Fourth company in SA awarded trading licence
REINET Investments yesterday announced the conclusion of its latest share buyback plan in which it splashed out R500 million to reclaim about 4.2 percent of its stake from shareholders in a bid to buffer its dividend payout.
The investment firm controlled by the Rupert family, which owns nearly 3 percent of British American Tobacco (BAT), said its third share buyback programme, which began in June and ended last Friday, resulted in the reacquisition of a total of 2 047 348 million shares which will be held as treasury shares.
Analysts said the move was more an optimistic venture than certainty as a decent dividend payout would depend on BAT’s ability to continue to grow dividends and reduce gearing, which could in turn realise value for Reinet’s shareholders.
“They are taking the view that the yield on buying back shares will be higher than keeping cash. They are using dividends from BAT for the share buyback,” Mergence Investment Managers Portfolio manager Peter Takaendesa said yesterday.
Reinet has been buffeted by headwinds from its investments, most notably in BAT, which is entangled in a regulatory quagmire in the US.
Earlier this year the group said it planned to return another R1.2bn to investors following the recent decline in its share price.
In March, it said it had spent R48.13 million plus transaction costs repurchasing 196 439 ordinary shares just days after it repurchased 205 980 ordinary shares for R50.74m.
The programme saw it spending R667m, plus transaction costs, in the two months to end January 30 in buybacks that would “return value” to shareholders, who have urged the firm for some time to sell down its BAT stake and repurchase its own stock.
Shareholders have been apprehensive that Reinet’s shares are trading at a hefty discount to net asset value (NAV)
“The benefit is on condition that BAT is undervalued right now, if its dividends and value go up a lot of value will be unlocked for Reinet shareholders. But no one knows for sure for now how the BAT share price and dividends will perform, they may at least be flat or grow by single digits for the next year or two.
“There is the view that BAT would rather be conservative and reduce their dividend payout to reduce debt, but it seems unlikely for now. The only risk is that the regulatory issues in the US play out much faster than expected,” Takaendesa said.
Reinet Investments shares closed 1.43 percent lower at R250 on the JSE yesterday. FELBRIDGE became the fourth company in South Africa to be awarded a licence to cultivate, import and export medicinal cannabis by the South African Health Products Regulatory Authority (Sahpra).
Felbridge said yesterday that the licence covered an existing 140000 square feet greenhouse facility in the Western Cape and was expected to produce 20tons of dried cannabis products a year at full production. Felbridge was expected to harvest its first crop in the first quarter of 2020, it said.
Cape Town-based Felbridge follows on the milestone first for Afriplex and its partner, House of Hemp, which were awarded the first licence in April.
A landmark judgment by the Constitutional Court on September 18, 2018, paved the way for the issuing of medical cannabis in South Africa. A report by Prohibition Partners forecasts that Africa could benefit by $7.1 billion (R108.5bn) per year by 2023 if cannabis cultivation is legalised.
The World Health Organisation estimates that South Africa is the third largest producer in the world of cannabis, which provides employment for some 1.2 million people made up of 900 000 cannabis farmers and 350 000 traditional healers who grow their own cannabis for medical reasons.
Leslie Zetler, the chief executive of Felbridge, said: “Being awarded our licence from Sahpra represents a major milestone for the company and reinforces our confidence in the benefits that medicinal cannabis holds as a viable natural alternative to conventional medicines.”