As companies cut off projects to businesses, shareholders receive mega pay-outs.
Defining Mega pay-out as:
A chunk of money from the company is paid out to shareholders, a dividend of over 20%; this pay-out, like many dividend pay-outs, we're going to take a look at how that impacted the share price and whether it could be an opportunity for compounded returns.
RMB Holdings Limited (RMH)
Refund from project
Earlier this year, after unbundling with First Rand, RMB Holdings saw its share price rise by 23% in a single day to R2 closing at R1.80. This was mainly due to the refund announcement of its failed Bucharest development project on the 9th of April 2021.
The refund was in the form of a special dividend of 80 cents per share (62 cents after-tax), which later whipped out 38% of the share price on May the 8th, ex-dividends date. Taking a dip to R1.20, the groups' share recently returned to a level just above its value after the unbundling, at R1.70.
Businesses under RMB Holdings after Unbundling
The Unbundling is expected to unlock billions in value for the group's shareholders through its current holdings. RMB Holdings currently holds 27.4% in Atterbury, 37.5% in Atterbury Europe, and 20.3% in Diversity and Integer properties.
Seeing progress in its operations, the company further added that "Covid-19, continued lockdowns and the resultant muted macro-economic growth in the countries in which RMH operates through the RMH Property portfolio companies continued to be factored in the financial results for the six months to end December."
As a property holdings company, RMB Holdings managed to cut its debt by 75% during its first six-month period that ended in December 2020. After declaring the special dividends, the group is looking into reinstating dividends in the medium to long term.
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Etion Limited (ETO)
Disposal of assets
Focusing on its profitable businesses, Etion Limited, a digital tech company, has in April 2021 agreed to sell its LawTrust business to Altron. After successfully completing the transaction on the 1st of October, Etion further declared a capital reduction of 33 cents per share while trading around 70 cents by the time.
Remaining business after disposal
Etions' remaining businesses are Etion Connect and Etion Create, which both have order books of R500 million in total, R178 million and R400 million, respectively.
"A substantial portion of that committed order book is an overseas contract where the economic value will come over a three-year period, and we are looking to kick-start that contract really soon. There'll be incremental revenue during this financial year and the following year and the year thereafter." Richard Willis, Etion CEO, commented on the Etion Create chunky-looking order book.
Etion shareholders are expected to receive payment by the 2nd of November, with the last trading date being the 23rd of October 2021. The Capital reduction is not subjected to tax.
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Disposals and failed projects are a possibility for any company and may at times stir fear amongst investors.
You want to keep in mind that your investment prospects may lie in the existing/retained businesses/projects in the holding company/subsidiaries and may at times continue to deliver robust growth, creating more value for investors.
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Sources – EasyResearch, JSE Sens, Etion Limited, RMB Holdings Limited, Moneyweb, IOL
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