Finweek English Edition - - FRONT PAGE - BY SI­MON BROWN si­ *The writer owns shares in Capitec.

Spar Spur and Grand Pa­rade

Sibanye Gold Bar­clays Africa Group


Spar is­sued a cau­tion­ary that says it’s in ne­go­ti­a­tions which if suc­cess­ful may have a ‘ma­te­rial ef­fect’ on the share price. The re­tailer may be buy­ing some­thing big enough to re­quire a cau­tion­ary, or it could be a delist­ing by way of ei­ther a buy­out from a for­eign com­pany or a pri­vate eq­uity firm. A mar­ket cap of R22bn is only just over $2bn with­out any pre­mium, which is not a large pile of cash, and with an historic P/E of around 17 times it’s not that ex­pen­sive even if it trades just off the highs. The bot­tom line is that we may lose yet another qual­ity listed com­pany.


I have never liked gold min­ers as in­vest­ments, but I have to hand it to Sibanye as it de­clares another div­i­dend. This time it’s 50c, mak­ing it a 125c div­i­dend for the year. Back in the olden golden days of lo­cal gold min­ing (the Eight­ies), listed min­ers were sim­ple. Each mi­ne­shaft would be a sep­a­rate list­ing and they’d pay a healthy div­i­dend. The logic was that if a mine had a life­span of 12 years, it would have a div­i­dend yield of greater than 8% so that over the life­span in­vestors would re­ceive their in­vest­ment back in div­i­dends. Of course you wanted more than your in­vest­ment back, so a 12-year life­span would re­quire a 15% div­i­dend yield, ul­ti­mately pay­ing out 180% of your in­vest­ment over the pe­riod. These days min­ers may make a profit, but to­day they are spend­ing their time (and in­vestors’ money) dig­ging new holes in the hope of find­ing new de­posits and hence keep them­selves in busi­ness for longer. This move has re­sulted in an in­dus­try that sim­ply no longer has any in­vest­ment ap­peal for me.


Grand Pa­rade In­vest­ments an­nounced it had sub­scribed to 10% of new Spur shares for the amount of al­most R300m. For Grand Pa­rade the deal has mas­sive po­ten­tial as it can in­te­grate back-end pro­cess­ing and lo­gis­tics for their fast grow­ing Burger King brand. It is not only pick­ing up ex­per­tise from Spur, but also plug­ging into ex­ist­ing in­fra­struc­ture. But what does Spur do with the ex­tra R300m? It al­ready has al­most R140m in cash and hardly any debt. So con­ceiv­able that it could put to­gether a stack of cash to go shop­ping, but ex­ist­ing man­age­ment have shown a lack of in­ter­est or abil­ity to do deals. With my tongue firmly in my check, maybe an of­fer for Taste, which has a mar­ket cap of only around R730m? Then put Carlo Gon­zaga in charge of the new group?


Bar­clays Africa Group re­sults show that the bank con­tin­ues to bleed clients and this is a big is­sue for fu­ture prof­its. Many of the clients whom the bank has lost may have been less prof­itable ones, but the re­al­ity is that as a rule peo­ple don’t change banks as it’s sim­ply too much of a has­sle (I have changed banks once in 30 years and then only be­cause I worked there). FNB was the ex­cep­tion when it gave away iPads and other de­vices to lure cus­tomers, catch­ing every­one else off guard and gain­ing many clients. But that was a nov­elty fac­tor to a large de­gree, and will be very dif­fi­cult for any bank to re­peat. We have also seen Capitec* pick up large num­bers of clients based on a good price of­fer­ing, but the big four are sim­ply un­able to com­pete head-on with Capitec. So how does Bar­clays get new clients to sign up? Be­cause if it doesn’t, the bank is es­sen­tially go­ing for­ward with a much-re­duced client base and hence profit po­ten­tial.

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