Tag Archives: JSE

Astoria Investments Ltd – Results Note – Crystalizing NAV with Optionality

Share Code: ARA – Market Cap: R537m – Discount to NAV: c.39%

Astoria Investments – Q3:24 – Results NoteDownload

Q3:24 Results: Headwinds of a Stronger Rand

  • Astoria reports quarterly but management only update unlisted valuations in the Q2 and Q4 reports. Thus, the key change over the Q3:24 period was a stronger Rand (c.9% stronger on a 12m-rolling basis and c.6% stronger versus the start of the current reporting period versus the USD).
  • With this context, Astoria’s NAV per share increased by +2.1% in USD and decreased by 3.7% in ZAR for the Q3:24 period (as compared to NAV at the start of financial year).

Astoria’s NAV components:

Commentary: ISA Carstens (Potential) Exit Proving Solidity of NAV

  • Astoria has received a non-binding offer for its stake in ISA Carstens &, along with fellow shareholders, final terms are being negotiated. While the offer is non-binding, its pricing is broadly in line with Astoria’s fair value for ISA Carstens. This gives us a great data point for the realism of management’s fair values for their unlisted investments (the 3rd-party offer aligns with Astoria’s valuation). Finally, this potentially turns c.8% of the Group’s NAV into cash which would provide management with ammo for future investment options (i.e. embeds some exciting optionality for future capital allocations).
  • Outdoor Investment Holding continues to trade well, Leatt Corp’s latest quarterly hints at a trough being reached, RECM Calibre has changed its name to Goldrush Holdings (code: GRSP), low diamond prices continue (Land is doing relatively well while Marine has its ship in dry dock for well-timed maintenance), & VCG continues corporatising and scaling.

Valuation, 12m TP & Implied Return: Discount a Little Tighter

  • Astoria’s share is trading at c.39% discount to the current NAV (Previously: 45%) once we update its NAV with current prices.
  • If we take out our calculated “HoldCo discount” of c.13.6% (Previously: 14.4%) from this NAV, we arrive at a fair value for Astoria’s shares of c.1216cps (Previously: 1204cps) or c.41% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1433cps (Previously: 1417cps) that implies a potential return of c.66% from the current share price.
Astoria Investments – Q3:24 – Results NoteDownload

Stor-Age Property REIT Limited – Initiation of Coverage – Good Stor(e) of Capital

Share Code: JSE: SSS – Market Cap: R7.2b – PE: 17.0x – DY: 7.9%

Stor-Age Property REIT – Initiation of CoverageDownload

Business Overview:

  • Stor-Age is an integrated & internally managed REIT that owns & operates self-storage properties in South Africa and the United Kingdom with a portfolio comprising of 103 properties (60 in SA operate under Stor-Age brand & 43 in the UK operate under the Storage King brand).
  • Stor-Age is the largest, market-dominant self-storage brand in SA whilst ranking 6th in the UK (the UK is an under-penetrated Developed Market based on self-storage space per capita versus other DMs).

Key Upsides & Downsides:

  • The current interest rate-cutting cycle may lower finance costs, boost valuations & increase the attractiveness of the property sector.
  • Furthermore, Stor-Age has a highly defensive product (self-storage), and the share price has been resilient through economic downturns with an excellent track record of operating and dividend growth.
  • Self-storage has high barriers to entry that includes long lease-up periods for newly developed properties and limited available properties in high-density, visible urban nodes.
  • The Group has a fast-growing, high-margin income stream of management fees from third-party property management and digital marketing platform that offer its shareholders exciting optionality.
  • Management has a pipeline of 13 properties that are expected to add 60,000m2 of GLA to its portfolio in the near term.
  • Management has decided to decrease its distributable income payout ratio from 100% to a more sustainable 90~95%, thus resulting in some downward pressure on short-term distributions per share despite expected growth in forecast distributable income.

Forecast, Valuation and Implied Return:

  • We see Stor-age as having a fair value of c.R15.50 per share based on a blended average of a discounted cash flow valuation (R15.92) and relative valuation model (R15.08); the latter is based on the valuation multiples of comparable listed self-storage peer companies.
  • Rolling forward our fair value by 12 months at our Cost of Equity (less our expected dividend) gives us a 12m TP of R15.97 per share, implying a total return of c.14% based on the current share price (R15.02).
  • We see a c.14% total return in the stock as comprising a forecast price return of c.6% and forecast dividend yield of c.8%.
Stor-Age Property REIT – Initiation of CoverageDownload

Sabvest Capital – H1:24 Results – Returning to Growth

Share Code: SBP – Market Cap: R2.9bn – Dividend Yield: 1.2%

Sabvest Capital – Results Note – H1:24Download

H1:24 Results: NAV Returns to Growth

  • Sabvest’s Net Asset Value (NAV) grew +3% y/y to 11786cps (H1:23 – 11465cps), management hiked the Group’s dividend to 35cps (H1:23 – 30cps), and bought back a further R51.7m shares during the period (average price of c.6893cps versus the NAV of 11786cps and the current share price of 7450cps).
  • Many of the Group’s underlying businesses recovered/grew nicely: Apex, Flexo and ITL all performed well while Corero’s share price more than doubled, and Transaction Capital unbundled We Buy Cars Holdings (JSE code: WBC).
  • On a balance, the Group’s portfolio outlook is good, its valuations are proving conservative (see ‘Thoughts’ below) and management is steadily degearing as cash is realized and/or flows centrally.

Thoughts: Exits Underscore Conservative Valuations

  • Sabvest has (1) agreed to exit Metrofile in two tranches at an above-market price (301cps), (2) received an initial R80.6m from its exit of Sunspray (at above-book at the time), & (3) concluded an exit from Rolfes that should be at a premium to its previous value in the Group’s NAV.
  • This is c.6% of assets being realized at above-book prices (proceeds should go into degearing) and it goes to evidence Sabvest’s conservative unlisted valuations.

Valuation, 12m TP & Implied Return: Discounted

  • The share is trading at a c.37% discount to NAV, which is well off from the JSE-listed peer group average discount particularly when compared based on Sabvest’s superior track record (i.e. the Line-of-Best-Fit below).
  • Using our updated NAV (with the latest market prices) we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 10754cps (previously: 9817cps), which still includes a HoldCo c.10% discount against this NAV (unchanged from prior period).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 12616cps (previously: 11675cps) with an implied return of +69%.
Sabvest Capital – Results Note – H1:24Download

Astoria Investments – Results Note – Navigating the Rough Well

Share Code: ARA – Market Cap: R484m – Discount to NAV: 45%

Astoria Investments – Q2:24 – Results NoteDownload

H1:24/Q2:24 Results: Fully-invested with OIH Paying Dividends

  • With a stronger Rand and lower RACP (soon-to-be renamed ‘Goldrush Holdings’) and Leatt Corp share prices, Astoria’s USD-NAV and Rand-NAV softened -2.9% and -3.5% respectively.
  • During the six months, Astoria invested more into Leatt Corp (LINK), and received a legacy agterskot payout. We currently consider the Group fully invested, but dividend flows from Outdoor Investment Holdings (OIH) should provide incremental capital for deployment & compounding.
  • Finally—as per policy—management have refreshed the Group’s unlisted company valuations, which we specifically discuss in the context of their performance and their peers.

Commentary: Leatt, Goldrush & Diamond Headwinds Cannot Last

  • OIH saw broad growth (excluding Family Pet Centre), Trans Hex (Land & Marine) somewhat bucked diamond trends with good pricing, ISA Carstens showed its quality, and the Vehicle Care Group (VCG) steadily (and responsibly) began scaling.
  • Unfortunately, Leatt Corp (trading its way through excessively stocked wholesale markets) and Goldrush (loadshedding hurting EBITDA margins) saw their share prices under pressure during the period, which created some headwinds to NAV.
  • Loadshedding (appears) gone for the moment and the wholesale market for Leatt should righten itself over time, thus implying upsides in both businesses from these levels.

Valuation, 12m TP & Implied Return: Widening of Discount

  • Astoria’s share is trading at c.45% discount to the current NAV (Previously: 40%) once we update its NAV with current prices.
  • If we take out our calculated “HoldCo discount” of c.14.4% (Previously: 14.2%) from this NAV, we arrive at a fair value for Astoria’s shares of c.1204cps (Previously: 1162cps) or c.54% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1417cps (Previously: 1386cps) which implies a potential return of c.82% from the current share price.
Astoria Investments – Q2:24 – Results NoteDownload

Astoria Investments – Results Note – Leatt Investment Concluded

Share Code: ARA – Market Cap: R508m – Discount to NAV: 40%

Astoria Investments – Q1:24 – Results NoteDownload

Q1:24 Results: Currency headwinds

  • Astoria Investments reported its Q1:24 results that show Net Asset Value (NAV) per share decreased -7.7% and -4.8% in USD and ZAR respectively as currency headwinds impacted translations and Goldrush (code: RACP) and Leatt’s (code: LEAT) share price pressure endured for this period.
  • As a reminder, Astoria’s reporting policy for Q1 and Q3 periods is not to perform detailed valuations of unlisted investments (except when developments require an immediate and material change in value). Price changes for listed investments and currencies are reflected on an ongoing basis.
  • In our updated Sum-of-the-Parts (SOTP) valuation below and on the next page, we have done the same and updated our view for the latest share prices and exchange rates.

Commentary: Further Leatt Investments Concluded

  • Astoria’s further acquisition of Leatt Corp’s shares was concluded during this period. We discuss this investment and the underlying business in some detail in our previous results note (LINK) and consider it an attractively priced asset with the deal using Astoria’s equity in a non-dilutive manner.
  • Late in April, Astoria’s management hosted an investor event that was recorded and can be viewed here: LINK.

Valuation, 12m TP & Implied Return: Above Average Discount

  • Updating Astoria’s NAV to current prices, the share is trading at c.40% discount to the current NAV (Previously: 42%).
  • If we take out our calculated “HoldCo discount” of c.14.2% (Previously: 13.9%) from this NAV, we arrive at a fair value for Astoria’s shares of c,1162cps (Previously: 1192cps) or c.42% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1386cps (Previously: 1420cps) that implies a potential return of c.69% from the current share price.
Astoria Investments – Q1:24 – Results NoteDownload

Sabvest Capital – FY 23 Results – NAVigating a Challenging Period

Share Code: SBP – Market Cap: R2.7bn – Dividend Yield: 1.3%

Sabvest Capital – Results Note – FY 23Download

FY 23 Results: Rare period of pressure

  • Sabvest saw its Net Asset Value (NAV) per share slip fractionally lower to 10936cps (FY 22: 11017cps) as headwinds of higher inflation, higher interest rates and higher raw materials costs coincided with logistics challenges across the businesses held in its portfolio.
  • Most of the Group’s businesses performed good-to-well, though ITL Group & Halewood continued to trade through difficult respective structural and cyclical headwinds.
  • Management expects to resume satisfactory growth in NAV per share in FY 24, & we tend to agree.

Thoughts: Today’s Underperformers = Tomorrow’s Upside

  • Over the last couple of years, ITL’s contribution to NAV has fallen from 20% to 10%, but the business (&, indeed, the entire global apparel sector) has restructured & could end up gaining from this period of disruption. Equity here is currently valued at zero but we suspect that this will not remain so & provides future upside optionality.
  • Likewise, Halewood’s current difficult trading period belies the value of the underlying that—in our opinion—management is valuing conservatively. As headwinds turn to tailwinds here, earnings should follow mix, & we see upside in this investment’s contribution to NAV too.
  • Finally, SA Bias is performing excellently & Apex, DNI, Valemount & Masimong all have healthy prospects.

Valuation, 12m TP & Implied Return: Wide discount to NAV

  • The share is currently trading at a c.37% discount to NAV.
  • Using our updated NAV (with the latest market prices) we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 9817cps (previously: 10060cps), which still includes a HoldCo c.10% discount against this NAV.
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 11675cps (previously: 11920cps) with an implied return of +69%.
  • See inside our report comparisons to some of the other JSE-listed HoldCo stocks.

Sabvest Capital: Breakdown of Group Net Asset Value (NAV)

Sabvest Capital – Results Note – FY 23Download

Metrofile Holdings – H1:24 Results – Tougher than Expected Interim Period

Share Code: MFL – Market Cap: R1.1bn – PE: 8.5x – DY: 6.3%

Metrofile Holdings Result Note – H1:24Download

H1:24 Results: Headwinds constrained revenues & hurt margins

  • Metrofile Holdings reported a much tougher H1:24 period than we had expected with several headwinds either constraining revenue growth or negatively impacting short-term margins.
  • Revenue grew +2% but this below inflationary pressures (labour costs increased +11%) and EBITDA decreased 4%.
  • Higher interest rates increased the financing burden and saw HEPS for H1:24 decline 13% to 13.0cps (H1:23 – 15.0cps).
  • In line with earnings, the dividend was lowered to 7cps (H1:23 – 9cps) and management bought back 1.5m shares in the market at a c.297cps VWAP.
  • The Group’s cash flow remained exceptionally strong (R160m of EBITDA converted into R143m of operating cash flow) and debt levels remained reasonable.

Our Thoughts: Strong recurring underpin to revenues & cash flows

  • Physical and digital subscription revenues make up 62% of Metrofile’s revenue, underpinning a strong base of recurring cash generation from which management continues to build out the Group’s digital strategy, this period being no exception.
  • On this digital strategy, IronTree, cloud & digital service revenue continue growing & we expect their contribution to Group revenue mix to grow (see Figures 2, 3 & 4 in this report).

Forecast, Valuation and Implied Return: Undervalued

  • We see Metrofile’s fair value as 390cps (previously: 423cps), implying an EV/EBITDA of 7.0x & a PE of 12.9x (comparing attractively to Iron Mountain’s current EV/EBITDA of 18.9x & PE of 129x).
  • Rolling our fair value forward, we arrive at a total return 12m TP of 456cps (previously: 500cps), implying a high c.78% return (including dividends) from these levels.
  • Our short-term forecasts were optimistic & have been lowered. Yet the fundamentals remain in place for Metrofile to defend its core business while it keeps investing in faster-growing, long-tail digital services businesses that are steadily transforming the Group. See Table 8 in the report (or below) for global comparisons.
Metrofile Holdings Result Note – H1:24Download

Metrofile Holdings – FY 23 Results – Great Top-line Growth

Share Code: MFL – Market Cap: R1.3bn – PE: 9.3x – DY: 6.0%

Metrofile Holdings – FY 23 Results NoteDownload

FY 23 Results: Double-digit Organic Growth

  • Metrofile revenue grew per our forecasts at +16% y/y (+3% added via the consolidation of IronTree for the full period and, importantly, +13% of this growth was organic in nature) but EBITDA was slightly lighter than we expected at R345m (FY 22: R325m) as inflationary pressure, the full cost of the prior year’s established go-to-market team was carried and necessary IT upgrades were all carried in these results.
  • The Group bought back 10m shares, helping HEPS grow +5% y/y to 32.1cps (FY 22: 30.8cps) and the dividend was maintained at 18cps (FY 22: 18cps).

Our Thoughts: Two Large, Near-term Contract Wins Offer Upside

  • The Group’s MRM South Africa and MRM Middle East both won significant contracts during the period. While the South African one’s timing is hard to know (we have excluded it from our forecasts), the Middle Eastern contract should start generating revenue from the end of FY 24E (included in our forecasts from the start of FY 25E).
  • Note: These two contracts alone add c.+20% to Group annual revenues for the periods they occur, we cannot understate how significant they (and their timing) are to Metrofile’s next couple of financial years.

Forecast, Valuation and Implied Return: Inexpensive quality

  • We see Metrofile’s fair value as 423cps (previously: 426cps), implying an EV/EBITDA of 7.4x & a PE of 13.2x (comparing attractively to Iron Mountain’s current EV/EBITDA of 16.1x & PE of 47.8x).
  • Rolling our fair value forward, we arrive at a 12m TP of 500cps (previously: 496cps), implying an attractive c.65% return (including dividends) from these levels.
  • Given the fast growth in Digital Services over the period and the significant premium these businesses trade at in public markets, we are increasingly expecting some sort of inflection points in the coming years where Metrofile’s valuation starts to reflect the growing percentage of revenue coming from Digital Services.
Metrofile Holdings – FY 23 Results NoteDownload

Sabvest Capital – H1:23 Results – Growth Despite Tougher Period

Share Code: SBP – Market Cap: R2.8bn – Dividend Yield: 1.3%

Sabvest Capital – Results Note – H1:23Download

H1:23 Results: Fully Invested

  • Sabvest grew its Net Asset Value (NAV) by +10.4% y/y to 11465cps (H1:23 10388cps) and maintained its interim dividend at 30cps (H1:22 – 30cps).
  • The Group is fully invested and, indeed, has several investment disposals in progress. With net debt at c.10% of gross assets, we expect realizations to be applied (somewhat) to degearing.
  • Management expects moderate growth in NAV per share for the full FY 23E period.
  • Note (below) how unlisted valuation multiples have remained flat over the period.

Sources: Sabvest, Iress, Profile Media, various company reports, & Blue Gem Research workings & assumptions; *Valuation performed by Masimong management predominantly based on Discounted Free Cash Flow methodology. **Average between subsidiaries’ multiples (4.5x and 6.0x).

Thoughts: More Nuanced Performances from Investees

  • While H1:23 was generally a tougher trading period for underlying businesses, particularly Apex, ARB and SA Bias all performed strongly and saw good growth in their earnings and, thus, resulting valuations.
  • Somewhat offsetting this, Halewood saw a cyclical adverse product mix and ITL continued to be buffeted by macro headwinds in the global apparel supply chain causing both to underperform. Both these businesses are good quality, and, in time, we expect these headwinds to abate, normal growth to continue and their respective contributions to Sabvest’s NAV to rise accordingly.

Valuation, 12m TP & Implied Return: 40% discount to NAV

  • Updating the Group’s NAV for the latest market prices we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 10060cps (previously: 9227cps), which still includes a HoldCo c.13% discount against this NAV.
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 11920cps (previously: 10906cps) with an implied return of +73%, excluding dividends.
  • Beyond the above numbers and implied returns, the fact is that the Group’s share price (6900cps) is currently at a large c.40% discount to what we estimate its current NAV is (11534cps). Given the Group’s track record, quality of NAV and prospects, we find this large discount strange.
Sabvest Capital – Results Note – H1:23Download

Renergen – FY 23 Results – R5.7bn EBITDA on a market cap of R2.7bn?

Share Code: REN – Market Cap: R2.7bn – PE: -94.1x – DY: 0.0%

Renergen – FY 23 Results Note – Updates & ValuationDownload

FY 23 Results: Producing Cash Flows from Phase One

  • With Phase One’s LNG production started ramping up during FY 23, Renergen produced its first Liquid Natural Gas (LNG) revenues of R12.7m (FY 22: R2.6) with R11.1m coming from LNG and the balance from the now closed CNH pilot plant (FY 22: zero from LNG & R2.6m from CNG).
  • Our FY 23 cost assumptions were too heavy, and we expected a full year loss of -22.3cps while the Group only actually lost -19.86cps (FY 22: -27.73cps).

Material Updates: A Coming Year of Big Events…

  • Phase One will spend FY 24E ramping up production, & it pivotally shifts Renergen from developer to producer status.
  • The Nasdaq listing process has started with management expecting its conclusion towards the end of this year. A circular to was released detailing the issuance of equity in two tranches; the first being 67.5m shares upon Nasdaq IPO raising c.$150m with the remaining tranche being raised towards the end of the Phase Two build. This is less implied dilution than we forecast & we have adjusted our view and SOTPs for this new data.
  • Management also published a revealing “Phase Two Guidance Note” forecasting FY 27E estimated EBITDA of between R5.7bn and R6.2bn per annum. Given that Renergen’s entire market cap is currently only R2.7bn, R5.7bn EBITDA is significant!

Valuation: SOTPs & Peer Relatives Higher Than Share Price

  • Updating and refining our forecasts, we see Renergen’s current fair value at c.6400cps (previously: 6233cps) and 12m TP as a little over 7500cps (previously: 7347cps).
  • Updating the crude listed helium peer relatives (market cap/helium), Renergen remains discounted against this measure. This remains true even if we take Phase Two’s future equity raises into account and despite Renergen being more advanced than its peers in both proving and starting to produce from its resource.
Renergen – FY 23 Results Note – Updates & ValuationDownload