A group of asset managers also call a special shareholders meeting at MAS (JSE: MAS)

And still Hyprop is nowhere to be seen

The interesting corporate finance games at MAS continue.

With Prime Kapital having called a shareholders meeting that will be held this Friday (11th July), a group of asset managers (Meago / Sesfikile Capital / Ninety One / MandG / Catalyst / Eskom Pension Fund / Stanlib / Mazi Capital / Momentum) have now done the same thing. Collectively, they hold in excess of 15% of the voting rights in the company, hence they can call such a meeting (just like Prime Kapital did). They make it clear that they are not acting as concert parties here.

While Prime Kapital is looking for shareholders to support a value unlock through an orderly sale of assets by the fund, these investment managers are worried about something else: corporate governance. They feel that the MAS board has been sitting on the fence, being a “conduit to market for dissemination of communications received by it” – a rather spicy but pretty accurate statement.

They don’t like the fact that Mihail Vasilescu is a director of MAS, as he has interests in Prime Kapital. They are also concerned about the perceived independence of Dan Pascariu, giving the long relationship with key players at Prime Kapital. They want both Vasilescu and Pascariu to leave the board, while proposing four candidates to be appointed to the board.

Another bone of contention is alleged poor disclosure around the joint venture agreement, the summary of which only recently came to light. The shareholders are specifically irritated by the development margin and the fixed dividend, terms that change the economics of the joint venture vs. how they originally understood it. There’s also an allegation that the joint venture made investments in listed securities at least once, something that wasn’t disclosed. Of course, the joint venture also bought many MAS shares (which is how we got here in the first place), suggesting a wider investment mandate than the investment community initially understood.

The most serious allegation, in my opinion, is the lack of disclosure of obviously critical terms in the joint venture. That’s going to be difficult for the board to defend.

There are a lot of questions being posed to the board. The shareholders have suggested that a board committee be established with the authority to respond to these queries. They have also proposed resolutions to remove Vasilescu and Pascariu from the board.

And…drumroll please…here are the four names of directors they have put forward for appointment: Des de Beer (one of the best-known names in property – and of course, a regular buyer of Lighthouse shares, as Ghost Mail readers know), Robert Emslie (highly experienced director with banking credentials), Sundeep Naran (also a strong ex-banking background, particularly in investment banking) and Stephen Delport (founder of Lighthouse Properties and its ex-CEO).

The troops are being called in, that’s for sure. All eyes now turn to the shareholders meeting on Friday and how that vote ends up going.

At this stage, it feels like Hyprop will be sitting on the blank cheque that the market somehow gave them for at least a few months before any kind of offer becomes viable. As a shareholder in Hyprop, that opportunistic capital raise and the related cash drag continues to irritate me.

Never a dull moment at Renergen (JSE: REN)

Mahlako Gas Energy wants their shares in Tetra4 to be repurchased

Just when you thought it was safe to go outside and believe that the weird stuff was over at Renergen, here’s something fresh to consider. Thankfully, it doesn’t appear to have any impact on the deal with ASP Isotopes, so the market hasn’t panicked. Still, there’s another legal distraction for Renergen at a time when they really need to be focusing on getting helium out of the ground.

The issue relates to Mahlako Gas Energy exercising a put option in relation to its stake in Tetra4, the Renergen subsidiary that houses the South African assets (and hence the only subsidiary that matters at the moment). Although the announcement is light on specifics, Mahlako Gas Energy believes that a put option event has occurred and that this entitles them to exercise the option. Renergen disputes this of course. On top of that, they even dispute whether the option transaction agreement (to which they are presumably a party) validly came into existence!

Sigh. It’s never boring at Renergen, that’s for sure.

Whatever the outcome here, it won’t be a quick process. There are dispute resolution mechanisms in place and if this does go to court, it will no doubt take years. Renergen won’t want to part with any cash to buy out a shareholder at this stage, unless it’s at a price so favourable that it wouldn’t have made sense anyway for the put option to be exercised by said shareholder.

Stefanutti Stocks enters into a new deal to sell the Mozambique and Mauritius subsidiaries (JSE: SSK)

The 2022 deal has been terminated

For a long time now, we’ve been reading updates from Stefanutti Stocks about delays in the disposal of SS – Construções (Moçambique), Limitada (SS Mozambique) and Stefanutti Stocks Construction in Mauritius (SS Construction). That deal is now dead. The good news is that there’s a deal to replace it.

The counterparty is East Africa Enterprises, an entity incorporated by the Dubai Multi Commodities Centre Authority. In other words, this is investment from the Middle East in Africa. Stefanutti Stocks will sell SS Construction for $700k, with the price payable by the end of December 2025. SS Mozambique will be sold for a total of $3.2 million, also payable by the end of December 2025. There’s some other cleaning up of balances as well, but that’s the meat of the deal from an equity perspective.

The repayments of loans is more interesting, with the purchaser extending $3.5 million to SS Mozambique for working capital purposes and further loans of $6.1 million in various tranches before the end of December. The $6.1 million is for the purposes of repaying a loan of R113.2 million from Stefanutti Stocks.

Although you would imagine that this is very good news (even though there are various conditions to the deal), the share price closed flat for the day! The joys of illiquidity.

PGM and chrome production up sequentially at Tharisa (JSE: THA)

It’s platinum’s time to shine – and they need to get the stuff out the ground

Tharisa’s share price is up 28% year-to-date, boosted by the recent platinum rally. As there is significant chrome exposure as well, they haven’t flown to the moon quite like some of the pure-play options in platinum (for context, Northam Platinum has nearly doubled). Diversification reduces risk and also tempers overall potential returns. Such is the world of finance.

Like all mining companies, the focus at Tharisa is on getting the commodities out of the ground. PGM production increased 6.2% quarter-on-quarter (i.e. Q3 vs. Q2 or what is referred to as a sequential view), while chrome was up 3.9%.

The recent rally in the sector can only be helping with discussions in the market around the funding of the Karo Platinum project. Although it’s extremely difficult to forecast long-term prices and thus the expected returns on such a project, it’s certainly even harder to convince investors to care about exploration and development when commodity prices are depressed.

This apathy is precisely why those prices eventually rally, based on lack of supply and an uptick in demand.

Speaking of development, it’s been a quarter of significant cash outflow at the group. Net cash is down from $79.3 million to $29.4 million based on project and working capital outflows.

Unfortunately, due to various production issues this year, they are still running below full-year guidance. They’ve taken 5% off the lower end of guidance for the year. It’s frustrating for investors in terms of what might have been, but that’s also why a diversified basket of miners is usually a lot smarter than just owning one. There are too many unpredictable elements in mining – including the elements themselves, as rainfall is a major factor!

Nibbles:

• Director dealings:
  • In what has to go down as one of the smallest stock purchases by Christo Wiese, he bought R27.8k worth of shares in Brait (JSE: BAT) through Titan Premier Investments. They’ve must’ve found some coins in the couch.

• enX (JSE: ENX) has declared a chunky special dividend of R1.30 per share. With the share price closing at R4.79 on Wednesday, that’s a significant portion of the total market cap. This comes after a number of divestments and what is now a cash balance far in excess of requirements. As one hopes to see in terms of capital allocation discipline, they are returning the cash to shareholders instead of chasing after unnecessary or marginal deals.

• There’s a change in management at Nedbank (JSE: NED), with Andiswa Bata appointed as Managing Executive of Nedbank Business and Commercial Banking (BCB). I must say, this structure makes much more sense to me than the old structure that had various people falling over one other to service smaller business clients. The BCB cluster will look after SME, commercial and what they call mid-corp clients, with the much larger clients being serviced on the Corporate and Investment Banking (CIB) side. Bata was most recently the CEO of the Business segment at FNB, so this is a solid external appointment. Nedbank has been bringing in a lot of new blood and fresh ideas from competing banks, not least of all Jason Quinn in the CEO role.

• Here’s something you won’t see every day: after Metrofile (JSE: MFL) announced that Bradley Swanepoel would be coming in as the new CFO, they’ve now backtracked on that. The parties have “mutually agreed” (I’m sure it was exactly 50-50 – not) that Swanepoel will no longer be appointed as CFO. These things are NEVER truly mutual. For whatever reason, one of the parties surely had a change of heart and then the conversations began about what to do. Shivan Mansing will continue in the dual role of group CFO and Managing Director of Metrofile Records Management South Africa for now.

• Super Group (JSE: SPG) announced that S&P has affirmed the company’s credit ratings as zaAAA (long-term) and zaA-1+ (short-term) after the disposal of SG Fleet Group. This is important for keeping the company’s borrowing costs at appealing levels.