The Finance Ghost on KAP, Libstar, and Pan African Resources: resilience, risk, and glittering gains

16 Dec 2024

Gold is still delivering the good news for Pan African Resources; diversified industrials group KAP is showing encouraging signs as Safripol improves its performance; but Libstar is losing its momentum after promising start in the first half of the financial year,

Less of a klap for KAP?

Diversified industrials group KAP has had a tough time out there. It has had to deal with difficult conditions in the chemicals industry that have made things unpleasant for key business Safripol.

Shareholders hoping for some improvement will need to continue being patient, although there are some encouraging signs as we head into the second half of the 2025 financial year. In a pre-close update dealing with the five months to November, KAP made it pretty clear that interim profitability won’t be a highlight.

The good news is that Safripol’s revenue and operating profit have increased, with that division being large enough to offset bad news in smaller divisions. Another important driver of performance is the restructuring activity at Unitrans, which has led to improved profits. These are improvements that can continue into the second half, with the benefit of investment in PG Bison hopefully also coming through.

KAP’s share price is down 21% over five years and is trading at about R3.15. For a long time during the pandemic, it traded in a range between R4 and R5. If it can just get some positive momentum in the business, the share price can rally to those levels. This could be one to watch.

A disappointing second half at Libstar

Libstar had a decent interim period, so shareholders might have hoped for the momentum to continue. Alas, a particularly disappointing third quarter has rather blunted the full-year numbers, despite some improvement in the fourth quarter.

Group revenue for the year to date at 22 November is up just 2.5%. The perishable products segment seems to have been the biggest drag on performance, registering revenue growth of just 0.4% year to date and suffering a decline in volumes of 3.4%. The ambient products segment appears to have better pricing power, growing revenue by 4.9% despite volumes dipping 2.5%.

Although it has managed to maintain gross margins, it seems very unlikely that the normalised headline earnings per share growth of 11.4% in the interim period will be maintained for the full year. The share price is up 20% thanks to those interim results and the stronger sentiment around SA stocks. I would just be cautious here as we head towards full-year results.

Gold is glittering

Pan African Resources is a gold mining house with a reputation as a strong operator. It has invested substantially in capacity recently. The Mogale Tailings Retreatment project achieved something that you won’t see very often: a construction process that came in below budget and ahead of schedule. If this is a sign of how good it is operationally, then shareholders should feel good about the future.

Another reason to feel good is the production guidance, which shows an expected 16% increase for full year 2025 and then a further 12.7% growth based on the midpoint of 2026 guidance. With the gold price having been one of the best investment stories of the year, this is exactly the type of thing the company needs to be achieving while prices are lucrative. In fact, if gold stays strong, Pan African will be debt-free in the next 12 to 18 months.

The share price is up roughly 110% year to date, reflecting both the increase in the gold price and the expected ramp-up in production at Pan African Resources. The old joke about something being a gold mine is making a lot more sense these days. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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Less of a klap for KAP?

A disappointing second half at Libstar

Gold is glittering