Ghost Bites (Brikor | De Beers | Stor-Age)

What’s brewing at Brikor? (JSE: BIK)

Nikkel Trading is nearly at mandatory offer level

Against the backdrop of brick-making business Brikor reporting a 100% drop in HEPS for the six months ended August 2022 (not something you’ll see every day), the share price has lost around 45% in the past year.

With a market cap of R142.5 million, this company really is ripe for a takeover bid.

Nikkel Trading is coming, having entered into agreements with major Brikor shareholders to acquire over two-thirds of the company’s shares. This was announced back in March, so it’s not a surprise to see another announcement that Nikkel Trading’s stake has increased.

This investor now holds 34.2% in Brikor, so the mandatory offer that was alluded to in March is right around the corner. A mandatory offer is triggered once a stake moves above 35%.

De Beers sales in line with expectations (JSE: AGL)

The third sales cycle brings more good news for Anglo American

De Beers really is a fantastic business within Anglo American. The sales cycles are hard to understand though, as I’m never sure how comparable a particular sales cycle in 2023 would be to the same cycle in 2022.

For this reason, I tend to focus on the CEO commentary. In the latest sales cycle (worth $540 million), De Beers sounds happy as sales were in line with expectations. Encouragingly, there are positive trends in demand for diamond jewellery, especially in China where a relaxation of travel restrictions is coming through in consumer confidence.

This is an important read-through for all luxury brands, as China is a huge market.

Stor-Age is doing clever deals in the UK (JSE: SSS)

The company is taking just a 10% stake in four properties and will manage them as well

For Stor-Age to create shareholder value, the company needs to find ways to enhance its yield. One way to do this is to manage properties, not just acquire them. This introduces an element of capital-light earnings, which would go a long way towards injecting some excitement into the share price.

The latest deal in the UK is a good example. Stor-Age is acquiring a 10% interest in a joint venture that is buying four Easistore properties as its first deal. The 90% partner is Nuveen Real Estate, a global investment manager with a whopping $154 billion in assets under management. There’s a very good chance of further deals down the line for this joint venture if the initial acquisition is a success.

Here’s the kicker: the properties will be branded and managed by Storage King under its third party management platform. Storage King is Stor-Age’s brand in the UK. This is why the forecast pre-tax yield on investment is 15%, with Stor-Age contributing £4.4 million (including transaction and rebrand costs).

This deal takes the Storage King portfolio to 39 properties by the end of the year.

The group is still investing locally as well. The development and expansion pipeline of 11 properties is as even a split as you can get: 5 in SA and 6 in the UK.

Looking a bit deeper into this deal, the debt funding is being provided by Natwest in the form of a £41 million five-year bullet facility (i.e. only interest is paid until maturity). There is also considerable room for value creation at property level, with occupancy at the largest property as low as 63.6%. The other properties vary from 84.8% to 93.1%.

Little Bites:

• Bytes (JSE: BYI has announced the appointment of Sam Mudd as an executive director of the group. Sam is currently the MD of Phoenix Software, a subsidiary of the group. Her CV is a wonderful throwback, with extensive experience including a stint at WordPerfect! If you were around before Microsoft absolutely dominated with its Office suite, you might remember that name.

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