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

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

Exchange-Listed Companies

Lighthouse Properties is to acquire Alegro Montijo, a regional mall which forms part of the greater Lisbon Metropolitan in Portugal for €177,8 million. The property is currently owned by Tiekenveen Holdings (98%), an Amsterdam-based company and Valportugal (2%). The acquisition follows two recent acquisitions in Spain.

Rand Merchant Bank (FirstRand) has disposed of RMB Nigeria Stockbrokers to Zedcrest, a Nigerian financial solutions firm. Financial details were undisclosed.

Bidvest has entered into an agreement to acquire 100% of Citron Hygiene LP, headquartered in Toronto, Canada from Birch Hill Equity Partners and other investors. Citron is a provider of washroom hygiene products and services in the US, Canada and UK. The acquisition, the value of which was not disclosed, will be fully funded through the variable rate Revolving Credit Facility. Bidvest also advised shareholders of a proposed restructure of its financial services division, with the board approving a process to dispose of Bidvest Bank and its related entity, FinGlobal. The short-term insurance businesses within the financial services division will be transferred to the automotive division. The disposal of Bidvest Life, which was announced previously, is according to the announcement, underway.

NE Property B.V., a subsidiary of NEPI Rockcastle is to dispose of the retail property known as Promenada Novi Sad for €177 million, to a Serbian subsidiary of CEE BIG B.V. The disposal is consistent with NEPI’s investment strategy to focus on core dominant properties and increase its presence in countries with investment grade ratings.

Brikor’s board of directors is considering proposing a scheme of arrangement in terms of which the shares of the remaining shareholders (excluding Nikkel Trading 392) will be repurchased. Specific details are yet to be announced but should the terms be accepted, Brikor will delist from the JSE.

Following the judgement of the Constitutional Court in March 2023 and as part of the constructive engagement process with the Department of Health, Clicks will divest of its total shareholding in the manufacturing pharmacy Unicorn Pharmaceuticals. The completion of the Unicorn disposal is expected to be completed by the end of July 2024 which will pave the way for the issue of outstanding and new licenses by the Department of Health.

The Vision Group’s business rescue plan for Tongaat Hulett, accepted by shareholders earlier this year, will see Vision acquire the claims from its lenders. Vision will use a portion of these claims to subscribe for 4,86 billion new ordinary shares in Tongaat at 101 cents per share, the effect of which will be to recapitalise its balance sheet. The equity subscription by Vision will result in it owning 97.3% of the issued share capital of Tongaat which will trigger a mandatory offer and delisting of the company unless a waiver by shareholder and the Takeover Regulation Panel is sought and granted.

Unlisted Companies

Renew Capital, a US-based Africa-focused impact investment firm that backs innovative companies with high-growth potential, has made an investment into Pumpkn, a local startup and agribusiness loan platform. Pumpkn leverages data to make credit assessments of agricultural small and medium-sized agribusinesses, assisting lenders to easily identify bankable businesses. Financial details were undisclosed.

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

Weekly corporate finance activity by SA exchange-listed companies

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

Kore Potash has conditionally raised c.US$1,28 million through the proposed issue of 91,802,637 new ordinary shares at a price of US$0.014 per share. 87,5 million shares have been placed with new and existing shareholders. The placing of the remaining 4,3 million shares with the company’s existing chairman, is conditional on shareholder approval, which will be sought in due course. The proceeds of the fundraise will be used to progress the Kola Potash Project.

Texton Property Fund has reduced its exposure in Blackstone Real Estate Income Trust iCapital Offshore Access Fund. The shares have been redeemed at R110 million which compares with the average acquisition price of R91,9 million – together with the total monthly distributions that were received during the hold period. The investment yielded a return during the holding period of 31.05%.

Vukile Property Fund will issue 36,978,550 new shares at R14.50 per share in terms of its dividend reinvestment alternative offered to shareholders. Shareholders holding 745,47 million (67.5%) Vukile shares elected to receive the dividend reinvestment alternative resulting in the retention of R536,2 million in new equity.

Firm commitments have been received by Orion Minerals for a placement of c. 513 million shares at an issue price of A$0.015 (R0.18) per share to raise A$7,7 million (R92,34 million). The funds will, in principle, be used to progress the development of the Prieska Copper Zinc Mine.

Following the listing of Rainbow Chicken by RCL Foods, Rainbow Chicken will be unbundled to shareholders by way of a pro rata distribution in specie.

Momentum Metropolitan shareholders have approved the change of name to Momentum Group. The change will be effective from commencement of trading on 17 July 2024.

Basil Read’s listing on the JSE will cease on 8 July 2024 following various non-compliances since its suspension on 21 June 2018.

aREIT Prop, which listed in March 2022, was suspended last month for failing to submit its annual financial statements. The company now faces removal from the JSE Main Board.

The JSE and LSE have suspended the listing of Kibo Energy with immediate effect (1 July 2024) for failure by the company to publish its Annual Financial Statements by the 30 June 2024 as required by the listing requirements. Further, the JSE has notified shareholders of African Dawn Capital, Copper 360, Visual International and Acsion that the listings of these companies have been annotated with RE to indicate the failure to submit annual reports timeously and as such may be suspended if not submitted before 31 July 2024.

A number of companies announced the repurchase of shares:

In line with its share buyback programme announced in March, British American Tobacco this week repurchased a further 740,000 shares at an average price of £24.47 per share for an aggregate £18,1 million.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 24 – 28 June 2024, a further 4,479,833 Prosus shares were repurchased for an aggregate €151,9 million and a further 336,220 Naspers shares for a total consideration of R1,21 billion.

Two companies issued profit warnings this week: Sable Exploration and Mining and ArcelorMittal.

Four companies issued cautionary notices this week: Cilo Cybin, Brikor, Tongaat Hulett and Salungano.

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

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

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

DealMakers AFRICA

Nigerian heathtech startup Blueroomcare has raised an undisclosed pre-seed funding round led by EHA impact Ventures. Other investors in the round included TVC Labs and Innovest Africa. Blueroomcare is an online, insurance covered, therapy platform that includes mental health services such as grief counselling, couples therapy, group therapy, trauma-focused therapy and addiction therapy.

Digital investment platform Level Africa has acquired Utilis Ventures, a Ugandan investment adviser. Financial terms were not disclosed. Utilis has been rebranded to Level Africa Uganda, effective 27 June 2024.

EdVentures has invested US$400,000 in Egyptian edtech Elkheta. The educational platform supports school students in Egypt with their studies by providing exercises, exams, interactive videos and direct teacher communication.

Finnfund has provided Communication & Renewable Energy Infrastructure (CREI) with a US$5 million mezzanine loan to facilitate the installation, operation and maintenance of 413 telecom site hybrid power solutions in South Sudan. CREI is a Dubai headquartered asset management company holding a portfolio of telecom towers and renewable power assets across Africa and Asia. The Finnfund loan will be used to finance CREI’s Telecom Energy Service Company in South Sudan.

CMILES CX has been acquired by US-based QuestionPro for an undisclosed sum. The Egyptian company specialises in customer experience technology solutions.

The International Finance Corporation has announced a potential US$50 million financing packing to B5 Plus, a Ghanian iron & steel company. The funding will be used to refurbish and repurpose a newly acquired steel plant at Tema Freezone to produce rebars and wire rod coil; to install a wire rod mill at Tema Freezone; develop a 10MW solar plant in the Prampram facility and fund working capital needs.

Kenya’s Peleza International has announced that it will merge with international digital security and compliance infrastructure company Prembly Ltd. The combined business will be known as Prembly Group and will be headquartered in the United States. Financial terms were not disclosed.

Zedcrest Group has acquired RMB Nigeria Stockbrokers. Financial terms of the deal were not disclosed.

Triton Minerals has sold 70% of its stake in the Ancuabe Graphite Project, including a 70% interest in the intellectual property and drill core assets relating to the Nicanda Hill and Nicanda West projects plus 70% of its interest in the Cobra Plains mining concession, to Shandong Yulong Gold. The transaction consideration of A$17 million will be settled in three tranches.

Enko Education has expanded into its 10th African country with the acquisition of Cours Lumiére in Lomé, Togo. This transaction also marks the 16th school to join the African international school’s network. No financial terms were disclosed.

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

Business Crimes and Forensic Services are a must-have for businesses to thrive

Lionel van Tonder
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Business Crimes and Forensic Services are a must-have for businesses to thrive

In today’s interconnected world, companies face a relentless adversary: business crime.

Corruption, misrepresentation, cybercrime and money laundering activities pose a significant threat that amounts not only to financial losses, but also potential fines, reputational damage, and even criminal sanctions. To navigate this shaky landscape, companies need to prioritise two crucial elements: understanding the nature of business crimes, and harnessing the power of forensic services.

The scope of the problem

Globalisation and technological advancements have opened new doors for perpetrators of commercial crime. Often, they operate in the shadows, making them exceptionally difficult to define and measure. Unlike traditional theft, business crimes are often meticulously concealed, leaving companies exposed to hidden vulnerabilities and delayed consequences.

Effectively combatting business crime requires a proactive, multi-pronged approach. A specialised field like forensic services combines legal expertise with investigative acumen. By thoroughly examining financial records, digital trails and internal communications, a team of seasoned forensic investigators can bring hidden criminal activity to light, protecting business assets and safeguarding organisations.

Businesses can gain a holistic understanding of potential threats and vulnerabilities by integrating lawyers and forensic investigators from diverse departments like litigation, corporate, finance, and technology.

Tailored solutions and proactive strategies

The benefits of forensic services extend far beyond compliance with legislation. Experienced investigators can delve deep into a business’s operations, identifying red flags and implementing safeguards before significant damage is inflicted. Early detection is crucial, for the longer a crime goes unnoticed, the greater the potential losses and reputational harm.

AI is the new frontier in the battle against business crime. Its ability to analyse vast datasets and recognise complex patterns makes it a potent weapon against sophisticated financial manipulation and cybercrime.

For instance, imagine a financial institution implementing AI-powered anomaly detection algorithms. These algorithms, constantly analysing transactional patterns, might flag seemingly insignificant deviations that humans could miss. This early warning could expose a promising fraud scheme, saving the company millions and keeping its reputation intact.

AI is a brilliant tool, but it is important to remember that it is not foolproof. Malicious actors can also wield this technology for nefarious purposes, making it vital to implement robust regulatory frameworks and ethical considerations. Ultimately, successful fraud prevention requires a balanced approach, leveraging AI alongside traditional forensic methods and human oversight.

The fight against business crime necessitates a comprehensive strategy that goes beyond reactive investigations. Businesses must adopt a culture of integrity and compliance, prioritising employee education, transparent ethical policies, and robust whistleblowing channels. By empowering employees to speak up, and actively preventing these crimes from taking root, a business can build a more resilient and trustworthy environment.

Business crimes are an ever-evolving threat, necessitating constant vigilance and adaptation. Businesses must be armed with the right tools and expertise to navigate this perilous landscape. By integrating a sophisticated understanding of business crime with the power of forensic services and ethical AI implementations, companies can effectively mitigate risks, protect their assets, and maintain their well-earned reputation. In the face of an insidious adversary, proactive defence and unwavering commitment to integrity are the cornerstones of success in the fight against the silent scourge of business crime.

Lionel Van Tonder is a Director of the Business Crime and Forensics division | Webber Wentzel.

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

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

Recent developments in Competition Law

Nazeera Mia
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Recent developments in Competition Law

There has been a dynamic transformation in Africa’s competition law landscape, characterised by a concerted effort to adopt and modernise competition regulation, enhance enforcement mechanisms, and foster greater cooperation for regional integration.

ADOPTING AND MODERNISING COMPETITION LAW

Competition law enforcement across Africa continues to evolve as new regulation is introduced and existing rules are tightened. Notable recent highlights include:
• The AfCFTA Competition Protocol was adopted in February 2023. The Protocol provides for the establishment of a continental competition regulator, and adopts a hard law approach to competition law enforcement.

• Dedicated competition legislation was introduced in Lesotho during 2022, and in Uganda early in 2024.

• Amendments to existing competition legislation in the Economic and Monetary Community of Central Africa, Egypt, Morocco and Zambia were adopted, and material amendments are proposed for the competition law regimes in the Common Market for Eastern and Southern Africa (COMESA); the East African Community (EAC) and Tanzania. It is also proposed that the Competition Act in various countries, including in eSwatini, Malawi, Namibia and Zimbabwe, be repealed. A draft Competition Bill for each of these countries is at various stages of assent.

• Plans are afoot to operationalise the Burundi Competition and Consumer Protection Commission, the National Competition Commission of Comoros, and the Competition Commission of the Democratic Republic of Congo. It is also envisaged that the EAC Competition Commission will soon adopt an ex-ante merger control regime and become fully operational in respect of all areas of competition law enforcement.

ENFORCEMENT

• The Egyptian Competition Authority (ECA) recently issued a statement detailing its enforcement activities, which spanned horizontal and vertical restraints, merger control, and abuse of dominance. The ECA explained that it filed a criminal case against four egg brokers for alleged collusion; proved tender collusion against a number of companies supplying electric poles and iron pipes used in the manufacture of equipment to generate electricity; proved collusive price increases in relation to textbook distribution; and proved tender collusion against two suppliers of auto parts to the Public Transport Authority in Cairo. The ECA also proved abuse of dominance by two schools that entered into exclusive agreements relating to the purchase of school uniforms.

• Front of mind in South Africa has been the approach by the Competition Commission of South Africa (CCSA) to the assessment of the public interest factors under the merger control provisions in the Competition Act, 89 of 1998 as amended (Act). Early in 2024, the CCSA published Revised Public Interest Guidelines in Merger Control, which adopt the perspective that there is a positive obligation on all merging parties to promote a greater spread of ownership by historically disadvantaged persons and workers. Various stakeholders have submitted comments, and we are likely to see revised guidelines later this year. From a behavioural perspective, the CCSA implemented its wider investigation powers under the Competition Amendment Act, 2018, particularly in the field of market inquiries. Notably, some 45% of all market inquiries conducted by the CCSA since 2006 were launched and/or concluded during 2023 and 2024.

• 2023 marked a decade of competition law enforcement in the COMESA region, with the COMESA Competition Commission reporting that, over this period, it had reviewed and taken decisions on some 360 merger transactions; investigated more than 40 cases of restrictive trade practices; conducted more than 12 market studies and market screening exercises; fined three businesses for non-compliance with the merger control aspects of the COMESA Competition Regulations; concluded 14 Memorandums of Understanding (MOUs) with member states; and provided capacity building and technical assistance to competition regulators and government institutions in 19 of its 21 member states.

Moreover, the Commission recently fined football marketing firms US$300,000 each for allegedly engaging in an anti-competitive business practice, and commenced investigations against American Tower Corporation and Airtel Africa for alleged anti-competitive behaviour. The Commission’s investigations into the pricing of COVID-19 PCR testing kits by various pathology firms and alleged territorial restrictions and retail price maintenance by Toyota Tsusho Corporation remain ongoing.

• In Kenya, the Competition Authority of Kenya (CAK) fined a leading retailer in Kenya KES1 billion (~US$7,6 million) for alleged abuse of buyer power, and also fined nine steel manufacturers KES338 million (~US$2.5 million) for alleged price fixing and output restrictions – these are the highest penalties yet to be imposed by the CAK.

• In Mauritius, enforcement remains a key priority of the Competition Commission (CCM), and several investigations were launched during the year. The CCM fined six producers of deer/venison for alleged collusive conduct, and conducted several market studies.

• In Namibia, the Namibian Competition Commission (NaCC) concluded settlement agreements with five pharmaceutical companies after investigating price fixing among the firms under the auspices of an industry association. The NaCC is also investigating firms in the poultry industry for alleged abuse of dominance.

• In Zambia, the Competition and Consumer Protection Commission fined roofing companies 8.5% of their annual turnover for allegedly sharing pricing information and coordinating on simultaneous price increases for the provision of roof sheeting via WeChat.

• The Zimbabwe Competition and Tariff Commission issued record-breaking fines for the prior implementation of notifiable mergers.

ENHANCED COOPERATION AND REGIONAL INTEGRATION

The COMESA Competition Commission has previously embarked on several initiatives to enhance cooperation and coordination among competition regulators in member states. The Commission hosted workshops and capacity building training with, among others, the Burundi Competition Commission; the National Competition Commission of Comoros; the Competition Commission of the Democratic Republic of Congo; the Ethiopian Ministry of Trade; and the Malawi Competition and Fair Trading Commission.

The Commission also revised existing MOUs with, among others, the Competition Authority of Kenya and the Zambia Competition Commission, indicating that revisions were necessary to deepen collaboration and facilitate a greater exchange of information.

It also signed an MOU with the Eurasian Economic Commission. The two institutions intend to cooperate in the exchange of non-confidential information, experiences and best practices in competition case investigations and research.

Nazeera Mia is a Knowledge and Learning Lawyer: Competition | Bowmans

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

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

Ghost Wrap #72 (KAP | Sephaku Holdings | ArcelorMittal | Nampak)

The Finance Ghost
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Ghost Wrap #72 (KAP | Sephaku Holdings | ArcelorMittal | Nampak)

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.

In just a few minutes, you can get the latest news and my views on KAP, Sephaku Holdings, ArcelorMittal and Nampak. Use the podcast player above to listen to the podcast.

Ghost Bites (Bidvest | Brikor | NEPI Rockcastle | Texton)

The Finance Ghost
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Ghost Bites (Bidvest | Brikor | NEPI Rockcastle | Texton)

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

Bidvest to acquire Citron and sell its financial services business (JSE: BVT)

This is a clear sign that the group is focusing on its core strengths

Let’s start with the acquisition news, which gives you an idea of where Bidvest is focusing.

Bidvest has announced a small deal to acquire 100% of Citron Hygiene, a washroom hygiene products and services business operating in the US, Canada and UK. The company is headquartered in Canada. This type of business is obviously very familiar to Bidvest, so this is a classic example of a known model into underpenetrated markets, which is less risky than a new model in new markets.

It also helps that 90% of the revenue is recurring in nature, with a customer base across a range of sectors. This helps to further de-risk the deal.

There are many growth drivers for this business, with one of the more interesting ones highlighted by Bidvest being legislation around free vending of menstrual products in washrooms in North America. The total addressable market is very large, which gives Citron an appealing growth runway without them having to step beyond their core competencies.

The sellers include Birch Hill Equity Partners, so the company has already been under formal ownership in the private equity sector. This will be part of why Bidvest feels comfortable buying the company, as the pain of getting it exit-ready has already happened.

The transaction will be fully funded from the variable rate revolving credit facility. Although Bidvest hasn’t disclosed the value of the deal, they note that the group is moderately geared. In other words, this shouldn’t put any strain on the balance sheet, as you would expect from what is essentially a bolt-on acquisition.

The deal is subject to UK Competition and Markets Authority approval, which is expected within five months of submission.

We now move to the disposal news, with Bidvest deciding to step away from the financial services business. Strategically, this makes sense. The financial services business has never been a great strategic fit for Bidvest, so investors tend to get confused rather than excited by the opportunities that it brings. As a general rule, investors prefer groups that are more rather than less focused.

With banking and related products and services offered through Bidvest Bank and FinGlobal, along with short- and long-term insurance products through other Bidvest entities, this is a significant operation that has performed well in the post-pandemic environment. Although this may raise the question of why Bidvest is selling this division, it’s important to remember that the right time to sell a business is when the performance is good, not when the trajectory is negative.

The financial services business needs the right owner, as Bidvest is planning to deploy its capital elsewhere – like in the Citron deal. It’s no accident that the acquisition has been announced on the same day as the plan to dispose of the banking business.

Interestingly, Bidvest wants to hang onto the short-term insurance business, which will be transferred to the automotive division within Bidvest. The previously announced disposal of Bidvest Life is still underway. The change going forward is that Bidvest will actively seek a buyer for Bidvest Bank and FinGlobal, with the hope of an acquirer being identified before the end of 2024. Banking licences and operations are expensive to put together from scratch, so I doubt they will struggle to find a buyer.

For reference, Bidvest Bank has a loan book of R5 billion and deposits of R8 billion. Operating income in FY23 was R219 million, so this is a profitable enterprise that should attract a decent offer. It’s going to take a while to conclude a deal and go through all the regulatory processes, but the eventual unlock of capital from a disposal will certainly help with Bidvest’s growth ambitions in the remaining six divisions in the group.

Will Brikor be leaving the JSE? (JSE: BIK)

The directors are considering a delisting

With a market cap of barely over R100 million, Brikor is one of the smaller companies on the JSE – but by no means the smallest. The trend of small caps leaving the market looks set to continue, with Brikor as the latest example of a company that is considering a delisting.

After the recent deal activity with Nikkel Trading, there’s not much point in Brikor remaining listed. The future of the company lies with Nikkel as the controlling and potentially sole shareholder if they go ahead with the delisting.

Although there is no guarantee of a transaction here, the board is seriously considering proposing a scheme of arrangement to repurchase the shares not held by Nikkel. This would take out the public shareholding and lead to a delisting. Shareholders have been advised to exercise caution until further announcements are made.

NEPI Rockcastle to exit Serbia (JSE: NRP)

The group is looking to focus its activities on countries with an investment grade rating

Credit ratings make a difference to the level of activity in a country, as they directly impact the cost of capital. Serbia is only slightly below investment grade, but that seems to be enough for NEPI Rockcastle to want to exit the market. For comparative purposes, Poland is an investment grade jurisdiction and a major focus area for the fund.

The selling price is €177 million and the net proceeds will be used to fund NEPI Rockcastle’s pipeline of acquisitions and developments. Before getting their hands on the money, they will need to get through various approvals ranging from competition authorities through to bank funding for the purchaser.

If the deal goes through as planned, NEPI Rockcastle would have no further operations in Serbia.

Texton has sold down its exposure in the US investment fund (JSE: TEX)

The right thing to do would be share buybacks, but I won’t hold my breath

During 2023, Texton decided that instead of buying back its shares trading at a deep discount to NAV, it would be better to invest in a US-based real estate fund. This practically turns Texton into a fund-of-funds strategy in terms of offshore exposure. Although the returns on the investment have proven to be lucrative in rands, the point is that Texton’s investors aren’t invested in the company because they want exposure to a US real estate fund. They can get that exposure themselves. Texton should be executing direct property opportunities or giving the money back to shareholders in the form of buybacks.

Perhaps some of this thinking is filtering through, with Texton selling down a portion of the investment in Blackstone Real Estate Income Trust. They will recycle capital of R110 million in the process vs. an initial acquisition price of under R92 million. Together with distributions, they achieved a total return on the investment of 31.05%.

For sure that’s a great return, but the point is that listed property funds don’t exist just to invest in other offshore property funds. It could just as easily have been a poor return if the rand had behaved differently. Don’t make the mistake of confusing a lucrative investment outcome for a great capital allocation culture.

The decision they make with the proceeds will tell us a great deal, with Texton noting that they will be “recycled in line with the group’s offshore investment strategy” – and sadly, that doesn’t sound to me like share buybacks.

Little Bites:

  • Director dealings:
    • A director of Argent Industrial (JSE: ART) sold shares worth over R1.1 million.
    • A director of Copper 360 (JSE: CPR) bought shares worth R101k.
    • The CEO and founder at Cilo Cybin (JSE: CCC) bought shares worth R3k.
  • Salungano (JSE: SLG) renewed its cautionary announcement relating to the voluntary business rescue of Wescoal Mining and the commencement of business rescue proceedings at Keaton Energy. The meeting for the business rescue plan for Wescoal is scheduled for 12 July. It’s not so simple at Keaton, where the business rescue application was initially dismissed and there’s also a provisional liquidation process underway, led by one of Keaton’s creditors. Obviously, none of this is good.
  • Telemasters (JSE: TLM) has declared a dividend of R0.001 per share. On a share price of R1.10, that’s a tiny yield.

Ghost Bites (ArcelorMittal | Brait – Ethos Capital | Sibanye-Stillwater | Spear – Emira | Tongaat Hulett)

The Finance Ghost
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Ghost Bites (ArcelorMittal | Brait – Ethos Capital | Sibanye-Stillwater | Spear – Emira | Tongaat Hulett)

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

ArcelorMittal expects losses to worsen (JSE: ACL)

Weak domestic demand in China is a core issue

ArcelorMittal closed nearly 5% lower on Tuesday after releasing a business update and trading statement. The bad news was right at the bottom of the announcement, with the headline loss per share for the six months to June expected to be between R0.96 and R1.04 per share, which is significantly worse than the loss of R0.40 in the comparable period.

China’s domestic steel consumption is weak due to the ongoing property crisis in that country and generally weaker infrastructure demand. This means that Chinese steel exports are flooding international markets, putting pressure on prices. Although tariffs in some markets on Chinese steel may help with prices, this is a complex situation that is very difficult for a company like ArcelorMittal to deal with.

What would help tremendously is an uptick in South African domestic demand for steel, as South Africa’s primary steel exports increased 13% in the first quarter of 2024. This means our exports are competing internationally with Chinese exports, which makes a tough situation even worse.

In some good news at least, the Longs steel operations have been stable for the first half of the year. Given the overall worries around the future of that business, this is important. There are some green shoots here, including improved performance by Transnet. The trade unions remain a major stumbling block, though.

The Flats business didn’t have such luck due to instability in the blast furnace, with hopes to claw back the lost volumes in the second half of the year.

With the share price down 67% in the past 12 months, this is an interesting way to take a very risky position on what the GNU could mean for domestic demand.

Brait shareholders say yes to the recapitalisation (JSE: BAT)

And Ethos Capital shareholders approve the unbundling of Brait (JSE: EPE)

Brait has released the results of its extraordinary general meeting. This sounds very fancy, but it’s basically a meeting to vote on the resolutions for the recapitalisation of the company. This includes the rights offer as well as the necessary resolutions for the convertible bonds.

They received almost 100% approval from those at the meeting, but please don’t mistake that for thinking that the market loves what Brait is doing. On the contrary, this is just the lesser of two evils from a shareholder value destruction perspective.

The share price is down 44% this year.

Although not technically a related deal but certainly part of the broader story, Ethos Capital shareholders approved the resolutions for the unbundling of Brait shares. And as previously indicated, Ethos has also bought shares shares held by Black Hawk and taken on its debt for no consideration. Black Hawk is a structure linked to two directors who were basically given by debt guarantee by Ethos to help them subscribe for shares.

The Black Hawk Down jokes write themselves.

Sibanye-Stillwater has concluded the latest s189 (JSE: SSW)

The SA gold and PGM operations will have a combined shared services structure going forward

Sibanye-Stillwater has been having a very tough time of things. The PGM prices simply aren’t playing ball, with the share price suffering as a result. To manage this prolonged downturn, the company has looked for every internal efficiency it can find, including in the gold operations.

The section 189 process for the SA gold and shared services functions has been concluded.

The Beatrix 1 shaft will be allowed to continue, provided there are no net losses on an average trailing three-month basis. If those losses happen, the shaft will be closed.

In the shared services side, the gold and PGM services will be combined into a single regional operational structure. The total number of forced retrenchments over the past 18 months in that regard is 966 employees out of a total of 11,500 potentially impacted employees.

Spear releases the circular for the Emira transaction (JSE: SEA | JSE: EMI)

This is important for Spear (and Emira) shareholders to read

If you are serious about learning about the markets (and of course you are, because here you are, reading Ghost Bites!) then I highly recommend taking the opportunity to read through circulars when they are released. You’ll learn so much. The latest example from Spear can be found here.

Spear is looking to acquire a large portfolio from Emira that is a genuine mover-of-the-dial for Spear. It will take the fund’s total assets from 29 to 40, with on ongoing bias towards the Cape Town Metropole. The value of the acquisition is R1.146 billion, which is a discount to the market value of R1.236 billion. The seller is paying transaction fees of R22.5 million.

Based on the price net of fees, the average initial annualised net operating income yield is 9.85%. Next time you want to put all your money into a residential buy-to-let opportunity, work out the yield and compare it to what Spear is paying here. Then ask yourself whether you are better off taking immense concentration risk in one property, or investing in REITs instead.

No prizes for guessing which route I like to take.

And finally, well done to Spear for pulling this deal off with total corporate costs of just R6 million, including only R600k in transaction advisor fees. Whilst I appreciate that property deals aren’t directly comparable to corporate M&A, there are management teams on the JSE that regularly get fleeced by investment bankers. They could learn a thing or two from Spear.

Tongaat Hulett might remain a listed company (JSE: TON)

But I don’t see much point

Tongaat Hulett might not be disappearing from our market after all. Vision Investments will be subscribing in new shares in the company by exchanging a portion of the lender group claims for new shares.

This is likely to end in a mandatory offer by Vision to other shareholders though, so it’s quite possible that the listing ends up being terminated anyway. It’s just not a guarantee at this point that the listing will disappear, even though Vision will hold 97.3% after the subscription for shares.

Even if minority shareholders want to stick around for some reason, the JSE won’t be happy with such a low spread (the number of public shareholders). I don’t see how the Tongaat listing survives this.

Little Bites:

  • Director dealings:
    • A number of The Foschini Group (JSE: TFG) directors sold shares previously received under share awards. Although some sales were specifically to cover the tax (including sales by the CEO), there were other sales that appear to be in excess of the tax amount. Those sales come to roughly R17 million in total across several directors.
    • The CEO of Pan African Resources (JSE: PAN) sold shares worth R1.8 million and entered into a collar structure over 500,000 shares as security for a loan of R2.1 million. The collar is a put at R4.94 per share and a call at R9.59 per share. The current price is R6.35. The finance director also took out a loan (but much larger at R11.1 million) and pledged 2,000,000 shares as security with a put at R6.07 and a call at R6.98.
    • A director of Southern Palladium (JSE: SDL) bought shares worth R1.35 million in an off-market deal. Disappointingly, this wasn’t disclosed to the company secretary timeously and so the company released this announcement a few days past the deadline.
    • A director of Copper 360 (JSE: CPR) bought shares worth R67.5k.
    • There were a number of sales by Alexander Forbes (JSE: AFH) directors in relation to share awards received, but not in obvious ratios and not always linked to tax. In some cases the sales seem to relate to previous tranches of shares. It’s too intermingled to pick out specific values, but just be aware that there has been selling.
  • Alexander Forbes (JSE: AFH) has received approval from the SARB for its special dividend, payable on 22 July.
  • As part of a deal going back to 2018 for the acquisition of AccTech Systems and Dynamics Africa Services, 4Sight (JSE: 4SI) announced that shares owing to nominated employees of the acquired companies have now been transferred to them. The shares were already in issue and held by Silver Knight Trustees. Those employees are responsible for covering the related taxes. The total value of transferred shares is R1.27 million.
  • Telemasters (JSE: TLM) announced a share repurchase programme between now and 30 September 2024, with a price capped at a 10% premium to the five-day VWAP. There isn’t much liquidity in this stock, so those looking to get paid for their holdings should watch the bid carefully to see if the share repurchase gives that opportunity.

Ghost Bites (Anglo American | Clicks | Cilo Cybin | Orion Minerals)

The Finance Ghost
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0
Ghost Bites (Anglo American | Clicks | Cilo Cybin | Orion Minerals)

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

Another setback at Anglo American – this time in coal (JSE: AGL)

The company has had to suspend production at the Grosvenor mine in Queensland

Mining really isn’t an easy industry, with Anglo American as just the latest example of how the risks play out in real life. There’s been an underground coal gas ignition incident at the Grosvenor steelmaking coal mine in Queensland, leading to an evacuation of the mine.

The procedures to assess the steps towards a safe reopening of the mine will take several months. This is the right call as safety is always the first priority in mining, but it’s obviously also a major financial setback.

For 2024 as a whole, Anglo’s total steelmaking business was due to produce 15 to 17 million tonnes. Grosvenor was expected to contribute 3.5 million tonnes of this. It looks as though they’ve already managed 2.3 million tonnes from Grosvenor this year, as they were expecting lower production from the asset in the second half anyway.

Goodness knows this could’ve been much worse, but it’s still an unhelpful addition to Anglo’s current challenges.

Clicks has agreed to sell Unicorn Pharmaceuticals (JSE: CLS)

This is to appease the regulator

In March 2023, the Constitutional Court ruled against Clicks in the battle with the Independent Community Pharmacy Association and referred the matter to the Director General of the Department of Health.

Through a further process of engagement, Clicks suggested that its position could be regularised through the disposal of manufacturing pharmacy Unicorn Pharmaceuticals. The Department of Health has accepted this proposal and has noted that no further new pharmacy licences will be processed for Clicks until the sale has happened.

Clicks believes that the sale of Unicorn will be completed by the end of July 2024. There are no details around the disposal at this stage, but an opportunistic buyer might have gotten a great deal here. The negotiating power certainly doesn’t sit with Clicks in this situation, as they need to get the deal done as soon as possible.

Cilo Cybin begins its listed journey (JSE: CCC)

The first step is to acquire a viable asset

Cilo Cybin has listed on the JSE as a special purpose acquisition company, or SPAC. This is like buying an unfurnished house. The structure is there but there’s nothing inside it – yet.

A SPAC listing is a useful way to get all the building blocks in place as part of attracting investors and lining up what is referred to as a “viable asset” – one that meets the necessary criteria to ensure that the SPAC is transformed into a normal listing within the required timeframe.

For Cilo Cybin, that viable asset is Cilo Cybin Pharmaceuticals. They are in negotiations to acquire that asset.

Separately, the company announced that resignation of HB Aucamp as financial director, to be replaced by Reshoketswe Ledwaba with effect from August 2024. Ledwaba has been the acting CFO since February 2024.

Orion Minerals announces the details of its capital raise (JSE: ORN)

Orion is raising A$7.7 million – which works out to R92.3 million

Orion Minerals has received firm commitments for a placing to sophisticated and professional investors (i.e. this wasn’t an offering to the general public) worth A$7.7 million. This works out to around R92.3 million, so that’s a meaningful capital raise.

The funds will be used for the Prieska Copper Zinc Mine, as well as infrastructure development at Okiep Copper and drilling at Okiep.

There’s also a rather interesting structure called a Share Purchase Plan that allows eligible shareholders to subscribe for shares in parcels starting from R2,000 up to R365,000 at an issue price of R0.18 per share. They will raise around R60 million in this way.

Orion has found a clever way to include not just institutional investors, but retail investors as well through the Share Purchase Plan. Junior mining is all about having enough money to take an asset to full production, so these capital raising activities are critical.

Little Bites:

  • Director dealings:
    • Dr Christo Wiese is taking advantage of the bloodbath in the Brait (JSE: BAT) share price, buying up nearly R25 million of shares in the company. Tread carefully here, as Dr Wiese gets to enjoy many privileges that you don’t as a minority shareholder, like the ability to underwrite discounted rights offers and pick up even more shares at a great price.
    • Three directors of Lewis (JSE: LEW) sold shares worth R8.1 million. The announcement doesn’t make it clear whether this was to settle tax from vested awards, so I assume that it wasn’t.
    • The chairman of London Finance & Investment Group (JSE: LNF) has bought shares in the company worth £87k.
    • A prescribed officer of Capitec (JSE: CPI) bought shares worth R374k.
    • A director of Copper 360 (JSE: CPR) has bought shares worth R67.5k.
    • A director of Vukile (JSE: VKE) bought shares worth R29.6k under the dividend reinvestment alternative.
  • Collins Property Group (JSE: CPP) announced that KR Collins will take over as CEO from 1 July 2024, as FH Esterhuyse moves into a non-executive role. As part of the restructuring that saw Tradehold become Collins, the focus is on growing the business as a REIT. This has led to a reshuffling of the chairs and changes to priorities going forward, with the restructuring now behind them.
  • Holders of 67.5% of Vukile (JSE: VKE) shares elected the dividend reinvestment alternative. The reinvestment price is R14.50 per share.
  • Pepkor (JSE: PPH) has confirmed that Ibex Topco (the old Steinhoff investment structure) now holds 28.271% of the shares in Pepkor, down from 42.038% after the recent disposals. Combined with other Ibex Group companies, the total holding in Pepkor is 30.171%.
  • Sable Exploration and Mining (JSE: SXM) has reported a headline loss per share of 51.45 cents for the year ended February 2024. The auditors have noted a going concern risk.
  • Kore Potash (JSE: KP2) has raised $1.28 million through the issue of new shares to existing shareholders as well as institutional and high net worth investors. They need the money to continue with the process of getting to a signed EPC contract for the Kola Potash Project in the Republic of Congo.
  • Kibo Energy (JSE: KBO) continues to win the SENS-announcements-to-market-cap ratio award, with yet another one on Monday. Mast Energy Developments (MED), the Kibo subsidiary, has finished refurbishing the Pyebridge gensets with the funding from Riverfort. They are also looking at a potential acquisition of an existing operational flexible power generation site in England. The various restructuring activities at Kibo don’t affect MED directly, which is a separately listed company. And in a separate announcement, Kibo announced that the London Stock Exchange will suspend trading in the company’s shares until financials for the year ended December 2023 have been released.
  • Hulamin (JSE: HLM) announced the appointment of Pravashni Nirghin, currently the interim CFO, as the permanent CFO of the company.
  • In what is hopefully a step towards dealing with the suspension of its shares from trading, Chrometco (JSE: CMO) announced the appointment of Stephen Rowse as CFO.

Ghost Bites (Castleview | Crookes Brothers | Grindrod | Lighthouse | Marshall Monteagle | Nampak | Nictus | PBT Group | Resilient | SA Corporate Real Estate)

The Finance Ghost
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Ghost Bites (Castleview | Crookes Brothers | Grindrod | Lighthouse | Marshall Monteagle | Nampak | Nictus | PBT Group | Resilient | SA Corporate Real Estate)

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

Castleview signs off on its first year in current form (JSE: CVW)

The year-on-year moves aren’t meaningful here

Castleview Property Fund has been through a major restructuring process, so comparing this year to the prior year (which also happened to be a 13-month period) isn’t helpful. It makes more sense to just view the current year in isolation.

For the year to March 2024, the total distribution per share was 52.823 cents. At R8.50 per share as the current traded price, this puts it on a trailing yield of 6.2%. The net asset value (NAV) per share is R8.70, so the fund is trading close to its NAV. Sadly, “trading” is a relative term here, as there’s no liquidity in this thing due to its shareholding structure.

The loan-to-value ratio net of cash is 48.9%, which is on the high side by property fund standards.

A massive turnaround in Crookes Brothers shows you the volatility of primary agriculture (JSE: CKS)

Over two years, there’s still a headline loss in total

Crookes Brothers released results for the year ended March 2024. They show a remarkable change in fortunes, with a headline profit of R51 million vs. a headline loss of R108 million in the prior period. Where there was no dividend in the prior year, there’s now a dividend of R2 per share.

In primary agriculture, volatility is guaranteed. There are just so many variables at play, as anyone with farming experience will tell you. Crookes was on the right side of several changes in operating conditions this year, including a reduction in input costs and better prices for the sugar cane and banana operations. The deciduous fruit business was sold and the proceeds were used to settle debt.

Aside from the deciduous business as a discontinued operation, revenue was up 18%. To supplement this, there was a positive fair value move in the biological assets thanks to improved conditions. There were strong revenue contributions from sugar cane and bananas, up 28% and 25% respectively. The pressure was felt in the macadamias business, where revenue fell 62% due to low global prices and disappointing production yields.

Sugar cane reported operating profit of R205 million, so that’s the most important division. Bananas contributed R16.4 million. Losses in the macadamia division were R38.4 million.

Crookes also has a property business in KZN which reported a loss of R8.8 million. There really is some random stuff in here, like Crocworld (I’m not kidding) which reported an operating loss of R2.7 million.

Back to the important stuff, cash from operations of R206.9 million was a vast improvement vs. negative operating cash flow of R12.5 million in the comparable period.

Grindrod’s logistics volumes are mostly higher (JSE: GND)

This pre-close update doesn’t give any earnings guidance

Grindrod has released a pre-close update dealing with the five months to May. It includes some interesting data points, but doesn’t give any real guidance on earnings performance.

For example, they note pressure on cargo flows for customers and the challenges of the cyclonic event in Mozambique, yet the Port of Maputo achieved record volumes (up 17%). Conversely, Grindrod’s drybulk terminals in Mozambique suffered a 6% drop in volumes.

In South Africa, Grindrod’s volumes were up 27% in terms of tonnes handled. As a reminder, the company has been appointed as preferred bidder to develop and operate a container handling facility at the port of Richards Bay.

On the rail side, the structural reorganisation of the business is mostly complete and they have a fleet of 13 locomotives that have been freed up after mutual termination of the iron ore rail operation with the customer in Sierra Leone.

Other tidbits in the announcement include a note that trading performance in the marine fuel trading business was impacted by oil prices. They are also working to recover advances related to the KZN properties, which have been a headache for investors for a long time.

Net debt is up from R101 million in December 2023 to R455 million as at the end of May. The net debt / equity ratio is up to 4.5%.

Marshall Monteagle is profitable again (JSE: MMP)

This is thanks to a decrease in expenses

Marshall Monteagle has investments across various sectors, with recent disposals including a property in the US and a tool and machinery trading business in South Africa. They also hold listed equity investments, so this is far more like a family office and less like a typical listed company.

For the year ended March 2024, revenue fell by 13%. With expenses coming in significantly lower though, they swung from a loss of $1.8 million to a profit of $2.3 million.

The final dividend of 1.9 US cents is flat vs. the prior year.

Nampak’s continuing operations are profitable (JSE: NPK)

The metals business is the real highlight here

Nampak closed 8% higher on Friday after releasing results for the six months to March. The big swing in continuing operations would’ve been the driver of that move, with revenue up 7% and EBITDA up a whopping 201%. They generated HEPS from continuing operations of R53.94 vs. a massive headline loss in the comparable period.

Even with discontinued operations included, they managed headline earnings of R267 million vs. a headline loss of R342 million in the comparable period. The loss from discontinued operations of R530 million was far less severe than in the comparable period.

In the metals business, they are calling this performance a “step-change” and that’s a term that corporates use sparingly. With operating margin up from 5.2% to 12.3% in this business, it seems warranted.

DivFood was another area of major improvement, swinging from a loss into an operating profit of R186 million despite a slight decrease in revenue. Successful turnarounds are generally driven by cost efficiencies rather than top-line growth and this seems to be no different.

In a separate announcement, Nampak obtained shareholder approval for the disposals of the liquid cartons business in South Africa, Nampak Zambia, Nampak Malawi and Bevcan Nigeria. Nampak is tracking ahead of internal timeframes for the broader asset disposal plan to fix the balance sheet, so the market would’ve loved that news as well.

There’s no dividend of course, as they aren’t out of the woods yet with the turnaround.

Nictus achieved a significant jump in profits (JSE: NCS)

For such a small company, they put a lot of effort into their annual report

Insurance and furniture retail group Nictus released results for the year ended March 2024. Although group revenue was down 5.1%, HEPS was up by a substantial 67.4% to 20.46 cents. The share price is 80 cents and this is one of the smallest companies on the JSE, so you would expect to see a low earnings multiple.

The dividend increased by 20% to 6 cents per share.

The insurance business made all the money here, with a profit of R6.4 million after tax. The furniture retail business lost R389k. The head office segment is a profit centre in this group, with profit of R4.5 million. It really is a tiny company by listed standards, with consolidated profit for the year of under R11 million.

PBT Group is dealing with margin pressures (JSE: PBG)

A post-pandemic normalisation had to come at some point

PBT’s financial reporting is really good. They go to great lengths to include interesting charts and plenty of information about the underlying business. One of the stats that stood out for me is the five-year revenue compound annual growth rate (CAGR) of 13% vs. the EBITDA CAGR of 22%. They’ve achieved significant margin expansion over the period, assisted greatly by the pandemic and demand from clients for data and cloud-related services. At some point, everything needed to take a breather here as corporates rationalised their spend.

This is why revenue is up just 3% in the latest period and gross profit margin has contracted, as client budget constraints became a problem. This led to EBITDA declining by 5.4%, driving a drop of 10.2% in normalised HEPS.

Despite this, cash generated from operations was 4.3% higher and the total dividend for the year ended March 2024 was up 3.4%.

PBT Group will be presenting on Unlock the Stock on Thursday, 4th July. To pose questions to the management team, you need to register to attend the online event. You can do so at this link.

Resilient and Lighthouse gave a pre-close update and full year guidance (JSE: RES | JSE: LTE)

Leasing activity in South Africa looks encouraging for Resilient

Although these are separately listed companies, Resilient has a 30.4% stake in Lighthouse and the two funds are invested alongside each other in certain properties in Spain and France, so the performance in those portfolios is applicable to both companies.

Before we get into the specifics, Resilient’s guidance for the full-year dividend is 410 to 420 cents per share. Based on the current share price, this is a forward dividend yield of 8.9%.

Lighthouse has guided for EUR 2.40 to 2.50 cents per share in distributions this year and hopes to be at the upper end of that guidance. Based on the current exchange rate, Lighthouse is on a forward yield of roughly 6%.

Resilient’s portfolio

In Resilient’s South African portfolio, leasing activity for the interim period has been strong. Rentals on new leases came in 36.3% higher than outgoing leases and they have strong annual escalations as well. Overall vacancies are down to 2.1%. It’s worth noting that solar energy currently provides 27.7% of Resilient’s total energy consumption, with an expectation for this to increase to 35% by the end of the year.

The Nigerian portfolio is being sold to Shoprite, with competition commission approval in South Africa and Nigeria having been achieved in May. These operations will be reported on a deconsolidated basis in the interim period.

Joint investments in Spain and France

In Spain, comparable sales growth was 7.3% for the four months ended April.

In France, comparable sales fell 4% for the four months to April based on political worries in the country. But despite this, net operating income is expected to be 8% to 10% higher thanks to vacancies being filled. Even then, the vacancy rate of 7.5% has more room for improvement.

Lighthouse-specific investments

During the four months to April, comparable sales across the Lighthouse portfolio (including the above assets) increased by 3%. The Iberian portfolio is 66% of Lighthouse’s property portfolio and is performing well, with sales growth well above the inflation rate in the region.

In Slovenia, comparable sales for the four months to April increased by just 1%.

Based on that strong performance in Iberia, it’s worth highlighting some additional details in the announcement on recent acquisitions in Spain, which were concluded at net initial yields of 7.5% and 7.7%. These deals were funded by the disposal of Hammerson shares. Still, Lighthouse’s loan-to-value ratio has increased from 14% to 20.3% as at the end of April 2024. This isn’t slowing them down, as there’s another deal underway to acquire a mall in Iberia.

After the disposals of Hammerson, Lighthouse’s stake has decreased from 16.3% to 7.0%.

SA Corporate Real Estate expects 6% growth in the interim distribution (JSE: SAC)

It helps that Indluplace is performing ahead of the acquisition expectations

SA Corporate Real Estate released a pre-close presentation for the six months to June. It goes into great detail on the portfolio, with the key takeout for me being that the industrial portfolio is still delivering the best performance.

For the six months, net property income is up 6.7% in the industrial portfolio vs. 3.0% in retail and 3.2% in Afhco. At recently-acquired Indluplace, they are running 2% ahead of the acquisition model.

In the retail portfolio, Pick n Pay contributes 2.3% of total portfolio revenue. They are actively managing the situation, including downsizing of hypermarkets.

Reversions are only marginally positive for the retail and industrial portfolios, with tenants clearly negotiating hard. In the residential portfolio, rental increases are better as one would expect.

With a loan-to-value ratio at the end of May of 42.6%, this balance sheet is running a little hot. They are working on a significant pipeline of asset disposals and they are raising equity capital for the unlisted residential fund, which will take some pressure off.

The fund expects distributions to be 6% higher for the interim period and between 5% and 7% higher for the full year.

Little Bites:

  • “Normal” director dealings:
    • An executive at Richemont (JSE: CFR) sold shares worth R24.5 million as part of stock options received from the company. That should buy a fancy timepiece or two.
    • A director and an associate of a director of NEPI Rockcastle (JSE: NRP) bought shares in the company worth €52.5k.
    • A director of Brimstone (JSE: BRT) bought ordinary shares worth R163k and the N ordinary shares (JSE: BRN) worth R92k.
    • A director of Copper 360 (JSE: CPR) acquired shares worth R67.5k.
  • Unusual director dealings:
    • Adrian Gore has made changes to the option structure recently entered into over his shares in Discovery (JSE: DSY). The new deal is for put options at R111.50 per share and call options at R180 per share, in both cases expiring in November – December 2025. Based on the current price of around R135 per share, this hedge related to a value of roughly R310 million.
    • In a useful example of a different type of hedge, Michiel le Roux (operating through an entity called Kalander Finco) hedged R231 million worth of Capitec (JSE: CPI) shares (put R2,311.87 and call R4,322.67) with a weighted average term of 3.43 years, all part of security for a loan. In this case, the listed shares are essentially security for the loan and the option structures provide protection for all involved against an extreme event. For reference, the current price is R2,629, so the put option protection isn’t very far away from the current price.
    • Here’s another derivate trade for you, this time by Kevin Ellerine who is a director of Hyprop (JSE: HYP). After unwinding calls and puts entered into in October 2020, the new trades are a long call at R31.48 and a short call at R47.22. In other words, he wins above R31.48 per share and loses above R47.22 per share. Hyprop currently trades at R31.40. The derivatives expire in 2027.
    • A director of Italtile (JSE: ITE) pledged R37 million worth of shares as part of financial obligations related to the director’s extended family. In cases where these structures end up going wrong and the shares go to the financial institution as security, they almost always end up being sold on market and putting the share price under pressure if the position is large enough. On Italtile’s market cap of R14.6 million, this pledge isn’t big enough to be a concern in my view.
    • An associate of a director of Mr Price (JSE: MRP) converted B shares into ordinary shares worth R40.7 million and then pledged them as part of a security arrangement.
  • Based on the regulatory challenges around the deal, Ascendis (JSE: ASC) announced that the fulfilment date for the remaining condition precedent has been extended to 20 July.
  • Attacq (JSE: ATT) announced that it has taken transfer of the remaining 20% in Mall of Africa. The seller is Atterbury, which is part of the RMB Holdings (JSE: RMH) portfolio.
    • Hulamin (JSE: HLM) announced that Volker Schuette has increased his stake in the company to 6.7%. Although it’s usually the case that nothing really comes of these sorts of moves on the register, they are always worth noting.
    • Sasfin (JSE: SFN) announced that the fulfilment date for the condition precedent for the deal with African Bank has been extended to 30 September 2024. This is due to delays in regulatory approvals.
    • aReit (JSE: APO) declared a dividend of 10.99 cents per share. Combined with previous dividends related to the 2023 year, this represents 100% of profit for the year ended December 2023.
    • MC Mining (JSE: MCZ) has entered into a R20 million loan facility with Dendocept, which has a 6.8% stake in MC Mining. It certainly isn’t cheap financing, coming in at prime plus 3%. That’s in line with the current bank financing in the group, which tells you a lot about the cost of debt for a junior mining house.
    • Conduit Capital (JSE: CND) is suspended from trading and must release a quarterly update, with the latest such example released on Friday. The hearing for the liquidation of Conduit Capital and Conduit Ventures was postponed to 2 August. Importantly, CRIH is due R50 million from Trustco under an arbitration award and is taking steps to enforce the award. The disposal of CRIH and CLL is a matter of ongoing negotiation with the Prudential Authority, as the deal was blocked. These are just some of the matters that the group is dealing with, all while trying to catch up on financial reporting.
    • Although immaterial to the overall group, it’s interesting to see Equites Property Fund (JSE: EQU) taking the route of wanting to execute a specific repurchase from executives who received share awards, thereby giving them the cash to settle the tax. This is instead of the executives selling the shares on the market. I’m just not sure what the point is really, as Equites and those executives can very easily achieve both their objectives (a repurchase on one hand and a disposal on the other) in on-market trades, especially when we are talking about an amount of just R2.8 million.
    • Sable Exploration and Mining (JSE: SXM) released a trading statement for the year ended February 2024 that reflects a headline loss per share of between 45 cents and 55 cents.
    • Sebata Holdings (JSE: SEB) announced that the release of its results for the year ended March has been delayed to 14 July.
    • Numeral (JSE: XII), which must have the smallest market cap on the JSE, released results for the year ended February reflecting headline earnings of just $21.6k.
    • Chrometco (JSE: CMO) is currently suspended from trading, so it must release a quarterly update. The auditors are busy with the 2022 – 2024 audits, made more difficult by subsidiaries in the group being in business rescue.
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