Ghost Bites (Acsion | Brait – Premier | Netcare | Southern Palladium)

No action at Acsion (JSE: ACS)

This R2.7bn company won’t be going private after all

Acsion Limited has been trading under a cautionary announcement since October 2022, based on the company contemplating a delisting of its shares. This would’ve triggered an offer to shareholders, something the board was probably trying to put the funding together for.

Although no reasons are given in the latest announcement, the potential delisting is off the table. The share price is illiquid and fell 11.7% after the news, which is precisely why shareholders should exercise caution.

Brait’s IPO of Premier Group will go ahead after all (JSE: BAT)

It won’t take long either – Premier will be separately listed from 24 March!

In case you’re wondering: no, you can’t just wake up and decide to list a company within the next two weeks. This certainly isn’t the normal timeline.

If you’ve been following the Brait story, you’ll know that Premier Group was all set for a listing before market demand seemed to fall away. Brait negotiated a private deal with Christo Wiese and his bankers, with that deal in progress until a group of investors approached Brait to make the Premier IPO happen.

This group of investors is large enough to meet the free float rules of the JSE, thereby de-risking the IPO. The board of Premier decided to go ahead with the listing rather than the alternative, private deal.

The IPO will raise between R3.5 billion and R3.6 billion, with Premier valued at R6.9 billion. Brait will retain approximately 47.1% of Premier after the IPO. The goal is to unbundle that stake to Brait shareholders by December 2024.

Margins are up at Netcare as volumes recover (JSE: NTC)

But diesel costs are going through the roof

For obvious reasons, hospitals have been able to operate without reliance on the grid for a long time now. It’s one thing when milk goes off in the fridge. It’s quite another when someone is lying on the operating table and the EskomSePush app gives you bad news.

Being independent of the grid and being able to do this without breaking the bank are two different things. Netcare spent R9 million on diesel in FY21 and R35 million in FY22. In just the four months to the end of January 2023, that amount has come in at R41 million. At that run rate, the cost for the year would be R120 million.

To put that in perspective, the capital expenditure plan for FY23 includes R111 million for the expansion of the mental health operations. Again, we can only dream of what this country could achieve if we were doing something other than spending a fortune on diesel.

The good news for Netcare is that the group has been on an energy efficiency drive since 2013, investing R585 million and saving R1.1 billion in energy costs along the way. Energy intensity per hospital bed has been reduced by 35% over the past decade.

Paid patient days haven’t quite recovered to pre-pandemic levels, but the trend is firmly positive. There are pockets that are now running ahead of pre-pandemic levels, like mental health days.

In this four-month period, revenue increased by 12.3% and EBITDA was up by over 20%. Operating leverage is a feature of the hospital business model, as the beds are there whether they are occupied or not.

Guidance for FY23 is revenue growth of between 9% and 12%, with margin expansion and improved return on invested capital. This assumes an average of stage 5 load shedding for the rest of the year, with the winter months as a worry.

Southern Palladium gives us a geology lesson (JSE: SDL)

Unless you’re a mining specialist, only the management commentary will be of value

Junior mining is about as specialised as investing gets. With reasonable levels of commercial knowledge, you can make sense of most other industries. When it comes to junior mining, you’re confronted with sentences like “the Merensky pyroxenite, containing potentially exploitable platinum group elements, is overlain by spotted anorthosite and underlain by leucocratic norite.”

Wonderful. Spotted anorthosite has always been my favourite kind of anorthosite.

On a more serious note, the Southern Palladium managing director’s commentary is positive, noting that the results thus far have further supported the conclusions in the recently completed scoping study. The shallower Merensky reef may be included in future development in addition to the UG2 reef, which would be expected to increase the upside potential of the project and extend the life of mine.

Little Bites:

• Director dealings:
  • An executive director of Harmony Gold (JSE: HAR) sold shares worth R113k.
  • An executive director of Invicta (JSE: IVT) bought shares worth R19k.

• The share code remains unchanged, but Kaap Agri Limited (JSE: KAL) will be changing its name to KAL Group Limited, which makes sense given that the major recent acquisition was in the fuel retail sector, not the agriculture sector.

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