Ghost Bites Vol 16 (22)
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Recent Posts
Unlock the Stock: Afrimat and Spear REIT
Afrimat’s track record is spectacular. Spear REIT is a highly respected property fund. On Unlock the Stock, you can learn about both companies.
RCL is far more than just a chicken business
RCL is far more than just a chicken business these days, which isn’t a bad thing.
Bidvest: strong trading profit growth in every division
Bidvest closed 3.8% higher after releasing results for the six months to December 2021.
Liberty Two Degrees: reversions continue to bite
Liberty Two Degrees holds stakes in some of the most iconic properties in the country
Alviva: 20% revenue growth excl. Tarsus
After teasing the market with a trading statement, Alviva has now released all the details of the interim results for the six months ended December 2021.
PSG Group and the Great Value Unlock
This is one of the biggest news stories on the JSE that we’ve seen in a while
JSE Limited: a cash cow in a shrinking field
You may not be aware of this, but the JSE Limited is listed on the JSE. You’re right in thinking that this sounds like the financial version of the movie Inception
Capital Appreciation on the deal train
The company has announced the acquisitions of three technology companies in South Africa and a 20% stake in a company in the Netherlands.
Woolworths won’t miss 2021
as released results for the 26 weeks to 26 December 2021. The share price rallied 6% despite a fair share of negative commentary on Twitter.
Cashbuild’s negative sales momentum continues
Cashbuild released its interim results for the six months ended 26 December 2021
- Pepkor has released results for the six months ended March 2022. Revenue increased by 3.3%, or 3.7% if you adjust for the disposal of John Craig, which represents a gain in market share of 189 basis points. Operating profit jumped by 19.1%, so margins have improved considerably. HEPS increased by 28.3% or 12.1% on a normalised basis (excluding the Steinhoff global settlement). Cash generated from operations was R4.1 billion. The group points out that revenue is up 15.4% over two years, representing substantial market share gains over the pandemic. Pepkor is still growing, opening 144 stores in this period (total footprint now 5,708 stores) and acquiring an 87% interest in Brazilian value retailer, Grupo Avenida. Avenida has 130 stores and Pepkor is happy with performance since February when the deal closed. Perhaps the most important insight in the announcement was this: “While global supply chain uncertainties persist, it seems that shipping costs have stabilised and may trend downwards.”
- After an incredibly busy week of results for listed companies controlled by Hosken Consolidated Investments (HCI), the mothership released its results for the year ended March 2022. Revenue increased 31% and EBITDA doubled that growth rate with a 62% increase. At headline earnings per share (HEPS) level, the increase is a rather daft 359%. The percentages become silly at that level. To make it easier to see the jump, HEPS increased from 287.7 cents to 1,321.3 cents. When viewed per underlying sector, the biggest swing was in gaming with a R20.5 million headline loss in the prior period swinging into headline earnings of R622 million in this period. The other sector worth noting is hotels, which still made a loss of R35.2 million. That’s a whole lot better than the loss of R318 million in the comparative period. HCI’s share price has been exceptional this year, up 138%!
- Gemfields is such an interesting business. With a market cap of over R3.8 billion, it’s also a substantial company that is still off the radar for most investors. The share price has doubled in the past year, so the lack of market knowledge on this company is a pity. Gemfields owns 75% of the Kagem mine in Zambia and has achieved a record-breaking emerald auction in May. Across 38 lots, revenue of $43.4 million was achieved. The price per carat was also a new record for Kagem auctions. Gemfields also mines rubies in Mozambique and has other gemstone prospecting licences in several African countries. As a final tidbit on this interesting group, Gemfields also owns premium jewellery business Fabergé.
- Nedbank released a voluntary update for the four months ended April 2022. There’s plenty of fluffy language and not many hard numbers in the update. I was hoping to see strong commentary around growth in corporate balance sheets and how the banks are getting a piece of the action. Instead, Nedbank talks about “moderate credit growth” and “robust consumer spending” which suggests that corporates are using internally generated cash flows to fund growth in this environment and that retail consumers are still driving growth. Net interest margin has “increased” and interest earning assets increased by “low-to-mid single digits” with “selective growth” in the corporate book. Impairments are within the 80bps to 100bps guided range for FY22. Non-interest revenue growth is up by double digits without adjusting for fair value adjustments and mid-single digits when taking a normalised view. Although expense growth is mid-single digits, JAWS (revenue and associate income growth less cost growth) is positive. That associate line is important, with income from Ecobank (ETI) expected to be up 74% year-on-year in the first half.
- Finbond Group has released results for the year ended February 2022. There’s a substantial increase in loans advanced, up by 25.9% to just over R5 billion. Despite this, turnover fell by 13.7%. The first reason is that there is a lag effect in revenue in the Illinois business in the US where loans are for 24 months, so the book needs to build up. The second reason is that Finbond now equity accounts for C1 Holdings (brings in the net income further down the income statement) vs. the base year where it accounted for all the revenue and then took out minority interest further down. As always, the sensible number to look at is HEPS, which improved by 25.3% but is still a significant loss of 17.9 cents per share. No dividend has been declared. Sean Riskowitz of Protea Asset Management LLC has joined the board.
- PBT Group is a company on the move. With a market cap of around R960 million, the business operates in the exciting and growing world of data science and related analytics. The share price has gained around 135% in the past 12 months. A special distribution of 30 cents per share has been declared, which sent the share price 7% higher on Friday.
- Murray & Roberts jumped 6.7% on Friday after announcing that the Clough Saipem 50/50 joint venture had been awarded the engineering, procurement and construction (EPC) contract by Perdaman Industries for the multi-billion Australian dollar urea plant. This is a huge contract with extensive work involved, of which Clough’s share is around R22 billion. This increases the group’s order book to an all-time high of around R80 billion. The share price is still down 21.5% this year.
- Huge Group has been rather quiet since the company’s disastrous attempt to acquire Adapt IT. I’ve missed the comic relief of that process. Shareholders will be pleased to note that HEPS for the year ended February 2022 will be more than double than prior year, coming in at between 56.01 cents and 58.81 cents. I strongly caution against making any decisions based on this trading statement, as Huge changed its accounting approach completely on 1 March 2021 and now sees itself as an “investment entity” – which makes the Adapt IT debacle even funnier – so underlying businesses are now recognised at fair value rather than consolidated. Full results are due this week and the share price closed on Friday at R3.69. This announcement came out after market close, so look out for any share price action on Monday.
- ISA Holdings is a company you’ve possibly never heard of. With a market cap of around R180 million, this small cap provides information security solutions and boasts nearly 80% of revenue being of a recurring nature. The share price is up over 57% in the past year, so plucky shareholders in this business have done well. Revenue for the year ended February 2022 was up 11% and HEPS increased by 26% to 10.5 cents, thanks mainly to a decrease in operating expenditure. A final dividend of 6.2 cents and a special dividend of 10.0 cents have been declared, adding to the 4.3 cents interim dividend. The illiquid share price closed 5.9% higher at R1.07 and now has an incredible trailing dividend yield. Be careful of assuming that the special dividend will be repeated. This is exactly why companies distinguish between ordinary and special dividends.
- NEPI Rockcastle has confirmed permanent executive appointments after operating with an interim CEO and CFO. Rudiger Dany and Eliza Predoiu have been permanently appointed to those respective roles. They have also appointed a COO in the form of Marek Noetzel. The useful thing about buildings is that they tend to withstand wholesale leadership changes with far more ease than operational companies. Shopping centres don’t complain about culture.
- Brimstone Investment Corporation has released a quarterly update on its intrinsic net asset value (NAV), which is based on the directors’ valuations of the underlying investments. Between December 2021 and March 2022, the intrinsic NAV is up 3.7% on a per-share basis. That’s a solid performance over three months in this environment. The fully diluted intrinsic NAV is R13.399 and the share price is trading at R7.09, a discount of 47%. Welcome to the frustrations of investment holding companies on the JSE! The largest contributors to the value are Sea Harvest (39.9%), Ocean (33.2%), Equites (5.7%), Phuthuma Nathi (4.8%) and FPG Property Fund (4.1%). Stadio also deserves a mention, contributing 3.1% to the intrinsic NAV.
- The Implats – Royal Bafokeng Platinum deal has taken another twist, with Northam Platinum intervening in the proceedings before the Competition Tribunal. You may recall that Northam Platinum also owns a significant stake in Royal Bafokeng that it acquired from Royal Bafokeng Investment Holdings. The Competition Commission recommended the approval of the deal, but the Tribunal is what really counts. Based on this issue, Implats has extended the “longstop date” (the legal term for the date by which all conditions precedent must be fulfilled) to 8 August 2022.
- Quantum Foods is a poultry group that includes Nulaid, the largest egg producer in South Africa. The share price jumped 22% on Friday after the company released results for the six months to March 2021. Revenue increased by 7% and HEPS fell by 41%. A dividend of 8 cents per share has been declared. The share price jump happened right at the end of the day and could well have been finger trouble, as I can’t imagine why people would react so favourably to an update like this.
- Rebosis Property Fund is in the process of selling a R3.35 billion portfolio of assets to a special purpose vehicle being put together by Vunani. Rebosis shareholders are holding their breath as well as their shares here, as the disposal is critical and the deal hasn’t gone through yet. In the six months ended February 2022, Rebosis’ net property income fell by 6%. The group has breached loan covenants, so all debt has been disclosed as short-term debt and a loan from RMB of R242.9 million is being renegotiated, with no certainty that this can be achieved. Rebosis is a highly speculative play and there are two classes of shares, so anyone considering a punt at Rebosis needs to do very detailed research first (even more so than normal).
- Kibo Energy has announced the termination of its intended acquisition of the Victoria Falls Solar Project. The deal didn’t pass the due diligence process. Kibo has other exciting things underway, like a waste-to-energy project in South Africa and its partnership with CellCube to deploy long duration energy storage solutions. The group is also busy investigating substitutions for coal in projects in Tanzania, Botswana and Mozambique. If you are bullish on renewable energy, this is a company that you could spend some time researching.
- Brikor (a brick manufacturing and coal business) released results for the year ended February 2022. Revenue is up 5.7% but EBITDA is down 64%. HEPS has fallen by 47.6%. The bricks segment had its best revenue result in the past five years. The coal segment had the opposite result, with revenue down 31.3% to its worst result in the past five years, attributed to excessive rainfall in the last quarter of the year. The brick business has performed “exceptionally” in April and May, with the coal business showing “significant improvement” in those months. The stock has low liquidity and has lost a third of its value this year.
- Capitec announced that S&P has revised the outlook for Capitec Bank’s issuer rating from stable to positive, in line with the change made to South Africa’s sovereign outlook. Capitec’s issuer ratings were also reaffirmed by S&P. The ratings agency noted that Capitec’s funding and liquidity profile compares well with the sector and forecasts that the risk adjusted capital ratio will remain strong.
- African Equity Empowerment Investments (AEEI) released interim results for the six months ended February 2022. Revenue fell by 8.9% and the headline loss got worse, deteriorating from R32.6 million to R69 million. AEEI reports a normalised headline loss number which looks even worse in percentage terms, coming in at R39.7 million vs. R6.4 million last year. No interim dividend has been declared.
- Buffalo Coal Corp has barely any trade on the JSE, so I’ll just give it a passing mention here. In the three months ended March 2022, revenue increased 12% and the operating loss more than halved from R52.7 million to R24 million.
- Imbalie Beauty has a market cap of R27 million, which possibly makes it the smallest company on the JSE. The headline loss for the year ended February was between 0.06 and 0.08 cents.
- Prior to Advanced Health listing on the JSE, the CEO of Presmed Australia (Mark Resnik) was granted an option to subscribe for shares in the Australian business. Resnik has exercised that option through an investment company, with the effect that Advanced Health’s interest in Presmed has been diluted from 60.57% to 56.44%.
- In case you feel bad about your life this morning, remember that Pembury Lifestyle Group is busy negotiating a reappointment of its auditors because it can’t even afford to pay outstanding audit fees. On the plus side, the Northriding property (initially a school) has been converted to a commercial building and leases have been concluded. Pembury is currently suspended from trading on the JSE.
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