| Tuesday 28 September 2021 Good morning Voornaam,
We have a bumper edition of InceConnect for you this morning.
Fairvest and Arrowhead have released a joint firm intention announcement for their merger. Although Fairvest is leading the acquisition, the structure of the deal is that Arrowhead will acquire Fairvest, thereby achieving a single-step merger, as Arrowhead has two different classes of shares. Arrowhead as an entity will continue to exist but will be renamed to Fairvest after the transaction.
Leaving the structuring complexities aside, the companies have pointed out that the combined REIT will be the largest exclusively SA-focused REIT with a portfolio of around R12.74bn, of which R9.3bn is currently in Arrowhead. Despite the sizes of the portfolios, the Fairvest management team will take the reins here. The existing Arrowhead CEO and CFO will both resig n. Arrowhead's COO and CIO will be retained in their current capacities.
Holders of 65% of Fairvest and over 50% of Arrowhead have already pledged their support for the transaction.
Moving on, PSG Konsult has released a trading statement for the six months to August 2021. HEPS is expected to be between 25% and 27% higher than the comparable period, coming in at between 30.4 and 30.8 cents. On an annualised basis, the company is trading on a P/E of nearly 17.5x. Earnings in these types are businesses are typically rather sticky, so the market is happy to pay higher multiples.
Despite a 16.9% increase in revenue, 4Sight Holdings reported a horrible 74% decrease in HEPS. There were major swings in the numbers vs. the prior period, like R37.6 million in Employment Tax Incentives and foreign exchange gains of R11.1 million. Excluding the big once-off for ETIs, operating expenses increased 8.2% during the period. Encouragingly, the major revenue gains were found in the private sector, with significant growth in software-as-a-service and support services.
Adapt IT is back in the news, announcing that holders 9.83% of shares in issue have already made the "exit election" i.e. will accept the R7 cash offer from Volaris. The deal will happen faster if the minimum threshold (more than 50%) is achieved sooner, so Adapt IT is encouraging shareholders to make their elections. In the meantime, Volaris has managed to mop up 0.218% of the shares in the market, obviously at a lower price than R7 per share.
Silverbridge Holdings is a tiny company (and I mean tiny - market cap of just R43.6m) that has released its annual results. HEPS is up to 12.3 cents from 8.49 cents the prior year. A dividend of 5 cents per share has been declared. The share price is R1.30 so the traded multiple is surprisingly high considering the min iscule size of the business, The bid-offer spread is almost as big as the company itself and it often sees days go by without any trade.
My feature articles this morning are on Alviva's annual results, British American Tobacco's fascinating hybrid capital raise and Indluplace's operational update. Allan Greenblo, editorial director of Today's Trustee, has written on Covid as an opportunity to introduce fundamental social and economic changes. If you want to catch up on the latest forex rates, check out the article from Currency Assist as well.
If you missed it yesterday, plug in your earphones and listen to Ep44 of Magic Markets, the third in the #HerenyaSeptember series, in which Petri Redelinghuys of Herenya Capital Advisors responds to the second batch of li stener questions.
With that, I wish you a productive Tuesday.
The Finance Ghost
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