DIFFERENT, BUT THE SAME
So Aveng has escaped having to do a rights issue by instead issuing a convertible bond. On the surface this is pretty much the same as a rights issue as it will result in new shares being issued for cash, but the company has the right to call the bonds under certain circumstances. That said, these circumstances are unlikely to occur, so we’re back to the beginning. Aveng has essentially issued new shares for cash. I continue to stay as far away as possible from construction stocks. trade in the share (assuming it wasn’t just snapped up by a single long-term holder) and this increased liquidity would improve price discovery. Price discovery is one of the main reasons for stock exchanges, but that discovery is distorted by a large shareholder that effectively reduces the free f loat available to trade. This reduction of free f loat is totally fine, but markets love liquidity. Increased free float in Distell would be of huge benefit to existing and potential shareholders.
UPDATES SHOW EXPENSIVE SHARES We’re seeing retailer updates hitting the JSE and they’re all pretty much the same – not bad, but far from shooting the lights out. There is double-digit top-line growth, but when new stores and inflation are taken into account we’re suddenly seeing low single-digit real growth, with some, local clothing sales – such as those of Woolworths* – actually shrinking 0.2% on a like-for-like excludinginflation number. Considering the P/E ratios these companies trade on, these updates make the shares expensive, but the market seems to be taking the view that at least profits are still growing, so we’re not seeing much selling.