Retail updates (#411)

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Simon Shares

Day 132 of lockdown and Covid-19, new cases definitely on the decline.

• Pick 'n Pay (JSE code: PIK) update was somewhat of a horror show, but I'm not sure what the market was expecting. It is for the period of lockdown and includes a voluntary retrenchment that cost the company.
• The Shoprite* (JSE code: SHP) on the other hand was for a full year to end June, so only three months of lockdown. Solid update and they're exiting Nigeria.

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• Gold $2,044.
• Goldfields (JSE code: GFI) update says HEPS will almost double and this is for the six months ending June when gold was under $1,800.
• Cashbuild (JSE code: CSB) buying TBC from some R1.1billion. Looks like a decent price and while they could write a cheque they'll use debt. So the question is can management execute on the merger?
• Intu (JSE code: ITU) will be delisted from the JSE Intu has been suspended already as the company is in bankruptcy so the suspension of the listing is just a technicality.
• City Lodge (JSE code: CLH) rights started trading yesterday. The stock lost 75% on perhaps the most dilutive rights issue I have ever seen, 13 new shares at 212c for every one held. Everybody asking me if the should take up their rights? Truthfully you have to or be diluted out of existence. Alternatively, sell the shares and the rights and walk away. The company has a solid balance sheet, aside from the BEE deal. But the lockdown is hurting and the question is if they'll need more money?

City Lodge market cap this morning cR600m, add in R1.2bn from rights issue, take out R800m for costs and BBE deal = R1billion (very rough numbers) ..

'Property͕ plant and equipment' (excluding furniture/equipment) = R2.4billion less R660m debt = R1.74billion

— Simon Brown (@SimonPB) August 5, 2020

• The US CARES act and specifically, the $600 payments has ended. Congress is in talks to extend but so far the two sides seem part apart. One wants to extend the $600 the other to reduce it to $200.
• SAB, Consol Glass and Heineken all responding to the liquor ban by cancelling projects. But are the cancelled or delayed? Are they opex or capex? Is this just a ploy to put pressure on the government? Or is this perhaps a bigger concern about stricter liquor laws post lockdown / pandemic?

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* I hold ungeared positions.

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