Mondi Paper is likely to apply for a JSE listing this month — but nobody’s talking, reports Jacques Magliolo
Amic-controlled Mondi Paper is to apply to the Johannesburg Stock Exchange for a listing within the next month, reliable industry sources from within the company confirmed this week.
Speaking on behalf of Mondi company directors, who are “still on leave,” public affairs manager Zelda Jonker said: “Of course, it is up to the Amic board to decide whether they actually want to list a subsidiary and in what manner, but we can confirm that there are strong rumours within Mondi that we will be listed this year.” No information is forthcoming as to the timing and manner of the listing, but these are, after all, details which will be unveiled at a later stage.
Not unexpectedly, Amic company secretary and press agent Mike Nayler was not available for comment. Nor has the JSE been approached. A spokesman for the JSE listings department says that they “haven’t received a formal application from Mondi, but it doesn’t mean that the company isn’t busy preparing the way for such a listing”.
Analysts confirm that 1995 would be the best time for the company to list. EW Balderson head of research at Arthur Thompson says: “The pulp and paper commodity cycle has just begun and it would be the right time for a company in this field to list.” In addition to an upswing in the cycle, experts believe that South Africa’s desperate need to implement its reconstruction and development programme means that there will be a focus on housing, education and health care facilities.
A portfolio manager says: “Infrastructural development related to these areas of the RDP will boost demand for Mondi’s timber products.” Experts say that Mondi is the “only timber choice” when it comes to benefiting from the RDP. Not only does the company operate the largest sawmill in South Africa, but it already has the largest share in education papers.
Once investors and speculators alike smell a possible new listing, they immediately demand the answer to three questions: will it be a profitable and sound investment, when will the listing take place and how will it list? It is in this sphere that analysts differ in their opinions.
The first question is bluntly answered by one analyst: “Mondi is the same dog as Sappi.” In contrast, another believes that “the company is an excellent short-term buy”. He says Mondi’s share price will perform the same as Sappi’s did last year.
Sappi’s share price started 1994 on 2 900 cents and is now trading at 7 200 cents, which means that investors saw the value of their investments increase by a phenomenal 148 percent.
Thompson more objectively sums it up this way: “Pulp and paper companies are too linked to the commodity cycle to be sound long-term investments, but in the short term these shares perform dramatically.” And as the cycle is unlikely to turn down before 1999, it certainly bodes well for potential investors.
It seems possible that the company will list within the first half of this year. One Sappi analyst said: “In the past few years Mondi has been telling the investment community that it intends to list, but particularly in the last few months when the cycle has shown signs of an upturn”.
The JSE listings department says that they have a “48- hour document turnaround,” so the amount of time it will take for the formal paper work to “work through the system” is dependent on the company’s sponsoring stockbroker.
How will the company list? Amic controls 53 percent of Mondi’s shares, which means that they have the final say as to whether, when or how it will list Mondi. At present there are 77-million Mondi ordinary shares in issue and it is possible that Amic will retain a portion of shares, say 10 percent, and float the remainder to the public.
This would release 33-million shares to the public. Alternatively, Amic could place these shares with financial institutions. The manner of the listing is entirely up to them.
Mondi is a fully integrated forest products business employing some 16 700 people and comprising six divisions. Mondi Forests owns or manages extensive timber plantations, Mondi Paper produces newsprint and Mondi Craft produces a variety of pulp.
Mondi Cartonboard manufactures a diverse range of board for industry; Mondi Timber products operates 11 sawmills and other manufacturing facilities which produce SAB- graded lumber and a wide range of timber products; and its 60 percent Paperlink division operates as a paper and board merchant supplying the printing and allied industries.