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Before I get onto how I was nearly fooled - I haven't had a chance to mention this before and I'm a bit late on the news, but was pleased to read that Sappi has announced it will ship all its dissolving wood-pulp exports originating at its Ngodwana mill in Mpumalanga via Emirati marine terminal operator DP World's dedicated container terminal in the port of Maputo. This is not terribly suprising, as Maputo is the closest port, and I expect more and more goods produced in Mpumalanga to be switched to being exported via Maputo. Presumably the Maputo Ports Development Company, of which Grindrod owns 24.7%, will get a slice of this action.
I was nearly Fooled : 19 Dec 2013 |
Background reading : executive director transactions in shares)
19 Dec 2013 : Not that it's that difficult to do so, but yesterday I was nearly fooled! I was having a look through the director dealings on the JSE, and most I ignored as a resulting of being piffling amounts or irrelevancies like the expiry of a collar. The ones that piqued my curiousity though, were 3 purchases by directors of Rockcastle on the Stock Exchange of Mauritius (Rockcastle has its primary listing on the SEM and a secondary listing on the JSE). There were some big numbers involved, with the 3 directors buying USD5.2m at a share price of USD1.3 (some R13.44). Here is how it was reported on the JSE Stock Exchange News Service:
Name of director: Craig Brabazon Hallowes
Transaction date: 17 December 2013
Number of securities: 2 000 000
Price per security: USD 1.30
Total value: USD 2 600 000.00
Nature of transaction: On-market purchase through the SEM
Nature and extent of director’s interest: Direct beneficial
Clearance to deal received: Yes
Name of director: Stephen Eugene Delport
Transaction date: 17 December 2013
Number of securities: 1 000 000
Price per security: USD 1.30
Total value: USD 1 300 000.00
Nature of transaction: On-market purchase through the SEM
Nature and extent of director’s interest: Direct beneficial
Clearance to deal received: Yes
Name of director: Guilleaume Ernst Paul Pretorius
Transaction date: 17 December 2013
Number of securities: 1 000 000
Price per security: USD 1.30
Total value: USD 1 300 000.00
Nature of transaction: On-market purchase through the SEM
Nature and extent of director’s interest: Direct beneficial
Clearance to deal received: Yes
These are probably the 3 most knowledgeable people about the company - their CEO, Finance Director and COO, so I initially saw this as a huge bullish signal about their intent. However, the amounts bought were suspiciously round numbers, which made me wonder whether they were genuine director purchases or part of an incentive program. After contacting Rockcastle, it turns out that the purchases were part of a loan scheme. Rockcastle has lent money to those directors, to purchase shares with. The loans accrue interest at 5%, and the directors have to pay back the loans after 10 years or when they leave the company. If the share price hasn't grown by 5%, then they're liable to pay in the difference.
The directors therefore definitely have some skin in the game and this will focus their minds. However, I don't see this as being as significant a signal as when executive directors use their own money to buy shares, as when a company has decided to follow this path of incentivisation, it is very difficult for an involved director not to follow suit even if it's voluntary. He would be seen as not believing in the company.
So, in short, a bullish signal from Rockcastle, but not strong enough to make me interested. I do think that Companies should disclose when director purchases are part of a loan scheme. I am impressed by the speed with which Rockcastle got back to me with a reply to my questions.
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