Ghost Bites Vol 35 (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
- PBT Group gained 12.5% after releasing a trading statement for the year ended March 2022. Revenue is expected to be 21.2% to 26.1% higher. There’s a great margin expansion story here, visible in EBITDA (a proxy for operating profit) growing by between 38.2% and 43.8%. Importantly, the profit turns into cash, evidenced by cash from operations increasing by between 44.5% and 50.4%. I’ll hit you with one more percentage range: normalised headline earnings per share (HEPS) is 60.6% – 67.2% higher. PBT is a company I’ve written about many times before, as this is an excellent example of how you can buy exposure to themes like “big data” right here on the JSE.
- Etion Limited has released a trading statement for the year ended March 2022. Headline earnings per share (HEPS) is expected to be increase by between 26.9% and 47.3% to 11.8 cents – 13.7 cents. This includes discontinued operations. After LAWTrust was sold (for a R140.6 million gain), the remaining operations are Etion Create and Etion Connect. Etion is in the process of selling Etion Create to Reunert for around R200 million, with a circular due to be sent to shareholders on 1 August 2022. This would leave Etion with only the Etion Connect business, a network hardware business.
- Steinhoff has released results for the six months to March 2022. Group net debt has increased sharply over the past six months from €8.1 billion to €10.2 billion, mainly due to a substantial decrease in the corporate cash balance. The operating company debt is nearly €1.5 billion. The critical point is that all litigation against Steinhoff has now been settled, so the group can finally focus on the balance sheet. There is one remaining legal headache, as the group is fighting with Tiso Blackstar and amaBhungane to avoid having to provide the investigative journalists with the PwC forensic report. The High Court already ruled against Steinhoff, with the latter filing a notice applying for leave to appeal on 23 May 2022. There’s still plenty of work for the group to do financially, with finance costs of R579 million vs. operating profit of R297 million. You don’t need your calculator to realise that the balance sheet isn’t sustainable. The share price has lost nearly 46% of its value this year, a nasty hangover after strong end to 2021.
- Whenever a company needs to appoint a “Chief Restructuring Officer” you know that the proverbial has hit the fan. Even Tongaat can’t sugar-coat its issues any longer. Piers Marsden from Matuson and Associates has been appointed to that role. Tongaat isn’t officially in Business Rescue but that is Marsden’s specialty. His previous experience is in “implementing restructuring plans to deliver long-term sustainable growth and future value to all stakeholders” at economic powerhouses like Cell C, Ascendis Health and Edcon. Ahem. As you may have guessed by now, the other part of the announcement is that Magister Investments has walked away from what was supposed to be the opportunity to slide through 35% ownership without having to make a mandatory offer. The TRP threw that plan in the bin, ruling (based on a legal technicality) that the waiver of mandatory offer was not valid. Tongaat has lost nearly 98% of its value in 5 years and over 50% this year. Remember, a share price can always halve again (technically until it reaches 1 cent per share). Sometimes it makes sense to buy when there is blood on the streets. In other cases, it makes sense to find another street.
- There’s big news in the value unlock journey of RMB Holdings Limited, which is now just a property investment company. This is a legacy vehicle that no longer has anything to do with the financial services group, having unbundled the shareholding in FirstRand in 2020. RMB Holdings has agreed to sell the shareholder loan claims and A ordinary shares in Atterbury Europe (representing a 37.5% stake in that company) to Brightbridge, an existing shareholder of the company. The parties shook hands on a price of R1.75 billion, to be settled by Brightbridge in cash if all goes to plan. Atterbury Europe’s net assets at the end of March were nearly R6 billion and profits were R1.4 billion. Remember, the selling price relates to a 37.5% stake. The net asset value per share of RMB Holdings is expected to decrease by 13.6% if this goes ahead, which suggests that Brightbridge is paying a price lower than RMB Holdings’ carrying value of the asset. The proceeds would be used for a special dividend, which is why the share price closed nearly 11% higher at R1.72 (vs. a pro-forma net asset value per share of R2.39 assuming the deal goes ahead).
- Sibanye-Stillwater has given an update on the impact of regional flooding at its US platinum group metals (PGM) operation. The irony of this issue based on the company’s name is something I can’t get over, especially as the floods are at the Stillwater mine! Overall, the mine was largely unaffected, but repairs to surrounding infrastructure (e.g. bridges) will take 4 – 6 weeks and the mine will remain suspended over that period. This facility contributes 60% of Sibanye-Stillwaters’ US PGM production.
- Redefine Properties has given the market more information on the contribution of EPP (the Eastern European part of the business) to the group’s distributable income guidance. For the year ending August 2022, Redefine has previously guided distributable income per share of between 50 and 55 cents per share and a payout ratio of around 90%, suggesting a dividend between 45 and 49.5 cents per share. Redefine owns 95.45% of EPP, as some minorities stubbornly stayed behind after EPP was delisted as part of the buyout by Redefine. EPP’s contribution is expected to be 7.5 cents in this financial year and between 8.5 and 9.5 cents in the following financial year. Of course, there are numerous assumptions behind this, so Redefine can only give a best estimate.
- Tiger Brands has been taking advantage of recent share price weakness to execute share buybacks. Since the authority was given at the AGM in mid-February, Tiger has repurchased just over 3% of shares in issue at prices between R137.88 and R170.47 per share, which tells you a lot about the recent share price volatility. The average price paid was around R155.80 and the closing price on Friday was R145.61. Tiger Brands is down nearly 20% this year.
- SA Corporate Real Estate released a pre-close presentation (you can find the full version here if you are interested). Net property income growth is flat in the industrial portfolio, slightly positive in retail and significantly negative in office (-24.1%). The affordable housing side of the business did well, up 14.2%. The vacancy rate in office is up from 18.9% to 22.8% and some of the areas will be repurposed for storage. The retention rate for office has deteriorated to 48.4% in this period and reversions have worsened to 24.6%, so it really is a mess in the office property sector. Luckily for SA Corporate Real Estate, office is a tiny part of the portfolio, so I’m mentioning these numbers to give insights into the challenges facing landlords in this sector. The share price is down nearly 15% this year.
- Marshall Monteagle has released its results for the year ended March 2022. This is an unusual one, as the financial year-end was changed and so this period covers 18 months. Needless to say, that ruins comparability to the prior year, so it doesn’t help much to know that revenue over 18 months was 67% higher than the preceding 12-month period. In the interests of giving you something useful, this period saw around 56% of revenue generated in South Africa, with around 42% in Europe and the remainder in the United States.
- Finbond released a cautionary announcement based on negotiations regarding a potential acquisition in Mexico. There’s hardly any liquidity in the stock, so a drop of nearly 24% on the day may not even reflect the reaction to this announcement.
- There’s a slightly wobbly in the Irongate Group buyout, but hopefully nothing major. The property fund is being acquired by Charter Hall and the deal needs to go through various regulatory approvals. The Foreign Investment Review Board (FIRB) needs to approve the deal and has requested an extension of the deadline to 1 July, which means that the approval won’t be in place for the scheme meetings on 29 June. These are the meetings of shareholders at which the deal needs to be approved in order to go ahead. The company is not aware of any reasons why the FIRB approval wouldn’t be granted. This isn’t the end of the world by any means, as shareholders would simply need to give their approval based on the assumption that the FIRB will also say yes. If shareholders planned to vote against the deal, they would do so regardless of regulatory approvals!
- Premier Fishing and Brands was slower on the draw with the update on its dispute with Nedbank over the bank wanting to close its accounts. AEEI (the controlling shareholder in Premier) had already announced that the Equality Court had granted an interim interdict preventing Nedbank from terminating the banking relationship. The same applies to Premier, which was the co-applicant in the matter.
- The Company Secretary of Altron has resigned and will be heading off to Oceana Group, a company in need of stability in its leadership structures.
- Afristrat has reminded investors to exercise caution when trading in the shares, as the company has defaulted on its issued notes. Afristrat needs to make an offer to the current holders of notes and preference shares to convert their holdings into ordinary shares. The company has lost almost its entire value over the past few years.
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