| Thursday 07 April 2022 Good morning Voornaam,
In case you missed the news on 5th April, Moody's changed the South African fiscal outlook from negative to stable. This has an immediate positive impact on large companies and especially the banks, whose credit ratings are always linked to the fiscal rating. For example, Nedbank announced yesterday that Moody's has affirmed its rating and changed its outlook from negative to stable. Telkom and Standard Bank released similar announcements, with the Moody's outlook changed to stable.
Purple Group (which you'll probably recognise as the controlling shareholder in Easy Equities) is still growing its profits quickly. The company released a trading statement for the six months to February 2022. Interim HEPS is expected to be between 1.60 and 1.66 cents and the absolute movement is a jump in profit from R8.3 million to between R17 .4 million and R18 million for the period. On an annualised Price/Earnings multiple (i.e. double the interim earnings and compare to the share price), the company is trading on approximately a 97x multiple.
I like to use the PEG ratio which divides the P/E multiple by the growth rate, with an answer of 1 as a reasonable benchmark. To be on a PEG of 1, Purple needs to grow annual earnings by 97%. It's a tall order to expect the company to double its profits every year but the current trajectory certainly looks exciting.
Grand Parade is taking its value unlock journey seriously. The Mac Brothers business has been posting horrible results and is heavily loss making. Grand Parade has run out of patience with the business and has placed it into voluntary liquidation. Of course, that's still a long and expensive process, but at least there's an end to the bleeding on the horizon.
British American Tobacco is busy implementing its share buyback programme, so you can expect to see announcements about the number of shares bought and the price paid. For example, the company bought 460,000 shares on 5th April for a volume-weighted average price of 3199.6821 pence per share. The relevance to shareholders is that as the number of shares in issue decreases, there are fewer investors sharing in the pie. This helps drive dividends per share and headline earnings per share (HEPS).
Calgro M3 is picking up some interesting international shareholders. The latest example is the University of Notre Dame Du Lac, which now holds a 6.9% stake in the company. At first, I wondered if Calgro M3 is coming up in impact investment filters based on the affordable housing angle to the business. Twitter soon jumped in, with a couple of people putting forward a view that an offshore fund (Protea Asset Management LLC - unrelated to JP Verster's Protea Capital Management) needed to offload shares that were difficult to sell as a block.
The Finbond announcement put more fuel on this fire, as the same university is now the proud owner of 8% in Finbond. Protea explained the rationale for the distribution of Finbond shares as being a move to improve Finbond's public shareholder spread. It's hard to know where to start with this, really. Distributing shares to one university certainly doesn't improve liquidity and funds don't lie awake at night thinking how to help small caps with liquidity. Based on that odd explanation in the SENS announcement, I find myself siding with the Twitter speculators and my market sources on this one.
Mahube Infrastructure is in the process of restructuring its group. RMB has now consented to the restructuring of the so-called SubCo, so various steps are now being implemented as outlined in previous announcements. Mahube shareholders should refer to those announcements for details.
MC Mining has issued shares to Senosi Group Investment Holdings as part of the conversion of its loan under the first tranche funding. Senosi will now own 19.9% of MC Mining.
There's practically zero liquidity in Eastern European property company Globe Trade Centre (not a typo - that's the name), so I won't go into detail on the 2021 financial results. In the unlikely event that you hold shares in the company, I suggest you check out the results.
Today's feature articles are on Pick n Pay's positive trading statement, which drove rallies in other grocery and FMCG businesses, as well as MTN's clarification of the situation in Nigeria related to SIM cards being barred.
Don't miss out on the latest Magic Markets episode, in which we learnt about the exciting world of private debt investments with the team from Westbrooke Alternative Asset Management. With a focus on high yields and low correlations with public markets, the private debt funds are worth learning about. Listen to the episode at this link.
Have a wonderful Thursday!
The Finance Ghost
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Local and Offshore Market News |
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| | | A Boone for Pick n Pay Pick n Pay has released a promising trading statement with a strong narrative. Remember, food inflation is generally good for retailers. Read More |
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