Prominent asset manager selects Blue Label as 2026 wild card
Anchor Capital has selected Blu Label Unlimited (BLU), formerly Blue Label Telecoms, as its 2026 wildcard, stating that it believes the share has potential to perform well.
“We believe investor reaction to the slightly underwhelming reception to Cell C’s listing has created a compelling set-up for the year ahead,” it said.
Fund manager Mike Gresty argued it was “time to ignore the doom-mongers” as there may be an excellent opportunity to adopt a contrarian position to the rest of the market.
“The value unlock from the restructuring of BLU, culminating in the Cell C IPO, dominated much of the 2025 investment narrative,” Gresty stated.
He said Cell C’s initial public offering (IPO) was a widely anticipated event, pushing the BLU share price to a level above R17 in August.
“However, the Cell C IPO proved a lot more challenging to get across the line than expected and was ultimately priced below the initial guidance range, valuing Cell C at R9bn,” he said.
“This is around half of what bullish ‘value unlock’ advocates had projected earlier in the year.”
Gresty said the outcome was a perfect set-up for the doom-mongers — questions about what lay behind the urgency of the Cell C listing provided fertile ground for naysayers.
BLU’s results were still mired in the complexity of the restructuring, and there was still longstanding investor unease around the credibility of its management team.
At the same time, there were questions over the future contractual terms on which Cell C depends to secure wholesale capacity from MTN and Vodacom, as it no longer has a mobile network of its own.
“This loss of investor confidence has shaken out many weak shareholders and driven BLU’s share price to levels below R10 in the process,” said Gresty.
“Granted, BLU might not have achieved the hoped-for Cell C IPO valuation price, but it did deliver the restructuring it promised — a point often lost amid the repetition of concerns.”
Gresty said that understanding what that means suggests that this may be an excellent opportunity to adopt a contrarian position.
BLU’s messy results
“Unfortunately, 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,” said Gresty.
“With investors typically allergic to complexity, it may require some patience before a clear picture emerges.”
However, Gresty said Anchor Capital believes three key things will emerge when the dust settles: A cleaner BLU with a revealed “rump” business, a reset Cell C with a viable path, and a stronger BLU balance sheet.
He explained that the combination of the IPO placement (~25%), BEE structure (30%) and Cell C management incentive plan (4.5%) will leave BLU with a Cell C stake of approximately 45%.
“That is important because it means Cell C will be accounted for as an associate rather than having to be consolidated as before,” said Gresty.
“This will reveal the BLU ‘rump’ business, which we think has qualities that are underappreciated because its earnings have essentially been poured into keeping a highly indebted Cell C afloat.”
Gresty said the BLU rump is a low-capital-intensity financial technology business that essentially acts as a tollgate on a broad range of financial transactions it facilitates.
“Initially merely a prepaid airtime distributor — now a largely ex-growth part of its business — it has expanded into many other areas, making use of various forms of prepaid vouchers,” he said.
“These include prepaid electricity, event tickets (Ticketpro), gaming (gambling), for example.”
Gresty said Anhcor Capital believes this “rump” should generate close to R1/share of earnings with a very high level of cash conversion.
“Thanks to healthy growth rates in the non-mobile airtime categories, we expect earnings to grow at a double-digit rate over the next few years.”
Cautious optimism about Cell C
He said that they are cautious of Cell C management’s assertion that its model will prove superior to that of mobile operators with their own networks.
Anchor Capital agrees that investors should be clear-eyed about how future contract renegotiations with Vodacom and MTN, on which Cell C is dependent, might change the economics.
“That said, the Cell C that now exists as a listed entity has a clean capital structure, thanks to a significant conversion of debt to equity before listing,” said Gresty.
“Cell C should generate healthy free cash flow, will benefit from a sizeable, assessed tax loss for years to come, has valuable spectrum, and has assembled a high-calibre management team that is keen to prove the sceptics wrong.”
Gresty said that, based on their estimates, they believe the initial IPO price equates to a forward price/earnings multiple of about 4.5x.
“Assuming Cell C delivers on its promises, there is scope for it to rerate upwards,” he said.
While the proceeds from the IPO were less than hoped for, he said BLU should emerge unindebted and with a decent cash pile with which to pay a special dividend or buy back shares.
“Furthermore, although not central to our investment thesis, we wonder if the urgency to get the IPO done might relate to possible corporate action opportunities,” said Gresty.
Specifically, Anchor speculated whether corporate action opportunities would only become available to both companies once they were independent of one another.
“In conclusion, with a market capitalisation at the time of writing of just R8.8bn, investors appear to be ascribing no value to the BLU rump at all,” said Gresty.
He said even that value implies a very depressed rating for Cell C, and that they see a tremendous underlying value with a multitude of options to drive upside in the year ahead.
“With recent announcements that the joint CEOs, Brett and Mark Levy, have acquired R190mn worth of BLU shares, it would appear they agree!”
Blue Label share price since 2017
Cell C share price since listing on 27 November 2025
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