The real deal?

Finweek English Edition - - COMPANIES & MARKETS - MARC HASENFUSS marc.hasenfuss@finweek.co.za

OUT­SIDE OF African Bank and Capitec Bank, the do­main of mi­cro-fi­nance or emerg­ing bank­ing ser­vices in South Africa is of­ten per­ceived as a not too in­spir­ing pic­ture. The other two listed con­tenders – ig­nor­ing Blue Fi­nan­cial Ser­vices (which is largely a pan-African busi­ness) – are African Dawn and Fin­bond, which don’t ap­pear to be held in much es­teem by the mar­ket.

The an­nual re­port shows it gen­er­ated a not in­sub­stan­tial profit be­fore tax of R153,5m in the year to endMarch 2011 and paid out R15m in div­i­dends

Be­fore them, Saam­bou and Unifer left some large scars on the mar­ket.

So it was with some in­ter­est and trep­i­da­tion that Finweek fol­lowed a Stock Ex­change News Ser­vice (Sens) ad­vi­sory that noted the an­nual re­port for East Lon­don-based Real Peo­ple In­vest­ments Hold­ings was avail­able on the com­pany’s web­site. Real Peo­ple’s com­mu­niqué popped up on Sens be­cause the com­pany has is­sued “se­nior un­se­cured float­ing rate notes” un­der its do­mes­tic medium-term note pro­gramme on the JSE (with a nom­i­nal value close to R600m).

Real Peo­ple of­fers a range of credit-linked fi­nan­cial prod­ucts to in­di­vid­u­als through­out SA (and also in East Africa), with the main lines of busi­ness be­ing “the pro­vi­sion of un­se­cured credit to for­mally em­ployed in­di­vid­u­als in SA and the ac­qui­si­tion of par­tially and non-per­form­ing per­sonal loan port­fo­lios”.

It seems Real Peo­ple has, un­like some of its listed coun­ter­parts, been do­ing rather well from its spe­cialised “bank­ing” ser­vices.

The an­nual re­port shows it gen­er­ated a not in­sub­stan­tial profit be­fore tax of R153,5m in the year to end-March 2011 and paid out R15m in div­i­dends.

To put this per­for­mance in con­text, the af­ter-tax prof­its of Real Peo­ple are roughly dou­ble the size of the com­bined mar­ket cap­i­tal­i­sa­tions of Fin­bond and Af­dawn.

It’s prob­a­bly not as easy as Real Peo­ple’s ster­ling prof­its sug­gest, and Finweek does note non-per­form­ing loans of R365m stand at around 25% of gross ad­vances of R1,4bn. How­ever, its an­nual re­port does show non-per­form­ing loan cov­er­age is 60%.

Still, we won­der whether any con­sid­er­a­tion has been given to list­ing the busi­ness on the JSE or – per­haps more in­trigu­ingly – has any listed fi­nan­cial ser­vices counter looked at mak­ing a play for Real Peo­ple?

Finweek also notes Real Peo­ple looks in­tent on sell­ing off or un­bundling its affordable hous­ing busi­ness – which, in­ter­est­ingly, doesn’t look a half bad propo­si­tion, with prof­its be­fore tax of around R30m. Pre­sum­ably “un­bundling” could en­tail a list­ing for this divi­sion, but some in­ter­est would surely be shown by the hand­ful of listed low-cost prop­erty de­vel­op­ers (al­though not all cur­rently could prob­a­bly af­ford such a trans­ac­tion).

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