AFRICAN PHOENIX
INVESTMENTS@finweek finweek finweekmagazine finweek^ 24 October 2019^37marketplace Simon says
Photos: Archive | Supplied
Now essentially
a private equity
fund
IMPALA PLATINUM
Betting on
palladium
With palladium now trading over $1 600,
Impala Platinum (Implats) announcing
plans to pay R1.4bn for Canadian palladium
mine North American Palladium (NAP)
certainly makes for a good-looking deal. NAP
produces over 200 000 ounces per year, at
an all-in sustained cost of around $800/
ounce, with current earnings before interest,
tax, depreciation and amortisation (ebitda)
around $110m a year. My concern, however, is
that commodities are inherently cyclical. And
surely the next major move for the palladium
price is down rather than up? If this holds,
they’re buying assets at the top of the market
rather than at the bottom. The problem, of
course, is that at the bottom of the market
nobody has the balance sheet (or courage)
to buy assets. But I think this deal looks very
toppish, and I will not be surprised if there is a
write-down of the price in the years to come.
That said, if the metal can hold onto current
levels over the next decade – a big ask –
then this should generate decent profits for
Implats. ■
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*The writer owns shares in Long4Life and Capitec, and does
freelance work for Tiso Blackstar.African Phoenix Investments’ conclusion of
the sale of Stangen to King Price became
effective on 1 October, with the price being
determined from the results due out in
early December. This now means that the
remaining asset will be that of API Capital
Fund, which has been seeded with R500m
and will focus on private equity investments.
This is a new direction for African Phoenix,
and it will be interesting to watch. But, for
now, all there really is, is lots of promise and
an important reminder that R500m is fairly
small for a private equity fund. Furthermore,
success in private equity is, quite frankly,
hard and a lot of detail about the areas of
focus and fee structures is required to get
a sense of the business. For now, the only
real valuation is net asset value (NAV)
that is some 94c. The share trades at 77c- a fair discount – and not unexpected, as
established private equity ventures, such as
Ethos, trade at an even larger discount to
reported NAV.
MURRAY & ROBERTS
Wor th another
look
If the metal can hold
onto current levels over
the next decade – a big
ask – then this should
generate decent profits
for Implats.
Easy does it
While Capitec’s* purchase of Mercantile Bank
(which has now been approved) is a small deal
for Capitec, it could become significant in time.
Bringing new tech ideas to business banking
and offering loans to small businesses should
both boost profits. There is also some potential
for cross-selling as Capitec moves up the value
chain from initially being an unsecured lender to
transactional, and now business banking. But
this will be a slow process – as it should be. It
is not going to spike profits any time soon, but
certainly we could see a decent percentage of
profits (maybe as much as a third) coming from
business banking in the next five or more years.CAPITEC
Aton’s decision not to appeal the Competition
Commission’s finding against its proposed
takeover of Murray & Roberts (M&R) has given
rise to a tricky situation. Aton owns almost 44%
of M&R. While the holding is not a majority,
it does give effective control of the company
to Aton, and I wonder what the plan now is?
Selling the stake will not be easy – certainly
not in the open market. But I suspect Aton will
hang onto the stake. Ideally, it wanted to own all
of M&R, but control is not a bad second place
and, over time, it could place its own executives
on the board and install senior management.
The other issue: What of the 2 200c that the
current board said M&R was worth? I don’t see
that happening any time soon, but I do think
M&R is worth revisiting as an investment now
that the protracted deal is gone.