Fourth com­pany in SA awarded trad­ing li­cence

Pretoria News - - BUSINESS REPORT - [email protected] | Philippa Larkin

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.”

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