Bidvest soars higher after getting its wings
The Bidvest Group has plotted a steady course north since it was split from bigger sibling Bidcorp last May in the sense that its market cap has soared. Of the two it seems to have done better than its foodservice twin in the nine months they have been separated, at least in terms of its share price.
It is early days, though, to tell if the operation was equally successful for the two. Bidvest CEO Lindsay Ralphs says they have been separate companies since the day of their unbundling.
Bidvest saw five of its seven core divisions maintain or increase margins in the six months to December 2016. Revenue rose 4.1% and the gross profit margin was stable. Domestic operations delivered a good trading profit, up 6.2%, despite local revenue rising more slowly. This pushed headline earnings per share (HEPS) up 4.4% in the interim.
Bidcorp, meanwhile, saw HEPS climb 20.3% in the halfyear ended December 2016, as trading profit jumped 15.7% to R2.8bn. Net debt has also been heavily reduced. But its share price has not done so well.
Nonetheless, says Avior Capital Markets’ Mark Hodgson, Bidcorp earnings were far ahead of market expectations and it has an exceptionally strong balance sheet.
He also says Bidvest’s results vindicate the unbundling of Bidcorp. The earnings divergence means the unbundling unlocked value for shareholders.
Ralphs says that despite rough seas he sees smoother sailing ahead. Operations have benefited from better minerals prices and growing agricultural production after the drought.
Growth is most likely to come from abroad, as it has for Bidcorp, now that the two are separated. In part, Competition Commission issues are likely to force its departure from SA.
Ralphs reckons the company can easily take on another $1bn of debt, saying it has a very low gearing. About 45% of shareholders are foreign entities, making it an attractive emerging player based in SA.
One enraged MP referred this week to social security agency Sassa’s distribution partners as “a bunch of gangsters” and urged the Department of Social Development to find a new partner. But investors weren’t worried, Within hours the share price of Cash Paymaster Services’ holding company, Net1 UEPS, had increased to a 12-month high.
Where does this leave Allan Gray and its international associate, Orbis Investment Management, each with 17% in Net1. Even if we assume they are very careful not to act in concert, the greater Allan Gray entity has substantial influence on Net1.
Understandably, neither wants to talk about its investment in Net1. And in the old days this very private, very wealthy and very powerful organisation might have got away with that stance. But this is the 21st century and investment is all about social responsibility.
Neither Orbis nor Allan Gray bang on about saving the world, though they do seem to have a passing interest in society.
Orbis says responsibilities are to “our clients, the firm, our colleagues and ourselves”. Allan Gray says it buys shares it deems undervalued and sells them “when we think they have reached their worth, regardless of popular opinion”.
So there’s little chance either will be swayed by the anger. After all, it does seem the angrier the parliamentarians get the higher the share price goes.