4Sight is doing a B-BBEE deal in its South African operations (JSE: EUZ)

And they’ve structured it in exactly the right way

There are a lot of really bad ways to structure B-BBEE deals. At their worst, they give banks a way to fund a structure that looks like a small private deal (and is priced like one with expensive debt), yet actually benefits from a guarantee from the larger holding company of the empowered group. The winner in such a case is almost always the bank, as there’s a clear mismatch between their true credit risk and what they are charging for the debt.

We’ve mostly moved past those structures, although I occasionally still see companies getting it wrong – usually while being advised by corporate finance teams in banks. I wonder why that might be…?

When you see non-banking advisory teams, you have a better chance of seeing a smart funding structure. And at 4Sight, they’ve gone the additional route of doing the deal at subsidiary level rather than listed company level, so they’ve cleverly taken listed share price volatility out of the deal. That’s another tick in the box.

The structure is that the 4Bonela Pele Education Trust will acquire 30% in 4Sight’s South African subsidiaries, thereby achieving full points under B-BBEE rules for doing a broad-based deal. The trust will support development programmes in the form of scholarships and similar awards for beneficiaries who are enrolled as students in the ICT sector. We can all agree that this is much more useful than making a rich person even richer simply because they were on the right board at the right time.

To fund the deal, there’s a capitalisation issue that basically puts the entire market value of the subsidiary in a new Class A share to be held by 4Sight. These carry a preferred return, locking in a decent outcome for listed company shareholders. This squashes the ordinary equity value in the subsidiary to zero, which means that the trust can acquire shares at nominal value – which also happens to be the fair value! Bingo, no banks required.

This is a great example of corporate finance. I’m always impressed when small caps do proper deals. It says a lot about the management team.

Alphamin has released full details of its first quarter (JSE: APH)

The quarterly operating update means that we knew what was coming

Alphamin releases a detailed operating update each quarter and then a financial update a few weeks later. This is why you might feel as though you’ve already seen the news on the first quarter’s performance.

In case you’ve forgotten or missed the recent stories at Alphamin, they had to cease production on 13 March due to security concerns in the region of operation. Naturally, this heavily impacted the quarter, leading to a 31% quarter-on-quarter drop in ore processed. EBITDA fell 18% on a quarter-on-quarter basis, as the production drop came at a frustrating time during which prices for tin moved higher. Given Alphamin’s importance in the global tin market, it wouldn’t surprise me if the price increase was partly due to the reduced supply.

Importantly, they returned to full production in late April, so the second quarter’s result will also be impacted by the loss of production. The full-year guidance for contained tin production has been decreased from 20,000 tonnes to 17,500 tonnes. Sadly, the risk of regional conflict is a feature of doing business in Africa, not just a bug.

Assura: blink and you might miss it (JSE: AHR)

So soon after adding the JSE listing, the scheme circular has been sent out

Assura was here for a good time, not for a long time. As previously announced. the bid by KKR and Stonepeak Partners has been supported by the board. The next milestone is the scheme circular with full details of the transaction. This has now been distributed to shareholders, along with the recommendation by the independent board that shareholders should vote in favour of the transaction. This is based on the work by advisory house Lazard that determined the terms to be fair and reasonable to shareholders.

To help shareholders make a decision, Assura also released a trading update for the year ended March 2025. They don’t sit still over there, with a busy year of deals that saw the acquisition of 14 private hospitals, the completion of 5 development projects and the disposal of 17 properties! On top of this, they put a joint venture in place that they seeded with 13 properties.

There are a total of 603 properties in the portfolio. They achieved a 3.2% weighted average annual uplift in the rent roll. The loan-to-value is 46.9%.

It’s a healthy, active property fund, which is exactly what makes it an appealing target.

Low single digit growth in Dipula’s dividend (JSE: DIB)

This is in line with what we are seeing from most REITs at the moment

In 2024, the local property sector was exactly where you wanted to be. I wrote on it at the time and it turned out to be the right call, so I’m glad I invested in property ETFs in my tax-free savings account early last year. As for 2025, I expected it to be a slower year and I haven’t been wrong thus far. This looks like a year in which property investors will bank the yield and be thankful for whatever growth comes through the door.

For the six months to February 2025, Dipula Properties (previously Dipula Income Fund) grew its dividend per share by 4.2%. The net asset value (NAV) per share was a better story, up 6.2%. Remember, this is a fund with a strong bias towards convenience, rural and township retail centres. That’s a good place to play in South Africa, so you would expect to see higher growth rates than at some other REITs that arguably hold lower risk assets.

I’m not sure that these growth rates are high enough in relative terms vs. the sector, but we also need to dig deeper into the Dipula portfolio to see why. Only 67% of the portfolio’s income is from retail properties. 16% is coming from office, 13% is industrial and 4% is residential. But here’s the thing that might surprise you: the office portfolio achieved stronger renewal rates than the retail portfolio, albeit at slightly lower weighted average escalations!

Dipula’s weighted average cost of debt has decreased marginally from 9.5% to 9.3%. Rate decreases have been modest, hence why we aren’t seeing particularly exciting growth in earnings in the sector. The loan-to-value ratio sits at 36.1%, so the balance sheet is healthy.

enX misses loadshedding (JSE: ENX)

There’s still demand for generators, but nowhere near as much

enX has released results for the six months to February. Revenue from continuing operations fell 10% and HEPS from continuing operations was down 29%.

The Power segment dragged the group down significantly. That division suffered a revenue decrease of 42% in response to the near-disappearance of loadshedding. Profit before tax in that area of the business plummeted from R46 million to just R9 million.

The Chemicals segment was flat at least, helping to stem the bleeding. It’s also a significantly larger business than Power from a revenue perspective, although it used to be the same size in terms of profitability due to structurally different margins. With profit before tax of R48 million in this period (vs. R45 million in the comparable period), it’s now doing the heavy lifting for the group.

Due to significant corporate activity to dispose of businesses, Power and Chemicals are the only two continuing operations. It’s therefore a concern that profit before tax from those operations was down 19% overall. The group expects the Chemicals business to be stable, while the Power business will have to make do with generator sales to data centre customers unless loadshedding returns.

Europa Metals has not found a suitable asset (JSE: EUZ)

The board has decided to return capital to shareholders and delist

Europa Metals has been involved in some dealmaking that led to a situation where the best way forward was a reverse takeover. It didn’t work out as planned, so the company had to scramble to try and find a suitable asset to justify Europa’s ongoing listing.

This didn’t work out either, which means that the only route forward is to return the assets in the company to shareholders and delist the company. The shares are now suspended from trading on the AIM. They aren’t currently suspended from trading on the JSE. It will take a while to execute this plan, as there are complex regulatory and tax hurdles to overcome.

Nibbles:

• Director dealings:
  • The COO of AngloGold Ashanti (JSE: ANG) is about to retire. That’s important context, as he chose to sell more than just the taxable portion of the latest share award. The total sale was $1.57 million and it’s not clear from the announcement just how much is for tax.
  • Des de Beer is back at it, buying R3.4 million worth of shares in Lighthouse Properties (JSE: LTE).
  • A prescribed officer of Capitec (JSE: CPI) bought shares worth R1.14 million.
  • An associate of a director of Boxer (JSE: BOX) bought shares worth R311k.

• There’s practically no liquidity in Eastern Platinum’s (JSE: EPS) stock, so I’m giving them a passing mention down here. In the three months to March 2025, revenue was down 5.7% and they swung into a mine operating loss of $4.7 million vs. a profit of $5.3 million in the comparable quarter. The working capital deficit just keeps getting worse, particularly as they focus on ramping up the Crocodile River Mine. This company is being kept alive by very specific funding lines. If for any reason they stop, shareholders will quickly learn the difference between a going concern and an ongoing concern.

• A company called Wimsey Capital (Pty) Ltd now holds over 5% in Santova (JSE: SNV). Some digging has led me to conclude that this entity is likely related to Chris Otto, one of the founders of PSG. It has a PSG Wealth registered address and if you go back a few years, you’ll find that a similarly (but not identically) named company was involved in Capital share dealings and was named as an associate of Otto when he was a director. It could be something, or it could be nothing.