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 JohnMynhardt 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.
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.