THE swings and arrows of microlending can be seen starkly in the fact that the JSE’s best-performing stock over the year to September, as well as the second-worst performer, were both microlenders.
While Finbond’s share price vaulted 1,364%, Blue Financial Services saw its stock plummet 68.3% — underscoring the fact that company-specific issues rather than macroeconomic factors can have the final say in a company’s earning ability.
Blue Financial wasn’t the worst, however. That “honour” goes to Gijima AST, the unprofitable IT company run by the politically connected Robert Gumede.
Gijima shed 89% of its value over the past year.
Third-worst performer was the Racec Group (down 63.46%), while diversified miner Village Main Reef was fourth (down 62.7%) and Jasco Electronics (down 60.5%).
Over the same period, the JSE’s all share index was up 21.4%, and it has continued to chug along towards record highs, surpassing the 45,500 level on Friday’s trade. But as is clear from the numbers above, a rising tide has clearly not lifted all boats.
According to Willie van Aardt, CEO of Finbond (the top-performing stock over the past 12 months), his company succeeded because of its cautious approach to lending where Blue Financial Services did not.
“We’ve got a quality debtors’ book, while most of our competitors have doubled and sometimes tripled the debtors’ book, so I’d say we’re very conservative compared with some of our smaller and even larger competitors. This has led to the quality of our book improving.
“Finbond’s average loan period is significantly shorter than that of our larger competitors, and our average loan size is significantly smaller,” he said.
Dr van Aardt emphasised that the dramatic rise in Finbond’s share price was not a result of any particular deal.
“There was no one-off event or transaction. Our overall business performance improved significantly over the past 12 to 18 months, since we have been granted a mutual banking licence by the South African Reserve Bank.”
But the same market hasn’t been kind to the once high-flying pan-African microlender Blue Financial Services. Its share price has taken a hammering. On Thursday, Blue revealed that its South African division would now focus on “asset rehabilitation” as the core of its business, rather than microlending.
“The company believes that this is the best route to take under the current economic climate in South Africa, and is also in line with the overall business strategy of the group of tailoring the product offering for each individual territory,” it said.
The worst performer, Gijima, saw its share price losing 90% of its value in only 12 months, something analysts said reflected woeful contract management over the past year.
Dirk Noeth, equity analyst for Avior, said: “A lot of Gijima’s woes have to do with problem contracts that they had to write down. There was the AST Scanning contract; subsequent to that, they also lost a big Absa contract and an SAPS IT one. There’s still hope for a recovery in the share price, but there will have to be a management clean-up and wiser cash management.”
Eileen Wilton, newly appointed CEO of Gijima, admitted that the company had a torrid year, saying that the 90% loss of value was a result of a perfect storm of bad news.
“It is common knowledge that we’ve had serious problems around management and we’ve seen people leaving. We’ve also had a rights issue during the year and this caused a distortion.
“Our institutional investors showed great confidence in our company and they took up and subscribed to our rights offer. From an operational point of view, we’re not losing any of our current contracts, and we’re working hard to restore our customer’s faith in us. We do not have an issue with our customers leaving us.”
“It is true we posted losses, but the second half of the year will be dramatically different to the first,” Ms Wilton said.
• This article was first published in Sunday Times: Business Times