Home » News » Business » Furnmart chickens out of BSE

Furnmart chickens out of BSE

Publishing Date : 12 November, 2018

Author : TSAONE SEGAETSHO

It has emerged that top furniture retailer Furnmart has decided to bow out of the local bourse fearing that it might not meet the new Botswana Stock Exchange (BSE) Listing Requirements which comes into effect on 1 January 2019.


According to reasons advanced by Furnmart in a recent statement, the grave concern is that, “the company will not meet the revised minimum free float after the permitted transition period and as aresult will not meet the conditions for remaining listed.” In simple terms, Furnmart fears that it will not meet the 30 percent minimum free float requirements of the new BSE listing. The furniture retailer finds the new listing regulation a little bit too strict and argues that it will not have the required time to meet the mandatory requirements. 


Among other things, the new regulations will see the local bourse transforming from a blanket approach which caters all asset classes to those specific to each type of security. The new requirements will see 75 percent of shares owned by the promoter locked in for two years for the main board. Another significant change for the main board is that three-year profit forecast is required if profit track record is inadequate. In these new regulations listed companies are compelled to have 30 percent of listed equity to be held by the public.


The other qualm is that theFurnmart shares has been decreasing since 2015 and has ranged between P0.53 and P0.55since October 2017. From P0.85 in the last quarter of 2016 to P0.70 last year, the share price continues to plummet. In the first quarter of 2017, the share price was P0.65 to P0.60 then P0.55. The share price remains at P0.55 pending delisting.


“In addition, the share has proved to be illiquid with only 3.04 percent of allshares trading in the 6 financial years and 0.02 percent from the start of the current financial year to theLast Practicable Date. The poor share performance and lack of liquidity are arguably compounded by the negative sentiment investors have shown towards the furniture industry in recent years following the poor performance of furniture companies listed in South Africa such as Steinhoff (owners of the JD Group) and the Lewis Group,” said Furniture in a recent statement.


Experts believes the company also suffers severe illiquidity, in the 12 months to 5 October 2018 only 0.18 percent of the issued share capital traded, with an aggregate value of only P591,831.Also, another reason for delisting is that the sector is not widely supported by many investors which further lessen any benefits of being listed, according to the furniture retailer.


Furnmart said, the changing investment, economic and regulatory environments that the furniture shop is exposed to create significant volatility in performance and requires more flexible and less governance driven management style to remain relevant and seize opportunities, with potentially more speculative decisions. This is less achievable as a listed company and is not necessarily suited to all current investors, according to Furnmart.


After looking at all the uncertainties of listing on the local bourse, Furnmart directors took a resolution that the shares be de-listed. SG Kleinwort Hambros Trust Company (CI) Limited as Trustee of The Marula Trust holds 221 229 300 shares representing 36.48 percent of the issued shares of the Company and ScotstrailInc holding 214 499 640shares representing 35.37 percent have each indicated it will vote in support of a resolution for delisting.


The two major shareholders who have a combined shareholding of 71.85 percent have each indicated that it will not disinvest from the company, and if an offer for the shares held by it is made to these entities, they will decline such offer. Furnmart chairman John  Mynhardt holds 4.31 percent while deputy chairman and John’s son TobiusMynhardt 4.31 percent of shares. Other directors, Fact Lebala have .17 percent while SubbaraoVenkataramani has only 0.02 percent of shares.

 

The Offer Price

An offer of premium market price of P0.65 has been put on table for “qualifying shareholders who elect to sell their Shares” and this will be a top agenda at the Extraordinary General Meeting slated for 11 December.  The P0.65 Offer is therefore being made to the minority shareholders as majority shareholders would not participate on the offer.


In an expert advice Imara Corporate Finance said the offer price of is not fair because it falls below, and represents a discount to, Imara’s fair-valuation range for Furnmart. Imara also says Furnmart has lost 76 percent of its peak market value from 27 August 2014 to 15 October 2018, thesecond largest loss for a domestic company on the BSE over the period. Over the same periodEBITDA, profit after tax, dividends and shareholder’s equity increased, enhancing Furnmart’srelative value compared to regional and BSE peers, says Imara. 


But the Offer is also reasonable because Furnmart’s price drop since September 2014 occurred amidst low trading activity, implying significant sell-pressure. According to Imara, the total number of Furnmart shares traded on the BSE over the last 12 months to 15 October 2018 was 1,090,931 which represents 0.18 percent of the total issued share capital and is an indication of the severe illiquidity of the Furnmart share price. The Offer allows minority shareholders the opportunity to sell their Furnmart shares in an otherwise illiquid stock.


“In the absence of a competing offer, and in the likelihood that the Delisting resolution will

be passed, the Offer provides Minority Shareholders with the opportunity to realise their

Investment in Furnmart at a premium to the current share price. The alternative to Minority


Shareholders is to remain in an unlisted company. The offer price of BWP 0.65 is at a 18% premium to the current share price and the 1-year high share price and at a 20% premium to both the 90-day and 1-year volume weighted average price. All Minority Shareholders are treated equally and without discrimination. No minority Shareholders are being forced to sell their Furnmart shares and can elect to remain as a shareholder in an unlisted company.  No Minority Shareholder has enjoyed any unfair advantage in terms of the Offer,” said Imara in a statement. 

Cartoon

Polls

Do you think the courts will help put the UDC, BMD impasse within reasonable time ahead of the 2019 General Election?

banner_14.jpg
banner_12.jpg

POPULER BRANDS