Wish upon a star
Investment company Stellar Capital Partners (SCP) is trading at a discount of nearly 40% to its latest sum-of-the-parts (SOTP) valuation of 114c a share. The price has shifted up nicely in the past six months — but the gaping discount strongly suggests punters’ hopes of realising a large break-up value from an orderly dismantling of the SCP portfolio might be misplaced.
Reading between the lines of its recently released half-year results, I suspect there is some longevity in the group despite the process of disposing of two large industrial investments.
After the sale of Torre and unlisted Amecor, Stellar will be debt free and have some cash to burn. The significant minority shareholding in unlisted financial services group Prescient will now become a strategic focus, and there appears to also be some enthusiasm about “alternative financial service businesses”. I wouldn’t get too excited about further forays into niche financial services — and hopefully none of these ventures requires serious upfront funding. Of course, there are some interesting large shareholders in Stellar, who could reverse quite intriguing operational assets into the counter.
But what really does rank as tangible good news is that the offer of R413m for Amecor — a gem of a security technology business — is more than the market initially expected. The chance of a full realisation of Stellar’s value soon is slim, but a nice compromise would be a sizeable cash distribution before any new dealmaking.
Mark of true worth
I don’t follow too many retail stocks with any enthusiasm. I do, though, monitor Truworths International out of morbid curiosity ever since long-serving CEO Michael Mark decided not to go quietly into retirement — notwithstanding the fact that the board had already appointed a Ceo-designate in the form of Jean-christophe Garbino.
At the moment it is not easy to determine if Mark’s determination to remain in the CEO seat has been to the benefit of shareholders. The share is not far off the level at which it was trading when Garbino was sent packing. But over 12 months, Truworths has lost almost 30% of its market value.
Truworths’ half-year results to December showed earnings down 5% to 361c a share. The interim report gives not even the slightest hint that Mark — who has served Truworths for nearly three decades — intends stepping down. There’s no mention of succession planning either, so clearly Mark wants to steer Truworths through these tough times. Hopefully, when the good times roll around again, Truworths will still be sprightly enough to keep pace with its rival, TFG, which still cuts a fine figure on the profit ramps.
Global warming
In July last year Global Asset Management (GAM), a forklift financing specialist turned green energy provider, suffered a most underwhelming response to a rights offer proposal to raise R67m. Lack of investor interest seemingly prompted GAM to look at ways of delisting from the JSE, which would probably facilitate the sale of its financing business and allow its management to focus on ramping up the fledgling energy business.
Last week GAM surprisingly announced that it had raised R50m in fresh capital by issuing new shares at 183c each to existing major shareholder African Rainbow Capital Investments (ARC). ARC’S shareholding increases to 45%, and it will now be required to make a mandatory offer to GAM minority shareholders at the same price. The funds will be earmarked for recently established pyrolysis plants that convert waste rubber into oil and for a pilot project that converts waste plastic into oil.
This could be interesting, for greenminded investors. But with GAM’S illiquid shares only recently bouncing from levels around 50c to 75c, I can’t see too many minorities declining 183c a share and opting to go along for the ride.
It’s unclear if Michael Mark’s determination to stay on as Truworths CEO, after 30 years at the retailer, is good for shareholders