Investors snub Oakbay
Investors have snubbed Oakbay Resources and Energy, as the company remains a tightly-held stock with ownership largely in the hands of the Guptas.
|||Johannesburg - Investors have snubbed Oakbay Resources and Energy as the company remains a tightly-held stock with ownership largely in the hands of the Gupta family.
Oakbay’s shares on the JSE have remained constant at R20 a share since the end of last month, rebuffing even the announcement of Jacques Roux as the new chief executive on Tuesday.
Roux replaced Varun Gupta, who resigned last month, along with Atul Gupta and Duduzane Zuma, the son of President Jacob Zuma.
But the announcement failed to rally the shares despite the company’s stated intention of loosening the ownership grip and increasing the liquidity of the shares as it plans to raise money in the local and international markets.
The Guptas and Duduzane resigned at the height of the accusations that the family was at the centre of the so-called state capture phenomenon in the country.
Analysts said yesterday that investors had scoffed at the stock, because it was so closely held, with shares hardly changing hands.
Stephen Meintjes, an analyst at Momentum SP Reid, said traders shied away from thinly traded stocks as these were considered risky. “They ask themselves – why are they thinly traded?” he said.
The Gupta family-owned Oakbay Investments owns 80 percent of Oakbay Resources and Energy.
Other major shareholders are Action Investments (8.47 percent) and Saranya Investments (5.65 percent).
When the company listed on the JSE in November 2014, it converted Industrial Development Corporation’s loan of approximately R256 million to a 3.57 percent equity. This leaves only a paltry 2.31 percent for “other” investors.
Turn-off
Michael Treherne, a portfolio manager at Vestact, said yesterday that the fact three shareholders owned more than 90 percent was a turn-off for investors.
“Also the difference between what investors are prepared to buy for Oakbay shares (R3.12 yesterday afternoon) and the sell price (R21.99) is so wide,” he said.
The lack of trading activity could affect Oakbay’s plans to raise money in the local and international markets for expansion. The company plans to raise money from local and international investors in order to finance Shiva Uranium’s expansion.
It said earlier that it would require at least R800m for optimum uranium production.
The prospects of capital raising have prompted the company to consider “diluting” shareholding in order to boost liquidity. Oakbay has identified increasing liquidity as a priority in the short to medium term.
In his comments in the company’s 2015 annual report, former chairman Atul Gupta said: “As part of the capital raising process, we intend to dilute rather than sell off any of our shareholding to new investors, as well as to create liquidity in the share.”
Oakbay mines and explores mineral resources, particularly uranium and gold deposits.
Oakbay said it was upbeat about the prospects of the uranium industry, although its future largely hinged on rising uranium demand.
In a commentary on its results for the six months to August 31, it said it expected uranium demand and prices to rise on the back of new nuclear reactors being built around the world.
“It is an accepted fact that by 2020 uranium demand will far exceed supply. Simply put, we are operating in the ideal growth market and uranium is the place to be,” Gupta said in the annual report.
Uranium is used as fuel for nuclear power plants and is a key mineral for the aerospace and defence industries.
Oakbay was in the news recently when its JSE listing came under threat after several financial institutions, including auditor KPMG and JSE sponsor Sasfin, cut ties with the company. This raised the risk of a breach of JSE rules.
Compliance
The JSE said yesterday that it was keeping “a close eye” on Oakbay’s compliance with the listings requirements and would ensure that the appropriate announcements were made.
Avior investment analyst, Wade Napier, said that Oakbay “was too closely held for the liking of the market. There is no point of looking at them.”
Oakbay, which is expected to release results for the year ended February 2016 on May 30, did not respond to questions yesterday.
BUSINESS REPORT