Ghost Bites Vol 17 (22)

Your daily market overview delivered in bite-sized bullets:

• Bidvest Group has released a voluntary trading update for the ten months to April 2022. The strong momentum has continued since the interim result, with “strong trading profit growth” and “excellent” cash generation. The business service operations are doing well, with a shrinking fleet and finance book as the blemish on the update. In trading and distribution, Bidvest has pointed to a strong performance even measured against a high base. Although working capital investment has been required in response to supply chain pressures and inflation, there is no concern over debtors. The group is looking abroad for growth opportunities, with several possible deals at various stages of progression. Results for the year ended June will be released in early September.

• Adcorp Holdings has released results for the year ended February 2022. Although revenue from continuing operations fell by 1.7%, gross profit increased by 7.0% and operating profit jumped by 68.2%. Headline earnings per share (HEPS) jumped by 190.6% to 99.4 cents. Importantly, group interest-bearing debt (i.e. excluding leases) fell from R456 million to R133 million. Banking facilities of R350 million are being negotiated and the facility in Australia has already been extended. Adcorp’s bid-offer spread is wider than the smile of an investment banking analyst getting a first bonus, so be careful with this one. The share price is flat year-to-date but the chart has flapped around between R4.65 and R6.30 this year.

• Momentum Metropolitan has released an operating update for the nine months ended March 2022. HEPS is up a meaty 59% as reported or 46% on a normalised basis. Although new business volumes were 16% higher, value of new business has fallen by 16% as new business margin has deteriorated from 1.1% to 0.8%. Return on equity has jumped from 11.7% to 18.2%. Momentum Corporate was the segment with the largest positive swing, as a normalised headline loss of R72 million in the prior period transformed into normalised headline earnings of R617 million in this period.

• Asset management group Sygnia has released a trading statement for the six months ended March 2022. HEPS will be up by between 20% and 25%, coming in at 89.8 cents – 93.5 cents. The share price closed 3.7% higher at R17.

• Novus Holdings has released a trading statement for the year ended March 2022. HEPS is expected to improve by at least 100% vs. the headline loss per share of 5.4 cents. I guess this means that the company will at least break even for the period. The announcement was called an “initial trading statement” so I don’t think the full story has been told here yet. Keep an eye on this one.

• Oceana Group has more twists and turns than a school of fish escaping a seal. The latest news is that auditor PwC has resigned with immediate effect in respect of the audit for the year ended September 2022. There is a “strained relationship” and Oceana points out that a significant number of votes were exercised by shareholders against PwC’s reappointment. There’s been a lot of negative noise around Oceana, with investigations into accounting practices and departures of executives in recent months. The company needs to appoint auditors within 40 business days and is in discussion with a Big Four audit firm. Shareholders will be hoping for some stability going forward.

• Huge Group has concluded a new debt package with RMB for R240 million in refinance and acquisition facilities, R15 million in general banking facilities and R12 million in asset based financing facilities. They are repayable in 20 equal quarterly tranches. R230 million of the refinance facility will be used to repay debt from Futuregrowth, leaving R10 million for potential acquisitions. The company notes that the repayments under the RMB facility are significantly less than the Futuregrowth facility. Let’s just hope that whatever strategy they follow with the money will be more successful than the Adapt IT debacle.

• Grand Parade Investments is in the process of unbundling its steak in Spur. I mean, its stake. The SARB needs to give approval for the transaction and this hasn’t been obtained yet, so the company has noted that the dates of the unbundling will need to be amended.

• Sibanye-Stillwater has received the details of a claim from affiliates of Appian Capital Advisory LLP. This relates to the termination of the acquisition of the Santa Rita and Serrote mines in Brazil, a deal that Sibanye walked away from after a geotechnical event which Sibanye concluded would be material and adverse to the business. Sibanye will need to defend the claim in the High Court of England and Wales, so a few legal eagles will be making money shortly.

• S&P has revised Telkom’s outlook from stable to positive, thereby confirming that nobody from S&P has ever tried to cancel a Telkom contract. Jokes aside, this is a result of the improved outlook on the South African government, which happens to own around 40% of Telkom. Many local companies have had their outlooks revised as a result of an improvement in the sovereign outlook.

• AngloGold is the latest company to implement an additional listing on A2X. This exchange offers a trading platform rather than an issuer regulation platform. The JSE (or other primary exchange) still sets the rules that each company must abide by. A2X is simply a place for shares to trade in a more efficient manner, effectively stripping some income away from the JSE.

• Renergen Limited has updated shareholders on the commissioning of the Phase 1 plant. If you have a deep and secret desire to be an engineer, you should read the full announcement for all the details. Investors will be interested to note that customer sites are being prepared in parallel to receive the liquefied natural gas (LNG), so the commercial operation date will be planned in such a way that the plant doesn’t need to be turned off again as part of providing customers with LNG. After a 32-month process, Renergen has had “no surprises” during hot commissioning and is nearly finished with the process. The announcement doesn’t give a completion date, though.

• Fuel forecourt REIT Afine Investments listed in December 2021 and provided a profit forecast for the year ended February 2022 as part of the listing documentation. The trading statement released by the company is based on variance to that forecast as well as the prior reported period. The latter comparison is pointless, as the listed entity only existed for one month of the comparable period. The important thing is that HEPS will be approximately 8% lower than the guidance in the profit forecast of 50.14 cents.

• UK property funds Shaftesbury and Capital & Counties are in discussions regarding a possible merger. The initial deadline was that by 4th June, JSE-listed Capital & Counties is supposed to either announce a firm intention to make an offer or confirm that it will not make an offer. That has now been extended to 17th June at Shaftesbury’s request, which the Takeover Panel has consented to. Further extensions are possible by Shaftesbury, once again with regulatory consent. Take note that as these are UK-based companies, those company laws apply even though Capital & Counties is listed on the JSE. Don’t confuse the domicile of the company with the exchange on which it trades.

• Kibo Energy has done a deal with Hasta Trust. This immediately put Arnold Schwarzenegger one-liners into my head, so I hope it does the same to yours. The deal is to develop a portfolio of long duration energy storage projects held by National Broadband Solutions (NBS) in South Africa, which is 100% owned by Hasta. This is linked to the distribution deal with CellCube for long duration energy storage solutions in Southern Africa. Under this transaction, Kibo will acquire a 51% interest in NBS.

• If you are a Textainer shareholder, you’ll be interested to know that the exchange rate for the dividend has now been set. The $0.25 dividend will be converted at R15.60/$, so a dividend of R3.90 will be paid on 15th June.

• Raubex Group’s offer for Bauba Resources will close at 12:00 on Friday 10th June.

• If you are unfortunate enough to be a shareholder in PSV Holdings, you should take note that the company is still in business rescue. If the group is not recapitalised, it will likely face liquidation with no prospect of any payment to shareholders. I’m afraid there isn’t even a website for me to link to for this company.

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