TORQUE ISN’T CHEAP
An investment proposal can be met with harsh questions, especially when you lob in a motorcycle for good measure
Iwas an unfamiliar visitor to Sea Point on Sunday morning for a spot of recreational tennis at the splendid Anthony Harris Academy. Bustling and hustling Sea Point is a long way removed from kelp-strewn Kommetjie, where the only close contact I have with humanity is entitled tourists who don’t seem to grasp that the boardwalk is meant for two-way foot traffic.
Shouldering on ... Before tennis I had ambled into a coffee shop not far from the head office of Hosken Consolidated Investments (HCI). Interestingly enough, sitting in a corner was a man I knew as an enthusiastic investor in HCI. What could I do but walk up and ask about the rumours that Africa Oil is looking to pitch an offer to the minority shareholders in Impact Oil & Gas.
HCI is currently the biggest single shareholder in Impact. I, too, am an enthusiastic HCI shareholder — though my enthusiasm admittedly does wane periodically when I reckon there is more value in the HCI offshoot Montauk Renewables. That little switch trade has probably cost me a small fortune. I’d do the calculation, but another depressing statistic for my ailing equity portfolio might send me headlong into the crypto markets.
Anyway, the little screenshot that one of my wellinformed sources sent me last week suggested Africa Oil had pitched an offer of about $0.73 a share to Impact’s minorities. The bid — subsequently confirmed and deemed cheeky — infers an $800m valuation for Impact. The man in the corner of the coffee shop estimated that at that valuation Impact was worth about R90 a share to HCI. Cheeky or not, that’s quite an underpin to the intrinsic NAV calculation ... albeit slightly academic, as the investment company is unlikely to sell its Impact stake any time soon.
Speaking of fuel — and critical calculations —I had to make up a convincing PowerPoint presentation for my wife after she discovered a second motorbike in the garage. I had managed to hide the bike behind the upended table tennis table, but my dear wife will find everything (except my contact lenses).
I found the old Honda 250 just didn’t have the legs for longer journeys — that is, beyond the Fish Hoek Tennis Club. Then there’s my daughter, who passed her driver’s licence a few weeks ago. With the freshly printed certificate in her hand, she asked me straight-faced outside the Fish Hoek licensing department: “Do you mind Ubering home?” I have not driven the car since ...
With numerous media engagements still requiring me to traverse Ou Kaapse Weg and Chapman’s Peak Drive, I needed a bigger two-wheeled machine. I opted for a third-hand 2012 KTM Enduro 690 R — a beast of a ride. My feet (and I am over six foot tall) barely touch the ground. But what a machine. It has more lowend grunt than Monica Seles fending off a series of match points. The horse power is sometimes hard to harness.
I might need to snatch some Astoria shares, with the company now holding a bigger position in Leatt Corp the makers of protective gear for adventure sports. I will certainly be needing a new wardrobe of protective accoutrements. The market, however, asked some harsh questions after Astoria paid almost double the current market price for the Leatt shares. The deal was negotiated in March when the Leatt share price was markedly higher but delayed by regulatory issues because the seller, I understand, was a founding shareholder of Leatt. In addition, it would be difficult to buy such a large parcel of shares on the open market doubly so to find a buyer willing to take a slug of Astoria shares. Still, with the higher price factored in, it will be intriguing to see how Leatt plays out for Astoria.
Meanwhile, justifying my KTM, I needed some convincing fuel (and maintenance cost) savings. The hitch is that the KTM doesn’t have the convenience of a fuel gauge and my wife, like an activist shareholder, is demanding accurate long-term projections. When I gave her the best Google estimates for a KTM, I got back the sharp riposte: “Every bike is different. What exactly does your old bike get on a tank?”
These are difficult days in the household, and I am beginning to feel as doubted as the asset managers at Brait. Since we are talking about Brait, what a horrendous pummelling in the share price last week. Both bonds are up for settlement in early December. The market seems to doubt the repayment terms can be renegotiated without ordinary shareholders incurring more pain. Even Brait’s private placing of a chunk of its stake in consumer brands business Premier shares on Monday did little to firm sentiment. I won’t lie, I switched out some of my shares into the exchangeable bond. A cowardly capitulation, I know. But I remember what happened at health-care conglomerate Ascendis, when the bondholders had the ordinary shareholders very tightly by the short and curlies. Yes, you could argue this won’t happen at Brait because some of the big ordinary shareholders are also big bondholders. Then again, in these tremulous times I don’t expect anyone to play nice. Finishing off with good news, how about that Merafe Resources? The ferrochrome company has been a fantastic smallcap play for punters that ignored the barrage of cynicism that has met comments over the past few years on the value and yield offering. I’ve been around long enough to know you always stay on your guard with junior mining ventures no matter how promising the operational progress. Cycles spin viciously. But a 22c a share final dividend (for a full-year payout of 42c a share) will be soothing especially when Merafe reports it now has R2.2bn cash on the balance sheet. In early April 2020 you could have picked up Merafe for 29c. Stack up the dividends since then for one of the most rewarding yield plays in decades on the JSE. I’d do the calculation, but I have other pressing projections to compile at this juncture.