Ghost Bites (AH-Vest | Industrials REIT | Grand Parade | Rex Trueform | Sappi | Universal Partners)

No joy for AllJoy from Eskom (JSE: AHL)

AH-Vest has flagged an ugly drop in HEPS

Even a big ol’ helping of tomato sauce won’t make shareholders feel better about this one. AH-Vest is the food manufacturing business responsible for AllJoy. There is NoJoy during loadshedding, with a substantial impact on food production.

Although generator capacity was increased during April 2023, the results for the six months to December 2022 were ruined. Eskom is only partly to blame here, with other factors like supply chain costs playing a role. Sadly, none of these issues have disappeared in 2023. If anything, they have worsened.

For the interim period, AH-Vest has flagged a 68.5% drop in HEPS.

And in case you’ve never heard of this company and you are now questioning your market knowledge, take solace from the fact that the market cap is only R21.4 million. There’s more liquidity in the sauce than in the stock.

Blackstone makes it formal with Industrials REIT (JSE: MLI)

The terms of a cash offer of 168 pence per share have been announced

Operating through a new entity called Sussex Bidco, Blackstone has formalised its offer to the shareholders of Industrials REIT. In practice, this means that terms have been announced.

The price of 168 pence per share is a premium of 40.6% to the one-month volume weighted average price (VWAP). The focus on becoming a pure-play UK multi-let industrial fund has paid off handsomely, attracting a substantial offer for shareholders. The independent board is very happy with the offer, agreeing unanimously to recommend it to shareholders.

Blackstone is the world’s largest alternative asset manager, with $975 billion in assets under management (AUM). Of that huge number, $326 billion is in the real estate side of the business. With a market cap of R11.1 billion, Industrials REIT is literally a rounding error for Blackstone at group level. It just shows how difficult it can be to materially move the needle in a portfolio the size of Blackstone’s.

For shareholders in Industrials REIT though, this is a cash bonanza of note.

A new sheriff in town at Grand Parade (JSE: GPL)

When you control the company, you call the shots

With a stake of 53.65% in Grand Parade Investments after its mandatory offer, GMB Liquidity Corporation now controls the group. Gregory Bortz (spot the initials there) is the new CEO of Grand Parade, taking the top job from 2 May 2023.

What are his plans for the group? Anything is possible. Bortz seems to be heavily involved in the local horseracing industry, so he’s an interesting guy who seems to know how to mix business with pleasure. Grand Parade adds gambling stakes to his portfolio, with the food assets now out of the way.

Rex Trueform posts much stronger results (JSE: RTO)

You need to read carefully though, as acquisitions were a major contributor

When a company posts a huge jump in performance, it’s always worth checking whether there were major acquisitions. Remember, if you buy businesses whether for cash or shares, you’ll be bringing far more revenue etc. into the group. Whether or not that is actually beneficial for shareholders requires a careful read.

At Rex Trueform, the core retail business posted solid growth in revenue but also experienced a substantial deterioration in gross margin due to tough consumer conditions. Gross margin fell from 53.5% to 48.5%, so the jump in revenue was blunted to a (still useful) 16.5% increase in gross profit in the core business.

There was plenty of action in other revenue lines, with media and property acquisitions bringing new sources of revenue into the group.

The net result on HEPS is encouraging to say the least, up by 114.9% to 270.8 cents. The net asset value (NAV) per share increased by 33.4% to R18.74, so the closing price on Friday of R10.09 reflects a substantial discount to NAV.

Marcel Golding’s group is clearly making progress in diversifying its sources of revenue. You can also look at African and Overseas Enterprises Limited (JSE: AOO), part of the same stable.

Sappi will need to be stoic after sale to Aurelius fails (JSE: SAP)

A new buyer is needed for the European graphic paper mills

Perhaps the Roman-emperor inspired name was a giveaway that things might get hectic here. Aurelius has given the thumbs down to the deal with Sappi, causing the latter’s share price to drop nearly 5.8% on this news.

Aurelius was due to acquire three European graphic paper mills from Sappi. One of the conditions precedent was that the parties would agree a separation and transitional services plan. They couldn’t agree in time, so the deal has fallen through.

This leaves Sappi with three mills that it doesn’t want to own anymore. I’m sure there are a few investment bankers who are already on the phone to potential alternative buyers.

Universal Partners: no financial cavities here (JSE: UPL)

The investment in Dentex worked out beautifully

Let’s face it: dentistry isn’t sexy. In my experience, it’s downright unpleasant. The dentist is one thing, but the sadistic oral hygienist is the one to really watch out for.

Personal traumas aside, Universal Partners has proven that investing in an odd industry can sometimes work very well. It’s not easy to scale something like dentistry, so this isn’t an obvious choice for professional investors to get involved in. As astute investors know, you can find excellent returns in unusual places.

Universal Partners invested £32.3m since 2017 to build out the Dentex business. In a deal with Portman Dental Care, the company will get 94% of that investment value back in the form of a cash payout and will retain exposure to the enlarged, merged entity via shareholder loans and equity. The cash risk is off the table and the value of the investment has more than doubled over the past few years. Considering that there was a pandemic in the middle of that period that would’ve done damage to the dentistry industry, that’s impressive.

The combined business will operate over 350 practices in the UK and will have a presence in 5 European countries as well.

Little Bites:

• Director dealings:
  • A prescribed officer of Standard Bank (JSE: SBK) has sold shares worth just over R2m.
  • An associate of a director of Ascendis Health (JSE: ASC) has bought shares worth R36k.

• There’s more bad news at Sibanye-Stillwater (JSE: SSW). Fatalities are still a reality in mining as the operations are risky across the industry. Still, it’s unusual to read of multiple fatalities. Sibanye is dealing with a tragic incident that saw four contractors killed during the installation of a head pulley of conveyor infrastructure. A fifth contractor has been seriously injured. Naturally, a full investigation is underway.

• Gemfields (JSE: GML) has finalised the exchange rate for its dividend. 52.56438 cents per share will be paid to local shareholders. For reference, the share price closed at R4.10 on Friday, so this is a huge yield that reflects the risk that the market is pricing into the business.

• After being forced to postpone its analyst presentation due to the CEO suffering an accident, Metair (JSE: MTA) has announced that the presentation will take place on 20 April.

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