Green shoots?
Global Asset Management ranks as one of the strangest counters on the JSE. Initially listed as a specialist financier of forklifts, the group has more recently broadened its operations into alternative energy solutions.
The fact that Global’s shares have veered between a 20c low and a 315c high suggests the market is nowhere near taking a firm view on its longerterm prospects.
The volatility presented a slight problem for Global in terms of its recent decision to raise capital through a rights issue (offering 50 new shares for every 100 already held). The pitch price was 183c a share — which discounted the last stated tangible NAV of about 212c a share. But the price was hopelessly dislocated from the ruling share price since early March. It did not help that the offer was not underwritten, with two major shareholders not following their rights. The rights offer bombed, with subscriptions for just 1.27 million, or 3.46% of the rights offer, raising only R2.3m.
However, Global’s results to end May still paint an optimistic picture for the renewable energy thrust, which revolves around waste-to-energy solutions. The good news is that a rising oil price has added to projected future cash flows. The bad news is that capital expenditure costs and project delays have hurt projected returns.
Enviroprotek closed its operations in Springs and will look to re-establish its recycling reactors at a new site in Nigel. Directors say that once it is operational at the start of September, the facility is scheduled to recycle up to 500t of waste rubber a month. Plastics Green Energy successfully concluded its pilot plant campaign and started construction of its commercial recycling facility in Nigel. Directors note that waste plastic supply agreements have been finalised and about 1,000t of feedstock sourced to date.
While it seems there is a hive of activity in the renewable operations, in the past financial year these operations generated zero revenue, with the core forklift rentals and maintenance business chipping in almost all the R93m revenue. This presents a problem for Global, as directors admit its LFS Assets rentals and maintenance business closed “hardly any new” financing deals since (main client) Linde Material Handling gave notice on the exclusive agreement for leasing forklift trucks.
With the core business at a crossroad and capital-raising opportunities extremely limited, it’s going to be a big ask for Global to power-up the bottom line with renewable energy assets.
Grease that (pip) squeak
Talking about fundraising, junior energy group Efora hopes to raise more than three times its market cap in a rights issue. The company is offering 1.2 billion shares at 50c a share to raise R600m in an exercise supported by 60.72% shareholder, the Public Investment Corp.
One might optimistically view this as a transformative capital-raising exercise, with Efora presumably eyeing more niche energy assets to bulk up its offering. I’m not so sure. Even with an extra R600m on the balance sheet it will be scouring the fringes of the energy market for deals, which is still risky.
Quantum of solace
Shareholders in Quantum Foods are hungrily anticipating a bumper dividend for the September year-end after a cracking performance from the company’s egg division.
Maybe it’s prudent to temper such enthusiasm, as Quantum is now making a voluntary pro-rata tender offer to all shareholders to repurchase up to 11 million shares (5% of the issued shares). The shares will be repurchased at a price equal to the volume-weighted average traded price for the 10 trading days ending August 3, plus a 5% premium. This will cost Quantum about R50m – equivalent to about 22.6c a share.
It creates quite the quandary for Quantum shareholders: hold back for a chunky dividend or take some “top of cycle” profits …
Global’s rights offer bombed, with subscriptions for just 1.27m, or 3.46% of the rights offer, raising only R2.3m