Industry News: Barloworld, Emira Property Fund, RMI Performance

Barloworld on the Acquisition Train

Barloworld recently closed the deal to buy Wagner Asia Equipment for a price of R2.8 billion. The deal was carried out by Nedbank Corporate, and Investment Banking (Nedbank CIB). The deal took about 8 months to close as, yes, investment banking is a delicate job, thus mergers and acquisitions take forever – that’s why it pays so much.

This deal is sure to stretch Barloworld’s arm in the global space. And it’s always great to see a South African company expanding globally. It gives that feeling of patriotism – that “we are proud of you guys” moment, you know. Luckily, they entered into the deal before 2020 showed its true colours, so they already put aside the money for the deal. Hopefully, it didn’t do damage nonetheless, since a lot of companies had to put off deals and projects that had already been set out, just to cover the bleeding Mandela’s in their operations.

RMI Performance Guidance

Rand Merchant Investment Holdings (RMI) recently issued a note to shareholders regarding expected performance (and yes, there’s RMB, RMH and RMI – it’s a lot but get used to it). The note pointed attention to RMI’s major portfolio holdings: Momentum Metropolitan Holdings, Discovery and Hastings Group. The note stated that the key performance indicator to be used is Normalised Earnings Per Share.

Quick Run: What are Normalised Earnings Per Share? Your usual Earnings Per Share ratio just uses the bottom-line net profit. The problem is that net profit has all sorts of things that don’t give a true reflection of how the company operates on a normal year (‘normal’ being the operative word because 2020 has been WOW!). So, what accountants do is “normalise” earnings by excluding non-operational stuff (like impairment losses), and once-off stuff (like payment on a BEE transaction), and accounting anomalies.

Now it makes sense why RMI is opting for Normalised Earnings Per Share as a key measure. The impact of Covid-19 can be handled better by Normalised Earnings Per Share. And you see this in the note, as RMI predicts that Earnings Per Share will drop by between 55% to 65%, as compared to Normalised Earnings Per Share, which is expected to drop by between 20% to 30% for the year ended 30 June 2020.

Small Cap Cover: Emira Property Fund Results

Straight out of the box South African property fund, Emira, recently presented their financial results with a lot of interesting actions that the company took to weather the Covid-19 storm. Notably, the fund provided almost R120 million worth of relief to 1 153 tenants – which is actually amazing. Yes, some tenants could not be saved, which saw the rent in arrears increase to 9% (really not half bad, if you ask me although I do believe the guys at Emira will be of a different opinion of course). Not only that but they said they will continue providing support for their higher-risk clients.

The fund cited good overall operational performance despite the disruptions of Covid-19. Only about 4% of their space was vacant by the end of the year – office real estate led the pack with 6.9% in vacancies as of June 2020; they managed to keep 80% of their tenants – a good year, relatively speaking. Under their portfolio, they had 5 Jet stores, so with the Edcon business rescue process drawing close, 4 of the 5 stores will transfer to TFG and 1 store will be taken back by Emira and re-let.

That’s your Monday money news this week. Be sure to be back next Monday, for your weekly update and to subscribe to our monthly Finance Gym Newsletter for monthly gold in your inbox, as we keep you in the loop. Stay tuned to our Instagram and Facebook this week as we bring you an event with a prominent partner in finance on the 11th of September, to end your week on the right note.

Author: Nkanyiso Nyawose

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