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The Finance Ghost: Even blackouts can’t dull the optimism at Bidvest as it foresees ‘strong real trading profit growth’

The Finance Ghost: Even blackouts can’t dull the optimism at Bidvest as it foresees ‘strong real trading profit growth’
The Finance Ghost
By The Finance Ghost
11 Jun 2023
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While Bidvest, Renergen and Copper 360 share positive news, MultiChoice tries to make the best of its ‘Nigerian cash extraction losses’

Good, better, Bidvest. In the latest trading update for the 10 months to April 2023, Bidvest is more interested in telling stories than bombarding us with numbers and figures. It’s interesting to note the difference in approach at Bidcorp, where the update for the same period was full of financial information.

The Bidvest update is a good story for shareholders. Though the company doesn’t explicitly mention specific growth rates or margins, it does make it clear that it’s been keeping up the impressive performance it reported in the interim period.

Profit margins are looking pretty good, thanks to price increases and careful cost management. It even mentions “strong real trading profit growth” and highlights the positive operational cash generation.

That said, dealing with rising wages has been a source of stress for the executives, who are doing their best to pass those costs on to their customers. Because Bidvest runs a lot of services essential to customer operations, it becomes easier to pass them on, which makes Bidvest a solid choice in an inflationary environment.

Even on the trading and distribution side – which includes automotive dealerships – Bidvest is feeling optimistic, comparing this performance to a record-breaking financial year 2022 base. The only nuisance seems to be blackouts (no surprises there), but even that it’s taking in its stride.

Interestingly, Bidvest also notes that the pressure on disposable income is gradually affecting vehicle and appliance sales, an important point to note for investors in groups that are heavily focused on local consumer discretionary goods.

MultiChoice’s Nigerian headache


MultiChoice would love it if shareholders ignored the obvious issue of the forex problems tied to Nigeria.

I have been flagging my concerns about MultiChoice in this environment, as DStv is an easy expense for a household to cut in difficult times. Add blackouts into the mix with a television that’s hardly ever on, and it becomes even easier to cut DStv.

But, surprisingly, the local business seems to have done all right, though we have to wait for detailed results to truly isolate the South African business.

In a trading statement for the year ending March, MultiChoice noted a drop in trading profit of between 0% and 5%, with the initial costs of the Comcast partnership included in that range. Core headline earnings per share (HEPS) is 0% to 4% higher, but this excludes the creatively named “Nigeria cash extraction losses”.

Simply put, it’s impossible to get money out of Nigeria at the official exchange rate. This means a company needs to recognise the in-country profits in the normal way, followed by substantial forex losses linked to getting the money out. If you feel like you’ve seen this movie before, you would be correct. Does Nampak ring any bells?

Core HEPS is a fantasy. The hard-hitting thriller is HEPS without the adjustments, where we see a headline loss of -290 cents to -309 cents vs HEPS of 381 cents in the comparable period. And an impairment to sports and betting company KingMakers makes the earnings per share number look a lot worse. There’s nothing regal about a loss per share of between -808 cents and -824 cents.

Renergen hits the high notes


Renergen has just hit a major milestone in its capital-raising journey. The US International Development Finance Corporation gave it a conditional approval for a juicy $500-million senior debt package. To add to this, Standard Bank approved a $250-million conditional debt facility.

One of the conditions was a US Congressional notification. It would be wildly embarrassing for the US if it approved a debt package that gets shouted down by officials because of SA-US tensions, but stranger things have happened. Assuming that goes to plan, Renergen also needs to raise equity funding to secure the debt, as the lenders won’t put the money in without the right debt-to-equity mix in place.

Other conditions are more operational in nature and not of concern to shareholders. After a long slide as the market woke up to the realities of a junior mining business and its capital requirements, Renergen seems to have turned the tide and injected some positive momentum into the share price.

Copper 360’s blast from the past


Back in the day, the Newmont mining company did a bunch of drilling at the Rietberg copper mine. It found some promising deposits but mining never went ahead.

Fast forward to 2023, and Copper 360 now holds the mining right over this area and is using its historical geological drillhole database.

To mark the occasion, it released an announcement full of geological terminology that got the market very excited. Few people actually know how to value an exploratory mining group, so the share price tends to rise and fall based on the positive or negative nature of updates.

After major post-listing volatility in this share price (through no fault of the company), positive drilling news helps to bring some stability to the price. DM

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