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