Ghost Bites (African Media Entertainment | Brait | MTN | Premier Fishing and Brands | Sun International)

African Media Entertainment share repurchases (JSE: AME)

For small caps, repurchases should be balanced against liquidity

There’s a double-edged sword at play when it comes to repurchases by small caps. They usually trade at modest multiples, so buybacks (literally an investment by the company in its own shares) can be highly effective. Lewis is a wonderful example of that.

The other factor that needs to be considered is liquidity in the stock. Low liquidity can really hamper the share price, as larger investors simply can’t take positions. African Media Entertainment isn’t exactly the most liquid stock around and that situation is likely to worsen, as 6.4% of issues shares have been repurchased since 31 March 2022.

The market cap is under R240 million, so this company is firmly in small cap territory.

Brait: the Premier IPO could be back! (JSE: BAT)

Virgin Active also seems to be doing better in 2023

In a trading update covering the ten months to 31 January, Brait gave the market some news that drove a 6.2% rally in the share price: the IPO of Premier could be back on the table!

This FMCG business has a formidable reputation and was being built for a separate listing before Brait pulled the plug based on market conditions. Interim revenue and EBITDA growth was 25% and 16% respectively, with that momentum continuing over the ten-month period. Importantly, margin has been maintained without losing market share.

Pricing power is critical in this space and Premier seems to have it, helping to drive a R294 million capital repayment on its debt in January thanks to strong profitability.

Brait is in the process of selling shares in Premier to Titan and RMB, which means Christo Wiese and his bankers are currently at the front of the queue to get the business. A group of institutional investors and other parties have approached Brait with a commitment to participate in the IPO. This group is big enough to meet the JSE’s free float requirements for a new listing, so the Brait board needs to seriously weigh up this option against the existing deal that is being executed.

At Brait’s other major business, Virgin Active, memberships for the year ended December 2022 were up 18% despite a tough December in South Africa and the UK. Italy seems to have done well over that period. Thankfully, the “new year, new me” crowd are in full force in 2023, with sales and net membership growth ahead of budget.

The group’s active membership base has reached 86% of 2019 levels, so the impact from the pandemic is still being felt.

At New Look, pressure on UK consumers has led to a more promotional environment and that isn’t good news for margins, despite a decent trading performance overall. New Look has a value-focused offering, which is a good thing when economic times are difficult.

MTN subsidiaries are reporting again (JSE: MTN)

Ghana and Rwanda have given us a view on latest numbers

MTN is an interesting one, with the African subsidiaries reporting on a quarterly basis and giving us solid insights into the performance of the group in key markets outside of South Africa. Nigeria is the big one, but it’s worth keeping an eye on the smaller businesses as well.

Ghana went first, releasing results for the year ended December. Total revenue was up 28.4% and EBITDA increased by 30.9%, so there was EBITDA margin expansion. As is the theme in Africa, the investment in the network is substantial, with capital expenditure up by 44%. This means that capital intensity (the percentage of revenue invested in capital expenditure) has increased.

The economy is in serious trouble in Ghana, with the government needing to use IMF money to steady the ship. This is why the government tried to shake the tree at MTN Ghana to see what tax revenue would fall out of it, a plan they abandoned fairly quickly. MTN is still investing in the country and is confident in the medium- to long-term prospects.

In Rwanda, MTN grew its service revenue by 19.9% and EBITDA by 20.8%. Capital expenditure was up by 28%. You can see exactly the same trends in play in Rwanda as in Ghana, minus the macroeconomic turmoil for the country as a whole.

MTN’s African subsidiaries are growing quickly, but they are cash-hungry beasts.

Premier Fishing and Brands could disappear from the JSE (JSE: PFB)

Sekunjalo has made a firm offer to shareholders

The original deal structure saw the offer being made by African Equity Empowerment Investments, with that offer having now lapsed and been replaced by an offer from Sekunjalo. The Takeover Regulation Panel has agreed to the offeror being substituted in this process.

In terms of the structuring of the “offer”, this is actually a scheme of arrangement that will be proposed by the board of Premier Fishing and Brands to shareholders. The minority shareholders only hold 6.14% of the company, so it really doesn’t make sense for the company to continue being listed.

The offer price is R1.60 per share. It’s quite incredible to note a return of nearly 260% since a year ago when the markets crashed in the wake of the Ukraine invasion!

Sun International is shining once more (JSE: SUI)

Shareholders enjoyed a 4.3% rally on Friday

The year ended December saw a strong recovery from Sun International, as the pandemic faded and a new dawn arrived for the tourism and entertainment industry. A genuine new dawn I mean, not the political kind filled with empty promises.

In a trading statement, Sun International guided that HEPS will be more than double the prior year, coming in at between 213 cents and 237 cents per share. There’s an adjusted HEPS number of between 415 cents and 461 cents, with the difference relating to the SunWest put option liability.

The important thing is that the results were solid across urban casinos, SunSlots and SunBet. Sun City appears to have put in a particularly strong rebound, as tourists flocked there for the famous Sun City Burn on the back of their necks.

Little Bites

• Director dealings:
  • The company secretary of Stor-Age (JSE: SSS) has acquired shares worth R264k

• In a few days from now, searching for Capital & Counties on the JSE won’t yield any results. The company is changing its name to Shaftesbury Capital after the recent merger. The current share code is JSE: CCO and it will change to JSE: SHC.

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