Lead­ing the way

Finweek English Edition - - LETTERS -

BE­ING IN­VESTED in both Pal­adin and its “em­pow­er­ment” sub­sidiary Them­beka Cap­i­tal, I’ve been quite en­ter­tained and en­light­ened by your mag­a­zine’s re­cent re­ports and spec­u­la­tions about cor­po­rate ac­tion in the PSG sta­ble in gen­eral and at Pal­adin Cap­i­tal in par­tic­u­lar. With Finweek lead­ing the way, “Mou­tonol­ogy” may even de­velop into a re­spectable school of in­vest­ment the­ory.

Re­gard­ing Pal­adin’s re­cently is­sued cau­tion­ary – as well as its CEO’s re­ported in­di­ca­tion of in­ter­est in the se­cu­rity in­dus­try – could the cau­tion­ary not pos­si­bly re­late to a buy­out of lit­tle Amecor, which op­er­ates on the tech­no­log­i­cal side of the se­cu­rity in­dus­try? Prob­a­bly be­cause of its ex­tremely illiq­uid and small cap na­ture, this im­pres­sive op­er­a­tion seems to have been com­pletely ig­nored by the “ex­perts”. It has good an­nu­ity in­come, con­sis­tently pro­duces lovely cash pay­outs and solid div­i­dends, has de­vel­oped good niches in a growth in­dus­try and is cur­rently dirt cheap.

In­ter­est­ingly, Amecor also op­er­ates in the al­ter­na­tive en­ergy sec­tor, an arena in which Pal­adin has a small in­ter­est. Even more in­ter­est­ingly, Amecor has also very re­cently is­sued a cau­tion­ary.

On Them­beka Cap­i­tal I must ex­press some dis­ap­point­ment with this in­vest­ment, es­pe­cially when you com­pare it to the ex­cel­lence of African Bank’s un­her­alded Hlu­misa em­pow­er­ment scheme (a re­port on the fan­tas­tic achieve­ment of this scheme is long over­due). On the face of it, with the black pub­lic hav­ing bought in at R30 in 2007 and with “in­trin­sic value”, given where the un­der­ly­ing PSG, Capitec and JSE prices are sitting – now prob­a­bly in the re­gion of R90 – the in­vest­ment re­turns ap­pear hand­some.

How­ever, the ap­par­ent “value” is cur­rently more vir­tual than ac­tual. The shares hardly trade and black share­hold­ers hav­ing to meet the real world needs for ex­pen­sive ba­sics, such as hous­ing and ed­u­ca­tion, are com­pelled to al­most give their shares away. I try not to look at the quoted price any­more, it’s too sad; but the last time I checked it was around R40.

It’s cold com­fort for black pub­lic in­vestors who can’t ac­cess or lever­age off their own cap­i­tal that PSG has on pa­per scored good em­pow­er­ment points and that Them­beka could one day be­come a R10bn em­pire. To pre­vent any un­for­tu­nate (as it were) per­cep­tions tak­ing root may I sug­gest a swap with the more trade­able Pal­adin shares be given se­ri­ous con­sid­er­a­tion.

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