In this edition of Ghost Bites:
- 4Sight Holdings is growing rapidly
- Afrimat’s terrible tale of two halves
- Investec wants to almost double its private banking business
- Nampak’s normalised HEPS shows reasonable growth
- Netcare’s profit growth is encouraging
- Oceana can thank its Lucky Star
- Don’t let Pick n Pay’s group HEPS fool you
- Sanlam is having a tougher year than they would like
- Spear REIT is acquiring a property in Tygervalley
- Tharisa made a fortune in the latest period
4Sight Holdings is growing rapidly (JSE: 4SI)
At this rate, they won’t be a small cap for long
I’ve been saying for a while that 4Sight Holdings is a small cap that is behaving like it wants to be much bigger. That’s a good thing!
Based on the latest trading statement, they are well on their way. HEPS for the year ended February 2026 increased by between 40.3% and 52.0%. Not bad, huh?
Ghost Bite: I’m excited to tell you that 4Sight will be joining Unlock the Stock for the first time next week. Get to know the management team and bring your questions for the interactive Q&A! Attendance is free, but you must register here.
Afrimat’s terrible tale of two halves (JSE: AFT)
Are they through the perfect storm yet?
Afrimat has released its results for the year ended February 2026. They reflect growth in HEPS of 32.5%, but this is against a very weak base. It’s also a wild swing in fortunes from the first half (H1) to the second half (H2), as HEPS in H1 was 101.9 cents vs. a loss of -6.1 cents in H2!
The impact of the ferrochrome smelter shutdowns and lower profitability in iron ore means that momentum in the business looks awful. The Nkomati anthracite mine literally had no sales for six months! This is a reminder of how important the ferrochrome smelters are to our economy, hence why Eskom has shown some willingness to offer support to this sector. NERSA still needs to sign off on this though, so they aren’t out of the woods yet.
Group operating profit was only up by 9.6% despite revenue being up 20.3%. The issues go beyond just anthracite, as the cement business is struggling with gross margins as they work to try and improve performance there. That business is still in a loss-making position (R185 million), dragging down the operating margin in the Construction Materials segment.
Although Afrimat remains at depressed levels vs. what shareholders are used to seeing, the trajectory in cash from operating activities is encouraging. This key metric has increased from R572 million to R831 million. Together with disposals of non-core assets, this is supportive of the balance sheet and the company’s ability to service debt.
It’s also worth noting that this cash result was achieved despite a build-up in iron ore inventory due to a customer reducing its orders. There are just no easy wins for Afrimat at the moment.
Speaking of difficulties, the diesel price is a major stress point. Afrimat consumes an enormous amount of diesel in its business. If prices remain elevated, that’s going to make it very tricky to protect margins.
Transnet also remains a risk. Export volumes were 17% below Afrimat’s allocation. It really has been a perfect storm for the company.
Ghost Bite: Afrimat’s share price has tanked by 36% in the past 12 months. It feels like everything has gone wrong for them at the same time, with the share price back to levels we saw in 2020! With Eskom showing some support towards the ferrochrome smelters, is this a dip you are willing to buy? Or did they simply bite off more than they could ever chew with the risky Lafarge acquisition?
Investec wants to almost double its private banking business (JSE: INL | JSE: INP)
They need more engines of growth
Investec is finding it difficult to achieve exciting growth at the moment. The numbers for the year ended March reflect revenue growth of 4.2% and adjusted operating profit growth of 3.4% (both reported in GBP).
This is despite more impressive growth rates in customer deposits (8.7%) and net core loans (9.6%). Again, both these growth rates are based on GBP numbers.
In case you’re wondering, the ZAR growth rate for revenue was 4.0% and operating profit was 3.2%. This is because total operating costs were up by 4.7%, so revenue growth didn’t keep pace with the underlying cost pressures.
By the time we get to HEPS, growth was just 0.7% (GBP) or 0.6% (ZAR). This iconic financial services group is in need of some new growth drivers, especially as return on equity has dipped from 13.9% to 13.6%.
They have big targets for 2030, including return on equity of 16%. That’s a substantial increase from here.
In FY27, they expect group ROE to be between 13% and 14%, so we will see another difficult investment period in FY27 before the benefits start to hopefully flow through. This is especially true in the UK, where ROE is expected to only be near the lower end of the target range.
It looks like the Zebra in my wallet is going to become a more common sight in South Africa. Part of Investec’s plan is to scale their private banking business and almost double the current base of 128,000 clients in South Africa. It’s much the same story in the UK, where they are looking to rapidly grow the current base of 8,200 clients.
Ghost Bite: This private banking plan seems fine, as long as I can continue to call a contact centre at any time of day or night and be met with an intelligent person who can solve any problem. The rewards programme also needs to remain strong. I pay pretty reasonable bank charges overall by having both my personal and business account with Investec. I’m sure that the likes of Discovery Bank are giving Investec plenty to think about at the affluent end of the market, while the value-focused options like Capitec are becoming increasingly compelling for many higher income earners!
Nampak’s normalised HEPS shows reasonable growth (JSE: NPK)
There are major distortions in HEPS as reported
Nampak has released a trading statement for the six months to March 2026. There are significant differences between normalised HEPS and HEPS, so that always makes things trickier.
HEPS has fallen by between 37% and 45%. There are significant non-recurring items though, including a pension fund surplus and COVID insurance settlement in the base period. Combined with relocation costs for the Angolan can production line in this period, this is a rare example of where HEPS can be a poor metric in terms of sustainable performance.
Instead, management would like you to use normalised HEPS. This suggests an increase of between 2% and 13%, with a range of R39 to R43 per share. This does seem like a far better way to think about performance, especially given what we know about the underlying progress being made.
Ghost Bite: You should always be wary when you see a normalised HEPS number. But sometimes, you actually have to go that route. This is one of those situations.
Netcare’s profit growth is encouraging (JSE: NTC)
You won’t often see a defensive business growing like this
Netcare’s trading statement for the six months to March 2026 tells a story of growth that you probably wouldn’t expect to see from a hospital group.
HEPS is up by between 18% and 23%, a strong growth rate by literally any standard. The fact that this is coming from a “defensive” business model is even more impressive!
They attribute this performance to a number of positive underlying factors, ranging from increased volumes through to operational efficiencies and the benefits of share buybacks.
Ghost Bite: New CEO Melanie Da Costa will be taking the reins at a group that is clearly in good shape. I’ve also seen a lot of really positive commentary in the market about her appointment. It all looks good!
Oceana is once again thanking its Lucky Star (JSE: OCE)
Fishmeal prices have been under pressure
Primary agriculture is difficult. It’s even harder when the volatility of the ocean is involved.
Oceana’s results are usually a game of give-and-take among the underlying divisions. In the six months to March 2026, there was a bit more taking than giving. Revenue fell by 6% and operating profit dipped by 1.6%. Despite this, the group still managed to grow HEPS by 7.7%!
Lucky Star foods and wild caught seafood were positive contributors to this quarter. The fishmeal and fish oil businesses struggled with lower catch volumes and weaker global prices.
This change in mix positively impacted gross profit margin, which increased from 27.8% to 28.1%. Along with cost control measures, this helped soften the blow of revenue pressure on operating profit.
The jump in HEPS was enabled by a 31.3% decline in net interest expense. Net debt has approximately halved over the past year! A healthier balance sheet certainly isn’t a bad thing in this environment, with a reduction in working capital driving an incredible jump in cash flow from operations.
In terms of outlook, the company has highlighted a few factors that should support fishmeal prices. It’s very difficult to accurately forecast these things though.
Ghost Bite: One of the worries here must surely be diesel and other fuel price pressures. These ships cost a lot of money to run!
Don’t let Pick n Pay’s group HEPS fool you (JSE: PIK)
Boxer is still doing the heavy lifting here
Pick n Pay has released a very strange trading statement. At the start of February, they told us that they expected the headline loss per share for the 52 weeks to 1 March to worsen by more than 20%. Now, they expect the headline loss to have improved!
How on earth did this swing happen in the space of only February? Also, does this actually mean that Pick n Pay itself is turning the corner?
I can’t really answer the first question, other than by pointing out that a business with marginal profitability can see massive percentage swings in profits based on only a few things changing.
But as for the second question, there’s a clear answer.
Pick n Pay consolidates Boxer (JSE: BOX), which means that the Pick n Pay group HEPS result is going to be driven to a great extent by the good things happening at Boxer.
If we drill down into Pick n Pay itself, the trading loss still got worse despite them having a better than expected month in February. The trading loss after interest was between R2 billion and R2.1 billion vs. R1.7 billion in the prior year.
Another very important point is that the prior period was a 53-week period. When you are loss-making, it actually helps you to be comparing a 52-week period to a 53-week period. It means you had one less week of losses!
The group headline loss per share is expected to improve by between 10% and 20% to between -55.39 cents and -49.23 cents. But I cannot stress enough that the underlying loss in the Pick n Pay segment has gotten worse, so this performance is thanks to Boxer.
Ghost Bite: As I’ve been writing for the past week, Pick n Pay is selling its golden goose and eating the proceeds. I can’t see the market being patient with this trajectory for much longer. It is critical that Pick n Pay shows a substantial improvement in its fortunes in the next financial year.
Sanlam is having a tougher year than they would like (JSE: SLM)
This is exactly why diversification is important
In the three months to March 2026, Sanlam grew operating profit by 8% on a comparable basis (and 2% as reported). That’s a decent outcome, particularly when you consider how things changed globally towards the end of the period.
But when you take into account the investment returns on shareholder funds, then the difficult market conditions have taken Sanlam’s year-on-year move in adjusted headline earnings into the red.
The variance at segmental level is quite something. For example, life insurance and health increased operating profit by 57%. General insurance was down by 61% as the short-term businesses (including Santam JSE: SNT) suffered a negative year-on-year move in underwriting margins due to large loss claims.
Importantly, the life insurance side is nowhere near as strong as that growth rate may suggest, as one of the important underlying trends is the pressure on value of new business (VNB) margin. We’ve been hearing about this change in product mix for a while now in local financial services results. Investment variances helped turn a difficult margin situation into strong growth in operating profit.
The group has been extremely busy developing its platforms across important markets. In South Africa for example, they’ve integrated Assupol and added 115 retail branches to the group. They also concluded the Ninety One (JSE: N91 | JSE: NY1) transaction across South Africa and the UK, giving Sanlam a 9.1% effective economic interest in Ninety One.
There’s much more to come, particularly in the planned introduction of banking services in South Africa in partnership with GoTyme. It’s incredible how competitive the banking industry in South Africa has become!
In India, they’ve been doing various transactions across the Shriram investments. In this period, they concluded the acquisition of additional interests in Shriram Life and Shriram General Insurance. Notably, $4.2 billion was invested by Mitsubishi UFJ Financial Group in Shriram Finance, so growth is being powered by more than just Sanlam’s capital.
These corporate activities have led to a decrease in discretionary capital from R8.1 billion to R3.2 billion. That’s still quite the war chest!
Overall, the group expects to still deliver in line with 2026 guidance. It’s a tough year though, particularly given the rough start in the short-term insurance business.
Ghost Bite: Sanlam has been an excellent long-term compounder of shareholder value. That doesn’t mean that they won’t have a bad year or two along the way!
Spear REIT is acquiring a property in Tygervalley (JSE: SEA)
This is a meaty deal, with a price tag of R960 million
Spear REIT has moved quickly in the past few days. After releasing their results and indicating that they are looking at acquisitions, they then released a cautionary announcement to signal to the market that one of the acquisitions is close to being announced.
We didn’t have to wait very long, as Spear has announced the acquisition of 1 Sportica Crescent in Tygervalley for R960 million. This is a portfolio of three premium-grade office properties with blue-chip tenants.
You might raise your eyebrows at office property, but this is a clever part of Cape Town to be investing in. With traffic to town just getting worse and worse, I think more Northern Suburbs executives will look to build their businesses in the Tygervalley area. This view is supported by the very low vacancy rates in the node.
The initial purchase yield is 9.67%. There’s a weighted average escalation of 6.5% and the weighted average lease duration is 2.4 years. The properties are fully let. The deal will be immediately earnings-enhancing.
Ghost Bite: With the market willing to value Spear REIT on a dividend yield of 6.68%, they can do deals like these all day long provided that interest rates don’t start rising. That remains the big question mark for the entire sector this year.
Tharisa made a fortune in the latest period (JSE: THA)
This will certainly help fund their underground plans
Tharisa is at a really important stage in its journey. The company is investing in underground development at the Tharisa Mine, a strategy to maximise the longevity of the underlying resource. This is an expensive and risky move that will be substantially derisked by the good times continuing in the PGM space.
Just a few more periods like the six months to March 2026 should do the trick. Revenue was up 28% and EBITDA jumped by 138.1%. Net profit after tax increased by a mildly hysterical 468.3%. When times are good in these businesses, they are very good!
They generated $96.4 million in net cash from operating activities, up 167.8% vs. the prior period. That’s just as well, because capital expenditure almost doubled to $103.5 million. This is why cash and cash equivalents dipped by 1.7% to $184.3 million.
Despite being in such a heavy investment period, they still increased the interim dividend from US 1.5 cents to US 2.5 cents.
Ghost Bite: One of the things you learn in finance at varsity is the signalling power of dividends. It sends a strong message to the market that Tharisa was happy to increase the dividend in the same period as capex nearly doubling. Let’s hope this decision won’t bite them in years to come!
Results of the previous poll:
Nibbles:
- Director dealings:
- A prescribed officer of Capitec (JSE: CPI) has bought shares worth R2.1 million.
- Other than many directors and senior execs reinvesting their dividends at Quilter (JSE: QLT), there was also a non-executive director who acquired shares worth over R1.1 million.
- A director of AngloGold Ashanti (JSE: ANG) sold shares in the market worth around R580k.
- ASP Isotopes (JSE: ISO) has filed its quarterly report. The company is still very early in its journey, with no revenue having been generated from the sale of enriched isotopes. Commercial shipments are expected in the third quarter of 2026. If they get that right, it will calm the nerves of investors. The company is also busy with numerous other projects, like the preparation of Quantum Leap Energy for a separate listing and extracting value from the Renergen acquisition. The current financials at the group are a very poor indication of the underlying long-term opportunity.
- Deneb (JSE: DNB) has a very thin layer of public ownership, so liquidity is a challenge in this stock. That’s a pity, as the latest results are strong. Revenue was up by 16% in the year ended March and HEPS jumped by 57%. The distribution per share only increased by 9% though, so they are retaining a bigger chunk of their earnings than before.
- Anglo American (JSE: AGL) announced the results of the dividend reinvestment programme. Holders of around 5% on the South African register and roughly 0.8% on the UK register elected to receive shares instead of a cash dividend. The shares were purchased in the market rather than issued by the company, so this isn’t the same as a scrip dividend alternative which preserves the company’s cash.
- Orion Minerals (JSE: ORN) has requested that the trading halt in its shares on the ASX should run until 25 May. This means that the pending capital raising announcement should be out very soon.
- Shuka Minerals (JSE: SKA) announced the drilling results from the maiden diamond drill hole at Kabwe. Even though the area was previously mined, there’s always the risk of a nasty surprise in the results. Thankfully, the company seems really pleased with the results, commenting that they came in “well beyond” their expectations.
- Zeder (JSE: ZED) has received approval from the SARB for its special dividend. The payment date is 8th June.
- It looks like it’s all over at Efora Energy (JSE: EEL). After trading under cautionary and hoping that they would put together a transaction to save the company, they’ve now withdrawn the cautionary as that deal has fizzled out. To make it worse, the directors will now proceed with a liquidation instead!
