: AGL | JSE: AMS)

This is all part of the planned “demerger” of the platinum assets

As part of focusing its group on what it has identified as its core operations, Anglo American recently announced the sale of its steelmaking coal assets and reminded the market that the demerger of Anglo American Platinum is coming in mid-2025. This would include Anglo American Platinum listing on the London Stock Exchange in addition to the JSE. There is now an important development in that demerger process.

As they work towards this (and frankly because Anglo American wants to get more cash), the group is proposing to sell around 6% Anglo American Platinum to institutional investors in an accelerated bookbuild process. The pricing is going to be interesting, with the share price down 38% this year and not much in the way of hype around the PGM sector to rely on.

Anglo American doesn’t intend to reduce its stake any further before the demerger of Anglo American Platinum.

Equites to sell a property in the UK (JSE: EQU)

The buyer is Amazon, who also happens to be the tenant

As part of its broader strategy of selling UK assets to reduce group debt and bring the proceeds home for its South African development pipeline, Equites Property Fund has agreed to sell a distribution centre in Peterborough to Amazon for £38.5 million on a transaction yield of 5.17%. Amazon is the tenant and there are 12 years remaining on the lease, so it’s clearly a strategic site for that group.

The last valuation performed on the property was £38.2 million, so the price is slightly above that. The proceeds will reduce the group loan-to-value ratio by 1.9%, taking it below 40%.

FirstRand’s lending margins are feeling the pinch from decreasing rates (JSE: FSR)

But of course, the credit loss ratio has seen the benefits

FirstRand has released a voluntary trading update for the six months to December. It’s big on narrative and low on actual numbers, so they are keeping us guessing here.

Overall, the performance is trending in line with previous guidance, so there are no big surprises here. In the South African business, much of the demand for debt is coming from corporates rather than retail borrowers, so this puts margins under pressure for FirstRand as corporates get a better deal. Combined with decreasing interest rates, this negatively impacts both net interest income (NII) and net interest margin (NIM).

In the UK, they are ahead of guidance in the lending business. Again, NIM is under pressure there, in this case because deposits growth is ahead of advances growth. In other words, they are accepting money from depositors and finding it difficult to lend it out quickly enough.

After a disappointing first half for non-interest revenue (NIR), the narrative is more positive for the second half. This is a key driver of return on equity for the bank.

It helps that the credit loss ratio at group level is better than expectations, especially thanks to South Africa. This is of course the benefit of a better environment with lower rates. You always have to look at the net outcome of the credit loss ratio and net interest income.

Expenses are also important of course, with the group ahead of guidance in this regard and showing an improved cost-to-income ratio.

The major uncertainty in FirstRand currently relates to the motor commission cases in the UK and the surprise court decision. There has been much support for the Supreme Court to hear the case, so there might still be a positive outcome here. In the meantime, FirstRand believes that the current provision is adequate.

HCI gets impacted by Impact Oil and Gas (JSE: HCI)

It feels like the name was tempting fate

HCI has released a trading statement for the six months to September. HEPS will be down by between 40.5% and 50.5%, so that’s not great news at all. The expected range is 480.7 cents to 577.8 cents.

The major negative impact was Impact Oil and Gas, so that’s easy enough to remember. This is due to large downward fair value adjustments of the investment in blocks offshore the South African south coast.

KAL Group’s dividend may be flat, but (almost) everything else is down (JSE: KAL)

It’s been a tough year for them

The year ended September 2024 won’t go down as the happiest of memories for KAL Group. Revenue fell 3%, gross profit was down 1.9% (so at least margins were slightly up) and EBITDA decreased 4.4%. By the time we reach HEPS, there’s a 9.2% decrease to 561.58 cents.

Net cash from operating activities also went the wrong way, down 1.8%. Despite this, the gearing ratios thankfully improved and so the group felt confident enough to keep the dividend at 180 cents per share. The benefit of a modest payout ratio is that there are years where you can keep the dividend flat despite profits falling.

The pressure was mainly felt in the Agrimark segment, where revenue fell by 5% and profit before tax was down 10.5%. This is KAL’s largest profit generator, contributing 61.6% of segmental profits.

If you want to learn more about the group and ask management questions, then register for the next Unlock the Stock event on 5 December. KAL Group will be presenting their numbers and taking your questions, so it’s a lovely opportunity. Attendance is free but you must register here.

Life Healthcare’s international business gives a shot in the arm (JSE: LHC)

Be careful here with extrapolating these numbers

Life Healthcare has released results for the year ended September. Paid patient days in acute hospitals increased by 1.6%, so the core business is moving in the right direction. When combined with the growth in NeuraCeq, an exciting part of Life’s business, group revenue jumped 12.7% for the year. This includes the excellent once-off boost from the sub-licensing deal of Life Molecular Imaging’s early-stage novel products for R664 million.

If we consider just the Southern Africa business, we find revenue growth of 7.7% and normalised EBITDA growth of 1.3%. This is more like what I’m used to seeing from the hospital groups. It was the International business that came in with a huge year-on-year move, with revenue up from R656 million to R1.85 billion and a move from negative EBITDA of R113 million to positive R637 million.

You therefore need to be very cautious in thinking that this performance can be repeated in the coming year. Although the international business has great momentum, the South African business remains a modest source of growth. Going forward, the international business will need to be driven by NeuraCeq sales (which are admittedly firmly on the up), without the benefit of a windfall like a sub-licensing agreement – unless they get lucky, of course!

Pepkor wants you to focus on normalised numbers – and with good reason (JSE: PPH)

The base period included a 53rd trading week

Retailers that report based on trading weeks rather than calendar years will have a period every few years where there is an extra week. Naturally, this boosts the year that includes the extra week and hurts the year thereafter in terms of year-on-year comparatives.

Pepkor finds itself in that position, with FY23 as a 53-week year and thus the results of the year to September 2024 not being directly comparable without adjusting for that extra week. I would therefore go with their approach of focusing on normalised rather than reported numbers.

On this basis, revenue increased by 9.2%, operating profit jumped by a lovely 17.4% (thanks to a boost from gross profit margin as well) and HEPS was up 10.3%. One of the other adjustments to HEPS to arrive at normalised numbers was related to a lease modification gain.

Looking deeper, the clothing and general merchandise (CGM) segment saw revenue increased by 5.2%, while the furniture, appliances and electronics (FAE) segment was up 4.5%. Gross margin went up on the CHM side and down on the FAE side, coming in at 38.1% and 28.4% respectively. Despite that trend, it was actually the FAE segment that posted the better operating profit performance, up 22.2% vs. 12.0% in CGM.

Thankfully, after some tough times, there’s even improvement in Ackermans in terms of like-for-like sales and better gross margins. This contributed to ongoing market share gains.

As for Avenida over in South America, they are still aggressively expanding the store footprint and opened a second distribution centre as well. Performance wasn’t great in the second half though, impacted by the weather. They still managed 5.5% like-for-like sales growth for the year.

As those following this company will know, the major story going forward is the acquisition of Shoprite Furniture, which will be combined with the Pepkor Lifestyle group to unlock synergies and other benefits of scale.

Recent sales momentum is positive, although we still haven’t seen a particularly strong boost to more discretionary categories. In the 7 weeks to 16 November, CGM segment sales grew 16% and FAE was up 6%.

Purple Group is firmly in the green (JSE: PPE)

This will go down as a landmark period for them

Purple Group released results for the year ended August that tell a great story. Revenue increased by 45.1% and operating expenses were up just 7.6%. Naturally, this means that profit gently went to the moon, up 206%! This drove HEPS of 1.77 cents, a huge improvement from a loss of 2.05 cents in the comparable year.

I must point out that this means that (1) they are still negative when viewed over two years and (2) the share price of R1.13 is a gigantic Price/Earnings multiple. The market is assuming that they can keep this up, with the multiple unwinding quickly. We’ve been here before with the Purple share price, but hopefully this time it’s different.

One of the major improvements has been the introduction of monthly fees on the accounts, avoidable by users through the Thrive programme. This effectively deals with the issue of accounts with low levels of usage, as a major issue with the business model was that EasyEquities was reliant on brokerage income – and that only works in a period of very high activity.

A positive surprise in this result is the consistency of profitability at EasyTrader, the rebranded GT247.com. A more stable market environment has played a role here, but there have also been strategic actions by management to improve things here. EasyTrader offers a natural progression for EasyEquities users who show characteristics of traders rather than investors.

The expansion into the Philippines is taking longer than anticipated and remains firmly in the cash burn phase. Global expansion is never easy and this seems to be another example of a move that was perhaps too optimistic in terms of timing. Thankfully, the South African operations have improved to the point where the group is profitable overall, so they are in a better position to incubate the opportunity in the Philippines that could still be lucrative in the medium-term.

There are also a number of other initiatives at play, like EasyMortgages as an attempt to leverage the user base and act as a distributor of financial products. Importantly, Purple will not take on any credit risk here, at least not initially.

With active client growth in the past year of 10.4% and a 24.8% increase in client assets, the flywheel is spinning for Purple. Will it spin quickly enough to justify this share price? That’s the bigger question.

London’s West End continues to boost Shaftesbury (JSE: SHC)

It certainly is a lovely part of the world

When the sun is shining in London, there’s nowhere else quite like it. The city attracts seemingly endless wealth from all over the world, which means the luxury market is thriving and so are the retail properties aimed at these markets. The sun may not shine all year, but the property market seems to do pretty well anyway.

Shaftesbury is enjoying a low vacancy rate and positive rental reversions across all its property types – even offices! The trading update for 1 July to 11 November sets a strong foundation for the end-of-year shopping season that is no important for retail and hospitality tenants.

To add to the strong underlying growth, Shaftesbury has been recycling capital into what they call asset management opportunities – properties where they can make changes and unlock decent returns as a result. With a loan-to-value ratio of 29%, Shaftesbury can afford to have fun with its portfolio rather than spend its days stressing about debt.

Stefanutti Stocks: a casual 506% jump in profit (JSE: SSK)

The share price is up 265% in the past year – also not a typo

If you enjoy low-stress investments that help you sleep at night, run as far as you can from the construction sector. When things are bad, they are really bad (even for the big names like Murray & Roberts). When things improve off a bad base, the percentage movements (and gains in the process) can be immense.

Stefanutti Stocks shareholders are enjoying the latter phase, with results for the six months to August reflecting 2% growth in revenue from continuing operations and a rather daft 113% increase in operating profit from continuing operations. By the time you reach profit for the period from continuing operations, the gain is 506%!

But then you get the discontinued operations, where the losses are worse by 557%. By the time this rollercoaster ride is over, profit from total operations improved from a loss of R2 million to profit of R2.8 million. To make things even messier, liabilities still exceed total assets, so the group simply has to deliver its restructuring plan and win the ongoing support of lenders.

As though you need any further complexity here, there’s also the ongoing claims related to the Kusile Power Project. Although the company hasn’t recognised the value of the claim in the financials, punters of this stock are certainly putting some value on it.

Vodacom and Remgro appeal the Competition Tribunal decision (JSE: VOD | JSE: REM)

The Tribunal hasn’t even made the reasons for its decision available yet

The Competition authorities in South Africa are doing an incredibly good job of ruining the GNU party. Regulatory overreach is becoming more and more of a problem, with the prohibition of the Maziv fibre deal as the last straw for many.

I cannot for the life of me understand how it makes sense to block a deal that would see so much additional investment flow into internet connectivity for the masses. It’s almost as though someone of great influence would prefer it if people don’t have access to information!

Of course, it would help make the decision less weird if the Tribunal would actually release their reasons for the decision. It certainly took them long enough to make this decision, so it’s hard to understand why the reasons aren’t available yet.

In the meantime, the transaction parties (including Vodacom and the Remgro investee companies) will appeal the decision in the Competition Appeal Court. In the absence of compelling reasons why this deal was blocked, I’m hoping this is the egg-on-face moment for a regulator that has been flexing its muscles in ways that don’t always seem related to competition matters. We need free markets, not regulatory interference.

Mid-single digit dividend growth at Vukile (JSE: VUK)

But the rand has impacted the NAV per share

Vukile Property Fund has released results for the six months to September. Like-for-like net operating income growth was 4.6% overall and 2.1% on a normalised basis. The loan-to-value ratio sits at 35.4%, so the balance sheet is in a decent position. This is reflected in the credit rating outlook being upgraded from stable to positive.

Despite the group being busy with significant acquisitions in Portugal in particular, the interim dividend has moved 6% higher. By all accounts, Vukile is doing what it should be doing: growing at or above inflation, while continuing to improve its portfolio.

The negative part of the story for South African investors is that the net asset value (NAV) per share has decreased by 1.8% based on the strengthening of the rand. You can’t have your cake and eat it unfortunately. The rand hedges (funds with extensive offshore interests) were great for a long time as the rand kept depreciating. This GNU-inspired year has been a different story.

The important thing is to look through the currency noise and decide whether you are happy with an expected growth in the dividend of between 4% and 6% for the year ending March 2025, assuming a stable currency.

Zeda’s profits have taken a knock from the used car market (JSE: ZZD)

This was always going to happen at some point

The pandemic was a crazy time in our lives for many reasons, not least of all the spike in used car prices based on low interest rates and lack of availability of new models. This did great things for car rental businesses that were reducing their fleets at the time, as they suddenly found themselves in the same position that a garden nursery enjoys: their inventory was going up in value every day!

Those days are over (for used cars, not plants) and things have therefore normalised for Zeda. This is why record revenue and growth of 14.5% on the top line hasn’t translated into a great result for shareholders, with operating profits down 5.6%. Due to forex fluctuations and the impact of a normalised tax rate vs. last year’s much lower rate, HEPS fell by 18.1%.

Looking through the cyclical noise, the debt ratios improved and so did the amount of cash on the balance sheet. Zeda is in a strong position overall and is still achieving solid returns for shareholders, like return on equity of 23.1% for the year ended September. With the first debt issuance in the DMTN programme planned for FY25 and as a dividend paying company, I also feel comfortable about the level of financial maturity here.

With HEPS of 312 cents, I’m still a happy shareholder here. Even at the current price of R14.29, it’s a P/E multiple of 4.6x which is hardly demanding. I bought in at an average price of R11.84, so no complaints.

Nibbles:

• Director dealings:
  • A prescribed officer of Gold Fields (JSE: GFI) has acquired shares worth $301k. Although the wording is a little odd, it sounds like this is part of meeting the company’s minimum shareholding requirement.
  • The ex-CEO of Italtile (JSE: ITE), who is still a non-executive director) has sold shares worth R3.5 million.
  • Acting through Titan Premier Investments, Christo Wiese has bought another R292.5k worth of shares in Brait (JSE: BAT)

• If you are interested in ADvTECH (JSE: ADH), then the presentation from the company’s recent strategy day will certainly be worth reading. There are a meaty 70 slides and they go into great detail around the underlying demographic trends and how these affect the school strategy. You can find it here.

• Attacq (JSE: ATT) has released a pre-close update, with the most important point being that they are on track to achieve guided growth in distributable income per share of between 17% and 20%. This is despite the ongoing challenge of negative reversions in the office portfolio – or the “collaboration hubs” as Attacq likes to call them. I must point out that turnover and trading density growth in October 2024 was below target, hopefully just a small wobbly before the all-important festive season. The all-in weighted average cost of debt is down 30 basis points since June 2024, so those benefits will be felt as well.

• RH Bophelo (JSE: RHB) released results for the six months to August. There’s very little liquidity in the stock and the market doesn’t seem to pay much attention to this healthcare group, evidenced by a net asset value (NAV) per share of R16.29 vs. the share price of just R1.84. This is despite the NAV per share increasingly considerably from R13.76 to R16.29 in the past year! Recent investments by the group have been in the dialysis and radiology markets.

• MAS P.L.C. (JSE: MSP) has released a cautionary announcement regarding negotiations to potentially acquire Prime Kapital’s 60% interest in PKM Development Limited. This would give MAS access to the high quality properties in that joint venture, a simplified structure and better access to debt. At this stage, there’s no guarantee of a deal happening.

• Deneb (JSE: DNB) put the minimum effort into the latest SENS announcement and didn’t include any management commentary, so they get kicked down to the Nibbles on an otherwise very busy day. For the six months to September, revenue increased 2% and HEPS fell by 13%. A quick scan of the income statement shows that the problem was in the other income line, which came in substantially lower year-on-year. I wish I could tell you why, but unfortunately the company didn’t give the market anything to work with.

• On such a busy day, Efora Energy (JSE: EEL) is only getting a passing mention. Revenue for the six months to August was only R2.9 million and the headline loss per share came in at 1.54 cents.

• Copper 360 (JSE: CPR) has released a trading statement for the six months to August. As they are still firmly in mining startup mode, the year-on-year move in HEPS isn’t the most useful information. Still, the headline loss per share for this period was between 10.85 cents and 12.50 cents. For context, the share price is 290 cents.

• For all the beautiful billboards and advertising, the Altvest Credit Opportunities Fund (part of Altvest JSE: ALT) generated interest income of R11.9 million in the six months to August and made a profit before impairments of R2 million. After credit loss allowances of R8.9 million and admin expenses of R10.3 million, the loss before tax was a whopping R17.2 million. They are sitting on a lot of cash that needs to be disbursed, so that will clearly be the focus going forward.

• Conduit Capital (JSE: CND) has agreed to sell its 51% interest in Century 21 for R7.24 million. Yes, you are correct that this is the property agency franchisor that has 51 franchises. It made a profit for the year ended June of R2.4 million. I genuinely cannot believe how little money this business actually makes for such a well-known brand! It’s clearly not as lucrative as I though to own estate agencies.

• Shareholders of Trematon (JSE: TMT) voted almost unanimously to dispose of the 60% interest in Aria Property Group. The remaining condition precedent is approval by the Competition Commission, which they hope to obtain by 6 December.

• Sable Exploration and Mining Limited (JSE: SXM) has added its name to the list of companies that recently transferred to the General Segment of the Main Board of the JSE. This is an administrative decision that impacts the way in which the listings requirements are applied.

• I doubt strongly that you are a Deutsche Konsum (JSE: DKR) shareholder, so I’ll give the latest business update only a passing mention here. Rental income is down 2.9% year-on-year and funds from operations also dipped. The focus is on the balance sheet, where the leverage ratio reduced from 61.6% to between 57% and 60%. This fund quite simply has too much debt.

• Another complete oddity on the JSE is Globe Trade Centre (JSE: GTC), with the company having released its results for the 9 months to September. Revenues are up 3%, funds from operations came in slightly higher as well and the net loan-to-value has decreased from 49.3% to 48.8%.

• After a very odd journey to get to this point, Numeral (JSE: XII) – previously called Go Life International – has managed to recover 50% of Cryo-Save after a strange sequence of events that included ex-directors allegedly making misrepresentations and inserting themselves into corporate deals. It’s all very weird. Numeral plans to acquire another 1% in Cryo-Save, so they will be able to consolidate the results of this stemcell business going forwards.