go­ing short

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IN­VEST­MENT SHORTS

Back to the fu­ture The pro­posed sale of Pre­scient’s fi­nan­cial ser­vices in­ter­ests to Stel­lar Cap­i­tal will leave be­hind a hub of tech­nol­ogy op­er­a­tions that will re­main listed on the JSE un­der PBT.

The irony, of course, is that these de­vel­op­ments re­store an old or­der in that Pre­scient’s fi­nan­cial ser­vices op­er­a­tions were re­versed into PBT some years ago. Truth be told, the Pre­scient trans­ac­tion — aside from reg­u­lar div­i­dend flows — did not gen­er­ate won­der­ful re­turns.

The left­over PBT may not spark much mar­ket in­ter­est, at least not ini­tially. But one might ques­tion the mar­ket’s ne­glect­ful sug­ges­tion that the left­over tech­nol­ogy bits (plus two in­vest­ment prop­er­ties) are worth roughly 11c/share — mean­ing an in­ferred mar­ket cap­i­tal­i­sa­tion of around R180m for PBT.

When PBT was re­verse-listed into the old Wooltru shell, the mar­ket cap­i­tal­i­sa­tion was around R400m.

The mar­ket may well be over­look­ing a lit­tle tech­nol­ogy gem, con­sid­er­ing that Pre­scient re­ported in its last set of fi­nan­cial re­sults that PBT con­tin­ued its un­bro­ken trend of grow­ing its in­come year-on-year since its in­cep­tion. In the year to end-March, PBT’s rev­enue grew 10% to R533m. Profit af­ter tax had also grown ev­ery year since in­cep­tion — un­til it dropped from R41m to R28m af­ter the weaker rand caused for­eign cur­rency losses of more than R9m (thanks to for­ward ex­change con­tracts on half of the com­pany’s an­tic­i­pated in­come from the Africa/Mid­dle East re­gion).

A mis­pric­ing op­por­tu­nity . . . maybe?

Quan­tum of so­lace?

Fi­nally, some news on long-sus­pended Quan­tum Prop­erty Group (QPG) — a spe­cial­ist real es­tate contender that de­vel­oped and owned the up­mar­ket 15 On Or­ange Ho­tel in Cape Town as its only as­set.

Un­for­tu­nately, the event is not go­ing to see any value be­ing re­alised for long-suf­fer­ing share­hold­ers. Nor will it give investors much-needed clo­sure in this drawn-out saga.

Read­ers may re­mem­ber that QPG got into a fi­nan­cial tan­gle when the 15 On Or­ange prop­erty was not able to gen­er­ate the cash flows needed to ser­vice the bor­row­ings from Absa that were re­quired to un­der­take this size­able de­vel­op­ment. This made the com­pany lose its grip on this at­trac­tive as­set.

For those share­hold­ers still bit­ter at de­vel­op­ments, there may be some so­lace in the fact that QPG di­rec­tor Peter Shaff has been con­victed of con­tra­ven­tions of the Com­pa­nies Act, and has been fined R40,000 (of which R15,000 was sus­pended for five years). The fine stems from a share­holder com­plaint around the com­pany not call­ing an AGM or pub­lish­ing an­nual fi­nan­cial state­ments for the 2012 fi­nan­cial year. QPG did not re­spond to a com­pli­ance no­tice, and the mat­ter was re­ferred to the Na­tional Pros­e­cut­ing Author­ity for pros­e­cu­tion.

Un­for­tu­nately for QPG share­hold­ers, cor­po­rate clo­sure does not seem im­mi­nent. Since the sus­pen­sion of QPG’s shares in 2012 — fol­low­ing the liq­ui­da­tion of its main as­set own­ing sub­sidiary, A Mil­lion Up In­vest­ments (AMU) — the com­pany has is­sued reg­u­lar no­tices to share­hold­ers ad­vis­ing of en­gage­ments with its le­gal ad­vis­ers “to as­sess the im­pact of the liq­ui­da­tion of AMU”. The last such no­tice was is­sued in July.

Four years seems like an aw­fully long time to as­sess such an im­pact on what es­sen­tially is a sin­gle prop­erty as­set. The ho­tel has long been un­der new own­er­ship, and per­haps it’s time for the re­main­ing QPG di­rec­tors to of­fer a more de­tailed (and frank) assess­ment of any pos­si­ble rem­nants of value.

Go­ing NUTS

When your shares are trad­ing at 2c and your busi­ness model re­volves around mal­nour­ished op­er­a­tions gen­er­at­ing less than R40m in rev­enue, the last thing you need is for your pro­posed “bulk-up” ac­qui­si­tion to fall away.

That is what has tran­spired at Nu­tri­tional Hold­ings — which has the ap­pro­pri­ate share code of NUT. The com­pany has can­celled the ac­qui­si­tion of Kairos Nu­tri­tion, an­nounced in late April, af­ter un­cer­tainty arose around achiev­ing tar­gets set as part of the sus­pen­sive con­di­tions.

This is the dif­fi­culty with penny stocks look­ing for reinvention. There is sim­ply not much that can be done when there’s lit­tle cur­rency in your pa­per, and when op­er­a­tional trac­tion is elu­sive.

At this stage it will take a stroke of mad cor­po­rate ge­nius to en­sure a sem­blance of vi­a­bil­ity at NUT.

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