DM168: The Finance Ghost: Cell C stumbles towards financial sustainability

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Blue Label Telecoms is taking steps to recapitalise Cell C and reduce overall debt. Its plan includes the purchase of prepaid airtime for R1.2-billion.

Competing against the biggest telecommunication networks is no joke. You just need to ask Cell C and the many investors who have lost money along the way. In the latest restructure of the balance sheet, creditors owed R7.3-billion had to accept a compromise offer of just R1.03-billion.

Sadly, Blue Label doesn’t have the best track record with anything outside of its core business. The share price is up 25% this year, which sounds great until you draw a five-year chart and notice a drop of more than 63%.The “value unlock” trade by investment holding companies has been a feature of the post-pandemic market. Investors ran out of patience a long time ago with structures that give layered exposure to companies that are individually listed on the JSE anyway.

Going forward, RMI is becoming the OUTsurance Group. It will also hold a few small investments, but the bulk of the value clearly sits in OUTsurance, valued at R40.5-billion.City Lodge’s recent occupancy levels tell a story of recovery. In the 2019 financial year, average occupancy was 55%. In July to the first half of September this year, occupancies were between 52% and 56%.

In California, logistics group Santova is acquiring 100% of A-Link Freight for $2.35-million. This is the company’s first move into the US market and it seems like a smart deal. Although the announcement is vague on the numbers, it looks like a deal based on a forward earnings before interest, taxes, depreciation and amortisation multiple of under 4x.

 

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