- MTN Group released a set of results that could be described as near-perfect. Demand for data is incredible and the FinTech strategy is working, although there’s a risk from African governments that investors need to keep an eye on. I wrote about the result in detail here.
- Transnet is a debt issuer on the JSE, so it needs to release trading updates to its investors. Revenue in the year to March 2022 increased by 1.6% to R68.3 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 22.1% to R23.8 billion. Cash generated from operations was R29.8 billion. Don’t worry, I’m just as surprised as you are by how much money this SOE makes from its operations. Transnet Freight Rail is where the problems lie, with a huge number of locomotives unavailable due to a Special Investigation Unit process regarding the procurement of those locomotives. Cable theft and infrastructure vandalism are also causing havoc, with lost revenue of R1.9 billion. The rail issues are top-of-mind for most JSE investors, as they are having a direct negative impact on coal exporters. There are massive costs below EBITDA like depreciation (almost R15 billion) and finance costs (R10.6 billion), so Transnet recorded a net loss.
- Adcorp has released a trading statement and operational update for the year ended February 2022. Headline Earnings per Share (HEPS) is expected to be at least 139% higher, so that would imply at least 81.7 cents vs. 34.2 cents in the prior period. The share price closed 13.4% higher on Friday at R5.50, implying a Price/Earnings multiple of 6.7x assuming 81.7 cents is the final HEPS number. We will only know for sure when full results are released on 30 May. Revenue is flat year-on-year on a constant currency basis, so this result has been achieved by cost management and improvement in margin mix e.g. exiting low margin contracts. The share price is down 20% over the past year and you should be aware that large percentage movements are common as the bid-offer spread is very wide in Adcorp (something I learnt the hard way with my own money).
- Tin miner Alphamin closed 9.1% lower on Friday despite announcing solid growth in volumes and profits in the latest quarter. In the three months to March, tin sales volumes were up 9% and EBITDA increased by 32%, assisted by a 14% increase in the tin price achieved. Net cash increased by 90% despite a large dividend payment. Although processed ore volumes were lower, record plant recovery was achieved. All in sustaining cost only increased by 4%. The share price is 31% higher over the past 12 months and only 4.7% up year-to-date.
- Texton Property Fund has agreed to sell the Woodmead Commercial Park, a retail centre in Johannesburg. Texton is trying to get out of its retail property exposure and has agreed a price of R132.5 million for this asset, which is a premium to the last disclosed book value of R114.3 million. R20 million of the price will be settled through a vendor loan, which simply means that the buyer will owe Texton that cash going forward. The vendor loan has a 36-month term and 50% is repayable after 24 months. The interest rate is prime plus 4%. The property achieves net rental income per annum of R14.1 million, so the price is a yield of around 10.7%.
- As I feared, the labour unrest noise is getting louder. We’ve already seen problems at Sibanye and ArcelorMittal. York Timber is the latest victim, after employees affiliated with NUMSA embarked on a strike from 25 April. After NUMSA walked away from a job grading process and issued a strike notice, York was prevented from accessing and operating its Escarpment operations. The Labour Court has declared the strike unprotected and this opens the door for York to institute disciplinary action against relevant employees. The Escarpment operations contributed 51% of group revenue in FY21, so this is a material issue. Inexplicably, the share price closed 2.9% higher on Friday.
- Finbond Group has released a trading update for the year to February 2022. The loss has narrowed but is still there, with a headline loss of between 19.1 cents and 16.7 cents per share vs. 23.9 cents per share in the prior year. In addition to the businesses in South Africa, Finbond is exposed to lower-LSM consumers in the US, with unprecedented stimulus having assisted these consumers and reduced their need for debt. 26.9% of Finbond’s revenue was generated in Illinois, a remarkable exposure for a small cap on the JSE. Recent regulatory changes in Illinois negatively impacted the company. Despite the losses, the group is sufficiently capitalised and encouraged by the prospect of a normalised economy.
- Eastern Platinum has released a quarterly update reflecting a 4.3% increase in revenue and mine operating income more than doubling to $3.4 million. Group operating income was $0.1 million vs. a loss of $1.7 million in Q1 2021. Thanks to a foreign exchange gain, net income attributable to shareholders was $3 million in this quarter vs. a loss of $0.9 million a year ago. Balance sheet liquidity has also improved, as one would expect when earnings are higher. Despite the company’s name, 84% of revenue is generated from chrome concentrate production from the Retreatment Project at Barplats Mines at the Crocodile River Mine. The rest of the revenue is from PGM concentrate sales to Impala Platinum.
- If you are an Oasis Crescent Property Fund shareholder, watch out for a circular related to the distribution. You need to choose between receiving it in cash or reinvesting in the fund. The default decision is to reinvest rather than receive cash, so make sure you address this if you want to be paid your distribution.
- The ongoing soap opera that is Nutritional Holdings continues to deliver entertainment for anyone that isn’t a shareholder. For example, the Ukusekela cannabis operation is not currently producing because the company is trying to get its licence renewed by the SAHPRA. I’m not sure it does the JSE any favours to continue to allow this company to be listed, even if that listing is currently suspended.
- In a classic case of lightning striking more than once, Gary Shayne (director of Ascendis Health once more and part of the original team that led it to financial destruction) has been closed out of a position in the company. In other words, he took a leveraged position on the stock and the financial institution on the other side of the derivative closed him out because the price dropped too far. To put it simply: he has already lost money on the company after returning to the board. The value of the sale was R643.5k.
- Raubex is in the process of making a mandatory offer to Bauba Resources shareholders at R0.42 per share. All conditions have been met (a compliance certificate from the Takeover Regulation Panel being the latest example thereof) and the offer closes on 27th May, although Raubex has the ability to extend the offer at its sole discretion. Separately, Bauba has released results for the eight months ended February 2022 as the year end was moved from June to February. This period reflected a headline loss per share of 5.92 cents.
- The buyout of Long4Life by Old Mutual Private Equity has met all conditions and will be implemented by the end of May. Shareholders will be paid out R6.2249 per share.
- ARB Holdings will be delisted from the JSE on the 7th of June as a result of the buyout by Masimong Electrical Holdings, an entity backed by JSE-listed investment holding company Sabvest.
- SME lender UsPlus has a Domestic Medium Term Note Programme on the JSE, which means it uses the local market infrastructure to issue debt. It has raised $10 million from a leading US impact investor that will take the total book to $17 million. The company was founded in Johannesburg in 2015 and provides working capital solutions to the SME sector, which is why impact investors are interested in the company. In case you aren’t familiar with the term, “impact investing” is an investment mandate that considers more than just financial returns. Other metrics would typically include job creation or carbon reduction.
- Redefine Properties has decided to discontinue the role of lead independent non-executive director. Where the Chair of the board is conflicted on a matter, the independent director chairing the relevant committee would then lead the board. I don’t usually report on committees and independent director changes but I did find this interesting.
