{"id":845898,"date":"2026-01-01T10:00:00","date_gmt":"2026-01-01T08:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=845898"},"modified":"2026-01-01T10:35:35","modified_gmt":"2026-01-01T08:35:35","slug":"hope-for-south-african-telco-giant-after-multi-billion-rand-flop","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/845898\/hope-for-south-african-telco-giant-after-multi-billion-rand-flop\/","title":{"rendered":"Hope for South African telco giant after multi-billion rand flop"},"content":{"rendered":"\n

Blu Label Unlimited provides an attractive investment case despite the disappointing listing of Cell C on the JSE. <\/p>\n\n\n\n

Mike Gresty from Anchor Capital stated that the IPO of Cell C overshadowed the narrative surrounding the restructuring of Blu Label.\u00a0<\/p>\n\n\n\n

While the market responded well to the news, pushing the Blu Label share price up to R17, the CEll C IPO proved more challenging than expected, with the group\u2019s share price falling to R10.\u00a0<\/p>\n\n\n\n

Cell C was priced below the initial guidance range, valuing Cell C at R9 billion – half of what bullish \u2018 value unlock\u2019 advocates had projected earlier. <\/p>\n\n\n\n

Gresty said that the disappointment of the IPO proved the perfect set-up for doom-monqers, with questions over the urgency of the listing and the complexity of the restructuring. <\/p>\n\n\n\n

There were also questions over Blu Label\u2019s management team and the future contractual terms on which Cell C depends to secure wholesale capacity from MTN and Vodacom. <\/p>\n\n\n\n

Cell C no longer has its own mobile network; instead, it roams off MTN\u2019s, while still holding onto some spectrum. <\/p>\n\n\n\n

While Blu Label did not achieve the Cell C IPO valuation price it hoped for, it did deliver the restructuring it promised. <\/p>\n\n\n\n

\u201cUnderstanding what that means suggests that this may be an excellent opportunity to adopt a contrarian position here,\u201d said Gresty. <\/p>\n\n\n\n

\u201cUnfortunately, BLU results for the financial year to end May 2026 (FY26) will remain messy due to the scale of the restructuring the Group has undergone this year.\u201d <\/p>\n\n\n\n

With investors not a fan of complexity, Gresty said that it may require patience before a clear picture emerges. <\/p>\n\n\n\n

Positives\u00a0<\/h2>\n\n\n
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Blue Label co-CEOs Mark and Brett Levy<\/figcaption><\/figure><\/div>\n\n\n

The investor noted that Blu Label\u2019s stake in Cell C now stands at approximately 45%, which means it can be accounted for as an associate rather than being consolidated. <\/p>\n\n\n\n

Associates typically have a strong level of influence over the company, but not control. This results in different accounting standards. <\/p>\n\n\n\n

Gresty said that this will reveal the BLU \u2018rump\u2019 business, which has qualities that were previously underappreciated, as its earnings have been previously impacted by keeping a highly indebted Cell C afloat. <\/p>\n\n\n\n

\u201c<\/strong>The BLU rump can be thought of as a low capital intensity \u201cfintech\u201d that essentially acts as a tollgate on a broad range of financial transactions it facilitates.\u201d <\/p>\n\n\n\n

\u201cInitially merely a prepaid airtime distributor, it has expanded into many other areas, making use of various forms of prepaid vouchers: prepaid electricity, event tickets, and gaming.\u201d <\/p>\n\n\n\n

Anchor Capital believes that this \u2018rump\u2019 can generate close to R1\/share of earnings with a very high level of cash conversion. <\/p>\n\n\n\n

Due to the healthy growth rates in the non-mobile airtime categories, the group expects earnings to grow at a double-digit rate over the next few years.<\/p>\n\n\n\n

Cell C itself also has a new life, with the company now having a clean capital structure after losing, due to the conversion of debt to equity before listing. <\/p>\n\n\n\n

Gresty said that the company should generate healthy free cash flow (FCF) and will benefit from a sizable, assessed tax loss for years to come. <\/p>\n\n\n\n

\u201cOn our estimates, we think the initial IPO price equates to a forward P\/E multiple of about 4.5x. Assuming Cell C delivers on its promises, there is scope for it to rerate upwards.\u201d <\/p>\n\n\n\n

While the proceeds from the Cell C IPO were less than hoped for, Blu Label should emerge unindebted. <\/p>\n\n\n\n

It also has a decent cash reserve, which it can use to pay a special dividend or repurchase shares. <\/p>\n\n\n\n

\u201cWith a market capitalisation at the time of writing of just R8.8 billion, investors appear to be ascribing no value to the BLU rump at all.\u201d <\/p>\n\n\n\n

\u201cEven that value implies a very depressed rating for Cell C. We see a tremendous value underpinned here with a multitude of options to drive upside in the year ahead.\u201d <\/p>\n\n\n\n

Joint CEOs, Brett and Mark Levy, have also acquired R190 million worth of BLU shares, backing the company\u2019s turnaround. <\/p>\n\n\n

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Blu Label Share Price<\/figcaption><\/figure><\/div>\n\n\n
\n","protected":false},"excerpt":{"rendered":"

Blu Label is presenting an attractive investment case despite the disappointing Cell C IPO, with Anchor Capital’s Mike Gresty adopting a contrarian position. <\/p>\n","protected":false},"author":95,"featured_media":839346,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[11827,23759,42],"class_list":["post-845898","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-anchor-capital","tag-blu-label","tag-cell-c"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/845898","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=845898"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/845898\/revisions"}],"predecessor-version":[{"id":846901,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/845898\/revisions\/846901"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/839346"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=845898"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=845898"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=845898"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}