Harsh realities do not support Novus’s uptick
The Caxton share price gained almost 5% on Wednesday for no apparent reason. Given that Novus also ticked up 2.56% it might just be down to generally strong investor sentiment. Certainly on the basis of operational performance there does seem to be support for a strengthening in the Caxton share price, but not much for an uptick at Novus.
From the beginning of April Caxton took over the printing of Media24’s newspapers in Gauteng. It also picked up the contract for printing Media24’s magazines in the Cape. The two contracts are extremely valuable and for years had been tightly controlled by Novus, which at one stage was a subsidiary of Media24.
Securing the contract gives Caxton an almost dominant position in Gauteng. Although it recently lost the contract to print for the Independent Group in Gauteng, Caxton now prints for Media24 as well as Tiso Blackstar (which publishes Business Day) and its own publication, The Citizen. The share is on an undemanding price:earnings ratio of 8.5 times, reflecting how out of favour old technology companies are.
At Novus things continue to look grim. It essentially threw away the Media24 contract by refusing to acknowledge the new realities of the situation.
The Novus board may have relied on the traditional hostilities between senior executives atMedia24/Naspers and Caxton to secure its hold on the valuable printing contract. But times and executives have changed and Media24 has reduced its stake in Novus to an unstrategic 19%.
Its relatively new shareholders, including Caxton with a 5% stake, will be hoping to see evidence of a long-promised pick-up in other areas, such as tissues and labels.
All sorts of creatures are spilling out of the woodwork following the pro- posed offer by Murray & Roberts for Aveng. It appears that Aveng — whose main Moolmans and McConnell Dowell engineering assets are seen to be complementary to the Murray & Roberts Cementation and Clough businesses — has attracted other potential bidders. For now, though, it is all very hush-hush. But there is talk of interest in certain Aveng assets by listed Australian parties and empowerment groups.
What has also come out of the woodwork is that Aveng’s management is not attractive to anyone, and the sooner it is out of the way, the sooner stakeholders will see value.
It also appears that despite the dismal construction environment in SA, JSE-listed groups such as Aveng and Group Five have skidded mainly on foreign contracts.
The Kpone power station in Ghana has been deeply expensive for Group Five, while Aveng has had a number of contested projects in Australia. That means the wallowing domestic major infrastructure environment remains of keen interest to certain parties.
Aveng has hefty debt, which the Murray & Roberts proposed offer will partially clear up. But what may surprise many in the markets is that Aveng Trident Steel has been sold for R600m. This will help reduce the Aveng debt pile ahead of more creatures falling from the woodwork.