Research archive for ABL

African Bank issued a Renewal Of Cautionary Announcement, Further Update On The Curatorship Of African Bank And Proposed Restructuring. The main points of the SENS are that they will not be splitting off the "bad bank" to the SARB and will just wind down the bad book in the current company. The "HoldCo" will not be listed as soon as originally proposed and will only be listed when "New Co" gets traction and all the listing requirements have been met. The curators didn't want the listing process to delay the process of getting the bank back on its feet. Our feel in the office is that if you own ABIL shares at the moment, you won't receive anything for them, you will just get a discount on the purchase of "HoldCo" when it lists. So you will have to put money in to realise any benefit from your current shares, and that would be assuming that the share price does not drop on listing day.

The big news for today is the rescue plan announced for ABIL by Gill Markus yesterday evening. As of 16:00 yesterday ABIL went into curatorship and this morning a SENS announcement was released stating that the shares and bonds trading has been suspended on the JSE.

Brett Proctor would say "Oh my word" in only the way that Brett Proctor can say it. Except this delivery has uprooted all of the stumps and rendered the batsman incapable of carrying on, in the same way that I remember a Dolphins batsman once limping out on crutches trying desperately to save a match, methinks or seems to remember that particular fellows surname was Lyle. In this case we are referring to African Bank which released a trading statement that disappointed like no other one of their recent statements could have before. To top it all off, CEO Leon Kirkinis resigned with immediate effect. The fellow has been there for 23 years and was one of the founders of the business, this is not Bradman with tears in his eyes because he could not see the ball, this is limping off after successive ducks in successive matches sadly.

African Bank shares are on a tear this morning, around 20 odd percent up at their best. Sadly 20 odd percent higher means that the share price is a little over 8 Rand, a level where the company raised money not so long ago, towards the end of last year. Sanlam have said publicly that they think ABIL needs to raise between 2 to 3 billion Rand more, which might not sound like a lot, but unfortunately ABIL's market capitalisation was all of 10 billion Rand on Friday. So why is the ABIL price up so much this morning? Well, they have said (not a lot) that they have "entered into negotiations regarding the possible disposal of Ellerine Holdings Limited and its subsidiaries which, if successfully concluded, may have a material effect on the price of the Company's securities."

On Wednesday we received a trading update for the first quarter ending 31 December from African bank. They start the update elaborating on the tough conditions in the economy.

ABIL came out with their full year results on Monday, the same day that the stock went ex-rights. From a results point of view, it looks like they through the kitchen sink at it, and have tried to get all the bad news out the way. I hope that is the case because, I thought they threw the kitchens sink at it earlier in the year.

ABIL released their full year numbers to end September on Monday. And the associated rights started trading with the ordinaries, a reminder for you all, you will get the chance (provided that you owned the ordinaries last Friday) to purchase an extra 84 per 100 held at 8 Rand a share. The ordinary share is trading around 14 ZAR right now and the N shares accordingly are trading at the differential between the price at which the company is raising money (8 ZAR) and the ordinary share right now. 6 Rand, you got that part, 14 minus 8 equals 6. Got it? So for every 100 shares you held on Friday at 18 ZAR a share, you would have 100 ordinary shares at 14 bucks and 84 N's at 6 bucks, an effective value uplift of nearly 6 percent. Again, we have run short of time and space, and WILL get to it tomorrow.

On Friday morning African Investment Bank (ABIL) announced a rights issue, where they would increase their number of shares in issue from 816 million to 1.5 billion. The way the rights issue works is that for every 100 shares that you own by the close of business on the 15 November (next Friday), you will receive the right to buy 84 shares at R8.00. You have three options with the rights, the first option is to buy the rights offer shares for R8.00. The next option is to sell your right/option (n shares) to someone else, and then the third option and the one option that you definitely shouldn't do is to do nothing. If you do nothing, you will not receive the cash for your N shares and you will not receive extra shares.

ABIL is out with a trading update this morning. But that will not be front and centre of shareholders minds. At the same time, the company has announced that they are raising up to 4 billion Rands by way of a rights issue at as of yet an undetermined price. And that is possibly the key to explaining the massive wild swings of the share price this morning. It has been down 10 percent, and it has been up 7 percent. The stock is currently trading a little higher now from the close Friday, up around three and a half percent. The volumes are enormous. Three times higher than the normal volume, which itself has been elevated significantly.

Yesterday we received a SENS announcement from African Bank with the details of a recent Moody's assessment. Although deposit ratings were unchanged the outlook was changed from stable to negative. Fair enough, following the recent write-down the business made a lot less money than was expected in this last half. Ratings agencies have to look at the businesses ability to pay back loans and if the business is less profitable then the risk increases. Here is what Moody's had to say:

Yesterday we saw a great vote of confidence for African Bank. One of the markets main concerns with the stock was African Banks ability to raise money in the bond market after falling out of favour with shareholders. If the market is worried about the prospects of the company then surely bond investors would also be concerned about Abil's ability to pay them back. This has not turned out to be the case.

OK, that is interesting. The story that was doing the rounds yesterday, that the central bank locally is happy that unsecured lending is slowing in South Africa, is pleasing at some levels. Bloomberg ran a short piece yesterday: South Africa Banks Slow Unsecured Loan Growth After Intervention. The trajectory has slowed from 30 percent per annum to 25 percent per annum. But cut away at the same time from a Reuters story at Engineering News to one of the Deputy Reserve Bank governors, Lesetja Kganyago suggests that unsecured lending in South Africa is too small to pose a risk to the banking sector.

Whoa! African Bank has been pummelled today. There is no better word to describe it. Down over 20% as I write this. Results were released this morning which has clearly not provided any more clarity and has encouraged the shorts to only add instead of cover.

The latest African Bank update has really brought matters in the unsecured lending market to a head. In July last year it started becoming apparent that the loan advances had reached a dangerous level. As a percentage of debtors in SA it had grown from 5% in 2007 to 10% in July last year and was contributing 40% of new credit granted at that time.

On Thursday just after the market closed African Bank came out with trading statement which said that the company is expecting earnings to fall by between 25% and 28% relative the comparable 170,4c for the 6 months ending 31 March 2012. This caused the stock to collapse 17.5% on Friday and down again today, 3.7% so far. As one of our core recommended stocks this of course reason for major concern.