A walk on the wild side
THIS IS ONE for the brave at heart. Purely as a valuation play, Vunani is fundamentally worth a buy. But it’s very much a speculative punt for an investor with a low risk profile and strong stomach. Full year financial results (for the year to end-December) will probably be out by the time readers receive this Finweek, but we have a good idea of what its results will look like following a recent trading update. That said, an improvement of at least 20% was expected in basic and headline losses per share. Yes, losses. So it’s a case of nothing from nothing. But instead of leaving nothing, it might just present a share worth buying.
For that we looked at a recent Sens announcement on a somewhat complicated settlement agreement on the disposal of Vunani’s shareholding in Edge Holdings, an asset management business in a similar market to Vunani. An agterskot payment of around R27,8m was initially meant to be settled through the issue of Vunani shares, but, perhaps understandably considering the share price weakness of late, the Edge vendors wouldn’t accept delivery of the shares. So an alternative settlement has been agreed that breaks Vunani’s ties with Edge.
The interesting part is in the pro forma financial effects. It’s not real, just an illustration, but it shows the deal would have cut net asset value from 5,2c to 4,3c/share and tangible net asset value from 3,7c to 2,8c/ share. That for a share currently trading at 5c/share, near its low for the year (it’s been as high as 11c/share over the past year).
Vunani also sold its holding in AltXlisted BSI Steel (Vunani is also on the AltX) and received around R35m, which it says will be used to reduce debt. That’s good. So is the fact CEO Ethan Dube and other directors were buying last year at 10c/ share. They’ll work hard to recover the 50% they’ve lost on their investment.
Results, though still covered in red ink, might move its share price up. At under 10c/share Vunani is worth buying, with the warning that it’s a speculative investment.