THE GOOD, THE BAD & THE UGLY

Finweek English Edition - - Companies & markets - EDITED BY MARC HASENFUSS

DI­VIDE AND CON­QUER COM­BINED MO­TOR HOLD­INGS (CMH) hit re­verse last week by sub­di­vid­ing its share (trad­ing at 10 000c) on a fiveto-one ba­sis “to en­cour­age more par­tic­i­pa­tion by private in­vestors”.

There’s still a per­cep­tion in the mar­ket that it’s more prof­itable, or cheaper to buy 100 shares at 100c each than one share at 10 000c. The ex­act op­po­site ac­tu­ally ap­plies.

Some time ago, PSG is­sued per­pet­ual pref­er­ence shares with a nom­i­nal value of 100c each, priced low to at­tract the pub­lic. Th­ese shares were last quoted at 98c/99c, a dif­fer­ence of one cent or one per­cent be­tween buyer and seller price. This gap can never nar­row as price adjustment on the JSE can­not be for less than one cent.

At the same time, Absa also is­sued per­pet­ual pref­er­ence shares but in­stead it opted for a nom­i­nal value of R1 000 per share. Th­ese shares were quoted at R926,10/R927,95 at the time of writ­ing. The dif­fer­ence be­tween the buy­ing and sell­ing prices was a mere 0,2%.

The Absa price, if the nom­i­nal value was also 100c to com­pare it with the PSG pref­er­ence share units, would be 92,6c/92,8c – much nar­rower and more com­pet­i­tive than PSG’s. PSG will ac­tu­ally do the in­vestors in its pref­er­ence shares a favour by con­sol­i­dat­ing.

This will sub­stan­tially re­duce the in-and-out cost on th­ese shares, which are in­ter­est rate in­vest­ments where ad­di­tional deal­ing costs of up to 0,8% are im­por­tant.

War­ren Buf­fett is also a firm sup­porter of high­priced shares. The shares of Berk­shire Hath­away, of which he holds 500 000, have never been sub­di­vided. DON­NING THE 2010 CAP... THE BE­LEA­GUERED Don Group looks as if it’s been play­ing foot­ball with a nine-mem­ber team for the last few fi­nan­cial re­port­ing sea­sons, but the 2010 World Cup looks set to give the com­pany the free­kick it has longed for.

CEO Thabiso Tle­lai says the com­pany's ho­tels have been roped in by Fifa to be used as ac­cred­ited ac­com­mo­da­tion for the sport­ing spec­ta­cle. Also, the World Cup has cre­ated “mo­men­tum to at­tract nor­mal busi­ness” in the leadup to the event. Fin­week hopes this will get the out­fit to move up from the bot­tom of the league ta­bles. BUILD­ING THE ZEDER BRAND(Y) SPEAK­ING AT Ned­bank’s mid­cap con­fer­ence, Zeder CEO An­tonie Ja­cobs pre­sented some fas­ci­nat­ing in­sights into the in­tri­ca­cies of buy­ing up tightly held agribusi­ness shares.

He noted that net­work­ing with share­hold­ers in some of SA’s smaller cen­tres in­volved braai­ing and drink­ing brandy. Sounds rather nice…

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