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DealMakers AFRICA – Analysis Q1 2025

Marylou Greig and Vanessa Aitken
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DealMakers AFRICA – Analysis Q1 2025

The return of Donald Trump to the U.S. presidency early in the quarter introduced uncertainty and recalibration in US-Africa investment dynamics, which is clearly reflected in the data captured by DealMakers AFRICA.

In the three months to end March 2025, deals on the continent (excluding South Africa and failed deals) numbered 75, valued at US$2,17 billion – this against 125 deals ($3,7 billion) in 2024, 133 deals ($3,69 billion) in 2023, and 202 deals ($9,8 billion) in 2022 – a noteable decrease over the period. Private equity investment, a key driver in M&A on the continent, fell 40% in Q1 year-on-year.

On a regional level, East and North Africa were the most active, accounting for 55% of deals captured in the quarter. Kenya remains the anchor for deal activity (12 deals) in the East African region, with the focus on financial services, healthcare and agritech. Tanzania and Uganda saw increased investor interest in infrastructure, manufacturing and logistics. East Africa’s energy transition saw an increase in M&A deals in the solar, wind and hydro sectors. Egypt remained the most active country in North Africa (14 deals), followed by Morocco (4 deals) and Tunisia (3 deals), with activity in the financial services, logistics and consumer goods sectors, and venture capital and private equity interest in fintech, healthcare and renewable energy. M&A activity in West Africa was dominated by Nigeria, which accounted for c.65% of deals announced in the region.

Africa represents a hotbed for fintech innovation. In fact, fintech was (by far) the dominant sector, accounting for c.50% of total investment for the quarter. Mobile connectivity and creative business models are leapfrogging traditional solutions, and one such fintech deal was LemFi’s $53 million raise which ranked in the top deals by value for the period. Interestingly, and unusually, the top deals by value reflect a broad range of sectors from mining to heavy industrials, fund raising and agriculture.

In the remaining quarters of 2025, M&A is likely to be influenced by whether the US clearly defines its Africa policy; but until such time, will likely remain subdued and inconsistent. However, sectors such as energy independence, critical minerals and digital infrastructure may still see interest, with dry powder waiting to be deployed in sectors with strong fundamentals and resilience to macroeconomic volatility. Despite global politics and potential trade wars, Africa provides massive market potential with good demographics and rapid urbanisation.

DealMakers AFRICA is Africa’s corporate finance magazine.
www.dealmakersafrica.com

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

Coal miner Exxaro Resources has invested in the manganese sector with the announced acquisition of select assets from Ntsimbintle and OMH (Mauritius) Corp, a subsidiary of Australian OM Holdings. The move is in line with Exxaro’s stated strategy to diversify beyond coal. The target assets from Ntsimbintle Holdings include – a 74% stake in Ntsimbintle Mining (SA’s largest single mine manganese exporter), 19.9% of Jupiter Mines, 51% of Mokala Manganese (in the Khalahari Manganese Field), 9% of Hotazel Manganese Mines and 100% of Ntsimbintle Marketing and Trading Private. From OMH (Mauritius), Exxaro will acquire a further 26% stake in Ntsimbintle Mining. The cash consideration payable is R11,67 billion but is subject to pre-emptive and tag-along rights which may see the final consideration payable decrease to R9 billion or escalate to a maximum of R14,64 billion.

4Sight has announced the disposal of a 30% stake in its South African operations in a B-BBEE transaction with newly formed 4Bonela Pele Education Trust. The Trust will support and fund development programmes focussing on higher education and formal training opportunities to support skills development relevant to the ICT sector, with 50% of the beneficiaries being black women. Shareholder approval is not required.

Grindrod and co-investor Vitol B.V have commenced exiting their 50% investments in the marine fuel trading business Cockett Group, CMOG Fuel DMCC and Cockett Marine South Africa following an agreement between the parties to proceed with a solvent winddown. In terms of the agreement Grindrod will receive US$22 million, being 61% of the carrying value of the investment as of 31 December 2024. Cockett was the only material asset remaining in Grindrod’s non-core asset portfolio.

Sanlam Private Equity (Sanlam) has acquired a stake in Boston City Campus for an undisclosed sum. Founded in 1991, the institution operates 47 campuses across South Africa.

In response to market speculation, Hammerson has confirmed that it is in the process of acquiring the units in the abrdn UK Shopping Centre Trust which holds the 59% stake in Brent Cross not already held by Hammerson for a net cash consideration of c.£200 million. Hammerson has an economic interest in Brent Cross of over 90%. Further details will be released in due course.

Europa Metals has been unable to identify suitable projects in which to invest or raise funds for and as such the Board has resolved to proceed with the return of the assets of the company to its shareholders. The company’s shares were suspended on the AIM market of the LSE and the company is currently engaging with the JSE.

Dimopoint, a wholly owned subsidiary of Collins Property, has disposed of letting enterprises to Trident Property via a series of inter-conditional agreements. The industrial properties, situated in Durban, Roodekop and Gqeberha, have been disposed of for an aggregate consideration of R649,75 million. The transaction forms part of Collins’ strategy to recycle capital, the net proceeds of which have been earmarked to fund investments in the Netherlands. The deal is a category 2 transaction in terms of the JSE Listings Requirements and as such, shareholder approval is not required.

Prosus has announced the completion of its December 2024, US$1,7 billion acquisition of Despegar, the Latin American online travel agency. Shareholders received $19.50 per Despegar share.

Barloworld and Newco jointly advised shareholders that the date, at which Newco would advise if it was to waiver the acceptance condition for the acquisition (standby offer) of Barloworld, would be extended from 9 May to 30 June 2025.

Unlisted Companies

Fuel Ventures, a UK-based early stage venture capital fund, has led a £340,000 investment round into Community Wolf, a SA startup providing public safety through its WhatsApp-based platform. The investment will be used to accelerate platform evolution and innovation and to scale the development and distribution of the Community Wolf platform including expanded marketing efforts from digital campaigns to out-of-home visibility into countries such as Nigeria, Brazil and wider South America.

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

Greencoat Renewables, a renewable energy infrastructure company investing in European renewable energy generation assets, has applied for an inward secondary listing on the JSE. The company is currently listed on the Euronext Growth Market in Dublin and the Alternative Investment Market in London. The listing is expected to become effective in H2 2025 at which time the company will not place or issue any new shares as part of the listing.

Shareholders of Bytes Technology will receive a special dividend of 10 pence per share as announced in the release of the Group’s annual results, distributing £24,1 million to shareholders.

The publication by Raubex of the Group’s audited financial results for the year ended 28 February 2025 has been delayed with the company not able to provide a definitive revised date for the publication. The delay is the result of the company receiving an anonymous whistleblower report containing allegations of unlawful conduct concerning the group and into which it is investigating.

This week the following companies announced the repurchase of shares:

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 7 to 9 May 2025, the group repurchased 2,760,000 shares for €162,63 million.

On March 6, 2025, Ninety One plc announced that it would undertake a repurchase programme of up to £30 million. The shares will be purchased on the open market and cancelled to reduce the Company’s ordinary share capital. This week the company repurchased a further 948,898 ordinary shares at an average price of 157 pence for an aggregate £1,49 million.

On 19 February 2025, Glencore plc announced the commencement of a new US$1 billion share buyback programme, with the intended completion by the time of the Group’s interim results announcement in August 2025. This week the company repurchased 16,750,000 shares at an average price per share of £2.64 for an aggregate £44,13 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 387,539 shares at an average price per share of 258 pence for an aggregate £999,339.

In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 670,216 shares at an average price of £31.22 per share for an aggregate £20,91 million.

During the period 5 to 9 May 2025, Prosus repurchased a further 3,394,728 Prosus shares for an aggregate €146,21 million and Naspers, a further 276,340 Naspers shares for a total consideration of R1,39 billion.

Two companies issued profit warnings this week: Santova and Barloworld.

During the week two companies issued cautionary notices: Santova and AH-Vest.

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

The International Finance Corporation, with support from the Government of Canada, has announced a US$5 million financing package for Husk Power Energy Systems Nigeria. The package includes a $2,5 million senior loan and a $2,5m concessional subordinated loan from the Canada-IFC Renewable Energy Program for Africa. The funding will support the rollout of Husk’s solar hybrid mini-grids in Northern Nigeria.

Ghana-based agribusiness, Mariseth, has secured a US$560,000 working capital loan from Sahel Capital’s Social Enterprise Fund for Agriculture in Africa. The company operates across several regions, aggregating crops from smallholder farmers and supplying them to FMCG companies in Ghana.

Corcel Plc has announced the acquisition, through its 90% owned subsidiary, Atlas Petroleum Exploration Worldwide, of an additional 30% gross (27% net) interest in its operated Block KON-16 in the Kwanza Basin, onshore Angola, from Intank Global DMCC for US$500,000 plus a future 5% overriding royalty interest limited to the first development area of Kon-16 in the event of a commercial discovery. The company has also announced the sale of a 5% net interest stake in KON-16 to Sintana Energy for $2,5 million. The nett effect of the transactions will see Corcel increase its net interest in KON-16 from 49.5% to 71.5%.

Nawy, an Egyptian proptech founded in 2019, has announced a US$52 million Series A equity round led by Partech and including e& Capital, March Capital Investments, Verod-Kepple Africa Ventures, VentureSouq, Endeavor Catalyst, Development Partners International Venture Capital via the Nclude Fund, Shorooq Partners, Outliers, HOF Capital, and Plug and Play. The company has also raised $23 million in debt funding from some Egyptian banks and financial institutions.

The International Finance Corporation and Proparco will provide a senior loan of up to €32,6 million to Groupe Duval as part of the financing for the Village Notre Père project, a new 21 km2 mixed-use real estate project in Plateau, the business district of Côte d’Ivoire’s economic capital.

Climate Fund Managers and Norfund have signed a Development Funding Agreement valued at US$3,6 million, with UK-based energy developer, Konexa, to support the next phase of Konexa’s energy expansion in Nigeria. The funding will enable the development of a solar PV plant and new and strengthened grid infrastructure connecting two of Nigerian Breweries Plc’s sites to renewable electricity supply.

Egyptian edtech platform, Career 180, has raised an undisclosed six-figure investment from Den VC. The funding will be used to support the company’s expansion into Saudi Arabia.

GOGO Electric, a Ugandan EV mobility solutions company, has agreed a revolving working capital facility with The Africa Go Green Fund (managed by Cygnum Capital). The funding will be used to expand GOGO’s electric motorbike production in Uganda.

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

Mind The Gap: Valuations in the US compared to Emerging Markets

James Moody and Calvin Craig
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Mind The Gap: Valuations in the US compared to Emerging Markets

The valuation gap between assets in the United States of America (US) and those in emerging markets has long been a topic of discussion among investors. While assets, particularly in the tech sector, typically attract comparatively higher valuations in the US, emerging markets have historically struggled to achieve the same multiples, despite the inherent ‘growth potential’. This article unpacks some of the possible reasons behind these differences, explores listed versus unlisted asset valuations, and assesses whether emerging markets present an opportunity or if the US will remain at the centre of investor interest.

Unpacking the potential reasons for valuation differences

The divergence in valuation between the US and emerging markets stems from a combination of structural, political, economic and perception-based factors. Key drivers include:
• Inherent Risk: Emerging markets typically face higher political, economic and currency risks. To compensate investors for these elevated risks, higher returns are demanded, with consequential downward pressure on valuation multiples. Although difficult to isolate, investor sentiment and biases also play a role in additional discounts that investors apply to emerging market assets.

• Liquidity and market depth: The US has deep pools of capital, with a large and diverse investor universe investing across the risk spectrum, allowing for higher liquidity and broader investor participation, boosting demand and resulting valuations.

• Regulatory and governance standards: Investors place a premium on the presence of strong legislative and corporate governance frameworks, comprehensive and transparent financial reporting, and the consistent protection of shareholder rights. Some emerging markets do not ‘tick’ all these requirements, leading to hesitation when investing in these markets.

• Cost of capital differences: The cost of equity in the US, driven by the risk-free rate (government bond/treasury yield) plus the product of the beta and the equity risk premium, is generally lower than the cost of equity in emerging markets. Companies in the US also benefit from lower interest rates (as government debt is generally cheaper, with a knock-on effect on lending rates to companies), as well as a large institutional lender base (increasing competitive tension in pricing of debt). The combination of a lower cost of equity and cheaper cost of debt leads to a reduced weighted average cost of capital (WACC), and consequently elevates the valuation of assets in the US relative to emerging markets.

Listed versus unlisted asset valuations

The valuation gap extends beyond public markets and into private assets, though the extent varies:
• Listed assets: Publicly traded US companies benefit from liquidity, investor familiarity, institutional backing and robust capital flows, often leading to premiums in the valuation. By contrast, listed emerging market stocks frequently trade at discounts due to market inefficiencies, inaccurate pricing, lack of liquidity and lower investor confidence.

• Unlisted assets: While some private equity firms seek out emerging market opportunities, valuation discounts persist due to liquidity/exit risks, regulatory challenges, and lower deal competition compared to US markets. Exit risks and a smaller investor universe reduce competitive tension and bidding for assets, which would typically enhance valuations. Investor certainty on the ultimate sale of an asset, is a key consideration for investment, particularly for private equity investors.

Will US returns and valuation multiples remain elevated?

Despite periodic corrections, valuations of companies in the US, particularly in technology and other growth sectors, have remained high due to strong earnings growth, capital market depth, positive market sentiment and investor confidence. Notwithstanding current global economic uncertainty, several factors suggest that elevated valuation multiples in the US are likely to persist for the foreseeable future:
• Dominance of innovation: The US continues to be a leader in technological advancements, with companies able to capture global markets and justify high growth projections.

• Institutional capital and market depth: Large institutional investors, pension funds and endowments provide stable, long-term capital, which underpins high valuation multiples.

• Monetary and fiscal policies: Lower US bond/treasury yields and interest rates have historically supported equity markets, resulting in higher valuations compared to emerging markets.

• Global benchmarking effect: Many investors compare valuations against US-listed peers, leading to a natural premium for US stocks versus emerging market counterparts.

However, investing in assets in the US does not come without risk. Downside risks, including geopolitical tensions, higher than expected interest rates, and overvaluation concerns in certain high-growth sectors, could all lead to a retreat of valuations.

Is there opportunity in emerging markets?

The long-standing discount in emerging market valuations relative to the US presents both a challenge and an opportunity. Recently, at the end of March 2025, prior to the strongest market impacts of the current global economic uncertainty, the average price to earnings multiple of the S&P 500 index (widely regarded as the best single gauge of large-cap US equities) was 25.57 compared to the JSE’s ALSI index of 13.18¹. This indicates, on a very simplified basis (given different sector weightings), that US-based companies listed on the S&P 500 are, on average, almost twice as expensive as companies listed on the JSE.

How can emerging markets lessen the valuations gap?

Lessening the discount to unlock the aforesaid opportunity does, however, depend on a few key objectives being achieved to ensure more mature capital markets (some country-specific, with others of a more global nature), including:
Structural reforms that:
•improve the enforcement of an emerging market’s rule of law, which will help foster policy certainty and a more predictable business environment. Numerous studies have demonstrated a strong correlation between the enforcement of the rule of law and a country’s economic development;

•place technology at the core of an emerging market’s economic development. Just as industrialisation once drove global growth, technology now serves as the primary engine of modern economic progress. Countries that align their institutions, infrastructure, and policies around technological advancement are more likely to attract investment, foster innovation, and achieve long-term competitiveness in the global economy; and

•improve corporate governance and transparency.

Introducing targeted tax incentives to stimulate increased investment flow.

A more stable and predictable interest rate environment.

Obviously, this is caveated that, inter alia, no major local and/or global events occur which would result in investors seeking the safety of US assets.
If such reforms are implemented and the local and global factors align, emerging market assets could see upward re-ratings, making them more attractive to global investors and thereby elevating multiples.

Conclusion

The valuation gap between the US and emerging markets reflects a complex interplay of risk, access to capital and investor perception. While US assets, particularly in tech, command substantial premiums, emerging markets may offer untapped intrinsic value for investors willing to navigate their inherent challenges. The path to closing this gap lies in improving governance, liquidity and investor confidence. These factors, if addressed, could unlock substantial revaluation upside potential and present investors with an opportunity to diversify and allocate capital more broadly beyond the US, thereby reducing their concentration risk.

1.https://worldperatio.com

James Moody and Calvin Craig are Corporate Financiers | PSG Capital

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

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

The Competition Commission’s new groove: A business friendly shift?

Reece May, Albert Aukema and Chris Charter
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The Competition Commission’s new groove: A business friendly shift?

Amid a turbulent and unpredictable investment environment featuring trade wars, actual wars and uncertainty around local and international fiscal and trade policy, one risks losing sight of matters at the coalface of M&A activity, namely the status of local merger control and whether it is adding to these uncertainties or firming up to increase investor confidence.

In South Africa, at the level of deal regulation through merger control, we see signs that the Competition Commission (Commission) has continued to develop its perspective and understanding of the effect of its policy of ownership of firms by historically disadvantaged persons (HDP) and workers on a merger transaction. At the risk of adopting the peculiarly South African bent of identifying green shoots before they are edible, there are indications that the Commission may be moving its ownership policy under the Competition Act in a more pragmatic direction.

The Competition Act requires that when assessing the effect that a proposed transaction will have on the public interest, the Commission must determine the effect that it would have on the “promotion of a greater spread of ownership, in particular to increase the levels of ownership by [HDPs] and workers in firms in the market”. Generally speaking, and as expressed in its own guidelines on public interest in mergers, the Commission has taken the view that “promotion”, in this context, meant that acquiring firms were required to improve on the HDP and/or worker ownership levels in target businesses. Over the past couple of years, this has resulted in the Commission routinely requiring merging parties to tender conditions such as commitments to enter into HDP equity transactions in the future, or establishing an employee share ownership plan (ESOP) for the benefit of a broad-base of workers.

These measures often posed challenges for investors, particularly private equity firms whose growth capital deployment strategies typically mean that the commercial mechanics of a deal are carefully calibrated; all the more so when investing in marginal economic circumstances. If local private equity firms’ deal making is subject to costs and strictures affecting deal value, or reducing equity value, private capital may well choose other markets. The introduction of internally financed ESOPs, for instance, could also run contrary to private equity’s requisite capital growth, including through reduced dividend flow. Often, private equity investments are for less than a 100% stake (often, management retains a level of control, or a private equity firm is part of a consortium). In those circumstances, a reduction of equity is all the more difficult to contend with.

In our experience, the strident application of an ownership policy resulted in reduced investment sentiment due to resulting increases in transaction costs, extended investigation timelines with resultant knock-on delays in closing, reduced returns due to equity commitments and, for black fund managers, uncertainty regarding inherent difficulties in exiting effectively at the end of their respective investment horizons. Minority black shareholders also found their stakes to be less attractive for buy-outs by private equity firms, who may prefer to leave these in place to avoid creating a public interest headache.

Fast forward somewhat to the establishment of the Government of National Unity (GNU) and the appointment of a new Minister of Trade, Industry and Competition, and the picture seems to be getting a little rosier. South Africa’s desperate need for private investment appears to be becoming a bigger part of the regulatory equation – though not to the exclusion of economic transformation objectives, of course – so the Commission is finding itself having to wrestle with two equally weighty policy imperatives: addressing inequalities of the past, and supporting investment so that the future can be secured.

A New Era of Flexibility?

Some recently reported merger decisions suggest that the Commission has, of late, adopted a more holistic view of its public interest assessment, taking into account the effect on all public interest grounds (not just HDP ownership). In the past, transactions which had a positive effect on other factors of the public interest, but which reduced HDP ownership levels, were met with a steadfast Commission who insisted on HDP equity or ESOP remedies – despite the adverse effects it may have on the private equity firm’s investment or exit. However, it now appears that the Commission has begun to look more earnestly at the entire public interest impact of a transaction, even allowing unconditional approvals for some transactions which reduce HDP ownership, but which come with sufficient countervailing public interest benefits.

Another shift is that in transactions that reduce the level of HDP ownership, the Commission has begun to seriously consider innovative solutions which meet regulatory requirements while also supporting private equity investment objectives. In particular, there seems to be a greater receptiveness towards alternative business friendly remedies (other than equity and ESOP remedies) in the face of a reduction in HDP ownership. These remedies include:

• HDP and small, micro and medium enterprise development initiatives, including spend commitments throughout the value chain which would align with companies’ B-BBEE strategy.

• Empowerment of HDP fund managers. The Commission has allowed for skills transfer arrangements and empowerment initiatives geared towards prospective HDP fund managers, ultimately fostering a more inclusive and dynamic investment environment.

• General public good remedies, including community development initiatives such as donations to schools, hospitals and other community areas.

Although these remedies still require capital outlay and implementation, they are often more business friendly than their traditional equity-displacing counterparts, and are more likely to align with the merging parties’ B-BBEE / ESG strategy.

Too pragmatic?

The Commission’s willingness to meaningfully engage with merging parties is very welcome. Allowing for more business-centred remedies – which still achieve positive public interest outcomes under the Commission’s interpretation of the Competition Act – creates a positive obligation to improve ownership outcomes. However, it is important to continue ensuring that any remedies tendered in deals are still meaningfully connected to the deal, and to the Commission’s mandate to investigate deals under the Competition Act.

In the absence of detailed reasons explaining the nexus between a deal and a given remedy, there is a risk that certain of the more ‘transactional’ remedies that have been offered are seen as unjustifiably removed from actual deal effects or commercial rationale. In a global environment that is currently suffering the effects of overly transactional approaches to trade policy, this approach may run the risk of reducing the public interest test to mere Rands and cents (the more cynical may say: rent extraction) rather than the balancing act envisaged by the Competition Act.

Where to from here?

While many investors would love to hear that statutory obligations, the requirement of mergers to promote the public interest, and transformation of ownership trends in particular, are on the cusp of being sacrificed on the altar of “regulatory reform”, the reality is far more nuanced. Certainly, deal architects who are able to work within the transformation paradigm, or at least are able to create deals that meaningfully promote the public interest, will find their path to approval smooth. Those who are less flexible will continue to face headwinds.

That said, the Commission does appear alive, and even somewhat responsive, to concerns from the investor community around perceptions that the policy may be hostile to deal flow and economic growth. Threading the needle between two policy imperatives is an unenviable task for a regulator. Like most of South Africa’s socio-economic paradoxes, these challenges will no doubt result in some mixed messages and seemingly capricious pendulum swings. Ultimately, a willingness between investors, their advisors and the regulator to engage in constructive dialogue, each willing to give a little and meet somewhere in the middle, could go a long way towards narrowing the policy spread.

Reece May and Albert Aukema are Directors of the Competition Law practice and Chris Charter is a Director and National Head of the Competition practice | CDH

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

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

GHOST BITES (4Sight | Alphamin | Assura | Dipula Properties | enX | Europa Metals)

The Finance Ghost
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GHOST BITES (4Sight | Alphamin | Assura | Dipula Properties | enX | Europa Metals)

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

And they’ve structured it in exactly the right way

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

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

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

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

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

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

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

The quarterly operating update means that we knew what was coming

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

enX misses loadshedding (JSE: ENX)

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

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

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

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

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

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

The board has decided to return capital to shareholders and delist

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

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

Nibbles:

  • Director dealings:
    • The COO of AngloGold Ashanti (JSE: ANG) is about to retire. That’s important context, as he chose to sell more than just the taxable portion of the latest share award. The total sale was $1.57 million and it’s not clear from the announcement just how much is for tax.
    • Des de Beer is back at it, buying R3.4 million worth of shares in Lighthouse Properties (JSE: LTE).
    • A prescribed officer of Capitec (JSE: CPI) bought shares worth R1.14 million.
    • An associate of a director of Boxer (JSE: BOX) bought shares worth R311k.
  • There’s practically no liquidity in Eastern Platinum’s (JSE: EPS) stock, so I’m giving them a passing mention down here. In the three months to March 2025, revenue was down 5.7% and they swung into a mine operating loss of $4.7 million vs. a profit of $5.3 million in the comparable quarter. The working capital deficit just keeps getting worse, particularly as they focus on ramping up the Crocodile River Mine. This company is being kept alive by very specific funding lines. If for any reason they stop, shareholders will quickly learn the difference between a going concern and an ongoing concern.
  • A company called Wimsey Capital (Pty) Ltd now holds over 5% in Santova (JSE: SNV). Some digging has led me to conclude that this entity is likely related to Chris Otto, one of the founders of PSG. It has a PSG Wealth registered address and if you go back a few years, you’ll find that a similarly (but not identically) named company was involved in Capital share dealings and was named as an associate of Otto when he was a director. It could be something, or it could be nothing.

UNLOCK THE STOCK: ASP Isotopes

The Finance Ghost
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UNLOCK THE STOCK: ASP Isotopes

Unlock the Stock is a platform designed to let retail investors experience life as a sell-side analyst. Corporate management teams give a presentation and then we open the floor to an interactive Q&A session, facilitated by the hosts.

We are grateful to the South African team from Lumi Global, who look after the webinar technology for us, as well as EasyEquities who have partnered with us to take these insights to a wider base of shareholders.

In the 52nd edition of Unlock the Stock, ASP Isotopes made their debut appearance ahead of a planned listing on the JSE. The Finance Ghost co-hosted this event with Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions.

Watch the recording here:

GHOST BITES (Altron | BHP | Bytes | Exxaro | Grindrod | Octodec | Santam | South32)

The Finance Ghost
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GHOST BITES (Altron | BHP | Bytes | Exxaro | Grindrod | Octodec | Santam | South32)

Altron gives much tighter earnings guidance (JSE: AEL)

Results will be released on 26 May

Altron has released a further trading statement for the year ended 28 February 2025. They previously gave the market guidance that continuing HEPS would be at least 40% higher than the comparable period. They also previously indicated that group HEPS would swing into the green vs. a loss of -29 cents in the comparable period.

The updated trading statement gives much tighter guidance. We now know that continuing HEPS will be up by between 68% and 75%, which means a range of 173 cents to 180 cents. Group HEPS will be between 131 and 136 cents, so that’s a substantial swing from the prior period (which was the loss referenced above).

The share price is up 92% in the past year and these numbers show you why.

BHP releases a conference presentation and transcript (JSE: BHG)

Every opportunity to learn should always be taken

As you’ll also see further down in the South32 section, there’s a Bank of America 2025 Global Metals, Mining & Steel Conference taking place in Spain that is leading to useful presentations being released by major mining groups. It also sounds like a good excuse to me for London investors and bankers to escape the weather and enjoy some time in a better climate with much tastier food.

These conferences always help with showing what companies are actually focused on. For example, this slide comes in pretty early and shows that BHP isn’t scared of putting more debt on the balance sheet:

Again, this isn’t new information. It’s just very interesting. It also ties in with a response from the CEO to a question about tariffs and volatility, in which he referred to the power of being able to invest through the cycle. Right now, BHP wants shareholders to understand that they are ready to pounce on any assets that become available at juicy prices. It may not necessarily be in copper, as there’s also a comment around how challenging the valuations have become in that space.

You’ll find the presentation, speech and Q&A transcript at this link.

Solid growth at Bytes, but it’s what the market expects to see (JSE: BYI)

High valuations create equally high expectations

When a company is trading on a P/E multiple in the mid to high 20s, the market is expecting to see plenty of growth. Although Bytes grew HEPS by 16.5% (in GBP) in the year ended February 2025, the share price is only 8% higher over 12 months. It’s had quite the run on a year-to-date basis though, up more than 32%!

The first nuance when looking at Bytes is to distinguish between gross invoiced income (GII) and revenue. GII is a driver of working capital requirements at Bytes, as they invoice much larger amounts than they actually earn. This is because they sell software and other services on behalf of major providers like Microsoft, which means they collect the full amount and then retain a commission. This puts the working capital burden on Bytes, so the software providers aren’t doing this by accident.

Although GII was up by 15.2%, revenue was up just 4.9%. This shows you that the working capital pressures are getting worse relative to revenue. Thankfully, gross profit was up 12% and operating profit was 17.1% higher, so the structure of Bytes’ business means that they could turn that modest revenue growth into a strong outcome.

Excellent cash conversion supported dividend growth of around 15%, through a combination of an ordinary and special dividend.

They expect to achieve another year of double-digit gross profit growth in 2026, but they only expect high single-digit operating profit growth. This might be why the market responded negatively to the announcement, with Bytes down 3.5% on the day. Single-digit growth isn’t high enough to support the current valuation.

Exxaro announces an R11.7 billion acquisition of Manganese assets (JSE: EXX)

This is a significant deal

With a capital markets day coming up on 9 July, Exxaro now has something particularly interesting to talk about. The group is known for its coal business, but the latest deal is a step into a different area.

They aren’t messing around here, as this is a R11.67 billion deal to acquire the largest single mine manganese exporter in South Africa, as well as another mine in the Kalahari Manganese Field. There are a number of other shareholders in the structure, although Exxaro will have 100% in a couple of underlying assets as part of the deal. It’s quite a web of holdings to untangle.

Technically, depending on how the closing adjustments play out, the purchase price could come down to R9 billion. As you would expect, if there’s scope for it to decrease, there’s also the potential for it to go up. Based on tag-along rights and other price adjustments, it could go as high as R14.64 billion. The amount of R11.67 billion is the unadjusted amount and is effectively the base case for the deal, although it’s unlikely that it will be the final amount.

Either way, Exxaro will fund the deal from existing cash and undrawn bank facilities, despite it being such a large amount. It’s also only a Category 2 transaction due to the sheer size of Exxaro, so shareholders won’t be asked to vote on this deal.

The deal is only expected to close in Q1 2026, so there are still some hurdles that they need to jump over from a regulatory perspective. It’s a complex deal with many moving parts, making it quite difficult to really get a handle on the valuation here.

The upcoming capital markets day is going to be interesting!

Grindrod exits marine fuel trading (JSE: GND)

The non-core assets have finally been dealt with

Grindrod has been on a journey of cleaning up its portfolio and focusing on the stuff that investors actually want. Although share price growth has stalled based on broader economic concerns, the market has been in favour of this approach.

The final step in the dance (in terms of material assets, at least) is the exit of the marine fuel trading business, Cockett. It’s an unusual approach, as this is a solvent winding down of the business rather than a disposal. This is the result of an agreement with the other shareholder in Cockett to take this course of action.

Grindrod has received $22 million under this agreement, which is 61% of the carrying value of the investment as at December 2024. In other words, you can expect to see an impairment here.

Octodec managed a small amount of growth (JSE: OCT)

It’s a grind in the property sector at the moment

In case you haven’t noticed, the SARB isn’t keen to drop interest rates by meaningful levels. We tend to get 25 basis points at a time, like a dog being fed scraps off the table instead of a proper piece of fat from a steak. It’s better than nothing, but not by much.

This is making life harder for property funds, as the economy isn’t exactly shooting the lights out either. Although we are seeing some growth in distributions per share at the moment, it’s in the low single digits for the most part.

Octodec is the latest such example. For the six months to February, the REIT’s diversified portfolio (including residential – unusual for property funds) managed distributable income per share growth of just 1.0%. They increased the distribution per share by 3.3%, so an uptick in the payout ratio made these numbers seem better than they are. Octodec has quite a low payout ratio by REIT standards (just under 75% in this period), so they have this headroom.

The net asset value (NAV) per share was 0.6% higher at R24.26. The market doesn’t seem to care much about the NAV, with the share price at R10.31. Local investors are only interested in valuing REITs based on cash dividends, not the NAV.

Another excellent quarter for Santam (JSE: SNT)

Insurance businesses are having a good time at the moment

Despite a difficult broader economic environment, Santam is finding ways to grow. They managed double-digit growth in gross written premiums in this quarter, as well as an underwriting margin above the upper end of the 5% to 10% target range. Annualised return on capital came in above 30%. These are great numbers!

Santam has a number of underlying insurance businesses and channels. This is important, as they don’t all do well at the same time. For example, although MiWay grew by double digits, the agri business saw a decline in volumes due to timing differences. But overall, the story is one of growth.

To add to the good news, the prevailing high interest rates and decent market returns by the group’s investment managers led to growth in the investment return earned on insurance funds vs. the comparable period. Investment returns were 2.5% of the net earned premium. This is a key source of returns for any insurance group. In fact, Berkshire Hathaway spent a long time showing us just how powerful this model is.

The group has warned of the potential impact of inflation. When it spikes, there tends to be a lag between an increase in the value of claims and the ability of Santam to put premiums up. And of course, they are always at risk of major natural disasters and other issues, although much of that risk is removed through reinsurance.

Santam’s share price is up 39% over 12 months and looks set to continue growing based on this update.

South32’s strategy update is a useful overview of the company (JSE: S32)

The presentation from a global mining conference has been made available

It’s easy to just ignore announcements about presentations from conferences, but you would be doing yourself a disservice. Sure, you won’t be getting any updated numbers (this would have to be formally released on SENS), but you can get plenty of nuggets about the strategy and the path that the company took to get here.

For example, this slide from the South32 presentation at the BofA Securities Global Metals, Mining & Steel Conference tells a story that has played out across a number of mining groups who have stepped away from coal:

I’ll include one more slide to show you the value of looking through these presentations. Although I don’t love what they’ve done at the top here with the arrows and the scaling of the chart, the underlying message is that the focus at South32 (and most mining groups) is to chase the holy grail: long-life assets with high operating margins. This chart helps you understand why you’ll often read about mining groups undertaking development activities to extend the life of mine:

You get the idea. If you want to have a detailed look, you’ll find the presentation at this link.

Nibbles:

  • Director dealings:
    • An associate of the CEO of STADIO (JSE: SDO) sold shares worth R3.85 million.
    • The CEO of KAL Group (JSE: KAL) bought shares worth R118k.
  • AH-Vest (JSE: AHL) is one of the most obscure listings you’ll find on the local market. It’s therefore not surprising to see the company announcing that an expression of interest has been received from its holding company, Eastern Trading, to acquire the shares not already held by that company and its concert parties. This would naturally include a delisting. At this stage, there’s still no guarantee of a deal happening.
  • If you’re interested in the cost of debt in Europe, then AB InBev’s (JSE: ANH) pricing of its latest offering of notes will be relevant to you. The 8-year notes are priced at 3.375%. The 13-year notes are at 3.875% and the 20-year notes are at 4.125%.
  • Here’s another data point from the debt market: Gold Fields (JSE: GFI) raised $750 million in 7-year notes with a coupon of 5.854%. This will be used to repay the outstanding amount under the $750 million bridge facility for the Osisko Mining acquisition in October 2024, as well as for general corporate purposes.
  • For those keeping track, Cresthold (which was one of the concert parties in the failed take-private attempt) now holds 10.2% in Ascendis (JSE: ASC).
  • Texton (JSE: TEX) has obtained SARB approval for its special dividend and return of contributed tax capital, a total payment of 100 cents per share before tax. The payment will be made to shareholders on 26th May.

GHOST BITES (Balwin | Boxer | Calgro M3 | Lewis | Metair | MTN | Redefine | Santova | South32 | Tiger Brands)

The Finance Ghost
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GHOST BITES (Balwin | Boxer | Calgro M3 | Lewis | Metair | MTN | Redefine | Santova | South32 | Tiger Brands)

Balwin’s second half was boosted by the rate cut in September 2024 (JSE: BWN)

But it wasn’t enough to save the full-year numbers

Balwin has released results for the year ended February 2025. Revenue fell 6% and HEPS came in 4% lower, so that’s not exactly great news. The company has focused its story around the momentum in the second half, with the wheels of commerce in the property sector greased by a 75 basis point cut in the interest rate.

Balwin banked 62% of its revenue and 67% of its profit in the second half, so the narrative isn’t wrong. If that continues into the new financial year – and if by some miracle we get another interest rate cut – then we should hopefully see better numbers in FY26.

The Balwin Annuity business gave some support to the numbers, with revenue growth of 33% and a contribution of 7.9% of group revenue. This also helped take gross profit margin up from 28% to 30%. Although this is a handy underpin, its importance is being flattered by just how weak the apartment sales have been.

A very encouraging sign is the 6% drop in operating costs. That’s the kind of discipline that you want to see from a company during a tricky year. The hope is that the same discipline would continue into a year of better revenue.

Speaking of discipline, there is no dividend as the board looks to focus on debt reduction. The loan-to-value ratio of 40.4% has shown practically no improvement from 40.5% a year ago, so it feels like they are on a treadmill at the moment.

At least they seem to be running at the same speed as the treadmill now, as opposed to falling and bumping their heads. The share price has come off hard since the GNU exuberance, now trading roughly in line with where it was a year ago (it can bounce around quite a bit per day, so the exact start date makes a big difference).

This is probably the closest I’ve ever been to thinking that Balwin might be a speculative buy.

Boxer’s growth whittled away by lease and tax charges (JSE: BOX)

You also have to work through the 53rd week complexity in these numbers

Boxer has released results for the 53 weeks to 2 March 2025. In retail reporting, the use of a 52-week calendar means that a day is lost each year (and two in leap years), leading to a 53rd week for reporting purposes every six years. This limits comparability, as it obviously flatters year-on-year growth when more trading days are included in a period.

Thankfully, this is why retailers report comparable earnings on a 52-week vs. 52-week basis, allowing investors to assess the trend. On that basis, Boxer grew turnover by 10.4%. Trading profit was 14.0% higher excluding the non-cash impact of a Pick n Pay financial guarantee in the prior year. I would suggest focusing on those two numbers and ignoring the noise.

Something that I wouldn’t ignore is the colossal increase in net finance charges of 46.2%, which is obviously much higher than trading profit growth and thus a drag on earnings. This is the foolishness of the accounting standard for leases, which puts the lease costs in as funding charges. Boxer actually has very little true funding costs in the way that any normal person would understand them i.e. in relation to external borrowings. But due to the extensive store rollout programme, the impact of leases comes through in the net finance charge line and takes profit before tax growth down to just 4.9%. The key takeaway here is that a store expansion programme doesn’t come cheap and Boxer is playing the long game here, hence investors would need to be in board for that journey.

And once you consider the increase in the effective tax rate, headline earnings came in 0.1% below the prior year. Then we reach HEPS, which is impacted by the number of shares in issue. Due to the IPO and a 13.4% increase in the weighted average number of shares in issue, HEPS actually declined by 11.8%!

It’s a messy set of numbers and FY26 won’t be a clean year either, as they anticipate another year-on-year HEPS decline as the increase in the number of shares from the IPO is fully baked into the numbers. The impact will be much worse in the first half, with Boxer warning of a drop in HEPS of more than 20% year-on-year.

I’m not sure that the share price is going to maintain its IPO price based on this update, especially as they’ve also indicated expected pressure in trading margin from these levels (and that’s before finance i.e. lease costs).

Calgro M3 disappoints the market (JSE: CGR)

This isn’t a great start to a new era at the company

Calgro M3 is under new management and is having a tough start to that journey, with disappointing results for the year ended February 2025 that sent the share price tumbling to a -10.7% move for the day. HEPS fell by 9.3% for the period, so the market response is in line with that.

The percentage moves further up the income statement were even more severe, with revenue down by 32.7%. There was an increase in gross margin to try and mitigate this impact, which appears to have largely been achieving through focusing on infrastructure installations (the accounting for these projects is complicated). Group gross margin was 29.43%.

Specifically in the residential construction business, which is still the biggest part of the business, gross profit margin was up by 103 basis points to 27.65% despite an 11.5% drop in revenue. It seems likely that margins will normalise once the mix of units vs. infrastructure developments normalises as well.

The concern here is that the reason why the group prioritised infrastructure development at its projects is because the market for residential units was soft. This is despite the recent interest rate relief. Calgro’s area of focus is lower income housing units, so this is supposed to be a resilient segment that reflects South Africans moving through the LSM brackets, a trend that has been a feature of our democracy. For whatever reason, that journey seems to have stalled recently. In the meantime, it makes sense for Calgro to have focused on getting infrastructure out of the way, leaving them free to respond to any uptick in demand.

The Memorial Parks business is now 8% of group revenue, up from 4% last year. Lay-by receipts were up 57.5%, which is a reminder that there are many South Africans who pay off a place of final rest over time. Gross profit margin increased from 42.45% to 50.09% in this segment.

After a JSE proactive monitoring review, there have been some changes to the timing of revenue recognition in the Memorial Parks business. The maintenance obligation of the parks is now being recognised as revenue with an associated cost of sales and the recognition of a provision for those costs. The old treatment was to defer the revenue into perpetuity. Another change is to the timing of burial right and burial service revenue, with revenue for the service itself now deferred to when the service takes place.

The group itself is in reasonable shape overall. This was hopefully just a blip along the way, with the market taking the share price back to where it was a year ago. If you can believe it, Calgro at R5 per share is trading on a P/E ratio of just 2.64x. They don’t pay much of a dividend, but at this point I think every spare cent should just be used for share buybacks.

A monster update at Lewis (JSE: LEW)

The strong performance in the interim period continued for the full year

When Lewis reported interim HEPS growth of 49.1% based on a revenue increase of 13.6%, they were sounding more like a growth stock than a value stock. A trading statement for the year ended March 2025 is even more astonishing, with expected HEPS growth of 55% to 65%.

The benefit of their share buyback strategy continues to come through here, as headline earnings itself will be 48% to 58% higher. The reduction in shares outstanding is good for 700 basis points in HEPS growth.

Aside from solid credit sales, they also managed to expand gross margin in the second half of the year while keeping expense growth below revenue growth. Credit quality also looks fine, with the company not raising any concerns around collection rates.

By late afternoon trade, Lewis was 16% higher, adding to a 12-month move of 49% coming into this update.

A first look at the “new Metair” (JSE: MTA)

The aftermarket parts era is here

Metair hosted an investor day at Autozone, the recently acquired aftermarket parts business that represents quite the strategic shift for the group. Apart from the very funny first page that includes a note to attendees about how to find the bathrooms (I’ve never seen this before in a capital markets presentation), it’s a good deck.

The group now arranges itself under two segments: Automotive Component Manufacturing (6 companies selling to OEMs) and Aftermarket Parts and Services (also 6 companies, including First Battery Centre and AutoZone amongst others). The revenue split is 74% – 26% in favour of Automotive Component Manufacturing, so they have a long way to go to derisk themselves from the OEMs.

In the same way that CMH complains about lack of growth in new cars, AutoZone benefits from an aging fleet of cars in South Africa. That’s an argument that I can get behind, although I do wonder about whether the influx of Chinese brands might change the way parts are bought once those vehicles are out of service plan. I’m merely flagging it as a risk, without any comment on whether AutoZone will be able to adapt to that changing mix.

The presentation also highlights the broader African opportunity, with a plan to develop routes to market on the continent. I think Metair should firmly be in the walk-before-we-run camp, particularly given how the other international opportunities have played out for them. Having said that, First Battery appears to have a decent presence in Africa, so perhaps this time will be different (as the saying goes).

Keeping in mind that AutoZone was acquired out of business rescue, it’s going to take a while for them to recover. The target is to be profitable in 2025, with 2026 – 2027 seen as recovery years.

Good luck to them. Metair really deserves a break.

Strong quarterly numbers at MTN – but the market was pricing them in (JSE: MTN)

The expectation is for ongoing good news

With a share price that is up nearly 30% year-to-date, the market is fully expecting MTN to deliver encouraging news on an ongoing basis. We got a strong preview of this in the African subsidiary results, where improved macroeconomics in Africa are working well for the group. With the release of group results for the first quarter, we can now see how it all rolls up to group level – and we can also see how things are going in South Africa.

The overall story is great, with service revenue up 10.4% (or 19.8% in constant currency) and EBITDA margin up by 530 basis points to 44.1%. Unsurprisingly, data and fintech revenue did the heavy lifting, up by 17.9% and 17.2% respectively – and that’s as reported, not in constant currency!

We already know that the African businesses did well. In South Africa, which is a far more mature market, service revenue was up 2.6%. Data revenue was up 3.9% and outgoing voice revenue fell by 3.2%, which isn’t a surprise. EBITDA in MTN South Africa decreased by 2.6%, so we are back to a world where the African businesses are driving the growth story. The group notes that if you exclude once-off items, EBITDA margin in South Africa increased by 40 basis points, even though revenue was up and adjusted EBITDA was down. No, I don’t understand that either.

Although HoldCo leverage has ticked up from 1.4x to 1.5x, they are still at healthy levels and they managed to move R1.9 billion worth of cash from operating companies to the holding company during the period. Currency issues in Africa mean that group level leverage ratios don’t tell the whole story. It’s about where the cash actually sits.

The share price closed ever so slightly higher on the day. This tells you that the African story is driving the share price (we knew about those results already), with the South African numbers being in line with market expectations. It’s also a function of a share price that has run very hard and is probably due a breather.

Not much growth at Redefine (JSE: RDF)

And yet the share price is up 15% in the past year

Like in all sectors, the valuation of a property group is a complicated thing. REITs are particularly exposed to prevailing bond yields in the market, as they are seen as a hybrid between pure equity and bonds. They are obviously also highly exposed to sentiment, as you can’t exactly pivot a model of properties in a particularly country into something else in response to economic changes.

This is why you can see a positive move of 15% in the Redefine share price in the past year despite distributable income per share up just 0.7% in the six months to February. They are quick to point out that total distributable income is up 3.6%, but the growth per share is what actually matters.

The full-year number isn’t expected to be much more exciting. Having just banked interim distributable income per share of 25.52 cents, they are guiding for a full-year performance of between 50 and 53 cents per share. FY24 was 50 cents per share, so the top-end of the guided range would reflect 6% growth. Low single digits (i.e. the mid-point of the range) is more likely.

With 73% of the South African portfolio in Gauteng and 34% of the South African portfolio in office properties, Redefine isn’t exactly sitting with a focused portfolio of crown jewels. Even with exposure to premium office properties, the group suffered negative rental reversions of 20.7% based on 6% of the GLA being renewed during the period. The troubles in the office property sector are far from over. Despite this, the group is still actively acquiring and developing office properties, so I guess they are playing the long game here.

At the mid-point of guidance for the distributable income per share and assuming an 85% payout ratio (also the mid-point of guidance), the group is trading on a forward yield of around 9.6%.

A modest uptick in recurring HEPS at Santova (JSE: SNV)

They are still in negotiations for an acquisition

Santova has released a voluntary trading statement dealing with the year ended February 2025. Ignoring both EPS and HEPS which were impacted by fair value changes in the comparable period, the guidance for recurring HEPS is growth of between 1.4% and 6.4%. It’s on the right side of zero, but not by much.

To inject some excitement into the story, Santova has renewed its cautionary announcement regarding a potential acquisition of a group of logistics companies in the UK and the Netherlands. This sounds like they are moving into a different part of the value chain, as they talk about fulfilment centres and related technologies.

This is part of a broader play in eCommerce, which is a trend that isn’t going away anytime soon. It seems like an interesting deal that they are looking to fund through existing cash and debt facilities.

The share price has had plenty of volatility in recent years, but no clear direction. Perhaps a shift in strategy will change that.

South32 has fished in the Anglo American pond for their next CEO (JSE: S32 | JSE: ANG)

The current CEO of South32 will step down in 2026

South32 has announced that Matthew Daley will join the company as Deputy CEO from 2 February 2026 and will take over from Graham Kerr as CEO later in 2026 when Kerr retires.

Daley is currently on the exco at Anglo American where he serves as Technical and Operations Director. He’s been with Anglo since 2017, prior to which he ran Glencore’s Canadian copper business. That’s a juicy mix of experience.

Daley is based in the UK and will relocate to Australia for the role. That’s a good reminder of just how global the mining sector on the JSE actually is.

Anglo has announced that Tom McCulley will replace Daley, while retaining his existing responsibility for Anglo’s crop nutrients business. There’s a transition period in coming months, after which Daley will leave Anglo and execute his move to South32.

The momentum continues at Tiger Brands (JSE: TBS)

Here’s another juicy jump in HEPS

With the share price up roughly 50% in the past year, Tiger Brands has been on a charge. Management’s initiatives to improve profitability in a tough market are clearly working, through a combination of focusing on supporting volumes and driving margins. They have also executed a number of changes to the overall portfolio, leading to a more focused business that isn’t trying to be on every shelf at your friendly local grocery store.

The results are clear: HEPS for the interim period is expected to be between 15% and 25% higher. It gets even better if you look at continuing operations, where HEPS is up between 30% and 40%. Results are due for release on 28 May, at which point shareholders will get all the details.

There’s also an update on the listeriosis class action, where Tiger’s lead reinsurer is essentially running the show in the legal defence. Settlement offers will be made to specific claimants who fall under certain classes based on exactly how they were impacted by listeriosis. The broader class action still in its first stage, with liability to be determined in court. The court process takes an incredibly long time. Tiger has adequate product liability insurance in place “for a group of its size” – which isn’t the same thing as saying they have adequate cover for any potential liability.

Nibbles:

  • Director dealings:
    • The former CFO of ADvTECH (JSE: ADH) has sold yet more shares, this time worth R1.2 million.
  • Curro (JSE: COH) has refinanced its existing debt facilities of R2 billion. This was necessary as R800 million would be due under revolving credit facilities at the end of 2025 and the remaining R1.2 billion related to term facilities due in 2026. The new package is a four- and five-year term loan structure for R1.4 billion, along with revolvers of R1.0 billion, thereby increasing the total facility to R2.4 billion. A number of banks have gotten involved here, as is commonly the case. What Curro really needs to be doing is filling its schools rather than buying new ones, so hopefully the increased facility is purely for flexibility rather than intended use for expansion.
  • Hammerson (JSE: HMN) has responded to press speculation by confirming that it is in process to acquire units in the abrdn UK Shopping Centre Trust that holds 59% in Brent Cross. This would be for a net investment of around £200 million and if I understand the announcement correctly, it would take Hammerson to an economic interest in Brent Cross of over 90%.
  • Alphamin (JSE: APH) has updated the market on the operational restart over the past few weeks at the Bisie tin mine. Between 15 May and 11 April, they are achieving targeted processing recoveries. This was done through using run-of-mine ore stockpiles. Underground operations recommenced in the last week of April. Importantly, a truck with tin concentrate for export left the mine on 9 May. So far, so good. The share price has recovered strongly since the major sell-off in late March, but remains 16.5% down year-to-date.
  • Trustco (JSE: TTO) has confirmed that they are busy with the Namibian audit for their FY24 financials while the “international processes” are all underway. There’s a delay in publishing the results, which Trustco attributes to various things all happening together (as though this is an acceptable excuse once they are on the US market). Anyway, they expect to publish financials by June 2025. I love that they think that US investors (if they attract any) will be fine with the casual missing of deadlines for financial statements just because the company is busy.
  • Having served on the board for longer than 5 years, Phumzile Langeni will step down as chairman and non-executive director of Delta Property Fund (JSE: DLT) to focus on personal business interests. No replacement has been named at this stage.
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