Ghost Bites (Brait | Copper 360 | Remgro | Sabvest | Transaction Capital – WeBuyCars)

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Brait placed R900 million worth of shares in Premier (JSE: BAT)

This represents 11.6% of total Premier shares in issue

When Brait initially told the market that it wanted to reduce its stake in Premier to raise cash, the intention was to unlock R750 million through the placement. Thanks to strong demand for the shares, Brait subsequently increased the placement size to R900 million. Even at that level, it was significantly oversubscribed.

The price at which the shares were placed was a 6.7% discount to the 30-day VWAP, which under the circumstances is quite good I think. You have to remember that a whopping 11.6% of Premier shares in issue were sold through this process. Doing that through the order book on the JSE would almost certainly have been a far worse outcome.

Brait’s stake in Premier reduces from 47.1% to 35.4% as a result. The free float of Premier increases from 22.0% to 33.6%.

Brait’s share price closed 4.5% higher on the news. When a company is trading at a deep discount to underlying assets, turning those assets into cash inevitably helps to close the discount.

Copper 360 moves ahead with Nama Copper (JSE: CPR)

The due diligence has been successful

Copper 360 announced the acquisition of Nama Copper Resources in November 2023. The envisaged price was R200 million, subject to a four-month due diligence process.

The due diligence went well, with R140.5 million paid to date under the deal and a management team having been appointed. A further R9.5 million is payable in the next two weeks.

The change to the deal is that Mazule, the seller, is no longer the offtake partner. The final R50 million owed to them will therefore be paid in cash across three monthly instalments over March to May 2024. Prepayments from the new offtake partner (Fujax UK) will fund these payments. The prepayments over the next few months will be subtracted from amounts due by Fujax over five years, with interest on the remaining balance applied monthly.

Remgro: firmly in the wrong direction of travel (JSE: REM)

What has gone wrong at Heineken Beverages since the Distell deal?

Remgro released results for the six months ended December 2023. It really hasn’t been a happy time, with the intrinsic net asset value (INAV) per share down by 4.6% to R236.95 in the space of just six months.

The share price? That’s at R130.98, a discount of 45% to the INAV. You can compare this to Sabvest below, trading at a discount of roughly 37%. There’s no way of escaping a discount to INAV for these groups; it’s just the extent of the discount that varies.

Unlike at Sabvest, Remgro accounts for some of its investments on a consolidated basis. The group reports headline earnings, but I just don’t think that’s very helpful for an investment holding company, unless you’re digging into the earnings of the underlying portfolio companies.

Speaking of which, there’s trouble at Heineken Beverages. In the comparable period, Distell’s contribution was R517 million in headline earnings. After the deal, Heineken Beverages managed to contribute a spectacular loss of R208 million, while Capevin contributed R57 million. That’s really bad. Remgro has now impaired the investment in Heineken Beverages by R3.5 billion.

There are other reasons for concern as well, like the entirely uninspiring performance of Mediclinic and the pressure on earnings at CIVH due to higher finance costs. TotalEnergies also recognised a negative fair value adjustment on its Natref stock in this period, with Remgro suffering a portion of that.

This is an awkward set of numbers for Remgro that gives the market very little (if any) confidence about the recent dealmaking track record.

Sabvest Capital releases its financials (JSE: SBP)

This is the first drop in NAV on a one year basis in twenty years

Sabvest is seen as one of the better investment holding companies on the JSE. It still trades at a discount to net asset value (NAV) per share though, with the share price at R69.00 vs. NAV per share of R109.36 as at the end of December 2023. This is despite having a portfolio of thirteen unlisted vs. three listed investments. Generally, having assets with no other access points on the market drives a lower discount to NAV. Even then, it’s tough for these types of structures on the local market.

The company accounts for its investments at fair value, which means growth in NAV per share is the measure of success. The 15-year compound annual growth rate (CAGR) in NAV per share is 17.2%, excluding reinvestment of dividends. Including reinvestment, it comes in at 18.5%. This is a strong track record.

Over 3 years and 5 years, the CAGR in NAV per share is 13.7% and 13.3% respectively.

Aside from being caught out by the pain at Transaction Capital (in which Sabvest has an important stake), the other significant knock was felt in ITL. This is the Intelligent Labelling Solutions business, which saw disappointing retail demand in the northern hemisphere among various other challenges.

These problems (along with the broader macroeconomic challenges in South Africa) led to a poor year for NAV growth, coming in at a 0.7% decrease. This is the first drop in NAV per share in a single period for over 20 years! It won’t do the CAGR track record any favours and they will certainly hope that this won’t be repeated. They expect to “resume satisfactory growth in NAV per share” in 2024.

The total dividend for the year of 90 cents was in line with the prior year. Share buybacks for the year came in at R11.8 million vs. R9.5 million the prior year.

The market has spoken re: WeBuyCars (JSE: TCP)

Transaction Capital’s pre-capital raise is complete

Transaction Capital had a tough day on the market, closing 7% lower after announcing the results of the pre-listing capital raise for WeBuyCars. R902.7 million was raised and the placement was priced at R18.75 per share in WeBuyCars.

The market probably didn’t like this because Transaction Capital offered shares at between R21.08 and R24.54 per share and investors weren’t interested at this price. The bookbuild was oversubscribed at R18.75 per share, but Transaction Capital elected not to accept all bids, so the amount raised was at the bottom end of guidance.

The implied market cap based on this pricing is R7.82 billion for WeBuyCars. I must be honest that I’m not sure how they expected to get up to 30% more than that in terms of valuation, which was implied by the upper end of the pricing range in the initial announcement.

A R7.8 billion valuation looks decent to me!

You can watch the recording of the recent Unlock the Stock event featuring the management team of WeBuyCars here:

Little Bites:

• Director dealings:
  • An associate of a director of Quantum Foods (JSE: QFH) has bought shares worth R5.44 million. The price paid was R10 per share and this was an off-market trade.
  • Des de Beer has bought another R1.66 million worth of shares in Lighthouse Properties (JSE: LTE).
  • A director of Standard Bank (JSE: SBK) bought shares worth R187.5k.
  • An associate of a director of Libstar (JSE: LBR) bought shares worth R144.5k.

• Shareholders in Marshall Monteagle (JSE: MMP) voted unanimously in favour of the disposal of Stromesa Court.

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