Blue Label dives even deeper into Cell C (JSE: BLU)
In this case, the adjustment seems reasonable
Blue Label has agreed to take Gramercy SA Telecom Holdings out of Cell C. This takes the form of the purchase of Gramercy’s 6.09% equity stake in Cell C for R6 million, as well as a claim (money owed by Cell C to Gramercy) at its face value of R450 million. The deals have been structured separately i.e. they aren’t inter-conditional, which is unusual.
Essentially, Blue Label is showing even more conviction around the future of Cell C, getting rid of a potentially problematic debt claim that was payable by March 2026, while locking in a greater shareholding.
I was a little surprised to see that the claim is being bought by Blue Label at face value (rather than at a discount), as Gramercy is swapping credit risk exposure to Cell C for exposure further up the chain at Blue Label. Perhaps the focus was more on obtaining the additional equity exposure in Cell C. It’s also possible that the underlying security package on the debt meant that Blue Label was the ultimate exposure anyway.
As you need a PhD in Financial Accounting to understand the Blue Label accounts, it’s hard for me to really have a view on what Cell C is worth or whether they got this for a steal. Blue Label’s share price is up 39% this year and 4% over 3 years, so it’s a stock that traders tend to love and investors mostly avoid.
Gold Fields has some positive momentum, but the year-on-year numbers aren’t as strong (JSE: GFI)
Always be sure of which percentage movements you are looking at
The highlights section of the latest Gold Fields quarterly update focuses on the quarter-on-quarter moves i.e. the three months to September vs. the three months to June. All metrics look good on that basis, with attributable production up 12%, all-in sustaining costs down 3% and net debt down by $30 million.
If you look at the year-on-year numbers though, it tells quite a different story. Even if we just consider continuing operations, attributable gold production was down 3%. All-in sustaining costs jumped 22.7% for continuing operations. Thankfully, gold prices are 29.6% higher than a year ago, so the economics still work.
Full-year guidance is unchanged, although they expect attributable production to be at the low end of guidance.
And yes, in case you are wondering, the group is still having to carefully navigate the capture and relocation of chinchillas at Salares Norte!
MTN continues to be whacked by currency depreciation in Africa (JSE: MTN)
Nigeria now has a lower EBITDA margin than South Africa
MTN has released a quarterly update for the period ended September. As you likely know by now, the theme is one of growth in Africa being ruined by currency depreciation, leading to such disappointing outcomes at group level that MTN had to extend its B-BBEE structure just to avoid it maturing with little or no value.
There’s no sign of this situation improving. The gap between reported growth and constant currency growth is immense. For example, voice revenue was up 1% in constant currency and down 31.3% as reported. Data revenue was down 15.3% as reported and up 21.3% in constant currency. Fintech revenue was at least in the green overall, up 8.5% as reported and 28.9% in constant currency.
So although there is some underlying growth in the business (like active data subscribers up 7.4%), it’s just not enough to offset the currency depreciation. Also, don’t be fooled by those constant currency growth rates – there are some high inflation territories, which is exactly why the currencies are depreciating over time.
But what choice do they have but to chase growth elsewhere? MTN South Africa could only grow EBITDA by 2.6% in this quarter, with voice revenue down 5.5% (no surprise there) and fintech revenue as the highlight with growth of 61.8% (also not a surprise).
Looking at the year-to-date performance now that we have three quarters of data, group EBITDA margin in Nigeria took such a knock (15.5 percentage points!) that it is now below South Africa. It’s truly a mess, as the operating risks are much higher in Nigeria and hence that business needs to be more lucrative on a margin basis to justify the exposure. Nigeria is now on an EBITDA margin of 36.2%, just below South Africa at 36.3%. For reference, Ghana is 55.8% and Uganda 51.7%.
Dividend guidance of 330 cents per share for FY24 is unchanged heading into the fourth quarter.
The good times continue at Sanlam (JSE: SLM)
Double-digit growth is the order of the day
Sanlam has released an update covering the nine months to September. The momentum in the interim period has continued into the third quarter, with a 15% increase in the net result from financial services for the nine-month period. As the icing on the cake, strong investment returns on the shareholder capital portfolio took the increase in net operational earnings up to 17%.
There’s strong strategic focus at the moment on integrating Assupol into the group’s operations. This R6.6 billion acquisition gives Sanlam strong reach into an important part of the market. There are various other corporate actions either underway or recently finalised, as they never sit still over at Sanlam.
In case you’re wondering, the two-pot system has seen withdrawals of R2.5 billion from retirement savings at Sanlam.
On a strong dividend yield and with these kind of growth numbers, Sanlam is one of those stocks on the JSE that makes it easy to sleep at night for its shareholders.
Stefanutti Stocks is profitable (JSE: SSK)
And not just in continuing operations
The construction sector is a wild place. Get your timing right on the broken stories and you can make incredible amounts of money. Over 3 years for example, Stefanutti Stocks is up more than 800%!
Recoveries from the brink of disaster are extremely risky. As you know by now, more risk can mean more reward.
A trading statement for the six months to August reveals that interim numbers have swung into the green. Looking at HEPS from continuing operations, the loss of 11.67 cents in the comparable period is now a distant memory, with an expected range for this period of between 27.42 cents and 29.76 cents.
If we look at total operations (i.e. including those earmarked for disposal), the move is from a loss of 22.41 cents to positive HEPS of between 11.21 cents and 15.69 cents.
Full details are due for release on 26 November.
On an adjusted basis, Telkom’s earnings have jumped (JSE: TKG)
In this case, the adjustment seems reasonable
Telkom has released a trading statement for the six months to September. It’s a voluntary statement, as HEPS as reported is expected to differ by -5% and 5% – i.e. flat at the midpoint.
The very important nuance is that there’s been a substantial after tax charge of R451 million relating to the termination of Telkom’s obligation of the defined benefit within the Telkom Retirement Fund. There have also been restructuring costs.
These types of movements are not reflective of the underlying business, which is why Telkom goes on to disclose an adjusted HEPS move of between 50% and 60%. That’s certainly a lot more like it, suggesting an adjusted range of 292.5 cents to 312 cents for the interim period.
Nibbles:
- Director dealings:
- There is some very large “rebalancing of the portfolio” by Shoprite (JSE: SHP) CEO Pieter Engelbrecht, with sales of shares worth around R30 million.
- The spouse of a director of Mantengu Mining (JSE: MTU) bought shares worth R602k.
- Astral Foods (JSE: ARL) has announced a successor to CEO Chris Schutte. He is due to retire at the end of January 2025, with current COO Gary Arnold set to take the top job. He’s been with Astral for the past 28 years, so that’s about as strong a succession plan as you can ever hope to see.
- In further succession news, Harmony (JSE: HAR) has appointed Beyers Nel and Group CEO and Floyd Masemula as Deputy Group CEO. Current CEO Peter Steenkamp is retiring at the end of December 2024 after nine years in the job. Nel is the Group COO, so this is an internal appointment. Masemula is also an internal appointment, with his focus remaining on the South African mines.
- Keep an eye out for Goldrush Holdings (JSE: GRSP) numbers in the next week or so. The group (previously RECM & Calibre) has changed to consolidated accounts rather than investment entity accounts, so NAV per share is no longer the appropriate performance metric. A trading statement based on an expected move in NAV per share is thus not the best way to look at this, so rather wait for the consolidated accounts for the six months to September that are due for release in the next 7 days.
