AECI’s margins are heading in the right direction (JSE: AFE)
The same can’t be said for revenue, unfortunately
AECI has released a voluntary trading update for the five months to May 2025. The group is following a turnaround strategy, which means absolute focus on improving margins and actively managing the business portfolio. A good example of this would be the Much Asphalt disposal for R1.1 billion, along with the restructuring of AECI Schirm Germany (which has been a major headache and which they hope to bring to a cash breakeven position in the second half of the financial year).
In this period, the South African business posted disappointing numbers, while the international operations did better year-on-year. This means that the turnaround efforts are running behind expectations overall. On the plus side, year-to-date EBITDA is up 12% despite a 2% decrease in revenue, with EBITDA margin up 200 basis points to 10%.
It further helps that net finance costs were 40% lower thanks to the proceeds received on the Much Asphalt disposal. Net debt has dropped from R4.7 billion as at May 2024 to R3.4 billion as at May 2025. This is a 1.1x net debt to EBITDA ratio, which means the balance sheet is in good shape overall.
Just how bad is it in the South African businesses? Well, the mining explosives business in Modderfontein (near where I went to nursery school, actually) had to declare force majeure for part of the period due to lead azide supply issues. They also had poor power supply, with unplanned outages.
And in AECI Chemicals, they struggled with low demand in South Africa for sulphuric acid, as well as a credit loss based on a major customer entering business rescue.
The share price has been exceptionally volatile over the past 12 months, but is on a charge this year with a year with a 21% year-to-date return. The uptick in margins supports the recent positive momentum, with the company no doubt hoping to improve conversion of turnaround efforts into headline earnings growth.
Closures and disposals at African Rainbow Minerals (JSE: ARI)
The losses at Cato Ridge are unsustainable
African Rainbow Minerals holds a 50% stake in Assmang, with the other 50% held by Assore (the jokes do unfortunately write themselves here). There have been some major steps taken with the assets of Assmang.
The first one is the closure of Cato Ridge Development Company, which means the retrenchment of all its employees. This comes after a period of trying to find ways to overcome the financial losses. The land is intended to be redeveloped into commercial and logistics property, with Assmang selling the properties to a wholly-owned subsidiary of Assore for R453 million.
The second step is the sale by Assmang to Assore of all the shares in Sakura Ferroalloys. When this deal closes, Assmang is expected to distribute R900 million in cash to African Rainbow Minerals.
Overall, this feels like a good example of a corporate that is cleaning house, with a cash unlock that certainly won’t hurt the African Rainbow Minerals balance sheet. For context, the group’s current market cap is R38 billion.
No news at ArcelorMittal – but is that good news or bad news? (JSE: ACL)
The share price has been choppy since the May cautionary
ArcelorMittal is trading under cautionary and caution is certainly what everyone should be exercising, as the company remains a financial basket case. Due to the social impact of the group’s longs business, there are a number of stakeholders working to try and defer or even avoid the wind-down entirely.
The update in May was that the IDC is making a loan available to defer the wind-down until at least the end of August. This also triggered a due diligence period during which the parties would consider strategic alternatives.
We are now at the end of June, which means that the wind-down date isn’t that far away anymore. All we have to work with is a bland cautionary update that simply references the May cautionary and gives no further updates.
Is that good news or bad news? It’s not clear, with the market sharing that sentiment in the form of sideways share price action since May. Literally anything is possible here.
It looks like there are enough acceptances for the Barloworld deal to go ahead (JSE: BAW)
The period for acceptance of the offer has been extended
As you may recall, the scheme of announcement for the take-private of Barloworld failed this year. This triggered a standby offer, which came with a clearly impractical minimum acceptances condition that was above the level required to get the scheme approved in the first place. As I wrote many times, there’s no way that the offerors ever intended to implement that condition. I also speculated that they were probably just looking for control of the asset i.e. a 50.1% holding or higher.
Time has proven me correct here, with the parties noting that they are willing to go ahead at the current level of acceptances that would give them a 57.7% stake in Barloworld. They specifically note in this announcement that 51% is the goal.
Due to technical elements of the deal and exactly how the remaining conditions are expected to be fulfilled, the offeror consortium has decided to extend the acceptance date deadline to the date on which the other offer conditions are either fulfilled or waived. There are still some important regulatory hoops to jump through and they want to make sure that the offer doesn’t lapse in the meantime. As part of this extension, the consortium has agreed to pay a break free of R20 million to Barloworld if the conditions are not fulfilled.
Barloworld is trading at R113 per share and the offer price is R120 per share, so there’s now a value of money consideration that will drive any arbitrage trading. There’s effectively a return of 6% between the current price and the offer price, but it could still take many months for this deal to be finalised.
Exxaro’s bearish tone matches their share price (JSE: EXX)
The pre-close update tells a tough story
Exxaro has released a pre-close update for the six months to June 2025. This period has of course been characterised by the trade war and the impact that this has had on the global economy. This has led to the weak sentiment in the coal market in 2024 continuing into 2025. The Richards Bay Coal Terminal export price for the first half of 2025 is expected to average $91 per tonne, a nasty 27.3% drop from $110 per tonne in the second half of 2024. The iron ore fines price is basically flat vs. the second half of 2024.
The pricing pressure isn’t being offset by volumes. Quite the opposite, actually, with production and sales volumes expected to be down 6% and 7% respectively. It’s not just export demand that is a problem, as Eskom’s offtake in the Waterberg region declined. And with weak export prices, more supply was available locally, putting the coal producers on the wrong side of the supply-demand dynamic.
There isn’t much good news here, but at least capex for the first half of the year is expected to be 19% lower than the second half of 2024. The balance sheet remains strong, with net cash of R19.5 billion (excluding net debt of R5.8 billion in the energy business – where even the winds aren’t blowing as well as they normally do).
In an effort to diversify, Exxaro is buying manganese assets in a deal that was announced back in May. The purchase price is between R9.0 billion and R14.64 billion, so now you know where that excess cash on the balance sheet is going.
The announcement isn’t explicit on earnings guidance, but it’s pretty clear that it’s going to be ugly. The share price is down 18% over 12 months and only 7% year-to-date, surprisingly.
Goldrush released its first-ever consolidated accounts (JSE: GRSP)
Life as an investment entity is behind them
Goldrush recently made the decision to transition from investment entity accounting (i.e. assets and liabilities at fair value) to “normal” accounting in which underlying operations are consolidated and you get detailed disclosure of the various line items. The bad news is that the latest numbers aren’t comparable to the prior year. The good news is that this gives investors much more visibility in years to come.
Goldrush has been in the news lately in relation to the Sizekhaya consortium, which was awarded the national lottery licence. This will lead to an initial build-out period for infrastructure, followed by several years of hopefully successful operations. There’s a fair bit of political heat on this contract at the moment, so that’s something to watch.
In Goldrush’s core operations, additional disclosure to assist with comparability shows that operating profit was roughly 0.7% higher year-on-year. As you would expect, areas like sports betting (revenue up 75%) are growing much faster than in-person offerings in the alternative gaming space (like bingo, with revenue down 1.7%).
With a stake in the ground now in terms of consolidated group accounts, investors will be able to keep an eye on how group operating profit margin moves over time. In 2025, that margin was 12.5%. Another key metric is of course HEPS, which was 141.91 cents in this period. The share price is currently R8.00.
Strong growth at Invicta (JSE: IVT)
But what will it take to get the share price out of the recent range?
Invicta’s share price enjoyed a sharp recovery as COVID abated, but things since then have been very sideways:
This share price looks like it wants to break higher, but what will that take? The latest numbers certainly help, with growth in revenue for the year ended March 2025 of 6% and HEPS of 14%.
Invicta has a number of industrial businesses around the world, with the common thread being a focus on supplying machinery parts and engineering consumables to various industries. As the underlying exposures tend to be cyclical, the diversified model works well here for smoothing profits. In this period though, there was impressive consistency across the divisions in terms of putting through decent numbers.
In terms of corporate activity, the group redeemed the outstanding preference shares and repurchased ordinary shares as well. They acquired Nationwide Bearing Company for R294 million in April 2024. At the same time, they moved their interest in KMP Holdings into Kian Ann Engineering, which they now equity account due to their 48.81% stake. They also disposed of the Kian Ann warehouse and used the proceeds to reduce debt.
The DNA of Invicta is firmly in dealmaking. The current global supply chain issues create volatility, but also opportunity. They are on the hunt for new acquisitions and products, so watch this space.
Lesaka sells Mobikwik for R290 million (JSE: LSK)
It’s been a busy period for them!
At the end of last week, Lesaka Technologies was the talk of the town with the Bank Zero acquisition. Now there’s a further update, with the company selling its entire stake in One Mobikwik Systems on the Indian Stock Exchange for R290 million.
This gives them significantly more cash than they need for the Bank Zero acquisition, with roughly R1 billion of the purchase price to be settled through the issuance of shares and around R100 million to be paid in cash. They are making significant portfolio changes at Lesaka and investors will be watching closely.
Even with the Bank Zero deal, the share price is down 18% year-to-date. I’ve picked up some concern in the market around the valuation of Bank Zero, so I look forward to seeing more details on the numbers and the price/book multiple they’ve paid there.
Lighthouse bucks the footfall trend (JSE: LTE)
The eCommerce risks are barely visible in this portfolio
As a Ghost Mail reader, you already know two things: (1) Lighthouse Properties loves buying properties in Iberia in particular, and (2) Des de Beer loves buying shares in Lighthouse Properties! I can’t see either situation changing anytime soon.
A pre-close update for Lighthouse notes two notable acquisitions in Spain this year, one of which was only announced on the day of the pre-close. The first one was the acquisition of Alcala Magna for €96.3 million on a yield of 7.6%. The latest deal is for Espacio Mediterraneo (which sounds like a delicious starter somewhere), acquired for €135.4 million on a yield of 7.0%. The latter must be a particularly high quality asset for that price to be justifiable.
Looking at the overall direct property portfolio, sales grew by 8.6% for the five months to May 2025. Importantly, footfall was up 4.6% – a much better result than we’ve seen from REITs recently (albeit in other regions). This helps explain why Lighthouse is excited about Spain and Portugal, with the portfolio in France also showing positive moves.
As an interesting tidbit, an increase in vacancies from 2.0% at December 2024 to 2.8% at May 2025 was mainly due to the closure of a trampoline park, with the national operator facing financial challenges. I must say, given the birth rate trend in Europe, I would need a lot of convincing to open a business focused on kids entertainment with high operating costs. As a sign of the times, the park is being replaced by a national fashion retailer.
Moving on to the balance sheet, holders of 23% of shares elected the scrip dividend rather than cash, leading to the issuance of around R127 million worth of shares in April at R7.52 per share. In early June, Lighthouse raised R400 million in an accelerated bookbuild at R8.20 per share, a discount of 2% to the net asset value per share. And to further support the acquisitions, they’ve raised €184.6 million (around R3.85 billion) in debt since December 2024. This is why the loan-to-value ratio has jumped from 25.0% to 35.5% since December. That’s still a healthy balance sheet, but there isn’t a huge amount of headroom for further gearing.
Full-year guidance distribution of 2.70 EUR cents per share has been reaffirmed.
MAS released a voluntary trading update ahead of the extraordinary general meeting (JSE: MAS)
Shareholders will need to think about the message they want to send with their vote
If you’ve followed the MAS story, you’ll know that PK Investments has called for a shareholders meeting to get the view of shareholders on whether MAS should essentially be put through an orderly value unlock process, which means selling off properties and returning capital to shareholders. You’ll also know that Hyprop is waiting in the wings to make a potential offer, all while sitting on equity capital that the market threw at them on the off-chance of an offer (RIP to distribution per share growth as a result).
Much of the issue, as explained by the MAS board in this announcement, comes down to a “difference of opinion” regarding the way in which the capital in the joint venture with PK Investments can be distributed. Bluntly, MAS wants that cash and PK doesn’t want to pay it out unless there’s certainty over what the future strategy will be. MAS is looking to publish a legal summary of the agreement and the position, but they need consent from Prime Kapital to publish it.
A further important confirmation in the announcement is that newly-appointed MAS CFO, Bogdan Oslobeanu, has no relationship with Prime Kapital. They are also looking to appoint additional non-executive directors to beef up corporate governance.
Now for the trading update, which deals with the five months to May 2025. Footfall was slightly higher and tenant sales increased by 7%, so that’s good news.
The problem is that MAS still has a hole in its balance sheet based on forecasts out to 2026, as they continue to run a race against time for debt maturities. They need another €43 million out of €262 million to cover capex and debt payments. To be fair, it might be more than that, as they are still in negotiations for €45 million in secured debt. The current cash balance is only €174 million.
Earnings guidance for the year to June 2025 is 9.37 to 9.79 EUR cents per share. I think the focus at this moment is more on the balance sheet than the earnings to be honest, with many moving parts here. The MAS share price is up 50% in the past year, having been on an epic rollercoaster ride with a 52-week high of R24.65 and a 52-week low of R15.76.
Resilient is running ahead of expectations (JSE: RES)
They expect strong growth this year
Resilient REIT released a pre-close update for the six months to June. Notably, Resilient owns 27.6% of Lighthouse, so you should read this in conjunction with the Lighthouse update further up. Another point to note is that Resilient hasn’t been shy to sell Lighthouse shares to fund its own development pipeline, with a disposal of R332.2 million in such shares in this period.
In South Africa, sales in the retail portfolio increased by 6.9% and leases achieved positive reversions of 2.2%. They’ve been pushing hard on solar investments, with recent installations taking them to a level where 39.2% of total energy requirements are being supplied by solar.
In the direct offshore portfolio, the Spanish asset saw sales increased by 8.7% for the period. France also put in a positive performance, up 4.6% in terms of retail sales. There’s a notable vacancy rate of 6.4% in the French portfolio though.
Overall, the group is performing ahead of expectations and Resilient has put out updated guidance of 8% growth in the distribution for FY25. This also assumes that Lighthouse achieves its guidance.
Spear’s Western Cape focus continues to pay off (JSE: SEA)
But of course, it’s hard to find a bargain in the province
The good news is that the Western Cape continues to do well, with Spear REIT correctly referring to it having the strongest real estate fundamentals in the country. The bad news is that the market knows this, so the chances of finding mispriced properties in the Western Cape probably aren’t good. This makes it harder for Spear REIT to keep growing its portfolio, as they must maintain discipline in acquisitions to avoid overpaying for assets.
In an update for the three months to May 2025, which is the first quarter of the 2026 financial year, Spear’s distributable income per share increased by 5.74%. Their loan-to-value ratio improved slightly to 26.18%, so the balance sheet is in good health – and it will be even better once you take into account the capital raise in June, with a pro-forma range of 16% to 18%. The tangible net asset value per share is R12.43 and the current share price is R10.30, so even Spear is trading at a discount to book – as is typical in the local property sector.
One of the strategies they are pursuing for growth is to push for higher rentals on renewals, a strategy that can lead to what they call “vacancy creep” on a short-term basis i.e. tenants electing not to renew based on pricing. It’s all about supply and demand of course, something that Spear has to manage closely. Even with higher vacancies than expected, they are on track with distributable income per share guidance of growth of 4% to 6% for FY26. In fact, they are above the midpoint of this range, currently running at 5.75%.
The key will be to bring vacancies in line with where they need to be, as I don’t think they can afford to be too greedy on renewal rates in this broader macroeconomic environment. In-force escalation rates in the portfolio are already running at over 7%.
Sephaku’s HEPS moved higher in FY25 (JSE: SEP)
The South African construction sector remained weak in 2024 though
Sephaku’s business consists of its 100% stake in Métier and its 36% stake in SepCem. This means that group revenue is only related to the Métier stake, as the SepCem numbers are accounted for as an associate. To add further complexity, SepCem has a December year-end, so Sephaku’s results for the year ended March 2025 actually reflect SepCem’s numbers for the year ended December 2024!
With that out the way, we can just consider the underlying performance. Métier saw volumes drop by 8% year-on-year after two years of strong growth, with rainfall in the last three months of the year as a factor. Despite this, revenue increased by 2% and every region has seen improved margins, with EBIT up 9%. Métier took on more debt this year for its capex programme and also used cash to execute repurchases of Sephaku Holdings shares.
In SepCem, the weak South African construction sector continues to weigh on performance. Volumes were down 4% and revenue fell by 1%. Due to the operating leverage inherent in the model, EBITDA fell by 11%. Despite this, net profit after tax was slightly higher.
With all said and done, Sephaku Holdings’ normalised HEPS was up 22.6% to 31.72 cents. That seems to be a flattering view of what’s really going on in this market.
Nibbles:
- Director dealings:
- Here’s some more selling by directors of Santova (JSE: SNV), this time by a director of a major subsidiary to the value of R2.1 million.
- A prescribed officer of Astral Foods (JSE: ARL) sold shares worth R356k.
- The company secretary of Pick n Pay (JSE: PIK) sold shares worth R163k.
- The ongoing saga of who will acquire Assura (JSE: AHR) seems to have settled down, with Primary Health Properties (JSE: PHP) close to having this one in the bag. Will there be a sting in the tail from KKR / Stonepeak? In the meantime, the latest update is that the Assura board has released supplementary documentation including board letters and an expected timetable for the deal. If the private equity players are planning to throw more cash at this thing, now is their chance.
- Copper 360 (JSE: CPR) released results for the year ended February 2025. They had some major production challenges, so they need significant capital expenditure to achieve profitability in the cathode business. Although revenue jumped by 349% year-on-year, it was below forecast levels due to various operational delays. Here’s the real problem: the loss for the year jumped from R64.8 million to R223.1 million due to the huge jump in costs to support operations that didn’t perform as expected. They refer to themselves as an “undercapitalised exploration company” and this only leads to one thing: equity capital raises. Time will tell exactly what that will look like.
- Having jumped through a regulatory hoop, Pan African Resources (JSE: PAN) is now able to repurchase shares on the JSE in addition to the London Stock Exchange. They believe that their shares are undervalued. As a happy shareholder, I won’t fight that logic.
- Here’s something you won’t see every day: the AGM of Equites Property Fund (JSE: EQU) includes a resolution regarding a special repurchase of shares from directors that represent the taxable portion of share awards. This avoids the directors having to sell the shares on the market. I don’t really understand the point here, as there is plenty of liquidity at Equites for both repurchases and on-market sales by directors to take place.
- Furniture and insurance small cap Nictus (JSE: NCS) saw its revenue drop by 23% for the year ended March 2025, yet HEPS increased by 84%. To add to these wild swings, the dividend for the year doubled to 12 cents per share! Despite this, someone hit the sell button, with a 6.4% drop by close of play on significantly higher volumes than an average day (but still very little liquidity overall). Here’s another crazy stat for you: HEPS has increased by over 4x since 2022, with the share price up 220% over three years. Small caps are many things, but boring isn’t one of them.
- Visual International Holdings (JSE: VIS), a rare example of a stock trading at literally R0.01 per share (the mathematical minimum), has seen HEPS drop by 88% to 3.33 cents for the year ended February 2025. In case you are following this stock closely for some reason, there’s a separate announcement dealing with an adjustments made for a tax matter that goes back to the 2013 / 2014 restructure.
- Cilo Cybin Holdings (JSE: CCC) is a special purpose acquisition company (SPAC) that is still busy finalising its acquisition of a viable asset, namely Cilo Cybin Pharmaceutical. The proposed acquisition price is R845 million, settled through the issuance of shares. While all this is going on, the money raised from the listing that is held in escrow has earned R4.8 million in investment revenue for the year ended March 2025, while the company burnt through R5.1 million in admin expenses. The remaining cash balance as at the end of March was R58.3 million.
- Recently listed Shuka Minerals (JSE: SKA) released financials for the year ended December 2024. This is very much a junior mining company with all the joys that brings, hence why there’s close to zero revenue and an operating loss of £1.8 million.
- Trencor (JSE: TRE) received unanimous approval at the shareholder meeting for the winding up of the company. There is still a legal condition for the winding up that is sitting with the Master of the High Court.
- Henry Laas has retired from the board of Murray & Roberts (JSE: MUR). Some careers end with a bang, while others end with a whimper.
- Efora Energy (JSE: EEL) is late with its results for the year ended February 2025. After initially indicating that they would be released by June, it’s now been kicked out to the end of July. The annual report is expected to be done by the end of August.
- In case you’re active in Telemasters (JSE: TLM) shares, be aware that the share repurchase programme will continue during the closed period from 1 July 2025 to 30 September 2025. The purchase price won’t be more than 10% higher than the 5-day VWAP.
- Conduit Capital (JSE: CND) is suspended from trading and must thus release quarterly updates. They are still pursuing the arbitration award that they were given against Trustco Properties. You may also recall that after the regulator blocked the sale of TMM for R55 million, the buyer eventually walked away after a period of trying to get the deal across the line. Conduit is still miles away from having the suspension lifted, with the auditors currently working on results for the six months to December 2022!
- Sail Mining Group (JSE: SGP) has been suspended from trading since July 2022. Since then, they’ve had three subsidiaries in business rescue! One of them subsequently came out of business rescue in December 2024, but there are still many complications here and the company will remain suspended until they’ve caught up on the financials.
- For the sake of completeness, another company in the JSE dustbin is PSV Holdings (JSE: PSV), where proposals are being made to take the business out of provisional liquidation. Perhaps there will finally be a recapitalisation of the company – and maybe even a website!
