The share price of Welkom Yizani, the black economic empowerment (BEE) shares of Media24, has shot up over the past few days to hit a high of R25.00 per share. The share has since eased back somewhat to trade around R19.50 but is still far above the R10.00 level at which it was trapped for a long time. By Ujuh
The upward movement will be a huge relieve to the multitudes of initial investors in the BEE scheme. However many had already lost patience and exited the investment at a loss.
Welkom Yizani shares had been trapped at R10.00 per share for more than a year which caused much consternation from initial investors. These investors paid in a subscription of R10.00 per share at the establishment of the scheme in 2006. Then the scheme’s shares were listed for trading on an over the counter platform on the 9th of December 2013. The shares were stuck at R10.00 for more than a year and at one point sunk to R3.50.
This meant that 100 000 initial investors in Welkom Yizani were losing money. Many did sell at R10 and below out of frustration as captured in this piece.
The source of the share price depression seemed to be a combination two key considerations; poor liquidity which could have been a function of a perception of poor commercial prospects for the underlying asset.
Welkom Yizani holds 15% stake in Media24, a print media dominated operation within the Naspers stable.
Media24 has not had the best of times in the past few years as profitability suffered. This was largely a result of dwindling advertising revenue. This picture did not bode well for the heavily indebted BEE scheme.
Media24 is one of the largest media companies in the country with huge exposure to the struggling print media. Its assets include well known titles like City Press, Daily Sun, Beeld, Rapport and a host of knock and drops and magazines and printing assets.
In its latest financial results Media24 reported almost flat movement in revenue whilst operating profit declined from R233m to R85m during the six months ended September. Explaining this performance the group said “In the past six months Media24 accelerated its investment in key growth areas, with a particular focus on ecommerce, digital initiatives and expansion projects in the rest of Africa. Our print businesses continued to experience tough trading conditions as a result of the weakening economy and structural changes to the media industry.”
The partial unbundling of a printing operation from Media24 into a separately JSE listed operation, still controlled by Media24, may have caused some excitement. The printing operation titled Paarl Media is set be listed on the JSE under the name Novus Holdings. The move might realise some cash for Naspers Yizani.
When the Welkom Yizani shares were listed in 2013, investment analysts assigned a to the BEE shares a met asset value (NAV) of about R25 per share. That NAV should have advanced further after dilution of debt in the past 12 months.