No fear

De­spite a 13% mar­ket drop in a sin­gle week, direc­tors con­tinue to buy

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA

MUCH LIKE THEY HAVE all along, direc­tors of JSE-listed com­pa­nies again proved to be con­sis­tent share buy­ers last week de­spite the con­tin­u­ing blood­bath on eq­uity mar­kets. In thin trad­ing dur­ing the week to 27 Oc­to­ber, direc­tors re­ported net buy­ing of R11m – al­most ex­clu­sively in the small and medium stock seg­ment on the AltX.

Led by waste man­age­ment com­pany In­ter­waste’s fi­nan­cial di­rec­tor Bron­wyn LeeAnn Will­cocks with buys worth R2,4m in the com­pany, other direc­tors made a meal of the mar­ket due to heav­ily dis­counted shares. The 6,6m shares Will­cocks bought at an av­er­age price of 37c each came to the mar­ket at 100c/ share last June.

Al­though In­ter­waste has been on a steady de­scent since peak­ing at 250c af­ter list­ing, Will­cocks ef­fec­tively used the buy­ing op­por­tu­nity cre­ated by the slump in its share price to in­crease her pre­vi­ous share­hold­ing from 23% pre­vi­ously to 25%. In­ter­waste is cur­rently trad­ing at its low­est ever level of 36c/share.

The cur­rent val­u­a­tion of the share can’t en­tirely be blamed on the neg­a­tive sen­ti­ment grip­ping the eq­uity mar­kets, as In­ter­waste was one of a host of AltX list­ings to miss its own earn­ings fore­casts at list­ing by a wide mar­gin. While it had promised head­line earn­ings per share of 11,8c for the year ended De­cem­ber 2007, the ac­tual fig­ure was only 44% of that. It also seems a long way off the promised HEPS of 12,9 for the year to De­cem­ber 2008, as it only man­aged to bring in 4,9c/share in the six months to June. That was still a healthy 27% growth on the pre­vi­ous cor­re­spond­ing pe­riod.

Judg­ing by the com­men­tary ac­com­pa­ny­ing the June in­ter­ims, In­ter­waste is op­ti­mistic about its sec­ond half per­for­mance. It es­tab­lished a met­als re­cov­ery busi­ness unit to­wards year-end 2007 to ex­pand the group’s re­cy­cling of­fer­ings. How­ever, it said de­lays ex­pe­ri­enced in im­port­ing spe­cialised equip­ment for the divi­sion ham­pered ini­tial growth be­fore the plant was com­mis­sioned mid-April: its per­for­mance has since “been out­stand­ing”. Ad­di­tional metal re­cov­ery fa­cil­i­ties will be es­tab­lished in both Gaut­eng and Mpumalanga in the “near fu­ture”.

It would there­fore seem Will­cocks’s ex­pen­di­ture on the com­pany’s shares was well-timed, some­thing prospec­tive in­vestors would do well not to dis­miss.

Kag­iso Me­dia’s Mur­phy Morobe was an­other big spen­der last week, pump­ing R3m into buy­ing 255 000 of the com­pany’s shares. Al­though his 1180c/share buy­ing price is still good at an earn­ings mul­ti­ple of less than 10 times, Morobe left it a bit late. Had he bought mid-July – when Kag­iso’s price fell to be­low 1000c/share, Morobe’s money would have gone a long way and saved him ap­prox­i­mately R1m on the shares he bought.

Yet an­other MTN di­rec­tor – Rob Nis­bet – took ad­van­tage of the slump in the cel­lu­lar op­er­a­tor’s stock and made a R3,7m call. That came a fort­night af­ter CE Phuthuma Nh­leko bet R1bn on the com­pany.

Big spen­der. Mur­phy Morobe


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