Smarting from the pain of having my repo rate prediction so thoroughly trounced, it would be wise of me to avoid making predictions and analyses this week. However, there was an event that caught my attention and will be of interest to AngloPlats shareholders.
This company has a market capitalization of R56 billion and has announced its intention to raise some R4bn with a rights issue. Now rights issues mean big fat company announcement documents full of dates and formulas and words like “perpetual’ and “cumulative” and big fat merchant bank fees. If you are already feeling numbed or alarmed at the direction this piece is going, just skip the next paragraph after noting that my opinion is: “Sell the letters and buy the ordinary shares rather than the preference shares if you want more exposure”
The nub of the story is that current ordinary share holders are being invited to increase their exposure to AngloPlats by taking up (i.e buying) Preference Shares. These “prefs” have a variety of characteristics including conversion to ordinary shares. The bad news is that the theoretical market value of the prefs on take up date (the middle of May) will be about 23% less than the amount you will have to pay for them! The kicker is that if the ordinary share price does reasonably well over the next few years, then one’s pref share position will soon move into a profit. However, my sums indicate (and you are welcome to the spreadsheet if you like) that if the share does go up, then one will enjoy a much higher return by buying more ordinary shares rather than by “taking up” the prefs.
But now on to something I really do know about – holidays. There’s one next week, remember? The mother of all parties is to be held in Pretoria on Tuesday and some one else is paying. I wonder who? I don’t think I’ll go. I’m not sure I received an invitation anyway. I’ll jut stay at home and light the Weber and prize the top off a Castle or two. So that keeps SAB as a “buy”.
It was a pity that the Stormers did so badly this morning, so it adds a little urgency to an early start tomorrow to shout for the Bulls. Now that’s going to be hard for an old bear like me.
