Ghost Bites (Orion | Raubex | Royal Bafokeng | Spear REIT)

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Orion has announced a R250 million funding package

The IDC Credit Committee has given this deal the green light

Orion’s share price closed 16.7% higher in celebration, despite this being a non-binding term sheet at this stage. Orion is very close to securing the debt but it can still go wrong.

Subject to conditions, the IDC has agreed to loan R250 million to Orion in the form of a senior convertible debt facility. This will be used to fund early works at Orion’s Prieska Project, including mine dewatering and trial mine operations.

The loan and capitalised interest may be converted into equity in the Prieska Project based on a valuation of R1.2 billion.

This package satisfies a key condition to the A$10 million Triple Flag funding package, so this is a major step forward for Orion that unlocks R350 million in total funding.

The company expects to be able to access the IDC funding in late 2022, subject to fulfilment of standard conditions precedent. As there is no detailed disclosure of the conditions, the market seems to have assumed that a collapse of the funding package is unlikely.

The Orion Minerals share price is still down 27.5% this year.

Raubex proves that construction can make money

In a sector still reeling from Murray & Roberts, Raubex brought some good news

With a focus on the South African market, Raubex managed to achieve solid earnings growth in the six months to August 2022. The company put out a voluntary trading statement, as earnings growth is a bit lower than the minimum threshold that triggers a mandatory trading statement (20%).

The company expects headline earnings per share (HEPS) to be between 10% and 20% higher than the comparable period. To add to the good news, Raubex highlights its strong balance sheet and healthy cash balance.

Detailed results are expected on 7th November.

Raubex is down 21% this year, as very few companies have escaped the brutal sell-off in equity markets.

Royal Bafokeng Platinum suffered a poor quarter

Metrics are down across the board

In the quarter ended September, there isn’t much for Royal Bafokeng shareholders to celebrate.

Production in the quarter was lower and the group has blamed ongoing uncertainty around its future ownership for safety and production impacts. BRPM increased its production but Styldrift was way down because of a fatal accident on 11 September that caused a Stop Notice to be issued. To resume operations, Royal Bafokeng needed to upgrade the collision avoidance system for the entire Styldrift trackless fleet.

Unit cash costs per tonne milled were 22.5% higher and per 4E ounce were 24.3% up. On a year-to-date basis, the increases are 16.1% and 18.3% respectively. Overall, cash operating costs were up 16.6% in this quarter and 19.0% year-to-date.

Capital expenditure was 10.8% higher in this quarter.

The silver lining is that net cash is higher at R5.1 billion. There’s no shortage of cash available to the firm, with R3 billion in debt facilities available.

Due to this poor quarter, guidance for the full year has been revised lower.

Despite all of this, the share price closed 0.87% higher. It was clearly already priced in.

Spear REIT announces interim results

It’s another solid performance by the Cape Town focused fund

With a market cap of R1.8 billion, Spear REIT is small by property fund standards. That doesn’t mean it behaves like a small fund, as Spear is seen as a solid performer that is respected in the market to a level far beyond what its size would suggest.

In the six months ended August, distributable income per share increased by 6.09% to 41.26 cents per share. The distribution is 12.33% higher to 37.14 cents per share, so the pay-out ratio has increased from 85% to 90%.

Reversions on lease renewals are still negative, coming in at -4.08% this period. The portfolio occupancy rate of 93.53% looks strong.

It’s just as well that the income went up, as portfolio values haven’t really moved in the past six months. Investment property value increased by 0.12% in this period. The fund’s net asset value per share fell by 5.1%.

Debt cover ratios have improved, with loan-to-value (LTV) at 38.69% vs. 39.05% at the end of February. Interest cover ratio also improved.

Guidance of 5% to 7% growth in distributable income per share for FY23 has been reiterated.

Based on the interim dividend, the company is trading on an annualised dividend yield of 9.9%. The dividend yield based on the last twelve months is 9.6%.

Little Bites:

• Director dealings:
  • The Ackermans are climbing into Pick n Pay shares. Associates of Jonathan Ackerman and Gareth Ackerman acquired shares worth R514k and R457k respectively.
  • The CEO of Choppies has bought shares in the company worth BWP807k.
  • An associate of the CEO of Momentum Metropolitan bought shares in the company worth just over R260k.
  • A non-executive director of Dipula Income Fund has sold shares in the company worth R108k.
  • Value Capital Partners (which has board representation on ADvTECH) has bought shares in the company worth over R32 million.

• Unsurprisingly, Walmart’s buyout and delisting of Massmart received resounding approval from Massmart shareholders. Only 0.02% of shareholders voted against the scheme of arrangement, which is either finger trouble or a level of optimism about a potentially better alternative that defies belief. With further conditions still needing to be met, the expected delisting date is approximately 8th November.

• Reinet Fund has suffered a decrease in net asset value (NAV) per share. Although this isn’t the same as Reinet Investments (the listed company), the Reinet Fund is a “substantial element” of the Reinet Investments balance sheet. If the NAV drops in the fund, it’s a strong sign that it probably dropped in the holding company. The fund NAV has decreased by 4.7% over the past three months.

• No fewer than five non-executive directors (including the chairman) of Transcend Residential Property Fund have resigned from the board. Regular readers will know that Transcend is under offer from Emira, an offer that the board did not recommend to shareholders based on the price. It’s very unusual to see a mass walk-out like this at board level.

• In another major board reshuffle, three directors of Huge Group have resigned. Their replacements have all been announced.

• KAP Industrial Holdings wants to change its name to KAP Holdings Limited or KAP Limited. The focus is on removing the word “industrial” which the company believes isn’t a good reflection of the current strategy. If you own a business with KAP in the name, you’re probably about to have a bad time. KAP has identified a number of companies that have infringed on KAP’s intellectual property rights. Legal letters are in the post…

• Transnet’s credit rating has been confirmed by Moody’s as Ba3 for the corporate family rating (a “speculative” rating – i.e. junk). The outlook is negative. Transnet puts a positive spin on this by noting that at least the credit ratings have been maintained for the time being. When your goal is to avoid going backwards, I guess it’s easier to feel like things are going well.

• In the latest news from embattled Afristrat Investment Holdings, an ordinary shareholder has filed an urgent liquidation application against the company. Afristrat opposed it in court and was granted a postponement to allow Afristrat to file its response to the allegation in the founding papers. This company is trying desperately to restructure, survive and find a way forward. This clearly isn’t going to help. I can’t even send you to the company website because it appears to have been hacked and redirected to a site that sent my antivirus software into meltdown!

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