AB InBev still struggling with beer volumes (JSE: ANH)
There are pockets of growth, but things are flat overall
Nobody likes a flat beer. AB InBev shareholders don’t exactly enjoy flat beer results, either. The company is dealing with the difficult situation of ongoing declines in beer volumes, with the third quarter revealing a drop of 3.7%. That’s even worse than the 2.6% decline for the nine months year-to-date.
Thanks to pricing increases, revenue was up 0.9% for the quarter. Normalised EBITDA increased by 3.3% as margins moved higher. For the nine months year-to-date, revenue is up 1.8% and normalised EBITDA is up 5.8%.
Underlying earnings per share increased by 1% for the quarter and 5.4% for the nine months.
There are some underlying growth areas, like Corona which continues to benefit from the weird marketing boost of a similarly-named pandemic. Corona grew 6.3% outside of its home market. But by far the biggest increase is in no-alcohol beer, up 27% – truly a sign of the times when it comes to consumer preferences.
Great cost control at Adcorp saves the numbers (JSE: ADR)
With revenue still under pressure, they have little choice but to be efficient
Adcorp has released results for the six months to August 2025. Things are still hard for them, with revenue down 5.5% as reported, or 3.2% on a constant-currency basis. Gross profit margin moved slightly higher, but not enough for a positive swing in gross profit.
Despite gross profit falling 3.7%, the group came out with a whopping 150.3% increase in profit before tax. When you see stuff like this, you immediately need to dig deeper to figure out what happened.
Kudos to Adcorp: they don’t make it difficult to find. The company reminds investors that the prior period included transformation costs of R25.6 million that weren’t incurred in the current period. But that’s not really telling the full story around how efficient Adcorp has been with expenses. A quick look at the income statement reveals that operating expenses were R60.6 million lower year-on-year. Sure, the R25.6 million is part of this improvement, but there’s clearly been a focus on making the business leaner in response to tough conditions.
Although cash generated from operations before working capital changes was up from R93.5 million to R126.9 million, there was a worrying increase in accounts receivable that led to a net working capital outflow of R134.6 million.
Nothing is easy for Adcorp in this industry. Words like “client caution” and “subdued permanent hiring” tell you everything about the current job market (particularly in professional services) and the downstream impact this has on recruitment and training businesses.
Datatec’s earnings have casually doubled (JSE: DTC)
The interim results look exceptional
Datatec’s share price is up 47% year-to-date. If you look over 12 months, the price is up 75%. There are good reasons for this that will become apparent when you look at the latest financials.
A change in accounting policy means that gross profit (11.7%) is probably a more helpful measure than revenue (up 2.9%). EBITDA was up 35.6% and HEPS more than doubled, up 109.5%. This is about as pretty as an income statement can get, with the power of operating leverage and then financial leverage coming through in EBITDA and HEPS respectively. In other words, the company is turning modest gains in underlying revenue and gross profit into exceptional results for shareholders.
The dividend per share was up by 133%, so there’s no concern here around whether the cash story supports the earnings.
The group is enjoying an environment of deep investment in infrastructure for data centres, networks and cybersecurity. Digital integrations and the need for customer support help justify Datatec’s position in the value chain.
The overall outlook is bullish. Along with great underlying performance, Datatec is talking about strategies to improve the market’s valuation of the group and get it closer to what the directors see as the inherent value of the subsidiaries. This includes a US OTC trading program, share buybacks and a less conservative dividend policy.
Dis-Chem will need “X, bigly labs” to work – and not just because the name is ridiculous (JSE: DCP)
The data wars are heating up in retail
X, bigly labs sounds like the love child of Musk and Trump. It also happens to be the name given by Dis-Chem to the data business that will look to maximise the Dis-Chem Better Rewards programme. This speaks directly to the competitive edge that top retailers are building around data.
They are doing this from a position of strength, with revenue up 8.7% for the six months to August and HEPS up 9%. The dividend was also up 9%. That’s a solid growth performance, although the share price is down 9.5% year-to-date after entering this year on an elevated valuation.
These numbers mask a far spicier underlying strategy. Core retail profit before tax was up 25.8%, but then Dis-Chem invested (i.e. spent) R130 million on growth initiatives. Roughly 60% of the spend was on X, bigly labs (sigh). 40% was in Dis-Chem Life, with the idea being to incentivise policyholders through Better Rewards.
Looking deeper, like-for-like retail growth was 5.4%. Another important metric is wholesale revenue to external pharmacies (independents and The Local Choice franchisees), which increased by 11.6%. Independent pharmacy growth was 7.9% and The Local Choice franchise sales increased 16.5% thanks to strong growth in the footprint.
Here’s the best news of all: like-for-like retail expenses were up just 2.5%. The same is true for wholesale expenses. Full credit to Dis-Chem: they are showing excellent cost discipline in an effort to unlock funding for their strangely named growth project. This is how great retailers pull ahead and weaker players get left for dead.
Fairvest pushes deeper into the lower-income retail strategy – and it’s a good one (JSE: FTA | JSE: FTB)
The latest acquisition is for two malls in KZN
There aren’t many natural growth tailwinds in South Africa. One of them is the shift from informal to formal retail, so retail properties on busy commuter routes and near townships are achieving decent growth. This does come with more security risk, of course. Another risk that is starting to become more worrying is the extent to which sports betting is impacting consumer spending.
Nonetheless, these properties tend to offer solid yields and Fairvest is happy to keep buying them, with the latest deal being for Jozini Mall and Tugela Ferry Mall in KwaZulu-Natal. The combined purchase price is R674 million and the fund is getting them on a blended yield of 10.17%. It’s pretty rare to see retail properties changing hands at yields above 10% these days. Remember, the higher the yield, the cheaper the property.
In both cases, the anchor tenant is Shoprite. Jozini Mall is being acquired for R399 million and Tugela Ferry Mall is worth R275 million.
Finbond has swung into profitability (JSE: FGL)
Loan volumes are improving in both South Africa and the US
Finbond has had some tough times in recent years. Apart from all the day-to-day difficulties of the South African market, they also had to contend with regulatory changes in Illinois that hurt the US business. For context, in the six months to August, the group generated 60.7% of revenue in South Africa and 39.3% in North America.
Total revenue in South Africa increased by 4.6%. The average consumer loan size was R2,089, so that gives you a good idea of how the business operates. Going forwards, they are looking to increase the business lending book in Finbond Mutual Bank. In North America, revenue jumped by 33.2% across the subsidiaries, joint ventures and associates, and the average loan size was $663.
Thanks primarily to the much better performance in North America, HEPS jumped from a loss of 2.0 cents to profit of 1.1 cents. When you consider the net asset value per share of 148.9 cents, you can see that there’s a long way to go to actually generate decent returns here.
A slight uptick in NAV at Greencoat (JSE: GCT)
Alas, the share price keeps washing away
Greencoat’s listing on the JSE has been a success in terms of volumes (14% of total trade in the company’s shares in Q3 were on the local market), but not in terms of the share price. Greencoat has been struggling with weaker than expected power generation, serving as a useful reminder that the wind isn’t as reliable a resource as Cape Town coastal residents might think.
Third quarter generation was 2% below budget. They still managed to achieve 1.2x coverage of the dividend, with the full year cover expected to be 1.6x.
In terms of the balance sheet, they completed the disposal of six assets in Ireland at a premium of 4% to the last reported NAV and used the proceeds to reduce debt.
The NAV increased ever so slightly in this quarter, now at €1.015 per share. That works out to around R20.30 per share, well above the current share price of R13.35.
The company is looking to move the listing to the Main Board, so they are taking it in their stride that the share price is having a rough time. Another challenge is that the withholding tax is complicated, with South African shareholders having to jump through additional hoops regarding the dividends.
A highly successful IPO for Optasia (JSE: OPA)
Unsurprisingly, the final price was R19 – the top of the guided range
In a market that is starved of IPOs, a quality asset coming to market tends to get the people excited. If you’re keen to understand more about what Optasia does, then you should definitely check out this podcast that I did with CEO Salvador Anglada.
After the news broke of FirstRand (JSE: FSR) taking a 20.1% stake in Optasia at R19 per share (the top of the IPO range), there was no doubt in my mind that the book would be way oversubscribed. Sure enough, it was “multiple times” oversubscribed and thus investors who asked for shares are likely to only get a small allocation vs. what they requested.
This creates pent-up demand for the shares, which is usually what leads to a share price jumping on market debut. Shareholders should be careful here. If FirstRand paid R19, that’s a very good anchor for what the value actually is. If the price goes vastly higher from IPO hype, then it creates the classic IPO trap that investors tend to fall into around the world.
With an implied market cap of R23.5 billion, Optasia is a most welcome addition to the market. The shares start trading on 4 November.
Nibbles:
- Director dealings:
- The CFO of Standard Bank (JSE: SBK) sold shares worth R8.8 million.
- The CEO of Spear REIT (JSE: SEA) bought shares worth nearly R100k across various family holding structures.
- The CEO of Vunani has bought more shares, this time to the value of R51.4k.
- An associate of a director of Astoria (JSE: ARA) bought shares worth R29k.
- Hyprop (JSE: HYP) announced that GCR Ratings affirmed the credit ratings with a stable outlook. This is particularly important for property companies due to the critical importance of debt within their structures.
- Southern Palladium (JSE: SDL) released a quarterly activities report that looks back on what was achieved in the three months to September. It was an important period for the company, with the completion of the optimised pre-feasibility study. Thanks to much better sentiment in PGMs generally, the company seems to be in a good place right now. They have won support for the planned raise of A$20 million and they are also offering a share purchase plan to retail investors for up to A$1 million.
- There’s close to no liquidity in Oando PLC (JSE: OAO) shares on the JSE, so I’ll just mention the earnings down here. For the nine months year-to-date, revenue fell 20% due to the changes to the Nigerian market caused by the Dangote Refinery. Gross profit fell by 42% and the group registered an operating loss for the period. Profit after tax jumped by 164% thanks to tax adjustments, among other things.
- The Curro (JSE: COH) transaction is one step closer to completion, with the Namibian Competition Commission giving the green light for the deal. The South African and Botswana competition regulators still need to give their approvals.
- Visual International (JSE: VIS) is closing the bookbuild for the raise of up to R2 million on Friday 31 October at midday.
