Afrimat’s ugly year continues (JSE: AFT)
The share price has shed 45% of its value in 2025
Afrimat is navigating quite the storm at the moment, with the business dealing with a most unfortunate cocktail of unfavourable commodity markets, major concerns around South African infrastructure and the overhang of potential corporate failure at ArcelorMittal (JSE: ACL) as a major customer. Although Afrimat has noted that the bulk of its supply to ArcelorMittal goes to ArcelorMittal’s Flats business, not the Longs business that is likely to be shut down, the market doesn’t like risk and especially not in a market like South Africa.
Speaking of risk, Afrimat recently rolled the dice in acquiring the Lafarge business, a transaction with substantial long-term potential and short-term pain.
The net result of all this is unfortunately a plummeting share price,
Afrimat has released a pre-close update dealing with the six months ending August. They note that although Q1 was weak, there were signs of improvement in Q2. This includes an improvement in sales volumes, as well as significant progress made on the integration of the Lafarge business.
Here’s a fun fact for you: 50% of the Transnet-approved quarries are owned by Afrimat. This gives you an idea of the potential upside in the business if we could just see an improvement to the South African infrastructure story. A separate and highly relevant point regarding Transnet is confirmation by Afrimat that the decline in logistics availability on the Saldanha export line has been stopped, which is obviously great news for the iron ore business.
Afrimat shareholders have historically been spoilt by the company’s diversification and ability to avoid the typical cyclical pain that is found in this sector. The recent combination of issues has proven to be too much for the market, leading to the huge decline in the share price. Afrimat is all the way back to the levels seen five years ago. Like all cyclicals, at some point this is likely to turn and those who buy at the bottom will make a fortune. Alas, figuring out the exact location of the bottom isn’t so easy.
Bidcorp just keeps delivering (JSE: BID)
This is one of the most solid names on the JSE
Bidcorp has released results for the year ended June 2025. With the recent performance of the rand, their position as one of the most effective rand hedges on the JSE was actually a negative in this period! This is evidenced by revenue being up 6.8% in constant currency, but only 4.3% as reported.
Trading profit increased by 6.4% and HEPS was up 6.5%. The dividend increased by 6.4%. It’s a dependable, simple shape to the income statement that appeals to long-term investors.
The share price closed 3.7% lower though, taking the year-to-date move to +4.7% (with very choppy trading along the way). Bidcorp trades at a lofty Price/Earnings multiple, hence why there’s no obvious direction to the share price in a period in which performance is positive, but also uninspiring.
As a quick note on underlying performance, it was the UK and Europe that saw a strong bump in profit in this period, with a positive contribution from emerging markets as well. Australasia was a drag on performance and is unfortunately the second largest segment in terms of profits, so that would’ve contributed to the share price dip on the day.
Blue Label Telecoms took an 18% bath on the day of releasing earnings (JSE: BLU)
And there was no shortage of fighting between bulls and bears on the socials
There are three types of people when it comes to Blue Label Telecoms: (1) those who claim to understand the financials, (2) those who at least acknowledge that they bought the stock based on momentum, rather than fundamentals, and (3) those who don’t buy complicated financials on principle. I fall into the third category.
It seems as though a number of people in the second category headed for the exit on Tuesday, with the share price closing 18% lower on the day of results. This is despite a 2% increase in gross profit and a 17% increase in EBITDA. Once you factor in the huge swing on the associates line though, you end up with a 262% increase in headline earnings!
It’s usually worth following the cash and seeing how a business actually makes its money. Blue Label generated cash from trading operations of R488 million and then spent so much on interest (and tax) that they ended up with a net cash outflow from operating activities of R466 million. The reason why the net decrease in group cash for the year to May 2025 was “only” R75 million is that they raised a whole lot of debt.
The sooner that Blue Label separates out Cell C and lists it as a standalone company, the better. The reaction by the market to these numbers tells you that people are jittery and unsure of what the fair value really is. Of course, this is both an opportunity and a risk, which is what makes markets so exciting!
Curro to be taken private at R13 per share (JSE: COH)
From growth darling to charity case – literally
A decade ago, Curro was the growth story on the JSE. People were fighting over each other for allocations in capital raises, with the story being clear: South Africa was failing its people and thus there was a huge opportunity in offering private education to middle-income South Africans. In some respects, they were right. The risk that was probably impossible to foresee at the time was a sharp decline in total births in South Africa, a function of both a huge shift in society and substantial emigration as well.
If you can’t fill the schools, it’s very hard to make money from them. Curro’s results for the six months to June tell a story of a company that is treading water, with revenue up 4.7% and flat EBITDA for the year. Recurring HEPS increased by just 0.2%.
Is that a sustainable business? Sure. Is it an appealing investment? No.
With very little likelihood (in my view) of the trend in learner numbers turning positive, Curro’s story has evolved from one of growth to one of social enterprise, where the company is capable of running at a sustainable profit, but probably not with the kind of metrics that investors want to see.
This is where the Jannie Mouton Stigting comes in, being a public benefit organisation that was founded by Mouton as an education investment vehicle and that currently has a 3.36% stake in Curro. Clearly, Curro is the perfect way to execute the overall dream of the organisation. The Jannie Mouton Stigting will be acquiring Curro and turning it into a non-profit company through this transaction.
I must say, I’m surprised that there is a reference in the announcement to a need to scale Curro even further. Perhaps they will invest in more schools aimed at lower-income families, with a price point to match. I hope so, as that would truly make a difference in South Africa. With the current pricing strategy, I just don’t think that Curro is targeting a broad enough group of kids.
The Jannie Mouton Stigting is paying up for the stake, with a price of R13 per share on the table for Curro. This is a reminder of the dangers of shorting, as having a short position in Curro would’ve been a perfectly reasonable thing to do under the current fundamental circumstances, yet this offer just came in at a 60% premium to the closing price on 25 August. Anyone caught short on this stock is seriously bleeding.
The deal will be paid for through cash (only 6.6% of the price) and a swap of Capitec and PSG Financial Services shares currently held by the trust. It’s therefore an incredibly clever situation in which the trust is using its capital base in highly successful companies to go and acquire a group that perfectly matches its objectives.
Other than for those who just saw their short positions obliterated, it’s hard to see how anyone could fault this deal. People like to hate on billionaires, yet another example of one stepping in to make up for the failings of government. Save your energy for hating on corrupt public officials instead.
A spectacular year for OUTsurance (JSE: OUT)
This adds to the positive sentiment in the financial services sector
Generally speaking, the insurance-based financial services groups are doing well at the moment. OUTsurance has added its voice (and growth) to that mix, with a trading update for the year ended June 2025.
They are enjoying not just decent premium growth, but also a favourable claims experience. Although they are incubating OUTsurance Ireland as a new business and are thus incurring start-up losses there, the growth elsewhere in the group is more than making up for it. In fact, it’s the Australian business that is really flying at the moment in terms of the larger segments, serving as a wonderful reminder that OUTsurance knows exactly how to build offshore businesses from scratch. If they can replicate the Australian success in Ireland, shareholders should be smiling.
The smiles are there already, with HEPS up by between 26% and 32% for the year to June 2025. Although OUTsurance trades at a substantial Price/Earnings multiple, that’s still good enough for a 12% year-to-date performance in the share price.
Spur is on the wrong end of an arbitration claim (JSE: SUR)
And it’s an oral agreement about ribs that is being debated, ironically
Two companies within the Spur group were served summons in 2019 by GPS Food Group RSA, based on an alleged oral agreement regarding the establishment of a rib processing facility. The damages claim is between R119.9 million and R167 million. If that first claim failed, there was an alternative delictual claim of R95.8 million.
The parties went to arbitration and the arbitrator made a “part award” yesterday in favour of GPS based on the first claim (the bigger one). No award was made on the second claim. Notably, the arbitrator hasn’t determined the quantum of damages.
Either way, Spur will appeal it within the next 30 days. This goes to a panel of three arbitrators and that ruling is final.
Transpaco reflects the broader SA industrial sentiment (JSE: TPC)
Almost every metric is slightly in the red
Transpaco released results for the year to June 2025. They are incredibly uninspiring, with revenue down 2.2% and HEPS down 0.9%. The dividend was down 2.1%. This isn’t the most liquid stock around, but a 13.3% year-to-date drop tells you that all isn’t well in the industrial segment of the South African economy.
The plastics division grew revenue by 0.2% at least, while the paper division fell by 4.6%. If there’s a silver lining in here somewhere, it’s probably that group operating margin was maintained at 8.6%. Under the circumstances, that’s actually quite impressive.
The SA Inc. dream really hasn’t come to fruition this year, despite all the exuberance we saw in 2024 around the GNU.
Nibbles:
- Director dealings:
- The spouse of the CEO of Huge Group (JSE: HUG) bought shares worth R675k.
- A director of Invicta (JSE: IVT) bought shares worth R58k.
- The CEO of Vunani (JSE: VUN) bought shares worth R8k.
- Putprop (JSE: PPR) has guided an increase in HEPS for the year ended June 2025 of between 20.8% and 40.8%.
- All the resolutions that would’ve been in favour of the group of institutional shareholders who demanded the extraordinary general meeting of MAS (JSE: MSP) failed to pass at the meeting. This is obviously because the Prime Kapital offer was a success in terms of getting enough votes locked in ahead of that meeting.
- Primary Health Properties (JSE: PHP) has confirmed that the offer to Assura (JSE: AHR) shareholders will remain open for acceptance until 10 September 2025. Primary Health now has over 92% in Assura and they will be following the compulsory acquisition (or squeeze-out) process to take this to 100%, delisting Assura in the process.
- ASP Isotopes (JSE: ISO) has officially started trading on the JSE! It will no doubt take a while for volumes to pick up, as is usually the case with a new listing.
- Rex Trueform (JSE: RTO) will increase its stake in Byte Orbit from 30.02% to 51.02% for R21 million. They will pay for it through the issuance of more Rex Trueform N shares, which are listed on the JSE. It may sound like a toothpaste company, but it’s actually a software and digital innovation company. This is also relevant to shareholders of African and Overseas Enterprises (JSE: AOO).
- AYO Technology (JSE: AYO) has pushed out its general meeting from 29 August to 29 September based on a request from the PIC to have more time to consider the “merits and risks associated with holding shares in a delisted entity”.
- Salungano (JSE: SLG) has agreed a “standstill” with its banks, which means they standstill on their legal rights provided that the company complies with the terms of its debt. Salungano has been in breach of its loan facilities since 21 June 2023. Remember, when you owe the bank a fortune, you can get them to standstill. When you just owe them for a car, you’ll be the one standing still after they take it away.
- Wesizwe Platinum (JSE: WEZ) is suspended from trading and hopes to finalise its audit process for the 2024 financials by the end of September.
Note: Ghost Bites is my journal of each day’s news on SENS. It reflects my own opinions and analysis and should only be one part of your research process. Nothing you read here is financial advice. E&OE. Disclaimer.
