Last year, the share price of digital distributor Blu Label Unlimited ran as high as R18 after the company announced the planned listing of Cell C. But what was meant to be the great value unlock has turned into a harsh reversal, with the share down more than 50% since then and now trading below 900c.
The reason is straightforward. Early expectations were that Blu could raise as much as R7.7bn from the Cell C IPO. In the end, Cell C listed in November 2025 at just R26.50 a share, with Blu raising about R2.7bn in gross proceeds from the sale of a 30% stake — both a lower price and a smaller sell-down than the market had initially hoped for.
As a result, Blu still carries net debt of more than R1.5bn, while trade and other payables have ballooned to more than R6.7bn. There is, however, one remaining lever from the Cell C IPO. Under an empowerment transaction, a further 15.95% stake in Cell C was sold on a vendor loan of about R1.4bn. If that loan can be refinanced with third-party debt, or if the underlying shares are eventually sold, Blu could make a further dent in borrowings.
Since listing, Cell C’s share price has gone nowhere fast. It trades at about R26, valuing Blu’s remaining 49.47% stake at roughly R4.3bn. That is a sizeable asset for a company with a market value of just over R8bn, and implies the market is assigning less than R4bn to Blu’s core business.
Management plans to reduce that exposure further over time. At the interim 2026 results presentation, joint CEO Brett Levy said: “We have always stated that we want to end up with between 25% and 30% of Cell C.” The catch is timing. Under the IPO terms, Blu is locked up for 12 months, which means it can only start selling again from November 27.
That leaves investors with a waiting game. Cell C is now a visible, listed asset rather than an opaque balance sheet headache, but the immediate rerating has not materialised. The next value unlock depends on a higher Cell C share price, future stake sales, dividends from Cell C, or some combination of the three.
The core Blu business is easier to understand but harder to get excited about. It remains a powerful distribution platform across prepaid airtime, electricity, vouchers, ticketing and other digital services. In the half-year period, normalised revenue was R5bn, or an effective R50.9bn if the gross value of PINless airtime top-ups, prepaid electricity, ticketing and universal vouchers is included. Normalised ebitda came in at R535m, normalised net profit after tax was R389m and core headline earnings were R398m. An interim dividend of 43.56c a share was declared.
But this is not a high-growth business. Core headline earnings fell 12% in the interim period, underlining the maturity of the platform. The electricity distribution business does not benefit from rising tariffs. Blu earns commission on kilowatt-hours distributed, not on the rand value sold. So when electricity prices rise and Eskom customers use less power, it can be negative for Blu. Airtime distribution faces its own long-term threat as more users recharge directly through mobile network operator apps.
For now, Blu remains more complicated than a company of its size ideally should be
Management’s answer is to broaden the ecosystem. That includes BluNova, the group’s central data, analytics and AI platform; embedded finance; treasury and procurement efficiencies; electricity vendor Cigicell; and, most importantly, Blu Energy. Blu Energy is being positioned as a growth engine: an integrated energy platform that aggregates power from independent producers, trades that power to municipalities and commercial and industrial customers, and develops embedded renewable generation at nodes on municipal grids.
It is a logical adjacency. Blu already has relationships in prepaid electricity, municipal collections, payments, billing and risk management. South Africa needs cheaper and more reliable power. Municipalities need revenue assurance. Blu’s “circle of life” model is designed to help municipalities identify lost revenue and use that fiscal headroom to support new renewable energy offtake without an upfront capital burden.
That could become meaningful, but not immediately. Management itself cautions that Blu Energy’s near-term profit contribution will be modest. For now, it should be treated as option value.
The investment case therefore comes back to cash flow and dividends. Blu’s guidance is normalised net cash generated from operating activities of about R65m per month, or roughly R780m a year. Against a core market value of about R4bn excluding the Cell C stake, that is attractive. It suggests Blu is less a growth stock than an income play with a listed Cell C kicker.
The missing piece is a formal dividend policy. Management says Blu remains committed to disciplined capital allocation and shareholder returns, and Levy’s statement that “our intention is to pay as big a dividend as possible” is exactly what income investors want to hear. But the market still needs clarity on how much cash will go to dividends, how much to debt reduction and how much to new growth areas such as Blu Energy.
The accounts also remain messy. Though Cell C is now treated as an associate, the comparatives are still distorted by the restructuring and listing. That should improve as the old noise washes out, but for now Blu remains more complicated than a company of its size ideally should be.
Below 900c, though, the share is no longer pricing in much excitement. The easy Cell C rerating has come and gone. What remains is a more mundane investment case: reduce debt, extract value from the remaining Cell C stake, formalise the dividend story, and prove that the core business can keep converting earnings into cash. For patient investors, that may be enough.
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