Ghost Bites (African Rainbow Capital | Eastern Platinum | Grindrod Shipping | Harmony | Italtile | MAS | RMB Holdings)

Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:

ARC completes its rights offer (JSE: AIL)

The underwriter got a big chunk of shares, which isn’t a shock

I’ve written extensively about this rights offer and some of the mechanics that I felt made it painful for minority shareholders. I won’t delve into that again here.

The latest news is that the rights offer by African Rainbow Capital has been completed and holders of roughly 65% of shares in issue followed their rights. This means that the underwriter got around 35% of the shares being issued in this capital raise.

For those who didn’t follow their rights and ended up with those shares going to the underwriter, this was a significant loss of value because of the pricing of the rights issue.

Eastern Platinum announces the whistleblower findings (JSE: EPS)

The good news is that they were unsubstantiated

The special committee of independent directors has worked through the investigation of the whistleblower allegations at Eastern Platinum. The allegations related to undisclosed related party transactions for the sale of chrome concentrate at discounted prices.

The good news is that the committee has found that the allegations are unsubstantiated, so this can be put to bed now.

Shipping rates look flat at Grindrod Shipping (JSE: GSH)

Grindrod Shipping’s holding company has given updated disclosure on shipping rates

You have to be careful in taking the disclosure by Taylor Maritime Investments and applying it directly to Grindrod Shipping. Taylor discloses the shipping rates for the combined fleets, so it gives insight into the direction of shipping rates but isn’t a perfect indication of quantum at Grindrod Shipping.

For the six months to September 2023, the time charter equivalent (TCE) was $11,550 per day. Looking ahead to the period ending 31 March 2024, the booked rate is an average of $11,634 per day. We aren’t seeing much of an uptick in shipping rates at the moment, but they aren’t dropping either.

Harmony looks to up its B-BBEE ownership (JSE: HAR)

The company envisages the issuance of convertible preference shares to two holders

Harmony Gold wants to top up its B-BBEE ownership through the issuance of convertible preference shares to the Harmony Gold Community Trust and the Harmony ESOP Trust.

Upon conversion, the shares would represent 0.4% and 2.0% of issued ordinary shares respectively.

The pro-forma effect of these transactions is a 5% decrease in HEPS.

Italtile’s sales are going backwards (JSE: ITE)

Consumer discretionary spending remains very tight

Italtile released a sales update for the five months to November. As you might expect, it notes all the different sources of consumer pressure and the problem of overstocked retailers. On top of this, competition is strong in the sector and margins are under pressure to try respond to the poor demand.

System-wide retail turnover fell by 2.9% in this period and the integrated import supply chain business was also negatively impacted by weaker retail sales. Group manufacturing sales to both group and third-party customers fell 5.9%.

Manufacturing businesses really struggle when sales go backwards, the operating leverage starts to work against you rather than with you. The company has warned that profitability will be negatively affected, but further details aren’t given.

MAS still might not pay dividends until 2026 (JSE: MSP)

This is an ultra-cautious approach to the balance sheet

MAS has released a pre-close update for the six months ending December 2023. Operationally, things sound good. For the four months to October, like-for-like footfall is up 8% year-on-year and trading density increased 7%. Occupancy cost ratios are good and so are collections.

Why, then, is there still no sign of a dividend? MAS recently suspended its dividend because of an incredibly cautious approach to the balance sheet. The company doesn’t like what is going on in the bond market, so they are working towards reducing bond refinancing risk in 2026. Now, looking that far ahead is admirable, but perhaps it really is too conservative here.

With the completion of a tender offer for those bonds, the exposure to the 2026 refinancing has been reduced. The group has repurchased €80.7million of notes at a 9.3% discount to par.

The best forecast is that €76million in debt will need to be raised by May 2026 to achieve the balance sheet objectives. Although the group is well placed for this, they believe that dividend payments cannot be resumed before June 2026 if existing bond conditions persist.

RMB Holdings gives an update on NAV per share (JSE: RMH)

Comparability is limited here due to a change in year end and a special dividend

If it wasn’t for the change in financial reporting period and the special dividend, RMB Holdings wouldn’t have needed to release a trading statement as earnings would’ve differed by less than 20%. This is why the percentage change is misleading.

Instead, the important update is that the net asset value range is between 95 cents and 115 cents. The share price is 57 cents.

Little Bites:

• Director dealings:
  • Tjaart Kruger has bought another R1.2 million worth of shares in Tiger Brands (JSE: TBS).
  • A director of a major subsidiary of Netcare (JSE: NTC) has sold shares worth nearly R1.7 million and a different director sold shares worth R1.2 million.
  • The chairman of Sibanye-Stillwater (JSE: SSW) has bought shares worth R426k. An independent non-executive director also bought shares worth R109k.
  • Although I’m sure that more announcements of this nature will come through, two directors of African Rainbow Capital (JSE: AIL) have subscribed for shares worth just over R200k in the rights issue.
  • An executive director of Libstar (JSE: LBR) has bought shares worth R101k.

• There’s some good news at Wesizwe Platinum (JSE: WEZ), with the employees who were staging a “sit-in” protest having returned to the surface at the Bakubung Platinum Mine.

• Sebata Holdings (JSE: SEB) released a trading statement for the six months ended September 2023. The headline loss per share has deteriorated from -5.27 cents to a range of -9.39 cents and -10.44 cents.

• African Equity Empowerment Investments (JSE: AEE) has classified its investment in AYO Technology as a discontinued operation. But even with that adjustment made, a trading statement for the year ended August 2023 reflects HEPS from continuing operations of between 0.50 and -0.08 cents, so this could be loss-making even with discontinued operations removed. HEPS from continuing operations was 2.93 cents in the comparable period.

• Kibo Energy (JSE: KBO) is still trying desperately to get the joint venture for Mast Energy Developments (MED) across the line. After multiple delays, the joint venture partner (Proventure Holdings) has committed to pay the remaining amount between 15 and 20 December. An extension has been granted to allow for this. It really will be a disaster if the joint venture fails to go through after all this effort and so many extensions.

• Spar (JSE: SPP) has announced the appointment of two non-executive directors. One has a lot of experience in FMCG and marketing and the other is a specialist in big data and artificial intelligence. Although it’s good to see a data push here, they definitely need to just get the basics right.

• The acting CFO of Kore Potash (JSE: KP2) has resigned. Andrey Maruta has come back into the role, which he previously held between 2019 and 2021 before pursuing another opportunity.

• Europa Metals (JSE: EUZ) has issued performance shares to directors that represent roughly 3.7% of shares in issue. It’s a pity that the website doesn’t seem to be working!

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