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Securing the B.A.G with Micro and Small caps


Securing the B.A.G with Micro and Small caps

As global markets become more competitive, acquisitions and partnerships, including mergers, are among the measures companies put in place for future business growth.

After a challenging year for many in the market, some Micro and Small caps (shares trading below R5 and $5) in different industries remain committed to creating more value for investors.

And since owning shares in international markets has become more accessible through the EasyFX no minimums birthday gift to INVSTRs, we look into the combination of B.A.G (Bubs Australia, Afristrat, Genius Brands) in the three EasyWallets - AUD, ZAR, and USD and how these companies are securing the bag.

Bubs Australia Limited (AUD:BUB)

Making headlines in the food industry, Bubs entered into supply agreements in the powder milk market, valued at $15.7 billion globally.

The agreements offer Bubs an opportunity to expand into international markets, with shipments due in various regions in the first quarter of 2022. These regions include China, a country considered to be the largest consumer with a value forecast of $3.8 billion in 2025.

Capitalising on the market, Bubs also introduced a new range of products to cater for family use, according to the Bubs Australia CEO, Fabrizio Jorge.

“We expect Bubs Family Nutrition will broaden the footprint among young families and support market diversification, while strengthening the foundations of continued business growth. This portfolio expansion will have the consequent effect of increasing utilisation of our Deloraine manufacturing facility, thereby providing cost efficiencies across our entire business.”

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Afristrat Limited (ZAR:ATI)

Formally known as Ecsponent, Afristrat has been in the restructuring process, which includes the disposal of MyBucks in various jurisdictions. The disposal enables the company to use the funds to reduce its debt.

After losing up to 99% of its market value, caused by irregularities and mismanagement, especially with the heavily invested MyBucks; the group further commented, in the first quarter of 2021, that while at first the investment for Ecsponent shareholders may have seemed to be short term; the outlook to create more value has now shifted to the long term.

Positioning itself in the financial services space, Afristrat further entered an agreement to acquire 100% of MHMK Financial services, an investment company with a strong portfolio for microfinance and banking operations in Africa. $9.6 million of MHMK’ net assist value was subjected to the acquisition; this is according to MHMK financial services’ end year results, which ended in December 2020.

The transaction was initially through a share settlement of 82 billion Afristrat shares, prior to a proposed share consolidation of 200:1, later revised to 17 billion shares and a ratio of 120:1, respectively.
Commenting on the share consolidation, the board added that this provides the company with a “more acceptable value” in the stock market, further adding that the consolidation will “enable shareholders to trade shares at a market-related price.”

“The transaction is expected to benefit the company by providing it with access to a quality portfolio of income-generating and high growth potential companies and funding, as well as providing an opportunity for Afristrat to expand its local and regional footprint,” Afristrat stated, debunking the acquisition rationality.

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Genius Brands International (USD:GNUS)

Making progress in the animation industry, Genius brands international recently celebrated over 70 million views for its “Stan Lee’s Superhero Kindergarten” animation series since its premiere on April 23. This comes after the company’ partnered with Marvel Studio on March 30. In terms of acquisitions to reach a broader market, after acquiring ChizComm in February, the group further acquired another company, WOW! Unlimited Media.

WOW! Unlimited Media is an animation and digital media house with a global footprint. As of June 2021, the company had Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $56.4 million and revenue of $5.1 million.

The acquisition brings to the table an order book valued at $62 million for the next 12 months.

According to Genius Brand international, Andy Hayward, “The acquisition of WOW! substantially accelerates the financial growth of Genius Brands, delivering on our promise to shareholders to execute meaningful and accretive acquisitions, as we seek to rapidly consolidate the marketplace and become the foremost producer, broadcaster, and consumer product licensor of high-quality children’s entertainment in the world.”

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Informed decision 

As a micro and small-cap INVSTR, one thing to keep in mind when investing in companies that fall within this bracket is the liquidity of these stocks.

In addition, with these companies making moves to secure the BAG, the successful implementation of plans to create more value for shareholders may result in exponential growth in the long term; especially with these companies continuing to expand their clientele and business operations through acquisitions and deals.

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Sources – EasyResearch, JSE Sens, Afristrat Limited, Rack Media, Genius Brands International limited.

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