Worth watch­ing

Financial Mail - - MARKET WATCH - @mar­chasen­fuss

The AGMS of Hosken Con­sol­i­dated In­vest­ments (HCI) and its var­i­ous listed off­shoots are not as well at­tended by share­hold­ers and in­vestors as the yearly meet­ings of in­vest­ment gi­ants such as PSG Group and Rem­gro.

HCI CEO Johnny Cope­lyn is per­haps not as enig­matic (or, for that mat­ter, as revered) as PSG’S Jan­nie Mou­ton or Rem­gro’s Jo­hann Ru­pert.

But the low-key (and dis­arm­ingly in­for­mal) AGMS do of­fer valu­able in­sights into an in­trigu­ing con­glom­er­a­tion of com­pa­nies. One of the more in­ter­est­ing com­ments from Cope­lyn came dur­ing the Niveus AGM, when he con­tended that un­listed sub­sidiary La Con­corde struck a good deal by sell­ing the op­er­at­ing as­sets of wine and brandy group KWV to Vi­vian Imer­man’s Vasari Group last year. He sug­gested the buy­ers of KWV would re­ally need to sweat the as­sets to se­cure a good re­turn.

“We did well in the way we man­aged the [KWV] busi­ness, and we did well in the way we ex­ited the busi­ness. We’ve done bet­ter with KWV than any other [pre­vi­ous ma­jor] share­holder . . . we are not hang­ing our heads in shame.”

With this in mind, it’s rather a shame that we will prob­a­bly never be able to gauge Vasari’s progress with KWV’S wine and brandy port­fo­lio — es­pe­cially the lat­ter cat­e­gory, which seems to be show­ing spir­ited gains in mar­ket share of late.

An­other note­wor­thy ob­ser­va­tion was made dur­ing the eme­dia Hold­ings AGM, at which Cope­lyn ad­dressed the con­tin­ued par­tic­i­pa­tion of Rem­gro as a sig­nif­i­cant mi­nor­ity share­holder in the owner of e.tv, ENCA and Open­view HD.

Re­spond­ing to a ques­tion on when Rem­gro could switch its hold­ing from un­listed eme­dia In­vest­ments into the listed com­pany, Cope­lyn said it would be prefer­able for Rem­gro to swap its hold­ing into the listed eme­dia Hold­ings. “We have not ex­plored this, though. But if they [Rem­gro] wanted to we would not op­pose it.”

The dif­fi­culty, of course, lies in the con­trol struc­ture of eme­dia, where lowvot­ing N-shares are not only more liq­uid but also trade at a pre­mium to the or­di­nary shares. There’s also the sense that eme­dia’s share price is dis­con­nected from the firm’s longer-term prospects. Con­se­quently, find­ing an ap­pro­pri­ate swap ra­tio for a siz­able un­listed share­hold­ing into listed scrip might be a fairly tricky ex­er­cise.

Debt fund­ing dues

Small busi­ness fi­nancier Ec­spo­nent has raised US$10M in debt fund­ing from an un­named Bri­tish cor­po­rate fi­nancier. That’s a fair chunk of money for a com­pany with a mar­ket cap­i­tal­i­sa­tion of less than R400m. To date Ec­spo­nent’s fund­ing ef­forts have been stren­u­ous af­fairs — is­su­ing high-yield­ing pref­er­ence shares to in­vestors to raise growth cap­i­tal to in­vest in en­deav­ours that need to gen­er­ate above-av­er­age re­turns.

Ec­spo­nent CEO Ter­ence Gregory has never shied away from dis­cussing the in­tri­ca­cies of this balanc­ing act.

But the long and the short of it is that the com­pany’s busi­ness model sim­ply can­not af­ford any cash flow hitches in or­der to ser­vice a wad of pref­er­en­tial pa­per.

Though se­cur­ing siz­able debt fund­ing is a sig­nif­i­cant de­vel­op­ment in Ec­spo­nent’s cor­po­rate life, the mar­ket still ap­pears to be in two minds. Over the past 12 months the share price has skit­tered as low as 9c and soared as high as 64c.

Baited breath

Brim­stone-con­trolled fish­ing group Sea Har­vest has bol­stered its off­shore pres­ence with the ac­qui­si­tion — via its sub­sidiary Mareter­ram — of a mack­erel busi­ness in Western Aus­tralia.

This prompts ques­tions around whether Sea Har­vest (pri­mar­ily a hake­fish­ing en­ter­prise) or Mareter­ram (prawns, scal­lops and seafood dis­tri­bu­tion) would not also be an­gling for AVI’S Aus­tralian seafood busi­ness, Sim­plot.

Sim­plot would add much-needed bulk to Mareter­ram, one of the smaller list­ings on the Aus­tralian Stock Ex­change.

The low-key AGMS of HCI and its off­shoots of­fer valu­able in­sights into an in­trigu­ing con­glom­er­a­tion of com­pa­nies

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