Strange timing
Ithought it rather interesting that two of the JSE’S most vaunted “game changers” — asset manager Sygnia and day-clinics developer Advanced Health — both detailed rights issues last week. The companies need fresh capital for (very) different reasons: Sygnia to fund the recent acquisition of db Xtrackers from Deutsche Group Holdings, and Advanced to shore up its strained balance sheet to continue its day clinic roll-out.
The most startling similarity, though, is that both counters are embarking on their rights issues at a time when their share prices are well off record highs. It’s worth remembering that both companies enjoyed frothy market debuts — Sygnia sped to R19 in mid-december last year and Advanced touched a high of 275c a few months after listing in April 2014. Sygnia is pitching its offer at 900c/share, while Advanced will dangle new shares at 130c/share — both rights priced at less than half their highs. The cynical investor in me might question why Sygnia and Advanced did not take the opportunity to raise fresh capital when sentiment was more buoyant.
You know . . . when the ducks are quacking, feed them . . . much like Jannie Mouton’s PSG Group did at the end of 2015, raising R2.2bn in an accelerated bookbuild when the shares were trading at a premium to the sum-of-the-parts value.
Fluorspar flash
I noted (with a great deal of interest) a report in Business Day that Sepfluor, the unlisted fluorspar miner unbundled from Jse-listed Sephaku Cement, is finally starting work on its R1.7bn mine at Rust de Winter.
Funding will come from private equity bankers and banks.
I learnt a fair bit about fluorspar about eight years ago when I took a (costly) flyer on junior mining counter Sallies, which was then building up substantial production capacity.
SA has a fair swathe of reserves in fluorspar, which is used by the steel and aluminium industries as well as for refrigeration. But the market has been fickle. Readers who recall Sallies will remember the company suffering persistent setbacks, and that a certain retail tycoon with a penchant for commodity plays threw good money after bad in a series of desperate capital raisings.
The business was eventually bought out for a song by a Us-based investment firm with grand fluorspar designs.
In any event, production should roll out at Sepfluor’s mine in early 2019, with an annual target of 180,000 t of acidgrade fluorspar and 30,000 t of metallurgical grade. If Sepfluor has intentions of coming to the JSE with a capital raising, it will probably need to deliver unerringly on its initial project targets to exorcise the ghost of Sallies.
Mind you, Sephaku’s efforts to rampup its cement business went off without too many hitches . . .
Pecking away
Uitenhage-based poultry group Sovereign Food Investments may well be perched uncomfortably, with rival Country Bird Holdings (CBH) controlling the biggest shareholding in the company.
But Sovereign CEO Chris Coombes must still feel the fate of the business may not be determined by CBH.
The latest Sovereign shareholder register shows that during June, Coombes increased his personal shareholding from 768,000 shares to 1.127m shares — or 1.66% of the issued shares.
One gets the sense that there might be a concerted effort to ensure CBH can’t tighten its claws on Sovereign. Certainly the firmer share price could dull CBH’S appetite to peck at more shares. Coombes’ willingness to buy at current levels must bode well for the company’s prospects, especially the ongoing valueadd initiatives.
Incidentally, the share register shows his wife, Ilse Coombes, holds another 270,000 shares — though she seems to be the savvier investor, having bought Sovereign shares at markedly lower levels some years ago.
Why didn’t Sygnia and Advanced not take the opportunity to raise fresh capital when sentiment was more buoyant?