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Ghost Bites (Discovery | Fortress Real Estate | KAP | Libstar | Nedbank | OUTsurance | Spur | Tiger Brands | Truworths)

The Finance Ghost
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Ghost Bites (Discovery | Fortress Real Estate | KAP | Libstar | Nedbank | OUTsurance | Spur | Tiger Brands | Truworths)

Discovery is achieving excellent growth in profits (JSE: DSY)

Discovery Bank has posted positive earnings

Discovery has released a trading statement for the six months to December 2025. With the share price closing 7.6% higher on the day, you know it’s a goodie.

Normalised profit from operations is up by between 22% and 27%, while normalised headline earnings should be up by between 25% and 30%. Those are excellent growth rates.

If you dig a bit deeper, Discovery Insurance was one of the highlights (growth of 32% to 37%). Another bright spot is Discovery Bank, which looks like it made at least R65 million in profit vs. a loss in the prior period of R145 million. They are acquiring around 1,500 customers per day in the bank.

Along with solid growth in Discovery Life of 13% to 18%, this was good enough to propel Discovery SA forward by between 16% and 21%.

As for the rest of the growth, investors will love seeing Ping An up by between 33% and 38%. Vitality is up strongly as well overall, although elements of it were affected by currency movements (specifically Vitality Network in Japan).

Results are due on 3rd March. In the meantime, investors might treat themselves to a smoothie thanks to a share price increase of 25% over the past year.

A healthy balance sheet and solid earnings growth at Fortress Real Estate (JSE: FFB)

The total return (share price + dividend) over 12 months is above 40%

Fortress Real Estate is an interesting fund. They have logistics properties worth R24.1 billion, with exposure to South Africa as well as Central and Eastern Europe. They have retail properties in South Africa worth R11.9 billion. They also have a 14.2% stake in NEPI Rockcastle (JSE: NRP) worth R15.4 billion.

Like most property groups, Fortress has earmarked certain properties for sale. They note that conditions in the property sector are improving over time, so they are being patient with the sales in order to get the best possible exit. The results for the six months to December 2025 reflect like-for-like net operating income (NOI) growth in the retail and logistics portfolios of 6.7%, so I tend to believe them.

Vacancies are down, tenant turnover is up and the sun seems to be shining on the fund at the moment. For example, the retail portfolio’s like-for-like NOI growth of 7.0% is more than double the rate of inflation.

The performance for the interim period is strong enough to give the group confidence to upgrade distributable earnings guidance for the full year. They now anticipate growth of 10% for FY26.

For the interim period, distributable earnings increased by 16.7% and the interim dividend per share was up by 15.4%. There’s a scrip dividend alternative (shares instead of cash for the dividend), priced at a 3% discount to the volume-weighted average share price.

The shape of KAP’s income statement has changed (JSE: KAP)

The focus on margin is paying off – but there’s much work to be done

When KAP first gave an indication of its earnings for the six months to December 2025, I ran a poll at the time asking about your views on the company. Here are the results:

That’s a bullish view, with only 11% of people believing that something will go wrong from here. But to really get momentum in the share price, the company needs to get more people in the 44% fence-sitting category to get on the bid and become shareholders.

The decrease in revenue of 3% is unlikely to convince those investors, but perhaps the jump of 32% in HEPS will pique their interest. This was driven by a 10% increase in operating profit despite the revenue pressure. It’s also worth highlighting that cash generated from operations was up by 39%.

To be fair, the base period was severely impacted by the ramp-up costs at PG Bison’s new MDF facility, as well as a horrible situation for Feltex in the local vehicle manufacturing industry. Both of these issues have improved, hence the jump in profits for the group.

PG Bison’s operating margin is up 160 basis points to 15.2%, with a revenue increase of 18% in that segment doing great things for profitability. And at Feltex, operating profit increased dramatically from R42 million to R146 million thanks to a 23% increase in revenue.

As for the revenue pressure, Safripol is largely to blame here. The company suffered an 18% reduction in revenue and a 40% drop in operating profit. The operating margin is just 4%, so a drop in revenue in this low-margin segment can be mitigated by revenue in other, high-margin segments. This is why we’ve seen such a change to the group margin.

Unitrans also contributed to the change in group margin. Despite revenue decreasing by 8%, operating profit was up 3%. They are focusing on margin, not revenue for the sake of revenue.

Sleep Group grew revenue by 5% and operating profit by 4%, with the company even attributing the weak demand to online gambling. If retailers in South Africa are to be believed, people are practically sleeping on the floor in order to have money for gambling. I know it’s a problem out there, but I still think that it’s at least partially just a convenient scapegoat. In any event, 5% revenue growth isn’t a bad outcome!

But there is one bad outcome: Optix continues to disappoint. Revenue fell 11% and the operating loss widened from R18 million to R43 million. We keep hearing about how things are going to improve at this investment. It’s becoming a larger and larger pimple, right in the middle of KAP’s nose, and at a time when the market is actually starting to look more closely at KAP’s performance.

They expect the second half of the year to be softer compared to the first half. They will hopefully manage to keep margins at decent levels.

KAP is down 9.5% over 12 months, but up 25% year-to-date!

Much better numbers at Libstar (JSE: LBR)

They carried on where they left off in the first half

Libstar has released a trading statement for the year ended December 2025. They had a solid first half to the year, so the market was hoping that the momentum would continue. The good news is that it did!

With the fresh mushroom operations being sold, that part of the business has been recognised as a discontinued operation. Keep that in mind when thinking about the percentage ranges.

With areas of the business like Perishable Products and Wet Condiments doing well, total HEPS is expected to increase by between 19.6% and 24.6%. The performance was helped along by a reduction in finance costs, made possible by strong operational cash flows that took pressure off the balance sheet.

Normalised HEPS from continuing operations increased by between 20.7% and 23.7%. It’s good to see that the normalised number isn’t terribly different to the number without adjustments.

It’s not all good news – there was still a large impairment that left them in a loss-making position in terms of EPS. The Ambassador Foods snacks business looks like it suffered an impairment of over R200 million.

It’s still a much better set of numbers than we are used to seeing at Libstar. The company is still trading under cautionary based on negotiations with potential acquirers of the group. Whether or not a deal will materialise remains unclear.

There’s only slightly positive growth at Nedbank (JSE: NED)

But it’s better than the market expected

Nedbank’s share price closed 8% higher on Thursday. This is a great reminder that share price moves are a function of expectations vs. reality, not just the underlying reality.

The trigger for the move was a further trading statement, in which Nedbank confirmed that diluted HEPS would increase by between 0% and 4% for the year ended December 2025. Not exactly exciting, is it?

Return on equity (ROE) is expected to be between 15.3% and 15.5%, down from 15.8% in the prior year.

The other important metric is of course net asset value (NAV) per share, which increased by between 3% and 5%. The NAV per share is between R247.60 and R252.41, while the share price is currently at nearly R315.

These numbers reflect a bank that is struggling to grow, but they were still ahead of the market’s even more bearish expectations.

The reason for the share price trading at a premium to NAV is that the ROE is well above the return required by investors on Nedbank. This means they are willing to bid up the price until it reaches an effective return that they are happy with.

The mid-point of the NAV guidance is almost exactly R250, so the share price is trading at 1.26x NAV (or book value). Based on ROE of 15.4% at the mid-point of guidance, the effective ROE (calculated as 15.4/126) is 12.2%. In other words, investors are paying a premium to NAV that gives them an effective ROE of 12.2%, as they pay R126 for every R100 of NAV, and earn R15.4 on that amount.

It’s not a simple concept, but I felt it was worth giving it a go. This concept is a major driver of bank valuations.

And in case you’re wondering why Nedbank would release a trading statement for such a small move in HEPS, it’s because the really big move is actually in Earnings Per Share (EPS). Due to the accounting treatment of the disposal of the stake in Ecobank, EPS will decline by between 52% and 55%.

Earnings are up at OUTsurance, but their Australian business had a very tough period (JSE: OUT)

Storms and catastrophe events severely impacted Youi’s margins

One of the many standing jokes in South African investment circles relates to how Australia just continues to hurt the people who invest there. One of the (very few) exceptions has been OUTsurance, who built the Youi business from scratch in that market. Building instead of buying has been key to success.

But even Youi can have a rough year, especially as an insurance company that has to retain some of the risk on its balance sheet in order to earn an underwriting margin. Thanks to catastrophe events and storms in Australia (as though the spiders and snakes weren’t bad enough), Youi’s normalised earnings for the six months to December 2025 were down by between 40% and 46%.

When you consider that Youi contributed more than half of the group numbers in the comparable period, that’s a scary decrease.

Thankfully, OUTsurance SA came to the rescue, just like they do when the robots aren’t working in Joburg. Earnings growth of 66% to 72% in that business did a spectacular job of offsetting the Youi pressure. In fact, it was enough for the OHL Group to be up by between 10% and 15%!

Although there were high-quality sources of earnings growth in South Africa (like increases in gross written premium and a better claims experience), I must note that the South African results were helped along by a change to share-based payment structures. This is good for shareholders, but would presumably have the largest impact on the implementation of the new scheme (i.e. in this period) rather than on an ongoing basis. In other words, the incredible growth in South Africa probably isn’t an indication of realistic growth rates in years to come.

Looking at the two smaller parts of the business, OUTsurance Life was flat, with a performance of -2% to 4%. This was mainly because of the change in the South African yield curve, rather than a reflection of the underlying sales performance. OUTsurance Ireland is in the incubation phase, with losses worsening by between 18% and 24%. They expect the losses to moderate in the second half of the year.

As an additional complication, OUTsurance Group as the listed company only holds 92.8% of OHL, which is where the abovementioned operations sit. There are also other balance sheet items that sit at group level, so the results are impacted by the performance in OHL as well as any other movements that sit above OHL.

Normalised earnings per share for the group increased by between 4% and 10%, while HEPS was up by between 11% and 17%. OUTsurance believes that normalised earnings is where you should focus.

The share price is only up 3% over the past 12 months. OUTsurance is an excellent business, but it trades at a demanding valuation.

Tasty mid-teen growth at Spur (JSE: SUR)

This has been a fantastic growth story in recent years

I’m a dad, which means that Spur is a place where I find myself every few weeks or so. It’s just one of those things. Parenting is both rewarding and challenging, with Spur waffles helping to grease the wheels of procreation.

The company knows exactly what they are doing, with a focused strategy that can only leave Famous Brands (JSE: FBR) investors with a bad taste in their mouths. Just look at the outperformance over five years:

Spur’s triumphant share price chart looks set to continue its journey, as the latest results for the six months to December are strong. Revenue is up 8.5%, HEPS increased by 13.6% and the interim dividend was up 13.2%. Cash generated by operations increased by a delightful 21.1%.

Customer count is up for the period, with average spend per head growing above menu inflation. Like I said, it’s those damn waffles.

Jokes aside, it’s actually the pizza. Panarottis was the star of the show, with restaurant sales growth of 17.4% for the period. Spur was good for 7.2%, while RocoMamas increased 4.9%. I’m afraid that John Dory’s remains poor, with sales down 11.7%. The Speciality Brands segment, which includes Hussar Grill and Doppio Zero, grew 9.1%.

One of the uncertain items is the contractual dispute with GPS Food Group. Although arbitration proceedings have supported the merits of the claim, the quantum hasn’t yet been determined. With two separate claims of R167 million and R95.8 million, we aren’t talking small numbers here. As Spur is appealing the arbitration outcome, they haven’t raised a liability at this stage. Just keep this in mind as a potential negative “surprise” down the line.

I’m keen to get your views on Famous Brands vs. Spur:

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Spur vs. Famous Brands: sit down or takeaway?

Which of these two names would you pick?

Tiger Brands is focused on efficiencies (JSE: TBS)

A price-deflationary environment means that only the strong survive

Tiger Brands released a voluntary update for the four months to January 2026. In an environment of low inflation in core products like bread and cereals, it’s really difficult to achieve significant revenue growth.

Revenue from continuing operations increased by 1% year-on-year. Volumes were up 2% and price had a -1% impact – your eyes do not deceive you, that is price deflation! They’ve continued to clean up the product range, with volumes up 5% if you focus only on the SKUs they will have going forward.

Revenue growth was achieved in all business units except for Home and Personal Care, where competitive forces were severe. They expect that to get better in the second half of the year based on turnaround initiatives.

Despite the subdued revenue growth, gross margin was up. This drove growth in operating profit, with a double-digit operating margin. Benefits in areas like supply chain costs also contributed to the growth in margin.

The optimisation of the group remains the focus. This includes transactions like the disposal of the Cameroonian subsidiary, Chocolaterie Confiserie Camerounaise S.A. (Chococam). They are also deciding what to do with Beacon Chocolate and King Foods, which remain in continuing operations for now.

Although some of the share price pressure this year is because of the significant special dividend that was paid in January, there’s also evidence of profit-taking here. The share price closed 6% lower on Thursday in response to this update.

The anaemic results at Truworths continue (JSE: TRU)

They appear to be incapable of addressing the slide in Truworths Africa

Truworths trades on a Price/Earnings multiple below 8x. This isn’t because of market apathy, or because of unreasonable bearishness among investors. It’s because the only thing propping them up right now is the Office UK business – and the market knows exactly how vulnerable these offshore stories can be.

For the 26 weeks to 28 December 2025, Truworths Africa suffered a revenue decline of 3.6%. They are down in almost just about every category, making it clear that they have no idea how to stem the bleeding in the local business. Office UK grew sales by 7.1% for the period, which was just enough to perfectly offset the decline in Truworths Africa.

In terms of sales channels, online sales were up 23.3% in Truworths Africa and contributed 7.4% of sales. Office UK’s online sales were up 7.5% in local currency and contributed 45.7% of total sales (the UK online market is mature vs. South Africa).

The Office UK growth vs. Truworths Africa decline led to flat sales at group level, accompanied by a steady gross profit margin of 51.8%. At least this is an area where Truworths Africa showed some improvement, with gross margin up from 53.6% to 54.0%. Office UK’s gross margin dipped from 48.2% to 48.0%.

Group trading profit increased by 2.8%, with margin up from 16.8% to 17.2%. Cost control in Truworths Africa was probably the highlight of this result, with trading expenses down 2.6% excluding forex losses.

By the time you reach HEPS, you find an increase of 1.3%. The dividend was up by a similar percentage.

For the first seven weeks of the second half of the year, sales in Truworths Africa were up by 0.6%. Compared to the decline in the first half, this is cause for celebration. But here’s the problem: Office UK’s sales were down 1.7% in rand terms despite being up 3.4% in local currency. An investment thesis based on one offshore entity is extremely vulnerable to issues like forex movements.

The Truworths share price is down 24% over 12 months. They are up 6.7% year-to-date, with the share price trying (and failing) to break above R61.

Nibbles:

  • Director dealings:
    • A prescribed officer of Reunert (JSE: RLO) sold shares worth R1.6 million.
    • An associate of a director of KAL Group (JSE: KAL) bought shares worth just under R1 million.
    • An associate of a director of Goldrush (JSE: GRSP) bought shares and CFDs worth R745k.
    • A director of Calgro M3 (JSE: CGR) has bought shares worth R175k.
  • Sygnia (JSE: SYG) has suffered yet another change in top management, with the company struggling to give investors much consistency beyond the almost-guaranteed presence of founder and CEO Magda Wierzycka. The latest is that Rashid Ismail has resigned as the financial director of the group. A replacement hasn’t been named as of yet.

Who’s doing what this week in the South African M&A space?

Marylou Greig
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Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

In March 2025, enX subsidiary enX Trading, entered into a subscriptions and options agreement with Trichem SA which saw the company acquire from enX a 25% stake in West African International (WAI). Trichem SA had the option to put the subscription shares to enX and to acquire the remaining 75% interest, which it has now done. Trichem paid R107,3 million for the initial stake and will pay not less than R286 million on aggregate for the full ownership of WAI, capped at an aggregate maximum consideration of R407 million – which will be paid in cash. The transaction is in line with enX’s strategy of increasing shareholder value by disposing of those businesses that unlock value when suitable opportunities arise.

Octodec Investments has announced the disposal of Killarney Mall to AJPG Property 1 for a consideration of R397,5 million. The property was strategically identified as an asset to recycle, with greater value to shareholders achieved in the unlocking by divesting and redirecting capital into other opportunities.

Altron Document Solutions, a subsidiary of Altron, will acquire a controlling equity stake in document solutions and technology services company Xtec KZN, in a move that will see it accelerate its regional growth and expand its services delivery capabilities across the South African market.

Mr Price has advised shareholders that all regulatory conditions in respect of the company’s acquisition of the retail business of NKD Group from Pegasus Group, have been received and the transaction has accordingly become unconditional.

Transpaco has been informed by the Competition Commission that the company’s R128 million acquisition of the Premier Plastics Group, announced in November 2025, has been prohibited. The company has advised it is working through the Commission’s response and will consider options available to it.

Unlisted Companies

Lithium Africa, has announced its intention to acquire a 70% stake in Namli Exploration & Mining. Namli holds the prospecting right and a mining permit comprising the Springbok Project which is located in the Namaqualand region of the Northern Cape. The project includes a past-producing lithium pegmatite mine with an associated, historically produced stockpile. Lithium Africa is seeking a partner to monetise the stockpile and in-pit material. The company will pay US$1,35 million in cash for a 30% stake and $4 million in total in a staged transaction.

DealMakers is SA’s quarterly M&A publication.
www.dealmakerssouthafrica.com

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
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Weekly corporate finance activity by SA exchange-listed companies

AttBid, a vehicle representing Atterbury Property Fund (APF), and WeBuyCars founders Faan and Dirk van der Walt, which made an offer to RMH shareholders earlier this month, has acquired in on-market transactions a further 31,83 million RMH shares. Following the transactions, AttBid and APF hold an aggregate of c.35.11% of the RMH shares in issue.

Marshall Monteagle has issued 1,300,000 shares for cash, raising approximately US$2 million at a price of $1.54 per share. The additional shares represent 3.63% of the total issued share capital of the company.

The Board of Caxton and CTP Publishers and Printers has taken the decision to withdraw the declaration of a special dividend of 100c per ordinary share announced in January. This follows the delayed receipt of approval from the SARB. The company will now pay an interim dividend in the same amount.

This week the following companies announced the repurchase of shares:

Anheuser-Busch InBev’s US$2 billion share buy-back programme continues. The shares acquired will be kept as treasury shares to fulfil future share delivery commitments under the group’s stock ownership plans. During the period 16 to 20 February 2026, the group repurchased 396,379 shares for €26,4 million.

In December 2025, British American Tobacco extended its share buyback programme by a further £1.3 billion for 2026. The shares will be cancelled. This week the company repurchased a further 308,209 shares at an average price of £45.28 per share for an aggregate £17,21 million.

During the period 16 to 20 February 2026, Prosus repurchased a further 2,058,244 Prosus shares for an aggregate €89,54 million and Naspers, a further 796,820 Naspers shares for a total consideration of R717,63 million.

One company issued a profit warning this week: RCL Foods.

Two companies issued or withdrew a cautionary notice: Trustco and Labat Africa.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Who’s doing what in the African M&A and debt financing space?

Vanessa Aitken
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Who’s doing what in the African M&A and debt financing space?

DealMakers AFRICA

In Mali, NDC Energie has acquired approximately 80 services stations across the country from Coly Energy Mali, a subsidiary of Benin Petro, for an undisclosed sum. Coly acquired the assets from TotalEnergies last year when the global firm exited its 25-year presence in the West African country. Its extensive assets accounted for an estimated 25% – 30% of the national fuel network.

Mineral exploration and development company, Kendrick Resources, has exercised its option to acquire a 70% stake in Namibia exploration licences EPL4458 and EPL 6691 from Bonya Exploration Pty Namibia. The consideration payable is US$300,000 in cash and the issue of 22 million ordinary shares in Kendrick. Further considerations of $500,000 and three million Consideration Shares will be payable once the extension of at least 18 months have been granted to the Licences.

Grene Capital Management Nigeria has completed of the management buyout of the firm from Actis. Grene Capital will now operate as an independent, Africa focused real asset fund manager, currently invested in two institutional-quality assets: Jabi Lake Mall in Abuja and Heritage Place office building in Ikoyi, Lagos.

WafR, a Morocco-based fintech, has closed a US$4 million oversubscribed seed round, co-led by LoftyInc Capital, Attijariwafa Ventures, and Almada Ventures, with participation from returning investors UM6P Ventures and First Circle Capital. WafR enables small merchants to optimise their revenues by becoming digital access points for payments, airtime top-up and other financial services. The funding will be used to, amongst other things, accelerate the expansion of its distribution network.

Spiro, an e-mobility company operating in Kenya, Uganda, Rwanda, Nigeria, Benin and Togo – with pilots underway in Cameroon and Tanzania, has raised US$50 million in debt funding from Afreximbank and two new investors Nithio and Africa Go Green Fund managed by Cygnum Capital. The new capital will support the continued expansion of Spiro’s battery swapping network across existing and new markets, while further advancing the company’s proprietary technology platform, including automated battery swaps, fast charging, and renewable energy integration.

In November 2025, Ellah Lakes, an agricultural company listed on Nigeria’s NGX, announced a ₦235 billion Public Offer consisting of 18,8 billion shares at ₦12.5k each. The funds were earmarked for acquisitions and working capital. On 23 February 2026, the company announced that the level of subscription had not met the minimum threshold for allotment and therefore no shares would be allotted pursuant to the Offer. Subscription monies received would be refunded to applicants.

Abu Dhabi headquartered, Mubadala Energy, has acquired a 15% participating interest in the Nargis Offshore Area (‘Nargis’) concession, an offshore exploration block in Egypt, from Eni. Financial terms were not disclosed. The Nargis concession is located in the East Nile Delta Basin of the Mediterranean Sea, approximately 50km offshore. The concession includes the Nargis‑1 discovery made in early 2023. The Nargis concession is adjacent to the Eni-operated Nour concession, in which Mubadala Energy has a 20% stake.

The Mauritius Commercial Bank (MCB) has successfully closed its inaugural GCC and India focused Syndicated Term Loan of US$450 million. Initially launched at $300 million, the facility was oversubscribed by approximately 2.1x, enabling MCB to upsize the loan to $450 million. The facility is structured as a two-year term loan with a one-year extension option at the borrower’s discretion (2+1) and will be used for general corporate purposes.

DealMakers AFRICA is the continent’s quarterly M&A publication
www.dealmakersafrica.com

Rising M&A activity signals growing investor confidence

Kgolo Qwelane
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Rising M&A activity signals growing investor confidence

The uptick in local and foreign mergers and acquisitions (M&A) activity in South Africa, as well as the successful hosting of the G20 Summit, bode well for the country’s investment landscape.

A recent deal of note is Metrofile, currently being acquired by US-based investor group, Mango Holding Corp. The acquisition represents a strategic opportunity for the group to establish a regionally diversified platform in the information management and digital services sector across Africa and the Middle East.

Not only will the deal give the investors immediate presence in South Africa, Kenya, Botswana, Mozambique and the Middle East through Metrofile’s operational footprint, it will give them access to a proven platform with a trusted brand, making it a strong foundation for digital expansion and business process automation services aligned with global customer demand trends.

For Metrofile, the offer represents a unique opportunity for its shareholders to realise significant value with a premium exit, and for its employees, customers and suppliers to participate in Metrofile’s digital expansion potential.

Tamela acted as an independent expert for Metrofile, mandated to ensure shareholder protection, fair valuation, and transparent decision-making. This involved reviewing historical financial information, analysing management forecasts and budgets, performing various valuations, and considering the prevailing economic and market conditions.

What made the transaction significant was the premium payable – roughly a 95% premium to the 30-day volume-weighted average price (VWAP) prior to the first cautionary announcement, providing shareholders with meaningful value uplift. More broadly, the transaction demonstrates that South African companies continue to offer attractive value to foreign buyers, partly due to the strategic market access they provide.

The Metrofile acquisition is just one example of a more resilient M&A market. Several other deals, such as Old Mutual’s acquisition of 10X Investments; FirstRand’s acquisition of a 20.1% stake in Optasia; Premier Group’s acquisition of RFG Holdings; Nedbank’s acquisition of fintech company, iKhokha; and Exxaro’s acquisition of a portfolio of manganese assets, also underline this upswing.

It is encouraging that these companies have the confidence to consider how they should be allocating capital and what strategic bolt-on acquisitions could help strengthen their portfolios, despite various geopolitical uncertainties, such as US-SA tension.

M&A activity is a critical catalyst for moving companies forward, whether they are bulking up or gaining access to new technology. It is also an effective way for large companies to consolidate their operations and divest non-core assets – a continuous process of analysing their portfolios and identifying opportunities for optimisation, always with the overarching goal of enhancing stakeholder value for all participants.

Looking at recent transactions, the Premier Group–RFG Holdings merger is one such example. In this instance, both companies operate in the consumer goods sector and looked to create a more compelling, robust and sustainable business.

In the Fintech space, Old Mutual’s acquisition of 10X Investments will allow Old Mutual to go to market with a modern, low-cost, tech-driven platform aimed at attracting younger, digital-savvy investors, and 10X Investments will gain capital for growth and tech investment, while maintaining its brand and operational independence.

While the boost in M&A activity, especially investment by local players, means the market benefits from improved investor confidence, attractive valuations and evolving regulatory frameworks, this necessitates careful navigation by experienced local partners, especially for foreign investors.

Kgolo Qwelane is a Corporate Finance Executive | Tamela

This article first appeared in DealMakers, SA’s quarterly M&A publication.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Private equity set to steer economic growth for Africa in 2026

Naqeeba Hassan
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Private equity set to steer economic growth for Africa in 2026

Private equity (PE) appears to continue to be a vital engine for economic growth in Africa, catalysing investment across sectors and attracting domestic and foreign capital.

However, as the industry matures, it faces increasing complexity, driven by regulatory reform, evolving fund structures, and heigh-tened scrutiny from competition authorities and institutional investors.

Competition law reform
Last year, two new African competition authorities became operational – Uganda’s new competition authority, and the East African Competition Commission. Both are expected to impact the time and the cost of transactions in the region.

In addition, in December 2025, the Common Market of Southern and Eastern Africa (COMESA) Competition and Consumer Commission announced the implementation of the COMESA Competition and Consumer Protection Regulations, 2025 (Regulations) and the COMESA Competition and Consumer Protection Rules, 2025 (Rules).

The Regulations and Rules repeal and replace the 2004 legislative framework, introducing a fundamentally reshaped enforcement landscape for competition and consumer protection in the COMESA region.

Key highlights for investors include that the Regulations explicitly establish a ‘one stop shop’ for conduct with a regional dimension, including an exclusivity rule preventing parallel national notifications for mergers that meet COMESA thresholds. They also include a stronger conflicts rule with respect to matters with a regional dimension (i.e. COMESA law prevails, rather than national competition or consumer protection laws) and delineate when Member States may act, including structured referrals.

Several important changes were made to the merger control regime, including a clearer definition of a ‘merger’, clarity on the scope of notifiability of joint venture transactions, and specific thresholds for mergers within digital markets (including platforms).

New merger notification thresholds were also introduced for transactions more generally, and the filing fee is now capped at US$300,000 (up from $200,000). One of the most consequential reforms under the Regulations is the transition from a non-suspensory to suspensory merger control regime, with financial penalties applicable for implementation of mergers without prior approval.

Taken together, these reforms mark one of the most far-reaching shifts in regional competition policy on the African continent and should be on the radar of every investor.

Risk a key consideration in exits
In another development, we have seen that PE fund managers and investment committees have started building exit strategies into their models from the outset.

Risk mitigation systems, particularly insurance, play a critical role in successful exits in Africa. Strategic acquirers are building models using their knowledge of assets, systems and experience in the region to deal with any known risk and uncertainty from early on.

There is also a growing appetite from insurers to underwrite risks via warranty and indemnity (W&I) insurance. While W&I insurance has traditionally been a buy-side policy, increasingly, sellers are adopting W&I insurance to ensure comprehensive coverage and clean exits by reducing the chance of any post-transaction liability and disputes.

Rigorous valuation and due diligence
Post-COVID, PE valuations have become more rigorous, with a move away from assessing value via benchmarks like headline multiples to a more detailed cash flow-based analysis.

There is an increased need by parties to include cyber aspects in their due diligence investigations. Conducting an ESG-related due diligence has also become more prevalent. In addition, there is increasing focus on conducting anti-bribery and corruption due diligence, as well as commercial due diligence, especially linked to cash flows, while IT due diligences have been significantly extended to include applications, governance and infrastructure systems.

Fund structuring becoming more commonplace
In recent years, Africa has seen an increased interest in fund establishment, particularly private credit funds aimed at mobilising institutional capital from pension schemes.

Alternative Investment Funds (AIFs) also offer a pathway for engaging institutional investors like pension schemes, insurers and family offices. With no restrictions on asset types or distributions, AIFs are able to invest in listed, unlisted and offshore assets and enable local currency fundraising, which alleviates foreign exchange risk.

Final note
Heading full swing into 2026, PE investors are expected to anticipate regulatory shifts, navigate increasingly sophisticated deal structures, and focus on long term value creation. It seems that those that do will play a defining role in the continent’s economic growth.

Naqeeba Hassan is a Partner | Bowmans.

This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Ghost Bites (AECI | Bidcorp | Blu Label | Fortress Real Estate | Hammerson | Motus | Mustek | Shaftesbury | Valterra Platinum)

The Finance Ghost
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Ghost Bites (AECI | Bidcorp | Blu Label | Fortress Real Estate | Hammerson | Motus | Mustek | Shaftesbury | Valterra Platinum)

Things are looking much better at AECI (JSE: AFE)

AECI Mining has achieved a significant margin uplift

With the share price up by roughly 16% year-to-date (and we are only in February), AECI is clearly doing something right. The group turnaround is showing decent momentum, with the release of results for the year to December 2025 confirming that HEPS is moving firmly in the right direction.

Revenue from continuing operations may have dipped by 4%, but EBITDA from those operations was up 12% as margins improved.

You pay dividends (and reduce debt) with profits, not revenue!

Earnings per share from continuing operations improved by 36%, while HEPS was up by an excellent 53%. Before you get too excited, the dividend was only 4% higher, so this HEPS move hasn’t been backed up by an exciting dividend move.

But here’s why: net debt has plummeted from R3.7 billion to R465 million. It doesn’t help to ramp up the dividends to shareholders while you owe the bank. AECI has quite rightly taken the improved earnings and used them to stabilise the balance sheet. They also realised R2.2 billion in asset disposals, so that did wonders for debt reduction.

AECI Mining did the heavy lifting in terms of EBITDA margin, achieving its highest ever EBITDA despite a drop in revenue. They’ve focused on margins and pricing in the business, with the results clear to see. EBITDA margin improved from 12% to 15%.

AECI Chemicals remains a problem though. Margins went the other way, as a 4.5% revenue increase was accompanied by a 5% decline in EBITDA. Pricing pressure was one factor, with expected credit losses being another. On the plus side, segmental free cash flow improved by 34%.

Overall, they are making significant progress.

Solid numbers at Bidcorp (JSE: BID)

The company has spent years growing into its valuation

Bidcorp is easily one of the best examples of a company that has roots in South Africa and beautiful blooms all over the place in offshore markets. Through bolt-on acquisitions and a consistent strategy, they’ve built what can genuinely be referred to as a food service empire.

The valuation was always helped along by the “rand hedge” era, in which companies were desperate to have exposure elsewhere. South Africa is on a much firmer footing now, so investors are less inclined to chase offshore opportunites. Combined with a demanding valuation, this is why the total return in this stock over three years is only 18%. That’s in the green, but not exciting.

But at some point, the company will have grown into its valuation. The share price is down 7.5% in the past year, yet the freshly-released results for the six months to December 2025 reflect growth in HEPS of 8.5% (or 6.9% in constant currency). The Price/Earnings (P/E) multiple is now in the mid-teens. For such a great company, that’s starting to become interesting.

For all the rand strength that we keep talking about, it’s worth remembering that this is mainly against the US dollar – a market that Bidcorp doesn’t operate in. This is why revenue for the period was up 7.1% as reported, or 5.9% in constant currency. There’s still a rand hedge element to this story, as the rand tends to weaken against the markets where Bidcorp operates.

Trading profit increased 8.1% as reported (6.9% in constant currency), so margins improved in this period. But nothing improved quite as much as the cash margins, with cash generated by operations (net of working capital) up by a juicy 27.2%. Working capital can skew this from period to period, but that’s still good to see.

The interim dividend increased by 9.8% – a solid outcome.

A scan of the segmental numbers does reveal one ugly duckling. And of course, it would be Australasia, the ultimate widowmaker for South African businesses. Revenue fell 0.3% and trading profit was down 4.6%. They note cost inflation, a tight labour market and ongoing wage inflation.

Believe me, if Bidcorp is struggling in that market, then the clothing retailers must still be getting hammered.

Dividends are back at Blu Label Unlimited (JSE: BLU)

But the numbers are still impacted by accounting complexities related to Cell C

Blu Label has had quite a year. They successfully executed the separate listing of Cell C (JSE: CCD), setting that business free to go off and execute a strategy built around the MVNO offering as a key growth engine. Blu Label has retained a stake of 49.47% in Cell C. This is below the threshold for control, so the stake will be equity accounted going forwards.

This will do wonders for the simplification of Blu Label’s financial reporting, but we aren’t quite at that point yet. They’ve had to recognise significant accounting losses related to the restructuring.

To mitigate that pain and to show the market that there’s a business underneath all this, Blu Label has resumed interim distributions by declaring an interim dividend of 43.56 cents. At least this gives the market a base to work with.

On the subject of bases, revenue was a neat R5.0 billion and gross income was R1.35 billion. EBITDA came in at R535 million, so the EBITDA margin is north of 10%. Headline earnings came in at R398 million, or a margin of around 8%.

In terms of group prospects, one of the major growth initiatives is BluEnergy, which has secured a multi-year energy trading licence from NERSA. They are looking to play in the renewable energy space, so that’s going to be one to watch.

The share price closed 12% higher on the day, perhaps because the market can finally understand more of the numbers?

I’m keen to get your views on this one. Please participate in the poll below:

A short and sweet trading update at Fortress Real Estate (JSE: FFB)

Mid-teens growth is the order of the day

Fortress Real Estate has given the market a brief update on the expected earnings for the six months to December 2025. The announcement may be devoid of additional commentary or management narrative, but at least they give a precise number.

Shareholders can expect a dividend per share of 87.89 cents, representing an increase of 15.4% year-on-year. The share price is up 36% in the past 12 months.

Hammerson has grown its earnings in the UK market (JSE: HMN)

6% dividend growth in pound sterling isn’t a bad outcome at all

UK property fund Hammerson has released results for the year ended December 2025. Like-for-like net rental income growth of 3% got things off to a good start on the income statement, with EPRA earnings growth of 5% by the time you work through the expenses. As for the cherry on top, dividend growth was 6%.

That might not sound exciting, but you need to remember that this is a hard currency return. And although there are a lot of valid concerns about the UK economy at the moment, the pound has proven to be a lot more resilient than the US dollar.

The portfolio value increased by 33% through a combination of acquisitions, growth in rentals and compression in valuation yields. They had record leasing activity and strong positive reversions in leases. Occupancies sit at 96%, so the Hammerson portfolio is doing well overall.

The flagship portfolio increased footfall by 2%, with the fund highlighting a “best and the rest” trend that is making it increasingly important for investors to look for quality retail properties. I agree with this sentiment, particularly in this omnichannel retail world.

The loan-to-value (LTV) of 39% is on the high side by South African standards, but the UK benefits from a lower cost of borrowing than we have here. This encourages funds to run at higher debt levels.

It looks like a solid set of numbers overall, with Hammerson up 23% in the past year.

Well, the market didn’t like something about the Motus update (JSE: MTH)

But I thought it looked pretty good overall

Motus has a diversified business in the automotive space. It’s worth giving you that context before we dive into the numbers.

In Import and Distribution, they have approximately 15.5% passenger vehicle market share in South Africa, powered by exclusive import rights for big brands like Hyundai, Kia and Renault (amongst others). This generates 17% of group operating profit.

In Retail and Rental, they then expand the offering to represent 29 OEMs and 38 brands across a footprint of 337 dealerships in South Africa. This takes their market share in new passenger vehicles to 18.4%. This is also where you’ll find their UK and Australian businesses. This is the biggest segment, contributing 40% of group operating profit.

Mobility Solutions is the value-added and financial products piece of the business. Despite generating just 2% of group revenue, this segment is responsible for 22% of group operating profit.

And finally, the Aftermarket Parts business gives them ongoing economic participation long after the customer has driven out in a new car. This segment has operations in South Africa, the UK, Asia and Europe, contributing 21% of group operating profit.

Does this give them enough flexibility and resilience to defend against the incursion of Chinese and Indian vehicles? With the share price up 11.6% in the past year and a juicy dividend yield as well, it seems that way. But despite releasing what I thought were solid interim results for the six months to December 2025, the share price closed 4.4% lower.

Revenue for the period increased 3% and operating profit was up 8%. With net finance costs coming down by a significant 23%, they managed to achieve a lovely jump in HEPS of 19%. The dividend was even better, up 25% year-on-year.

The real joke is cash flow from operating activities, which was up more than 10x from R186 million to over R1.9 billion.

Net debt to EBITDA improved from 2.1x to 1.5x, so that’s another highlight in the numbers.

Motus is certainly enjoying the improved new car sales in South Africa, with operating profit up 15% in the home market despite so much activity in the so-called emerging brands. The UK market also achieved some growth in vehicle sales. Although Australia’s economic growth has been revised downwards, that market achieved a new all-time high in vehicle sales.

I can’t see an obvious reason why the market didn’t like these numbers, so it could just be profit-taking by investors and punters. With the most diversified model of the automotive-focused players on our market, Motus should weather the storm of disruption in this sector.

Mustek’s profits have jumped off a low base (JSE: MST)

Revenue fell by 2.4%, yet HEPS is up 256%!

Just like people, income statements come in all shapes and sizes. Mustek’s results for the six months to December 2025 are a great example, with revenue dipping by 2.4% and profits up sharply.

The profit boost didn’t come from the gross profit margin, as that contracted from 13.9% to 12.6%. EBITDA was down by 1.6%. Nothing about this sounds like it should be boosting HEPS!

When you reach the net finance cost, you find the reason for the HEPS move. Net finance costs fell from R83 million to R48 million. Compared to EBITDA of R128 million, that’s a big difference. This is why net profit increased from R13 million to R45 million.

This boosted HEPS from 23.47 cents to 83.54 cents. The huge percentage move has been driven by a reduction in finance costs, along with the low base for earnings in the comparable period.

Shaftesbury continues to celebrate London’s West-End (JSE: SHC)

Dividend growth looks exceptional

Shaftesbury released results for the year ended December 2025. They are excellent to say the least, with the fund’s West End-focused strategy in London working beautifully.

Much as your social media feed may try to convince you that London is now a hellhole, the reality is that it remains a beautiful and incredibly important city that attracts people from all over the world. The West End is one of the best areas in the city, so that’s a good place to own property.

The portfolio valuation increased by 6.2% on a like-for-like basis, reflecting the underlying appeal of the area. Another indication of success is the leasing activity, with rentals coming in 13.9% ahead of previous passing rents (this is how UK funds talk about reversions).

With underlying earnings per share up by 12%, this is an impressive double-digit growth performance in hard currency. Oddly enough though, under the HEPS rules, earnings actually dipped from 3.4 pence to 3.3 pence per share.

The dividend is what investors will focus on though, up by an excellent 14% year-on-year. Shaftesbury shareholders just might treat themselves to a West End shopping spree!

Earnings almost doubled at Valterra Platinum (JSE: VAL)

The same certainly can’t be said for the dividend

Valterra Platinum released results for the year ended December 2025. Revenue increased by 7%, which sounds like a modest improvement. It was enough for adjusted EBITDA to jump by 68%, and for HEPS to increase by a casual 98%.

Yes, they nearly doubled earnings off revenue growth of just 7%!

And to add to the weird shape of the numbers, the dividend per share is down 37% year-on-year. Hmmm.

If you’re wondering why revenue growth wasn’t higher, you aren’t alone. After all, the PGM basket price did amazing things in 2025 – Valterra’s average realised basket price for PGMs increased 26% in rand. The flooding in Amandelbult took the shine off things unfortunately, driving a 10% decrease in PGM production. Refined PGM production fell 13% and sales volumes were down 15%. This is why revenue wasn’t nearly as high as you might expect.

They delivered cost savings of R5 billion though, so that helped create a decent outcome for earnings. It’s also worth noting that they received R2.3 billion in flooding-related net insurance proceeds, reducing the impact of that irritation and boosting earnings without a related increase in revenue.

With a net cash position of R11.5 billion, they’ve really turned things around from the net debt position at 30 June 2025. This does raise further questions about the move in the dividend, though. I know that the company’s demerger from Anglo American (JSE: AGL) would’ve affected comparability, but still.

Guidance for 2026 remains unchanged, with refined production guidance of 3.0 – 3.4 million PGM ounces. They achieved 3.4 million ounces in 2025, so the midpoint of guidance is actually a decrease from current levels.

At least capex guidance has been moderated by a couple of billion, coming in at R17 billion – R18 billion. This should help free cash flow.

The business is in much better shape than in early 2025, as evidenced by the share price doubling over the past six months. It’s just a pity that the dividend hasn’t kept pace with the earnings growth, with the company taking a more measured approach to lock in the balance sheet strength.

Nibbles:

  • Director dealings:
    • Here’s something you won’t see every day: the CEO of PPC (JSE: PPC) funded R5.6 million worth of tax liability (related to share-based payments) using a one-year term loan. He’s pledged shares worth R15.6 million against this debt. If that isn’t a show of faith in a company, I don’t know what is.
    • An associate of a director of Goldrush Holdings (JSE: GRSP) bought shares in the company (and entered into CFDs) worth nearly R158k.
    • An associate of a director of Visual International (JSE: VIS) sold shares worth R38.6k.
  • Here’s something interesting: iOCO (JSE: IOC) announced that Dennis Venter has resigned as the co-CEO of the group. This leaves Rhys Summerton as the sole CEO. I’m never a fan of co-CEO structures, so I don’t see this as a bad thing.
  • Back in December, Mahube Infrastructure (JSE: MHB) released a firm intention announcement regarding an offer by Sustent Holdings. The circular is expected to be released in early March. But here’s an interesting development: the company has announced that an entity named Bunter Capital (and related parties) has built up an interest of just over 10%. One has to wonder about the chess moves in the background.
  • Labat Africa (JSE: LAB) has renewed the cautionary announcement regarding negotiations with an AI and technology company operating in the SADC region. The parties are still finalising the terms of whatever this deal might be. As always, there’s every chance that the talks just fizzle out, hence the need for shareholders to be cautious.
  • Shuka Minerals (JSE: SKA) announced encouraging results from recent samples at the Kabwe Zinc Mine. This is surface testing that sounds like it used rather rudimentary methods to conduct, but it gets the job done – the company feels good about the significant material available at the surface. Testing at the surface is surely cheaper than testing the metallurgical characteristics of the ore body much further down.
  • Africa Bitcoin Corporation (JSE: BAC) announced that Buyisiwe Makunga has resigned as a director and Chair of the Group Audit and Risk Committee. The company stresses that this isn’t because of governance concerns, but rather a conflict of interest in a business opportunity. I’m sure that’s true, but the timing is still unfortunate based on the precipitous drop in the bitcoin price and the rebrand of the group.

Ghost Bites (African Rainbow Minerals | Altron | NEPI Rockcastle | Octodec | RCL Foods | Redefine Properties | Super Group)

The Finance Ghost
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Ghost Bites (African Rainbow Minerals | Altron | NEPI Rockcastle | Octodec | RCL Foods | Redefine Properties | Super Group)

African Rainbow Minerals probably achieved double-digit interim HEPS growth (JSE: ARI)

The PGM segment is probably the highlight here

African Rainbow Minerals released a trading statement for the six months to December 2025. This was triggered by the move in earnings per share, which jumped by between 65% and 75% thanks to the profit on disposal of Sakura and a gain on remeasurement of the 50% in Nkomati Mine.

But what the market really cares about is HEPS, which increased by between 5% and 15% (not enough to trigger a trading statement). That suggests 10% at the mid-point, or just enough to be considered double-digit growth.

African Rainbow Minerals has various underlying interests, with PGMs as the highlight in this period. Investors will have to wait for 6th March to see how underlying operations performed.

Altron gives more details on a strong performance (JSE: AEL)

They are focusing on annuity opportunities that have higher margins

Altron believes that the year ending February 2026 marks the end of its “Accelerated Growth” strategy. They are now in “Transformative Growth” mode. These concepts always smell strongly of Eau de Management Consultant, but they are important for getting internal alignment in organisations that are going through change. Managing large groups of people who have different incentives isn’t easy.

Altron’s efforts are paying off though. Earlier this month, they released a trading statement that flagged growth in HEPS from continuing operations of more than 30%. In a voluntary operational update, they’ve given more details on how they got there.

It’s worth noting that HEPS from continuing operations for the first half of the year was up 22%, so they came into the second half with great momentum.

It’s also good to note that the discontinued operation is Altron Nexus, which was sold on 1 August 2025.

Double-digit EBITDA growth certainly helps, as does the low-to-mid-teens growth rate in operating profit (if you exclude the change in Netstar’s depreciation policy that distorts comparability).

The Platforms segment is doing the heavy lifting, with 45% of group revenue and around 90% of EBITDA and operating profit. This is clearly where you’ll find the best margins and a number of annuitised revenue streams.

Within Platforms, Netstar’s growth (mid-to-high teens EBITDA, and high-teens operating profit excluding the depreciation change) has been driven mainly by the South African business, as Australia’s recovery has been slower than anticipated. Altron FinTech is also in Platforms, achieving improving margins and high-twenties operating profit growth. Altron HealthTech, the third pillar in Platforms, achieved high-teens operating profit growth.

In IT Services, they struggled with a drop in revenue. The segment also clearly runs at a much lower margin. Altron Digital seems to be the biggest headache, but at least it was profitable in December 2025 and January 2026 after cost-cutting measures. Altron Security achieved double-digit revenue growth and operating profit growth in line with the interim performance. Altron Document Solutions achieved more than 30% growth in operating profit for the year, so that’s an example of where turnaround strategies can work.

Overall, annuity-based income is up to 65% of total revenue (both segments have this type of income). This gives great visibility on cash flow and helps with the valuation as well.

Double-digit growth in net operating income at NEPI Rockcastle (JSE: NRP)

They’ve hit the top end of revised guidance

NEPI Rockcastle released results for the year ended December 2025. Distributable earnings increased 6.7% and net operating income was up 11.2%. Tenant turnover across the Central and Eastern European portfolio increased by 3.6% on a like-for-like basis, while retail occupancies were up at 98.8%.

As you can see, there’s a good story to tell here – at least if you own dominant shopping centres in the region.

On a per-share basis, the growth isn’t quite as exciting. Distributable earnings per share increased by 3.1% for the year. When you keep issuing new shares, this is what happens.

Another important metric is like-for-like net operating income growth, which excludes acquisitions completed in 2024. Growth of 4.4% on this basis gives you a good idea of why distributable earnings per share growth was in the low single digits.

The fund welcomes Marek Noetzel as the new CEO on 1 April 2026. He takes the reins of an iconic property fund with a loan-to-value ratio of just 32.8%, below the 35% strategic threshold. That sounds to me like a good opportunity to hit the ground running.

Octodec will offload Killarney Mall for almost R400 million (JSE: OCT)

This is only slightly below the book value

Hot on the heels of a general operating update that dealt with Octodec’s portfolio and many of the unique challenges that they need to manage on a daily basis, the company has now announced that they have a buyer for Killarney Mall. With a relatively high vacancy rate, the new owner (AJPH Property) will have some work to do.

For Octodec shareholders, this means an exit from this asset at a price of R397.5 million. It remains subject to adjustments for working capital. This price is only slightly below the valuation of R407.6 million that was performed with an effective date of 31 August 2025.

Selling at a premium to book is obviously preferred, but companies need to sometimes get out and move on to new assets. It looks like Octodec is making a sensible decision here, with the proceeds being used to reduce debt and deploy into future projects.

RCL has given tighter guidance for a tough year (JSE: RCL)

As previously noted by the company, the pressure is in sugar

At the start of this month, RCL released a trading statement for the six months to December 2025. It noted an unpleasant drop in HEPS from total operations of at least 25% (or a decrease of at least 27.4 cents).

Most of this move (at least 21.8 cents) was thanks to the troubles in the sugar industry, with the stronger rand and ineffective sugar tariffs placing the local industry under even more strain. An additional issue for the year-on-year HEPS comparability is that there was a partial recovery of the sugar levy in the prior period. In more positive news, the initial trading statement noted that Groceries and Baking were expected to report improved underlying profitability.

We now have a further trading statement that gives a tighter range. HEPS from total operations is now expected to drop by between 29.2% and 32.1%.

Kudos to the company for keeping investors informed – an initial trading statement and subsequent further trading statement shows commitment to the market. It’s just a pity that the numbers have gone the wrong way.

Redefine’s pre-close update is full of nuggets (JSE: RDF)

Perhaps the most interesting is that large retail centres are doing well

Redefine Properties released a pre-close update dealing with the six months to February 2026. There’s a bullish narrative overall, with the company believing that they are in the strongest position they’ve been in during the post-pandemic period. Property fundamentals are showing positive signs and the balance sheet is in good shape, so they can take advantage of the opportunities out there.

But what do the numbers say? Well, in South Africa, negative rental reversions of -6.3% are worse than -5.2% in FY25. Renewal success rates are up though, so perhaps they are being slightly less strict on price in order to get the leases across the line.

The weighted average lease escalation of 6.4% is well above inflation in South Africa, although one must remember that property funds don’t deal with the CPI basket. They face municipal charges, as well as security, energy and other costs that tend to run above CPI.

Speaking of energy, Redefine’s solar projects generated 13.1% of the total energy demand in this period. They’ve invested heavily across the retail, office and industrial portfolios.

In the retail portfolio, Redefine notes that large-format centres have recovered. Turnover growth is now in line with convenience centres. Positive reversions in the retail portfolio of 2.4% were ahead of 1.0% in FY25. This is probably the bright spot in the update.

The office portfolio is where things got nasty. Reversions were -16.8%, even worse than -12.9% in FY25. This can be very lumpy though, with Redefine expecting it to moderate to -11% by the end of the year. Interestingly, of the 95 renewals in the period, 28 had negative reversions and 53 had positive reversions. The large tenants have the best bargaining power, as you might expect.

The industrial portfolio achieved positive renewals of 3.7%, up from 0.8% in FY25. This has been a solidly performing property asset class in South Africa.

In Poland (the EPP portfolio), like-for-like footfall increased by 0.8% and like-for-like turnover was up just 0.5%. Retail occupancies were steady at 98.2%, while office fell from 84.2% to 82.9%. At least rental reversions were up to 1.9% vs. 0.4% in FY25. In the ELI portfolio in Poland, which has the logistics assets, rental reversions were 1.8% – significantly lower than 6.9% in FY25.

They are looking to dispose of a number of assets in Poland as part of a broader plan to simplify the joint ventures in that country. They are also looking to build a strong self-storage platform in the country, taking advantage of trends like urbanisation and eCommerce.

Looking at the balance sheet, the group weighted average cost of debt has been maintained at 7.0%. There are various refinancing negotiations underway, with one of the primary goals being to address the maturity concentration risk in FY28. The loan-to-value (LTV) of 41.4% (calculated in line with the covenant of 50%) is in a healthy space. The see-through LTV of 47.2% is in line with what we’ve seen in recent years.

Overall, for FY26, they think that the upper end of the 4% – 6% guidance for growth in distributable income per share is in play.

Super Group pulled off an exceptional interim period (JSE: SPG)

Leaning into Chinese and Indian cars has worked

If you’re going to panic, panic quickly. This is some of the best advice you can ever be given. Instead of clinging to a sinking ship, get yourself onto something else as quickly as possible.

Super Group is proof of this, with the share price closing 5.4% higher thanks to the group achieving great interim numbers. Revenue was up 7% and operating profit increased by 8.7% as margins improved. By the time you reach HEPS from continuing operations, you find a fantastic outcome of 28% growth.

Cash generated from operations increased by 39.4%, so these results aren’t just pretty on paper. They are pretty in the bank account as well.

To understand the numbers, we need to dig into the segments.

The Supply Chain segment grew revenue by 6.3% and operating profit by 14.9%. This is the largest segment in the group, with operating profit of R695 million. The highlight within the segment was surely Ader in Spain, with revenue growth of 17.2% and EBITDA up by a rather ridiculous 225.6%. This is what can happen in low margin businesses when revenue heads in the right direction. Another useful outcome in this segment is that the cross-border transport business achievied a 90% reduction in trading losses.

Fleet Africa grew revenue by 15.3%, but operating profit could only manage a 4.2% increase due to pressure on margins from lower rental volumes. Operating profit was R156 million in this period.

Dealerships SA certainly deserves a mention, with the company leaning into Chinese and Indian brands for growth. 29.7% of new vehicle sales volumes are attributable to these brands, as Super Group’s volumes in this space more than doubled year-on-year. The profile of cars on our roads is changing dramatically. Operating profit improved from R193 million to R209 million, an excellent change in trajectory.

Dealerships UK managed to achieve a decent performance in Ford, while also taking advantage of the new Chinese brands. Operating profit growth jumped by 50.4% to R62 million thanks to the initiatives in this space. But I must point out that operating profit is at roughly half the levels we saw in interim 2024.

The discontinued operations still have some tough areas, like UK automotive logistics that is exposed to the broader automotive manufacturing environment in the UK and Europe (which is in enormous trouble). They are also looking to sell the UK KIA dealerships, having shut Hyundai and Suzuki. I’m old enough to remember when the new South Korean brands (KIA and Hyundai) were the disruptors rather than the disruptees.

Kudos to the group – they changed what needed to be changed. There’s a lesson in here for all of us about the importance of not ignoring disruption.

Give me your views on where the automotive sector is headed:

Nibbles:

  • Director dealings:
    • An associate of a director of Dis-Chem (JSE:DCP) bought shares worth R1.45 million.
    • A director of a major subsidiary of Stefanutti Stocks (JSE: SSU) bought shares worth nearly R45k.
    • Incoming CEO Magen Naidoo has bought another R9.6k worth of shares in Mantengu (JSE: MTU).
  • The Competition Commission has given Transpaco (JSE: TPC) a bloody nose. The regulator has prohibited the acquisition of Premier Plastics, a deal that was announced on 6 November 2025. Premier produces retail plastic carrier bags, so there’s immense overlap with Transpaco’s existing business. This is why the regulator wasn’t so keen on this R128 million transaction. Transpaco is considering its options based on the commission’s decision.
  • Reunert (JSE: RLO) announced that incoming CEO Anthonie de Beer will be appointed as an executive director from 1 March 2026.
  • Marshall Monteagle (JSE: MMP) concluded a rights offer back in November 2025 for $10.7 million. The raise was significantly oversubscribed, leaving many unfufilled excess applications. The company then used its general authority to issue shares, in order to give those applicants the opportunity to apply for new shares. This has led to an additional issue of shares worth $2 million.
  • Numeral (JSE: XII) is trying to raise R100 million (a large number). With only a partial underwrite of roughly R32 million, they are looking to close a huge gap. I’m not surprised to see that the closing date for this offer has been extended all the way out to 31 August 2026. This isn’t the kind of thing you see when people are queueing up to invest.
  • Blu Label (JSE: BLU) announced that Lindsay Ralphs, who previously served as the CEO of Bidvest (JSE: BVT), will be appointed as independent director and chairman designate with effect from 24 February 2026.
  • In case you were holding your breath, which I’m sure you weren’t, Trustco (JSE: TTO) has renewed the cautionary announcement regarding the potential delisting from the JSE. This is based on their ongoing assessment of the Simplified Listings Requirements.

Ghost Bites (Aveng | Clientèle | Gemfields | Mr Price | Nedbank | Octodec | Sasol | SPAR)

The Finance Ghost
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Ghost Bites (Aveng | Clientèle | Gemfields | Mr Price | Nedbank | Octodec | Sasol | SPAR)

Profits and cash flows look better at Aveng (JSE: AEG)

The order book has softened though

In construction, due to the immense pain that a bad contract can inflict, it’s possible to see profits improve substantially despite a drop in revenue. In fact, revenue can be a poor predictor of profitability, which is why I completely avoid investing in this sector.

We see this come through in Aveng’s results for the six months to December 2025. They reflect a drop in revenue from R16.6 billion to R14.2 billion, yet operating earnings swung beautifully from a loss of R356 million to profit of R107 million.

Even though infrastructure markets have softened in Australia and New Zealand, gross margin improved from 2.7% to 5.6% as the quality and implementation of projects improved. There’s also the substantial impact of the Jurong Region Line (J108) project in Southeast Asia and the Kidston Pumped Storage Hypro project in Australia, with combined losses of A$20.2 million in this period vs. A$76.7 million in the prior period.

Like I said – revenue is a poor predictor of profitability!

Aveng has recognised the forecast costs to complete those projects in this period, but the associated cash flows will be in the second half of FY26 and in FY27. It’s worth noting that cash on hand improved from R3.1 billion to R3.4 billion in this period.

Headline earnings came in at R4 million. That might not sound like much, but the comparable period was a loss of R399 million. At least they are back in the green, albeit only just.

There are other difficult contracts in the group as well, like the Tshipi project. Aveng is negotiating commercial settlements with various clients, with David Simpson appointed as the interim group CEO to focus on commercial resolution and delivery of underperforming projects. At the Moolmans business, Pieter van Greunen has been appointed as managing director, with the resolution of the Tshipi contract as one of the key focus areas.

The group heads into the second half of the financial year with work in hand of R38.6 billion, up from R37.5 billion in the first half. But it seems like success depends as much on resolving the legacy projects as it does on the new stuff.

And as a reminder, after a lot of work went into figuring out what to do with McConnell Dowell, Aveng has decided to keep that that business for now.

Clientèle’s numbers are complicated (JSE: CLI)

But they do seem to be heading in the right direction

Clientèle has released a trading statement for the six months to December 2025. Based on the JSE rules, the release of such an announcement immediately tells you that the numbers differ by at least 20% vs. the prior period. In this case, the percentage move is a lot bigger!

But we need to deal with some issues that are impacting the comparability of numbers.

One of the major distortions in the numbers is the bargain purchase gain of over R400 million related to the acquisition of 1Life. This is excluded from HEPS, which gives me a good opportunity to remind you that HEPS is the number that the market uses to actually judge performance.

Here comes another distortion that does impact HEPS though: a change to the application of IFRS 17 that led to a restatement of the interim results for the six months to December 2024. That may sound like a long time ago, but remember that this impacts the base period of comparison for the six months to December 2025.

But perhaps the biggest distortion of all is that Emerald Life has been consolidated for the first time in the latest numbers. This has resulted in HEPS increasing by between 92% and 112% vs. the previously reported numbers, a sizable jump that is essentially a doubling of HEPS at the midpoint of that range. After the base period was restated for IFRS 17, the expected increase in HEPS is between 43% and 63%.

There are a lot of adjustments to consider here, but the direction of travel is up.

Gemfields flags decent pricing for fine-quality rubies (JSE: GML)

But the lower-quality stuff is under pressure

Gemfields announced the results of a mixed-quality rough ruby auction held from 9th to 20th February. This is the auction that was deferred from December 2025. The auctions are always difficult to use to establish a trend, as the quality of the stones varies from one auction to the next.

In this case, they achieved auction revenue of $53 million, having sold 90% of the lots offered for sale and 88% of the carats offered for sale. The average price was $279 per carat.

Although fine-quality rubies attracted decent prices, management has indicated that other qualities were more “muted” due to the uptick in product on the market from illegal mining networks, along with weaker demand from China. The products may be beautiful, but it’s still a tough space to operate in.

Notably, this is the first auction that includes material from MRM’s second processing plant.

If we look at previous auctions over the past few years, the price per carat at this auction is the lowest that we’ve seen. Although Gemfields notes that this is because lower quality rubies weren’t offered at those auctions, the reality is that pressure on the average price per carat can’t be good news for shareholders. I doubt it’s much cheaper to extract a lower quality ruby vs. a high quality ruby, so the price per carat is still relevant to profitability.

Mr Price is ready to close the NKD deal (JSE: MRP)

Based on the lack of share price recovery, the market still doesn’t like it

A chart of the Mr Price share price makes it depressingly easy to see exactly when they announced the NKD acquisition. You’re looking for the precipitous drop in late 2025 that looks like someone threw the share price off the side of a cliff:

You may also note that the share price hasn’t really staged a recovery yet. Some efforts earlier this year to address the anger in the market stemmed the bleeding, at least, but there’s little doubt that the market is still angry about the deal.

Mr Price has gone ahead with the deal anyway, with the latest update being that all regulatory conditions have now been fulfilled. The deal is therefore subject only to the money actually changing hands. They are targeting a scheduled closing date of 31 March 2026.

In yet another effort to try to get the market on the same page as management here, there is an investor presentation scheduled for 17 March. I’m not sure how they will try to tell a better story that time around, but perhaps some pleasantly surprising nuggets will be shared.

Nedbank secures an important regulatory win in the NCBA deal (JSE: NED)

They have received an exemption from making a mandatory offer

In January this year, Nedbank announced an intention to acquire a 66% stake in NCBA Group, a major financial services operation in East Africa. Nedbank is well behind its peers when it comes to the African growth story, so this feels a bit like a game of catch-up.

To pay for the deal, Nedbank is using 20% cash and 80% new shares in Nedbank. The deal is worth a substantial R13.9 billion, so it’s not surprising that they can’t do a transaction of that size purely in cash.

An important component of the deal is that the remaining 34% of shares in NCBA will continue to trade on the Nairobi Securities Exchange. This makes the deal a manageable size for Nedbank, while giving them control via the 66% stake. Companies like to buy control, but not necessarily 100% of the earnings.

But in the event of needing to do a mandatory offer, Nedbank was prepared to switch the structure to an offer for 100% of the shares. This tells me that they want either 66% or 100%, but preferably nothing inbetween.

They don’t need to follow this route though, as the takeover law regulator in Kenya has provided the exemption from the mandatory offer, so 66% it shall be.

Another element to the transaction is that this is a pro-rata offer to shareholders, which also allows for excess applications for those who want to sell more than 66% of their shares to Nedbank (to make up for others who may not want to sell). Nedbank has received irrevocable undertakings to accept the offer from holders of 77.54% of NCBA shares in issue.

Octodec affirms guidance – but this portfolio sounds like hard work to manage (JSE: OCT)

Inner-city properties come with a host of challenges

Octodec might begin with a bullish narrative in its pre-close update for the interim period, but it quickly becomes clear that managing their property portfolio is anything but easy.

In an update that covers the five months from 1 September 2025 to 31 January 2026, the Johannesburg residential portfolio is one of the more obvious challenges. Octodec highlights the pressure on landlords to provide alternative solutions to failing council service delivery and infrastructure. Tenant affordability is another challenge. Nothing about this sounds particularly encouraging for rental yields.

On the plus side, at least the retail portfolio around Lilian Ngoyi Street has improved after the damage from the gas explosion was finally fixed. The Joburg CBD really is an example of how to play the property game on hard mode.

The overall retail shopping centre portfolio had a vacancy rate of just 0.2% as at the end of January 2026, which is better than the 0.5% reported for August 2025. The ugly duckling is Killarney Mall, currently held for sale with a vacancy rate of 17.7% at the end of January (in line with August). The launch of a Regus shared-office space at Killarney is expected to improve footfall.

The collection rate is largely okay, although they do highlight that one of their tenants is in business rescue.

Despite the portfolio being a tricky thing to manage, Octodec has plenty of experience in this space and the risks are well diversified. This has enabled them to raise debt at reasonable rates, with refinancing of maturing debt on improved commercial terms also being possible.

It also make a big difference that the loan-to-value ratio is on the right side of 40%, with disposals of nine non-core properties during the five months (for a total of R81.2 million at a 3.7% premium to book value) helping to achieve this outcome. Unutilised facilities increased from R675 million to R1 billion, so they have decent headroom on the balance sheet.

The goal is to get to 35% in the long term, achieved through further disposals of smaller properties in the portfolio. They also need to fund various capex projects of course, including the ongoing Gezina City project.

The weighted average cost of debt is down to 8.8% at the end of January 2026, an improvement from 9.1% in August 2025. This is thanks to the refinancing activity, as well as the lower overall interest rates.

Guidance for the year ending August 2026 has been affirmed, with expected growth in the distribution per share of between 0% and 4%. That’s not much, but at least it’s in the green.

Earnings fall at Sasol, but at least free cash flow is up (JSE: SOL)

Growth remains hard to come by

Sasol’s share price is up 62% in the past year. But for the six months to December, HEPS has fallen by 34%. Markets can be confusing things, especially for the likes of Sasol where the valuation is low and the the share price performance will depend on just how much bad news actually materialises.

With flat turnover (despite a 3% increase in volumes), Sasol’s adjusted EBITDA fell by 12%. Production volumes at Secunda Operations were up 10% and this no doubt informed some of the share price action, but the macro environment is still working against Sasol. The average rand price of oil fell 17%. Even the price of chemicals (in US dollar per ton) dropped, with the rand strength against the dollar putting further pressure on the translation of the international chemical results.

Capital expenditure fell by 43% to R8.5 billion, so free cash flow generation actually improved dramatically thanks to this. Free cash flow for the period was R0.8 billion vs. -R1.3 billion in the comparable period.

On a market cap of R89 billion though, R0.8 billion in free cash flow isn’t exactly an exciting yield (even if you annualise it).

Here’s the real kicker though: this is actually the first positive interim free cash flow for four years. When you’re used to dry bread, a piece of toast with butter can feel gourmet. I just wish that the butter was coming from improved cash flow from operations, rather than a drop in capex.

With net debt to adjusted EBITDA of 1.6x, the balance sheet is in reasonable shape. EBITDA can change quickly though, so this ratio is always at risk. Debt was brought down from R103.3 billion to R93.5 billion, so that’s an encouraging sign.

In terms of updated guidance, the dip in capex is expected to stick. They reckon that capex for the year will be R2 billion lower than previous guidance of R24 billion – R26 billion. Alas, the International Chemicals adjusted EBITDA is revised lower to between $375 million and $450 million, well off the previous level of $450 million to $550 million. This is a decrease in adjusted EBITDA margin, to between 8% and 10% vs. previous guidance of 10% to 13%.

There are no easy wins at Sasol, that’s for sure.

SPAR’s share price obliteration continues (JSE: SPP)

Will they ever recover from the catastrophic SAP implementation?

SPAR is such a good example of how the success of your local franchisee can be a terrible indication of the health of the franchisor. We’ve all shopped at a SPAR that we know and love, with a great deli and a product assortment that makes it unique in the local community. Yet for all the effort that goes into making that happen by the franchisee, we have a scenario where the holding company performance looks like something revolting that got cleaned out of a grimy corner of the storeroom.

Part of the problem is that the franchisees aren’t required to buy everything from the franchisor. In other words, SPAR as a wholesaler must compete with other suppliers to the stores. You would imagine that this is a no-brainer, as SPAR is surely the most efficient and obvious supplier to the stores. After all, they send one truck from the distribution centre that has everything on it.

Right? Well…

What happens when the distribution centre implements a new system in a way that is disastrous even by oh-no-this-retailer-is-going-with-SAP standards? And what happens when they do it in their traditionally-strongest regional market?

Also, what happens if that same company runs around in Europe dealing with problems elsewhere, instead of focusing on the home market?

Here’s what happens:

I actually have a small speculative position here, based on a thesis around believing that it would be difficult to fully destroy a brand that is part of the fabric of community retail in South Africa. I’m now wondering about whether it is so difficult after all.

CEO Angelo Swart has decided to throw in the towel. He’s only 43 years old based on the SPAR website, yet this turnaround managed to burn him (and his family) out. That tells you something about how bad it actually is.

Reeza Isaacs is taking the top job, hopefully bringing some stability to the story. Megan Pydigadu moves from COO to CFO to replace Isaacs. And based on the latest trading update at the company, they have a lot of work to do.

For the 18 weeks to 30 January 2026, SPAR’s wholesale turnover from continuing operations was up just 2.1%. To make it even worse, their gross margin fell, which means they could only achieve this number through highly promotional activity to drive sales.

SPAR Southern Africa? Growth of just 0.9% – a shocker. Within that, Grocery & Liquor was just 0.8% (exceptionally poor), Build it fell 2.4% (also poor, but a tricky business) and SPAR Health was up 23.0%. Perhaps all the accountants looking at these numbers were at least buying their headache tablets internally.

In Ireland, growth was 3.1% in local currency and 6.1% in rand. This helps bring the group number up to the 2.1% noted above. Yay.

With internal selling price inflation of 2.6% in Grocery & Liquor, they suffered a negative move in volumes despite all the promotional activity. Although they try and make things sound better by referring to 2.3% overall growth in November to January (i.e. excluding a soft October that dragged them down to 0.8%), even the “better” number is actually very weak.

Another example of clutching at straws is to describe the high-income segment as showing a “modest recovery” with like-for-like growth of 1.6%. Modest, indeed. Compare this to Checkers and Woolworths Food, and you’ll quickly see just how bad SPAR is.

Retailer loyalty is the way they measure the extent to which franchisees procure from the wholesaler. Loyalty in KZN is at just 71.5% vs. 84% for the rest of South Africa, reflecting the immense hangover of the SAP implementation that left retailers stranded for stock. There’s even litigation around this, with claims related to the SAP implementation and how it affected the claimant. The initial claim was R5 million and the litigation “significantly exceeds” that amount. Other than the claimant and one other retailer, all KZN retailers have reached settlements with SPAR.

You can’t just stop a SAP process along the way. To get the full benefits, they need to finish the project. They talk about a risk-mitigated revised plan to finish the project.

My long-standing joke remains undefeated: Ernie Els is the only truly successful SAP implementation story.

The group has reiterated that they want to hire a Managing Director for the Grocery & Liquor business in South Africa. I’ll say it again: adding layers of management to the structure is not the answer.

And are they at least done with selling businesses in Europe? Not quite, with AWG in South-West England needing to be sold. I’m going to pull this pearler from the announcement, as it genuinely tells you everything you need to know about SPAR:

“Further, the Group does not anticipate needing to make a cash injection to effect the disposal.”

They are so accustomed to having to pay people to drag their rubbish away that they now need to specifically indicate to the market whether that will be happening again.

They talk about a transaction structure that has been “substantially agreed” for the AWG disposal. Let’s hope they can get it done quickly.

Somehow, against this backdrop, SPAR believes that they might be able to do share repurchases in the next financial year. Getting the authority from shareholders vs. actually being in a financial position to pull the trigger on share repurchases are two different things.

Overall, the company is now a steaming pile of you-know-what. I would’ve loved to buy the dip here, but I think it would be a safer bet to stick to the type that I’ll find in the chips aisle.

But what do you think? Do you believe they can restore SPAR to its former glory?

Nibbles:

  • Director dealings:
    • Despite all the positivity around Dis-Chem (JSE: DCP) (or perhaps because of it?), an associate of director Stanley Goetsch sold shares worth R11.2 million.
    • An associate of a director of 4Sight Holdings (JSE: 4SI) bought shares worth R724k.
  • Another day, another SENS announcement from ASP Isotopes (JSE: ISO) regarding US subsidiary Quantum Leap Energy. Except in this case, the update actually relates to a South African subsidiary of Quantum Leap Energy! Group structure aside, it relates to an agreement with the South African Nuclear Energy Corporation (Necsa) to collaborate, develop and produce High Assay Low Enriched Uranium (HALEU). This services contract builds on the previously announced memorandum of understanding between the parties. Necsa will provide facilities and infrastructure in Pelindaba, while Quantum Leap Energy will provide proprietary enrichment technology. The world’s energy needs are going through the roof right now thanks to AI data centre infrastructure and general industrial electrification, so ASP Isotopes and its subsidiaries are fully focused on addressing that opportunity.
  • Telemasters (JSE: TLM) released a trading statement for the six months to December 2025. They have flagged a increase of 94% in HEPS, taking it from 0.35 cents to 0.68 cents. Note: I said 0.68 cents, not R0.68. So although the share price is under R2, it’s still trading on an enormous Price/Earnings (P/E) multiple.
  • Louis Raubenheimer, son of Raubex (JSE: RBX) founder Koos Raubenheimer, has been appointed to the board of that company as an independent non-executive director. He has plenty of prior experience with the company, having held various roles from 1992 until 2022. His most recent role was running the Roads and Earthworks Division.

Why AI may not be the next big bubble

Nico Katzke, Satrix
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Why AI may not be the next big bubble

The talk in investment markets is that the AI “bubble” may soon burst. Nico Katzke, Head of Portfolio Solutions at Satrix, disagrees with these predictions, though he does caution investors about potential risks.

“In market terms, a bubble means irrational pricing,” he says. “It occurs when hype eclipses reason. Prices then reflect investors’ urgency to buy, as they fear they’ll miss out. This hype pushes prices even higher, reinforcing positive sentiment in a self-perpetuating loop.”

In other words, bubbles occur when asset prices far exceed their sustainable value. This happened with tulip prices in the 1600s (“tulip mania”) and tech stocks in the early 2000s (“dot-com” bubble). Some analysts believe it’s happening to artificial intelligence (AI) shares now.

Katzke is not convinced by that analysis. He points to the 2000 dot-com crash as a lesson from the past that informs the current market. “In the early 2000s, there were naysayers who wrote the obituary for a tech industry that – at the time – looked like it had died before it had even matured,” he says. “A few analysts were saying, ‘We told you so. This was all hype, all bubble, no substance.’ But hindsight shows us that the market was not irrational in valuing highly the companies that would ultimately benefit from widespread internet adoption.”

Instead, the dot-com crash was simply a case of not all tech companies becoming winners. There’s a lesson there for today’s AI companies and today’s investors.

“Markets tend to be remarkably resilient and efficient over time,” says Katze. “The dot-com crash simply preceded an era of enormous stock market growth – particularly in companies that succeeded in the Internet age. Were there failures? Of course. But after the stock market correction, many analysts pointed to the irrational behaviour of companies that were overly enthusiastic about building the internet’s infrastructure, including laying the same fragile undersea fibre-optic cables that have enabled our current era of global connectivity. In hindsight, we’ve come to rely on that infrastructure. And the technology is still here. After all, you’re likely reading this on the internet.”

The long-term market rebound that followed the dot-com bubble of the 2000s highlighted the importance of staying calm and avoiding panic selling. Stock markets truly are the only marketplace where customers flee when there’s a sale. Building long-term exposure to equity markets and remaining invested has been shown to deliver long-term value.

Katzke recommends adopting a cautious but open-minded approach to the current AI bull run. “Will there be pain from AI? More than likely. Some companies may disappoint. Others will fail entirely. Are valuations stretched today? I would incline to agree, but at the same time, I would point out that traditional accounting measures aren’t great at measuring the value of technology companies,” he says. “Even though markets will likely remain volatile for some time to come, investors should not forego long-term investment discipline due to short-term uncertainty.”

Like AI, other assets – such as cryptocurrencies, commodities and resource stocks today – also face “bubble” warnings. “It’s not helpful to label everything a bubble,” says Katzke. “All that does is create fear among investors, who then view those industries or stocks as being irrationally priced. This fear affects behaviour, and investors remain on the sidelines without a sober consideration of the long-term risk/reward trade-offs in investing in an asset class.”

Instead, he suggests taking a pragmatic, long-term view of the market. “AI stocks may look expensive today, based on fundamentals, but how relevant are those fundamentals?” he concludes. “Many of these companies are building the infrastructure for tomorrow’s AI-powered world. I would argue that building exposure to companies developing the infrastructure that will power future AI integration is still a sound investment. Here we like the larger, well-diversified technology indices such as the Nasdaq 100 as opposed to smaller, more niche and predominantly software exposed indices.”

This article was first published here.

Disclaimer

Satrix consists of the following authorised Financial Services Providers: Satrix Managers (RF) (Pty) Ltd and Satrix Investments (Pty) Ltd. The information does not constitute financial advice. While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.

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