VENTURES: What's Up for 2009
Recent Western Cape Business News
THE view across our business land-scape looks a lot less hospitable for 2009 with the prolonged fall-out from the global financial crisis likely to leave more than a few potholes on the economic trails in and around the Western Cape.
Let’s start with the positives, though.
Local food producers – especially in the fishing and fruit producing areas – should carry the benefit of a markedly weaker rand on their exports.
Oceana, the Cape’s biggest fishing group, has already expressed confidence for 2009 with strong demand from emerging and developed economies for its range of products.
One operation CBN is watching with some interest is Sekunjalo’s abalone farming effort near Gansbaai. With wild abalone collecting halted, the group has a major advantage in securing lucrative supply contracts in the East.
So far R40 million has been invested by Sekunjalo in a bid to push production from 120 tons to around 250 tons.
Capespan recently delivered bumper interim profits and should continue to perform strongly as the weaker rand enhances its basket of ‘in demand’ fruit like apples, grapes and oranges.
The progress of Swartland based staple foods giant Pioneer will also be interesting to follow. Pioneer’s ventures into food brands has not been terrible successful, and CBN wonders if 2009 will not see a shake-up (or rather rationalisation) of that portfolio.
CBN has also been following the initial successes of former SANS Fibres boss Thys Loubser at wine and brandy producer KWV Limited. Surely KWV will also celebrate the weaker rand, which should enhance margins on its sizeable export production.
Of course, wine and brandy – unlike fish and fruit – may be regarded as a bit of a luxury by more cash-strapped overseas consumers. Hopefully KWV can find a viable price niche, and win market share in the process.
Seeing as we’ve mentioned SANS Fibres, we may as well bring up the rather unpleasant matter of the company shutting up shop.
CBN wonders whether bidders will come forward in the new year to look for bargain bits at SANS? We reckon the PET division should find a buyer in the short term, although the remaining assets could take a while to liquidate.
Talking of sad yarns, the situation at struggling clothing and textile conglomerate Seardel is also worth gauging in 2009. Empowerment group HCI rushed in to underwrite a R300 million rescue rights issue, which was needed to shore up Seardel’s balance sheet after the group’s bankers become a little concerned about debt levels. From what we can garner HCI has ripped through Seardel’s old management structures, initiating several important changes at executive and operational management levels.
While the weaker Rand could curb cheap(er) imports, there’s no doubt HCI –as the largest shareholder - will sweat assets vigorously in 2009. CBN reckons assets will be sold off – probably starting with the Epping-based toy division Prima Toys and then the consumer electronics divisions.
The Cape’s handful of diamond mining groups also look set for a tough 2009. Trans Hex started to show glimmers of hope when the financial crisis whisked away demand for quality stones in the last few months of 2008.
More important, though, is for Parow-based Trans Hex to show more compelling progress at its Angolan operations in 2009.
Kimberley Consolidated Mining, a junior diamond venture that looks under-funded, desperately needs to produce convincing cash flows from its Bo-Karoo mine.
Without decent cash flows KCM will battle to fund its much vaunted exploration and development activities.
Whether marine diamond miner Wealth 4 U will still be around in 2009 is debatable. Production is down to a dribble, and talk is that the group now wants to move its operations from Namaqualand to Namibia.
On the property side, the Cape can probably also expect a quiet year…perhaps even a year of quiet desperation for those companies holding geared real estate portfolios.
One property group where readers will be able to gauge progress everytime they venture into the city centre will be Quantum Property Group.
QPG is developing the property known as ‘15 on Orange’, which is adjacent to the Company Gardens. ‘15 on Orange’ is a rather ambitious mixed-use development in Cape Town, which carries a value close to R1billion and is set for completion early this year. It seems ’15 on Orange’ will represent QPG’s foothold in the Cape market with the group recently indicating a willingness to grow its ‘asset base before August 2010 to generate greater profitability’.
Directors claim ‘15 on Orange’ is progressing on schedule. The development includes a 5-star hotel as well as 12 luxury penthouse apartments, boutique shopping and a 4-storey parking garage.
It all seems a little extravagant under current circumstances, but we shall see… Apparently the penthouse apartments were pre-sold at a ‘substantial gross profit’ for the group of R24 million.
Another development that seems to be gaining traction (finally) is the Cape Town Film Studios.
CBN understands that the preparation of the site is basically complete and construction tenders are in the process of being awarded. The studios could take another 15 months to complete, which means the business should become operational in 2011.
Of course, when market values are down and business confidence gets eroded, the predators come out to play.
One such stalking beast will be new look Stellenbosch investment giant Remgro, which is now considerably lighter since unbundling its tobacco interests.
Remgro has a cash pile worth several billions of rand, and CBN would guess that chairman Johann Rupert would probably encourage the group to be a tad more aggressive in securing new investments.
Another ‘old hand’ to watch under the current conditions is Jannie Mouton of PSG Group. With Christo Wiese joining Mouton at PSG as a major strategic shareholder, there could be some fun and games in 2009.
Local empowerment groups Brimstone, Sekunjalo, HCI and Cape Empowerment Trust may also be tempted into some well priced deals. Sekunjalo recently clinched a deal with the local arm of telecoms giant BT, which could ensure some deal-making momentum into 2009.
Talk is that gaming investment company Grand Parade Investments will be seeking some assets to complement its casino interests – most likely in the field of limited payout machines or online gaming.
The most interesting deals for 2009, however, could come from listed building cladding specialist Mazor. The group has shown a penchant for glass of late, and we suspect a sizeable transaction is looming in early 2009.
One perhaps trivial matter that CBN will be watching with some interest is whether Bellville-based Sanlam will during 2009 surpass its old rival Old Mutual in terms of size. Currently Sanlam is only a few billion rands behind Old Mutual in terms of market value after the latter hit a few nasty bumps in its offshore operations.
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