The Botswana Stock Exchange’s domestic Company Index (DCI) is at a one year low after contradicting by 10% since the beginning of the year. The DCI comprises of 22 listed local companies on the domestic counter and it is a market weighted index. The DCI is dragged down by losses in the financial and retail stocks that make up majority of the domestic listed companies.
However, the six listed property stocks have been resilient in what appears to be a bearish market, delivering capital gains above the DCI. We take a look at the top four property companies that are delighting their shareholders, especially the Botswana Public Pension Fund which has stakes in both companies.
New African Properties
New African Properties(NAP) is not only the best performing property stock but at 11% year-to-date(YTD) returns, it is the overall second best performing stock in the DCI, coming second to Botswana Insurance Holding Limited(BIHL).
This is a reversal of fortunes from last year when the group’s ranked third amongst property companies after delivering 22% in share price increase. The company broke records in June in what was the single biggest day trade in the history of the BSE after the company traded 26% of its issued capital worth P457.3 million.
NAP was listed on the BSE in 2011, with a total of 604 397 124 issued units. According to NAP’s 2015 annual report, the majority of the units are owned by body corporate/trusts at 80 percent, followed by insurance companies, pension/equity funds at 13.6 percent while individuals hold 6.4 percent of issued units.
Of all issued units, the public accounts for 20.1 percent and the rest lies solidly with directors’ interests. The largest unit holder is Cash Bazaar Holdings (Pty) Ltd with 79.3 percent stake. In 2015, the company’s traded units were at 1.98 percent of the total issued units, making the June trade the biggest of the company since its existence.
NAP owns properties such as Riverwalk Mall, Riverwalk Plaza and Kagiso Mall in Gaborone, Mafenyatlala Mall in Molepolole, Kasane Mall and Mokoro Centre in Maun. The portfolio comprises primarily of prime retail sites with a strong tenant base, including Pick ‘n Pay, Spar, Choppies, Mr Price, Woolworths, Pep, Cashbuild, Furnmat, CB Stores, Ackermans, Cape Union Mart, Exclusive Books, FNB, Hi-Fi Corporation, Home Corp, Incredible Connection, Jet, KFC, Nando's, New Capitol Cinema, Mugg & Bean, JB Sports, Truworths and many others.
The second best performing property stock belongs to RDC properties after its share price appreciated by 6% since the beginning of the year. The Share price is currently trading at P2.65. In the previous year the share price surged by 27%, making it the second best performing property stock.
RDC Properties is the first variable rate loan stock company to list on the Botswana Stock Exchange in 1996. The company selectively develops and invests in modern commercial, industrial and residential buildings in prominent locations in Botswana and Madagascar.
RDCP’s property portfolio value surpassed the P1 billion mark in 2015, and the portfolio includes Masa Centre, Chobe Marina Lodge, Standard Chartered House in main mall, Isalo Rock Lodge in Madagascar and RDC flats. The company plans to expand to Namibia and Mozambique with plans in Namibia progressing well after the group reserved a holding company name that will carry out developments after land has been allocated.
The group’s 2015 annual report lists the top unit holders as Realestate Financiere SA, the controlling shareholder at 31.47%, Botswana Public Officers Pension Fund (BPOPF) at 31.6% (the units are held through various nominees), while Chobe Financial Corporation, Aspera Holdings Limited and Motor Vehicle Accident Fund (MVA) each hold 16.62%, 3.74% and 3.70% respectively.
The Gulaam Abdoola led property giant continues to impress its shareholders as the market correctly prices the value of the stock which has spiked by 5.5% in the last 8 months to trade at P3.24. The gains extend the group’s spectacular performance as it ended the previous year as the fourth best performing stock in the domestic board after returning 47% in capital gains.
The group’s property portfolio is valued at P1.7 billion, a portfolio that includes Game City, the largest indoor mall in Botswana and Mlimani City, the largest purpose built indoor shopping centre in Tanzania. The group also owns Nzano Shopping Centre in Francistown, Mogoditshane Supa Save mall, Turnstar House in Mall, Fairgrounds Office Park, Tapologa Estates and other residential and retail properties.
Turnstar Holdings is in the last stages of Game City expansion which when complete will modernise the existing common areas, toilets, entrances and shop fronts of the centre. An additional 9,000 sq.m exhibition hall comprising of restaurants, a food court, multi-function entertainment area, exhibition hall and playground is being constructed on the upper level with a view of the Kgale Hill.
The group is also extending its Mlimani city through additions of two office blocks, a new ticket parking system and refurbishment of the conference centre. The ongoing works are expected to improve the group’s revenue. The Group’s top ten linked unitholders include BPOPF, GH Group, Associated Investment and Development Corporation, Botswana Insurance Fund Management, Debswana Pension Fund and Motor Vehicle Accident Fund.
The group’s property value which is in the north of P750 million and spans the office, retail and industrial sectors with the bulk of revenues coming from the highly competitive and saturated office sector. The group was the fourth best performing property stock in 2015 at 12% share price appreciation. The stock which is now trading at P3.05 is up by 4.8% since the beginning of the year.
The group owns a stellar portfolio comprising of Prime Plaza Buildings in the CBD, Sebele Centre Mall, Letshego Place, South Africa High Commission Building, DHL Building, and G4S headquarters. In Francistown, they own Nswazi Mall and Mantlo House after disposing of Barclays Plaza and Blue Jacket Square Mall to BPOPF. Other properties include Hillside Mall in Lobatse, Boiteko Mall in Serowe, Ramotswa Shopping Centre, Ghanzi Shopping Centre. In the region, the group operates two buildings in Lusaka and Kitwe which houses G4s offices.
Primetime which is set to open its new Pilane Crossing Mall is currently locked in an impasse with the Ministry of Trade and Investment over trade licenses concerning South African companies that are leased as tenants. The Ministry is refusing to grant trade licenses since the Trade act stipulates that such licenses are reserved for citizens. However the silver lining is that the licenses will be approved if the involved retailers cede 51% of shareholding to citizens.
The top major linked unitholders list is led by Linwood Services Limited with 25.99% shareholding, BPOPF has a stake of 16.88% through its nominee, Tati Company Limited holds 14.23%, Metropolitan Life Botswana has 7.51%, while Debswana Pension Fund and D.P Training both hold 3.41% and 3.34% respectively.
A squeaky and glittering metaphoric smile was the look reflected from the Pula against the greenback this week and money market researchers lean this on optimism following Monday’s announcement of another Covid-19 vaccine which is said to have boosted emerging market economies.
With other emerging market currencies, the Pula too reacted to optimism and fanfare on the new Covid-19 vaccine against the weakening US dollar which has been losing its shine since the uncertainty laden US elections.
After bouncing back into the Johannesburg Stock Exchange (JSE) last week Friday, following a year of being in the freezer, the Choppies stock started this week with much fluidity.
Choppies was suspended in both the Botswana Stock Exchange and its secondary listing at the JSE for failure to publish financial results. Choppies suspension on Botswana Stock Exchange was lifted on 27 July 2020. On Friday last week, when suspension was being lifted, Choppies explained that this came into fruition “following extensive engagement with the JSE.”
Choppies stock, prior to suspension, hit a mammoth decline in value of more than 60 percent, especially in September 2018. Waking from a 24 month freezer, last week the Choppies share price was at R0.64 and the stock did not make any movement.
However, Monday was the day when Choppies stock moved vibrantly, albeit volatile. Choppies’ value was on a high volatile mood on Monday, reaching highs of 200 percent. At noon, the same Monday, the Choppies share had reached R1.05. Before taking an uphill movement, Choppies stock slightly slipped by 2 cents. But the Choppies share rode up high and by lunch time the stock had reached the day’s summit of R2.00 and that was at 13:30 when investors were buying the stock for lunch.
The same eventful Monday saw gloom on the faces of Choppies rivals, when Choppies gained by 220.31 percent around lunch time its rivals in the JSE Food & Drug Retailers sector were licking wounds. Spar lost 2.94 percent, Pick Pay fell by 2.43 percent, Shoprite 7.52 percent and Dis-Chem 1.98 percent. The only gainer was Clicks by a paltry 0.51 percent.
In an interview with BusinessPost, Choppies sponsors at the JSE PSG Capital Managing Director Johan Holtzhausen explained that the retailer’s stock was in high demand after a long suspension. He said when a company list or a suspension is lifted the market needs to find itself on the pricing of the share.
“Initially when the suspension was lifted there were more buyers than sellers. As far as we could see this created a shortage of shares so to speak and resulted in the price at which the shares traded going to R1.20 and eventually R2.05 before finding its level around R0.80 sent from a JSE perspective.
This is marked dynamics and reflect that there are investors that are positive about the stock in the long run. This is a snapshot over a short period and one requires a longer period to draw further conclusions,” said Holtzhausen in an interview talking about the Choppies stock.
On Monday this week where the Choppies value grew by 200 percent, the stock took a turn looking down, closing the day at R0.87 from a high of R2.00. According to local stockbroker Motswedi Securities on Monday while there was no movement by Choppies in the local stock exchange as the retailer appeared on the board as 141,000 shares traded at P0.60 each.
However in Choppies’ secondary listing the stock price rallied to over 200 percent during intraday trading on Monday before losing steam and declining to around R0.87 share.
Before press yesterday Choppies opened the market with the stock starting the day at R0.80 then went flat for few hours before taking a slide downward, dropping 5 cents in 30 minutes. Choppies then went flat at R0.75 for 50 minutes yesterday before going up at 10:20 am where it nearly recovered the open day price of 80 cents, but was shy of 1 cent. From 79 cents the price went flat until noon.
Competition and Consumer Authority (CCA) has revealed that in its assessment of the Jet take over by Foschini, there were considerations on possible market rivalry and a clash in targeted classes.
According to a merger decision notice seen by this publication this week, high considerations were made to ensure that Foschini’s takeover of Jet is not anyhow an elimination of rivalry or competition or if the two entities; the targeted and the acquiring enterprise serves the same class of customers or offer the same products, to elude the anti-trust issues or a stretch of monopoly.
The two entities are South African retailers whose services stretched to Botswana shores. Last month local anti-trust body, CCA, received an acquisition proposal from South African clothing retailer, Foschini, stating their intentions to take-over Jet.
South African government’s Business Rescue Practitioners earlier this year after finding out that Jet’s mother company, Edcon, is falling apart, made a decision that Foschini can buy Jet for R480 million. This means that Foschini will add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents.
However the main headache for the CCA decision which was released this week, is distinguishing the targeted and the acquiring entity businesses and services.
When doing a ‘Competitive Analysis and Public Interest’ assessment, CCA is said to have discovered that Foschini is classified as a “standard retailer” which targets middle-to-upper income consumers and it competes with stores such as; Truworths and Woolworths. The targeted entity, Jet, is on the lower league when compared to its acquirer, it serves customers of lower classes and is regarded as a discount/value retailer targeting lower income consumers or a mass market. This makes Jet to be in direct competition with Ackermans, Pepkor, Cash Bazaar and Mr Price.
“Therefore, a narrower view of the market is that Foschini through its stores trading in Botswana is not a close competitor to Jet. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merged enterprise post-merger,” concluded CCA this month.
The anti-trust body continued to explain that in terms of the Acquisition of a Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market.
This made CCA reach to a conclusion that there is no case of an acquisition of a dominant position in the market under consideration or any other market on the account of the proposed transaction.
What supports the merger according to CCA is that it is in compliance with regards to ‘Public Interest Considerations’ because the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise. This is so because in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business.
“On that note the Authority (CCA) found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In light of this, the assessment revealed the critical need to protect the employees of the merged entity from possible merger specific retrenchments/ redundancies,” said CCA.
Before making a determination that the recently proposed transaction is not likely to result in the prevention or substantial lessening of competition or endanger the continuity of the services offered in the relevant market, CCA said it then moved into a concern for public interest which is a protection enshrined in the Competition Act of 2018.
CCA’s concern was mostly loss of livelihood or employment by 126 Batswana workers at Jet stores, stating that possible retrenchments or redundancies may arise as a result of implementation of the proposed merger.
Much to the desire of trade union or labour movements in Botswana and across Southern Africa where the Jet stores are stemmed-who also raised concerns about the retail’s workers job security- CCA subjects Foschini to keep the target entity 126 workers.
“There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises. For clarity, merger specific retrenchments or redundancies do not include (the list is not exhaustive): i. voluntary retrenchment and/or voluntary separation arrangements; ii. Voluntary early retirement packages; iii. Unreasonable refusals to be redeployed; iv. Resignations or retirements in the ordinary course of business; v. retrenchments lawfully effected for operational requirements unrelated to the Merger; and vi. Terminations in the ordinary course of business, including but not limited to, dismissals as a result of misconduct or poor performance,” said CCA.
CCA also orders that Foschini informs it about all the details of 126 Jet employees within thirty (30) days of the merger approval date. CCA should also know information of when Foschini is implementing the merger, within 30 days of the approval date.
Other conditions include Foschini sharing a copy of the conditions of approval to all employees of the Jet or their respective representatives within ten (10) days of the approval date.
“Should vacancies arise in the target, the merged enterprise shall consider previous employment at one of the non-transferring Jet stores to be a positive factor to be taken into account in the consideration of offering potential employment,” said CCA.
According to CCA, in cases of any job losses, for the Authority to assess whether the retrenchments or redundancies are merger specific, at least three months before (to the extent that this deadline can be practically achieved and in terms of the prevailing and legally required employment practices) any retrenchments or redundancies are to take place, inform the Authority of: i. The intended retrenchments; ii. The reasons for the retrenchments; iii. The number and categories of employees affected; iv. The expected date of the retrenchments.