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The Finance Ghost: The market lowdown on Bidvest and ArcelorMittal

The Finance Ghost: The market lowdown on Bidvest and ArcelorMittal
The Finance Ghost
By The Finance Ghost
7 Jul 2024
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The Bidvest Group looks to simplify its holdings, while things aren’t going well for ArcelorMittal.

Even the diversified groups must focus


The recent trend on the JSE has been one of focus, with several examples of companies unbundling or selling divisions that aren’t a sensible strategic fit. This is very different from the trend we saw a decade ago, when investment holding companies were all the rage, attracting high valuation multiples.

Bidvest is the latest example of the simplification trend, with a decision to look for a buyer for Bidvest Bank and FinGlobal. The group is best known for industrial services, so a bank is a difficult-to-understand component of its portfolio.

Investors prefer things that are easy rather than tricky, as coherent investment stories get the best outcome in the market. This doesn’t mean that Bidvest’s banking business is of poor quality.

It simply means that Bidvest is not the best owner for that asset.

Bidvest hopes to find a buyer for the banking operations by the end of the year. With the positive sentiment about the Government of National Unity (GNU) and what this could mean for SA Inc, it seems to be getting the timing exactly right.

It’s also no accident that Bidvest an­nounced an offshore acquisition on the same day as the announcement of the decision to exit the bank.

This helps to drive the narrative, which is that Bidvest is focusing on its core segments. The acquisition of Citron Hy­­giene is a perfect bolt-on opportunity in the services business, with operations in the US, Canada and the UK in the washroom hy­­giene space.

This is a familiar model for Bidvest, which helps de-risk the transaction.

Citron has a solid growth runway, so the deal makes plenty of sense. We just don’t know how much Bidvest has agreed to pay for Citron, as this is a voluntary deal announcement. The transaction is too small as a percentage of Bidvest’s market cap and assets to require a detailed terms announcement.

Where is the bottom for ArcelorMittal?


ArcelorMittal’s losses are getting worse. For the six months to June, the headline loss per share is expected to be between R0.96 and R1.04. That’s considerably worse than the loss of R0.40 in the comparable period.

Clearly, things aren’t going well. There are various reasons for this, including issues in South Africa and China. The steel market is a complicated thing that is affected by global supply and demand, like any commodities business. There are good times and bad times, not to mention wonderful times and awful times.

In cyclical businesses, the best returns come from buying when things seem hopeless. This isn’t to say that every downturn is an opportunity. The important thing is to assess the drivers of the downturn and how they might change.

With the share price down nearly 90% from the recent peaks at the start of 2022, there’s room for recovery. Things could also get worse, as the share price is still way above the 2020 levels. ArcelorMittal is a roller-coaster ride, suitable only for speculators with strong stomachs.

Why would anyone speculate with a buy in this stock? For one thing, the GNU sentiment could filter down into not just Arcelor­Mittal’s share price, but also earnings if infrastructure investment and construction pick up in South Africa. There’s also the benefit of an improved Transnet, assuming it can be delivered and sustained.

The risks mainly relate to China, where uncertainty surrounds a recovery in the domestic property market and what this could mean for steel prices. The global tariff situation is also difficult to predict.

Those who allocate a small portion of their portfolio to speculative opportunities could consider spending some time re­searching ArcelorMittal. It’s very hard to pick the bottom here, but it’s not hard to see the upside potential. DM

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


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