SIMON BROWN: I’m chatting with Anthony Clark. You’ll discover him on Twitter and Small Talk Daily. Of course the president on Monday night gave plenty of speak round energy technology. Frankly, the story sounds nice. The execution is what’s going to matter.
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Anthony, I admire your time as we speak. There are a few shares available on the market [that would be affected by this move]. We had been chatting earlier than we hit ‘record’. ARB could be certainly one of them, however Sabcap owns that. There’s Reunert. Even Renergen might benefit. But the one that I’ve been noticing is Ellies. The inventory hasn’t moved, however definitely they’ve form of pivoted into photo voltaic.
ANTHONY CLARK: Hi Simon. Yes, Ellies is a really fascinating inventory. For many, a few years, the corporate rode excessive on the final wave of loadshedding. I believe the market forgets going again between 2010 and 2013, the place Eskom was really paying corporations to exit to your houses to put in low-energy mild bulbs, blankets in your geysers, and so forth. Ellies made a substantial amount of cash on that preliminary initiative. When that resulted in 2013, the share worth principally fell off a cliff. I used to be my notes earlier than we got here on air and the height of Ellies was April, 2013, at R9.40. It received all the way down to a low of about three or 4 cents. It’s now buying and selling at 21 cents. So it’s a typical penny share.
I believe the fascinating factor with Ellies, as you appropriately say, is it’s at all times repositioning itself to try to reap the benefits of a really tough setting. They’ve gone by DStv, they went for company lighting. At one level they had been making some huge cash from turbines, and so they’ve now flipped as soon as once more to do form of what I might name house automation, home-streaming methods and naturally, as you appropriately talked about, different energy and photo voltaic.
SIMON BROWN: It’s going to be a protracted street for them, though I see them once I go into a number of the {hardware} shops – they’ve received area there. So they’ve received the area, and I think about they’ve received some suppliers, however [it’s a] lengthy street again into the minds of buyers. As you say, a inventory sitting at 20 cents as soon as was the darling of the JSE.
ANTHONY CLARK: Yes. The concern I’ve with Ellies is as a penny share it’s going to be extremely tough for the institutional market to ever take the corporate critically once more with a market worth proper now, as I look, at R161 million. I used to be their final interim outcomes steadiness sheet, and so they have completely no money of their steadiness sheet. They have R119 million of debt and R187 million in stock.
Now, in the event that they needed to all of a sudden increase cash to try to increase into a brand new space of other energy, solar energy or any of the brand new applied sciences – which we all know shoppers on this nation will need, to negate Eskom’s issues – the place are they going to seek out the cash from to truly roll up this initiative? They can’t increase cash through an fairness placement as a result of the share worth has bombed out. Standard Bank has been propping them up for years. The present rate of interest is Jibar plus 4.5%. Who goes to present them cash to truly roll up this new initiative?
So my concern with Ellies is it has a beautiful little footprint, a reputation that all people is aware of as a result of all of us have their distant blasters and extension leads, and so forth, however I can not see the corporate in its present kind having adequate monetary assets to truly transfer or migrate into a brand new space.
What it wants, excuse the pun, is slightly mild fairy to come back in, give it some cash, use the identify, use its distribution community, use its installers to say ‘You know what, we’ve to put in DStv. Let’s migrate. Perhaps we’ll set up a photo voltaic panel for you.’ That’ll save money and time, which Ellies at the moment doesn’t have.
SIMON BROWN: Yes. I take your level on that. Reunert clearly has the cable division. I’ve chatted with them earlier than. But then Sabcap (Sabvest Capital) with Chris Seabrooke, not too long ago took out ARB, and ARB is an apparent winner right here. Sabcap is a inventory that I do know that you’re a fan of.
ANTHONY CLARK: Yes, I have to say Christopher Seabrooke couldn’t have foreseen the president final evening fully deregulating the unbiased energy market. But the transaction that Sabcap did, shopping for up an organization with the household who personal ARB Holdings, and naturally Masimong, the black empowerment firm run by Mike Teke, now appears to be a particularly astute deal. From reminiscence they’ve a look-through stake of slightly below 21%. When I spoke to Chris Seabrooke earlier than he went to Mykonos, he mentioned the corporate was performing fairly nicely. And I believe the information popping out in a single day on the potential for cabling and connectivity going ahead, as everybody rushes out to place in photo voltaic panels, inverters, and so forth, I believe will actually place ARB Holdings very, very nicely.
So I believe, as soon as once more, for no fault of his personal, Seabrooke has as soon as once more landed a really opportune little gem of a enterprise [in ARB] that absolutely will tick into earnings over the following couple of years.
SIMON BROWN: Yes. He is a capital allocator of absolute notice.
A fast final one is Renergen. I really haven’t been down there, however I believe you’ve been down because the January journey. Phase one might be the massive story, however there could possibly be potential right here. They’ve received all that gasoline. Every time they poke a gap in Virginia within the Free State, they only discover extra gasoline.
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ANTHONY CLARK: You are spot on. I used to be there actually three weeks in the past with the CEO Stef (Stefano) Marani. The plant is principally going by its check operation. Two of the websites had been really operational and so they intend to in all probability change on the gasoline on the finish of this month to start out producing liquid pure gasoline and helium.
But part two can be materially bigger. Then they’ll be producing or producing 800 tonnes of gasoline a day and 5 tonnes of helium. Given that that web site is on one of many largest identified gasoline deposits on this planet, it has potential to increase.
One wouldn’t be remiss in saying that there may be probably alternative for Renergen – or ought to I say a 3rd occasion – contracted to come back in, construct a gasoline plant on that web site, faucet the gasoline that’s within the shallow floor and begin producing electrical energy to feed again into the grid.
I might think about that, given the deregulation of the market yesterday, any financer price his salt, be it’s it domestically or internationally, should be chomping on the bit, saying, ‘Here we are, there’s an amazing gasoline deposit within the Free State, we will hook up with the grid and we will have peak energy obtainable on the flip of the button’. So I might think about in the end Renergen will in all probability provide some very giant portions of gasoline to an unbiased energy producer who may construct an operation, one would think about, very close to its gasoline plant in Virginia within the Free State. It looks like a pure factor to do.
SIMON BROWN: You raised two factors I hadn’t considered there. A 3rd occasion doing it, and naturally they’d put it proper subsequent door, put it the place the gasoline is. You don’t should then pipe that gasoline a whole bunch of miles.
Anthony Clark, Small Talk Daily on the Twitters, I at all times admire the insights.
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