Jacques Magliolo reports on the latest two firms to come to
Adding to this year’s spate of listings on the Johannesburg Stock Exchange were German chemical giant Hoechst and Eastern Cape-based Sovereign Foods Investments.
The market capitalisation — issued shares multiplied by the share price — amount to R322-million, boosting the R80-billion already added in the last 12 months to the JSE’s overall market capitalisation. In June this stood at
Analysts suggest the increase in the listing of new companies is not altogether positive.
Bruce Krugel, head of industrial research at stockbrokers Mathison & Hollidge, says: “These listings are positive in that they show businessmen believe in the exchange’s capital raising abilities.” However, he adds, a listing surge is usually a precursor to a correction in the market.
“Companies tend to come to the exchange for a listing when the market is top-heavy. They do this to obtain greater income per share issued.”
A look at the number of new and proposed listings in the last six months shows the companies that have come to market are no lightweights. As well as Hoechst and Sovereign, Bell Equipment, Chromecorp, Prestasi, Real Africa Investments and Real Africa Holdings have listed.
Investors have also witnessed the breakup of Johannesburg Consolidated Investments into three new companies, and the split of M-Net and MultiChoice shares.
Aside from possibly signalling a bear run, do these newly listed firms represent real competition for local companies, and will they help improve liquidity?
Consensus in the market is that the listing of these companies will improve competition. Hoechst and Sovereign, for instance, will compete directly with local firms.
Chemicals, oils and plastics company Hoechst SA is controlled by Germany’s Hoechst AG, which has a market capitalisation of R108-billion. This is larger than the combined value of Anglo, De Beers and Minorco. As such, Hoechst cannot be dominated by South African companies.
Frankel Pollak Vinderine industrial analyst Johan Snyman says: “In the chemical sector, Hoechst will compete against AECI, Chemserve and Sentrachem, while on the pharmaceutical side it will compete directly with Adcock Ingram and SA
He adds that Hoechst offers a mixed bag, but investors “can be sure that it will be a fierce competitor in South
Food sector-listed Sovereign is 72 percent owned by Sovereign Food Holdings, with the rest of the shares held by institutions.
This company will now directly compete with food-listed Choice and with Rembrandt-controlled Rainbow Chickens, which operates as an integrated broiler chicken producer and an animal feed miller.
The recent listings will not improve the “liquidity” of the JSE, measured by the value of shares traded as a percentage of the overall value of shares.
These companies have mostly placed their shares in private hands. The JSE’s liquidity is still at a low six percent, compared to the New York Stock Exchange figure of 170 percent a year. Also, the R80-billion increase in the JSE’s market capitalisation is only a 10 percent increase over last year.