Research archive for BVT

Bidvest, Adcock and CFR, it is not that complicated anymore. OK, is the Bidvest slash CIH consortium reaching their goal of getting 34.5 percent of the shareholders of Adcock agreeing to sell to them, rather than the Chileans in the form of CFR Pharmaceuticals another dose of Brian Joffe brilliance, or sensible shareholders in the end? Possibly all of those things, Joffe has been at the helm of Bidvest since he founded the business in 1988. When you hear Brian Joffe talk, he sounds more like a doer rather than someone who attended the finest colleges and has a hot potato in his mouth. A straight talker, not afraid of prickly conversation, when it comes to decisions around businesses. It is simply business, that is all that it is. And he saw an opportunity here, thinks that his business, Bidvest and CIH (Community Investment Holdings) can do a better job than the current management crop at Adcock Ingram.

Adcock, CFR and Bidvest. Adcock obviously are scrambling here to indicate to their shareholders, which include the PIC and Bidvest (26 odd percent between them) that the CFR deal is best. The Adcock release from yesterday, this part is probably the most important:

Why would Bidvest want to buy Adcock? Or even a portion thereof? The company segments their business into four distinct operations, South Africa, Namibia, Foodservice and Bidvest corporate. The last one is where I presume the Adcock stake would appear and we discussed briefly in this office that perhaps there is a change of direction here. The business of automobiles, cables and associated services, banking and insurance, freight and storage services, manufacturing and trading businesses, office furniture and equipment, hospitality industry services and equipment, outsourced corporate services, travel management and the big foodservice businesses all tie up into a large diversified business that is centrally managed.

Things seem to be getting heated between Bidvest and the Adcock Ingram board. As I am sure you are aware, Bidvest made an offer on the 22nd of March to Purchase 60% of the shares in Issue, half for cash the other half for Bidvest shares. Adcock then fired back on Tuesday 2 April stating that the offer had no firm intention and that Bidvest had not engaged with the board before making the offer public which was the usual practice. This means basically that the board will not respond to the offer because certain legal requirements have not been met.

In case you missed it, perhaps you took the day off like I did on Friday, Bidvest have done something cheeky and potentially opportunistic. The official announcement came Friday, joint cautionary announcement: "Bidvest Shareholders are advised that Bidvest has today submitted a firm intention letter ("the Letter") to the Board of Directors of Adcock Ingram Holdings Limited ("Adcock Ingram") in terms of which Bidvest proposes to acquire 60% of the issued share capital of Adcock Ingram from its shareholders." Wow. Why I say cheeky is that the timing seems good, from the part of Bidvest. Adcock has struggled for the better part of five years since having been unbundled from Tiger Brands.

This morning we have half year numbers to December 2012 from Bidvest, the listed company that we are closest to. And by that I mean if I lean a whole lot forward in my desk and look right, I can see their stairwell. Byron has a slightly better view of the back entrance to Bidvest. That is what I mean, closest to. Have we seen Brian Joffe? Yes, a few times. In fact, even outside on the street, admiring a motor vehicle, he has a weakness for that, but we all have our vices. Chocolate, food and the like. Brian Joffe has been called the Warren Buffett of South Africa, I suppose because of his style. I have heard this said before, but the suggestion is that 10 Brian Joffes could create over 1 million jobs with this entrepreneurial approach. Huh? Well, since founding Bid Corporation in 1988, listing the business in 1989. Those were dark days for South Africa back then, those were really dark days. But, the man recognized that people need services and according to the Bidvest website the first two acquisitions were Chipkins and then Sea World. And how time flies. 25 years later, the whole business is worth 78.7 billion Rands. Around 8.65 billion Dollars market capitalisation.

Yesterday we had another trading update from a big recommended stock, Bidvest. And it sure was a nice surprise. But, like the Massmart one, there were lots of moving parts. You see, last year they sold a stake in Mumbai International Airport which resulted in an abnormal profit of R399 million. That means that the last comparative period has an abnormally high base.

Bidvest have been very active over the last few weeks. Well I say last few weeks but these deals have obviously been discussed and evaluated in meeting rooms for months. Besides that point, the company has made two announcements indicating intentions to buy two separate companies.

Bidvest have released results for the full year to end June this morning. They look decent enough in this "challenging" environment. The results were pretty much telegraphed in the trading statement, which we wrote up over ten days ago: Bidvest trading update. Here are the numbers that you need to know. Revenue increased 12.7 percent to 133.5 billion Rands, the companies trading profits increased to 7 billion Rands, normalised HEPS clocked 1352.3 ZA cents per share. Perhaps the biggest surprise to the upside is a 29.6 percent increase in the dividend to 622 cents per share. Perhaps this is just to take into consideration the change in dividend taxation. You, the shareholder will get 290.7 cents per share for the second half of the year, 255 cents was paid for the final dividend last year.

Bidvest released a trading statement yesterday afternoon which said that for the full year to June investors should expect a jump in earnings of between 26 to 30 percent when compared to the corresponding numbers. This includes the part sale of a stake in the Mumbai airport, which netted the group 399.1 million Rands. EPS last year clocked 1110.5 cents, which means that the range should be between 1399 to 1444 cents. HEPS for the year to end June 2011 were 1157.4 cents, this increase puts the range at around 1458 to 1504 cents per share. The second half is roughly 3 percent better than the first half. At over 200 Rands, and having nearly trebled from their lows during the crisis times of 2008/2009 is the stock starting to look a little stretched? I suspect not, and further value could be unlocked with a big bang exit from Brian Joffe in the form of Bidvest restructuring.

This time of the year it is difficult to get a complete handle and requires some serious extra reading (on top of the extra reading) to be on top of company results and trading updates. I am going to look at results of Bidvest this morning, they have released their interim numbers as folks continue to fight their way through traffic. Humans really need to become more innovative, and manage their time better. That will come in the era of the driverless motor vehicle. Perhaps Bidvest will even sell them.

Bidvest. This is a company that I feel very close to. No wait, that is because their back stairwell is around 10 metres from where I sit daily, no wonder I feel close to this company. The company released a trading update this morning for the six months to end December. "... headline earnings per share are expected to be between 35% and 40% higher than the results of the comparative period (December 31 2010: 539.8 cents per share) after accounting for the profit on the partial sale of the investment in Mumbai International Airport Private Limited, as announced on Sens on October 19 2011."

The guys next door to us reported results for the full year to end June 2011. The guys next door are the Bidvest Group. I wonder if that sign is still up in their lobby that read: "We refuse to participate in the recession". Yes, me neither!! Jump straight into the numbers like I did in the pool yesterday (it was incredibly cold!!). Revenue increased nearly 8 percent to 118.5 billion ZAR, trading profit increased to 6.1 billion ZAR (up 9.1 percent) which translated into an 8.2 percent increase in HEPS to 1157 (point four) cents per share. And a dividend of 480 cents per share for the full year, . 143.49 ZAR is where the price closed on Friday, so pure vanilla simple valuations sees the stock trade on a yield of 3.3 percent and on a price to earnings ratio of 12.4 times. Not that stretched really. But there has been recent disappointment by the short term punters as the Bidvest board abandoned approaches to unbundle the food services business.

Drop the caution folks, it is no longer required. That is what Bidvest are telling the market this morning, you no longer need to exercise caution when dealing in the company's shares. Of course the announcement is related to their Foodservice business. Here is a copy paste from the official release:

Bidvest was the big (major) news yesterday. Now the news struck us around midday, the stock spiked and then closed at 162 ZAR, up nearly five percent on the day. And the news is (drumroll): "Shareholders are advised that Bidvest has recently received various unsolicited proposals relating to its Foodservice Business." The first part that is most interesting is the word "various" that means more than one. And then the word "unsolicited" which basically means that someone else initiated it. So, the way I read it, a couple or a few investment banks or major shareholders have told the company to move-it-move-it (Madagascar style).