Bigger fish to fry?
SMALL CAP ELECTRONICS company Jasco has turned itself around – apart from its still struggling security division. And as provider of the “last mile” in telecoms it represents a play on South Africa’s imminent broadband revolution.
But it remains small, with the prospects of merely ticking along, growing organically and through other small, targeted acquisitions. That’s unless it decides to do a deal with existing black economic empowerment shareholders Community Investment Holdings (CIH), Anna Mokgokong and Joe Madungandaba’s company, formerly known as Malesela.
Last year, Jasco cancelled a cautionary announcement that would have grown the company from R350m in turnover to one with income of around R600m, increased critical mass, enhanced black control and broadened its products and customer base.
Though CEO Martin Lotz won’t confirm
who the target was, given that it was a related party transaction, it seems logical to assume that Jasco was trying to move closer to CIH.
So what went wrong? Jasco told shareholders at its interim results presentation last year that the value to reward ratio had been unacceptable and the transaction had been cancelled after spending R1,4m on an extensive due diligence exercise.
However, it continued to actively pursue acquisitions with similar goals in mind as the previous transaction would have achieved, Jasco said.
Lotz says Jasco has a strong relationship with Madungandaba, its nonexecutive deputy chairman in charge of strategic input and marketing opportunities, whom he describes as a “shrewd” businessman with opportunities at his fingertips daily.
CIH owns a 35% stake in Jasco, with voting rights over 51%. With the possible conversion of the preference shares its empowerment ownership will increase. CIH has various investments in logistics, as well as power and energy.
Mokgokong and Madungandaba are among a handful of hard working black professionals who started their business long before the empowerment bandwagon and tend to keep a lower profile than most, despite presiding over a current R4bn turnover company. Meanwhile, Jasco’s telecoms division, which accounts for around 60% of the group, remains well placed. Its Webb Industries subsidiary does everything needed for wireless base stations, a still growing market throughout Africa, while Telesciences and Tasslelane provide last mile – the access network from the backbone to people’s homes and offices – fixed line equipment, software and services.
The latter should benefit as Telkom upgrades its network and increases its ADSL subscribers and also as second national operator Neotel rolls out its network. How much they will benefit is up to Jasco to capture its slice.
Though a further deal with CIH may not be imminent, it seems highly likely in the medium to long term. That possibility, and the fact that it’s a broadband beneficiary in a deregulating market, makes Jasco a share to keep a watchful eye on.
Still on the
look-out. Martin Lotz