Mazor: Sidestepping the cycle
The delisting of the construction firm was mooted at its AGM, but investors may not get the price they want
The tenure on the JSE of building supplies group Mazor, which specialises in aluminium and steel cladding as well as glass, could soon come to an end.
At a lengthy AGM this week, CEO Ronnie Mazor, whose family is the largest shareholder in the group, said talks would be held with other major shareholders about the delisting of the company.
But shareholders should not expect a premium price. Mazor noted: "We will put an offer on the table, but it will be an offer that does not put my family at risk."
Aside from the Mazor family, major shareholders include Global Capital, Cloudberry Investments and fund manager Niall Brown.
Brown argued that with the bulk of Mazor’s shares being held by a handful of investors it makes little sense to retain a JSE listing.
Mazor said last year a large shareholder had wanted to exit at a price of 220c — but that the best offer the family could table was 160c. "If we can’t meet on price, we will continue the ride."
Mazor has had ups and downs since listing on the JSE in 2007.
In the year to end-February 2018 Mazor slipped into the red at operating profit level after notching up operating profit of R55m in the previous financial year.
The group’s share price has dribbled down from about 190c a year ago to current levels of about 140c.
Mazor indicated that further share buy-backs are possible, but stressed that the bid price would change dramatically to reflect perceptions of future NAV rather than current NAV.
In early June Mazor disclosed it had repurchased 4.3 million shares at between 150c and 160c. The share repurchase authority allows Mazor to buy back another 17.55 million shares.
The group still has about R56m of cash on its balance sheet. But at the AGM Mazor said the company is out of the market in terms of share buybacks. "We’ve lifted our bid in the market. We want to see market equilibrium."
It does seem the group’s share price could remain under pressure in coming months, with Mazor predicting a really rough financial year ahead. "If we can match the past financial year, I’ll be happy. If we break even this year I will be dancing in the street."
He was disparaging about prospects for the local construction sector. In a bid to sidestep the construction cycle, the company has embarked on two property developments in Stellenbosch (at an estimated cost of R45m) and Bellville (R50m-R55m).
Mazor said the property developments would not be held for the long term, but sold off once development has been completed, in the next 24-36 months.
He said the Stellenbosch and Bellville nodes have the highest growth rates in Cape Town, with "a huge number of families migrating to these areas monthly".
Mazor pointed out that development work would commence only once 70% sales have been secured — adding that the group would seek bank loans to finance the developments.
Brown asked whether Mazor has given consideration to closing its underperforming glass division, which has made a profit only once in 10 years and incurred capital expenditure of R78m.
In the year to end-February, the glass segment traded about R3m in the red, with revenue slowing to R141m (previously R156m).
But Mazor countered that from a cash-flow perspective, the glass business is in better shape than it was several years ago.
He stressed there is no intention to sell off the glass assets, adding that, in any event, it would be difficult to find a buyer for these assets. "There are a lot of stupid private equity people out there at the moment … but no-one is stupid enough to buy construction."