- Hosken Consolidated Investments has reported a strong surge recovery in its results for the financial year until the end of March on Friday.
- The results followed a week of confusion, where the group released two wildly different profit updates within a day of each other.
- HCI's share price has jumped more than 175% over the past year, amid speculation about the size of an oil find in Namibia.
Following a week of confusion – where the group released two wildly different profit updates within a day of each other – Hosken Consolidated Investments (HCI) reported strong results on Friday.
Its income for the year to end-March, increased by 36% to R19.1 billion, while its headline profit per share jumped to R13.21 - up from R2.87 in the previous financial year. Due to the impact of the Covid-19 pandemic on the group's operations and the requirement to preserve cash resources, the board, however, decided not to declare a final dividend.
HCI's major shareholder is the South African Clothing and Textile Workers Union. The group's investments include in eMedia, Tsogo Sun, VSlots, and Deneb.
Many of the company’s underlying operations rebounded sharply as normality started to return to post-pandemic day-to-day life, according to analyst Anthony Clark of Small Talk Daily Research.
"We saw gaming revenue up sharply, hotels and travel, transport and media all performing extremely well, including a nice contribution from a coal operation," Clark said
In addition to other oil and gas exploration holdings, HCI also has an indirect stake in an oil find block off the Namibian coast being developed by, among others, Total.
According to Clark, it is this option the group has that is keeping its share price up.
"If it did not have the oil find, its share price would be fundamentally overpriced," Clark said. HCI’s share price has jumped 175% over the past year.
"I have seen reports flying around from a number of independent oil consultants potentially saying that the [Namibia offshore] stake alone could be worth between R10 billion and R14 billion, depending on how you value a stake of something that is in the ground and has yet to come to production. Production could take 10 years and could cost billions of dollars, which I don't believe HCI will participate in as it simply can't afford it," says Clark.
"So, the market believes HCI might flip its stake and sell - and that is why the share price is running so hard. It is not running because of the underlying assets, which are known, like Tsogo Sun, eMedia, and Deneb. It is running because of the optionality of the oil assets. I would like management at some point to enlighten the market on what is going on with that potentially lucrative optionality on the oil find off the coast of Namibia."
'Shenanigans'
On Wednesday this week, HCI issued a trading update on SENS, advising that the company would report headline earnings per share of more than 20% (345.2 cents), compared to headline earnings of 287.7 per share, for the year ended 31 March 2021.
But on Thursday, HCI said it expected headline earnings per share of between R12.92 and R13.50.
This was followed by a trading update on Friday seemingly cancelling the updated trading statement.
Clark finds what he calls "these shenanigans the last couple of days" interesting.
The update on Thursday came out after the market closed. "The share price for HCI started to run [late afternoon] so clearly somebody was aware that there was a good trading update coming and possibly even a revision, because the stock closed the day up around 7%," says Clark. "This morning we had a cancellation and a re-issuance [trade statements] and the share price ran again. Then, surprisingly, results come out with no dividend."
Andre Visser, director of issuer regulation at the JSE, told Fin24 it is engaging the company via its sponsor about these trading statements. Fin24 also reached out to HCI for comment, but by the time of publication nothing had been received yet.
By mid-afternoon on Friday the HCI share price was down 5.44% at R17.