No brainer for in­come seek­ers

Finweek English Edition - - Companies & markets - MARC HASENFUSS

MAYBE THE pro­longed bull mar­ket con­di­tions have the mar­ket so pre­oc­cu­pied with growth that a great in­come play like em­pow­er­ment mez­za­nine fi­nancier Makalani Hold­ings is al­most com­pletely over­looked.

Ini­tially the mar­ket was crit­i­cal of Makalani for its pur­ported tar­di­ness in com­mit­ting its funds of more than R2bn to BEE lend­ing op­por­tu­ni­ties. With a sur­feit of BEE trans­ac­tions over the past three years, pun­ters felt Makalani should have no prob­lem fund­ing lu­cra­tive fund­ing op­por­tu­ni­ties.

To­day R1,7bn has been lent by Makalani in a variety of care­fully se­lected em­pow­er­ment trans­ac­tions, mean­ing that three quar­ters of the avail­able funds have been mo­bilised – in­clud­ing the latest deal with Daim­ler Benz’s Sandown Mo­tors for R360m. Yet the share price still lan­guishes at lev­els lower than 9500c on the JSE – 5% less than what the com­pany listed at in 2005. Last stated net as­set value for Makalani was 10005c/share, but we sus­pect that’s stretched a bit since that of­fi­cial val­u­a­tion.

At a pre­sen­ta­tion at the Ned­bank Mid-Cap con­fer­ence, CEO Vusi Mahlangu stressed that the group would not chase deals. “It’s easy to spend money…but we want to spend it wisely.”

To Makalani’s credit, the group has care­fully as­sem­bled a di­verse lend­ing book, not com­mit­ting more than 15% of avail­able funds to any spe­cific eco­nomic sec­tor.

The big­gest ex­po­sure (14%) is in mo­tor ve­hi­cle re­tail­ing with min­ing (7,8%), banks (6,7%), fi­nan­cial ser­vices (8,7%), house­hold goods (8,9%), trans­port (6,2%), in­sur­ance (5,2%), health­care (2,1%), gam­ing & leisure (3,8%), en­gi­neer­ing (2,3%), ser­vices (1,1%) and pa­per/pack­ag­ing (3,8%) mak­ing up the bal­ance. Qual­ity as­sets are rep­re­sented in th­ese lend­ing sec­tors – most no­tably Metropoli­tan Life, Brait, Nam­pak, Mve­laphanda Group, FirstRand, Gold Fields, Kumba, Im­pe­rial, Uni­trans, Peer­mont, Mondi and Life Heal­h­care.

The cur­rent pre-tax yield on in­vested as­sets is a use­ful 14,02% with Mahlangu re­as­sur­ing that Makalani’s strat­egy is still to grow its port­fo­lio with qual­ity as­sets at at­trac­tive yields.

In­terim re­sults for Makalani (to end De­cem­ber) will be pub­lished in about three weeks’ time. We sug­gest those who need in­su­la­tion against mar­ket volatil­ity and need a com­pen­satory in­come flow should take a glance at Makalani sooner rather than later.

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