Monday, September 15, 2025
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Ghost Bites (4Sight | Argent Industrial | Growthpoint | Hyprop | Schroder European Real Estate | Sirius Real Estate | Thungela)

The Finance Ghost
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Ghost Bites (4Sight | Argent Industrial | Growthpoint | Hyprop | Schroder European Real Estate | Sirius Real Estate | Thungela)

4Sight saw a jump in profits – even against a 14-month base period (JSE: 4SI)

But where’s the dividend?

4Sight changed its year-end from December to February in 2024, which means that the base period is the 14 months to February 2024. It’s therefore unsurprising that revenue for the 12 months to February 2025 couldn’t quite match the 14-month period, although it got pretty close. Much more impressively though, operating profit came in well ahead of that comparable period, so there’s been a clear improvement in the underlying business.

The past few years have seen explosive growth at the company. Revenue has almost doubled since 2020 and headline profit has more than tripled. The tech buzzwords are all over this thing, but the numbers are coming through as well.

Margins remain too low though, with a net profit after tax margin of 4.0% and return on equity of 11.9%. Growth is great, but these numbers will need to see significant improvement for the company to attract a premium valuation.

The thing that I don’t understand is why there’s no dividend, despite an ordinary dividend having been paid last year. Flip-flopping on dividends won’t do their valuation any favours either, as investors like consistency. Despite all the growth in the underlying business, this small cap’s share price has been flat for the past year (aside from the usual bid-offer spread choppiness that plagues illiquid stocks).

Double-digit growth at Argent Industrial (JSE: ART)

Operating leverage, financial leverage and…tax leverage?

When a business has operating leverage, it means that percentage moves in revenue lead to larger percentage moves in operating profit (up or down), due to the presence of fixed costs. When there is financial leverage, percentage moves in operating profit lead to larger percentage moves in net profit (again, up or down), due to the presence of debt. So when you have both, a modest change in revenue can lead to a significant move in profits.

At Argent Industrial, revenue for the year ended March 2025 only grew by 3.6%. Operating profit was up by 8.0% and profit for the year increased by 9.7%. This suggests that the usual suspects of operating leverage and financial leverage are doing the work. But if we dig deeper, we find that profit before tax grew by 7% and profit after tax grew by 9.7%. This means that a substantial decrease in the tax rate was a major driver of earnings as well – a more unusual case of tax leverage!

To further improve the numbers, there’s a 1.8% decrease in the weighted average number of shares outstanding. This means that HEPS growth came in at a meaty 12.5% – again, this has been driven by just a 3.6% increase in revenue! The total dividend was 10.4%, so the payout ratio came down slightly but shareholders got double-digit growth nonetheless.

Argent has been pretty focused on building up the group’s international business. The latest numbers certainly reflect that trend, with flat revenue in South Africa and a drop in profit before tax of 28.6%, whereas the “other regions” segment was good for revenue growth of 7.2% and profit before tax growth of 21.9%. As a further indication of relative profitability, revenue across the two major segments is very similar, yet South Africa generated profit before tax of R102 million and other regions generated R265 million.

Growthpoint is responding to major shifts in South Africa (JSE: GRT)

The Western Cape continues to be the oasis

Growthpoint’s update for the nine months to March 2025 is a reminder of how important this year is from a strategic perspective. But before we get into that, let’s deal with the most important news: guidance for distributable income per share growth for FY25 has been improved slightly. They originally expected 1% to 3% and now they expect 2% to 3%. So, it wasn’t as bad as they thought it might be, but it also wasn’t any better than they thought it could be.

The fund is making significant changes, including a R2.8 billion asset disposal target for the year ending June 2025 of office properties (primarily B and C grade offices), as well as older industrial and manufacturing assets and properties in deteriorating CBDs. They are also getting out of motor dealerships. Essentially, Growthpoint is on a mission to improve the quality of its portfolio, rather than having broad exposure.

R2.2 billion is the targeted investment for FY25 into the core portfolio, which includes mainly logistics, industrial and retail assets. Unsurprisingly, the Western Cape is a focus. I have no doubt that their positive experience with the V&A Waterfront has influenced this decision.

Similarly, the plan in the international businesses is to be more focused on a core portfolio, rather than having such broad exposure. They are “evaluating all options” related to Globalworth Real Estate Investments and NewRiver REIT (the latter being the stake they now hold after the disposal of Capital & Regional in a share-for-share deal).

So, how did they do against the targets?

At the nine-month mark, they’ve sold and transferred R1.1 billion in assets. Since the end of March, another R445 million in disposals have been transferred. A further R1.2 billion are in process, of which around R780 million is expected to be completed by the end of June. This would take them to around R2.3 billion, which means they are R500 million off their target. That’s a decent attempt, I think. Notably, of the R1.1 billion already transferred, the total pricing was a R29.6 million discount to book value. Again, not bad at all.

In terms of development and capex spend in South Africa, they’ve invested R1.2 billion thus far. That seems to be just over half their goal, with the announcement not giving further details on that gap.

In terms of performance in the South African portfolio, vacancies improved since June 2024 but ticked up slightly from December 2024 to March 2025, mainly due to the completion of a new speculative industrial development. The lease renewal success rate has been dropping, now at only 67.4% vs. 76.3% in FY24. They seem to be standing firmer on pricing, as reversions came in at -1.0% vs. -6.0% in the prior year. Rental escalations are stable at 6.9%.

Looking deeper, the retail portfolio saw an outperformance by community centres vs. regional malls, with the total portfolio reflecting growth in footfall of 2.6% and trading density growth of 5.5%. Notably, Edgars is either reducing space or exiting malls altogether, so there is once again an Edcon-flavoured headache for landlords. Reversions are at -0.8%, improved from -2.1% in FY24, but with a dip in the renewal success rate from 86.4% in FY24 to 84.6% currently. Again, lower quality retail assets are hurting them. Conversely, the redevelopment of Bayside Mall (and it looks good, I went the other day) has led to a turnover increase of 26% at the property. An interesting move is the installation of their own fibre backbone at Bayside as a source of non-rental income for the retail portfolio and improved data.

The office sector has seen some improvement, with vacancies down from 15.1% in FY24 (and 15.9% in December 2024) to 14.7%. It seems as though vacancies have stabilised at national level. The Western Cape and KwaZulu-Natal continue to outperform Gauteng as companies try desperately to respond to the trend of where people actually want to live. Negative reversions are -3.3%, which is vastly better than -14.8% in FY24. The Western Cape is the only positive region at 3.5%.

In logistics and industrial properties, vacancies improved to 4.4% from 5.2% in FY24, although speculative developments did drive an increase in vacancies vs. December 2024. It’s fascinating that although office and retail trends are so firmly in favour of the Western Cape, the Gauteng logistics properties continue to do very well. There are of course tons of people in Gauteng, but the overall deterioration of the place means that the way they can be serviced by the likes of Growthpoint is changing. Having said that, the Western Cape is once again the only region with positive reversions in this portfolio.

It’s always worth touching on the performance at the V&A Waterfront. EBIT grew by a whopping 23% for the nine months. Here’s the really interesting thing though: on a rolling 12-month basis, visitor numbers fell by 2%. They attribute this to the rise in online grocery sales. You ignore changing consumer behaviour at your own peril.

The various international operations are all separately listed and can be referred to directly for more details. I personally find it more interesting to focus on the South African insights in the Growthpoint announcement, as they tell us something about the entire property sector in our country as well as a look-through into retail trends (like online shopping).

On the debt side, the weighted average rand cost of funding has decreased from 9.6% in FY24 to 9.1%. If you include cross-currency interest rate swaps and foreign-denominated loans, the improvement is from 7.2% to 7.1%. The swaps are the reason for a more modest improvement on that basis.

If you can believe it, this was just a summary of the insights in what was a very long and detailed nine-month update.

Hyprop enjoying higher retail sales, but footfall is flat in South Africa (JSE: HYP)

Here’s another example of the effect of eCommerce adoption

Hyprop has released an operational update for the five months to May 2025. The announcement goes into tons of detail about specific tenants, with the only really interesting point being that the reduction of space by Edgars comes up again (as it did with Growthpoint). But the good news for Hyprop is that the major reduction at Canal Walk was replaced by a premium Jet store, so all is well from a landlord perspective in that particular case.

The South African portfolio saw a 7% increase in tenant turnover for the five months to May, thanks to trading density being up 10.2%. Footfall was just 0.1% higher, with a clear trend of shoppers adopting eCommerce as an alternative. This doesn’t mean that Hyprop and its tenants can’t make money – it just means that I can’t see why footfall would grow from here.

In Eastern Europe, tenant turnover for the five months was up 3.5% and the footfall impact is even more stark, with a drop of -3.3%. Trading density rose by 4.0%. Vacancies are almost non-existent at a 0.1% vacancy rate, but I don’t like that footfall trend.

The loan-to-value ratio improved from 36.3% in December 2024 to 34.2% thanks to the capital raise in June. Note that in this case, they are quoting a metric that goes beyond the end of May. Of course, the real question is around whether they are going to have a crack at an acquisition of MAS. At this stage, they are still playing it coy, with fluffy paragraphs about why they like the idea of making a bid for MAS. At this stage though, there’s nothing concrete.

Overall, they expect to achieve the guidance for distributable income for the year ended June 2025 (an increase of 4% to 7%). But of course, having now raised loads of new capital, the growth on a per-share basis has plummeted to a range of -1% to 2%. When you’re putting out numbers like that, you can’t be out there making will-they won’t-they statements about a deal forever. There’s now a genuine cash drag on the balance sheet and a negative impact on shareholders. If they are going to do something with MAS, it needs to become clear sooner rather than later.

Schroder European Real Estate is still struggling with valuation pressures (JSE: SCD)

European office properties aren’t doing well right now

Schroder European Real Estate released its results for the six months to March 2025. It gives you a sense of how tough things are that the company is crowing about a positive total return. In other words, if you offset the dividend against the drop in the net asset value (NAV) per share, you come out slightly positive. How exciting.

Share buybacks helped achieve that outcome, so at least they are reducing the number of shares in issue at a time when capital values for the underlying properties are going the wrong way. The exception to this is the industrial portfolio, which saw an uptick in the valuation.

Another way of seeing this is that EPRA earnings before exceptional items fell from €4.3 million to €3.9 million – and if you then account for the negative valuation movements, you get to a small IFRS loss.

A further challenge they are dealing with is a fight with the French Tax Authority. Schroder has taken advice and hasn’t raised a provision at all, which is a pretty aggressive approach. We don’t often see European tax fights on the South African market, but it feels pretty unlikely that the exposure is truly zero.

Their outlook for the market isn’t exactly the most bullish thing you’ll read all day. They expect only gradual improvements in 2025, with a hope for better conditions in 2026. Their balance sheet is at least in good shape to navigate this, with the loan-to-value ratio at 18%.

Sirius wasted no time in announcing another acquisition – and a disposal! (JSE: SRE)

This comes off the back of a fresh debt facility having been raised

As I wrote when Sirius Real Estate announced a new revolving credit facility this week, you can expect plenty of deals from the group as they look to deploy equity and debt capital. The latest such example is the acquisition of a light industrial property in Geilenkirchen, Germany, for €12.9 million.

This is a sale-and-leaseback transaction with an engineering firm that entered into a triple net lease on the property, which is a structure that means that Sirius isn’t taking the risk of operating cost overruns on the property. The net initial yield on the deal is 9.3%.

Despite having so much capital that they need to deploy, Sirius couldn’t say no to the opportunity to dispose of a small non-core asset in the UK for £1.55 million. This price is a 7% premium to the most recent book value and reflects a disposal yield of 8.1%. It may be a small disposal, but this is the kind of dealmaking that gives Sirius a strong reputation among investors.

Try not to fall off your chair: Thungela has noted an improved Transnet Freight Rail performance (JSE: TGA)

It helps greatly if they can actually get their products to port

Thungela has released a pre-close update for the six months to June 2025. The most exciting news is surely the 17% year-on-year improvement in rail performance at Transnet Freight Rail. They expect further improvement in 2026. Before you get too excited about government progress here, I must remind you that industry collaborative initiatives are largely to thank for this, with the private sector stepping in to try and solve public sector problems – how utterly unusual in South Africa.

In Australia, where Thungela acquired the remaining stake in Ensham from co-investors, production and sales were negatively impacted by “challenging geology” in the first half of the year. Presumably after talking to the rocks and asking them nicely to do better, Thungela expects better production in the second half.

Coal prices unfortunately have a very bearish story to tell in 2025. Benchmark prices are sharply down in both South Africa and Australia for the five months to May 2025 vs. FY24, with decreases of 12.9% and 24.6% respectively. On top of this, the discount to the Richards Bay benchmark coal price has increased based on weak markets, so the average realised export price has actually fallen by 14.5%. In Australia, the discount has been consistent, but the benefit of fixed price contracts has meant that the average realised export price has only decreased by 11.4%. The challenge is that a portion of the price is subject to adjustments, so the final decrease will likely be slightly worse.

It really is so typical that when coal prices were high, Transnet couldn’t deliver. Now that coal prices are falling off, Transnet has improved and export saleable production increased from 6.2Mt to 6.4Mt. In terms of FOB cost per export tonne in South Africa, they expect to be marginally above the upper end of guidance for the year, as production was impacted by higher rainfall.

Those geological issues in Australia were no joke, with production at Ensham down from 2.1Mt to 1.6Mt (both on a 100% basis to avoid the effective shareholding change distorting these numbers). Unsurprisingly, lower production means that the cost per tonne will be above guidance, as fixed cost overhead recoveries take a serious knock when production decreases.

In terms of capital expenditure, they’ve put R1.1 billion into the South African business (a fairly even split of sustaining and expansionary capex), while Ensham’s capex is expected to be R127 million for the half year, with the majority of the spend coming in the second half.

With net cash of between R5.9 billion and R6.1 billion, Thungela’s balance sheet remains very strong. They need it, as the drop in coal prices has led to the share price shedding a quarter of its value over 12 months and a third over 6 months. You need a strong stomach for cyclicals:

Nibbles:

  • Director dealings:
    • Adrian Gore has put another huge hedge in place over his position in Discovery (JSE: DSY). Firstly, he had to sell shares worth R10.5 million as early settlement of the previous collar. Then, he bought puts at a strike of R215.07 per share worth R446 million and sold calls at a strike price of R297.52 per share worth R617 million. The expiry dates are in 2031. For reference, the current spot price is R211, so the puts are approximately at the money. In simpler terms, he’s locking in the current level and giving away upside above the call strike price 6 years from now.
    • The CEO of Pan African Resources (JSE: PAN) sold shares worth around R5 million. It’s interesting to see some profit-taking in the gold space.
    • A director of Vodacom’s (JSE: VOD) South African subsidiary sold shares worth almost R1.4 million.
    • Non-executive directors in Anglo American (JSE: AGL) were happy to receive shares in lieu of fees to the value of around R750k.
    • After a significant rally in Santova (JSE: SNV) and recent director buying, it’s certainly worth noting that a director of a major subsidiary of Santova has sold shares worth nearly R330k.
    • The chairman of Sasol (JSE: SOL) bought shares worth R82k.
    • Barely worth mentioning, but the size is likely due to lack of volumes rather than anything else – Sean Riskowitz has bought just R416 worth of shares in Finbond (JSE: FGL). Not R416k – R416, as in the price of grabbing some food for the family at your local burger joint.
  • Accelerate Property Fund (JSE: APF) is moving its listing to the General Segment of the Main Board of the JSE, giving themselves a regulatory framework that is more appropriate for where the company is in its journey. They also used this as an opportunity to remind the market that much progress has been made in the past 18 months, including a significant drop in vacancies at Fourways Mall.
  • Oando (JSE: OAO) has released more details on its results for the three months to March 2025. They increased volumes by 72% and have made progress on other growth projects. Margins were the story of the period though, with gross profit up 172% despite an increase in revenue of just 2%.
  • Mantengu Mining (JSE: MTU) issued shares worth R9.4 million to Disruptioncapital as part of the broader equity facility in place with GEM Global Yield LLC.

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?

Yet another quiet week of M&A activity

Exchange-Listed Companies

Eastern Trading, the majority shareholder of AH-Vest holding a 95.7% stake in the company, has made a firm intention offer to acquire the remaining ordinary share capital of AH-Vest. The consideration terms of the offer is 55 cents per share payable in cash with the aggregate consideration of R2,42 million. Prior to the offer, the share traded at 3 cents per share.

Master Drilling has increased its stake in A&R Group by a further 15% to 66% for a purchase consideration of R50,3 million to be settled in 60 equal monthly instalments. The acquisition deepens its investment in technology-enabled mining solutions. The acquisition of additional shares became effective on 1 May 2025.

Sirius Real Estate has acquired a light industrial property in Geilenkirchen, Germany, for €12,9 million, strengthening its footprint in the Euregio Maas-Rhine industrial region. As part of its ongoing UK portfolio optimisation strategy Sirius also disposed of a small non-core asset in Huddersfield to a private individual for £1,55 million.

This week Assura recommended to its shareholders to accept the revised offer from Primary Health Properties (PHP) which is higher than KKR-Stonepeak’s best and final offer of 52.1 pence. In terms of the revised offer, Assura shareholders will receive 0.3865 new PHP shares, 12.5 pence in cash, 1.68 pence in quarterly dividends and a special dividend of up to a maximum of 0.84 pence per share if the offer becomes unconditional. This implies a total value of 55 pence for each Assura share and values the group at £1,79 billion (c.R43 billion).

Unlisted Companies

Oslo-headquartered Link Mobility, a cloud communications platform has announced the acquisition of SMSPortal, a local A2P (Application-to-Person) provider. The purchase consideration of US$115 million is before conditional payment. The transaction will be settled through an upfront cash payment of $100 million, financed with cash and an equity consideration of $15 million implying a multiple of 4.6x cash EBITDA. The equity component will be settled with 5,9 million shares issued at a price of NOK26 per share.

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

MTN has advised shareholders of further progress made in the MTN Zakhele Futhi structure unwind. MTN has repurchased 50,590,890 shares, representing c.2.68% of the group’s issued share capital from MTNZF in full settlement of the outstanding balance of the notional vendor funding of R6,43 million. Following this c.2,48m MTN shares will remain in the structure and will be sold on the open market in due course.

The JSE has approved the transfer of the listing of Accelerate Property Fund to the General Segment of Main Board with effect from commencement of trade on 27 June 2025. The listing requirements in this segment are less onerous for the smaller cap firms.

This week the following companies announced the repurchase of shares:

In the period 21 November 2024 to 20 June 2025 Momentum repurchased 42,403,434 shares in terms of the general authority granted by shareholders in November 2024. The shares were repurchased at an average price of R31.22 at a total value of R1,32 billion.

African Rainbow Minerals has repurchased and cancelled 3,239,681 ordinary shares in a series of unrelated transactions. The average price per share paid was R154.27, representing a total consideration of R499,8 million.

In its annual financial statements released in August 2024, South32 announced that it would increase its capital management programme by US$200 million, to be returned via an on-market share buy-back. This week 720,860 shares were repurchased at an aggregate cost of A$2,07 million.

In October 2024, Anheuser-Busch InBev announced a US$2 billion share buy-back programme to be executed within the next 12 months which will result in the repurchase of c.31,7 million shares. 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 June 2025, the group repurchased 125,000 shares for €7,71 million.

Hammerson plc continued with its programme to purchase its ordinary shares up to a maximum consideration of £140 million. The sole purpose of the buyback programme is to reduce the company’s share capital. This week the company repurchased 304,548 shares at an average price per share of 295 pence for an aggregate £897,303.

In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 347,783 shares at an average price of £35.93 per share for an aggregate £12,49 million.

During the period 17 to 20 June 2025, Prosus repurchased a further 3,853,134 Prosus shares for an aggregate €178,62 million and Naspers, a further 321,556 Naspers shares for a total consideration of R1,69 billion.

Three companies issued profit warnings this week: Castleview Property Fund, Marshall Monteagle and Cilo Cybin.

During the week three companies issued or withdrew cautionary notices: AH-Vest, Ayo Technology Solutions and TeleMasters.

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

Nigerian on-demand delivery platform, Chowdeck, has acquired Mira, a point-of-sale platform specifically built for the food and hospitality industry in Africa. Terms of the deal were not disclosed.

Serengeti Energy and Kwama Energy together with four impact-oriented financiers, have partnered to develop the Ilute Solar Project located in Zambia’s Sesheke District in Western Province. Led by FMO – the Dutch Entrepreneurial Development Bank – with a US$26,5 million package, the project brings together a mix of funding from FMO, the Sustainable Energy Fund for Africa (SEFA) managed by the African Development Bank (AfDB), Triodos Investment Management and EDFI Management Company, through the EU funded Electrification Financing Initiative – Electrifi. The blended finance model weaves together commercial, development, and concessional capital to mitigate investment risks, unlocking a new way of financing renewable energy in Africa.

In May 2022, Amazon entered into an Option Agreement with EFG Holding, acquiring US$10 million of EFG Holding GDRs, with the option to convert the GDRs into a direct stake in Valu (U Consumer Finance S.A.E), equivalent to 4.255% of its share capital, upon a qualified liquidity event. Amazon has exercised the option, based on the terms and conditions of the Agreement, which will result in Amazon owning approximately 3.95% of Valu, which listed on the Egyptian Stock Exchange on 21 May 2025.

Desert Gold Ventures has entered into an option agreement with Flower Holdings SARLU to acquire a 90% interest in the Tiegba Gold Project in Côte d’Ivoire. Desert Gold will pay Flower a total of US$450,000 over the term of the agreement plus issue 1,500,000 common shares in three equal instalments.

The European Union-funded AgriFI facility, managed by EDFI Management Company, is investing c.€2,2 million (US$2,5 million) in Complete Farmer, a Ghanaian agritech company working to improve market access and productivity for smallholder farmers. The financing will contribute to the construction of six new fulfilment centres – hubs for aggregation, quality control, and logistics – with a focus on the country’s northern regions.

Shoptreo, a Nigerian e-commerce startup has secured an undisclosed round of funding from Rebel Seed Capital. Shoptreo equips local artisans with digital storefronts, integrated logistics, payments and inventory tools to efficiently meet global demand.

The Republic of Angola has become the latest sovereign shareholder in Africa Finance Corporation (AFC) with a US$184,8 million equity investment in the infrastructure solutions provider. Angola now becomes the second Lusophone African nation, after Cape Verde, to join the growing list of equity investors in AFC.

Egyptian logistics startup, Nowlun has raised an additional US$600,000 in a seed extension round led by Ingressive Capital. This follows $1,7 million raised in December 2024.

Following the 2024 disposal by Air Liquide of 12 subsidiaries across Africa [Benin, Burkina Faso, Cameroon, Congo, Ivory Coast, Gabon, Ghana, Madagascar, Mali, Democratic Republic of Congo, Senegal and Togo]to Adenia IV, Air Liquide has disposed of its Nigerian subsidiary to Oak Heir Ltd, a Nigerian family trust founded and managed by Gbotemi Kuti.

Gadaa Bank S.C. has officially listed on the Ethiopian Stock Exchange (ESX). The bank’s prospectus was approved by the Ethiopian Capital Markets Authority on 17 June 2025, and the shares were listed on 23 June. Gadaa becomes the second bank to list on the ESX.

Nigerian diversified financial services group, BAS Group, has acquired a majority stake in local fintech startup, Zuvy for an undisclosed sum.

AfricInvest has announced its successful exit from AFG Holdings, a pan-African banking group headquartered in Côte d’Ivoire. AfricInvest first invested in the group in October 2022.

BURN, a Kenyan clean cookstove manufacturer and carbon project developer, has signed an agreement with the Trade and Development Bank Group to scale access to clean cooking in Mozambique, the DRC and Zambia.

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

A transformative year for South Africa’s corporate law regime

Cathy Truter, Ricci Hackner and Mili Soni
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A transformative year for South Africa’s corporate law regime

Over the past year, a wave of legislative reform has begun to reshape the legal landscape in which businesses operate. From enhanced transparency requirements and stricter compliance obligations to more streamlined regulations, these legal developments have ushered in a new era of corporate accountability, transparency and operational efficiency.

Companies Amendment Acts

In July 2024, President Cyril Ramaphosa signed the First and Second Companies Amendment Bills into law, now known as the Companies Amendment Act, 2024 (Companies Amendment Act) and the Companies Second Amendment Act, 2024 (Second Companies Amendment Act), which amend the Companies Act, 2008 (Companies Act). The most material changes introduced are those pertaining to remuneration disclosures and, from an M&A transaction perspective, the new thresholds that will trigger the requirement for private companies to comply with the Takeover Regulations and the scrutiny of the Takeover Regulation Panel (TRP) when implementing affected transactions.

Certain sections of the Companies Amendment Act and the entire Second Companies Amendment Act became effective as of 27 December 2024. Amendments that are now in force and effect include updates to AGM requirements for public and state-owned companies in terms of mandating the presentation of a social and ethics committee (SEC) report and a remuneration report, alongside SEC appointment approvals. Amendments have also been made to SEC exemption applications and membership requirements.

Further changes include adjusted timelines for amending a company’s Memorandum of Incorporation, while also addressing delayed consideration and stakeholder shareholding issues. Additionally, the legislation introduces a relaxation of approval requirements for financial assistance to subsidiaries, share buybacks and auditor appointments. Other key amendments comprise clarified definitions for employee share schemes and securities, changes to business rescue post-commencement finance, revised timelines for initiating director liability claims, and streamlined procedures for company name changes.

Sections not yet in force include those on remuneration disclosures for public and private companies; access to private company financials; removal of the right of ‘accredited entities’ to perform dispute resolution functions in favour of using the Tribunal; provisions enabling the validation of irregular share issues; obligations to publish where records are kept; and new M&A transaction thresholds requiring TRP scrutiny. It is anticipated that these changes will take effect this year.

General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, 2024 (GLA)

The GLA proposes further amendments to the Companies Act (among other Acts), aimed at strengthening South Africa’s framework for combating financial crime and addressing the deficiencies identified by the Financial Action Task Force (FATF) as part of efforts to secure the country’s removal from the FATF grey list.

These changes propose increasing the maximum penalty for administrative fines to R10 million (up from R1 million) and empowering the Companies and Intellectual Property Commission (CIPC) to deregister a company for non-compliance with beneficial ownership, beneficial interest, security register and annual return filing requirements for any consecutive year, coupled with the imposition of administrative fines.

The GLA was published for public comment on 13 December 2024, with a submission deadline of 6 February 2025. Following public consultations, the revised GLA will be submitted to Cabinet and then to Parliament for consideration.

CIPC guidelines and opinions

The CIPC has made it clear that compliance with the new beneficial ownership, beneficial interest, and security register filing requirements – as well as annual return submissions – is of critical importance. Under pressure from the FATF, the CIPC has repeatedly warned that it will be taking a hardline stance on non-compliance. The extended deadline for meeting these filing obligations was 30 November 2024. On 31 January 2025, the CIPC began the process of deregistering non-compliant companies.

Companies that have been deregistered by the CIPC are, from a legal standpoint, prohibited from trading. Deregistration may trigger the freezing of bank accounts, potential personal liability of directors, and result in significant operational disruption. In extreme cases, the state may even absorb the deregistered company’s assets.

The scale of the CIPC’s enforcement is significant: approximately 800,000 non-compliant companies were earmarked for deregistration. Rectifying the consequences of deregistration and re-registering a company can take up to 30 working days. As a result of the widespread deregistrations, the CIPC has relaxed certain reinstatement rules. Companies in this position are strongly encouraged to seek legal advice without delay.

Other notable developments from the CIPC include new guidelines on electronic AGMs, aimed at promoting effective and meaningful shareholder participation and engagement, as well as a practice note that strengthens the qualifications and responsibilities of business rescue practitioners.

King V Code of Corporate Governance (King V Code)

The King Committee has released the draft King V Code for public comment, marking an evolution from King IV. Building on its predecessor, King V aligns more closely with recent amendments to the Companies Act and places greater emphasis on sustainability, stakeholder inclusivity and integrated thinking — anchored in values like Ubuntu.

While the King Code is not legislation, many of its practices have been incorporated into the JSE Listings Requirements, making them binding on listed companies.

South African courts have also recognised the persuasive value of King’s principles, frequently referring to them in judgments involving corporate misconduct.

Beyond the courtroom, King has influenced legislative reform and empowered civil society and activists in holding companies accountable.

King V introduces a streamlined set of principles, a stronger framework for technology and AI governance, a standardised disclosure template, and an expanded ethical mandate. As the global and local business landscapes shift in response to climate change, technological disruption, and growing demands for social equity, King V responds by reinforcing outcomes-based governance with clearer guidance — balancing prescriptiveness with the flexibility of proportionality.

JSE modernisation

The Johannesburg Stock Exchange has recently undertaken several significant initiatives aimed at modernising its regulatory framework and enhancing market accessibility. These developments reflect the JSE’s commitment to fostering a robust and investor-friendly market environment while aligning with global best practices and local legislative requirements.

New Service Issue 32
The JSE has released a revised Service Issue 32 of the JSE Listings Requirements in February 2025, incorporating consolidations of the most recent effected changes (including those pertaining to market segmentation, the rejuvenation project, the new specialist securities rules and the B-BBEE segment, each detailed below).

Dual listings
The amended section 18 on Dual Listings has, among other things, collapsed the approved exchanges lists, provided for a fast track for qualification, simplified the dual listing company structure, and made provision for companies with a secondary listing – in certain circumstances – to follow compliance of a company’s primary exchange (rather than the more onerous regime) subject to new requirements.

Depository receipts (DRs)
Also dealt with in the Dual Listings section, the amendments have introduced provisions differentiating between sponsored and unsponsored DRs (i.e. issuers of unsponsored DRs must be regulated under the Banks Act or an equivalent, and must demonstrate expertise. Depository responsibilities and the entity’s financial data will also need to be published).

Alignment with legislative changes
The JSE is aligning its Listings Requirements with the Companies Amendment Act and the Second Companies Amendment Act. Proposed changes focus on corporate governance and remuneration policies. For example, proposed changes will remove non-binding advisory vote requirements for a company’s remuneration policy from the Listings Requirements for companies governed by the Companies Act. They also contemplate deleting aspects of schedule 14 on share incentive schemes since remuneration will be adequately covered elsewhere.

For foreign issuers, amendments propose that the non-binding advisory vote will remain, but the percentage of negative votes that trigger shareholder engagement will change. The JSE has announced that it will align the effective date of these changes with those of the corresponding provisions in the Companies Amendment Acts.

Simplification project advancements

The near final consolidated version of the new Listings Requirements pursuant to the JSE Simplification Project has now been released, with a final public consultation process currently being undertaken by the Financial Sector Conduct Authority. The last few phases of the Simplification Project have focused on streamlining pre-listing statements for Main Board issuers, while maintaining disclosure for AltX issuers and aligning with the Companies Act; and new listing criteria, simplifications for dual listings and hybrid securities clarifications. The JSE is aiming to finalise and bring the Simplification Project changes into effect in 2025.

As the corporate law framework evolves, businesses transacting in South Africa have an opportunity to address the challenges and embrace these legal and regulatory shifts. Doing so will ensure business operations and transactions are navigated in a way that is sustainable and aligned with global best practice.

Cathy Truter is Head of Knowledge Management, Ricci Hackner and Mili Soni are Knowledge and Learning Lawyers | Bowmans

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

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

Coining the future: Kenya’s digital asset revolution

Njeri Wagacha and Wambui Kimamo
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Coining the future: Kenya’s digital asset revolution

SCOPE OF REGULATION IN KENYA

Kenya’s financial landscape has long been dominated by traditional banking institutions. However, with the rise of cryptocurrencies, regulatory bodies have gradually shifted their stance. In 2015, the Central Bank of Kenya (CBK) issued a public notice warning against the use of virtual currencies, citing their unregulated status and lack of government backing. This position was echoed by the Capital Markets Authority (CMA) in 2018, which cautioned against participating in initial coin offerings (ICOs) due to the high risk of fraud and lack of investor protection. The CBK reaffirmed its position in a further notice issued in 2020.

Despite these warnings, cryptocurrency adoption among Kenyans has grown. The Kenya Revenue Authority (KRA) reported that between 2021 and 2022, cryptocurrency transactions amounted to approximately KES2,4 trillion – nearly 20% of the country’s GDP – demonstrating widespread public engagement with cryptocurrencies. The government’s recognition and acceptance of virtual currencies followed suit in 2023 when it introduced the Digital Asset Tax (DAT), imposing a 3% tax on income derived from the transfer or exchange of digital assets. This marked Kenya’s first formal approach to regulation, signalling a shift from caution to structured oversight.

However, the regulatory framework for crypto assets in Kenya remains uncertain due to the absence of specific definitions or classifications of digital assets. The CMA provides the legal foundation for securities regulation, but its definition of securities does not explicitly cover cryptocurrencies. Kenyan courts have interpreted the law more broadly in the Wiseman Talent Ventures case, where Wiseman attempted to conduct an initial coin offering of its token, KeniCoin. The court applied the U.S.-developed ‘Howey Test’ 1 to classify the offering as an investment contract, thus bringing it under the jurisdiction of the CMA. The decision emphasised consumer protection and recognised the potential mandate for the CMA to regulate the digital asset space in the absence of a legal regime.

Despite this, the Wiseman ruling did not establish a definitive classification framework for cryptocurrencies, as the court refrained from providing abstract criteria for determining when a digital token should be regulated under the CMA Act. The court also noted that the KeniCoin token bore characteristics of a currency, which would ordinarily fall under the purview of the CBK, which has an exclusive mandate over issues related to currency and payment systems. This overlapping consideration further illustrated the lack of clear boundaries between the CMA and CBK’s regulatory mandates in relation to cryptocurrency. While the judgment highlighted the court’s prioritisation of consumer protection, it also highlighted the urgent need for a clear regulatory framework for digital assets in Kenya.

IMF MARKET ANALYSIS

In December 2024, at the request of the CMA, the International Monetary Fund (IMF) conducted an analysis of cryptocurrency activity in Kenya. It highlighted the absence of cryptocurrency specific regulations, with oversight based on existing CBK and CMA mandates – an approach that was limited and not legally binding, as outlined in the Wiseman case. This regulatory gap has contributed to the rise of crypto-related scams and criminal activity. The IMF gave various recommendations, including:

  • Conduct a comprehensive market analysis on the state of Kenya’s crypto market and identify financial, market and consumer protection risks;
  • Develop crypto-specific regulations aligned with international standards through collaboration with foreign regulators, to manage risks associated with international exchanges while accommodating Kenya’s unique context to maintain financial stability; and
  • Strengthen cooperation across the relevant authorities, and invest in adequate technical and human resources to ensure effective oversight.

VIRTUAL ASSET SERVICE PROVIDER BILL 2025 (VASP BILL)

The Kenyan government has since embraced the sector, as seen in the draft National Policy on Virtual Assets and the VASP Bill, introduced by the Blockchain Association of Kenya in March 2024.

The VASP Bill proposes a comprehensive regulatory framework to promote financial stability, market integrity and consumer protection while addressing anti-money laundering (AML) / combating the financing of terrorism (CFT) risks. It designates the CBK and CMA as the key regulators responsible for the licensing and oversight of VASPs. Key provisions include licensing based on eligibility, financial health, cybersecurity and public interest; mandatory Know Your Client (KYC) procedures, reporting of suspicious transactions, a local presence, robust governance structures; and severe penalties for non-compliance, including up to KES10,000,000 for individuals and KES20,000,000 for entities, or ten (10) years imprisonment.

Public participation concluded on 29 January 2025, with the following feedback:

  • The 3% tax on the transaction amount should instead be on gains or transfer fees;
  • Introduce tiered licensing to accommodate multi-service providers and eliminate regulatory duplication; and
  • Harmonisation with international standards is required, to support cross border transactions and global competitiveness.

THE BENEFITS OF CRYPTOCURRENCY ADOPTION AND REGULATION

Regulatory oversight plays a key role in protecting investors and ensuring market integrity. The VASP Bill aims to enhance consumer protection, prevent fraud, and align Kenya with international standards. If effectively enforced, the framework could boost investor confidence, attract innovation, and position Kenya as a leading crypto investment hub.

The VASP Bill will formalise tax compliance by requiring licensed entities to report and remit the DAT, replacing the current reliance on voluntary contributions. In the financial year ending June 2024, the KRA collected KES10 billion in DAT from just 384 cryptocurrency users, highlighting the significant capacity for revenue generation for the government.

In 2024, Kenya was grey-listed by the Financial Action Task Force for inadequate measures against money laundering, terrorist financing, and unaddressed crypto-related risks. The implementation of the VASP Bill demonstrates Kenya’s commitment to strengthening its AML/CFT framework, as it provides comprehensive provisions to address these concerns.

Stablecoins are cryptocurrencies pegged to fiat currencies or commodities and offer price stability compared to traditional cryptocurrencies. A survey by Emurgo Africa revealed the growing adoption of stablecoins in sub-Saharan Africa, driven by local currency volatility and limited banking access. In Kenya, factors like inflation, currency depreciation, a strong fintech ecosystem, and widespread internet access have accelerated stablecoin use. Platforms like Binance have leveraged M-Pesa to enable stablecoin-fiat exchanges, expanding financial access in remote areas. Stablecoins are increasingly viewed as a cost-effective, reliable alternative for value storage and currency conversion, offering protection against inflation and currency instability.

IN SUMMARY

Just as M-Pesa transformed the way in which Kenyans interact with money, cryptocurrencies are set to further revolutionise the financial sector by offering decentralised, borderless and digital alternatives. With Kenya’s history of embracing technological advancements and its large, digitally literate population, the country is well-positioned to become a key player in the global cryptocurrency market. As fintech startups focused on cryptocurrency continue to penetrate the market, future collaborations between traditional banks and blockchain companies are likely, fostering a more inclusive and efficient financial ecosystem.

1.A contract which involves the investment of money or other property with the expectation of profit or gain based on the expertise, management or effort of others.

Njeri Wagacha is a Director and Wambui Kimamo a Trainee Lawyer | CDH Kenya

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
www.dealmakersafrica.com

GHOST WRAP – The JSE Winners’ Club in 2025

The Finance Ghost
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GHOST WRAP – The JSE Winners’ Club in 2025

At the halfway mark in 2025, we’ve lived through some huge geopolitical shifts. The world’s gaze has shifted beyond just the US market. This opens up new opportunities of course, but finding those gems isn’t easy.

Many investors choose to stick with what they know in times like these. This means homegrown favourites on the JSE. But which stocks have been the big winners thus far this year, and what do they have in common?

In this episode, I explain how the key themes of gold, platinum and telcos have proven to be the rising tide that lifts all boats in those industries. There have also been rewards for stock-pickers beyond those sectors, with the examples of Naspers/Prosus, OUTsurance and WeBuyCars all being interesting. 

The Ghost Wrap podcast is proudly brought to you by Forvis Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Forvis Mazars website for more information.

Remember, nothing you hear on this podcast is investment advice, nor does it reflect the views of Forvis Mazars in South Africa. Always speak to your financial advisor.

Listen to the podcast here:

Transcript:

My thanks as always to Forvis Mazars in South Africa for making Ghost Wrap possible.

We are at the halfway mark of the year and what a year it’s been. US politics have been at the forefront of market movements, along with ongoing conflicts in the Middle East in particular. Gold has continued to shine and there are even strong positive movements in platinum if you can believe it. Many commodities outside of those two have had a tough time though, putting downstream pressure on other players in the value chain.

In the consumer sector in South Africa, the main trend has been an uptick in credit sales, facilitated by retailers with more advanced credit services than before and of course the ever-growing popularity of BNPL, which appears to be exploding onto the scene in South Africa. This is a serious disruptive force for banks, as providing credit at point of sale is vastly more powerful – and arguably more dangerous – than extending general credit lines. This will be an interesting trend to watch.

Our interest rates have remained frustratingly high, although this has contributed to a stronger rand vs. the US dollar. The rand has strengthened by over 5% against the US Dollar on a year-to-date basis, although we can’t say the same for currencies like the Great British Pound where we’ve gone the other way. A weaker dollar amidst inflation concerns and an overall worry around the concept of “US Exceptionalism” – and the trade war of course – have been fascinating features in the market. But if you cast the net wider to European equities, it’s genuinely difficult to find much to get excited about.

And in all this noise, there have still been some great stories on the JSE. In this Ghost Wrap, I’ll be looking at companies that have returned at least 20% year-to-date – a genuinely great performance. In several cases as I’ll highlight here, the returns are much higher.

Welcome to the winners’ club. This is not necessarily an exhaustive list, but these are some of the names that I think have been really interesting this year at the halfway mark.

The Goldies

Not much to discuss here that you haven’t heard before, other than to point out that gold has continued its fabulous run – in a world worried about inflation and conflict, along with a weakening US Dollar, gold has been your friend. This means that names like Gold Fields, Harmony Gold, AngloGold and others have all had a great time this year. If you’ve been in gold, you’ve been smiling. You’ve been firmly in the winner’s club.

The good news is that these companies are just printing cash at the moment, paying down debt where they have any and coming out with much stronger balance sheets as a result. Who knows how long this particular strength will continue for, but gold does have a very long track record of gently ticking up – and that’s good news for investors.

The Plats

We now get to the plats, where there’s a specific theme that links all of them together and explains a bunch of names being in this illustrious winners’ club. That of course is the platinum price – platinum futures have gone ballistic, with a 44% climb year-to-date in USD terms, with platinum as the obvious one to focus on in the PGM basket. I’ve seen a bunch of explanations and theories for this, but it really comes down to the same thing every time with these commodities: supply and demand dynamics. PGMs have been horrible for a long time, which means that limited additional supply comes on-stream. All you then need is some kind of demand boost and suddenly those prices jump.

There are also technical arguments being made about punters looking beyond just gold for inflation hedges, with silver and platinum as natural landing points here. There are also references being made to jewellery demand, which I think makes more sense, as gold prices have gone so high that platinum becomes an interesting alternative in that space, albeit a different colour.

Whatever the reason, names like Impala Platinum, Northam Platinum and Sibanye-Stillwater are finally doing well. If this carries on, my Sibanye position might even dig itself out of a hole. I can only dream.

The Telcos

The third category to touch on is the telcos. This is the last broad category that I want to focus on, proving once again that if you pick the right sector, you don’t always have to pick the perfect stock to get really strong returns. In telcos, which by the way has generally been a very difficult place to make sustainable returns, things are so good that the board of MTN Zakhele Futhi (the B-BBEE scheme linked to MTN shares) chose to unwind their scheme i.e. deliver returns to investors just several months after the scheme had to be restructured to avoid maturing underwater or close to underwater. That’s how significant the rally has been.

MTN is up 42% year-to-date, Vodacom has done 33% and those who picked the riskier names have done even better, with Telkom up 50% and Blue Label Telecoms as the clear winner, up a whopping 150% thanks to the market’s love affair with the Cell C strategy.

Now, the reasons for the performance in the sector vary. Telkom has been a turnaround story, as has Blue Label if we are being honest. Vodacom and MTN offer broader exposure to both South Africa and other regions in Africa, with a generally weaker US Dollar giving some breathing room to many of those economies. Again, the macroeconomics played a big role here.

A few stock picks

What you’ve hopefully taken from this thus far is that you simply cannot ignore geopolitics and macroeconomics in your portfolio. You didn’t have to make heroic picks in gold or platinum or even telcos – you could’ve done very well just owning a couple of names in one, two or, if you’re really lucky, all three sectors. I had exposure to two of them thankfully, being a Pan African Resources position that I tactically took earlier this year (exposure to gold) and a long-suffering Sibanye-Stillwater position that I’m starting to think might even get its head above water vs. my average in-price.

Among the three names I’m going to finish off with, I also hold two: Prosus and WeBuyCars. We can lump Naspers in with Prosus of course, but that doesn’t count as the third name as it’s really just the same thing. No, the third name I want to mention is OUTsurance, which has been a solid player this year that I don’t have exposure to at this time.

Let’s do Naspers/Prosus.  The company just held a capital markets day in which they set out their strategy based on building regional ecosystems that have the ability to go and use centralised AI models using data inputs from multiple apps. At an extreme, they think that user behaviour on an app in say Latin America might teach them something useful for an app in perhaps Eastern Europe. Look, the jury is out on this. I think there might be some AI benefits to come, but probably not to the extent that AI evangelists would believe. Where I am very bullish is on three other points: (1) growth ex-US in this environment, (2) adoption of eCommerce and platforms in general by consumers and (3) the leadership style and approach of Naspers/Prosus CEO Fabricio Bloisi. So far, so good – that belief is working out very well for me.

WeBuyCars is another favourite of mine, up 31% year-to-date. With so much noise and disruption in the automotive sector, this remains my favourite overall play. They don’t represent new car brands in South Africa. Instead, they focus on providing the most efficient way to churn the existing base of used cars in our country. I must say though, I saw some concerning headlines recently around how they might consider selling new cars in time to come. That would probably be the trigger for me to sell my position or at least trim it. I sincerely hope that they stick to their knitting and don’t get tempted into less lucrative business models. A big part of that share price’s success is that they have not been anywhere near new car sales.

Finally, OUTsurance. This is one of the very few South African success stories in Australia by the way, mainly because they built that business from the ground-up rather than acquired it for a silly number. OUTsurance is a company that simply just gets on with it. The interims were released in March and the next major release will be for the year-ended June, which will come out by September. Diluted HEPS was up 46.1% in the interim period, so I wouldn’t be surprised to see a trading statement soon, which would be triggered by an expected move of at least 20%. Naturally, the complete lack of a trading statement would indicate a disastrous second half of the year, but there’s no obvious reason why that would’ve been the case, so I think we will see a trading statement in the next couple of months. Short-term insurance is all about shifting risk from the customer to the underwriter though, so one must always remember the risk of major loss events – and this can sometimes be something like the weather.

That concludes this episode of Ghost Wrap. The winners’ club has delivered some strong returns for the first half of the year. Of course, the big question is whether these winners can keep on delivering in the second half of the year, and whether new winners can emerge. The markets certainly keep things interesting!

Ghost Bites (FirstRand | Primeserv)

The Finance Ghost
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Ghost Bites (FirstRand | Primeserv)

FirstRand is reminding the market why it trades at a premium valuation (JSE: FSR)

They are performing ahead of the guidance given in March this year

Of course, the first thing is do is to go and look at what FirstRand told the market in the interim results, as the flavour of the latest announcement is very much that things have improved since then.

Essentially, they guided for weaker net interest income (NII) growth in the second half of the year, but higher non-interest revenue growth, with the credit loss ratio trending lower as well. Operating expenses were expected to increase below inflation (with the motor commission provision in the base – this becomes very important later), while earnings growth should be slightly ahead of the long-term guidance of GDP +0% to 3%. Finally, return on equity (ROE) was expected to be in the target range of 18% to 22%.

So, what’s changed? In terms of the core banking business, FirstRand is telling a more bullish story around loans and advances than we’ve seen at peers, although one has to be careful in interpreting fluffy paragraphs rather than hard numbers. It’s important to remember that FirstRand operates in many more regions than just South Africa, so the comments on loans and advances at e.g. Nedbank give a far more focused view on our country than what you’ll get from FirstRand. Something I will highlight from FirstRand is that demand for home loans has been quite weak, whereas vehicle finance through Wesbank is performing well.

Despite the shift in portfolio mix towards corporate and commercial loans that are typically lower margin than retail loans, FirstRand expects NII to be better than they expected in the March guidance. On the NIR front, they are in line with guidance, thanks to great businesses in the group like RMB.

In terms of the credit loss ratio, they remain at the bottom end of their through-the-cycle range and broadly in line with guidance, although my read on the narrative is that it isn’t going quite as well as they had hoped. Retail impairments are slightly up (driven by macroeconomic volatility) and a recent focus on lending to SMEs has led to a natural increase in risk in the book.

But here’s the big win vs. guidance: operating expenses are “significantly better” than guided. With the UK motor commission provision in the base, operating expense growth has been negative. Even with adjusting for the UK motor commission provision in the base, they are keeping cost growth below inflation. It feels like the original guidance was deliberately conservative around the provision, as at no stage was anyone expecting that costs excluding the provision would be negative. The overall point here is that the provision remains uncertain, with the UK Supreme Court is expected to give judgement at the end of July 2025. Control over general operating costs has been good.

The combination of slightly better NII and much better cost control has led to a sharp increase in guidance when it comes to earnings. They now expect full-year growth of low double-digit to mid-teens, which is well above the long-term growth guidance. ROE is still expected to be in the 18% to 22% range.

This is a good reminder of why FirstRand trades at a premium valuation vs. peers. Simply, it’s a better business.

Primeserv flags higher earnings (JSE: PMV)

Perhaps the share price will see some love on Thursday

Business support services group Primeserv released an announcement after market close on Wednesday that should result in happy shareholders. A trading statement for the year ended March 2025 reveals that HEPS has increased by between 24% and 34% vs. the prior year.

This is an acceleration from the interim numbers, where HEPS was up 17% and the interim dividend increased by 20%, so cash quality of earnings was strong.

Although there isn’t much liquidity in this stock on a daily basis, there is at least some. It will be interesting to see if there’s some share price action on Thursday based on this announcement.

Nibbles:

  • Director dealings:
    • Directors of ADvTECH (JSE: ADH) have sold shares worth R4.9 million. This comes after recent sales by directors of a major subsidiary in the group. This is a bearish sign.
    • Christo Wiese has bought more shares in Brait (JSE: BAT), picking up shares worth nearly R1.2 million through Titan Premier Investments.
    • Des de Beer bought shares in Lighthouse Properties (JSE: LTE) worth R860k.
    • An associate of a director of a major subsidiary of PSG Financial Services (JSE: KST) bought shares worth R194k.
    • The CEO of Vunani (JSE: VUN) bought shares in the company worth R65.7k.
  • In a weirdly small trade, an associate of Sean Riskowitz bought shares in Finbond (JSE: FGL) worth R1.2k.
  • There’s a very interesting new director appointment at Gemfields (JSE: GML). Rational Expectations (one of the two major shareholders that acted as underwriters in the recent rights offer) has appointed Louis du Preez as a board representative. Yes, the same Louis du Preez who was CEO of Steinhoff from 2019 as part of the restructuring of that catastrophe. As a lawyer with immense expertise in restructuring, my read on this is that Rational Expectations has sent in a bulldog to make very sure that Gemfields doesn’t get itself into trouble again. Or, there’s some kind of broader plan afoot to restructure the company. Either way, it’s a director appointment worth mentioning.
  • DRDGOLD (JSE: DRD) has announced Henriette Hooijer as CFO Designate. This is an internal appointment, which is always great to see. Current CFO Riaan Davel will step down at the end of the FY2025 reporting season, but will consult to the company until January 2027. Hooijer will take office from 1 February 2026.
  • Oando (JSE: OAO) has been catching up on its financial reporting. They’ve finally released the quarterly report for March 2025, so they are now up to date. Although profit more than doubled year-on-year, they could only manage HEPS of 0.01 Nigerian Naira.
  • Alexander Forbes (JSE: AFH) obtained approval from the SARB for their special dividend, with a payment date of 21 July.

Ghost Bites (Attacq | Capital Appreciation | Grindrod | Nedbank | Sephaku | Sirius Real Estate)

The Finance Ghost
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Ghost Bites (Attacq | Capital Appreciation | Grindrod | Nedbank | Sephaku | Sirius Real Estate)

Attacq is on track to meet full-year guidance for distributable income per share (JSE: ATT)

This pre-close update comes at the perfect time for Unlock the Stock

Attacq has released a pre-close update dealing with the year ending June 2025. The timing is very helpful, as you can engage with the management team on Unlock the Stock this week. Attendance is free, but you must register here.

The key insight is that the group is on track for growth in distributable income per share (DIPS) of between 24.0% and 27.0%. There have been some major corporate actions sitting behind this number, as this is obviously not an indication of maintainable growth. The interim period saw the bulk of the increase, when DIPS was up by 49.1%.

Digging deeper into the pre-close update reveals a combination of organic growth metrics (like monthly trading density growth of between 2.2% and 7.2% in the second half of the year) and significant progress made in the development pipeline as well. Weighted average annual trading density growth of 3.8% is well below 5.8% in the prior year, so that’s something to keep a close eye on.

An encouraging sign is that occupancy in the “collaboration hubs” (what everyone else just calls office properties) has ticked higher:

They’ve had success in the leasing of the new office development The Ingress, noting that the property will achieve the required rental yield. This is another positive data point for the office sector, although this is a high quality building in a particularly sought-after area, so you have to be careful in assuming that the entire sector is doing better.

The next development that needs to do well is Aspire Waterfall City, which is a mixed-use development that has a large residential component (roughly 217 units). Given the unique nature of the property and where it is located, they will probably make a success of this.

Happily, the weighted-average cost of debt has dropped by 50 basis points from June 2024 to April 2025 and they are in the process of refinancing further facilities at lower margins. There are substantial debt maturities in the next 24 months, so this is a good time to be achieving better rates.

The market appreciates Capital Appreciation (JSE: CTA)

The Payments division is ensuring they live up to their name

In the year ended March 2025, Capital Appreciation grew revenue by 7.6%. Now, that might not sound like much, but it looks very juicy when you combine it with an 80 basis points increase in gross profit margin and then a whopping 340 basis points increase in EBITDA margin. This is enough to drive a 23.3% increase in EBITDA and then a 25.2% increase in HEPS. Lovely.

The high growth period has put strain on working capital, with cash generated from operations down by 34.8%. Despite this, the total dividend for the year came in 20% higher at 12 cents. Dividend growth has lagged HEPS growth though, so there is some caution around the balance sheet (despite the high current cash balance) and ensuring that they have cash available to support growth.

Growth is the thing they certainly aren’t short of, with an 18.8% increase in the number of terminals in the hands of customers. The base of installed devices is what drives revenue of course. Income from terminal sales increased 41.1% and from payments increased 18.6%.

The Software division is performing below expectations at the moment, although it did get better in the second half of the year relative to the first half. To give you an idea of the variance in performance across the divisions, Payments grew EBITDA by 25.4% and Software saw EBITDA fall by 31.8%!

The recent Dariel acquisition may be cause for concern, as the company achieved only 55% of the EBITDA warranty that formed the basis for the earn-out payment. Although that helps in terms of reducing the final purchase price, it would be far better to see strong performance in that business.

I think this chart is a nice way to finish off, showing how developed the South African economy is vs. some of our peers in terms of moving past cash transactions:

Can Grindrod maintain the second quarter momentum? (JSE: GND)

These numbers look weak and the CEO just left to rather go and be the CFO of Kumba

A few eyebrows were raised when news broke of Xolani Mbambo stepping down as CEO of Grindrod to go and be the CFO of Kumba Iron Ore instead. Sure, Kumba is a very large group, but you don’t often see a move from CEO to CFO. To add to this bearishness around Grindrod, the pre-close statement by the group isn’t particularly good.

The challenge is that it’s hard to know whether Grindrod will maintain their exit velocity. The second quarter was better than the first quarter, so a continuation of that trend would lead to a decent financial year overall.

The choppy Grindrod share price reflects these concerns. This isn’t a chart that I would want to have a long position in right now:

With a weak global environment for most commodities in the first few months of 2025, the dry-bulk terminal at the Port of Maputo saw a drop in exports from 5.8 million tonnes per annum to 5.2 million tonnes per annum for the five months to May. But there were record volumes in May, so again it comes down to exit velocity.

In terms of the financial performance, Grindrod’s share of earnings from the Port of Maputo fell from R178 million to R165.9 million. Although EBITDA margin in the Port and Terminals segment increased from 33% to 35%, the Logistics EBITDA margin was down from 32% to 25%.

Despite the acquisition of the remaining 35% interest in the Matola terminal for R1.4 billion in this period, Grindrod’s group net debt is steady at R0.4 billion. This is despite a sharp increase in gross debt over the five months from R2.9 billion to R3.7 billion.

I would keep a close eye on this one.

A soft five months for Nedbank (JSE: NED)

Unlike at competitor Standard Bank, not-interest revenue isn’t saving the day

We are in a very awkward environment for the banks. Interest rates have come down just enough to start hurting their net interest margins, but not enough to drive meaningful demand for loans and advances. This immediately puts net interest income (NII) – the lifeblood of banks – under pressure. Now, this pressure can be mitigated by a strong performance in non-interest revenue (NIR), which is also a major boost to return on equity (ROE). This is what we saw play out at Standard Bank in their recent update. Sadly, Nedbank hasn’t enjoyed the same trajectory in NIR, but they’ve suffered the same fate in NII.

In terms of economic expectations, Nedbank reckons that South African GDP will grow just 1.0% in 2025, down from their original expectation of 1.4%. They specifically highlight weakness in the mining and manufacturing sectors. It’s so interesting that consumer spending has been strong this year, but I can’t see the consumer trend continuing if the underlying economy is weak. Notably, they expect a 25 basis points interest rate cut in July this year, after which rates will remain steady.

The broader economic environment led to just 5% growth in corporate loans and advances in the first quarter and then 7.5% in April, albeit off a weaker base in that month. Household credit growth was just 3.0%. Dovetailed with the recent trend in results at retailers where credit sales are doing well, this tells me that South Africans are borrowing from retailers (and buy-now-pay-later providers) to buy clothes, rather than from banks to buy cars and homes.

For the five months to May 2025, headline earnings came in flat. This is thanks to the lack of growth in NII and NIR, with even an improvement in the credit loss ratio being unable to offset this impact. Essentially, the increase in income was only enough to cover the typical growth in expenses.

Important metrics to note include NII growth in the low single digits, NIR growth above mid-single digits and the credit loss ratio within the top half of the through-the-cycle target range of 60 basis points to 100 basis points.

Nedbank’s strong performance on the market on the day of these results was thanks to global geopolitical factors, not these numbers. The share price is down 8% year-to-date. It’s worth noting that Absa is down 6.6% year-to-date, so neither of them are doing well at the moment.

Sephaku shareholders had a good day (JSE: SEP)

The market responded positively to a strong trading statement

Sephaku released a trading statement for the year ended March 2025. It guides an expected increase in HEPS of between 17% and 24%, which means coming in at between 30.0 cents and 32.0 cents vs. 25.71 cents in the base period.

This outcome was driven by improved results at both Métier and Sephaku Cement. Métier is having a better time of things right now (they talk about “strong growth” in revenue and profit), while Sephaku Cement was happy to just return to the previous year’s financial performance.

The share price closed 6.3% higher, which means that it is finally in the green year-to-date after a tough run.

Sirius Real Estate further diversifies its sources of debt (JSE: SRE)

A new credit facility sees a couple of banks lending to Sirius for the first time

Property funds need constant access to capital, as the way they grow is through property acquisitions. Although they can “recycle capital” by selling properties and reinvesting the proceeds, this is harder than raising money for new deals. Of course, being able to raise capital depends on management’s track record, so only the best funds are able to successfully raise – in a healthy market cycle, that is. When you see the sub-standard funds executing oversubscribed bookbuilds, it’s time to worry.

Thankfully, Sirius Real Estate is anything but sub-standard. They have a particularly good track record when it comes to active asset management in the property space, using various techniques to improve the valuation yield on properties over the period of ownership. This means that the market is happy to support regular equity capital raises.

Of course, a big part of the appeal of property funds is their use of leverage, so it’s equally important that they can raise debt funding as required. Sirius is also having no problems with this, with the latest example being a new €150 million unsecured revolving credit facility with a three-year term. Instead of being linked to a specific property or deal, this facility is simply available for Sirius to access as and when required. This makes it a helpful source of finance.

The facility is priced at 120 basis points above short-term EURIBOR, which in current pricing means 3.2% in euros. Importantly, it brings BNP Paribas into the fold as lenders to Sirius for the first time, with ABN AMRO also lending to the group for the first time in over a decade. The final bank in the consortium is HSBC

This is the firepower that Sirius needs to keep executing deals in Germany and the UK at a debt:equity ratio that makes the returns work for investors.

Nibbles:

  • Sun International (JSE: SUI) has managed to jump through the hoops required to get a work permit for Ulrik Bengtsson, the incoming CEO. He will take up the new role on 1 July 2025.
  • If you’re interested in Naspers / Prosus (JSE: NPN | JSE: PRX), then be aware that the company is hosting a capital markets day in London on Wednesday 25th June. The presentation will be available after the event and I’ll be sure to cover some of the most interesting insights here in Ghost Bites.
  • Vukile Property Fund (JSE: VKE) has decided to wind up the share purchase plan, in which loan funding was provided to directors and key executives to buy shares. This is fairly common in the property sector. The problem is that the scheme pre-dates COVID and hence the returns were very disappointing. By letting it run this long, participants are at least mostly at break-even or slightly in the green, although a few are in the red. Vukile has avoided an approach of simply writing off the underwater portion of the loan in previous years, as they are trying to be fair to all shareholders (without punishing their key staff). They’ve reached a point where 60% of the scheme has been wound-up and the rest will be disposed of in the coming months.
  • Telemasters (JSE: TLM) has withdrawn the cautionary announcement related to an acquirer that has been sniffing around a potential offer. The acquirer has not managed to raise the required funding for a deal and there’s no point in Telemasters remaining under cautionary forever. If an approach is made down the line (backed by tangible funding), then the company will make additional announcements as required.
  • Tiger Brands (JSE: TBS) has received SARB approval for the special dividend, with the payment date (7 July) unchanged. Similarly, SAB Zenzele Kabili (JSE: SZK) received SARB approval for its dividend, with that payment date having been changed to 7 July (a complete coincidence that it’s the same day as Tiger Brands).
  • Cilo Cybin (JSE: CCC) has released a trading statement dealing with the year ended March 2025. The headline loss per share is expected to be between -0.8 cents and -0.9 cents. The loss has been driven by the costs incurred for the acquisition of Cilo Cybin Pharmaceutical as a viable asset.

Ghost Bites (AH-Vest | Assura – Primary Health | Goldrush | Harmony | Naspers – Prosus)

The Finance Ghost
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Ghost Bites (AH-Vest | Assura – Primary Health | Goldrush | Harmony | Naspers – Prosus)

AH-Vest is finally set to be taken private (JSE: AHL)

This is one of the most obscure listings on the JSE

AH-Vest is a very good example of the kind of company that should be taken private. There is no reason for such a tiny business to be in the listed space, with zero liquidity and all the regulatory costs along the way. Thankfully, this situation will soon be resolved, as Eastern Trading is swooping in to acquire all the shares that the company doesn’t already hold.

The deal is at 55 cents per share and the total acquisition price is just R2.4 million. Although this is an outrageous premium of 1,833% to the current traded price of 3 cents per share, you can see that we are talking about tiny amounts here overall. This is because Eastern Trading already owns 95.7% of the issued share capital.

This deal is long overdue.

Assura has now decided to back the Primary Health Properties offer (JSE: AHR | JSE: PHP)

You could get motion sickness from how quickly they change direction at Assura

After much to-and-fro, it looks as though Primary Health Properties managed to convince the Assura board that the revised offer is a better bet for shareholders than the KKR and Stonepeak cash bid. I am rather surprised to be honest, as the cash deal looked more compelling to me.

The latest version of this offer is 0.3865 new Primary Health Properties shares for each Assura share, along with 12.5 pence in cash. Assura shareholders would also be entitled to a special dividend of 0.84 pence per share. Based on 20 June 2025 market prices, this values Assura at 53.3 pence per share, which is 5.8% higher than the 50.42 pence per share cash offer from KKR and Stonepeak. That’s a whole lot of deal implementation and post-merger risk for just a 5.8% premium, including the raising of a vast amount of debt to get the deal done.

Notably, both offers would’ve allowed Assura shareholders to retain the April dividend entitlement, as well as the dividend due to be paid in July. These dividends have been excluded from the above numbers.

The bidding war has been lucrative for Assura shareholders, as the price including the April and July dividends (55.0 pence per share) is a 45.6% premium to the 3-month volume weighted average share price.

To give you an idea of the relative size of the two groups, Assura shareholders would have 48% in the enlarged entity. Those who want to get a higher proportion of cash vs. shares will have the ability to do so via a “mix and match” facility.

The last offer from KKR and Stonepeak was called a “best and final” offer. We will now see how serious those words actually are.

Goldrush releases its inaugural trading statement in its post-investment entity era (JSE: GRSP)

As an operating company, the focus is now on HEPS and EPS

Investment entities focus on measures like net asset value (NAV) per share, whereas operating entities use headline earnings per share (HEPS) and earnings per share (EPS) as their key performance metrics for trading statements. Goldrush has moved on from investment entity accounting, so the focus is now on HEPS and EPS.

This means that the trading statement for the year ended March 2025 isn’t comparable to the prior period at all, as HEPS was calculated completely differently across the two periods. Instead, it’s best to just look at the range in the trading statement rather than the year-on-year move. The expectation is for HEPS to be between 130 and 150 cents. For reference, the share price is currently trading at R8.80.

Harmony has met guidance for the year ending June 2025 (JSE: HAR)

With the gold price doing the things, Harmony is delivering on what it can control

Harmony’s share price is up 65% year-to-date. The gold price keeps delivering wonderful opportunities for the mining houses that can make hay while gold is shining. Harmony certainly ticks that box, with a pre-close update indicating that the company will meet production guidance for the year ending June 2025.

This means total production of between 1.4 million and 1.5 million ounces, while all-in sustaining costs will be between R1,020,000 and R1,100,000 per kg. Underground recovered grades were better than guidance. As the icing on the cake, capex was slightly below the guided R10.8 billion.

Looking ahead, the major next step is the acquisition of MAC Copper in Australia. They are looking to complete that deal in the second half of this year. There are also several extension projects at existing assets.

Results will be released in August.

Everything is looking better at Naspers / Prosus (JSE: NPN | JSE: PRX)

Even the Prosus dividend has doubled

I couldn’t be happier with my position in Prosus, as evidenced by another 3.3% rally in the share price on Monday in response to the release of results. The reason I own Prosus and not Naspers is that I want cleaner exposure to the international assets rather than South African assets like Takealot and Media24. It’s much of a muchness really, with Prosus up 33.5% year-to-date and Naspers up 31.5%.

In my opinion, the most interesting reason to look through the Naspers results is to see how Takealot is doing. Takealot.com grew revenue by 19% in dollars, with the number of orders up 15%. Mr D grew by 11%, with immense growth in groceries in particular. Adjusted EBIT at Mr D was $4 million, but Takealot ran at negative adjusted EBITDA of -$16 million. They attribute this to increased investment in response to competitive pressures from new international entrants. This probably means Amazon, but could mean the Chinese platforms as well. Either way, the expectation is for Takealot and Mr D to generate positive adjusted EBIT in FY26 on a combined basis.

Focusing on Prosus for a moment, revenue increased by 12.8% and they swung from an operating loss of -$546 million to profit of $173 million. HEPS almost doubled by 132 US cents to 256 US cents. Free cash flow more than doubled from $422 million to $1.02 billion. And finally, the divided did in fact double, from 10 Euro cents to 20 Euro cents per share. The Naspers numbers are different but the direction of travel is much the same.

As a reminder, the focus on profits doesn’t mean that the group is no longer doing deals. Quite the contrary, actually. Recent transactions include the acquisition of Despegar in Latin America, expanding the regional reach to over 100 million customers across several verticals. They also acquired Just Eat Takeaway.com, with the plan being to use AI to turn that European food delivery business into a growth story

The integration of AI into the business is the crux of the Prosus strategy. They highlight use cases ranging from efficient route generation in logistics through to automated customer support, fraud prevention and detection of “bad content” in a trust and safety context.

The best way to think about the group these days is that they are focused on building regional ecosystems that become powerhouses through offering a variety of services to a large user base. This is “superapp” thinking, although in many cases they aren’t trying to do everything through one app. It’s more about driving user engagement, feeding that data into AI models and creating a stronger ecosystem overall. This graphic of the ecosystem in India tells the story with an extreme example of how many platforms can fit into this strategy:

The difference these days at the group is that Fabricio Bloisi is a proper operator who has walked this scale journey before himself. He’s not just a desktop capital allocator. This chart on iFood in Latin America shows what is possible in these platforms:

I’m long Prosus and have absolutely no plans to change that. Onwards and upwards we go!

Nibbles:

  • Director dealings:
    • Here’s something that worries me as a shareholder in ADvTECH (JSE: ADH): the top exec in the resourcing business and his spouse sold shares worth a total of R25.2 million and a senior exec in the tertiary education business sold shares for R2.6 million.
    • An associate of two directors of Astoria (JSE: ARA) entered into a CFD trade with a value of R21 million.
    • A director of Stor-Age (JSE: SSS) has borrowed R10.7 million from Investec and has pledged shares worth R28.6 million as security for that loan. It’s not hard to see why the bank felt comfortable with extending this credit.
    • Christo Wiese is back on the bid for Brait (JSE: BAT) shares, buying shares worth nearly R1.6 million through Titan Premier Investments.
    • Des de Beer bought shares in Lighthouse Properties (JSE: LTE) to the value of R659k.
  • Equites Property Fund (JSE: EQU) announced that GCR Ratings has affirmed its credit ratings with a Stable outlook. This is important in the context of how Equites is shifting exposure from the UK market back to the South African market.
  • As I’ve noted many times, junior mining is all about consistent access to capital to support resource development activities. In this regard, Orion Minerals (JSE: ORN) has announced than an entity related to company chairman Denis Waddell has provided an unsecured loan facility of up to $0.5 million to the company. This will be used for working capital and carries a cost of 10% per annum. The amount is repayable by the end of September 2025, or upon the conclusion of a funding transaction that enables the repayment of this amount, or at a later date as agreed between the parties. This is the type of thing that you typically see in private companies rather than listed companies. It’s a show of faith by the chairman in the company’s prospects.
  • The process of extracting the value from MTN Zakhele Futhi (JSE: MTNZF) and unwinding the structure continues, with the latest update being that MTN has repurchased around 50.6 million shares from MTNZF in full settlement of the notional vendor funding balance of R6.4 billion. The latest guidance from MTNZF is that the net asset value (NAV) per share of the structure is between R20.00 and R22.50. As there is still a holding in MTN shares, its important to keep in mind that this amount can fluctuate.
  • Here’s some good news from Wesizwe Platinum (JSE: WEZ): the processing plant has completed two months of cold and hot commissioning after the rectification plan and is now operating smoothly.
  • Omnia Holdings (JSE: OMN) has received exchange control approval for the payment of the special dividend of 275 cents per share.
  • Momentum (JSE: MTM) has been busy with a share repurchase programme, repurchasing 3.02% of issued share capital since the AGM in November 2024. This is an investment of R1.32 billion in the company’s stock at an average price of R31.22 per share. The current share price is R33.30, so that’s been a successful process.
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