Furnmart chickens out of BSE
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.
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.