Waiting for pay day

Earlier this year I raised the possibility that something might finally give at perennially profitable industrial services specialist Howden Africa in terms of the four-year dividend impasse. How wrong I was . . .

For those who need reminding, the cash-generative (and superbly managed) Howden has not paid a dividend since the interim payout in 2013. At last count (the year to end-december), Howden boasted earnings of 332c/share that were underpinned by R216m cash generated by operations (equivalent to 328c/share).

Net cash generated was R144m. This pushed Howden’s cash pile to R909m, which means cash on hand represents an astounding 40% of Howden’s R2.1bn market capitalisation, or almost R14/share. After eavesdropping on last week’s AGM, I think I can safely say that there’s more chance of the Kings winning the Super Rugby tournament than there is of Howden paying a dividend any time soon. At the AGM, several shareholders aired their frustrations over the lack of dividends — but also the lack of clarity around why payments have been withheld. Chairman Ian Brander was measured, reiterating the official line that cash is being withheld for possible acquisitions and share buybacks. Shareholders were quick to point out that Howden has not been under cautionary, nor has it bought back a single share.

In fact, one shareholder suggested Howden stop trotting out the share buy-back issue as a reason for withholding dividends, arguing it is a red herring. Another reckoned there is no other company on the JSE with such a strong balance sheet that does not pay a dividend to shareholders, adding that the pause in payouts “made no sense at all”.

Brander argued that the dividend matter had been “discussed at length” by the board, and a decision to retain cash for share buy-backs and acquisitions was believed to be in the best long-term interest of the company. Interestingly, he claimed Howden had a significant acquisition lined up last year, but it “did not go where we wanted it to go”.

A critical question raised by dividendcraving shareholders was about the timeframe Howden has set for making acquisitions (or executing share buybacks). If the company can’t bank an acquisition in the short term, its cash pile will bloat to R1bn.

Tide high in Greenbay

International property investor Greenbay is certainly not one of the JSE’S high-profile real estate counters — but it carries a not-insubstantial market capitalisation of close to R14bn. How the company has grown to this imposing size is most interesting. Here are some fun facts to mull. Since mid-2016 Greenbay has held four accelerated bookbuild exercises, raising an incredible R9bn. Investor appetite, it appears, is insatiable — the capital targets of the first three accelerated bookbuilds were raised markedly from the initial amounts pitched.

Greenbay trades at a sizeable premium to net asset value. Fascinating . . . in an eyebrow-raising kind of way.

Relinquishing their hands

The chips have been down for the local casino sector for some time as discretionary spending steadily crimps.

Though profit growth is off the table, local casinos are still spinning reassuring cash flows at decent operating margins. My impression is that the sector can afford to bide its time until better days, economically speaking, roll in. So it’s strange to consider that the JSE’S casino giants, Sun International and Tsogo Sun, have had CEOS departing. Last year Sun’s Graeme Stephens left unexpectedly. But a bigger surprise was long-serving Tsogo executive Marcel von Aulock resigning last week. Come to think of it, if the two big casino players ever spun off their smaller properties, there would be no shortage of proven talent to hire to manage them. Aside from Von Aulock and Stephens, Steven Joffe (ex Gold Reef Casinos & Resorts) and David Coutts-trotter (ex Sun) are still knocking around.

There’s more chance of the Kings winning the Super Rugby tournament than there is of Howden paying a dividend any time soon