TAKING STOCK - JSE MAGAZINE

TAKING STOCK

Last year saw the biggest jump in equity sales by SA companies on the JSE in nearly a decade

TAKING STOCK

For the JSE, 2014 was a bumper year. According to Bloomberg, the bourse saw an impressive increase of 58% in the value of equity raised, to a total of R147 billion. The last time the exchange performed this well was 2005, it said.

According to the JSE’s Donna Oosthuyse, Director: Capital Markets, who was interviewed by Bloomberg in December 2014, many companies raised capital on the bourse to do acquisitions in other markets, particularly as the rate of economic growth in SA was below what local corporates were spotting in other markets around the continent.

‘Real estate is an industry that is popular with investors. It gets good coverage in terms of analyst support,’ she said.

The FTSE/JSE SA Listed Property Index gained 18% last year, compared to an 8% increase in the FTSE/JSE Africa All Share Index. Property businesses led the number of initial public offerings after the JSE changed its listing requirements in 2014 to allow for real estate investment trusts. By December, when Pivotal Fund and Acsion were the final two companies to list for the year, the combined market value of the JSE’s 51 listed real-estate firms had increased to about R544 billion.

Bloomberg said that last year, other local corporates such as food/clothing retailer Woolworths and furniture/household goods retailer Steinhoff Holdings raised capital to expand beyond Africa.

The bourse saw an impressive increase of 58% in the value of equity raised. The last time the exchange performed this well was 2005

Woolworths, for example, raised some R10 billion in a bid to buy David Jones, an Australian department store chain.

Meanwhile, in August 2014, Steinhoff Holdings sold R18.2 billion of stock as part of its plan to extend its footprint across Africa, Poland and Australia. Three months later, it bought Pepkor Holdings. At the same time, the retailer acquired Australia’s oldest department store, Best&Less, in a deal totalling R62.8 billion for all new assets.

Oosthuyse told Bloomberg that the outlook for further listings and capital raising depended on what happened with US interest rates, as foreigners made up 30% to 40% of trade on the JSE.

‘We still do have a pipeline of listings to come. A lot of it is going to depend on where the values are in the exchange and what the general economic sentiment is, and how corporate leaders are looking at their own growth prospects,’ she said.

At its last meeting in December 2014, the US Federal Reserve kept interest rates unchanged but indicated that the cost of borrowing was likely to increase some time this year.

The IMF is projecting growth of about 6% in sub-Saharan Africa (not including SA), in 2015. Oosthuyse was quoted as saying that the JSE was in line to ‘attract some interest’ from renewable energy companies as a result of the country wanting to triple electricity production from clean sources.

‘The whole renewable energy space and the energy space in general might be an interesting area for listings. We’ve had a lot of companies and advisors approach us to talk about the ways that renewable energy equity investors can exit through listing or raise additional capital through a listing.’

According to some experts, the country’s capability to generate sufficient electricity is one of the main reasons for its restrained economic growth of around 1.4%, compared to some other African economies – a scenario that also partly drives the need for local corporates to expand into parts of the rest of Africa.

Oosthuyse told Bloomberg that the JSE has a large pool of liquidity with R8 trillion in assets of non-bank financial institutions – almost twice the size of the assets of the banks.

By Louise Brougham-Cook
Image: Gallo/GettyImages