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Market Watch: Bumpy road ahead

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JSE-listed companies: FM Edition:

Anything that adventurous bunch at investment house PSG is involved in is worth watching. So when empowerment pioneer Patrice Motsepe’s African Rainbow Capital (ARC) joins PSG as a significant shareholder in a venture, then it’s time to pay attention.

The company in question is services specialist CSG Holdings — where PSG and ARC now speak for about 25% of the issued shares. CSG’s traditional staffing solutions and its industrial/mining services divisions remain chunky operational elements — but the latest interim results show the success it is having in broadening its facilities management (FM) division.

The FM division is now the largest in CSG, after acquisitions in the catering, cleaning and security sectors. The half-year report showed the division’s revenue up 88% to R392m, with operating profit close to R29m.

This means the FM division accounted for 40% of total operating profits. With margins on this (mostly) annuity business being held at more than 7%, there will surely be further efforts to bulk up this segment.

Yes, CSG is not yet a Bidvest. But there’s value at current levels, and the chances of CSG posting full-year earnings of about 20c/share seems a reasonable expectation, along with a fairly generous dividend payout.

PSG Asset Management has snapped up a 10% stake in mining services business Extract (left over after enX bought out Eqstra). It would be a vote of confidence if PSG Asset Management took a slug of CSG as well. Maybe PSG has longer-term plans?

Little reward

Tradehold, the investment company controlled by Christo Wiese, is an odd beast, mixing UK real estate with African and SA property development, as well as financial services. Glancing at the latest results it seems ludicrous that the promising UK-based specialist lending business, Reward, is buried beneath (dare we say it) boring real estate.

Though Tradehold warned that the uncertainty created among small business owners following the UK’s "Brexit" had led to a marked drop in the small to medium enterprises confidence index, Reward performed admirably, even with additional competition in small business lending. It managed to post a pretax net profit of £1.3m (about R23m) off a turnover of £3.7million (R65m).

Reward is clearly a great little business. Will there be long-term plans to emancipate it from Tradehold via a separate listing on the London Stock Exchange’s AIM?

Some local lending specialists may well be enamoured of Reward’s viable offshore niche.

Diamonds and (T)rust(co)

There’s been an acerbic exchange between those who question the strategies of Namibian investment company Trustco, and founder and CEO Quinton van Rooyen. Trustco raised eyebrows when it proposed acquiring R3.6bn worth of diamond exploration and gem polishing assets from Van Rooyen in a related-party, paper-funded transaction (where settlement is based on eye-popping profit forecasts).

Then there was the share buy-back agreement with Buckley Capital, where Trustco agreed to buy back the US investor’s large shareholding at a later stage at a huge premium to the recent share price trading band. Van Rooyen, on Twitter, dismissed the scepticism, suggesting that Trustco "can pull most things off, as you know".

It seems one key Trustco executive, FD Ryan McDougall, is not hanging around for the great "pull off".

McDougall, who was appointed FD in early 2013, will resign at the end of December "for personal reasons". Interestingly, at this critical juncture Trustco will not look outside for another FD, and Marizanne van Niekerk, the CFO of Trustco’s investment segment, will take up the FD post.