The financial media — the FM included — has homed in on Bidvest’s decision to offload its niche banking operation.
In a market dominated by a handful of players, any developments on the fringe of the banking sector are often intriguing. This is especially so if there is a hint that a new meaningful competitor might be building operational mass. African Bank springs to mind, along with TymeBank and Discovery.
Bidvest might once have harboured great banking ambitions, but enthusiasm has waned in line with so-so performances. Without scale, it’s best to make a sale. I think the company is doing well to grasp a particularly prickly nettle at Bidvest Bank. Even relatively small distractions can be costly — and quite unnecessary, considering the group’s redoubtable light manufacturing/services core.
More reassuring, however, might be Bidvest’s acquisition of Citron — which operates its specialised washroom hygiene services across North America and the UK. This is squarely in Bidvest’s sweet spot, operationally speaking. Almost all the revenue is recurring across a sprawling customer base in manufacturing, hospitality, facilities management, education, commercial and health care. I don’t doubt Bidvest when it says the total addressable market in Citron’s North American territories is “exponentially bigger than Citron’s current revenue”.
The announcement makes it clear this is not a deal of considerable scale, and it will be funded out of an existing revolving credit facility. But, history will show, Bidvest is a past master at buying up niche businesses and enhancing their profit-spinning abilities. Maybe after the bank — which carries a NAV of R2.3bn — is sold (hopefully within nine months or so), we might see more of these smart little bolt-on acquisitions, recalling the glory days when a certain Brian Joffe was pulling the deal levers.
Speaking of larger-than-life characters, retail tycoon and serial risk-taker Christo Wiese has snaffled a clutch of Brait shares ahead of the proposed rights issue. This seems fairly significant, as Wiese has already shown his direct support for Brait’s key subsidiaries — JSE-listed consumer brands group Premier and unlisted fitness chain Virgin Active.
On June 26, Wiese — via Titan Premier Investments — grabbed 8.9-million Brait shares at 88c a share, another small batch on June 28 and then 17-million shares at the start of the month at 99c a share.
An investment of close on R25m in an investment company that most of the market has become increasingly wary of is noteworthy. The Brait shares firmed to 105c last week, but had drifted back a tad at the time of writing. I suspect most interested observers at Brait might not be overly keen to splurge on Brait shares at this delicate juncture — even if the rights offer pitch price has been set at a heavily discounted 59c a share. Just a little more profit flexing at Virgin Active might also be needed.
On the topic of turnarounds, the unexpectedly quick rebound in core operations at packaging giant Nampak might inspire a few punters to bet against Warren Buffett’s well-worn contention that turnarounds seldom turn.
One long-standing turnaround contender, York Timber, seemed to get a sympathetic life from developments at Nampak. York — which seems to have spent most of the past 30 years in turnaround mode — has skittered up more than 8% in the past week.
While there is no operational correlation between Nampak and York, the companies do share a large common shareholder in A² Investments — where former Hosken Consolidated Investments executive André van der Veen and asset manager Adrian Zetler are prime movers.
At last count (the half year to end-December) York was hardly buzzing. Revenue was down 2% to R882m, with profits and cash flow severely curtailed. Earnings came in at 5.6c a share. Headline earnings per share decreased to under 5c a share with core earnings 10c a share in the red. But some heart might be taken that York was recently prepared to fork out R75m to acquire further timber lands (1,365ha, to be exact) — which will be important in ongoing efforts to reduce the company’s reliance on external third-party log purchases. As with Brait there is a lot of value showing on paper ... with NAV last reported as 584c a share. And as is the case at Brait, sceptical investors might want to see the trees for the wood before planting capital into York.
Another company suffering the swings of outrageous fortune is Integrated Exchange-listed Vunani Capital Partners. Hardly a year ago, its shareholders were enjoying all the benefits of being invested in a roaring coal mining business — which materialised in bumper dividends and the rare sight of a share price trading at a premium to NAV.
Vunani’s 37.5%-owned Black Wattle Colliery (BWC) paid a dividend of R142m last year. Vunani’s share was astounding — at least in relation to its current market value of just R271m. With coal prices seeing a quick trot downwards, BWC has been a lot less lucrative this time around. No dividends were declared in the year to end-February, with BWC — which also had to contend with flooding — barely staying in the black. Vunani’s share price touched 327c in mid-2023 but has crumpled to 125c. NAV is now 148c a share and intrinsic NAV is 238c a share, so that more familiar discount is back in the share price.
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