BCX shares soar on speculation
Business Connexion shares soared 10% today after the company announced that a subsidiary, Business Connexion Communications, had entered into negotiations which “may have a material effect on the price of the company’s securities”.
Business Connexion Communications was originally a division of Bidvest, which was acquired by BCX in 2005. Willem van Rensburg, who left BCX last year, spearheaded the acquisition. During his tenure as CEO, Peter Watt spoke at times about growing the communications arm of BCX to scale by purchasing other companies. The idea was to grow this division into a meaningful communications business and offer bundled services to the rest of BCX’s customers.
There has been speculation among analysts and industry watchers that BCX may look to offload this unit. Revenues and profits were hurt at BCX Communications while the company was under bid from Telkom. Blue-chip clients were prepared to wait for the outcome, instead of spending money with the division. This severely depressed earnings at that specific division, as well as the BCX share price (which closed yesterday at R4,71).
In its annual results (for the year ended May 2007), Business Connexion Communications posted a loss of R24m on turnover of R55m. In the most recent interim results to November 2007, the division posted a R6,8m loss on revenue of R67,9m.
Irnest Kaplan, MD of Kaplan Equity Analysts, wrote in a note to clients last year that management had said “they will not spend more on this segment unless they see further take up of its services. They say if it loses too much money they may dispose of it”.
Kaplan went on to speculate about a possible partnership with Neotel, and noted that management would follow a cautious approach.
On its website, BCX points to a blue-chip customer list for Business Connexion Communications: AngloGold Ashanti, BHP Billiton, Bidvest Group, Edgars, FedEx, JSE, McCarthy, Metcash, Nampak, Old Mutual, Rennies, Santam, Sasol, Value Logistics – a list of clients Neotel or Internet Solutions would surely love to get their hands on?
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