Dialling in at the right (earnings) time

DIRECTORS OF COMPANIES listed on the JSE took it easy this week with trades worth only R35m. Even this number is a tad generous as R10,5m worth of trades were options being exercised with the vesting shares then sold.

Three directors at cellphone operator MTN, led by Santie Botha, accounted for a total R8m worth of trades. They took delivery of options awarded back in 2006, under the firm’s incentive programmes, and immediately sold the shares. Botha and her colleagues sold a day after the company released pleasing interim results to June and on the same day the company’s shareholders approved MTN’s latest black economic empowerment deal.

The deal, valued at R8,1bn, offers shares equivalent to 4% of the company’s issued shares to the previously disadvantaged public at an initial cash outlay of 2000c/MTN share. This contrasts nicely to the market value of R122,90 at the time of writing (although beneficiaries will have to wait six years to trade their shares).

Already with a “very high” black ownership at 29%, MTN’s latest empowerment attempt has again avoided the nasty habit of enriching a few black faces (sometimes through outright theft and corruption) by inviting the public to pitch in as little as R2 000 for their shares and stating clearly that allocation preference will be biased towards the bottom pile in terms of subscribed value. Those who have been following MTN’s fortunes in the last 16 years of its being would have expected that.

In the top five of the JSE by market capitalisation, MTN is headed by two black men who have never won a Government tender to advance in business (and that’s not to say their political stature hasn’t helped them in business). Due to its history of ownership by Government (through Telkom), MTN’s major rival Vodacom has been the cellphone provider of choice for Government departments and almost all State-owned companies. Trade unions only threatened to switch to other cellphone providers in protest when Vodacom found its way to the market on its own last year. But CE Phuthuma Nhleko and chairman Cyril Ramaphosa and their teams quietly went on with the business of building a multi-national empire firmly rooted in its home market and empowerment origins.

The previously disadvantaged shareholders are also dialling in at the right time in terms of earnings and dividend prospects (after paying off the resultant estimated R5bn debt). “It’s MTN’s intention to increase its total annual dividend payout ratio to 40% of the full year’s adjusted HEPS,” said the company when announcing a 151c/share interim dividend. That came about as a realisation that major expansion opportunities may have been exhausted, especially with cellphone operators having to navigate tricky state interests when negotiating deals across borders. Although limiting growth prospects, the higher dividend payouts will hasten the repayment of the R5bn debt and deliver returns for the BEE beneficiaries.

Elsewhere, Quantam Property Group executive director Gary Neil Shaff has sold 1,4m of his shares in the group while chairman Chaim Cohen bought 1,9m shares at the same 144c/share that Shaff was happy to accept for his shares.

At short-term insurance company Indequity, non-executive chairman Chris Meyer has again – for the umpteenth time since July – sold shares. This time he sold 250 000 shares at 134c/share. Meyer was a buyer for most of the year at 100c/share and less.