Sprucing up Rextru
Isuspect it won’t be long before the consortium anchored by empowerment pioneer Marcel Golding (formerly a prime mover at Hosken Consolidated Investments) and media-shy investor Hugh Roberts shows its hand at Rex Trueform (Rextru). Golding and Roberts now have control of Rextru, which has the Queenspark fashion chain, valuable properties in the Salt River node in Cape Town and a substantial cash pile as its main assets. The consortium also has control of African & Overseas Enterprises (AOE), the pyramid holding company for Rextru (and until recently one of the most enduring family-controlled businesses on the JSE).
Last week Rextru released some awful results from Queenspark, which appears to be labouring far harder than its larger listed fashion retail rivals. Operating margins were a frayed 0.13% (compared with 2% in the previous financial year), a situation that is clearly not sustainable. Rextru still has more than R50m cash on hand and its mainstay property is generating a fair rental stream, but an effort to bolster the dowdy Queenspark is long overdue. Queenspark, which has expanded at a snail’s pace over the past 15 years, needs scale desperately. An obvious development would be for Golding and Roberts to usher in other complementary niche brands to build a more diverse fashion bouquet. With additional scale, it’s possible Queenspark might draw the attention of large international retail players looking to set up shop in SA. The other alternative is that the influential duo usher other operational assets outside the retail sphere towards Rextru. If that’s the longer-term plan, the retention of the archaic AOE pyramid might make sense in ensuring perpetual empowerment credentials.
Whatever the case, something must surely give at an increasingly uninspiring Rextru sooner rather than later.
Slow-flowing Delta
The winding down of Delta EMD, once one of the JSE’S stalwart industrial com- panies, might be a prolonged affair, and it may even make sense to delist before the final liquidation proceeds are paid out to shareholders. Nevertheless, the value proposition remains interestingly poised. Delta carries a net asset value (NAV) of 183c/share — more or less double the ruling price of a rather illiquid share.
NAV is underpinned mainly by the R81m cash pile and the remaining asset — a property in Nelspruit listed as a noncurrent asset — held for sale worth a not-insubstantial R25m. Delta has indicated that it will pay out a final dividend and then delist from the JSE, but the intimation is that this will transpire only after the Nelspruit property is sold.
The bad news is that no bids were made for the property at an auction held in late June, which might lead some investors to question the realism of the R25m value that has accorded to the noncurrent assets. Deep-value vultures will no doubt pay attention in the weeks ahead. If some shareholders lose patience with the winding-down process there could be an opportunity to clamber in at silly prices.
Chop till you drop
Botswana-based retailer Choppies, which has pan-african ambitions, is not going to produce the prettiest figures when it publishes its results for the year to the end of June. So what? The retail sector is under stress in almost every segment.
What will distract from lacklustre profits is if Choppies offers details about its recent cautionary, which indicated that talks with a third party in SA were under way “for acquisitions of a limited number of retail outlets”. The retail market in SA, especially in the grocery space, is fairly concentrated, with only a handful of big players. The publication of a cautionary suggests the value of the deal is at least 5% of Choppies’ market value.
So it will be fascinating to learn where Choppies, holding a market capitalisation of R3.9bn, has sourced a sizeable retail opportunity that by inference must be worth at least R200m.
With additional scale, it’s possible that Queenspark might draw the attention of large international retail players