Fintech firm looks abroad
As the share price dribbles along on the JSE, management seeks to broaden the shareholder base
back of higher coal prices and production. Adjusted ebit from agricultural products rose 86% on a 100% basis. Glencore sold a 50% interest in this division last year to two Canadian investment funds. The marketing division grew adjusted ebit 13% and Glencore has upgraded its earnings outlook for the full year by $100m to $2.4bn-$2.7bn.
Ian Rossouw, an equity analyst at Barclays in London, says perceptions that the quality of Glencore’s assets is inferior to its peers are hard to justify. Glencore has, among other things, the lowest coal and copper cash costs of the diversified miners. Its valuations are also attractive, for example the p:e ratio of the industrial business (excluding the marketing business) is 9.5 in 2017 and 9.1 in 2018, reflecting a 19% and 41% discount respectively to its peer group.
Rossouw says Glencore is Barclays’ top pick in the sector.
Glasenberg says business conditions have “normalised”, allowing Glencore to resume capital-efficient merger and acquisition opportunities. Its latest deals include the purchase of additional stakes in Mutanda and Katanga copper mines in the Democratic Republic of Congo for $534m cash and a $2.55bn bid for Rio Tinto’s Hunter Valley coal mines. The original bid was unsuccessful but was followed by the formation of a joint venture with Yancoal, which will give Glencore a lesser stake in these mines for a $1.14bn investment.
Glasenberg says the commodities cycle is changing and key markets, such as China, are maturing. Glencore’s portfolio is best positioned among the diversified miners to take advantage of changing demand.
He believes global growth is the most synchronised it has been in the past six years and ongoing expansion in manufacturing capacity suggests trends will continue into the second half of this year.
If the global electric vehicle fleet grows in line with predictions, it means there will be 26m electric vehicles on the roads by 2030, from about 2m now, he says. The average battery will require 40 kg-50 kg of nickel, 5 kg15 kg of cobalt and 50 kg-75 kg of copper, including for charging points and grid access.
Though mining shares have frequently disappointed investors, they can outperform the rest of the market at certain stages in the cycle. They are not yet too expensive and a diversified miner such as Glencore or BHP Billiton offers less risk than a single-commodity share.
Don’t be surprised if fintech investment company Capital Appreciation (Capprec) seeks an additional listing on an international bourse in the future.
The company’s tenure on the JSE to date has been rather frustrating, with capital depreciation being the order of the day. Since listing as a special purpose acquisition company, or Spac, in late 2015 with a not insubstantial R1bn in fresh capital, Capprec’s share price has dribbled well below the 100c/share prelisting offer price.
It’s not as if Capprec’s prime movers — including former Netcare and Afrocentric founder Motty Sacks, Bradley Sacks (previously a technology and media sector deal maker for Bank of America), retired Bidvest Bank CEO Alan Salomon and former Macsteel executive Michael Pimstein — have done much wrong.
But it did take longer than expected for the company to bag its first deal(s), an impasse that perhaps resulted in the share drifting off investors’ radars. Even when Capprec, in February this year, detailed the purchase of African Resonance (as well as a stake in Resonance Australia), Dashpay and Synthesis for a collective R842m, the market seemed uninterested. The Financial Mail canvassed a sample of more adventurous small-cap analysts, but few had as much as glanced at Capprec after the deal.
Interestingly, the deal more or less coincided with another fintech-aligned Spac, M-fitec International, throwing in the towel in its pursuit for viable assets. Whether that development also weighed on sentiment for Capprec is not clear.
Nevertheless, the three specialist businesses acquired by Capprec all offer technology solutions and services in vibrant niches. The key consideration for Capprec, which has the Public Investment Corp and African Rainbow Capital as sizable backers, is the transformational powthe