A handful of investors in the Media24 Welkom Yizani BBBEE scheme who stood ready to sell when the scheme’s trading platform launched yesterday realised more than 50% capital return before costs from their seven years old investment. The few who managed to sell at R20.00 per share got a 100% return.
You needed to be an early trader for this gain. A 50% capital gain translates to an average of about 7.1% per year capital return and at 100% it adds up to an average of about 14.2% per year gain.
In its first day of trading on an over the counter (OTC) platform, Welkom Yizani saw about 75000 shares traded in 517 deals and with a total value of R1.2 million.
Earlier sellers were selling at levels above R15.00 per share. Then at 16:22 the share price declined to R13.00 and closed at R12.00. There was a deal done at R11.20 just before the close of the trading platform yesterday.
This proved a big disappointment for many of the investors who paid R10.00 per Welkom Yizani share in 2006. Some readers in this platform, ujuh.co.za, were seething with anger. One reader commented: “How can this share’s highest price be R19.00 today.” There were more comments expressing disappointment and showing obvious hope for a bigger capital gain.
These hopes could have been influenced by two factors. The first is the news of sterling performance by Naspers, the facilitator of the Welkom Yizani scheme. The second will be an unfair comparison to the capital delivered by the MTN Zakhele BBBEE scheme which came to market two weeks ago to deliver a 3.5 times capital gain on investment before costs. Investors in the MTN Zakhele scheme went in at R20 per share and the share price was hovering around R90 in the first two days of trading before trading was suspended due to technical glitches of its OTC platform.
The Naspers factor is best represented in comment made by a couple of readers who were screaming a “We was robbed song”. The readers communicated a view to this effect: The level at which Welkom Yizani shares traded in their first day was disappointing when compared to Naspers which has just breached the R1000.00 per share mark, having come from levels below R500 in 2009.
This view confuses the relationship between Welkom Yizani and the JSE listed media giant Naspers. The globalising Naspers is a partner with Welkom Yizani in print biased South African operation Media24. Naspers was left with 85% of Media24 after selling the 15% to Welkom Yizani in 2006 for BEE purpose.
Welkom Yizani does not have a stake at Naspers level but only at Media24 level. The growth reflected in Naspers valuation is largely explained by its non-print and to a large extent non South African operations.
This is clearly represented in the latest financial commentary by Naspers CEO Koos Bekker. “Naspers now earns the majority of its revenues, including associates, offshore instead of in South Africa, and from the internet businesses instead of pay television.”
Welkom Yizani investors also need to factor in the debt in the structure of the scheme. They invested into a share worth about R50.00 in 2006 but paid in R10.00 per Welkom Yizani share. Net Asset Value (assets minus liabilities) of the scheme reflects the high debt balance in the scheme. There is also the fact that Welkom Yizani operates in a largely matured print media industry. While the industry is showing signs of recovery in the latest Media24 financial result, its prospects can never be compared to those of new economy companies like MTN and other businesses in the Naspers stable.
Offcourse there is the fact that, when MTN Group did its BBBEE deal in 2010, it offered a stake at group level. This gave investors in the MTN Zakhele BBBEE scheme exposure to MTN Group foreign ventures. This makes sense given the fact that MTN Group was built on the back of South African support base. If you like you can say MTN Group was built on the back of the ‘blood and sweat’ of South African workers. As such, if there is any cause for protest against the Welkom Yizani scheme, it rests in the decision to keep BBBEE out from Naspers group level. But then Naspers is not alone in this practice.