A solid quarter at Alphamin after their operational restart (JSE: APH)

The numbers look much better

After a rough time in Q1 2025 that saw a sequential drop of 31% in ore processed (i.e. vs. Q4 2024), Alphamin needed a strong recovery. Security concerns in mid-March had ruined that quarter due to an operational stop on 13 March 2025. Operations were only resumed on 15 April 2025. As you can imagine, this resulted in a decrease in production guidance for the year and a nasty outcome for the share price:

As you can also see, the share price has clawed back much of the losses. The production results for the second quarter should give further momentum to the recovery, as tin sales increased by 19% in Q2 vs. Q1. With steady tin prices and only a slight uptick in all-in sustaining costs, this means that EBITDA was up 21% sequentially. This is despite a 4% decrease in production.

With results like these, the balance sheet is looking much healthier. They’ve swung from a net debt position of $2 million to a net cash position of $50 million – that’s much more like it.

They can’t get back the lost time of course, but they are certainly doing their best.

Capitec’s credit rating has a positive outlook, but there’s a broader story here (JSE: CPI)

S&P had some good things to say about SA as a whole, to the benefit of all banks

Credit ratings don’t tell you much about equity returns, as credit rating agencies are focused only on downside risk, whereas equity investors need to consider the upside potential in the context of the down risk. The useful thing for equity investors is that a better credit rating means a lower cost of borrowing, which in turn puts more of the economics of the business in the hands of equity holders.

Capitec’s credit rating has been affirmed by S&P with a positive outlook. That’s not a surprise. The bigger surprise is the commentary from S&P about South Africa, which I’m going to repeat verbatim from the Capitec announcement because it’s so interesting:

“S&P Global Ratings (‘S&P’) revised their Banking Industry Country Risk Assessment (BICRA) anchor for South African banks upwards from ‘bb+’ to ‘bbb-‘based on their view that the South African banking system has transitioned into an expansionary phase and that the risk of economic imbalances has declined. S&P’s view is based on their expectation that real estate prices will increase moderately in nominal terms and that lending growth will remain cautious and mainly driven by infrastructure investments.”

Expansionary phase? Real estate prices up moderately in nominal terms? Infrastructure investments?!?

Look, I’ll take it. I’ll take it with a smile.

Revenue slipped at Hudaco and it’s apparently South Africa’s fault (JSE: HDC)

At least operating margin moved higher

Hudaco released results for the six months to May 2025. Revenue fell by 2.4%, with the company making many references to overall conditions in South Africa. Despite this, operating profit increased by 1.5% and operating margin moved up from 10.4% to 10.8%, so they managed to turn water into wine (and plenty of whine in the narrative).

By the time you get to HEPS, you find a jump of 19.6%. This is because of a fair value adjustment related to the Brigit Fire vendor liability. HEPS is good, but it doesn’t catch every single distortion. Helpfully, Hudaco disclosed comparable earnings per share without that adjustment, which increased by 6.1% (a solid outcome based on the revenue pressure).

Solid cash generation in the period supported an increase in the interim dividend per share of 7.7%.

Looking deeper, the segmental trend has continued: consumer-related products are under pressure with sales down 6% thanks to lower volumes. They saw a strong uptick in operating margin though, from 9.9% to 11.3%. In engineering consumables, sales fell by 1.2%, so the more resilient part of the business couldn’t find its way into the green in this period. Operating profit fell by 2% in that segment as margins went the wrong way.

The outlook statement continues to blame South Africa for Hudaco’s challenges. Whilst I don’t doubt that things aren’t easy, aren’t these executives being paid a great deal of money to find ways to create shareholder value despite the challenges? It always frustrates me when listed companies throw their hands up in the air, especially when the dividend payout ratio is just 37%. If you’re retaining two-thirds of shareholder capital, you need to do something with it beyond just complaining about South Africa. If you can’t figure that out, then pay a higher dividends.

Reinet has agreed to sell Pension Insurance Corporation – at a discount to Reinet’s NAV (JSE: RNI)

What will they do with all this money?

Reinet recently responded to speculation about a potential sale of Pension Insurance Corporation. They confirmed that they had been approached by a potential buyer. Things have subsequently moved quickly, with a subsidiary of Athora Holding (a European savings and retirement group) looking to buy Reinet’s entire 49.5% stake in Pension Insurance Corporation. This is part of a broader deal in which all shareholders in the company are selling to Athora.

Based on the March 2025 accounts, this stake was 53.7% of Reinet’s net asset value (NAV). This comes after they sold their British American Tobacco stake, leading to cash and liquid funds being 26.3% of Reinet’s NAV as at March 2025. The private equity and partnership investments were less than 20% of NAV, so this disposal turns Reinet into a group that will have so much cash once this transaction closes in 2026 that Johann Rupert might even need to sleep with his doors locked once more. We won’t tell Trump.

Reinet notes that the proceeds will be used for ongoing investment purposes. To deploy this extent of capital alongside the British American Tobacco proceeds, they must have a gigantic deal in mind. I really hope it won’t just be spread around the various investment funds they have already allocated capital to, as that will lead to Reinet trading at a substantial discount to NAV.

The price on the table is £5.7 billion for 100% of Pension Insurance Corporation. This implies a value of £2.8 billion for Reinet. They recognised the stake at a value of €3.7 billion as at March 2025, which converts to £3.2 billion at current exchange rates. In other words, Reinet is selling at a discount of 12.5% to the last value at which they carried it in their accounts.

Although they expect the price to tick up to £5.9 billion for the entire thing once dividends have been taken into account, we need to compare the current value to the NAV rather than the expected eventual price.

Discount aside, they have invested £1.1 billion in this stake over the years, starting with £0.4 billion in 2012. They’ve received £0.4 billion in dividends. That’s a net investment of £0.7 billion to get £3.2 billion out – not bad at all!

Nibbles:

• The joke that is aReit (JSE: APO) continues. The company is suspended from trading because they haven’t done financials for the year ended December 2023. The reason? Their auditors are reliant on third party confirmations from auditors of some of their tenants, with an unclear timeline for this to become available. How on earth is a listed company in a position where they are reliant on auditors of tenants for their accounts to be done? Every possible warning sign was there when this thing listed. As regular readers may recall, I didn’t make myself popular when they came to market and I certainly have no regrets, as it turned out even worse than expected.