Ghost Bites (The Foschini Group | Jubilee Metals | Oasis Crescent Property Fund)

If you enjoy Ghost Bites, then make sure you’re on the mailing list for a daily dose of market insights in Ghost Mail. It’s free! SIGN UP >>>

The Foschini Group shows that shopper behaviour is normalising

After a volatile year for the share price, the year-to-date performance is -4.95%

TFG (no relation to your favourite ghost) released a Q2 trading update and a trading statement for the six months ended September 2022. The announcements are always incredibly detailed, so we can dig in here.

Let’s kick off with the earnings guidance, as headline earnings per share (HEPS) for the six months to September is expected to increase by between 8% and 28%. That’s a wide range. With a whopping 31% increase in group revenue this quarter, one would hope that the HEPS growth is towards the upper end of that range (recognising that this was a quarterly revenue growth number, not an interim number).

Before you get too excited about the 31% growth, I must caution that there’s a lot of noise in that number.

It’s helpful to know that TFG Africa (which includes South Africa) contributed 67.2% of turnover. TFG Australia contributed 19.6% and TFG London contributed the remaining 13.2%.

Looking at TFG Africa, turnover was up 22.5% overall and 6.4% on a like-for-like basis, so you can see the impact of acquisitions in these numbers. Tapestry Home Brands was acquired with effect from 1 August. If the recent comments on my Twitter page by upset Coricraft customers are anything to go by, the company needs to do serious damage control with customers. TFG may have an interesting time there.

TFG London grew turnover by 4.4% in local currency and achieved margin expansion. TFG Australia skyrocketed 104.5% in local currency, as the comparable quarter was plagued by Covid restrictions on trading.

In a particularly interesting metric, group online turnover contracted by 6.9% as consumers returned to stores. The contribution to group turnover was 8.1% in this quarter (vs. 11.4% in the comparable quarter). The impact was even more severe in TFG London (down 16.2%) and TFG Australia (down 25.9%) as shopping habits normalised. This is bullish for retail property funds.

A key feature of the strategy is the localisation of the supply chain, which the group calls its “quick response” capability. This supported growth in TFG Africa this quarter. In case you’re wondering how the local business makes its money, 72% of turnover in this quarter was in Clothing categories, 11.9% in Homeware and 8.9% in Cellphones.

It’s also worth noting that cash turnover contributes 71.4% to total TFG Africa retail turnover. Cash turnover grew by 24.3% this quarter and credit turnover by 18.3%, with a decline in average acceptance rates as the group used more stringent acceptance criteria.

Jubilee Metals signs off on a busy year

The year ended June 2022 was full of operational achievements

With the release of its audited annual results and AGM notice, Jubilee reminded the market of significant progress made in the financial year:

• Target production achieved across PGM, chrome and copper
• Inyoni expansion in South Africa was completed in March 2022, increasing production capacity by 85%
• Roan copper concentrator completed in Zambia, with ramp-up commencing in July and nameplate throughput rates achieved in September
• Based on the investment programme, the tangible net asset value per share increased by 40%

Looking at financial performance, revenue increased by 5.4% and EBITDA was 25% lower in a year that was disrupted by the extensive capital programme. Cash from operating activities increased by 11% despite the drop in EBITDA.

The balance sheet looks good, with a positive net cash position.

The share price is down more than 29% this year, a victim of widespread pain in the commodity sector.

Oasis Crescent Property Fund grows distributable income

Even without the use of debt, this fund has beaten inflation over the years

The Oasis Crescent Property Fund is unique on the local market. It provides investors with a Shari’ah compliant property fund, which means no use of leverage whatsoever. As most readers will be aware, property funds and debt go hand-in-hand. In this environment of rising rates, not having debt isn’t necessarily a bad thing.

Despite the lack of leverage, the unitholder return of 10.3% per annum compares favourably to inflation.

Although total income decreased by 2.4% in the six months to September 2022, distributable income increased by 13.9%. The net asset value per unit dropped by 2.5% to R22.93 per unit (vs. a traded price of R19.51).

Due to negative fair value movements, headline earnings per unit was negative.

A distribution of 47.11 cents per unit has been declared for the interim period. Your eyes aren’t deceiving you: this fund trades on a much lower yield than most property funds in the market.

Little bites:

• Director dealings:
  • The group managing director of Distell has sold shares worth nearly R6.8m
  • Des De Beer is still buying shares in Lighthouse Properties, this time worth nearly R1.7m
  • The CFO of Bidvest has sold shares worth R3.4m
  • An associate of the CEO of Momentum Metropolitan has acquired shares worth R0.9m

• There are significant movements on the Grand Parade Investments shareholder register, with GMB Liquidity now holding 27.88% in the company. Entities called Arakot and Midnight Storm were the sellers. This is all very mysterious. Based on Twitter commentary from credible sources, it appears as though GT Ferreira and Hassen Adams have disposed of shares.

• Hyprop has announced the reinvestment price for the dividend of 293.64090 cents per share. Investors can elect to reinvest the dividend in Hyprop shares at a price that represents a discount of 10.4% to the 7-day VWAP. The share price will keep moving of course, so the point here is that the reinvestment option is attractive if you want to increase your Hyprop exposure (like I do). The default alternative is to receive the cash, so you have to specifically notify your broker if you want to receive the shares.

• Zeder’s special dividend of 10 cents per share is being delayed as approval from the SARB hasn’t been obtained yet. An updated timetable will be announced on SENS in due course.

• A positive impact of the Chinese stock meltdown is that Naspers and Prosus can continue their respective share buyback programmes with a lower share price. Between 17 October and 21 October, Naspers and Prosus repurchased shares worth R1.79bn and $207m respectively. The next tranche should be at a much lower average price.

• If you are a Stefanutti Stocks shareholder, you should refer to the circular dealing with the disposal of the business in Mozambique.

INVEST IN SHARES