Make out a personal cheque for R207m

In the biggest director’s deal of the past month, Dave van Niekerk, CEO of Blue Financial Services (JSE:BFS), has bought shares in Blue worth R207m.

Before the Securities Regulation Panel would authorise Blue to make a firm bid for its rival in microfinance, Credit U, or even to go out on road shows looking for institutional support, it wanted assurance that the purchasing parties had the resources to conclude the deal.

Blue, which is a microlender in 12 African countries, offered 44,5 Blue shares for every 100 Credit U. It amounted to a total offer of R278m, half in shares, half in cash. Blue would issue 51,5m share at 540c.

Van Niekerk, who was personally underwriting Blue’s bid was obliged to prove that he had sufficient cash to satisfy the cash consideration of R139,07m.

Van Niekerk was therefore required to buy a R207m single-stock future to underpin the cash half of the transaction. The future expires on September 14. Meantime, Van Niekerk’s own shares in Blue are being held as security.

With shareholders such as AIG, the IFC and Stanlib on board already, he is confident that institutions will step forward to help fund the deal.

The acquisition will virtually double the size of Blue in SA. Credit U has a book of some R280m – virtually equal to the purchase consideration.

It will double Blue’s number of branches in SA and remove a competitor. Because Blue’s stock enjoys a PE multiple of more than 50 and the pricing is so favourable, the transaction would have enhanced diluted headline earnings per share in the year to February by some 36%.

Blue’s most recent results for the year to February underscore just how profitable microlending is. Its loan book doubled to R480m. That brought in interest receipts of R182,7m – which suggests an average loan rate of 38%. Its interest cost rose by 162% to R66m – still only a third of interest earnings.

Blue is a pan-African version of Abil (JSE:ABL). Indeed, Van Niekerk worked at Abil. He confirms that the goal is to get bigger and let higher volumes continue to boost profits even if interest margins reduce over time.

Blue’s results are consolidated at official exchange rates, which might be seen as risky given the Zimbabwe experience and the potential for turmoil in certain areas of operation.

Van Niekerk is not fazed, however. He says Blue can move money quickly and easily between different theatres. Van Niekerk points out that the business thrived before and after the deadly riots earlier this year in Kenya and that Blue’s spread over numerous countries reduces its risk.

Van Niekerk’s right hand man Riaan Swart stepped down earlier this year to focus on his family and game farming. Swart retains the 19% of the equity he had before the CreditU acquisition. Van Niekerk held 18,7% before the deal, AIG 14,8% and Stanlib 11,2%. The latest transaction is bound to affect the relative shareholdings.

Swart’s departure left Van Niekerk as chairman and CEO, which puts the company foul of King 2. The company recently underwent a change of CFO as well.

Blue’s share price has doubled to 665c in the past year. That is well clear of the 540c price at which the new shares are being offered. The PE of 55 shows that subprime lenders in SA are still highly regarded.

Company	Share	Director	Type	Date	Total
Blue Financial Services Ltd	BFS	Dave Van Niekerk	Buy	12-Aug-08	207,080,000
Eureka Industrial Ltd	EUR	Ronald S Price	Buy	23-Jul-08	107,843,620
City Lodge Hotels Ltd	CLH	Hans R Enderle	Sell	28-Jul-08	60,353,306
Investec Ltd	INL	Bernard Kantor	Sell	22-Jul-08	39,848,000
Allied Electronics Corporation Ltd	ATN	William P Venter	Sell	12-Aug-08	33,928,800
Invicta Holdings Ltd	IVT	A Goldstone	Buy	15-Aug-08	30,550,000
Investec Ltd	INL	Bernard Kantor	Buy	22-Jul-08	26,015,000
Fairvest Property Holdings Ltd	FVT	J F du Toit	Buy	25-Jul-08	21,603,220
Foschini Ltd	FOS	M Lewis	Buy	28-Jul-08	20,363,138
Foschini Ltd	FOS	M Lewis	Buy	25-Jul-08	15,202,571
Anglo Platinum Ltd	AMS	M Valli Moosa	Buy	31-Jul-08	11,166,980
Foschini Ltd	FOS	M Lewis	Buy	31-Jul-08	10,980,000
Group Five Ltd	GRF	Cristina Teixeira	Buy	21-Aug-08	8,568,000
Foschini Ltd	FOS	M Lewis	Buy	06-Aug-08	6,923,095
Foschini Ltd	FOS	M Lewis	Buy	24-Jul-08	6,409,036
Ansys	ANS	Alan Holloway	Sell	29-Jul-08	4,800,000
Alex Forbes P	AFP	Director of a subsidiary	Buy	15-Aug-08	3,369,100
African Dawn Capital Ltd	ADW	M N Ramashela	Buy	18-Aug-08	3,078,000
African Dawn Capital Ltd	ADW	M N Ramashela	Sell	18-Aug-08	3,078,000
Foschini Ltd	FOS	M Lewis	Buy	29-Jul-08	2,878,866
Tiger Brands Ltd	TBS	Director of a subsidiary	Options exercised	30-Jul-08	2,830,779
Foschini Ltd	FOS	M Lewis	Buy	07-Aug-08	2,799,677
Combined Motor Holdings Ltd	CMH	C L Odendaal	Sell	08-Aug-08	2,621,586
AngloGold Ashanti Ltd	ANG	Mark Cutifani	Buy	01-Aug-08	2,412,500
Astrapak Ltd	APK	G Petzer	Sell	15-Aug-08	2,196,000
Beige P	BEGP	Aubrie du Preez	Buy	08-Aug-08	1,935,614
AngloGold Ashanti Ltd	ANG	Srinivasan Venkatakrishnan	Sell	01-Aug-08	1,837,119
TWP	TWP	Nigel John Townshend	Buy	25-Jul-08	1,807,000
TWP	TWP	Steven Dewsbery	Buy	25-Jul-08	1,798,000
Tiger Brands Ltd	TBS	Director of a subsidiary	Options exercised	23-Jul-08	1,784,000
Absa Group Ltd	ASA	Steve F Booysen	Options exercised	20-Aug-08	1,575,450
Stefanutti	SFB	Director of a subsidiary	Sell	18-Aug-08	1,211,000
Beige P	BEGP	Mathys M du Preez	Buy	08-Aug-08	1,106,031
Kumba Iron Ore Ltd	KIO	Vincent Patrick Uren	Buy	24-Jul-08	1,018,258
Afrimat Ltd	AFT	Francois du Toit	Buy	21-Aug-08	862,500
Tiger Brands Ltd	TBS	Director of a subsidiary	Sell	24-Jul-08	853,078
Fairvest Property Holdings Ltd	FVT	J F du Toit	Buy	24-Jul-08	839,150
The Spar Group Ltd	SPP	Roelof Venter	Sell	05-Aug-08	818,850
Blue Financial Services Ltd	BFS	Mpumela J Sondiyazi	Sell	11-Aug-08	808,750
Stefanutti	SFB	Director of a subsidiary	Sell	14-Aug-08	700,000
Miranda Mineral Holdings Ltd	MMH	Alan R Thompson	Sell	12-Aug-08	699,072
Allied Electronics Corporation Ltd	ATN	Director of a subsidiary	Buy	24-Jul-08	690,000
Invicta Holdings Ltd	IVT	A Goldstone	Buy	24-Jul-08	690,000
Alex Forbes P	AFP	Director of a subsidiary	Buy	15-Aug-08	584,705
Hosken Consolidated Investments Ltd	HCI	Yunis Shaik	Buy	05-Aug-08	580,000
Hosken Consolidated Investments Ltd	HCI	Elias Velaphi Mphande	Sell	05-Aug-08	580,000
Naspers Ltd	NPN	Director of a subsidiary	Sell	25-Jul-08	573,448
Merafe Resources Ltd	MRF	D Steve Phiri	Buy	06-Aug-08	526,080
Hosken Consolidated Investments Ltd	HCI	Yunis Shaik	Buy	15-Aug-08	450,000
Hosken Consolidated Investments Ltd	HCI	Elias Velaphi Mphande	Sell	15-Aug-08	450,000
Beige P	BEGP	Aubrie du Preez	Buy	06-Aug-08	415,729
Ellies	ELI	Director of a subsidiary	Sell	14-Aug-08	405,000
Illovo Sugar Ltd	ILV	Director of a subsidiary	Sell	18-Aug-08	403,218
City Lodge Hotels Ltd	CLH	Hans R Enderle	Sell	28-Jul-08	398,554
Kumba Iron Ore Ltd	KIO	Director of a subsidiary	Sell	20-Aug-08	343,650
Remgro Ltd	REM	Josua Malherbe	Buy	08-Aug-08	340,000
Miranda Mineral Holdings Ltd	MMH	Michael Cook	Sell	12-Aug-08	336,791
City Lodge Hotels Ltd	CLH	Clifford Ross	Buy	28-Jul-08	312,835
African Brick	ABK	Benoni van Graan	Buy	28-Jul-08	267,500
African Brick	ABK	Benoni van Graan	Buy	30-Jul-08	264,375
Resilient Property Income Fund Ltd	RES	Des De Beer	Buy	19-Aug-08	262,500
Omnia Holdings Ltd	OMN	N K H Fitz-Gibbon	Buy	31-Jul-08	257,496
Beige P	BEGP	Mathys M du Preez	Buy	06-Aug-08	237,553
City Lodge Hotels Ltd	CLH	Clifford Ross	Buy	14-Aug-08	234,750
Miranda Mineral Holdings Ltd	MMH	Ronald John Nel	Options exercised	12-Aug-08	233,241
City Lodge Hotels Ltd	CLH	Frank W J Kilbourn	Sell	28-Jul-08	228,180
African Dawn Capital Ltd	ADW	C d W Vivier	Buy	22-Jul-08	220,000
African Brick	ABK	Benoni van Graan	Buy	01-Aug-08	200,640
PSG Group Ltd	PSG	Willem Theron	Buy	11-Aug-08	180,500
Kumba Iron Ore Ltd	KIO	Vincent Patrick Uren	Buy	24-Jul-08	179,693
Allied Electronics Corporation Ltd	ATNP	Director of a subsidiary	Sell	01-Aug-08	179,690
Ellies	ELI	Raymond Hillard Berkman	Buy	25-Jul-08	177,000
Pretoria Portland Cement Company Ltd	PPC	O Fenn	Options exercised	22-Jul-08	175,722
City Lodge Hotels Ltd	CLH	A C Widegger	Sell	28-Jul-08	171,135
Investec Ltd	INL	Ian R Kantor	Sell	11-Aug-08	169,249
Peregrine Holdings Ltd	PGR	Director of a subsidiary	Buy	29-Jul-08	166,650
Telematrix	MIX	Stefan Joselowitz	Sell	22-Jul-08	159,600
Telematrix	MIX	Stefan Joselowitz	Buy	22-Jul-08	159,600
Beige Holdings Ltd	BEG	Yaseen Bhayat	Buy	12-Aug-08	147,000
Mr Price Group Ltd	MPC	Shane van Niekerk	Sell	15-Aug-08	138,960
Beige P	BEGP	Aubrie du Preez	Buy	08-Aug-08	133,416
Beige P	BEGP	Mathys M du Preez	Buy	08-Aug-08	133,416
Spanjaard Ltd	SPA	B L Montgomery	Buy	14-Aug-08	125,000
Illovo Sugar Ltd	ILV	Director of a subsidiary	Options exercised	18-Aug-08	124,146
Brikor	BIK	G van Niekerk Parkin	Buy	23-Jul-08	111,940
The Spar Group Ltd	SPP	Roelof Venter	Options exercised	05-Aug-08	108,438
Ideco	IDE	Vhonani Mufamadi	Buy	23-Jul-08	101,645
Cadiz Holdings Ltd	CDZ	Ram Barkai	Buy	21-Aug-08	99,956
Investec plc	INP	Ian R Kantor	Sell	11-Aug-08	98,619
Omnia Holdings Ltd	OMN	N K H Fitz-Gibbon	Buy	31-Jul-08	96,689
Merafe Resources Ltd	MRF	Con J Fauconnier	Buy	08-Aug-08	96,000
The Spar Group Ltd	SPP	R W Coe	Options exercised	05-Aug-08	90,706
Wescoal Holdings Ltd	WSL	Designated advisor	Buy	01-Aug-08	90,000
Wescoal Holdings Ltd	WSL	Designated advisor	Buy	31-Jul-08	90,000
Set Point Technology Holdings Ltd	STO	Mark J Smith	Buy	22-Jul-08	90,000
Wescoal Holdings Ltd	WSL	Andre Russell Boje	Buy	04-Aug-08	80,000
Convergenet	CVN	Gordon Stanley Edwards	Buy	22-Jul-08	76,757
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	13-Aug-08	70,970
Miranda Mineral Holdings Ltd	MMH	Alan R Thompson	Buy	15-Aug-08	66,000
Miranda Mineral Holdings Ltd	MMH	Ronald John Nel	Buy	15-Aug-08	65,500
Ellies	ELI	Raymond Hillard Berkman	Buy	14-Aug-08	62,790
Beige Holdings Ltd	BEG	Ian Black	Buy	12-Aug-08	60,000
Brikor	BIK	Garnett Parkin (Junior)	Buy	24-Jul-08	54,084
All Joy Foods Ltd	ALJ	Maslamony T Pather	Options exercised	08-Aug-08	50,000
Set Point Technology Holdings Ltd	STO	Christopher S Seabrooke	Buy	28-Jul-08	48,600
Aquarius Platinum Ltd	AQP	Nicholas T Sibley	Buy	07-Aug-08	47,400
BSI	BSS	N G Payne	Buy	21-Aug-08	44,129
Brikor	BIK	Designated advisor	Buy	23-Jul-08	38,563
Ideco	IDE	Malose F Kekana	Buy	23-Jul-08	34,980
Kumba Iron Ore Ltd	KIO	Director of a subsidiary	Options exercised	20-Aug-08	33,060
Set Point Technology Holdings Ltd	STO	Mark J Smith	Buy	22-Jul-08	31,356
Beige P	BEGP	Aubrie du Preez	Buy	06-Aug-08	28,655
Biege P	BEGP	Mathys M du Preez	Buy	06-Aug-08	28,655
PSG Group Ltd	PSG	Johannes F Mouton	Buy	11-Aug-08	28,500
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	23-Jul-08	28,500
Kumba Iron Ore Ltd	KIO	Vincent Patrick Uren	Buy	25-Jul-08	27,930
Metmar Ltd	MML	Company secretary	Buy	01-Aug-08	27,150
Allied Electronics Corporation Ltd	ATNP	Director of a subsidiary	Options exercised	01-Aug-08	26,954
Mondi Plc	MNP	Peter Oswald	Buy	30-Jul-08	25,300
Spanjaard Ltd	SPA	R J W Spanjaard	Buy	21-Aug-08	24,840
African Eagle	AEA	Euan Arthur Worthington	Buy	23-Jul-08	22,500
ConvergeNet	CVN	Hanno Van Dyk	Buy	06-Aug-08	21,407
ConvergeNet	CVN	Hanno Van Dyk	Buy	11-Aug-08	17,400
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	31-Jul-08	17,150
Nictus Ltd	NCS	N C Tromp	Buy	14-Aug-08	13,063
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	29-Jul-08	13,000
ConvergeNet	CVN	Hanno Van Dyk	Buy	11-Aug-08	11,700
ConvergeNet	CVN	Hanno Van Dyk	Buy	07-Aug-08	11,500
Beige P	BEGP	Lionel I Karp	Buy	08-Aug-08	11,204
Conduit Capital Ltd	CND	Stanley D Shane	Buy	29-Jul-08	11,000
Amalgamated Electronic Corporation Ltd	AER	Derrick Alexander	Buy	11-Aug-08	10,000
Alex Forbes P	AFP	Director of a subsidiary	Buy	15-Aug-08	9,592
Beige P	BEGP	Mark M Di Nicola	Buy	08-Aug-08	8,571
All Joy Foods Ltd	ALJ	Stanley Fanaroff	Options exercised	08-Aug-08	7,150
Amalgamated Electronic Corporation Ltd	AER	Derrick Alexander	Buy	05-Aug-08	6,608
Lonmin plc	LON	Brad Mills	Buy	19-Aug-08	6,588
Combined Motor Holdings Ltd	CMH	C L Odendaal	Sell	08-Aug-08	6,494
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	18-Aug-08	6,240
African Eagle	AEA	Geoffrey W Cooper	Buy	22-Jul-08	6,000
ConvergeNet	CVN	Hanno Van Dyk	Buy	07-Aug-08	5,800
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	19-Aug-08	5,760
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	21-Aug-08	5,625
City Lodge Hotels Ltd	CLH	I Nigel Matthews	Sell	28-Jul-08	5,552
Stratcorp Ltd	STA	Company secretary	Buy	13-Aug-08	4,950
Set Point Technology Holdings Ltd	STO	Christopher S Seabrooke	Buy	14-Aug-08	4,446
Beige P	BEGP	Lionel I Karp	Buy	08-Aug-08	3,734
African Eagle	AEA	Bevan John Metcalf	Buy	24-Jul-08	3,000
Beige P	BEGP	Lionel I Karp	Buy	06-Aug-08	2,406
Allied Electronics Corporation Ltd	ATNP	Director of a subsidiary	Sell	31-Jul-08	2,310
Beige P	BEGP	Mark M Di Nicola	Buy	06-Aug-08	1,841
ConvergeNet	CVN	Hanno Van Dyk	Buy	06-Aug-08	1,184
Beige P	BEGP	Lionel I Karp	Buy	06-Aug-08	803
City Lodge Hotels Ltd	CLH	Director of a subsidiary	Sell	28-Jul-08	608
Kimberley Consolidated	KCM	Hein Puren le Riche	Buy	15-Aug-08	480
Allied Electronics Corporation Ltd	ATNP	Director of a subsidiary	Options exercised	31-Jul-08	347
Mondi Ltd	MND	Company secretary	Buy	07-Aug-08	125
Mondi Ltd	MND	David A Hathorn	Buy	07-Aug-08	125

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According to Moneyweb stats Swart and Van Niekerk bought 7 494 966 shares between 7/12/2007 to 17/01/2008.According to this article 63.7% of Blue shares are in the hands of Swart(19%),van Niekerk(18.7%),AIG(14.8%) and Stanlib(11.2%).Funds holding this share according to Moneyweb stats are Coris Capital Equity Fund(118200),Stanlib Small Cap Fund(2289400) and Stanlib Value Fund(13000000). On the 12/08/2008 van Niekerk takes up a SSF to the value of 31 000 000 shares. Operating income up by 124% but operating expenses up by 164%.Headline earnings increased by 39% but share issuance increase by a whopping 35%.The net asset value of the share is only R1.34 and the Tangible asset value only R0.55. According to JSE stats the PE of the company is 57.25 and the EY 1.75 and the company pays no dividend! The companies profits -R61 million. My question :Where is the value of this share relating to the stats mentioned above?Is it only in a share price increase or what? Someone please explain this to me! Firstrand looks dead cheap to me at R16.00 with relation to this share…………..so does Didata,Abil,Billiton,Mittal ect ect ect ect. Please help,and please don’t delete my question again!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

COMMENTS 3

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Between 7/12/2007 and 17/01/2008 the two directors,Swart and Van Niekerk bought 7 494 966 shares in the market according to Moneyweb stats.According to this article 63.7% of the shares are held by Swart(19%),Van Niekerk(18.7%),AIG(14.8%) and Stanlib(11.2%).The funds holding this share according to moneyweb are Coris Capital General Equity(118200),Stanlib Small Cap(2289400) and Stanlib Value Fund(13000000). Now Van Niekerk is writing a cheque for a SSF worth 31million shares. The operating income increased by 124% but the expenses increased by 164%.The share issuance increased by 35%.The net asset value of the share is R1.34 and the Tangible asset value per share is R0.55. According to the JSE stats ,PE at 57.25,EY at 1.75 it makes a profit of -R61million and it pays no dividend. Where is the value in this share or am i missing something?Is the only value in a share price increase………so maybe it goes to R10?? Sjoe………FIRSTRAND looks dead cheap at R15. Please help explaining this share……………………………..!

The high PE, P/B etc implies a very high growth rate (in absolute terms and also relative to the other shares you mention). After doing my own analysis, I think that the growth rate in EPS for the next few years will be below expectations – caveat emptor at these prices… Taking this argument further, BFS could be a prime candidate for shorting. You have a fundamental valuation way below the current share price and you know that Van Niekerk will get a margin call over R200m of stock if the price drops by around 25%. Add to that any big redemptions out of the units trusts and you’ve got yourself a meltdown! PS Why would I share this view and not just quietly profit from it myself? Because I can’t get my hands on stock to borrow for a short sale!