Sappi has had a great week, with the stock up nearly 10% in the last five days or so. The announcement that fueled the move was short and very sweet. Markets react when management gives guidance on record quarterly earnings.
Sappi’s previous guidance was for a strong fourth quarter despite inflationary pressures. Things are even better than that, and the company is expected to beat the record Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) achieved in the third quarter.
Encouragingly, European energy prices are below expectations. Market conditions were better than management thought.
Despite this useful uptick, the stock is only up about 5.5% this year.
Pepco bucks European trends
Steinhoff has released a deal update showing the latest quarterly updates from Pepco.
It’s important to note that Pepco-formatted revenue increased 17.4% at constant currency, so underlying growth was 7.4%. The remainder is from new stores, largely the result of an aggressive expansion strategy in Central and Eastern Europe.
Pepco’s story is encouraging, but access via Steinhoff means exposure to the group’s balance sheet and all its problems. Steinhoff is looking to extend the term of the debt, but there are still many uncertainties about the value of the shares at the group level.
Grindrod is still pushing the volume
Grindrod’s stock is up nearly 90% this year. This is a perfect example of the importance of evaluation. When trading at deep discounts to underlying value, companies need a catalyst to reverse the situation.
Aside from asset divestments to unlock value, Grindrod’s stock price has been driven by an eventual upturn cycle. The latest update for the nine months to September reflects growth of 23% at the port of Maputo and 47% at the dry bulk terminal at Grindrod. Locomotive deployment has improved from 32% to 63% and trains are on track.
Grindrod shows little signs of slowing down, but investors should be careful not to go after it too much. Grindrod has dropped more than 12% in this month he has.
Sanlam becomes a little more Afrocentric
It is unusual to see partial offers in the market. In this type of deal, the acquirer is trying to achieve a specific shareholding rather than his 100% shareholding in the target.
When Afrocentric announced an offer from Sanlam, many on Twitter accidentally panicked about another company leaving JSE. Sanlam only wants between 55% and 60% of his stake, so there are no plans to delist Afrocentric.
The basis for this agreement is Sanlam’s incorporation of the Afrocentric product suite into Sanlam’s customer base. He may also cross-sell Sanlam products to Afrocentric clients.
With an offer price of R6 per share, Afrocentric’s share price of R5.25 reflects a partial offer structure. Arbitrage that brings the price closer to the asking price usually doesn’t work here, as the exact number of shares each shareholder can sell to his Sanlam is unknown.
The stock has risen 28% in the last month. However, if you have held it since the beginning of the year, it will remain flat this year.
Focus on Aven
After agreeing to sell Trident Steel at a favorable price, Aveng announced further good news in the form of a strong order for Australian business McConnell Dowell.
For those who enjoy more speculative play with JSE, you may need to dig into Aveng’s numbers. DM168
After years in investment banking for The Finance Ghost, her mother’s dire predictions came true. he became a ghost.
This article was first published in the weekly DM168 newspaper available nationwide on R25.