Thursday, October 22, 2020

Sefalana Holdings goes for share split to jerk-up liquidity

Sefalana Holdings, the milling and wholesale company, has sounded warning bells to the market about its intended share split aimed at improving liquidity and giving retail investors an opportunity to be plugged onto the financial markets.

Sources said late last week that the company is proposing a share split of 10 to 1, which is expected to be approved by the AGM at the end of this month in a bid to improve its liquidity.
The move comes at a time when its share price has been enjoying a dramatic good run between July and September this year when it rose 62 percent to stabilize, at 2250 thebe ÔÇô powered by sterling financial results to end of April this year.

The giant leaps in share prices started on July 12, when it traded at 1400 thebe, and on July 26 when it notched up to 1500 thebe before shooting up to 2050 thebe on August 1, this year with over 100,100 shares exchanging hands in one day.
It further pushed ahead on August 14 to 2100 thebe before going through 2300 thebe and slightly moderating on September 27 when it shed 50 thebe to stabilize at 2250 thebe.

The movements were sparked by the financial results published on July 30 this year, as turnover rose to P 70.6 million with net profit of P 33.7 million against P 9.1 million in the previous year.

The results, which were strengthened by bold announcement of massive acquisitions, including the upping of its shareholding from 40 percent in one of its troubled subsidiaries, Metsef, were largely in line with the market expectations.
“The directors are confident that the group can sustain the current profitability but the growth is only likely to come from new acquisitions and expansions. Plans are in hand to expand property portfolio, investigations are being made into the return into the milling industry and the controlling stake in Metsef is under debate,” the company said at the time of publishing the results.

The acquisition of its loss-making Metsef is most likely to the bickering between its shareholders, namely Sefalana Holdings and Frasmet of South Africa. The two parties have being engaged in a long running boardroom battle, which ultimately reached the High Court, as they quarrel over the management agreement. The case is due again in December this year when it is expected to be finalised.

The company’s good results were driven by its darling Foods Botswana and better operational cost containment which made last year’s results, against this year’s, to look like chalk and cheese. And in August this year, Foods Botswana won another government contract for the supply of sorghum soya valued at P 15.8 million.

Sources pointed out that the proposed share split driven by Foods Botswana, mainly through and a number of government contract, such as Tsabana, will be taken to AGM, which is expected at the end of this month. The share split ratio is expected to be on the ratio of 10 to 1, which will allow small investors to enter at a price of around 225 thebe once it is approved.

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