{"id":622287,"date":"2025-12-08T17:00:44","date_gmt":"2025-12-08T15:00:44","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=622287"},"modified":"2025-12-09T08:02:20","modified_gmt":"2025-12-09T06:02:20","slug":"prominent-asset-manager-says-blue-label-is-a-solid-wild-card-bet","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/business-telecoms\/622287-prominent-asset-manager-says-blue-label-is-a-solid-wild-card-bet.html","title":{"rendered":"Prominent asset manager selects Blue Label as 2026 wild card"},"content":{"rendered":"\n

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.<\/p>\n\n\n\n

\u201cWe believe investor reaction to the slightly underwhelming reception to Cell C\u2019s listing has created a compelling set-up for the year ahead,\u201d it said.<\/p>\n\n\n\n

Fund manager Mike Gresty argued it was \u201ctime to ignore the doom-mongers\u201d as there may be an excellent opportunity to adopt a contrarian position to the rest of the market.<\/p>\n\n\n\n

\u201cThe value unlock from the restructuring of BLU, culminating in the Cell C IPO, dominated much of the 2025 investment narrative,\u201d Gresty stated.<\/p>\n\n\n\n

He said Cell C\u2019s initial public offering (IPO) was a widely anticipated event, pushing the BLU share price to a level above R17 in August.<\/p>\n\n\n\n

\u201cHowever, 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,\u201d he said.<\/p>\n\n\n\n

\u201cThis is around half of what bullish \u2018value unlock\u2019 advocates had projected earlier in the year.\u201d<\/p>\n\n\n\n

Gresty said the outcome was a perfect set-up for the doom-mongers \u2014 questions about what lay behind the urgency of the Cell C listing provided fertile ground for naysayers.<\/p>\n\n\n\n

BLU\u2019s results were still mired in the complexity of the restructuring, and there was still longstanding investor unease around the credibility of its management team.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\u201cThis loss of investor confidence has shaken out many weak shareholders and driven BLU\u2019s share price to levels below R10 in the process,\u201d said Gresty.<\/p>\n\n\n\n

\u201cGranted, BLU might not have achieved the hoped-for Cell C IPO valuation price, but it did deliver the restructuring it promised \u2014 a point often lost amid the repetition of concerns.\u201d<\/p>\n\n\n\n

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

BLU\u2019s messy results<\/h2>\n\n\n\n
\"\"
Logo reveal at Cell C’s brand refresh event in 2024<\/figcaption><\/figure>\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 said Gresty.<\/p>\n\n\n\n

\u201cWith investors typically allergic to complexity, it may require some patience before a clear picture emerges.\u201d<\/p>\n\n\n\n

However, Gresty said Anchor Capital believes three key things will emerge when the dust settles:  A cleaner BLU with a revealed \u201crump\u201d business, a reset Cell C with a viable path, and a stronger BLU balance sheet.<\/p>\n\n\n\n

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%.<\/p>\n\n\n\n

\u201cThat is important because it means Cell C will be accounted for as an associate rather than having to be consolidated as before,\u201d said Gresty.<\/p>\n\n\n\n

\u201cThis will reveal the BLU \u2018rump\u2019 business, which we think has qualities that are underappreciated because its earnings have essentially been poured into keeping a highly indebted Cell C afloat.\u201d<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\u201cInitially merely a prepaid airtime distributor \u2014 now a largely ex-growth part of its business \u2014 it has expanded into many other areas, making use of various forms of prepaid vouchers,\u201d he said.<\/p>\n\n\n\n

\u201cThese include prepaid electricity, event tickets (Ticketpro), gaming (gambling), for example.\u201d<\/p>\n\n\n\n

Gresty said Anhcor Capital believes this \u201crump\u201d should generate close to R1\/share of earnings with a very high level of cash conversion.<\/p>\n\n\n\n

\u201cThanks 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.\u201d<\/p>\n\n\n\n

Cautious optimism about Cell C<\/h2>\n\n\n\n
\"\"
Blu Label Unlimited co-CEOs Brett and Mark Levy<\/figcaption><\/figure>\n\n\n\n

He said that they are cautious of Cell C management\u2019s assertion that its model will prove superior to that of mobile operators with their own networks.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\u201cThat 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,\u201d said Gresty.<\/p>\n\n\n\n

\u201cCell 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.\u201d<\/p>\n\n\n\n

Gresty said that, based on their estimates, they believe the initial IPO price equates to a forward price\/earnings multiple of about 4.5x.<\/p>\n\n\n\n

\u201cAssuming Cell C delivers on its promises, there is scope for it to rerate upwards,\u201d he said.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\u201cFurthermore, although not central to our investment thesis, we wonder if the urgency to get the IPO done might relate to possible corporate action opportunities,\u201d said Gresty.<\/p>\n\n\n\n

Specifically, Anchor speculated whether corporate action opportunities would only become available to both companies once they were independent of one another.<\/p>\n\n\n\n

\u201cIn 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,\u201d said Gresty.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\u201cWith recent announcements that the joint CEOs, Brett and Mark Levy, have acquired R190mn worth of BLU shares, it would appear they agree!\u201d<\/p>\n\n\n\n

Blue Label share price since 2017<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Cell C share price since listing on 27 November 2025<\/h2>\n\n\n\n
\"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

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.<\/p>\n","protected":false},"author":15,"featured_media":594212,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41906],"tags":[75716,100568,355,96393],"class_list":["post-622287","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-telecoms","tag-anchor-capital","tag-blu-label-unlimited-blu","tag-cell-c","tag-mike-gresty"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/622287"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=622287"}],"version-history":[{"count":2,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/622287\/revisions"}],"predecessor-version":[{"id":622377,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/622287\/revisions\/622377"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/594212"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=622287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=622287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=622287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}