Pyramids and profits
Good afternoon {{first_name}},
The good news: we are back to a morning newsletter. The bad news: I don’t trust my website server yet in terms of properly synchronising uploads.
The website itself appears to be clean, but we’ve struggled to actually get new content to work. I keep reminding myself that things can always be worse - for example, I could’ve bought the SpaceX IPO!
For those who prefer to read, a bumper edition of Ghost Bites (covering Wednesday to Friday last week) is now available and seems to be working.
There are a lot of people really enjoying Ghost Bites on YouTube, so use this as an opportunity to check out the latest video. I’m finding that the audiovisual approach gives me ways to explain things in a way that just isn’t as easy in long-form writing.
As I said the other day: never waste a good crisis!
In that spirit, I’m trying something a little different today. I don’t want to lose the readers among you, so I’m including the various Ghost Bites updates in the mailer today. You’ll find them further down.
But first, a word from our sponsor (as they say in the classics). Without brand partners, there would be no Ghost Mail. Thankfully, I’m lucky enough to work with leading South African financial services groups who bring you genuine insights, not irritating adverts.
Perfect example: Reza Fakie of Old Mutual Investment Group.
Latest Ghost Stories podcast
Reza is a quantitative portfolio manager who spends his days building models that take into account various investment factors.
This is where academic research meets the real world in the pursuit of alpha.
In this podcast, he explains how the fund works and what his day-to-day life looks like. Don’t miss it!
As always, the podcast is also available on Apple Podcasts and Spotify
Ghost Bites (Merafe | Mpact | Implats | Vodacom)
Well, here goes. Welcome to this in-mailer edition of Ghost Bites!
Merafe: volumes way down, profits way up?
Merafe closed nearly 5% higher on the day despite releasing a production report that is filled with challenges.
They were down on chrome ore and PGM concentrates. Attributable ferrochrome production was the worst of course, with a precipitous decline from 112kt to 28kt in the six months to June 2026. It’s hard to win when your smelters can’t afford electricity.
There’s hope for the future thanks to the special Eskom tariffs, but there’s also hope for the interim period. HEPS increased by between 55% and 75% for the period. How is that possible?
The company attributes this to higher commodity prices and volumes sold over the period. When results come out on 11 August, they are going to make for interesting reading.
Mpact: when leverage whacks you over the head
It was an unhappy day for Mpact investors. A trading statement for the six months to June 2026 has revealed an expected decrease of between 57.3% and 47.8% in underlying EPS from continuing obligations.
This has been driven by a decrease in EBITDA of just 4%, so that shows you just how much leverage sits in this business. But what does this mean?
Well, the modest decrease in EBITDA turns into a big problem by the time you include higher depreciation (thanks to the completion of the Mkhondo upgrade project) and a 13% increase in net finance costs (also linked to Mkhondo, as interest couldn’t be capitalised to the project anymore).
The good news is that net debt is down from R3.0 billion to R2.6 billion. It’s not much of a silver lining on a day when the stock dropped by 5%, but at least it’s something.
The conflict in Iran did them no favours in this period, with a combination of higher input costs and lower demand as businesses cut back. The agricultural sector, a key customer of Mpact, also struggled with adverse weather conditions.
Performance tends to be weighted towards the second half of the year, so a crummy first half is definitely preferred to a poor second half. The big debate is whether the second half will actually be any better!
Impala Platinum: safety first
Implats is having a tough time. The company has flagged recent serious incidents at the Impala Rustenburg complex, with the decision taken to suspend operations from 24 July until 28 July. This includes a number of targeted interventions around safety.
Naturally, this is going to have an impact on production for the year ending June 2027. An update on this will come in due course.
Vodacom: pyramids and profits
This is firmly an Egyptian story. After my travels to the desert earlier this year, I can confirm that the average Egyptian has two settings: using their car hooter, or using their phone. Or, most terrifyingly, doing so simultaneously.
With Vodacom growing Egyptian service revenue by 32.8% in local currency, things are looking very interesting there. Reported revenue grew by 18.7%, so the currency translation didn’t fully ruin the party. Compared to just 2.0% growth in service revenue in South Africa, it’s clear where the relative growth engine is.
The other segment that must be mentioned is Vodacom International, with normalised revenue growth of 12.1% and reported growth of just 2.3%. Vodacom completed the acquisition of a controlling stake in Safaricom at the end of June, moving from a shareholding of 35% to 55%. They are building out their African business by focusing on less spicy regions than we’ve seen at MTN.
Fibre remains an important investment area in an otherwise mature South African market. Vodacom invested a further R800 million into Maziv to support the completion of the Herotel transaction. Importantly, the prepaid business in South Africa also returned to growth in this quarter.
Importantly, the medium-term targets for EBITDA and operating free cash flow have been upgraded from double-digits to early-teens growth. This is deliberately vague, but it’s a direction of travel that investors will appreciate. I still have several years to go before I can confirm this, but I strongly suspect that early-teens growth is preferred to early-teens children.
The share price closed 2.4% higher. The total return over 12 months is 18%, so Vodacom has been a good play recently!
Nibbles:
Cornél Lodewyks, managing executive of Lancewood, has been promoted to COO at Libstar. It’s always good to see promotions from operating subsidiaries up to group level.
Mustek’s financial year-end will change to March 2027 to align with Novus Holdings as the new controlling shareholder.
More ways to learn and grow
The Finance Ghost plugged in with Capitec
Maurice van Heerden explains his approach: entrepreneurship without excuses. It’s about building a winning culture that rewards performance and self-starters. The results speak for themselves!
Due diligence decoded: inside the modern deal risk process
Once the letter of intent is signed, the real work begins. The Forvis Mazars team joined me recently to explain key due diligence concepts across financial, tax, HR and ESG workstreams.
Global markets update with Shaun Murison
Semiconductor stocks continue to come under pressure in Asia following overnight weakness in the US, which saw the Nasdaq selloff continue. Increased Chinese competition has met capex spend and questions around the sustainability of the AI infrastructure boom.
South Korea's Kospi was down 10% and Japan's Nikkei fell more than 4% this morning.
The tech sector will look to earnings from Apple, Meta, Microsoft and Amazon later this week to further assess hyperscaler spend and the tech sector outlook.
Oil prices have continued to fall on hopes that the US and Iran can make progress in talks to at least pause the war in the Middle East. The dollar is however still showing strength, gaining on an increasingly hawkish outlook for the Fed's monetary path and on safe haven appeal. The stronger dollar is weighing on precious metal prices, which are lower on the day.
The rand is softer and we are expecting a negative open for the JSE All Share Index.
This update is provided by Shaun Murison, Senior Market Analyst at randswiss.com. Connect with him on LinkedIn here and follow him on X here.
Key Indicators:
USD/ZAR R16.78/$ | US 10yr 4.62% | Gold $4,049/oz | Platinum $1,609/oz | Brent Crude $81.77