A much better period for Capital Appreciation (JSE: CTA)

The Payments division remains the key

Capital Appreciation released a further trading statement for the year ended March 2025. Thanks to the initial trading statement released at the end of May, we already knew that it would be a good period with HEPS up by at least 20%. The latest update just confirms to what extent.

For the year, HEPS is expected to be between 24% and 26% higher vs. the restated base. Importantly, the restatements made HEPS in the prior year 2.8% higher, so it actually created a more demanding base. This makes the growth all the more impressive.

The expected range for HEPS is 17.35 cents to 17.57 cents. The share price is R1.66, so the company is trading at a pretty modest multiple despite the recurring nature of earnings in the key Payments division.

The Software division remains a headache, although to a lesser extent than in the prior period.

Despite huge challenges in Mozambique, Gemfields’ expansion project is nearly complete (JSE: GML)

Being “materially on budget” is an achievement here

Those who have been following the Gemfields story will know that the company had to raise capital due to suffering tough financial results at the same time as undertaking extensive expansion projects. The balance sheet buckled under this weight and shareholders needed to chip in with more capital.

The good news is that the second processing plant at Montepuez Ruby Mine (MRM) in Mozambique is 95% complete and “materially on budget” – and when you read of the challenges involved, ranging from getting work permits through to transporting equipment across Mozambique and managing illegal miner incursions, you realise just how impressive this is.

In terms of the emeralds in Zambia, Gemfields is taking a cautious approach. They’ve reopened a couple of production points at Kagem and they expect to expand operations from July, but full-scale production is not expected for “some months” based on current market conditions. This is an indication that pricing remains under pressure.

The final operational update is that the group is still looking at strategic options for Fabergé, which is a fancy way of saying that the business is for sale. With such a soft market at the moment for gems (and mined diamonds for that matter), there’s much uncertainty in the luxury jewellery space and those aren’t the right conditions for trying to sell a business. We will have to wait and see if someone is willing to buy it.

In a separate announcement, Gemfields confirming the shareholdings of major shareholders and key executives after the rights issue. I’ll just mention a few of them here. CEO Sean Gilbertson has a 4.13% stake in the company, so that’s meaty alignment with other shareholders. The underwriters of the rights issue, Assore International Holdings and Rational Expectations, hold 32.85% and 15.58% respectively.

The notice for the MAS Extraordinary General Meeting is out in the wild (JSE: MSP)

These advisory votes could create a strange situation

The recent activity around MAS has been fascinating to follow. As a reminder, we have PK Investments (the joint venture partner) on one side of the equation, with what started as a cheeky bid for the company that has now become an attempt to use cash in the joint venture as leverage to drive a broader value unlock strategy. On the other side of the equation, we may see Hyprop making an offer to shareholders, although there’s absolutely no guarantee of this.

To test the waters with shareholders, PK Investments requested MAS to call an Extraordinary General Meeting (EGM). The resolutions on the table are of an advisory nature only, as they don’t actually bind the company or its directors to anything. There’s also technically no guarantee of the joint venture paying the much-needed dividend that would upstream cash to MAS. I would see these resolutions as part of a broader process around the deal as the parties feel each other out.

The first resolution is to authorise the board to implement a “structured and commercially driven realisation of the assets of MAS” with the goal being to complete it within 5 years. The second resolution is to authorise the board to distribute the net proceeds of the joint venture dividend to shareholders.

The EGM is scheduled for 11 July. Will Hypop make a move before then, or will they wait to see how shareholders vote?

Master Drilling increases its stake in A&R (JSE: MDI)

This takes their holding from 51% to 66%

Back in 2021, Master Drilling acquired a 25% interest in the A&R group. In 2022, they exercised a call option to take the stake to just over 51%, which is a typical “pathway to control” structure that listed companies often look to implement.

It’s quite unusual to see a stake move higher than 51% unless the intention is to get to a 100% holding i.e. to have no minorities in the structure. Once you control the assets at a 51% stake, the benefit of holding an additional percentage up to 75% (the special resolution threshold) in the company is limited. This isn’t stopping Master Drilling from increasing its stake though, moving up to 66% in a deal that will see them pay for the additional stake over a five-year period.

The purchase price for the additional stake is R50.3 million. It will be paid for in 60 monthly instalment that attract interest at prime less 2%. The cap on the total payments is R119 million. This deferred payment structure is allowing Master Drilling to fund the deal from existing resources.

Master Drilling notes that benefits of this deal include things like increased influence over innovation and technical development, but there’s really no practical difference between having 51% and 66%. This is purely a capital allocation decision.

Vunani swings into losses (JSE: VUN)

And yet the dividend is much higher

Vunani released results for the year ended February 2025. Although revenue was up 4%, they saw a 66% decrease in their results from operating activities. The group swung from HEPS of 7.4 cents into a headline loss per share of 2.8 cents. Despite this, the final dividend was 35 cents vs. 9 cents in the prior period!

This is the group’s first headline loss in the past five years, despite revenue being at the highest level we’ve seen over that period. They also reported negative cash from operations of R9.4 million vs. positive R27.8 million, so that makes the dividend decision look even stranger.

Hopefully the sale of 30% in administration business Fairheads to Old Mutual Corporate Ventures will inject some life into Vunani, but I wouldn’t hold my breath. It remains a scrappy story with businesses facing tough fundamentals, like the asset management business and the ongoing decrease in assets under management, as well as the losses that they keep making in the securities and capital markets business.

Nibbles:

• Director dealings:
  • It’s a good day to be part of the Saltzman family, with Dis-Chem founder (JSE: DCP) founder Ivan Saltzman distributing shares worth R6.8 billion within the family. The question now is whether the family can avoid the trap of generational wealth. Back in March 2024, Dominique Olivier wrote about the Vanderbilt family and the “shirtsleeves curse” in her Ghost Mail column.
  • The vesting of share awards at Vukile (JSE: VKE) led to sales by numerous directors and senior execs of amounts in excess of the taxable portion. These excess sales came to around R24.5 million.
  • The business development director of British American Tobacco (JSE: BTI) sold shares worth R4.4 million.
  • An executive director at Harmony Gold (JSE: HAR) sold shares worth R261.5k.
  • The company secretary of Alexander Forbes (JSE: AFH) sold shares worth R195k.
  • The CEO of Spear REIT (JSE: SEA) bought shares for himself and his minor children worth R56.7k.

• Crookes Brothers (JSE: CKS) released a trading statement dealing with the year ended March 2025. Thanks to better performances in the banana and property segments, HEPS is up by 27% to 425.1 cents. The share price closed 9% higher at R30.

• OUTsurance Group (JSE: OUT) has increased its stake in OUTsurance Holdings from 92.70% to 92.75%, thanks to more employees selling shares in the unlisted holding company in exchange for shares in the listed group.

• The CFO of Kumba Iron Ore (JSE: KIO), Bothwell Mazarura, is stepping down as CFO and Executive Director after 8 years with the company. His notice period runs until the end of December 2025. Here’s the particularly interesting news though: his replacement is Xolani Mbambo, who is stepping down as CEO of Grindrod (JSE: GND). Mbambo brings plenty of experience in logistics to Kumba, so this appointment makes a lot of sense given the current operational challenges in iron ore in South Africa.

• With James Day set to take the CEO role at Emira Property Fund (JSE: EMI), he’s stepping down as Financial Director of Castleview (JSE: CVW). He will however remain on the board of Castleview as Emira’s representative. Lida Le Roux will take over the top finance job from at Castleview. There was also a trading statement for Castleview, reflecting that the final dividend per share for the year ended March 2025 will be 30.1% lower year-on-year. This only gets a mention down here as there is literally zero liquidity in Castleview’s stock.

• Marshall Monteagle (JSE: MMP) is another counter that has very little liquidity in the stock. A trading statement for the year ended March 2025 reflects a drop of 62% in HEPS and 93% in EPS. They attribute this to negative fair value adjustments on the investment portfolio and the movement in value of commercial properties.

• African Rainbow Minerals (JSE: ARM) repurchased almost R500 million worth of shares between 31 March 2025 and 25 April 2025. This is the joy of having proper liquidity in this stock, something that comes with achieving scale on the local market (the market cap is over R36 billion).