Going south

Is something on the fritz at South Ocean Holdings (SOH)? Last week SOH — whose share price has lost more than 70% in the past three years — opted for a clawback offer, involving unnamed empowerment participants, to raise R20m to fund the company’s working capital requirements. The terms of the offer have not been disclosed. The pricing will be most interesting, given the share price fizzle over the years.

Of course, a fund-raising exercise is not terribly surprising, as SOH has performed poorly in recent years with lessthan-convincing operational cash flows. Margins have hardly been reassuring, even in the few fair trading periods.

It’s probably worth reiterating that SOH’S bankers renewed a bank overdraft facility of R274m last May. But this was up for review after the interims to end-june “due to the negative financial performance of the group”.

Interestingly, the proposed clawback offer came scarcely a week after

Mantsu Kabelo Lehloenya resigned as CFO. Her replacement is still being sought, which could be worrying.

Unfortunately, SOH shareholders will presumably view the terms and conditions of the offer before the market is given sight of a trading statement for the year to end-december 2017. I doubt there will be too many pleasant surprises in those numbers, and the fact that SOH is willing to raise R20m with its share price at bombed-out levels gives off a whiff of desperation.

Some market watchers have held that SOH should sell off its unprofitable lighting business, Radiant, to concentrate on its core cables business. Radiant posted a R10m loss at earnings before interest, tax, depreciation and amortisation level in the half-year to end-june off turnover of R142m. If its numbers have further dimmed in second-half trading, it might be difficult for SOH to give the lighting business away.

Recovery play

The share price of Ascendis is down over 40% in the past 12 months. Major shareholder Coast2coast is also mulling a significant paper loss since underwriting a recent R750m rights offer that was bizarrely pitched at a premium price of R20/share.

If worried shareholders were in need of a tranquilliser with the share price under R14, then a Sens announcement detailing two significant equity positions in Ascendis would go a long way to soothe frayed nerves.

WDB Investments — the women’s empowerment initiative with holdings in Woolworths, Bidvest, Discovery and MMI — and black-owned value investor Sentio have each built up their respective stakes in Ascendis to about 5%.

The development should increase market anticipation for Ascendis’s results, which are set for publication on March 1. If anything, these results need to reinforce executives’ notions that Ascendis adds value to acquisitions, with its corporate team able to extract synergies and cost savings.

Nowfor more scrip ...

Sabvest is one of my favourite investment companies — though I only own a handful of the hard-to-get shares. Still, it was heartening to see that tagged onto Sabvest’s latest dividend declaration was a commitment to pay a special dividend of 100c/share. This follows proposals by SA Bias Industries, Sabvest’s largest investment, to sell its International Trimmings & Labels division for over R2bn.

If memory serves, this will be the third special dividend declared by Sabvest in the past few years.

Grateful as I am for any additional cash infusions to my investment portfolio, I would be over the moon if Sabvest’s board would apply their minds to addressing the lack of free float in the issued ordinary and N-shares. Over

88% of the issued share float is held between two shareholders.

Admittedly, I don’t have a ready solution. The company certainly does not need additional capital – which rules out a shares-for-cash issue. Scrip dividends are out of the question with the share still trading at a substantial discount to intrinsic value.

Quite the quandary . . .

That SOH is willing to raise R20m with its share price at bombed-out levels gives off a whiff of desperation