Ghost Bites Vol 39 (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 released its results for the year ended March 2022 and they tell a wonderful story. By operating in the big data and cloud computing industry, PBT enjoys incredibly high organic demand for its services. Swimming downstream is always so much easier than upstream. Margins are higher and all of it lands in the bank account, with near-perfect conversion of EBITDA into cash from operations. To understand more about this result and the business, read this feature article.
- Industrials group Hudaco has released its results for the six months ended May 2022 and they are worth paying attention to. Operating leverage is clearly visible here, as strong revenue growth looks even better once you reach the bottom of the income statement. The balance sheet is growing in response to pressures on supply chains, but Hudaco has enough flexibility in its operating model to handle this with relative ease. To learn more about Hudaco, you should read this feature article.
- Exxaro released a pre-close update for the six months ended 30 June. The API4 coal export price index has averaged around $270 per tonne vs. $151 in the six months ended December 2021. Total production is up 1% vs. the preceding six months and sales volumes are down 3%, which means the company has mostly taken advantage of the pricing but it could’ve been a lot better. Logistical constraints were the major issue, with export volumes down 27%! The ongoing pressures on local ports can only be good news for Grindrod, which has enjoyed incredible growth in its Mozambique port and terminals business (refer to this feature article for more information on that). To give an idea of just how bad Transnet is, the Mpumalanga export rail performance declined from 15 trains per week in 2021 to 8 trains per week this year. In good news for cash flows, capital expenditure is around 47% lower.
- Sibanye-Stillwater must’ve been pleased to announce something unrelated to strikes or floods. The group already holds a 30.29% stake in Keliber (a Finnish mining and battery chemical company) and intends to exercise a pre-emptive right to increase the shareholding to 50% plus 1 share, which will set Sibanye back €146 million. In addition, Sibanye will make a voluntary cash offer to the minority shareholders of Keliber, other than the Finnish Minerals Group (a state-owned holding and development company). This would take the stake to over 86% if minorities accept the offer, which would come at a further investment for Sibanye of €196 million. A capital raise will then be executed with a potential equalisation mechanism that would get Sibanye to an 80% holding anyway, with a maximum possible cheque from Sibanye of €104 million for the raise. The total potential investment is thus €446 million, with a maximum of €250 million being in equity and the rest being in debt. Keliber is aiming to be the first fully integrated lithium producer in Europe, so this deal is core to Sibanye’s “green metals” strategy. Sibanye hopes to close the deal by February 2023. The share price is down over 15% this year, so Sibanye shareholders (like me) will be pleased to see positive momentum.
- Alviva jumped by over 16% on the news that it may join the long list of companies that have departed from the JSE. The company has received an expression of interest from a consortium looking to buy the remaining shares in Alviva that they don’t already own. The consortium comprises major shareholders and empowerment partners of Alviva with an existing stake in the company of 18.6% of shares in issue. Key managers at Alviva have been invited to participate in the consortium as well. A cash offer of R25 per share will be made to shareholders, representing a premium of 30% to the 30-day volume weighted average price. Absa will be providing funding to the consortium. At this stage, there is no firm offer. If discussions between the parties reach that point, a firm intention announcement will be released.
- Sabvest Capital has acquired a look-through interest of 18.95% in Halewood South Africa by participating in a consortium that bought the entire company from UK holding company Halewood International. This is a manufacturer of alcoholic and non-alcoholic beverages including Red Square and Caribbean Twist. There’s also a drink called Buffelsfontein, which sounds like it hurts the next morning. Sabvest’s investment is held through its 41.03% interest in Masimong Beverage Holdings and RMB has come in as a co-investor. The share price closed 8.8% higher on a day that burned bright red on the JSE, taking the year-to-date performance to a highly impressive 34%. This investment group is a lovely reminder that there is plenty of money to be made in the local market if you know where to look.
- Datatec has withdrawn its cautionary announcement and released all the relevant details of the disposal of Analysys Mason for up to £210 million. The purchaser is Bridgepoint Development Capital. Datatec’s share of this number is approximately 38% of Datatec’s market cap and the proceeds will be paid to shareholders as a special dividend. This is a substantial value unlock, which is why the share price jumped 22.5% on the day. A deal of this size has many hoops to jump through, so the various approval processes will now get underway.
- Merafe Resources has announced the benchmark ferrochrome price for the third quarter of 2022. The price of $1.80 per pound is a 16.7% decrease from the second quarter. The share price has gained over 36% this year and only lost 3.7% despite this announcement. With Eskom as a major risk for the group, there’s rigorous debate on Twitter about whether this company is truly a bargain. On a trailing Price/Earnings multiple of 2.4x, there’s a pretty big margin for error built into the valuation.
- Pan African Resources closed 5% higher on a day that was red for the gold miners. The group has completed a definitive feasibility study on the Mogale Gold Tailings Storage Facilities that form part of the Mintails Mining assets near Krugersdorp. The highlight is that the project has the potential to increase the group’s current production by at least 25%. The real ungeared internal rate of return (IRR) is estimated to be 20.1% based on a gold price of $1,750/oz and an exchange rate of R15.50 to the dollar. Construction capex would be R2.5 billion with an estimated payback period of 3.5 years post commissioning. The construction period would be between 18 and 24 months.
- Lighthouse Properties has released a pre-close update related to the six months ended 30 June. In April and May, turnover in the portfolio exceeded the 2019 pre-Covid turnovers by 5.1%. That’s a major turnaround from the relative performance of -6.1% in the first quarter of 2022. Notably, France is still running well below pre-Covid levels, with the uptick coming from Iberia and Slovenia. Vacancies increased slightly from 5.1% at December 2021 to 5.2% at May 2022. The share price is down around 24% this year.
- When it comes to pre-close updates in the property sector, Resilient chose to play its cards close to its chest. In a very brief update, the fund noted that the South African portfolio achieved comparable sales growth of 9.7% for the five months ended May 2022. A positive reversion of 2.8% was achieved overall (i.e. new leases were signed at higher rates than existing leases), though Resilient does note that leisure-related tenants experienced negative reversions. There is still pressure on those tenants, but the removal of the mask mandate should help with that. The fund is busy with solar installations at various malls in South Africa and construction work at properties in France.
- MAS Real Estate received strong support from shareholders to acquire six properties in Romania and extend its development joint venture with Prime Kapital. This is critical for the fund’s pipeline of acquisition opportunities in the region.
- In an unusual combination of Lord of the Rings and general flatulence, Gandalf has struck gas in the Free State. Renergen is every geek’s dream, using names from Star Wars and Tolkien’s finest to refer to elements of its projects. Gandalf is a new gas blower and gas was intersected at 480 metres from the surface. Further drilling to 1,200 metres is expected to be complete by August. Separately, the company reiterated that the Phase 1 plant is making progress and so are the customer sites, so synchronisation of the project timelines should be achieved. There has been a cautious approach taken in testing, which has delayed things by a few weeks. In this case, “safety first” is definitely the name of the game. Renergen made significant progress with capital raising activities in the last quarter (both debt and equity), as detailed in the company’s quarterly report that you can read here.
- Anglo American has a zero emissions haulage solution called nuGen, which sounds more like a USN product designed to help you get ready for summer. Names aside, Anglo has agreed non-binding terms to combine this with First Mode, the company that partnered with Anglo to build the technology. In other words, Anglo would take an equity stake in this business, which would remain independent and would operate under the First Mode name. Anglo needs to decarbonise its fleet of around 400 ultra-class mine haul trucks. This also requires investment in critical supporting infrastructure. Anglo has held 10% in First Mode since 2021 and will move to a majority holding under this deal. First Mode would offer similar services to other third parties, so Anglo effectively creates a profit centre out of decarbonising its fleet and helping others do the same. Clever stuff!
- Wilson Bayly Holmes – Ovcon, which most of us simply know as construction group WBHO, released a trading statement for the year ended 30 June 2022. WBHO has withdrawn funding from the Australian operations and they have been placed into administration, a painful decision no doubt. The group provided A$119 million to settle obligations on that side of the pond and expects to be better off than this estimate by at least A$23 million. WBHO is also negotiating an exit on an amicable basis from the contract related to the Western Roads Upgrade. But by the time you take into account other costs to close the Australian business, the original A$119 estimate actually goes the other way, with an updated figure of A$135 million. WBHO can fund this from current resources and a three-year term loan facility. In the local business, revenue in Building and Civil Engineering is expected to be 5% lower and in the Roads and Earthworks division will be at least 11% lower. In both cases, operating profit is higher (by 8% and 4% respectively). The situation in the UK isn’t pretty, with revenue down by 25% and profit by 40%. There’s also no real improvement in the steel industry, with the Construction Materials segment revenue 15% higher and operating profit 48% lower. Across major areas of the business, the order book is considerably higher than a year ago and the balance sheet is in decent shape. Excluding the Australian operations, HEPS is expected to be at least 3.6% lower for the year ended June 2022.
- Christo Wiese has entered into a derivative structure related to Shoprite shares. He’s sold puts at a strike price of R198.87, which means that he receives a premium and would need to buy the shares at that level if the counterparty so chooses. Wiese has also bought calls at R217.94, which means he has paid a premium to be able to buy the shares at that level if he so chooses. The maturity date is 15 December and 10,000 contracts were entered into for both trades, so the call exposure is higher than the put exposure. The current traded price is around R197.88, so my interpretation is that Wiese is happy to buy at this level anyway (hence the sold puts) and is looking for leveraged upside based on the share price increasing from here this year. You gotta risk it to get the biscuit, as they say.
- Crookes Brothers has released results for the year ended March 2022. The agriculture group reports “operating profit before biological assets” which is interesting, as it tries to show the operating profit without the significant swings in the value of the “living” assets in the group. That number increased by 18% and the profit after biological asset fair value adjustments fell by 39%, so that gives you an idea of the volatility in that fair value measurement. Headline earnings per share fell by 16% to 229.6 cents. The Price/Earnings multiple is thus 18.2x but it hardly matters as there is almost no liquidity in the stock.
- After a huge director dealings announcement related to Marcel Golding earlier this week, an associate of a different director bought shares in both Rex Trueform and African and Overseas Enterprises. The amounts were only R48.5k and R86k respectively, but it’s interesting to note this activity.
- A director of Thungela has acquired shares in the business worth R195k.
- Trustco has issued a cautionary announcement, so now you have to be cautious of a potential deal in addition to being skeptical of their accounting policies. An independent third party is having a serious look at the option to become up to a 70% shareholder in Meya Mining for $50 million. This potential deal is at term sheet stage and Trustco hopes to finalise agreements by the end of July.
- Nictus has declared a final dividend for the year of 3 cents per share. This little company has a market cap of only R36.8 million and liquidity is practically non-existent. The spread is the size of the moon, with the best bid at R0.39 and the best offer at R0.92 per share. It’s worth noting that in the year ended March 2022, HEPS fell by 48.84% to 9.43 cents.
- Eastern Platinum Limited has announced Wanjin Yang as its new CEO. The company is working towards restarting underground operations at the Zandfontein section of the Crocodile River Mine. An independent competent person’s report on the mine has been filed.
- Bauba Resources, which Raubex is in the process of mopping up the minorities in, has announced that Nuco Chrome has been granted a mining right valid for a period of eight years. It will allow for the mining of chrome, cobalt, copper, gold, nickel and platinum groups metals in an area near Rustenburg.
- Sable Exploration and Mining has released results for the year ended February 2022. The headline loss per share has been confirmed as -141.76 cents. The net asset value per share is -598.1 cents. So, in case you were curious, this isn’t exactly a financial powerhouse.
- Property developer Visual International has reported a loss for the period ended February 2022 of R7.9 million. The announcement claims that this is an improvement from a loss of R7 million, proof once more that in the bottom of the dustbin on the JSE, the sponsors (or designated advisors for AltX companies) don’t even read announcements properly before releasing them. The auditors have raised a material uncertainty about the company’s ability to continue as a going concern.
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