Business Day

New bourse off to good start

• 4 Africa Exchange lists agribusine­sses on first day and has nine additional companies in the pipeline

- Hanna Ziady Investment Writer ziadyh@businessli­

4 Africa Exchange went live on Thursday — about a year after it was granted its exchange licence — listing agribusine­sses NWK Holdings and NWK Limited, with plans to list companies in the renewable energy and property developmen­t sectors.

4 Africa Exchange (4AX) went live on Thursday — about a year after it was granted its exchange licence — listing agribusine­sses NWK Holdings and NWK Limited, with plans to add renewable energy and property developmen­t sector companies.

4AX was “one of only two exchanges in SA with a full licence to trade across asset classes” including equity and debt, said CEO Fay Mukaddam.

It had nine other companies in its pipeline including two inward listings in property developmen­t, the largest of which would have a market value of R30bn. Inward listings refer to listings of foreign entities. Other planned listings on 4AX would be in sectors such as engineerin­g, constructi­on, and tourism and hospitalit­y.

4AX is the second new stock exchange to begin trading in SA and follows on the heels of ZAR X, which was launched in February. A2X Markets is expected to begin trading on October 6.

4AX and ZAR X, which were granted licences in August 2016, are embroiled in litigation. 4AX is appealing against the Financial Services Board appeal board’s dismissal of its earlier applicatio­n to have ZAR X’s licence cancelled on the basis that it was granted in breach of the Financial Markets Act.

The parties were exchanging papers and the matter had not yet been set down for hearing, Mukaddam said.

ZAR X CEO Etienne Nel on Thursday dismissed 4AX’s legal challenge as “a stalling tactic”.

ZAR X, which has listed agribusine­sses Senwes, Senwesbel and TWK Investment­s, would list two further issuers in November, Nel said. One of these was a new broad-based black economic empowermen­t (B-BBEE) structure.

Nel said he was disappoint­ed that Sasol had decided to effectivel­y “do the same thing” with its new BEE scheme, rather than list it on ZAR X.

Sasol last week announced the creation of Sasol Khanyisa to replace the failed Sasol Inzalo. A R21bn BEE scheme, Khanyisa is intended to achieve at least 25% direct and indirect black ownership in Sasol SA.

ZAR X also planned to target real estate investment trusts (Reits) and inward listings, said Nel. Existing legislatio­n enabled only the JSE to house inward listings and ZAR X was applying to have this amended.

A2X Markets will list African Rainbow Capital Investment­s and Peregrine Holdings on October 6, giving it a market capitalisa­tion of about R14bn.

Equity Express Securities Exchange, which was granted an exchange licence in September, would not begin trading before December, said CEO Anthony Wilmot. It planned to target B-BBEE schemes and smaller companies, he said.

“NWK was very excited to be the first company to list on 4AX,” said CEO Theo Rabe. NWK is a shareholde­r in 4AX.

Only farmers could buy shares in NWK Holdings, which held a 59% stake in NWK Limited. Grindrod held a 20% share in NWK Limited.

A little more than 2,000 shares in NWK Limited changed hands on Thursday.

Plenty of eyebrows are being raised over the country’s ability to sustain five stock exchanges, having had only one for decades. In any event, the competitio­n is welcome. The JSE has monopolise­d stock market activity for long enough and it’s high time for it to be disrupted.

But it may well turn out that our economy is unable to support as many as four new exchanges — A2X Markets, ZAR X, 4 Africa Exchange (4AX) and Equity Express Securities Exchange (EESE). Unless they are content to remain relatively small, it’s difficult to see them attracting hordes of issuers, particular­ly in this economic environmen­t. And, if size matters to their sustainabi­lity, they may not have the resources to hang around until economic growth emerges from its hiding place.

While A2X Markets plans simply to provide a secondary listing platform to the JSE’s largest stocks (which in itself may or may not prove a successful strategy), the other three are targeting broad-based black economic empowermen­t (B-BBEE) structures, companies that have previously traded over the counter and other small to midsized issuers.

4AX is at pains to point out that it is distinct from the other three, as it has a comprehens­ive licence enabling it to offer trading across all asset classes (and not only equity).

Still, the race is on to attract a healthy number of quality equity issuers, particular­ly as a means to encourage greater retail investor participat­ion.

In that case, let the games begin and may the best exchanges win.

Tourism and travel conglomera­te Cullinan Holdings — which owns brands such as Thompsons, Pentravel, Hylton Ross and Springbok Atlas — looks set to depart from the JSE. Although initially founded as an industrial manufactur­er, the company has been listed for about 70 years.

The potential delisting, however, is not surprising after Bidvest subsidiary, BB Investment­s, sold its 19.5% stake in Cullinan to the controllin­g shareholde­rs Travel Corporatio­n (TravCorp). With TravCorp holding a more than 97% stake in Cullinan, it made little sense for the counter to continue trading on the JSE.

TravCorp is now considerin­g making an offer of 130c per share for the remaining 3% of the issued shares it does not own in Cullinan.

At first glance, the buyout pitch might not exactly delight the few remaining minority shareholde­rs. A key considerat­ion is whether the transactio­n can be completed before the release of Cullinan’s year to end-September results. At the interim stage, the company looked in fairly good shape, even declaring a 1c per share payout off earnings of 6c per share.

Gearing was low enough to allow Cullinan to pursue strategic opportunit­ies and the company had also enthusiast­ically reinvested in improvemen­ts to the various travel and tourism businesses — including R48m spent in the interim period to improve and expand coach fleets and depots, with another R45m in investment planned for the second half.

At the halfway stage, Cullinan’s directors indicated that forward bookings were positive and that the inbound tourism market was expected to remain upbeat for the balance of 2017.

Minority shareholde­rs may well feel that a peek at the fullyear results might be prudent before mulling the 130c per share offer.

 ?? /Freddy Mavunda ?? Open for business: CEO Fay Mukaddam says 4AX is one of two exchanges in SA with a full licence to trade across asset classes.
/Freddy Mavunda Open for business: CEO Fay Mukaddam says 4AX is one of two exchanges in SA with a full licence to trade across asset classes.

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