A walk on the wild side

Finweek English Edition - - COMPANIES&MARKETS PORTFOLIOPUNTS - SHAUN HAR­RIS

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.

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