Wednesday, December 4, 2024

GHOST BITES (Coronation | Old Mutual | RMB Holdings)

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Single-digit growth at Coronation (JSE: CML)

Provided you adjust for the SARS dispute, of course

Coronation has released results for the year ended September. Revenue was up 7% and fund management earnings per share (excluding the SARS matter) was up 9%, so it’s a respectable result but nothing exciting.

If you don’t adjust for the SARS issue, then the increase is 273%! This is because Coronation won the fight in court and has now reversed previous provisions. This is great news for shareholders but doesn’t tell you anything about the underlying business performance.

It does drive a much higher dividend however, with Coronation able to pay shareholders instead of SARS. The dividend per share increased 243% to 566 cents per share.

Of that dividend, 153 cents was a special dividend, so I wouldn’t include that when looking at the dividend yield. Instead, I would compare total dividends of 413 cents to the share price of R39.75 to arrive at a yield of 10.4%.

This tells you that the market isn’t exactly expecting much growth from Coronation, as the dividend alone is good for double-digit returns. The group notes that the South African savings industry is cashflow negative, so Coronation as a major player is likely to continue experiencing outflows.

At first blush, it’s a sad view on the outlook for South African wealth creation, although I must point out that a sector peer like PSG Financial Services has adjusted its model to include a strong distribution angle, a strategy which works. It’s too easy to just sit back and blame the country around you. If there’s no real prospect of growth, then why should executives at Coronation be earning big numbers?


Old Mutual’s key metrics seem to be improving (JSE: OMU)

Brace yourself for the two-pot number

Old Mutual has released a voluntary update for the nine months ended September. There’s some good stuff in here, like a 6% increase in Life APE sales and a positive story across the board in the Mass and Foundation Cluster. There were some pressures though in Old Mutual Corporate and Old Mutual Africa.

Gross flows tell an even better story, up 19% including a positive contribution in the Africa regions as the group introduced products like a dollar unit trust. Despite the improvement in gross flows, there was still a net outflow for the group (i.e. withdrawals exceeded inflows), albeit much smaller than the huge net outflow in the comparable period.

Speaking of outflows, the two-pot system has led to claims of R2.4 billion having been submitted by Old Mutual clients. With 99.7% of claims submitted via WhatsApp as Old Mutual used that as the communication platform of choice, I’m reminded of why I’m a Meta (Facebook / Instagram / WhatsApp) shareholder!

Looking at lending activity, Old Mutual took a strict approach to lending that saw loans and advances come in flat vs. the prior period.

Old Mutual has received approval from the Prudential Authority to proceed with a R1 billion share repurchase. They will commence with the repurchase on 21 November. For context, the group market cap is R61 billion and management reckons this is below where it should be, hence the share buyback.


RMB Holdings gives net asset value guidance (JSE: RMH)

But the guidance is too wide to really be useful at the moment

RMB Holdings is an investment holding company with a property portfolio. The group has been selling down assets and returning cash to shareholders, an important point to remember when looking at a trading statement dealing with a move in net asset value (NAV) per share.

Compared to September 2023, the NAV per share will drop by between 27% and 46%. It’s more helpful to consider the actual numbers involved, with an expected range of 56.1 cents to 75.9 cents. That’s a decrease of between 28.1 cents and 49.9 cents. Over the period, dividends to the value of 30.75 cents were paid.

Based on the midpoint of guidance, it therefore seems that the NAV has come down even after taking the dividends into account.


Nibbles:

  • Director dealings:
    • The director of CMH (JSE: CMH) who has recently been selling shares is at it again, with a sale to the value of R3.2 million.
    • The independent non-executive chairman of WeBuyCars (JSE: WBC) bought shares worth R150k.
  • Delta Property Fund (JSE: DLT) has agreed to another property sale, this time for the Beacon Hill building in King Williams Town for R13 million. They went the auction route this time, which tells you how rough things are for the worst part of the Delta portfolio. The hammer went down at R13 million and the property was previously valued at R39 million. At some point, you just have to cut your losses.
  • Redefine Properties (JSE: RDF) has confirmed that the dividend reinvestment price for shareholders electing that alternative is R4.45 per share. This is a 3.4% discount to the spot price on 18 November, so there’s some incentive at least to take this route instead of a cash dividend.
  • The CFO of AfroCentric (JSE: ACT), Hannes Boonzaaier, has resigned after 22 years of service with the group. He will remain until 31 January 2025 to help with a handover. No replacement has been named at this stage.
  • Sygnia (JSE: SYG) announced that its proposed amendments to the employee share option scheme received approval from 97.31% of shareholders present at the meeting.
  • There is practically zero liquidity in Cafca Limited (JSE: CAC), a Zimbabwean cable manufacturing company listed on the JSE. They report in Zimbabwean Gold, so there are some big local currency numbers that aren’t worth much in proper currencies. For what it’s worth, HEPS fell by 38%.
  • Sable Exploration and Mining (JSE: SXM) has appointed Ulrich Bester as CEO and Mpume Sidaki and executive financial director, both with effect from 1 December 2024.
  • Salungano (JSE: SLG) has renewed the cautionary related to the business rescue of Keaton Energy, noting that agreements with suppliers in respect of the section 155 compromise proposal are still to be finalised.

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