Taking a little look
The recent regime change in Zimbabwe has sparked chatter around an economic recovery, albeit off rock-bottom, that may offer superb investment opportunities. Even if the political will to rebuild the economy holds, it will still take a while for real economic traction to take hold north of our borders. Mainstream investors, understandably wary of political mirages, may also prefer to wait a while for tangible evidence of an economic recovery. But brave(r) investors may find this a most exciting time to back neglected assets in Zimbabwe.
With this in mind, I took some time to peruse the latest Sens submission from the Cloud Atlas AMI Big 50 ETF — an exchange traded fund made up of African stocks excluding those from SA. The latest change in key constituents did not reflect any additional Zimbabwean influence, with Grit Real Estate Income Group, STE Assurances Multirisques Ittihad SA and Société de Distribution d’eau coming into the portfolio, and Custodian & Allied Insurance, Forte Oil and La Compagnie Ivoirienne d’electricité going out. The only Zimbabwean company represented in the AMI Big 50 top 10 holdings is beverages group Delta.
Overall the weighting still leans heavily towards North Africa. Companies from Morocco and Egypt form nearly 41% of the total portfolio at the end of 2017. Banks (29%) and telecommunications (22%) represent more than half of the portfolio. Whether Zimbabwean counters will feature more prominently in 2018 remains to be seen. AMI Big 50’s total portfolio exposure to that country was just over 6%.
Backing the buyback
Market participants tend to hold very different opinions about companies embarking on share repurchase programmes. That’s quite understandable, as the record will show these exercises are either inspired (Mazor springs to mind), vaguely earnings-and-value accretive (British American Tobacco) or extremely costly (Anglo American).
I suspect logistics group Onelogix has probably got it right in repurchasing 5.2m shares (1.8% of its issued share capital) between mid-october and midjanuary. Onelogix paid between 299c/share and 306c/share in an exercise that cost R15.8m — which infers an average price of about 303c/share.
In a great bit of corporate showmanship, Onelogix got the share repurchase programme to coincide with the release of an upbeat trading statement that, at the time of writing, had sent the share scurrying to 330c. With interim headline earnings from continued operations between 22c/share and 24c/share, shareholders might be applauding the buyback when the full-year financials are released later this year.
The white knight retreats
Why Steinhoff held a large and influential shareholding in PSG Group was never articulated. There was always an association between the firms — at least ever since Steinhoff’s Markus Jooste rode to PSG’S rescue when Absa threatened a hostile takeover.
The clearing of most of Steinhoff’s remaining holding in PSG — through an accelerated bookbuild offer last week — is a welcome move for both companies. PSG would probably like nothing more than to put some distance between itself and Steinhoff, which obviously needs the cash to keep its bankers calm. The bookbuild exercise did at least confirm that there is still appetite for PSG in the open market, with investors content to snap up shares at a decent enough discount to the group’s sum-of-the-parts (SOTP) value of R294/share. PSG has in recent years enjoyed a much narrower discount to the SOTP than countermates such as Remgro and Hosken Consolidated Investments.
Gut feel is that the book-build might, in years to come, prove one of those all-too-rare moments when PSG shares offer great value. Aside from latching onto rare value, seeing some new names on the PSG share register could be exciting.
The only Zimbabwean company represented in the AMI Big 50 top 10 holdings is beverages group Delta