New bank looks to rise from the cash

THE relisted African Phoenix Investments — formerly known as African Bank Investment Holdings — faces the challenge of building the entity into something a little more than just a cash shell company.

African Phoenix, back on the local bourse since this week, is the “bad” part of the bank that used be affiliated to African Bank Limited Investments. The holding entity has three companies under its umbrella: Ellerines Holdings, Residual Debt Services and Stangen.

The share traded about 20c higher than its net asset value per share at 35.7c. NAV represents the value of assets minus liabilities.

Where this figure would go for African Phoenix depended on what the new management team and board did with the cash and what their plans were for the growth of the small Stangen continuing business, said Jean Pierre Verster, a portfolio manager at Fairtree Capital. Of the three entities, Stangen is the only trading entity. Ellerines is still in business rescue, and worth nothing, as is Residual Debt Services, which is under curatorship.

How the new firm, headed by Enos Banda, will derive returns is still opaque to the market.

“They have not yet told their market about their plan.

“There’s no strategy or business plan that has been presented to the market yet,” said Verster.

African Phoenix’s balance sheet is made up almost entirely of R1.8-billion in cash and short-term deposits.

Buyers and holders of the share could mostly come from hedge funds who had sold the old African Bank shares short in 2013 and 2014 and now needed to buy those shares back.

“When the old African Bank [Abil] was suspended, it had quite a large short interest. Those short sellers need to buy back and deliver the shares,” said Adrian Cloete, portfolio manager at PSG Wealth.

Verster said this was a possibility, although he did not anticipate a mad rush to cover short positions because the South African market only allowed someone to short a share once they had secured borrowing for that share.

“I think it’s more a case of African Phoenix trading at a high premium because of people speculating about [its] future prospects,” he said.

African Bank Limited — the “good bank” — is separate from African Phoenix and unlisted. It is owned by the Reserve Bank, the Public Investment Corporation and a consortium of six South African banks, with Brian Riley at the helm.

It’s still early days, but Cloete reckons it will be a while before investors plough into the stock as the losses from the old company are still fresh in their memories. “Market participants are going to tread very carefully with African Phoenix . . . as they have been burnt very badly.”