Bidvest’s fight for fish and business survival

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Windhoek

Trouble for the Bidvest Namibia group continues as analysts this week erased 32.98 percent of Bidvest’s NSX-listed stock price value in their books, also warning stockholders that it could be a good idea to sell the Bidvest stock at this point in time.

This is while Bidvest continues its legal fight with government, where its crown jewel fishing company Namsov is suing the Ministry of Fisheries and Marine Resources for a bigger horse mackerel quota than it got last year.

Until now the bulk of Bidvest’s profits had come from the fishing sector, where it owns various fishing and fishing venture companies. Bidvest also owns stevedoring and fish and marine support businesses, in addition to commercial enterprises that now sustain the profit stream.

This week Bidvest posted a warning that its financial results for the year to 30 June 2015 would reflect a decline of between 10 percent and 11 percent in headline earnings – “primarily from the significantly lower horse mackerel quota allocation [to] Namsov and its joint venture partners with the second quota allocation for the 2014 calendar year.” The results for 2015 are expected to be released on August 25.

This prompted analysts to warn that such declines in profits and headline earnings per share are set to continue for years to come, which is bad news for institutional shareholders such as the Government Institutions Pension Fund (GIPF), which owns 11 percent shareholding in Bidvest in the form of government civil servants’ pension funds.

Other private pension and provident funds also own 11 percent, while individual public shareholders own 13 percent of Bidvest stock on the NSX, which is worth N$2.223 billion.

Simonis Storm Securities, a local stock brokerage and market research firm, effectively cast doubt on the sustainability of Bidvest’s business model and its stock that currently trades at N$10.49 per share. “Our adjusted valuation of the existing businesses is now 703 cents (N$7.03) per share and we maintain our sell rating,” says James Cumming, the Head of Research at Simonis Storm Securities.

“Dividends are most likely to remain unchanged for the next few years due to tough business conditions. We don’t expect things to get easier for Bidfish,” says Cumming.

The earnings per share (EPS) are projected to be up by between 17 percent and 19 percent, but this is purely because of a profit that Bidvest got from selling off one of its fishing vessels.

Bidvest CEO Sebby Kankondi did not respond to questions sent to him.

Last year the fisheries ministry slashed the quota to Namsov and Bidvest’s other fishing venture partners, saying that quotas needed to be redistributed fairly among all participants in the fishing sector, without giving preference to one specific company.

The fisheries ministry has been – in private discussions – explicit of how Bidvest’s fishing companies and fishing venture partners have been given room to overrun the fishing sector, especially horse mackerel, at the expense of other smaller and new entrants in the fishing sector.

Bidvest’s sin was not to have foreseen the possibility of its quotas being reduced, perhaps because, as the fisheries ministry privately expressed, Namsov has been the largest, if not the biggest, recipient of horse mackerel quotas since independence.

The analysis excludes the acquisition of Novel Motor Company, a Namibian dealership for Ford, Land Rover, Jaguar and Volvo, which Bidvest bought last month for N$231.8 million, in a bid to diversify the group’s income from the fishing sector.

“From the reports in the press, it appears that the government has taken a decision to support the state-owned fishing enterprises and other new entrants at the expense of current incumbents in the fishing sector. Our view is that Bidfish will find it difficult to convince the minister to maintain its quota allocation at current levels, let alone increase it,” said Cumming.

“Bidvest will have to rely more on its non-fishing businesses in order to maintain profit. The acquisition of Novel Ford goes some way to achieving this, but we are not convinced this will totally supplement the profits forgone in Bidfish. We can also expect more aggressive acquisition activity from Bidvest,” Cumming says.

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