Daily Maverick



Sustainabi­lity for Cell C?

Competing against the biggest telecommun­ication networks is no joke. You just need to ask Cell C and the many investors who have lost money along the way. In the latest restructur­e of the balance sheet, creditors owed R7.3-billion had to accept a compromise offer of just R1.03-billion.

This is part of Blue Label Telecoms’ plan to recapitali­se Cell C and finally achieve some degree of financial sustainabi­lity for the business. In addition to the steps taken to reduce overall debt, a subsidiary of Blue Label Telecoms will buy prepaid airtime for R1.2-billion from Cell C.

Sadly, Blue Label doesn’t have the best track record with anything outside of its core business. The share price is up 25% this year, which sounds great until you draw a five-year chart and notice a drop of more than 63%.

Investors have got plenty OUT

The “value unlock” trade by investment holding companies has been a feature of the post-pandemic market. Investors ran out of patience a long time ago with structures that give layered exposure to companies that are individual­ly listed on the JSE anyway.

A structural “discount to intrinsic net asset value” is the only result here, as the layers create costs and complexiti­es, and move investors further away from the assets. To close the discount, companies tend to unbundle their listed assets or sell off noncore unlisted assets. A recent high-profile example is the collapse of the PSG structure into the unlisted space.

Rand Merchant Investment (RMI) Holdings unbundled major listed investment­s (Discovery and Momentum Metropolit­an) and sold off its stake in Hastings. The value creation in the process is staggering. The market cap at June 2021 was R48-billion before these steps took place. After unbundling value worth R34.6-billion and paying dividends of R3.2-billion, the market cap a year later was R42.6-billion!

Going forward, RMI is becoming the OUTsurance Group. It will also hold a few small investment­s, but the bulk of the value clearly sits in OUTsurance, valued at R40.5-billion.

City Lodge’s story of recovery

City Lodge’s recent occupancy levels tell a story of recovery. In the 2019 financial year, average occupancy was 55%. In July to the first half of September this year, occupancie­s were between 52% and 56%.

You can also enjoy a dinner at City Lodge now. The group has had to evolve its offering to respond to consumer trends, which means less of a focus on being purely a bedand-breakfast for business travellers.

Local corporates make moves in US

AngloGold already has operations in Beatty district in Nevada. This location is full of gold and they even have a stable supply of electricit­y, so AngloGold is happily investing in more properties for exploratio­n purposes. The latest deal is a $150-million transactio­n that could increase to $200-million.

In California, logistics group Santova is acquiring 100% of A-Link Freight for $2.35-million. This is the company’s first move into the US market and it seems like a smart deal. Although the announceme­nt is vague on the numbers, it looks like a deal based on a forward earnings before interest, taxes, depreciati­on and amortisati­on multiple of under 4x.

That seems like a solid entry point into the US market. We can only hope that both of those companies look back on these announceme­nts one day with joy rather than regret.

 ?? Photo: Supplied ?? OUTsurance head office in Centurion.
Photo: Supplied OUTsurance head office in Centurion.

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