Ghost Bites Vol 41 (22)

Corporate finance corner (M&A / capital raises)

• It seems like deals are falling over left and right in this environment, both locally and offshore. The latest example is Texton Property Fund, whose sale of the Foretrust and Loop Street properties is no longer going ahead. The intended buyer (Stonehill Property Group) was unable to fulfil the necessary conditions for the deal, despite an extension that was granted from 12th April until 30th June.

• Another example is Delta Property Fund, which has seen the sales of Fort Drury and Sediba for a combined price of R76.5 million fall over. On the plus side, the fund has announced an unrelated disposal of three properties (two in Sunninghill and one in Port Elizabeth) for R76 million. Delta really needs this to go through, as it would reduce the loan-to-value (LTV) from 57.0% to 56.9% and vacancy levels by 30 basis points from 31.3% to 31.0%. Those are still frightening numbers.

• Hyprop and Attacq are co-invested in the Ikeja City Mall in Lagos, Nigeria. The funds are in the process of selling the property and the necessary application has now been made to the country’s competition authorities. The longstop date for the transaction (i.e. the date by which it needs to be completed) has been extended to 31 December 2022.

• Kibo Energy has agreed a three-month extension for the redemption of convertible instruments. The redemption date is now 30 September 2022 and covers notes to the value of just over £0.65 million

Earnings updates

• Salungano Group (previously Wescoal) has released results for the year ended March 2022. The group met the 8mt production target for the year and secured its first coal exports, as it looks to diversify from our part-time electricity provider Eskom. The group wants to become a diversified investment company, with agriculture and renewables in the cross-hairs. This kind of behaviour usually terrifies investors. Despite revenue increasing by nearly R1.24 billion, operating profit increased by just R3 million. There is once again no dividend for shareholders.

• If you would like to take a detailed look at PPC’s results for the year ended March 2022, the annual financial report is now available at this link.

Share buybacks and dividends

• Investec has been busy with a buyback programme since approval was granted at the AGM in August 2021. The company has repurchased 3.13% of shares in issue under that approval for a total value of R852 million. The average price paid is R85.24 which compares favourably to the current price of R86.72.

• I don’t cover it often as the company gives a daily update of buybacks, but it’s worth reminding you that British American Tobacco is busy buying back its own shares. This is typical of a value stock that is treated by investors as a cash cow with questionable long-term growth prospects.

• While I’m at it, I may as well use a quieter day of news on the JSE to remind you that Glencore is buying back shares and releasing daily updates as well.

Notable shuffling of (expensive) chairs

• Growthpoint has appointed Andile Sangqu as Lead Independent Director, an important role in corporate governance.

• Anglo American has appointed Helena Nonka as Group Director of Strategy and Business Development. I have worked in similar teams in more than one listed company before. These are the teams that deal with large corporate deals and projects that sit outside of business-as-usual for the group. Nonka comes from a similar role at a renewable energy company, which gives some indication of the skills Anglo is clearly looking for.

Director dealings

• A non-executive director of Kaap Agri has bought shares in the company worth around R145k.

• An associate of a director of Raubex bought shares worth around R1.48 million, yet another one to add to a long list of recent insider purchases at the company. The directors are piling into Raubex shares.

• Michiel Le Roux (founder of Capitec) has reminded the rest of us how poor we are. His investment entity has raised around R566 million of loan funding using shares in Capitec as collateral. This comes with a derivative collar structure, which protects Le Roux from the Capitec share price falling below R1,812.58 per share. It also caps his upside on these shares with a call strike price of R3,222.37. The structure’s average expiry date is 3.3 years from now.

Unusual things

• Visual International has been sent to the JSE’s naughty corner for failing to release an annual report on time. Based on the financial situation at that group, I think the report is the least of the worries.

There are often announcements that are immaterial to most readers (like low value director dealings, acceptance of share-based awards and changes in non-executive directorships) that don’t make the cut for Ghost Bites, though they may have some relevance to you. Ghost Bites (and Ghost Mail) is never a replacement for your own research into an investment.

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