Ghost Bites (AEEI | RMB Holdings | Sea Harvest | Thungela)

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AEEI is dragged into the red by AYO Technology (JSE: AEE | JSE: AYO)

The highlight is definitely the Fishing and Brands segment

African Equity Empowerment Investments (AEEI) released results for the year ended August 2023. They are complicated, as they include discontinued operations (AYO Technology) and the reporting of normalised headline earnings, which always needs to be treated with caution.

The AYO results have once again put the group in the red, but that is being unbundled to shareholders (lucky them) and so this is now a discontinued operation from the perspective of AEEI. It should be noted that this isn’t the only blemish in the numbers, as there’s also a large impairment in the biotechnology business.

The business that is worth focusing on is Fishing and Brands, with that segment delivering profit before tax of nearly R78 million in this period. The Technology segment (not AYO, but rather one other business) made profit before tax of R13 million. The Health and Beauty segment made a small loss off a revenue base of R49 million. Events and Tourism managed to lose R15.7 million off revenue of R24.9 million.

You probably know this already, but AEEI is a scrappy group of businesses with the embedded poison pill that is AYO Technology. The unbundling will at least take AYO out of the mix.

RMB Holdings releases interim results (JSE: RMH)

It’s important to adjust for the special dividend when looking at the NAV move

RMB Holdings is busy with a classic value unlock strategy, which means managing existing assets as efficiently as possible and returning capital to shareholders along the way. This is why it’s important to look beyond the year-on-year move in net asset value (NAV) per share of -56%. The group is intentionally becoming smaller.

Instead, the right metric is to look at NAV per share excluding the impact of the special dividend. On that basis, the group has actually grown by 5% to 104 cents per share.

There’s another special dividend coming of 23.5 cents per share, payable in December. This is being funded by the cash received for the settlement of the Atterbury base loan, as well as the cash generated by ongoing operations.

The current share price is 63 cents a share.

Sea Harvest is fishing for an acquisition (JSE: SHG | JSE: BRT)

The company has released a cautionary announcement

Sea Harvest released a cautionary announcement regarding a potential acquisition of certain businesses and assets of Terrasan. Although we don’t know exactly what is up for grabs, a quick look at the Terrasan website shows that the group has business interests in abalone, pilchards and aquafeed.

Discussions are clearly a long way down the road, as the companies are obtaining the various regulatory approvals and are filing a merger applications with the Competition Commission

As Sea Harvest is a 54%-held subsidiary of Brimstone, that company also released a cautionary announcement regarding this potential acquisition.

Transnet issues continue to plague Thungela (JSE: TGA)

Export saleable production by the South African operations have fallen year-on-year

Thungela released a pre-close update dealing with the year ending December 2023. It’s been a tough year for the entire coal industry, with prices way down vs. last year. Whether you look at the Richards Bay Benchmark or Newcastle Benchmark coal prices, they have more than halved year-on-year in dollars. Interestingly, each of the major operations can end up selling coal at a discount or a premium to the benchmark price, depending on the specific underlying contracts.

Sadly, export saleable production in South Africa is down by 7.6% due to a deliberate reduction in response to poor Transnet performance. Export sales in South Africa are flat year-on-year, so production was effectively adjusted downwards to the realistic level that Transnet can support. There’s certainly no shortage of demand. We just have to get the stuff to the ports.

The security issues at Transnet, as well as locomotive breakdowns, seem to be problems that just cannot be solved. Luckily, Thungela has certain operational attributes that allow it to be flexible in terms of getting the coal onto trucks. Even then, production had to be curtailed.

The Ensham acquisition in Australia has a different story to tell, with export production ahead of expectations. It’s nice to have working infrastructure! There were many critics of the Ensham deal when Thungela first announced it, but perhaps it is the right long-term play in the context of Transnet. It also helps that the eventual price paid for Ensham was R3.2 billion, not R4.1 billion as expected. This was due to closing adjustments and the lock-box structure with a date of 1 January 2023, which allowed Thungela to benefit from the performance from that date until completion.

Thungela’s net cash position at the end of 2023 is expected to be R9.6 billion.

Little Bites:

• Director dealings:
  • Here’s a big one: the CEO of BHP (JSE: BHG) has sold more than half of his stake in the company for a total of nearly AUD 19 million. The announcement specifically notes that this is due to a divorce, so it’s more a reminder of how big divorces can get than a view on the share price itself. It’s also an important reminder to read SENS announcements carefully, especially about director dealings and any reasons given!
  • Sabvest Capital (JSE: SBP) has director representation on the board of Metrofile (JSE: MFL) in the form of Chris Seabrooke. Sabvest is an institutional investor, but it still counts as a director dealing that the company bought R2.7 million worth of shares in Metrofile.
  • A non-executive director of Richemont (JSE: CFR) has bought shares worth R177k.
  • The wife of a director of Afine Investments (JSE: ANI) has bought shares worth R10k.
  • An associate of a director of Huge Group (JSE: HUG) bought shares worth nearly R8k.

• Sasfin (JSE: SFN) needs to send its shareholders a circular dealing with the disposal of the Capital Equipment Finance and Commercial Property Finance businesses to African Bank. A dispensation has been obtained for the 60-day rule. Sasfin hasn’t committed to a date for the release of the circular.

• In an awkward update for Marshall Monteagle (JSE: MMP), the company corrected what was said in the results announcement regarding the potential sale of its California property for $26.5 million. The initial disclosure was that contracts have been exchanged. Instead, the company is only at heads of terms stage, which means negotiations on smaller points are still underway.

• For those interested in environmental reporting and how mining groups are responding to climate change, Glencore (JSE: GLN) announced that it has concluded engagements with shareholders who voted against its climate plan. An update plan will be released in March 2024, incorporating the important acquisition of 77% of Teck’s Elk Valley Resources (EVR) steel making coal assets.

• Orion Minerals (JSE: ORN) has beefed up its board with the appointment of two experienced mining executives as non-executive directors.

• The ex-CFO of Astral Foods (JSE: ARL), Daan Ferreira, has been appointed as a non-executive director on the board on Premier Group (JSE: PMR).

• There’s another resignation from the board of AYO Technology (JSE: AYO), this time in the form of non-executive director Valentine Dzvova. She is the CEO of African Equity Empowerment Investments (JSE: AEE), so this is part of the overall separation of these two companies.

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