DURBAN - Tiso Blackstar share price has shed more than 47 percent in the last five months despite the group reporting 57.7 percent increase in profits after tax in the six months to end December.
The share price has declined from R8.55 a share at the end of December to the current levels of R4.50 a share, as of last Friday.
The fall in share price has led to the group’s decline in market capitalisation to R1.23 billion on Friday, down from R2.30bn at the end of December, representing a 46.5 percent decline during the last five months.
Its all-time high was achieved three year ago, when it traded at R14.85 a share in April 2015 after having listed in 2011.
Firstly, Tiso Blackstar acquired Times Media Group (TMG), which has been listed for a long time and the share price traded above R48 a share for TMG. However, in 2008 the share price declined to R22.50 a share.
The loss to the Public Investment Corporation (PIC) through a direct shareholding and indirectly through Kagiso asset management in TMG is as follows:
The PIC owned directly 20 percent and indirectly another 10 to 15 percent in TMG.
The market capitalisation at 2008 was 300 million shares at R22.50 a share, which equates to R7bn.
The PIC has lost 30 percent of this since 2008, and losing around R2bn.
In 2004 it was R48 a share and the PIC lost R4bn.
Dr Adrian Saville, chief executive of Cannon Asset Managers, said the business trades at a material discount to its reported net asset value (NAV) of 1 274 cents a share and the stock price has essentially been in structural decline since mid-2015, which was just over 1 400cps in May 2015 to 450c a share now.
“The discount to NAV and poor rating reflect Tiso Blackstar’s extremely variable operating and financial performance and very difficult operating environment, especially for the media component of the group,” Saville said
However, Saville added that although interim results pointed to improved prospects for the group, the sale of its interest in KTH was not realised.
“As a result, a proposed special dividend has been reconsidered. The cancellation of the sale agreement also points to the value of KTH being lower than the carried price of R1.5bn.
Saville also noted that negative commentary has been circulating relating to the cancelation of the KTH sale, including some going as far as to refer to business rescue.
“TBH has refuted these suggestions and points to improved performance, improving financial health and decent cash flow. Delisting from AIM has led to negative perceptions and hints at business stress. This is notwithstanding the fact that the AIM listing accounted for just 9 percent of the equity float and was illiquid and expensive to carry,” he said.
The interims results presented for the six months to end December showed a better performance in its core businesses, which the group said the core businesses performed exceptionally well under such circumstances, delivering a mix of sustainable new revenue streams and tight cost management.
In the period Tiso Blackstar reported a profit after tax of R62.78 million, up from last year’s R39.81m. The performance was a huge improvement from a loss of R15.45m made at year-end in June last year.
The group has tried unsuccessfully to sell its 22.9 stake in Kagiso Tiso Holdings (KTH), a non-core business, with little success in the last few months.
“As previously mentioned, the initial sale transaction has been cancelled subsequent to December 31 and a new transaction entered into for the disposal of 3.61 percent of KTH’s issued ordinary share capital (excluding treasury shares) for a cash purchase price of R197.9m. Progress is also being made to dispose of the group’s remaining interest in KTH,” the group said.
“The core businesses delivered combined growth in earnings and revenue and are well placed to benefit from the improving economic climate. Unfortunately, the results from the group’s non-core steel interests, namely Robor Proprietary Limited (Robor) and Consolidated Steel Industries Proprietary Limited (CSI), as well as Kagiso Tiso Holdings Proprietary Limited (KTH) dragged down a good performance from the core results, but plans are in place to resolve and reduce exposure to these assets,” the group said.
It added that by year-end, the group is aiming for non-core assets not to be consolidated, as the group will have either reduced its controlling interest, disposed of them entirely or classified them as non-current assets held for sale.