Messmart (that's not a typo) has released a trading statement for the 52 weeks ended 26 December 2021 and it reads like a horror movie script for shareholders. Massmart is struggling terribly, as Game continues to hurt them and the deal with Shoprite for businesses like Cambridge, Rhino and Massfresh hasn't been implemented yet, so Massmart shareholders are still carrying those losses. The group headline loss will be between -R1.48bn and -R1.57bn. For continuing operations (excluding the businesses being sold to Shoprite noted above), that loss is between -R939m and -R1.02bn. The group does highlight a timing difference between the losses from the riots and the recognition of insurance recoveries. That has contributed to the loss, but there are far deeper issues in the group than that.
At the other end of the spectrum, we find the trading statement from MTN. Earnings per share (EPS) has taken a knock of between 15% and 25% in the year ended December 2021, but that's a result of impairments of MTN Yemen and other accounting lines related to deconsolidation issues and fair value gains. The number that investors care about is headline earnings per share (HEPS) which is a closer (but not perfect) reflection of the sustainable earnings in the business. HEPS has increased between 25% and 35% despite a number of non-recurring negative items. The HEPS range is R9.36 to R10.11.
Capitec previously released a trading statement in December that indicated an increase in HEPS for the year ending February 2022 of between 75% and 80%. Based on the pending issue of shares to employees under a B-BBEE scheme (and assuming it all gets approved), the guidance has been updated to an increase of between 82% and 88%. An issue of shares is usually dilutive for HEPS, so my read on this is that the financial performance looks even rosier since the update in December.
Mustek has released a trading statement for the six months ended December 2021, in which HEPS increased by between 12% and 22%. Net asset value per share has jumped by as much as 28.6% in the past year, which shows significant value creation by this technology small cap.
Hyprop's 60%-held subsidiary Hystead has agreed to dispose of its entire shareholding in the Delta City Mall in Montenegro. The property value is EUR95 million and the amount that Hystead will receive after allowing for debt will be around EUR24 million. The purchaser still needs to obtain bank funding, so the deal has some hurdles to get over.
African Rainbow Minerals has suffered a knock to profitability from lower iron ore and palladium prices, as well as the strengthening rand vs. the dollar. For the six months ended December 2021, HEPS is expected to be between 24% and 33% lower. The share price traded at its 52-week low back in October and has increased significantly since then, although it remains around 15% lower vs. one year ago.
Santam has released a trading statement for the year ended December 2021. The base year includes the horrors of Covid-related business interruption claims and related provisions. It's therefore not surprising that HEPS could be as much as 3x higher for this period! The expected HEPS range is 2,246 - 2,744 cents vs. 905 cents in the prior year. In addition to the base effect, the latest result was driven by improved underwriting results (net margin at the top-end of the long-term target range of 4% to 8%) and increased investment income attributable to shareholders.
Harmony Gold closed 7.5% higher on Friday (much to my relief as a shareholder) after releasing a trading statement and operating update for the six months to December 2021. The update reflected an expectation of HEPS decreasing by between 62% and 67%, so the share price increase was thanks to the improving narrative around gold as an inflation hedge this year rather than this trading statement. Notably, Harmony is facing cost pressures in labour and consumables, so the gold price really needs to behave itself (i.e. increase) during periods of inflation. If it doesn't, the investment case for gold miners really starts to look shaky.
There's also a shiny new e pisode of
Magic Markets for you to enjoy, in which Dino Zuccollo from Westbrooke Alternative Asset Management joined us to discuss important investment concepts like liquidity and balance sheet structuring.
There's a lot to learn in this episode!
Have a great Monday!
The Finance Ghost
