enX acquires a property in Alberton (JSE: ENX)
I’m not sure this is the capital allocation that the market wants to see
Shareholders in enX are very much in the mode of wanting the company to sell assets and return capital to shareholders. It therefore stuck out to me on SENS that enX is doing something completely different (at least with a portion of its capital), by buying a property in Alberton that is currently used as a manufacturing facility by two of its subsidiaries.
Of course, buying a strategic site as a manufacturing facility isn’t the weirdest capital allocation decision in history. It just stands out for being so different to the flavour of recent announcements from the company.
The purchase price is R95 million, which is above the market value of R90.3 million as prepared by an independent property valuation expert. They must really want the property. The property owner has unlocked this price by keeping enX on a short leash as the tenant, with a six-month notice period in the lease that would cause huge disruption to the subsidiaries if it was triggered.
enX will pay for the deal in cash and will look to refinance the property down the line.
EBITDA margins are significantly lower at Grindrod (JSE: GND)
At least profits from the Port of Maputo are growing quickly
Grindrod has provided a pre-close trading update to the market. Having cleaned out a bunch of non-core assets in recent times, the focus is on bulk handling, container handling, logistics capability as well as rail and transport.
The lack of Chinese economic growth has put the commodity market under pressure, which in turn creates a negative environment for Grindrod’s export drybulk commodities business. Stimulus announcements in China haven’t had the desired impact on iron ore and steel demand, so there’s no real improvement there just yet.
The protests in Mozambique have also played a negative role, impacting volume flows into the Port of Maputo. Ships were delayed and in some cases cancelled. Despite this, Grindrod notes 37% growth in its share of earnings from the Port of Maputo, driven primarily by chrome volumes it seems. The broader Mozambique business was hit by protests and the coal market, with volumes down sharply.
We can only hope that the positive momentum in the South African business continues, with volumes at Richards Bay and Durban up a combined 28%. Sentiment is improving around Transnet as well.
Despite the particularly strong performance at the Port of Maputo, Grindrod’s EBITDA margin fell in both segments. The Port and Terminals segment is down from 42% to 35% and Logistics fell from 30% to 22%.
Group gross debt increased from R2.9 billion as at June 2024 to R3.1 billion by the end of November. Net debt remains low though, dipping from R0.5 billion to R0.4 billion.
Results for the year ending December 2024 are expected to be released on 6th March 2025.
MAS has given the balance sheet more breathing room with the disposal of malls in Romania (JSE: MSP)
The deal is worth €49 million
If you’ve been following the MAS story, you’ll know that this property fund has been trying to prepare for a world that isn’t so friendly to sub-investment grade property funds. With major debt refinancings on the horizon, MAS went on the front foot to try and protect shareholders from a potentially damaging outcome. Although local shareholders didn’t appreciate the cancellation of the dividend at the time, the share price has now made a full recovery. Those who played the recovery have done really well, up 34% in 2024!
The latest good news from the company is that the strip malls in Romania are being sold for €49 million. These are mature centres, so MAS won’t get outsized returns from the properties going forwards. Instead, they can unlock the capital to help with debt maturation in 2026 and give themselves room to focus on properties where better returns are available.
The price is 3.1% above the fair value of the properties based on an independent valuation, so they got it away for a good price as well! Net cash proceeds after adjustments are expected to be €43.5 million.
For reference, net operating income from the properties was €3.6 million for the year ended June. This implies a yield of 7.3% for the selling price.
Thanks to this deal, the required additional funds for the funding commitments to June 2026 have dropped from €116 million to €64 million. They are almost there!
Much excitement at NEPI Rockcastle, but modest per-share growth (JSE: NRP)
This is what happens when shareholders get diluted
NEPI Rockcastle is a great property fund. It’s comfortably one of the best on our local market, as evidenced by a recent flurry of deals that saw the group easily raise €800 million in new funding. This was needed for property acquisitions worth €778 million in October and December.
The balance sheet remains in great shape, with a loan-to-value ratio below 35%. The pre-close update released by the company confirms that net operating income should be up 13% for the year, with the acquisitions making only a marginal contribution to that growth. So, the portfolio is doing extremely well.
And yet, the guidance for distribution per share growth is just 5.5% for the year. How did such an exciting story turn into growth that offers little more than inflation?
The answer lies in dilution, or the sheer number of new shares in issue. The scrip dividend alternative (in which shareholders accept shares in lieu of cash) had a 39% take-up rate. NEPI also raised equity on the market to assist with the acquisitions. Although this is necessary for growth over time, it does impact the per-share growth for shareholders in the near term.
A 10.8% year-to-date share price return is still very decent though, particularly once you add on the juicy dividends to get to the total return!
Sibanye-Stillwater unlocks $500 million through a streaming deal (JSE: SSW)
This mainly relates to gold as the by-product of the PGM operations
With its share price down over 32% this year and still languishing close to 52-week lows, Sibanye continues to face the challenges of a difficult PGM market. At least the gold market is holding up, allowing Sibanye to raise $500 million through a streaming deal focused mainly on gold from its PGM operations, with the inclusion of a small amount of platinum. This is because gold is part of the basket of metals mined by the PGM operations.
The trick here is that Sibanye can lean on the gold stream as a source of finance, while retaining upside to PGMs through the inclusion of only a modest amount of platinum in the streaming deal. Clearly, this strategy only works well if things recover at some point in the PGM sector, but Sibanye simply has to work on that assumption as their long-term existence largely depends on it.
The purchaser of the stream is Franco-Nevada Corporation and they will pay Sibanye $500 million upfront. Sibanye will receive a production payment of between 5% and 10% of the spot price per ounce, depending on whether you’re looking at the gold or platinum side of the deal.
Separately, Sibanye announced the BDO will take over as the new auditors, replacing EY for “commercial reasons” – are the Big Four firms simply becoming too expensive even for listed companies to justify?
The situation is Mozambique is improving for South32 (JSE: S32)
But the country isn’t out of the woods just yet
Politically-driven unrest is a feature of doing business in Africa and Mozambique is no different. Recent elections sparked protests and road blockages, which made things very difficult for South32’s Mozal Aluminium business.
Thankfully, there have been no security incidents at Mozal Aluminium itself. The other good news is that road blockages have largely cleared, so they are in the process of rebuilding alumina stocks at the smelter.
With the announcement of election results expected on 23 December, anything can still happen. For now at least, mitigating actions are working and Mozal Aluminium has continued to export aluminium to customers.
Nibbles:
- Director dealings:
- In order to fund investments in hotels, Koos Bekker’s family trust sold a huge number of shares in Prosus (JSE: PRX). The total value is around €157 million. This represents 20% of the trust’s stake in Prosus. In case you’re wondering, they have retained all their Naspers (JSE: NPN) shares.
- The CEO of Datatec (JSE: DTC) has entered into a new hedge structure over R14.9 million worth of shares. The put strike price is R44.70 and the call strike price is R59.75. The current price is R43.77 and the options expire in 2026.
- Carl Neethling has bought another R11.7 million worth of shares in Ascendis Health (JSE: ASC) in an off-market transaction.
- Directors of Octodec (JSE: OCT) acquired R7.64 million worth of Octodec shares in an off-market trade.
- The CEO of Argent Industrial (JSE: ART) sold shares worth R502k.
- The outgoing CFO of AfroCentric (JSE: ACT) sold shares worth R81.7k.
- The CEO of Sirius Real Estate (JSE: SRE) bought shares in the company worth nearly £4k.
- Although one must be careful to read too much into regulatory reporting at banks, the latest quarterly report from Capitec (JSE: CPI) suggests that things are still going well there. Common Equity Tier 1 is up from R42 billion to R44 billion over just three months, which is most likely because of profits landing on the balance sheet as equity.
- BHP (JSE: BHG) has been hit with a class action lawsuit in Australia “on behalf of all women who worked at BHP’s Australian workplaces at any time during the period 12 November 2003 to 11 March 2024 who were impacted by the alleged conduct” – those are very specific dates and no further information has been given about the conduct, other than references to sexual harassment and sex discrimination. The amount of damages sought is unspecified. Lawyers inevitably go for settlements in these situations, so keep an eye on this.
- We have yet another cybersecurity incident at a listed company, this time at Tharisa (JSE: THA). It seems that systems have been taken offline, yet operations are unaffected at the moment. They will keep the market updated.
- Dilution for shareholders at Mantengu Mining (JSE: MTU) continues. The company has issued another 4.78 million shares as part of a previous agreement to make certain shareholders whole. With around 175 million shares in issue in total, this dilution can add up.
- Deutsche Konsum (JSE: DKR) has absolutely no liquidity in its stock, so results for FY24 get only a passing mention here. They also aren’t doing terribly well at the moment, with rental income down 2.9% and funds from operations down from EUR 33.1 million to EUR 28 million due to the added pressure of debt costs. At least the net loan-to-value has dipped from 61.6% to 57.2%, though it remains very high.
- Rex Trueform (JSE: RTO) has appointed Karly White as Financial Director. This is an internal appointment, as White was previously the Financial Director of subsidiary Queenspark.
