There are sev­eral new list­ings on the JSE for in­vestors to mull over

Financial Mail - Investors Monthly - - Contents - Marc Hasenfuss

LONG4LIFE Share price: 673c JSE code: L4L

BUY IM MIGHT USU­ALLY HAVE sev­eral mis­giv­ings about punt­ing a much-hyped new list­ing as a “buy” — dou­bly so if there are no fun­da­men­tals to mea­sure prospects by and the share price, at the time of writ­ing, re­flects a huge pre­mium on the cash-only cap­i­tal base. But Long4Life is no or­di­nary in­vest­ment firm.

The prime mover is deal-mak­ing doyen Brian Joffe (pic­tured). It prob­a­bly won’t be long be­fore in­vestors can gauge whether his Mi­das touch is still in­tact, as deals are likely to be bagged in the short term.

Long4Life is in ad­vanced ne­go­ti­a­tions to buy 100% of beauty fran­chise Sor­bet for about R130m in a share and scrip deal. Long4Life’s prelist­ing state­ment also noted that, in terms of the in­vest­ment pipe­line, there is sig­nif­i­cant scale and scope of op­por­tu­ni­ties in the mar­ket seg­ments be­ing tar­geted. The com­pany has al­ready iden­ti­fied a num­ber of other op­por­tu­ni­ties.

Long4Life might be­come a fo­cused in­vest­ment ve­hi­cle rather than a di­ver­si­fied con­glom­er­ate like Joffe’s for­mer en­ter­prise, Bid­vest. The prelist­ing state­ment noted the in­vest­ment port­fo­lio may com­prise fewer than 10 in­vest­ments at any given time.

What is per­haps most re­as­sur­ing is that the terms of the re­mu­ner­a­tion scheme en­sure the ex­ec­u­tive is in the same boat as share­hold­ers. Joffe did re­ceive shares at a dis­counted price of 400c/share ahead of the JSE list­ing, but that’s a small price to pay to have him work for your re­turns.

SEA HAR­VEST Share price: R13.60 JSE code: SHG

HOLD THIS FISH­ING COM­PANY was recently par­tially spun out of em­pow­er­ment com­pany Brim­stone and sep­a­rately listed on the JSE. The list­ing co­in­cided with the re­cent weak­ness in the rand, which has helped Sea Har­vest trawl north of its prelist­ing of­fer price.

The com­pany ex­ports a chunk of its hake catch and has a con­trol­ling share­hold­ing in Aus­tralian Stock Ex­change-listed Mareter­ram (which holds a lu­cra­tive niche in the king prawn mar­ket).

Sea Har­vest is solid rather than spec­tac­u­lar, with a dom­i­nant share in SA’s frozen hake sec­tor. It en­joys de­cent op­er­at­ing mar­gins, gen­er­ates de­pend­able cash flows and has a strong bal­ance sheet. Oper­a­tionally, it is geared for steady growth, hav­ing in­vested heav­ily in ves­sels and pro­duc­tion fa­cil­i­ties in the past five years.

But for now there is no com­pelling rea­son to snag Sea Har­vest shares. Bot­tom-line prof­its will jus­tify the cur­rent mar­ket rat­ing — but the X-fac­tor may only be­come ap­par­ent when Sea Har­vest uses its em­pow­er­ment cre­den­tials to bait fish­ing coun­ters that feel their BEE cre­den­tials might be a dis­ad­van­tage in the 2020 fish­ing rights al­lo­ca­tions.

Sea Har­vest prob­a­bly has the ca­pac­ity to take aboard two medium-sized fish­ing en­ter­prises car­ry­ing val­ues of R150mR600m. But IM ex­pects deals may only start rolling in 2018. This is a worth­while “hold” with in­trigu­ing long-term prom­ise.


SELL THIS FLEDG­LING PRI­VATE school busi­ness did not get the warm­est wel­come when it listed on the JSE last month. At the time of writ­ing, the share price had drifted be­low the 100c/share is­sue price, with mar­ket in­ter­est not ex­actly over­whelm­ing.

The com­pany of­fers an “early en­try” al­ter­na­tive to JSE pri­vate ed­u­ca­tion dar­lings Curro Hold­ings and Ad­vTech. The earn­ings mul­ti­ples com­manded by these com­pa­nies do cre­ate a cer­tain level of froth around pri­vate ed­u­ca­tion ven­tures. Adding to this is the fact than even con­ser­va­tive in­vest­ment com­pa­nies like Tre­ma­ton Cap­i­tal and RECM & Cal­i­bre have tilted at the sec­tor.

But at this junc­ture it is disin­gen­u­ous to com­pare Pembury to Curro or Ad­vTech.

Pembury plans to set its schools’ fees at a notch be­low the af­ford­able stan­dard set by Curro. But the schools are smaller, and the main­stream sports of­fer­ing is re­placed by al­ter­na­tive sports codes that re­quire con­sid­er­ably less in­fras­truc­tural lay­out.

There is de­vel­op­ment risk in terms of en­trench­ing the schools brand, es­tab­lish­ing mar­gins and rais­ing cap­i­tal for longer-term growth plans. Un­less Pembury at­tracts an in­flu­en­tial strate­gic in­vestor — IM is aware of whis­pered ru­mours in­volv­ing Long4Life — the mar­ket is likely to re­main watch­ful in the com­pany’s first 18 months since list­ing.

This means the share price could stay at cur­rent lev­els, or drift down in the ab­sence of de­ter­mined buy­ing by se­ri­ous play­ers.

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