No fairytale ending for this cursed counter
reminding of some of the horrendous value implosions on the JSE right now.
At the time of writing the construction sector was teetering on brittle foundations, with one-time stalwart Aveng trading at a priced-for-disaster level of 2c. Stefanutti and Mazor have also started creaking, badly. I suspect Mazor won’t wait much longer to pitch an offer to minority shareholders and delist from the JSE. Ultimately, harsh lessons will have been learnt around just how fast “hard” NAV can be eroded.
One “deep value” story that fascinates me is diamond miner Trans Hex Group. It’s been a steady erosion of value for shareholders, which probably started when retail tycoon Christo Wiese put a spanner in the then Remgro-controlled Trans Hex’s plans to buy profitable and productive marine diamond miner Ocean Diamond Mining Holdings almost 20 years ago.
Remgro unbundled its major stake in Trans Hex to shareholders in 2010, and that
I’M SURE NO-ONE NEEDS
was perhaps the writing on the wall. If Remgro could not find suitable deals or muster the enthusiasm to build critical mass at Trans Hex — which was fast running out of mining time at its Orange River operations — then perhaps this was an option best left alone.
I suppose what attracted punters to Trans Hex, even when the group was running down its core SA mining operations, was the sizeable cash pile, which at times was worth more than the share price.
Sparks of optimism were fanned a few years ago when deep-value investment specialist RECM & Calibre and, ironically, Wiese emerged as major shareholders. The acquisition of a controlling stake in De Beers’ Namaqualand diamond mining operations — West Coast Resources (WCR) — also increased hopes that Trans Hex could find a new lease of life.
Things have not panned out as envisaged, though. The effort at WCR has been underwhelming, and Trans Hex’s share price has sunk as low as 40c, for a market value of less than R45m.
At the time of writing news had just broken of the proposed sale of Trans Hex’s stake in WCR to Kernel Resources. No sale price was mentioned, but it looks like Kernel is also keen on Trans Hex’s Block 6A, 7A and 8A marine concessions.
In February last year Trans Hex bought an additional 27.2% stake in WCR (from RECM & Calibre) for R39.1m. That inferred a value of about R140m for WCR. At the time that meant Trans Hex held an investment worth about R90m in WCR, which is worth double the current share price.
Clearly the market thinks Kernel is not going to fork out too generously for the controlling stake in WCR, which is not great for Trans Hex. I can’t see this concluding happily.