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The Finance Ghost: The market lowdown on Telkom, Texton and Pick n Pay

The Finance Ghost: The market lowdown on Telkom, Texton and Pick n Pay
Telkom (Photo: Gallo Images / Lefty Shivambu) | Pick n Pay (Photo: Unsplash) Sasol (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Pick n Pay faces an uphill battle to regain anything close to its former glory. It would be hard enough in a high-growth environment. It’s exceptionally difficult in our stagflationary economy.

It’s been a fairly slow start to the year on the JSE’s Stock Exchange New Service (Sens). Most of the focus has been on major market moves in the first trading weeks of the year, with a stock like Sasol (down 8% already this year, and that’s after a small positive bounce) getting attention from the market.

Still, we’ve had a few updates to keep the wheels of Sens greased, including in relation to 2023 deals that are either in their closing phases or at least making progress.

The spillovers

There’s some potentially exciting news at Telkom at least, with another milestone reached on what could be the sale of the Swiftnet business. The reason for it only being “potentially” this and “could be” that, is because there is absolutely no guarantee of a deal going ahead here.

Although there’s a B-BBEE consortium with interest in the asset, commercial terms haven’t been firmed up. The completion of a confirmatory due diligence is an important milestone and has given some further energy to the transaction, but that still doesn’t mean a deal will happen.

Texton’s rights issue was a frustrating end to last year, with the capital raise structured in such a way that, in effect, a gun was held to the heads of minority shareholders. There are ways to structure a rights issue that are more friendly to minority shareholders and Texton opted not to take that route.

This never endears a company to shareholders or the market.

At first blush, it looks as if the rights issue was strongly supported, with 94% of shareholders following their rights. If we look more closely, we see that nearly all the shares were issued to directors. Among external shareholders, uptake on the capital raise was poor, leaving the underwriters to get their hands on 6% of the new shares.

Another hangover from 2023 is Kibo Energy and its attempts to close the joint venture agreement between subsidiary Mast Energy Developments in the UK and Proventure Holdings. Sadly, Proventure seems to struggle with the basics, like making a payment over the festive season. 

Proventure’s excuses for not making the required payment are flimsy, suggesting that there’s more going on behind the scenes than we think.

There was at least some good news for Kibo later in the week, when funder RiverFort Global Opportunities issued a conversion notice to it.

Simply, this means that RiverFort was happy to swap debt exposure for equity exposure, taking an 11.68% stake in Kibo in settlement of a loan. Kibo is about as speculative as it gets, trading at literally R0.01 per share.

A happier 2023 spillover is that Life Healthcare has met all the conditions required to sell Alliance Medical Group. A deal isn’t a deal until the money has changed hands. With conditions now met, that will happen by the end of January. 

Life Healthcare will need to settle offshore debt and transaction costs with the proceeds. Some of the cash will be retained for growth initiatives and the rest is expected to be distributed as a special dividend to shareholders.

Can Summers end the winter of discontent at Pick n Pay?

Facing a competitor as formidable as Shoprite is no joke. Let’s not forget Spar or Woolworths either, both of which are strong in the market. 

Pick n Pay faces an uphill battle to regain anything close to its former glory. It would be hard enough in a high-growth environment. It’s exceptionally difficult in our stagflationary economy.

Sean Summers has been entrusted by the Ackerman family to do the job. 

He’s made some important leadership changes, focusing on internal appointments and getting operationally strong people into executive roles. When you need to get the basics right, that makes sense.

The market isn’t believing in the turnaround narrative just yet, with the share price already down 6% this year. Pick n Pay desperately needs to achieve stability in the core Pick n Pay grocery retail business.

The government will be incentivised to minimise blackouts in the lead-up to elections and that might give Summers some breathing space on costs. He will take those breaks wherever he can get them. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.

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