Finweek English Edition - - INVESTMENT -


Kelly Group, es­pe­cially its US op­er­a­tions, has strug­gled in re­cent years, but it has now sold the trou­bled US M Squared Con­sult­ing for $11m. The sale price can po­ten­tially be ad­justed sub­ject to war­ranties and work­ing cap­i­tal amounts, but it is still a big deal for the group. As­sum­ing an ex­change rate of R8.80/$, this adds al­most R97m to its ex­ist­ing cash pile of al­most R90m at the Septem­ber year-end. This gives the group cash of some R187m while its mar­ket cap is only slightly more at R192m.

Of course, it isn’t as sim­ple as that as Kelly Group also has a load of debt, with an in­ter­est-bear­ing deben­ture to In­vestec of R152m due for pay­ment at the end of this month. The lat­est re­sults in­di­cated that it was re­fi­nanc­ing this loan amount and that this is its only debt, so hardly a strain on the bal­ance sheet. As­sum­ing it does re­fi­nance the debt, this leaves the com­pany very cash f lush and the share price be­low the pub­lished net as­set value. Kelly Group is look­ing very at­trac­tive although it op­er­ates in a sec­tor that is se­ri­ously strug­gling right now. Em­ploy­ment ser­vices really need a strong and grow­ing econ­omy to boom, so no rush to buy but cer­tainly worth keep­ing a very close eye on.


Tsogo Sun an­nounced an up­grade to its Sil­ver­star, Gold Reef City and Mon­te­casino op­er­a­tions in Gaut­eng – it will be spend­ing R750m on the up­grades. But it is also spend­ing R150m on “char­i­ta­ble or so­cial in­fras­truc­tural de­vel­op­ments in the Gaut­eng province”. I un­der­stand the idea be­hind gam­bling com­pa­nies hav­ing so­cial re­spon­si­bil­ity com­mit­ments – but this is at best some se­ri­ous arm-twist­ing or at worst an out-and-out shake­down. The is­sue here is that the Gaut­eng Gam­bling Board will se­lect and ad­min­is­ter the projects for the R150m shake­down and one has to ask what its com­pe­tency in this area is. Surely there is a bet­ter more spe­cialised State or pri­vate group­ing that should man­age the R150m?


As I write this col­umn gold is tank­ing – it’s cur­rently un­der $1 450 and firmly in bear land but, more im­por­tantly, what about the gold min­ers? Their big­gest prob­lem is that they are price tak­ers (as are all min­ers) in that the price they re­ceive for their prod­uct is de­ter­mined by the mar­ket and not them­selves. This puts them on the back foot and with gold be­low $1 500 and rand f loat­ing around R9/$ the gold min­ers earn­ings are go­ing to be hurt mas­sively. We’re see­ing the big min­ers trad­ing just off ten-year lows and if gold gets weaker (or even just re­main­ing be­low $1 500), I would ex­pect fur­ther down­side from the gold min­ers.


Zeder re­sults in­di­cated a change in strat­egy that is fairly sig­nif­i­cant. Pre­vi­ously it only really ever took non-con­trol­ling stakes in com­pa­nies. The two re­cent ac­qui­si­tions of con­trol­ling in­ter­ests in Agri­col and Chay­ton in­di­cate a change in strat­egy, which is likely to be good news for share­hold­ers of Zeder. A con­trol­ling stake is typ­i­cally more ex­pen­sive to ac­quire but has far bet­ter re­wards and is a good move by Zeder, although it will take time for this new strat­egy to play out through the com­pany.


FoneWorx has found it­self em­broiled in a pub­lic spat with the Kirsh fam­ily and I don’t have space here to go into the messy de­tails but the SENS re­leased by FoneWorx is a well thought out and de­tailed ac­count of what’s hap­pened and how it has played out. Of course it is FoneWorx’s view of the saga and un­doubt­edly the Kirsh fam­ily has a dif­fer­ent view, but it cer­tainly goes a long way to keep­ing share­hold­ers in­formed of how the deal is un­rav­el­ling.

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