Richard Cheesman, senior investment analyst at Urquhart Partners, on what the smart money is doing
13 March 2025 - 05:00
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Richard Cheesman, senior investment analyst at Urquhart Partners
Buy: Super Group
JSE-listed Super Group is a business undergoing a significant transition. The company sports a market capitalisation of R9.2bn, while the sale of its Australian subsidiary, SG Fleet, is expected to result in a cash inflow of R7.5bn.
Proceeds are expected to be used to settle R2bn of the company’s local debt, and R5.5bn is planned to be returned to shareholders as a dividend. A simpler group will allow management to focus on restructuring the struggling UK dealerships division, and selling inTime. While currently loss-making, inTime was purchased for a substantial R2.1bn in 2015. Its net assets are of a similar size today and the division stands to benefit from any improvement in the European economy. Future capital allocation for the group is expected to centre on organic growth, share buybacks and dividends. With the business expected to generate about R750m in profits, investors are effectively paying just five times earnings — an undemanding valuation with potential upside from a cleaner, more agile company.
Sell: Prosus
Prosus has an array of advantages stacked in its favour: a large ownership stake in one of the most valuable companies on the planet, a clean(ish) balance sheet, a refreshed executive team, a visionary chair and a large discount that easily enables accretive capital allocation. Yet the recently announced acquisition of Just Eat Takeaway.com (JET) does not seem to play to these strengths. Shareholders voted with their feet, and Prosus’s share price fell 7.5% on the day the deal was announced. While about half of that fall can be attributed to Tencent, the remaining reduction in market capitalisation, at almost R80bn, is of a comparable magnitude to JET’s price tag. Bulking up and growing faster are back in vogue, while the focus on per-share value and return metrics unfortunately seems to be fading. Why not consider collapsing the convoluted double-holding company structure, or spinning off the non-Tencent assets? Investors can consider seeking opportunities elsewhere rather than rolling the dice to see if the recent rash of acquisitions pans out.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
BROKERS’ NOTES: Buy Super Group, sell Prosus
Richard Cheesman, senior investment analyst at Urquhart Partners, on what the smart money is doing
Richard Cheesman, senior investment analyst at Urquhart Partners
Buy: Super Group
JSE-listed Super Group is a business undergoing a significant transition. The company sports a market capitalisation of R9.2bn, while the sale of its Australian subsidiary, SG Fleet, is expected to result in a cash inflow of R7.5bn.
Proceeds are expected to be used to settle R2bn of the company’s local debt, and R5.5bn is planned to be returned to shareholders as a dividend. A simpler group will allow management to focus on restructuring the struggling UK dealerships division, and selling inTime. While currently loss-making, inTime was purchased for a substantial R2.1bn in 2015. Its net assets are of a similar size today and the division stands to benefit from any improvement in the European economy. Future capital allocation for the group is expected to centre on organic growth, share buybacks and dividends. With the business expected to generate about R750m in profits, investors are effectively paying just five times earnings — an undemanding valuation with potential upside from a cleaner, more agile company.
Sell: Prosus
Prosus has an array of advantages stacked in its favour: a large ownership stake in one of the most valuable companies on the planet, a clean(ish) balance sheet, a refreshed executive team, a visionary chair and a large discount that easily enables accretive capital allocation. Yet the recently announced acquisition of Just Eat Takeaway.com (JET) does not seem to play to these strengths. Shareholders voted with their feet, and Prosus’s share price fell 7.5% on the day the deal was announced. While about half of that fall can be attributed to Tencent, the remaining reduction in market capitalisation, at almost R80bn, is of a comparable magnitude to JET’s price tag. Bulking up and growing faster are back in vogue, while the focus on per-share value and return metrics unfortunately seems to be fading. Why not consider collapsing the convoluted double-holding company structure, or spinning off the non-Tencent assets? Investors can consider seeking opportunities elsewhere rather than rolling the dice to see if the recent rash of acquisitions pans out.
BROKERS’ NOTES: Buy Exor, sell Curro
BROKERS’ NOTES: Buy Ferrari, sell Porsche
BROKERS’ NOTES: Buy Investec, sell Clicks
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.