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Ghost Bites (BHP | Glencore | Merafe | Shoprite | Zeder)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


BHP makes a copper acquisition (JSE: BHG)

The target is Filo Corp in Canada

After having a good ol’ sniff around Anglo American (JSE: AGL) and subsequently walking away based on an unwillingness by the Anglo board to propose the deal to its shareholders, BHP has found love in Canada. Unsurprisingly given BHP’s narrative around Anglo, the target company is involved in copper.

Filo Corp. is listed on the Toronto Stock Exchange and owns 100% of the Filo del Sol copper project in South America. BHP will be acquiring the firm alongside Lundin Mining, with BHP and Lundin creating a joint venture to hold Filo as well as the Josemaria projects in Argentina and Chile. Lundin currently holds 100% of Josemaria. By pooling their interests in the region, they create potential synergies around infrastructure and staged expansions.

BHP’s total cash payment for the deal is expected to be $2.1 billion, so this is a meaty cheque to write. The total deal value is $4.1 billion, representing a 32.2% premium to Filo’s 30-day VWAP before the date of press speculation around the deal. Interestingly, to pay for its part of the deal, Lundin will offer shareholders in Filo an option to accept cash or shares in Lundin.

To provide interim financing to Filo while the deal is underway, BHP and Lundin have agreed to subscribe for shares worth a total of C$115 million.


Glencore needs a strong second half to the year (JSE: GLN)

The first half of the year has been weak relative to the expected second half

Glencore expected 2024 to be a tale of two halves and that seems to be playing out, with full year production guidance maintained despite a significant drop in production in the first half of the year.

With various issues related to ramp-ups and annual shutdowns (within Glencore’s control) and more tricky matters like geotechnical events, there are a number of reasons why second half production will look better than the first half across several commodities.

Own sourced copper was down 2% for the first half. Cobalt fell 27%, zinc was down 4% and nickel came in 5% lower. Ferrochrome production fell 16% (see Merafe below) and coal was down 7%.

There is no room for error in the second half, which is always a bit scary in a sector as operationally unpredictable as mining.


Merafe’s earnings have dropped sharply (JSE: MRF)

The company made the decision to decrease production based on market conditions

Merafe’s attributable production from the Glencore Merafe Chrome Venture fell by 17% for the six months to June, due to the Rustenburg smelter not being operational in 2024. They made this decision based on prevailing market conditions, as it was cheaper to not run that smelter at all for the period than to run it at a loss-making level.

HEPS for the six months will be between 23% and 43% lower at between 24.0 and 32.4 cents, which isn’t a surprise in the context of the production number combined with lower commodity prices.

Merafe’s cash balance is R1.72 billion, up from R1.66 billion as at the end of December 2023. Included in this cash is R344 million set aside for future environmental obligations, so not all that cash is available.


At Shoprite, Sixty60 continues to deliver (JSE: SHP)

And group sales growth is still in the double digits

Shoprite has released an operational update for the 52 weeks to June 2024. The group increased sales by 12% for the year, which is a really impressive outcome. Nothing seems to be able to stop them!

If we consider the two halves, group sales increased by 13.9% in the first half of the year and 10.2% in the second half, so there’s a slowdown there – if you can call 10.2% a slowdown. Supermarkets RSA is where things cooled off, from growth of 14.6% in the first half to 10.1% in the second half. A significant part of this trend was the stores acquired from Massmart, which weren’t in the base period for the first half but were there for the second half.

Oddly, the Furniture division saw sales growth improve in the second half, from 1.7% to 3.2%, giving full year growth of 2.3%. Supermarkets non-RSA was pretty consistent through the year, with full year growth of 6.1%. The Other Operating Segments bucket did well, up 21.1% for the year. OK Franchise was the star of the show there, with sales up 23.8%.

The core of the group is Supermarkets RSA, contributing 81% of group sales. With 12.3% full year growth after a performance of 17.8% last year, they really have washed away the competition over the past two years. Internal selling price inflation was 5.8% for the full year and 3% for June, so food inflation has thankfully calmed down. That’s good for consumers, but not necessarily for grocery retailers that use food inflation to offset inflationary pressures in other costs like energy and security.

Within the underlying businesses, Checkers and Checkers Hyper grew by 12.3%. Sixty60 continued to deliver in every way possible, with sales up 58.1%. Shoprite and Usave were up 10.7% and LiquorShop grew 20%. Some of the new formats are being rolled out quickly, like Petshop Science with 33 new stores and UNIQ clothing with 13 new stores.

Of course, this doesn’t tell us anything about profitability yet. The market has to wait for detailed financials to see that, due for release on 3 September. It certainly helps that load shedding costs for the second half came in at R254 million vs. R500 million in the first half. Electricity costs went up of course (because Eskom actually supplied the stuff), with the group guiding mid to low single digits growth in water and electricity costs overall.

The share price peaked its head above the R300 level for the first time before closing just below it:


Zeder announces another disposal (JSE: ZED)

This time, it’s Novo Fruit Packers

In June, Zeder announced the disposal of Theewaterskloof Farm. In July, the disposal of Applethwaite Farm was announced. To make it a trio of deals, the company has announced the disposal of the Novo Fruit Packhouse operation in Paarl.

This is part of the Capespan Agri asset that is included in Zeder Pome Investments, in which Zeder holds 87.1%.

The price is R195 million plus the value of stock-on-hand, limited to R5 million. The net assets as at 31 December were R214.5 million and profit after tax for the year ended December came in at R16.4 million, to give you a sense of valuation.

The purchaser is Dutoit Agri.


Little Bites:

  • Director dealings:
    • The group company secretary of Vodacom (JSE: VOD) has sold shares worth R387k.
    • An associate of a director of Pick n Pay (JSE: PIK), James Formby, purchased shares worth R295k.
    • Acting through Titan Premier Investments, Dr Christo Wiese has bought another R63.2k worth of shares in Brait (JSE: BAT) and R198k worth of nil-paid letters as part of the rights offer.
  • With all the noise around the board of Quantum Foods (JSE: QFH) at the moment, it’s interesting to note that Piet Burger has been appointed as an independent, non-executive director. He has held executive positions at Tiger Brands and Pioneer Foods previously. With Country Bird trying to remove the chairman of the company at the moment, it’s quite a time to join.
  • NEPI Rockcastle (JSE: NRP) will be holding a capital markets day in Romania on 1 October, so I’m sure that a few lucky property analysts will get on a plane. For the rest of us plebs, the presentation will be made available on the day.
  • Mark Bower will be stepping down as chairperson of Netcare (JSE: NTC), having been on the board since 2015 and in the role of chairperson since January 2023. Alex Maditse, currently an independent non-executive director, has now been appointed as lead independent director.
  • Ellies Holdings (JSE: ELI), the listed holding company, has been placed under final liquidation. Operating entity Ellies Electronics is still in business rescue and the business rescue plan is being implemented.
  • Efora Energy (JSE: EEL) is suspended from trading. Although the company has made a major effort to catch up on financial reporting, it still owes the financials for the year ended February 2024 to the market. They expect to achieve this by 2 August, so they are nearly there. In the business itself, the transfer of the Alrode Depot to Efora has been completed.

Ghost Wrap #74 (Balwin | British American Tobacco | Mr Price | Vodacom)

Listen to the show here:


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.

This episode covers:

  • Balwin’s push into rentals and what this means for the investment case.
  • British American Tobacco’s growth wobbly in the New Categories.
  • Mr Price and the question marks around organic growth.
  • Vodacom’s challenges in finding growth outside of markets with risky currencies.

Ghost Bites (Pan African Resources | Rex Trueform | South32)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


Pan African Resources made the most of the gold price (JSE: PAN)

At a time of record average prices, group production moved higher

When the gold price is shining brightly, mining houses simply have to make the most of it. Pan African Resources has done exactly that in the year ended June, with group production up 6.2%. With average prices at a record high for the group ($2,201/oz), the timing of this great production result was perfect. Notably, production was within guidance.

All-in sustaining costs (AISC) are expected to come in at $1,350/oz, so there’s plenty of margin here to put a smile on the faces of shareholders.

These solid numbers could’ve been ever better, were it not for a delay in commissioning a ventilator shaft at Evander 8 that impacted production in the last two months of the period. This made them miss the high end of production guidance and also had a negative impact on unit costs. The delay should be out of the way in the next few weeks.

The Mogale Tailings Retreatment Project (MTR Project) is nearing its final stages, with first gold production anticipated ahead of schedule in October 2024. They should reach steady state production in December 2024. Best of all, they are coming in below budget! The forecast AISC over life of mine is below $900/oz, so that’s going to be a spectacular project if gold prices can stay at reasonable levels.

Previously announced FY25 guidance of between 215,000oz and 225,000oz has been reiterated. They produced 186,039oz in this period, so that’s a massive jump of 18.3% in the coming year at the mid-point of guidance.

Net debt has ballooned from $22 million to $106.4 million, with construction costs at the MTR Project of $71.5 million as the major driver, along with other expansion capex of $23.8 million at Evander 8 and $9.9 million at Fairview solar plant. The Fairview project will provide 15% of Barberton Mines’ energy requirements and will achieved significant savings vs. Eskom tariffs.

Financial Director Deon Louw has notified the company of his intention to retire with effect from 30 September, having been in the role since 2015. He will continue as a consultant to the group. Marileen Kok will take over, having been with the group since 2020 as Group Financial Manager.


Rex Trueform continues its push into property (JSE: RTO)

And remember, this company is a subsidiary of African and Overseas Enterprises (JSE: AOO)

Rex Trueform already holds 53.68% in Belper, an unlisted property business focused on industrial properties in the Western Cape. As part of a desire to increase exposure to this asset class, Rex Trueform will subscribe for additional shares that will take the stake to 72.03%. This is after taking the initial stake in 2022.

The structure is that the outstanding loan from Rex Trueform to Belper will be converted to shares, including the accumulated interest on the loan. The total value of the debt being converted is just under R27.4 million. As Belper’s current net asset value is negative R6.8 million, this will take the property business back into positive equity value.


South32 says goodbye to Illawarra Metallurgical Coal (JSE: S32)

The push into low-carbon metals continues

South32 announced that the sale of Illawarra Metallurgical Coal is now unconditional, taking the business closer to a simplified business and balance sheet.

Importantly, capital has been unlocked to invest in copper and zinc projects in line with the plans around focusing on low-carbon future opportunities.


Little Bites:

  • Director dealings:
    • A director of Dis-Chem (JSE: DCP) received R441k worth of vested shares and sold the whole lot, not just the portion required to cover taxes.
    • A director of 4Sight (JSE: 4SI) and an associate sold shares in off-market deals worth over R154k.
  • After Sasol (JSE: SOL) was given an immense scare from the regulator, it was eventually decided back in April 2024 that the boilers at Secunda Operations would be regulated on an alternative emission load basis. This is literally the difference between commercial viability and an economic nightmare. Of course, we are playing off the environment against the jobs etc. at the plant, so there are simply no winners here. Either way, the limits related to the alternative emission load basis have now been published, so Sasol has certainty over the matter and can carry on with its business, much to the annoyance of climate activists.
  • Lighthouse (JSE: LTE) is still busy selling down the stake in Hammerson (JSE: HMN), with the latest sale of shares being worth R765 million. They don’t have to disclose every single sale, but rather the one that takes them through a 5% threshold in terms of ownership in Hammerson – and this was the one. Lighthouse now has 4.93% in Hammerson, so don’t expect to see another announcement like this one.
  • Although Cilo Cybin Holdings (JSE: CCC) has technically released its inaugural set of financial results, they are a bit pointless. The company is a special purpose acquisition company (SPAC) and doesn’t have any operational assets yet. It earns investment revenue on the R63 million in cash and incurs the costs of being listed. There will no doubt be far more exciting things to report about this company in periods to come.
  • Oando PLC (JSE: OAO) released an announcement that angrily refuted claims that the group has shares in a company in Malta that imports adulterated petroleum products into Nigeria. Interestingly, not only have they never had such shares, but the Maltese company named in the allegations doesn’t even exist. There’s a stern warning in the announcement to members of the press to validate claims before printing them. Seems like an appropriate level of irritation in this scenario.

Orion Minerals: A Catalyst for Change in South Africa’s Capital Markets

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Orion Minerals has demonstrated a pioneering approach to capital raising that could redefine how South African listed companies access capital. By successfully implementing an Australian-style Share Purchase Plan (SPP), the company has challenged the traditional, often exclusive, fundraising methods prevalent on the JSE.

The company’s recent capital raise, which comprised a R91 million placement to sophisticated investors followed by a R44 million SPP open to all eligible shareholders, showcased the effectiveness of this dual-pronged strategy. While the placement catered to institutional investors, the SPP ensured that retail investors were afforded a fair opportunity to also participate in the company’s growth.

This approach stands in stark contrast to the typical South African “accelerated bookbuild,” which generally excludes retail investors. By granting all eligible shareholders the chance to participate in the SPP, Orion has fostered a more inclusive and democratic approach to capital raising. This is particularly significant for South Africa, where a growing retail investor base is crucial for market depth, liquidity and the overall vibrancy of the public markets.

Orion’s novel collaboration with Utshalo to facilitate widespread shareholder participation also played a role in the success of the SPP. By providing accessible information – podcasts, webinars, direct emails and 7-day a week responsiveness – and a user-friendly investment platform, Orion ensured that retail investors were able to make informed investment decisions and apply to participate in the SPP.

The implications of Orion’s success extend beyond the company itself. By demonstrating the viability and effectiveness of the SPP model, Orion has set a precedent for other South African listed companies seeking to raise capital. This approach can be adopted across all sectors to create a more inclusive and dynamic capital market.

Regulatory changes are likely unnecessary to realize the potential of the SPP model and Orion’s experience highlights the positive impact that this innovative approach can have on both companies and investors.

By embracing the SPP model, South Africa can foster a more vibrant and accessible capital market, ultimately helping to drive economic growth and creating shared value for all stakeholders.

To get more information on why Utshalo exists, how it all works and how the company helped Orion Minerals, listen to this episode of Ghost Stories featuring Utshalo founder Paul Miller:

Lego: brick by brick, a private company masterpiece

Lego’s journey from a small Danish workshop to a global powerhouse is a tale of innovation, adaptability, and the enduring magic of play – not to mention succession planning and how family businesses can become legacies. But with playtime lasting almost a century already, can they keep putting new spins on their game before the players lose interest?

It all started during the Great Depression in 1932 when Ole Kirk Christiansen, a carpenter in Billund, Denmark, began making smaller versions of his full-size furniture pieces. Initially conceived as design aids, these miniature wooden furniture sets soon captured the imaginations of children, so Christiansen, being a smart businessman, went where the ducks were quacking and started marketing his creations as toys.

Despite the tough economic times, Christiansen’s commitment to quality craftsmanship set his products apart. His toys became increasingly popular, even in circumstances where consumers were so poor that they would barter home-grown vegetables for them. The name “Lego,” coined in 1934 from the Danish phrase “leg godt” meaning “play well,” perfectly encapsulated the company’s philosophy.

A material evolution

Christiansen’s early wooden toys were popular enough, but the post-World War II era brought new opportunities with the advent of plastic. Sensing the potential, Lego purchased an injection-moulding machine in 1947, becoming one of the first companies in Denmark to do so. This move was groundbreaking, allowing Lego to create the first plastic interlocking bricks in Europe in 1949, initially called “Automatic Binding Bricks.” Inspired by Kiddicraft’s Self-Locking Bricks, these early versions paved the way for the modern Lego brick we know today. Lego bricks, then manufactured from cellulose acetate, were developed in the spirit of traditional wooden blocks that could be stacked upon one another but could be “locked” together. They had several round “studs” on top and a hollow rectangular bottom. They would stick together, but not so tightly that they could not be pulled apart.

At first, plastic products didn’t catch on with customers, who preferred wooden or metal toys. Lego had to deal with a lot of returns due to poor sales. Then, in 1955, they launched the “Town Plan,” using plastic Lego building bricks as the system.

The bricks got a lukewarm reception and had some technical issues. Their “locking” ability was limited, and they weren’t very versatile. But in 1959, Lego improved the bricks by adding hollow tubes to the underside. This change made the bricks lock together better and be more versatile. The company patented the new design and several similar ones to fend off competition.

After a devastating warehouse fire struck the Lego Group in 1960, most of the business’ inventory of wooden toys was destroyed. Ole’s son, Godtfred Kirk Christiansen, made the decision then and there that the plastic line was strong enough to abandon the production of wooden toys. Despite the fact that this decision caused his brothers, Gerhardt and Karl Georg, to leave the company and start their own toy business, Godtfred stood firm by his vision and vowed to steer Lego’s plastic toy line into the future.

Keeping it in the family

Perhaps one of the most astonishing things about the Lego story is that it has remained a family-owned business for the entirety of its existence – and for most of that existence, it was family-run too. Godtfred, who formally took over the business after his father’s death in 1959, played a crucial role in expanding the company’s vision. He introduced the Lego System of Play, emphasising a cohesive system where every brick could connect, ensuring compatibility across sets. This approach fostered creativity and endless building possibilities.

Godtfred’s son, Kjeld Kirk Kristiansen, joined the managerial staff in 1972 after earning business degrees in Switzerland and Denmark. One of Kjeld’s first achievements with the company was the foundation of manufacturing facilities, as well as the research and development department that would be crucial for keeping the company’s manufacturing methods up to date.

The family’s leadership ensured that Lego’s core values of quality and creativity remained intact even as the company grew. Under Godtfred’s guidance, Lego introduced themed sets and the beloved minifigures, which soon became an integral part of the Lego experience. Kjeld’s leadership oversaw the introduction of innovative specialty ranges such as Technic, Duplo, Light & Sound and Bionicle.

For 72 years, the descendants of Ole Kirk Christiansen steered the Lego brand from one innovation to the next – but their legacy of success could not be maintained. In the face of near bankruptcy in 2004, Kjeld Kirk Kristiansen, Ole’s grandson, stepped down as CEO, marking the end of direct family leadership. The family would remain involved through the Lego Foundation and the board of directors, but they would no longer head up operations. Jørgen Vig Knudstorp, the new CEO, managed to lead the company through a remarkable turnaround while staying true to the company’s heritage.

Crash and revive

Despite its years of successes, Lego faced significant challenges in the late 1990s and early 2000s. The rise of video games and electronic toys threatened traditional play, and internal missteps led to overexpansion and a diluted focus on core products. By 2003, Lego was teetering on the brink of financial collapse, reporting its first losses in decades.

In response, Lego underwent a major restructuring. This included streamlining operations, cutting costs, and refocusing on the core product – the Lego brick. The company scaled back on non-core ventures, sold off Legoland parks, and renewed its commitment to quality and innovation.

By 2007, Lego had downsized from a global workforce of 9,100 in 1998 to 4,200, mainly due to outsourcing. In the US, Lego sales jumped 32% thanks to Star Wars and Indiana Jones-themed sets, while global sales rose by 18% in 2008. In 2009, Mads Nipper, Lego executive vice-president of marketing, noted that licensed themes played a bigger role in the American market compared to overseas. About 60 percent of Lego’s American sales were linked to licences, double the percentage from 2004. Nipper mentioned that by 2009, Lego had become “definitely more commercially oriented.”

Beyond the brick

Lego’s resilience and ability to innovate were exemplified by its ventures beyond traditional toys. The 2014 release of “The Lego Movie” in partnership with Warner Bros was a masterstroke, blending storytelling with brand marketing. The film was a global success, grossing over $468 million and proving that Lego’s appeal transcended generations. More than just a movie, this was a celebration of creativity, imagination, and the joy of building.

This success spurred sequels, spin-offs and a renewed interest in Lego products. Lego also continued to capitalise on its intellectual property through partnerships with popular franchises like Star Wars, Harry Potter, and Marvel. These collaborations brought new fans to the brand and allowed for the creation of unique, themed sets that appealed to both children and adult collectors.

How do they keep coming up with new sets after almost a century? Well, that’s where things get really interesting. Lego Ideas is a platform where fans can submit their own designs for potential production, further engaging the community while making sure that the designers behind Lego don’t find themselves stuck in an echochamber. This initiative harnesses the creativity of Lego enthusiasts worldwide, turning fan ideas into official sets and fostering a sense of community and shared creativity.

Play on

Lego’s journey from a small Danish workshop to a global icon is a testament to its ability to innovate and adapt while staying true to its core values. The company’s commitment to quality, creativity, and the joy of play has made it a beloved brand across generations. Despite facing significant challenges, the brand has shown remarkable resilience and an ability to reinvent itself.

The story of Lego is not just about the bricks, but about the endless possibilities they represent – a legacy that will undoubtedly continue to build a better future, one brick at a time.

Ghost’s note: don’t forget Lego for adults, either! I bought the Lego Peugeot Le Mans set to remember the recent trip by. This brand is an absolute powerhouse across all ages.

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

Ghost Bites (Bowler Metcalf | Famous Brands | Gemfields | Nedbank | Orion | Sea Harvest)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


A tip of the hat to Bowler Metcalf (JSE: BCF)

Earnings are way up

Bowler Metcalf has one of the simplest websites around, with the black hat as the logo and not much else. That’s fine, because shareholders care more about performance than prettiness – or at least, they should.

For the year ended June 2024, the performance was certainly there. The plastic packaging group has grown headline earnings per share (HEPS) by between 42.5% and 62.5%, coming in at between 146.8 cents and 167.3 cents. That’s a big move vs. 102.96 cents in FY23 and also represents strong growth vs. FY22 HEPS of 116.25 cents, so this wasn’t just thanks to a weaker base period.

The better results are attributable to higher volumes, which in turn lead to manufacturing efficiencies and economies of scale in the business. Capacity utilisation is a critical part of profitability in a manufacturing business. This performance helped offset the costs of planned maintenance in the properties.

Detailed results for the year are due on 10 September.

After Friday’s share price jump of 11.2%, the year-to-date performance is now 21.7%.


An unappetising update from Famous Brands (JSE: FBR)

March to June haven’t been great

As part of releasing the results of the AGM, Famous Brands also gave a trading update for the March to June 2024 period. This means four months worth of trade, or a third of the financial year, which means the pressure seen over these months puts the rest of the year under a lot of pressure.

They are struggling “across all markets” with weak consumer demand and it was especially bad in March and April. When you consider that load shedding was gone over this period, this takes me back to the view I always had: load shedding helped Famous Brands on the top line. It may have impacted their operating costs as restaurants, but it also encouraged people to get out the house rather than sit in darkness.

The worst of the pressure seems to be in Signature Brands, which includes the more upmarket formats. This speaks directly to consumer affordability. The Leading Brands segment was described as having a continued revenue recovery in South Africa and SADC, especially in the Casual Dining Restaurants format, with customers responding to value offerings. This also tells us a lot about affordability.

And when there are fewer burgers going out the front door, there are fewer burger ingredients arriving at the back door. As Famous Brands has a substantial logistics business, that’s a double-whammy impact for the group. With high fixed costs in logistics, a drop in volumes leads to higher overhead absorption per unit sold and thus lower gross margins.

It’s not great beyond our borders either, with the AME segment suffering from disruptions in markets like Kenya. And in the UK, sales are down year-on-year.

The only silver lining here is that inflationary pressure on food is stable at the moment, so menu prices are settling. That’s good news when consumers are already struggling to eat out.

The announcement came out after market close, so keep an eye on Famous Brands on Monday morning.

Here’s the year-to-date share price chart:


Gemfields released an operational update (JSE: GML)

The disclosure is pretty irritating though, with no comparative numbers given

One of my pet hates on the market is when companies release an update that doesn’t have the numbers for the prior period. They aren’t allowed to do this for formal financial releases of course, but there are no set rules for operational updates. I just don’t see the point of having shareholder communication if you aren’t actually communicating in a useful manner.

In the six months to June 2024, Gemfields generated auction revenues of $121 million. Maybe the reason why they left out the comparative number is because they made $145 million in the prior year? I had to go digging for that number, of course.

They have a net debt position of $44.4 million, which is very different to a net cash position of $62 million a year ago, in both cases excluding auction receivables. They have been investing heavily in capital expenditure.

So, it’s the usual story. When companies don’t want to highlight a worrying trend, they will just leave out the comparative. Thankfully, I’ve seen this enough times on the market to know that digging is usually a worthwhile exercise.


Nedbank puts on its green boxing gloves (JSE: NED)

The dispute with Transnet and the Special Investigating Unit is escalating

Remember the name Regiments Capital? State capture? All that stuff? Well, here’s a little throwback for you.

Way back in 2015 and 2016, there were interest rate swap transactions between Nedbank and Transnet, with Regiments Capital acting as Transnet’s financial advisors. After much noise around these structures in the wake of the report on state capture, Nedbank is steadfast in its view that none of the bank’s staff did anything dishonest or corrupt. Despite this, review proceedings have been served on Nedbank by Transnet and the Special Investigating Unit (SIU).

Slightly hilariously to be honest, the claim is that Nedbank made a profit of R2.7 billion on the swaps. People are somehow convinced that banks are these immense money making machines that can make billions on a single deal. Please consider for a moment how big that number is. Most JSE small and mid-caps don’t even have a market cap that size, let alone a profit on a single trade for a bank.

Nedbank notes that it actually made less than R43 million in margin on the swaps, which is still a lucrative trade but certainly a lot more reasonable. The bank also highlights that the swaps were commercially sound and achieved a fair return on equity of 15.5% over the life of the transactions.

Time will tell on this one, but the claim of a R2.7 billion profit sounds absurd to me.


Orion shows us there’s no reason to ignore South African retail investors (JSE: ORN)

The company raised R44 million under the Share Purchase Plan, which is excellent

For far too long in South Africa, the default has been to get out the little black book and phone institutional investors to raise capital. Over the long term, we cannot have a vibrant capital market like this. I discussed this recently with Paul Miller of Utshalo, the company that helped Orion with the Share Purchase Plan in the South African market. You can listen to how passionate he is about this issue in this podcast:

I’m genuinely really glad to see that the Orion raise has been a success, with A$3.6 million (around R44 million) raised under the Share Purchase Plan. R33.6 million was raised in South Africa and the rest would’ve been mainly in Australia.

This is a very helpful addition to the A$7.7 million raised from institutional and sophisticated investors earlier in the month. The key here is that the retail investors in the Share Purchase Plan were given the chance to subscribe for shares at the same price as the professional investors, thereby creating a level playing field and a fair relationship with all shareholders.

The total raise of A$11.3 million puts Orion in a strong position to complete the Bankable Feasibility Studies. Even more than that, I think it sends a strong message to South African companies and advisors that it’s time to stop ignoring retail investors as a source of capital.


Sea Harvest expects a major drop in earnings (JSE: SHG)

There are a number of factors at play here

Sea Harvest has released a trading statement dealing with the six months to June 2024 and it doesn’t tell a great story at all. HEPS will fall by between 33% and 38%, coming in at between 47.6 cents and 51.5 cents. Fishing businesses have notoriously volatile earnings and this is another example.

The reasons? For one thing, low catch rates in the South African business didn’t help. If you don’t catch the fish, you can’t sell them. Better pricing thankfully made up for the poor volumes, without which they would’ve been in much bigger trouble. Other issues included a late start to the Australian prawn fishing season (an issue that hopefully just shifts earnings later in the year), as well as demand and pricing pressure in key abalone market and prevailing high interest rates in South Africa and Australia.


Little Bites:

  • Director dealings:
    • A prescribed officer of Acsion Limited (JSE: ACS) bought shares worth R55.5k.
  • Although Grindrod Shipping (JSE: GSH) is on the brink of delisting, it’s still worth referencing the latest shipping rates update as it has broader inflationary implications for your portfolio. Parent company Taylor Maritime Investments announced that its blended net time charter equivalent increased 7% vs. the prior quarter, which is a pretty big increase considering that this is a quarter-on-quarter rate, not year-on-year.
  • Accelerate Property Fund (JSE: APF) announced that Dawid Wandrag will retire as joint CEO of the company due to emigration. Abri Schneider will therefore be the sole CEO with effect from 1 September.
  • Sebata Holdings (JSE: SEB) released a trading statement for the year ended March 2024. It reflects a headline loss per share of between -103.65 cents and -100.75 cents, compared to a loss of -14.48 cents for the comparable period. The share price is R1.00 and you won’t see a Price/Earnings multiple of -1 too often!
  • Tongaat (JSE: TON) has responded to media articles regarding a proposal received by the Business Rescue Practitioners as an alternative to the current Vision Parties proposal. Although the practitioners acknowledged that a proposal was received, they have also made it clear that they are legally obligated to implement that approved business rescue plan that is legally binding on all affected persons and the company.

Ghost Stories #43: Market optimism and investment strategies in post-election South Africa (with Nico Katzke)

Listen to the show using this podcast player:

In this excellent discussion with Nico Katzke, Head of Portfolio Solutions at Satrix Investments, we talked about a range of topics that are of great relevance to South African investors. This included:

  • The performance of the local market in the aftermath of the election and why indices behaved differently
  • How the carry trade works and why this tends to protect the rand
  • The relative appeal of South African equities in this environment
  • Property and government bonds as a way to play the local theme
  • How ETFs can be used to express these views and build a portfolio

For those willing to put in the effort to expand their investment knowledge and build wealth, this is a fantastic podcast. The full transcript is included below for those who prefer to read. This podcast was first published here.

Indexation: Anything but Passive.Take control of what you're investing in by incorporating indexation into your portfolio. Satrix - Own the market

Full transcript:

Introduction: This episode of Ghost Stories is brought to you by Satrix, the leading provider of index tracking solutions in South Africa and a proud partner of Ghost Mail. With no minimums and easy, low-cost access to local and global products via the SatrixNow online investment platform, everyone can own the market. Visit satrix.co.za for more information.

The Finance Ghost: Welcome to this episode of the Ghost Stories podcast, and this episode features Nico Katzke of Satrix. Nico, we’ve done so many of these. I enjoy every single one with you. We seem to be in a bad habit lately of starting the podcast late, because we just enjoy catching up before we actually hit the record button, about everything from both of us being swept away by the weather, through to a shared enjoyment of poker that we just discovered. We might have to act on that at some point.

But of course, we are here to talk about the markets, which is kind of like poker at scale, because there’s lots of maths, there’s lots of sentiment, there’s lots of understanding what other people might do. I suppose I’m not shocked that we both enjoy poker as well.

Nico Katzke: Absolutely. I’m an equal part a fan of poker and chess.

The Finance Ghost: Yeah, that’s another thing I like, is chess. I used to play a lot of that, and I think it is the same way of thinking, honestly.

Nico Katzke: Yeah, well, chess, a bit less so, because I think the rules of the game are fixed in chess. That’s why you see computer algorithms corner the chess market, where with poker, there’s so many moving parts, and it’s a psychological game.

Investments are a bit more like poker. I think that’s more reflective of the markets, actually. There’s a lot of sentiment driving returns and movement, and it’s not a fixed rule game.

The Finance Ghost: That’s fair enough, actually. There’s a risk element to both. But you’re right, there’s technically a right answer in chess, whereas there isn’t a right answer necessarily in poker, not something that you can train a computer to know for sure is the right answer. Go run all these scenarios and away you go. Yes, that’s a good point, actually. I guess poker is closer to the markets, although it is amazing how many people I know in finance who spent a lot of time in their lives playing chess.

If you ever wanted your kid to get into the markets, you could definitely do worse than put a chessboard in front of them, or perhaps poker cards. But I think one is probably in the parenting handbooks and the other one is something you do a bit skelm and when maybe your spouse is not 100% keeping an eye on what you’re up to.

Nico Katzke: I suppose, I suppose. But the same algorithms that have cornered chess, if you apply them in poker tournaments, they actually end sort of mid-table; they don’t beat seasoned poker players. And I think that that’s the key. Sometimes a suboptimal move is the best move. And, when it comes to – or objectively suboptimal, if you can even define any move in poker as such – and I think that’s part of the market as well. Sometimes you might do something that, in hindsight, probably wasn’t the best move, but it turned out to be okay. Dealing with your decisions just makes life that much easier.

The Finance Ghost: And there’s a lot of luck, and there’s a lot of luck in the markets as well. I mean, this morning in Ghost Mail, I literally wrote about how this rally on the JSE has given Pick n Pay this incredible get-out-of-jail card. Not only have they not had load shedding to deal with for the last three months, but they’ve also now had this market rally as they’re about to do their rights offer.

Look, that makes a bigger difference to Pick n Pay shareholders than it does to the company. The company raises R4 billion regardless. It kind of just hurts shareholders more if the share price is lower. But later this year, they’re planning to unbundle Boxer and sell down a piece of that stake. And obviously you want to be selling an asset into strength, not selling it into weakness. I mean, that’s markets 101, right? You want to sell high. You can’t sell high if sentiment is poor. And of course that’s been the story of the second quarter in South Africa on our market, is sentiment. And it’s all been driven around what’s happened with elections. It’s been quite something to watch.

Nico Katzke: If we take a step back, it’s almost as if the markets had an enormous sigh of collective relief that we had following the election. If you think just two months ago many were predicting the worst possible outcome for markets, of an ANC/EFF alignment that was almost going to materialise. And I think a lot of people, their anxiety became clear and it reflected in the prices of assets. Instead, after the election, we had a splintering off of the least market-friendly and radical elements from the ANC, I suppose, and a merger of parties that are, in my most optimistic take of the situation, at least hoping to steer the country away from further economic erosion.

You don’t want to give credit where credit’s due, but if you want to be overly optimistic, you might say that Cyril has been playing fourth dimensional chess and has seen this well in advance and with the radical elements splintering out of the ANC, you can to some extent argue that some of the more populist elements or hard left-leaning, and some corners corrupt elements of the ANC have splintered off again. What you’re left with is a more centrist, market-friendly, pragmatic ANC that’s willing to negotiate.

What we need as a country and what democracy needs is for there to be a coming together of different views and acceptance of different views. And in order to steer this economy forward, we all need to pull our weight. We can’t be saying one part needs to pull and another part shouldn’t pull or shouldn’t be involved in pulling. I mean, that’s no way of talking about it. And if ever we can get any inspiration, it’s from our rugby team that just everyone pulls in the same direction. The eye on the prize. And once you start unifying things, it’s a powerful force. And that’s why I’m so glad that the new government has unification in its name. And let’s hope – long may it continue.

The Finance Ghost: I love that you raised the Springboks there. Siya’s tackle, which will forever go down now as the cause of us needing visas to go to Ireland. The sort of jokes on Twitter around the rugby are always great. And everyone talks about Rassie playing 4D chess. Maybe President Ramaphosa as well, I don’t know. But either way, I’m happy with the outcome. I’m a dyed-in-the-wool capitalist, and I firmly believe prosperity for everyone comes from markets that are working.

Unfortunately, there’s a lot of populist views otherwise. In my opinion, simple, is you just have to look at the world around you, where are the most prosperous countries, where do the jobs come from, etc. etc. Obviously, we won’t dive too deep into politics on this show. That’s not really the mandate, although it’s hard to resist in an election year, because unfortunately, markets and politics are linked. That’s the reality. And if you don’t believe that, you just need to go and draw a chart of our market and go and compare the first quarter to the second quarter. I looked last night at the Satrix Top 40 ETF, it was up when I looked last night, 7% year-to-date, that’s the return excluding dividends for just over six months. On an annualised basis, which is always a very dangerous thing to do, it looks fine. You would double that more or less, and you get to actually a decent return, certainly a lot better than we see, or that we’ve seen on an average year in the JSE for many years now.

However, the first quarter was flat. The second quarter is where all of the magic happened, and there was this big sentiment uplift. Now obviously investors will look at that and say, well, if you’re not in the market, you can’t get the upswings, you just can’t. If you’re going to sit back and be in cash all the time, then at some point the markets will leave you behind and you’re not going to get these benefits, which is why people advocate for ongoing, steady investing into equities, into ETFs. I’m a big proponent of that.

Obviously this is a Satrix podcast and it sounds like I’m getting paid to say that, but I do this myself. I believe strongly in adding ETFs to your portfolio and doing it on an ongoing basis. At the very least, you should be maxing out your tax-free savings every year into ETFs or you are really not playing 4D chess then, you’re really not even playing 1D chess. Over and above that, traders, I guess, would look at this and say, well, this is the kind of benefit of taking a risk based on events, based on outcomes, based on probabilities, based on looking at a market and saying, well, South Africa was “cheap” – you see people saying that a lot – so have a punt on the outcome. Risk and reward, hey, that’s how this game works. If you’re not prepared to take the risk, you’re not going to bank the returns.

Nico Katzke: Absolutely. And I think to your point, the market is probably still cheap locally. A lot of these companies are trading well below what you would regard as international levels of price earnings or dividend yield multiples. However you look at it, it still arguably remains very cheap. And while there’s been this run in the second quarter, to your point, I think a lot of these asset classes are actually flat if you just look at it on a twelve month basis.

Locally, I think there’s a case to be made that local is again lekker. It’s probably a bit early to tell what the long-term impact of this coalition government will bring to the South African economy and markets.

Particularly if you think about it, oftentimes market participants are only asking for government to reduce bureaucratic barriers and allow the market to actually run. Ultimately, a sustainable economy is one where the government is not creating all the jobs, the market is, and the market wants to create jobs. If you think about the South Africans that are here are passionate about their country, they want to live here. And I think when people want to live in a country, they want to raise their kids in a country, they want to long term be here – that’s when they start to invest in a country.

When there’s uncertainty around the sustainability of our economic policies, government, etcetera, that’s when people start to be hesitant for taking on long-term investment. I’m really hoping that this new government is a step in the right direction. I don’t think it’s going to be the end of our political woes completely. I think this might be a bumpy ride going forward, but at least we’ve left the bus station. At least we’re on a path in most respects. I think most people will agree we’re in a better place now than we were just a few months ago. I think that much is clear. And we’re hoping for more favourable policies towards economic growth, streamlining, for example, of decision-making and delivery of products and services, basic services that we all need for a functioning economy. The financial markets reaction has been favourable to this to date and over the last few months, and we hope that may continue.

If you look at the optimism, to your point, it certainly reflected, if you look at the ETFs, the Satrix FINI ETF, which tracks banks, insurance companies and other financial services providers, that’s done phenomenally well. And you had a day after the election where the banks rallied – what was it – financials rallied 8% in one day.

The Finance Ghost: You’ve stolen my thunder here, Nico. On my other screen here, you’ll never believe it, but I just charted the Satrix FINI because I thought, oh, the Top 40 is maybe not the best indication of SA Inc., because it’s full of rand hedges and it’s full of this stuff. Then I looked at Satrix INDI and I’m like, yeah, maybe. But then I looked at Satrix FINI and I thought, okay, that’s actually the best view on the sentiment trade. And well done to you for completely stealing my thunder. You are a good poker player. I can see it. I can see it.

Nico Katzke: I called your raise and I raised the FINI.

The Finance Ghost: My Satrix ETF raise, yes.

Nico Katzke: But that’s interesting, Ghost, because if you take a step back and ask the question, because I think a lot of casual market participants will look at their Top 40 holding and think, well, why haven’t I seen the bounce in the Top 40 that I’ve experienced in the FINI, as an example. Have I missed the opportunity? Let’s take a step back and unpack that.

If you look at the Top 40 index, there’s a lot of global heavyweights in there. Your Richemonts, your Billitons, your Naspers. These are companies that derive the majority of their earnings from offshore. The strengthening rand, in many respects, is actually not great for their nominal valuations. Think of a Richemont. If you’re selling luxury goods overseas and you’re repatriating dollars and euros and yens and the like back into rand, well, a stronger rand simply means those returns are now against you. What you want with those companies is actually that the rand weakens so that your dollar is worth more in rand terms.

The interesting situation is the Top 40 is much more of a rand hedge, if you compare it to, for example, the FINI, which is a rand play. Let’s think that through. If you look at your financials, your banks, your insurance companies, etcetera, well, they are effectively lending out money in rand. They are being paid back 10, 15, 20 year loans, and they’re getting paid back in rand. If the rand strengthens, then those debt liabilities are worth more today, if you discount that back to today.

For banks, you want the rand to be strong. A weakening currency simply means that the value of your future returns in any neutral currency compared to the dollar or what have you, is always going to be worse off. What’s good for the rand is good for the banks and the industrials and financials and the like. Well, the financials specifically. But you’d also hope longer term for the industrials, too. Definitely, it matters which one you had in your portfolio.

The rising tide lifts all the boats, but in this case, some boats were lifted a bit more.

The Finance Ghost: Yeah, some boats are in the right part of the harbour to get that tide, absolutely. And, of course, the other thing with the banks is credit loss ratios. If the economy is going to do better, then you hopefully will see a better credit performance ultimately, which does wonders for margins. And you also see more activity, you see more non-interest revenue coming through, which is a wonderful boost to return on equity.

You’ve raised that point there on the strengthening rand and the level of rates that the banks can earn. And I think that brings us neatly to this concept of a carry trade, because we have a situation where South Africa is a nice high-yield economy. And it’s been that because people have priced in a significant amount of risk, and why wouldn’t they? If you look at the economic track record over the last ten years, and as much as populist politicians want us to believe otherwise, and like to tell long stories about the markets, very few of which are true, people don’t give you money because they feel sorry for you. They invest in you because they believe you’re going to give them a risk-weighted return. And if you carve out a country that is riskier, your cost of borrowing is going to go up, and your ability to invest in your people in South Africa is diminished. Your ability to do infrastructure, your ability to service debt, all of this stuff.

This is the uncomfortable truth that populist politicians don’t want you to understand, and certainly aren’t going to explain nicely, but that carry trade is an important point to understand, because from a bank perspective, that’s part of it, really. They’re earning great rates on what is now seen as a more stable economy. The banks are then worth more than they were a few months ago. Theoretically, the rand is now offering a great yield on what people believe is maybe a more stable economy. Is this the kind of stuff that leads to us eventually being able to do rate cuts, maybe even beyond what is happening in the Fed? If our risk weighting comes down, can we cut deeper and then stimulate growth accordingly?

Nico Katzke: There’s two interesting elements that you raised there. The first is the carry trade phenomenon. The second one is what might likely happen to rates toward the end of the year. I think let’s first talk about the carry trade. And it’s such an important feature. We did some research a number of years back, following Nenegate, and the puzzle at the time was clearly our government was in a shambles. They was a grab for public resources and sustainability of our political sphere, at the time, was very dubious. There should have been a lot of strong alarm bells.

And to your point, no one is nice out there. If foreigners see the investment case for South Africa not being there, they’re just going to extract their money. At the time, the rand weakened a bit, but not to the extent that you would expect if an emerging market, another emerging market, were to fire their finance minister, install someone, and then the Monday again fire and bring in someone else. I mean, that level of shambles in managing the public purse should have sent the rand into a deep spiral. The question that we asked after the fact was, why didn’t the rand blow out far more?

If you look at other emerging market economies, all our peers on the global stage, some of them have far larger economies. Think of your Brazils, your Argentinas, your Turkeys. I mean, their currencies blow out a lot. And we complain when the rand goes from R17 to the dollar to R19 to the dollar, and we all feel so much poorer, so much worse off about life in general. But have you ever seen the rand go from R17 to R50 to the dollar? You don’t see those type of blowouts. And the question is why? Why don’t we see these extreme currency fluctuations? I know the rand is volatile, absolutely, but the level of swings is actually comparatively muted if you look at some of our emerging market peers. And what we found is that a large part of this is actually due to this carry trade that is implicitly happening in the market, that’s not always easy to see explicitly, the level of this. It’s not sort of reported by Bloomberg, you can see the level of carry, but you can imply it, and you can see how there is a lot of flows happening.

So let me take a step back and explain what the carry trade is. To give your listeners a sense of why I remain optimistic that the rand will not blow out to R25, R30 to the dollar. And I’ve been saying this for years.

You can think of carry trade very crudely as using cheap money to buy higher-yielding money. Okay, so basically what this means is that investors take advantage of interest rate differences between countries by borrowing money where rates are low, like, for example, the US or Japan, and then investing the borrowed money in countries where interest rates are high. If you take, for example, an investor that is able to borrow money in the US, where the current ten year-bond yield is at, what’s it, 4.3%, and then use that money to buy ten-year SA bonds that yield above 10%, so you’re borrowing at 4, call it 5%; you’re borrowing at 5% and you’re buying at 10%, or you’re earning 10%. That 5% interest differential is in your favour.

Now, of course, there’s no free lunch, right? And this strategy’s success is definitely dependent on an investor’s time horizon and entry and exit points. Of course, this is a very active trade, and it’s a risky trade, but it’s a potentially very profitable trade. Now, this trade of borrowing in US and investing in local or SA yields that are 5% higher, this trade only makes sense if the rand does not weaken by more than the 5% interest difference.

If it weakens more – let’s say the rand weakens by 12% – that means, yes, you’re earning that 5% yield difference, but you’re getting back rands that are now 12% weaker. Then you lose 7% on your investment. If you can time it well to actually enter this trade, and if the rand stays more or less flat or even strengthens, that will all go into your favour. Now, the fascinating thing is that the attractive carry prospect is such an important feature for our local currency, and one that I would argue likely has saved us in the past from larger blowouts that are typical of other EM currencies. Now, the reason why South Africa or the rand, is so well positioned for taking advantage of this when the rand weakens – the reason for this is that we have a very deep and liquid bond market, which means investors can easily access and offload these instruments.

If you’re able to invest in South African bonds, but you’re equally able to tomorrow sell it, if the rand, for example, goes against you, well, that means you are more willing to enter into a carry trade. Years ago, Turkey just simply banned or imposed capital control. You weren’t able to expatriate your lira-earning debt instruments back into your original currency, which meant you had to sit through the currency weakening. If you’re not able to offload those instruments or access it easily, well, you’re not going to enter into a risky carry trade.

Part of why we have such a deep, liquid and trusted bond market, as an example, is because we have strong and credible central bank and financial institutions that exude confidence in the market, and that the more radical forces that oftentimes speak in the political spheres have not been able to capture those institutions. The market believes that. The market trusts that. The combination of all of what I’m saying, maybe if you re-listen to that and just think about this interesting phenomenon, a very important feature at the centre of all of that, or the correcting feature that you have, is if the rand were to weaken tomorrow – let’s say it goes from R18 to the dollar to R21 – market participants look at that and they say, you know what? The odds of the rand weakening further has now greatly been reduced. This carry trade is becoming more attractive because the rand will likely go back to call it R19, R18 levels.

What happens then is when the rand starts to weaken, it moves outside of that bound, you start to see market entrants buying up rands, buying these instruments to make that carry trade possible, which then pushes the rand back into that R18, R19 level. You have this almost natural correcting force from the carry trade investors that actually just push the rand back into a more “realistic” level, if you like. That’s a very important feature of our local currency, is that it is so liquid and so easily tradable, and our bond instruments are credible that this actually supports the currency to the point where you don’t see wild swings. And I’d argue we should defend those critical institutions because that certainly defends the currency.

The Finance Ghost: Absolutely. We’ve covered equities, we’ve covered the rand. That pretty much covers it off in terms of the big stuff from a South African perspective. And I would encourage people to actually go have a look at that Satrix government bond ETF that I’ve done a couple of shows ago with Siya. Go and draw that chart. That’s STX GOV, pretty interesting. Obviously, that’s rallied beautifully as well now with the improved sentiments. There are many ways to play this game, ultimately.

But the one thing that is still in the back of the mind of the bears among us, really, is there was great excitement once upon a time when a gentleman named President Cyril Ramaphosa went and had a walk on the Sea Point promenade and there was mass celebration, and everyone thought this was wonderful. And then we went into a very tough period. And yes, Covid did not help anyone, so bank that. We’re not exactly a super tech-focused economy. It’s not like we got the upswing of cloud computing. We really didn’t. All we did was get absolutely smashed by the downward move in tourism. Over that time you didn’t want to be a tourism economy, you wanted to be a tech economy. And we’re not one of those. Fair enough, but either way, I think we can all agree that it was a very disappointing few years economically. I guess we just have to hope that doesn’t happen again, right, otherwise, so many of these positive swings we’ve seen, they’re vulnerable. They’re vulnerable to bad news. And I think if we start to see any kind of just reversion to populist politics or just non-market friendly policies of any kind, I guess this unwinds very quickly, right? That’s the risk.

Nico Katzke: Absolutely. So you can, if you’re pessimistic, you can argue that, the Ramaphoria has given way to GNU-phoria, which is now all the rage. The market is loving this. Certainly there’s a renewed optimism around South Africa’s future and you might look back and say, well, we had that euphoria when President Cyril Ramaphosa walked on the promenade. But the reality, I think, and why I’m more optimistic this round, is that a lot of those bad elements from government have been removed. And this is why I say that if you don’t want to give credit where it’s not due, but in truth, when Cyril Ramaphosa took over the government or took over the presidency back then, you had a lot of those bad elements still firmly entrenched in the governing party.

It’s almost like fourth-dimensional chess. Those bad elements have arguably splintered off into other factions and have now left the chat, if you like. What’s left is parties that are wanting to negotiate, parties that are wanting to find common ground and move forward. Hopefully, this round, the presidency will see the opportunity and seize the opportunity to actually take this optimistic view to their advantage. Because the optimism we had then was off an extremely low base. And you can hopefully, I think, comfortably say that we’ve reached rock bottom in the past few years and we are on an upward trajectory. It’s very hard for me to imagine how we turn back from here into the levels of poor service delivery and government, the very poor radical machinations. But you know what I mean, it’s very hard to actually reverse those gains I think we’ve made in terms of optimism in recent two months, I’d say, post-election, and long may that continue.

Look, and I think we all just want a better economy. We all just want to move in a positive direction, create jobs, because government can’t create jobs indefinitely. It can’t be the main source of job creation. It has to come from the public. And the public is wanting to pick up the pieces and put back together, I think a fantastic economy. We have great companies, we have world-leading companies in many respects. Hopefully they get the opportunity now to actually not be pulled back by bureaucracy and the red tape we’ve seen in the past, but actually just look to the future and flourish. That would absolutely be my hope. And so let’s hope this GNU-phoria may continue. Optimism is a powerful, powerful thing.

The Finance Ghost: Okay, so before we end off the podcast, I just have to temper all the South African enthusiasm with a year-to-date chart that includes the S&P500 and the Nasdaq 100. Now, obviously, timing is important, and we can debate all day long about what will the next five years look like, how expensive are the markets, etcetera, etcetera, etcetera. But I think we can also agree it’s been a strong year so far for South African equities, or rather a strong quarter, really. Now, admittedly, I was comparing here to the Satrix 40, which is maybe not the best comparison as we’ve discussed, but for a lot of South Africans looking for just broad market exposure, that’s the button they hit. Correctly or incorrectly, they hit Satrix 40. Now, the Satrix 40 as of last night was up 7% year-to-date. S&P500 – so I’ve done the feeder fund, the Satrix feeder fund, so these are all Satrix products you can go and invest in right now – so this takes the S&P500 return, and it turns it into rands. So we are comparing apples with apples here because we’re comparing to the Satrix 40 in rands. The S&P500 year-to-date, 16%. And then the Nasdaq 100, obviously powered by all of the stuff around AI and Nvidia and blah, blah, blah, all of the tech stuff, up 21% so far this year.

Interestingly enough, despite all of the sentiment and everything else, if you’d come into this year and you said, okay, I’m going to have a punt at my local market index, I think we’re going to have a great year. Yes, you’d be doing pretty well year-to-date. If you annualize the Satrix 40 return, it looks good. But then you look at the overseas stuff and you’ve got to just remind yourself, we can all get very excited about the Springboks and everything else, but we are not sitting in an economy that is changing the world right now. Unfortunately, we’re just not. And there’s something to be said for diversification and making sure a portion of your money is sitting in those tech companies that will change the way we live for the next 20 years. We’ve got some great companies in South Africa, but not many of them are going to change the world over the next decade.

Nico Katzke: I can’t agree more. And if you look at the performance of those global indices, a large part of that is due to tech really coming to the fore and markets pricing it as here to stay. And like we’ve said on previous discussions, you’re in the infrastructure development phase. There’s a lot still that needs to happen in terms of investing and spending before we actually see broad market application.

Watch this space. I think your large companies, potentially a lot more runway to actually improve earnings going forward, even off the current high base. Something to maybe consider as well and curb our enthusiasm is if you look at the ten-year bond yield today, it’s still higher locally than it was at the beginning of the year. Yes, there’s been optimism, but that was, like I mentioned, off a very low base, almost off a default assumption that the worst possible outcome will happen in the election. Yes, there’s been sort of almost a euphoric signal from the market. But clearly the market is not saying we are completely out of the woods yet. This might be a good opportunity to look longer term and reason for yourself whether you think we’re taking a step in the right direction because it’s not completely priced in yet.

I think the market is cautiously optimistic on South Africa. It might also be a great opportunity where the rand is a bit stronger, perhaps currently than it was a month or two ago, to get some of that offshore exposure with the rand being a bit stronger and build that exposure. For me, that is absolutely a dollar averaging exercise. Investing in MSCI World or S&P500 or Nasdaq, you shouldn’t be wanting to time it, because these are volatile indices, make no mistake.

You want to average your entry, let’s say you want to invest R100,000 into S&P500. Instead of doing it one shot, pressing the button, maybe stagger that investment in over 12 months, 24 months. That’s what I mean by dollar averaging, and build that exposure so that you build that exposure through the market cycle. That’s always the ideal when it comes to investing long term, is building exposure, not timing it, not sort of jumping in when you think that the timing is right.

But yeah, absolutely building that exposure. Another asset class you haven’t mentioned is the SA listed property index, which is up handsomely year-to-date, I think just, just more than 10%.

The Finance Ghost: My personal little favourite for a GNU dawn with a G, actually. Yes, it’s an interesting one. It’s something we discussed on Magic Markets recently as well. I think that’s not a bad place to play what’s happening in South Africa. I really do, especially in a tax-free savings account. Get the yield tax-free on these REITs.

Nico Katzke: That’s a very high duration call if you like, if you want to make a comparison to bonds or very high beta SA Inc. play. Either way you cut it, the local property market probably stands to benefit the most from a more stabilised government, improved public services delivery, with rates coming down perhaps towards the end of the year. If you look at the STeFI currently, versus on a three-year basis or rolling three-year and a rolling twelve-month basis compared to the same for inflation, you are starting to see that real yields are picking up. This is creating room for the central bank certainly to start cutting rates from a real yield perspective.

That’s breaching the 2% longer-term real yield level again on a rolling basis. We prefer to look at those things on a rolling basis. You don’t want to look at it just at a snapshot, but you want to sort of look at that trend. And certainly there is, you can almost safely say definitely more runway for the central banks to start cutting rates locally, but we’ll probably take our cue from the Fed there. I’d be very surprised if we start to move out of lockstep with global central banks. It’s always possible, but I wouldn’t think we would be too enthusiastic about doing that. But in all likelihood, it seems like the Fed will start cutting rates at some stage this year. And once that starts to happen again and yields start to go down, that’s just great for property again, and it’s going to be great for financials as well, and all those companies that stand to benefit from your discounting rate going down.

Because as we’ve said on this podcast before, you and I have discussed this, if you look at interest rates long term, especially the sort of ten year plus interest rates, they’re a great proxy for what the market uses to discount future earnings back to today’s levels. When interest rates go down, that simply means you’re discounting at a lower rate. That’s good for properties from that perspective, because those indebted vehicles that use debt to acquire property, now that debt is looking far more manageable. You’re discounting future earnings to today at a better rate, at a lower rate. In your price, that’s being reflected as well. Looking ahead, I’m very cautiously optimistic. You don’t want to peg your hopes on uncertain outcomes but like in poker, you have to play the hand that’s dealt. And I think currently we’re sitting with a good hand compared to a few months ago. I’m looking forward to playing this hand and seeing how this plays out. Cautiously optimistic, the table is turning.

The Finance Ghost: Nico, I’ll end off by saying, on the interest rates, on the banks, I guess you got to be careful that as rates come down, their net interest margin normally contracts as well. They benefit from the valuation curve effectively, but they actually generally suffer a bit of a knock to their earnings. And that’s why I like the property companies so much, because not only do they benefit from the valuation curve, but their expenses go down because they are the most highly geared assets in the world, right. You’re sitting with, typically a 40%, 50% – oh, that’s a bit high – like 40% loan to value and that money is going to the banks. That’s my favourite play.

But I think where I want to end off is to actually say this is where ETFs are just so interesting. These thematic instruments that are low cost, easy in and out, highly liquid, available in your tax-free savings account and let you express a view on the markets. All kinds of interesting views. Don’t make the mistake of thinking ETFs are some boring, Top 40 debit order only – that stuff’s important. But you can do so much more with them as well. You can go and take a view on property for this year or whatever the case may be. And that’s certainly my favourite thing about the ETFs. And Satrix has such a wide range of them, so go and check them out. And Nico, thank you as always for your time. It’s been another great discussion. The time goes so fast and I just always enjoy having these chats with you.

Nico Katzke: Absolutely. And I think, maybe just one last point on the banks, that margin point you make is absolutely valid, but there comes a point where its actually hurting you because your creditors are really struggling to make their payments. And what you see is in an economy where interest rates are very high, especially real yields are very high, you do see a lot of people renege on their ability to make those payments. That’s also when banks start to get in trouble, is where a lot of these loans become bad loans. Hopefully with interest rates coming down, they are able to still preserve a healthy margin, that’s certainly still there, but at least your consumers are able to make good on their mortgages and the like.

I think that would be good for the banks as well. And certainly a more stable economic outlook will be good for banks. But I like the way you ended it. Absolutely. ETFs are a great way to buy diversified exposure. Buying single stocks, it’s great fun and it’s a great way to learn.

But ultimately, when you’re building long-term market exposure, you also need to have that stable, income-generating asset that is well-diversified, low cost, and delivers over a 5, 10 year period. I think that’s where ETFs are really great vehicle.

Thanks for your time and thanks for your great show again. Keep the good content in the morning coming through.

The Finance Ghost: Thank you Nico. I appreciate it. We’ll do this again. Ciao.

Nico Katzke: Cheers.

Satrix Investments Pty Limited and Satrix Managers RF Pty Limited are authorised financial services providers. Nothing you have heard in this podcast should be construed as advice. Please do your own research and visit the Satrix website for more information on all their ETF products.

Ghost Bites (Anglo American | British American Tobacco | Equites | Hammerson | Mpact | PPC | Spar | Tharisa)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


Copper and iron ore are the highlights at Anglo American (JSE: AGL)

And there’s a substantial impairment at Woodsmith

Anglo American has released interim results for the six months to June. Group EBITDA margin was 33%, which gives useful context to outperformers like copper (53%) and premium iron ore (43%). Remember, margins don’t tell you anything about year-on-year moves. For example, EBITDA from copper was up 36.6% but EBITDA from iron ore fell by just over 20%. They might be higher margin businesses, but they had two very different trajectories in the latest period.

This is only part of the complexity at Anglo American. Another challenge is understanding the real drivers of performance in the group. De Beers gets lots of attention for how much pressure it is under at the moment, yet that segment only contributed $300 million in EBITDA – or well less than half of PGMs. In fact, the drop in iron ore year-on-year was more than the entire contribution from De Beers!

Although group EBITDA only fell by 2.6%, the impact of higher impairments and restructuring costs led to Anglo American actually reporting a net loss to shareholders for the period! The major impairment related to Woodsmith, with $1.6 billion recognised due to a decision to slow down development of the project.

Even with the impairment excluded, HEPS fell from $1.35 to $0.42 for the period.

As has been well documented in the aftermath of BHP sniffing around the company, Anglo American is transforming itself into a copper, iron ore and crop nutrients business. It therefore tells you how tough the outlook is that despite wanting to be in crop nutrients as a key vertical, Anglo has had to scale back those plans for the time being to deleverage the balance sheet.


British American Tobacco manages a small uptick in adjusted earnings (JSE: BTI)

The share price is pretty much where it was ten years ago

For British American Tobacco, it’s all about two things: (1) ESG consultants coming up with snazzy concepts like a Smokeless World and (2) dividends. If you’ve ever stood next to someone vaping, you’ll know that smokeless clearly means different things to different people.

The way this company defines them, the Smokeless categories contribute 17.9% of group revenue, up 140 basis points vs. the prior year. It’s all about getting smokers to migrate from cigarettes to the new products with reasonably awkward category names, like Modern Oral. They are collectively called the New Categories and the ambition of achieving £5 billion in sales by 2025 is in doubt, with the company blaming this on lack of enforcement against illicit single-use products in the US and the disposal of the businesses in Russia and Belarus in 2023.

Those issues are the causes of higher amortisation charges, as well as a drop in revenue as the group is comparing this period to a previous period that included the Russians. Reported revenue is down 8.2% and organic revenue fell 0.8%. New Categories revenue fell 0.4%.

Adjusted organic profit from operations fell by 0.9%, yet reported diluted earnings per share jumped 13.8% due to once-off items and net finance costs. On an adjusted basis at constant currencies, earnings per share increased 1.3%. That’s the right number to keep in mind.

The other all-important metric is cash conversion of profits, which came in at 78.4% on an adjusted basis, up 560 basis points. As reported, it was 74.3%, up just 17 basis points. Adjusted net debt fell by 12.4%. These two things lead to stronger dividends, which is really the only reason why anyone invests in this stock. Full year guidance is for operating cash flow conversion in excess of 90%.

There are three more quarterly dividends of 58.88p per share before the dividend will hopefully be increased once more. This is because the company declares an annual dividend that is then split into four payments.


The UK leaves a bitter taste for Equites Property shareholders (JSE: EQU)

The grass isn’t always greener on the other side

To be fair, having recently travelled to the UK, I can confirm that it is very much greener thanks to all the rain they get. As for investment returns though, it’s never a guarantee that developed market assets outperform emerging market assets. Far from it, in fact.

Equites Property Fund has concluded a deal to get out of the Equites Newlands Group development platform. This includes various steps related to sales of entities that hold interests in certain sites. It’s not a full exit though, as there are three properties excluded from the transaction that will be continue to be held jointly with Newlands.

Essentially, this recycles capital from land investments and allows Equites to repay debt. It’s a double-whammy from a cash flow perspective when you’re paying debt costs and the land on the other side isn’t generating a cash return.

Here’s the bad news: the price is £10 million and the carrying value value of the sites as at July 2024 was £17.3 million. Furthermore, the payment of the £10 million is deferred for a potentially long time, as £4 million is linked to profits due to Newlands when the excluded sites are developed.

Although these aren’t huge numbers in the context of a R10.6 billion market cap fund, it’s still a disappointing loss of shareholder value.


Hammerson reckons the worst is behind them (JSE: HMN)

The Value Retail disposal hopefully signals the start of better times

UK property fund Hammerson has been through quite a time, with three years of turnaround initiatives behind it. The latest interim period might make you believe otherwise, with a sharp drop in the net tangible asset value per share and a significant loss for the period.

If you read closely, you’ll see that they recognised a substantial impairment on the disposal of Value Retail, a deal which will generate £600 million in proceeds while cleaning up the balance sheet and bringing the loan-to-value (LTV) down to 25%.

In other words, this was hopefully the last painful financial period for the group. The interim dividend increase of 5% for the period certainly suggests that they are feeling more confident.

Going forward, they believe that the dividend should grow at between 6% and 8% per year. Assuming stable valuation yields for the properties, they believe the annual shareholder return should be 10%. Remember, this return is in hard currency, so it isn’t directly comparable to a rand-based return.


The Competition Commission overhang is finally off Mpact (JSE: MPT)

The market doesn’t like uncertainty in any form

Mpact has had a cloud over its head for a while around the Competition Commission investigation and what the outcome could be. The allegations pertained to historic anti-competitive conduct between Mpact and New Era in relation to the supply of paper for a relatively short period of time.

Mpact’s approach of co-operation with the Commission led to no penalty being sought against the company by the regulator. It’s worth noting that New Era has settled the complaint with the Commission without any admission of liability.

This issue has now been put to bed, as has a slip-up around non-notification of deals before 2011. The settlement for the latter issue came to R7 million.

The overhang is now gone and the market doesn’t need to worry about a potentially major knock from this investigation.


PPC’s disposal of CIMERWA has achieved COMESA approval (JSE: PPC)

This could be the catalyst for a special dividend by PPC

PPC announced the disposal of CIMERWA in Rwanda back in November 2023 and had already received the $42.5 million in cash on 25 January 2024 when the deal closed. In an unusual transaction structure, this deal carried a condition subsequent rather than a condition precedent. This is an “unscramble the egg” clause that reverses the deal if a condition isn’t met.

That condition was approval by COMESA, the competition authority with jurisdiction across many African countries. The great news is that the approval has been received, so the deal is now done and dusted.

The board is determining the best capital allocation approach going forward, which may include a special distribution. Nothing is certain until a formal announcement, so don’t bank on it happening.


Is a deal for Spar Poland just around the corner? (JSE: SPP)

There does seem to be progress towards a potential transaction

It hasn’t been a secret for a long time that Spar has wanted to get out of the disastrous foray into Poland. On 12 June, the company announced that it had signed key salient terms with a third party for a potential sale of the Polish assets.

Although no deal has been concluded yet, a renewed cautionary notes that they are at an “advanced stage” in negotiating the terms and conditions. If they can pull off an even halfway decent deal, I suspect it will be met with much approval by the market.


Tharisa is wheeling and dealing – energy, that is (JSE: THA)

I find wheeled renewable energy fascinating

I don’t know why I get such a kick out of renewable energy being transmitted from one part of South Africa to another through Eskom’s grid. It’s kinda obvious when you think about it, as Eskom does the same thing with its power stations – and with far more consistency these days. Still, I enjoy the thought of the sun shining and the wind blowing in the Western and Northern Cape and that energy being used to power Tharisa’s mining operations up in the platinum belt in the North-West. This is known as power wheeling and it’s a good way for Eskom to earn a return on the transmission infrastructure.

Tharisa has announced a 15-year deal with Etana Energy to procure up to 44% of Tharisa’s Mine’s energy demand from renewable sources, with a plan for the wheeled energy to be available from 2026. This complements other deals in place that will deliver 30% of Tharisa Mine’s energy needs.

Not only is this good news for cleaner energy, but it gives Tharisa more certainty over a significant portion of its energy costs from 2026 onwards.


Little Bites:

  • Director dealings:
    • An associate of a director of Dis-Chem (JSE: DCP) sold shares worth R18.7 million.
    • Dr Christo Wiese is clearly having a full go at getting Titan’s stake in Brait (JSE: BAT) as high as possible, with purchases of R13.2 million worth of shares and R310k worth of nil paid rights letters. When the underwriter is also buying up the nil paid letters, you know they are serious about getting every share they can.
    • A non-executive director of Zeda (JSE: ZZD) sold shares in the company worth R345k.
    • A director of Stefanutti Stocks (JSE: SSK) bought shares worth R35.8k.
    • Sean Riskowitz has bought R27.6k worth of shares in Finbond (JSE: FGL) to add to the small number he bought earlier in the week.
    • A director of Visual International (JSE: VIS) bought shares worth R18.4k.
    • Although not a traditional director dealing, it’s worth noting that the Datatec (JSE: DTC) scrip alternative was chosen by two directors and the company secretary, including Jens Montanana who added shares worth R45.8 million to his tally.
  • The heat is on Quantum Foods (JSE: QFH) chairman Wouter Hanekom, who again finds himself in the cross-hairs of a angry shareholder. Previously, Braemar tried to get a change in the board across the line. Now, Country Bird Holdings has written to the board demanding a meeting. The agenda? The proposed removal of Hanekom as well as Geoffrey Fortuin as lead independent director. The drama continues and the puns about features flying write themselves.
  • Sibanye-Stillwater (JSE: SSW) released an update on the cyberattack that the company has been dealing with. They suffered some operational delays in part of the US PGM operations due to the issue, but they expect to process accumulated stockpiles in due course. The group’s systems are largely restored but financial results have been delayed, with a planned release date of 12th September.
  • MC Mining (JSE: MCZ) announced that a A$1 million unsecured loan facility has been secured by the company. The facility is available until 30 June 2025 and interest is priced at 9.25% off an Australian rates curve. The lender is Eagle Canyon International Group, controlled by Christine He, MC Mining’s interim CEO.
  • Sygnia (JSE: SYG) announced that Niki Giles will step down as Financial Director with effect from 31 August. Rashid Ismail will take over as an internal promotion.
  • Oando (JSE: OAO) announced that consent has been received from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for the acquisition of 100% of the shares of Nigerian Agip Oil Company.
  • Acsion (JSE: ACS) somehow made a mistake in the disclosure of HEPS in the results for the year ended February that were published on 12 July. HEPS as published was 98 cents per share, but the correct number was 107 cents. That’s a big difference and this is the most important number that a JSE-listed company discloses, so that’s not great.
  • Efora Energy (JSE: EEL) has almost caught up on its financial disclosure, with a trading statement noting that HEPS for the year ended February 2024 will be a loss of between 1.67 cents and 1.77 cents vs. a profit of 0.51 cents in the prior period.

Unlock the Stock: Attacq and Capital Appreciation

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.

In the 39th edition of Unlock the Stock, we welcomed Attacq and Capital Appreciation back to the platform. To understand the drivers of the share price performance, 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 (AECI | Balwin | Primary Health Properties | Vodacom)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


The market didn’t enjoy the AECI update (JSE: AFE)

The share price fell 10.3% on the day

AECI released a trading statement for the six months ended June 2024. When a company talks about being in a “year of transition” then you know that choppy numbers are the order of the day, with up-front investment in the hope of long-term gains. Hopefully, the worst is behind them in this period, as HEPS for the six months will be down by between 54% and 60%.

Although the first half of 2023 was a record performance, this is still a substantial drop. The company tried to explain this by noting once-off events contributing to high operating costs in this period. Without those once-offs, EBIT would have been stable vs. the prior year with margins holding.

Examples of these once-offs include statutory shutdowns at AECI Mining and the related alternate sourcing of ammonium nitrate solution at higher market prices, as well as operating model restructure costs in AECI Property Services and Corporate. They do also reference AECI Schirm Germany as a once-off, which is a stretch. That business has been a problem for a while.

More than once in the announcement, they note that the second half of the year should be stronger than the first half. The market didn’t care, with a 10.3% knock to the share price on the day.

The company also announced the sale of the Animal Health business as a going concern to Nutreco International. The price hasn’t been disclosed. They expect the deal to close in four to six months.


If you can’t sell ’em, rent ’em? (JSE: BWN)

I am not sure that this is the right move for Balwin

With a share price that has lost roughly half its value in the past 3 years, Balwin isn’t exactly a market darling. The stock was also completely ignored in the GNU upswing that was so good for most of the South African market, giving you another strong clue that most investors aren’t interested. To get positive attention again, Balwin will need to make excellent capital allocation decisions.

I’m not sure that scaling a rental portfolio is going to achieve that. This is a capital-heavy model with all the same pain and agony that buy-to-let brings to people, except for a much larger portfolio of up to 7,300 apartments over the next 8 to 10 years.

It’s no secret that sales have been tough at Balwin, so it’s hard not to think that this is a strategy to find an alternate way to develop the land portfolio. The first six developments would represent around 20% of the current unused land portfolio

The problem is that Balwin will spend all the development money up front and will then earn a rental yield rather than a gross margin on properties, so this is very capital intensive. They talk about doing it in a ring-fenced subsidiary and raising long-term finance from commercial lending and development finance institutions. I’ll believe it when I see it in terms of the cost of debt making this attractive vs. the typical rental yield on residential. With a plan to focus on lifestyle developments that include solar, fibre and facial recognition, these won’t be cheap developments. The targeted rental range is R6,000 to R13,000 per month.

I’ve been nothing but bearish on the Balwin model and I haven’t been wrong on it yet. This strategic initiative doesn’t change my mind.


Primary Health Properties saw some dividend growth (JSE: PHP)

The portfolio valuation came under pressure though

Primary Health Properties reported results for the six months to June. Net rental income grew by 0.9% and the dividend per share moved 3.0% higher. That’s where you’ll find the good news. As for the bad news, net tangible assets per share fell by 2.82% as property valuations headed in the wrong direction.

Also keep an eye on the loan-to-value ratio, which ticked higher from 47% to 48%. Although 89% of the rent roll is funded by government bodies in the UK, that’s still a level of debt worth watching carefully.

The tangible net asset value works out to roughly R24.60 per share and the current price is R21.74.


Vodacom really wants you to focus on normalised growth (JSE: VOD)

This is because service revenue growth without those adjustments is zero at group level

Vodacom has released a trading update for the quarter ended June 2024. It’s all about the adjustments, especially for currency movements. Sadly, as MTN has taught us, you can’t just sweep African currency movements under the table and hope that nobody will notice.

Group service revenue came in almost perfectly flat year-on-year as reported, yet grew 10% on a normalised basis. That’s because Egypt fell 7.2% as reported and grew 43.7% in local currency. Do you see the problem with using the normalised numbers?

Group revenue (i.e. not just service revenue) grew 1.5% as reported and 10% on a normalised basis. Growing revenue outside of traditional call and data revenue has been a major focus area, including initiatives like financial services.

Vodacom South Africa grew total revenue by 1.9%, which shows you how mature that business is after 30 years of operations in South Africa. Data traffic grew by 31.3% and mobile services only increased by 6.3%.

The proposed acquisition of joint control in fibre operator Maziv is currently with the Competition Tribunal, with the Competition Commission wanting to block that deal.

When it comes to telecoms, I always remember what I paid 10 years ago for my cellphone contract and what I pay now. Their operating costs have gone up every year over that period, yet I pay less today than I paid then – and that’s without adjusting for inflation. That’s not an attractive story.


Little Bites:

  • Director dealings:
    • Although the quantum isn’t reflective of usual director dealings because this is an institutional investor that has director representation on the board, it’s still worth noting that Capitalworks has bought another R52.5 million worth of shares in RFG Holdings (JSE: RFG).
    • The CEO of Jubilee Metals (JSE: JBL) bought shares in the company worth nearly R950k.
    • Sean Riskowitz bought shares in Finbond (JSE: FGL) worth R2.4k.
  • I covered the most important parts of the Karooooo (JSE: KRO) update earlier in the week, but in case you want to get all the details, the company has released its quarterly report here. Don’t be too quick to link this release to the 11% drop in the share price on the day, as Karooooo is sadly an illiquid stock and suffers from a very large bid-offer spread that leads to single day moves like these. If you’re planning a position here, take that into account.
  • Lesaka Technologies (JSE: LSK) has issued the notice for a special meeting for the issuance of shares to execute the Adumo acquisition. They need to issue 17,279,803 shares to pay R1.59 billion of the purchase price, along with a cash payment of R232 million. If you would like to see what the Nasdaq documentation looks like, along with all the detailed disclosures (much of which gives you a great overview of the company), check it out here.
  • RECM and Calibre (JSE: RACP) is changing its name to Goldrush Holdings Limited, as the 59.4% stake in Goldrush is the bulk of the group. The new share code is JSE: GRSP. Trading under the new name will commence on 14 August.
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