Lucrative seam of media earnings

PHUTHUMA Nathi offers the only opportunity other than Naspers for investors to get access to the huge cash flows generated by MultiChoice South Africa.

PHUTHUMA Nathi offers the only opportunity other than Naspers for investors to get access to the huge cash flows generated by MultiChoice South Africa.

Until 2006, MultiChoice South Africa was 100% held by Naspers and provided the cash the latter used in its global search for other business opportunities. In the past eight years it has pumped out attractive cash dividends and the Phuthuma Nathi schemes are now almost debt-free.

This is why the two Phuthuma Nathi shares have been among the strongest performing BBBEE schemes. This week, Phuthuma Nathi 1 was trading at R142 and Phuthuma Nathi 2 was at R146.50.

In September 2006, eligible black people were offered an indirect interest of 15% in MultiChoice South Africa. The offer, pitched at R10 a share, was three times oversubscribed with about 120000 applicants receiving the 45million Phuthuma Nathi shares on offer. A few months later, an additional 7.5% stake was offered to applicants who had not received their full allocation. This second block of shares is now referred to as Phuthuma Nathi 2 and the earlier allocation is referred to as Phuthuma Nathi 1.

In total, Phuthuma Nathi shareholders were allocated a 22.5% stake in MultiChoice South Africa. However, this stake was reduced to 20% when shares in MultiChoice South Africa were issued to fund the acquisition of the 40% interest in M-Net/SuperSport in 2007 held by Avusa.

Over-the-counter trading in Phuthuma Nathi 1 and 2 commenced in December 2011. At the end of the first day, the shares were trading at about R28 - a significant advance on the initial offer price of R10. But it was way off the R120 that most analysts believed the shares should be trading at.

OTC trading has seen the shares move beyond the R120 value tagged by analysts, in part because MultiChoice South Africa has paid out special dividends in addition to the attractive ordinary dividends, in a move aimed at paying off the debt ahead of schedule.

There is no plan to convert the Phuthuma Nathi shares.