Our opinion on the current state of ACT

Afrocentric (ACT) is a black-owned investment holding company which focuses on health administration and insurance. Sanlam recently acquired 28,7% of the company which will help with its financing and marketing. The group owns 100% of Pharmacy Direct (a courier company), 100% of Curasana (a pharmaceutical wholesaler) and has recently acquired the other 74% of Activo Health (which distributes generic medicines and nutraceuticals) to give it 100%. This acquisition was executed for R588m in cash and shares, which is a multiple of 9,3 times Activo's most recent after-tax profit (R63m). Its largest asset is its controlling stake in Medscheme which administers medical schemes covering 3,2m lives in South Africa, Namibia, Kenya, Botswana, Zimbabwe and Swaziland. Afrocentric is intent on accessing the Medscheme client base to sell its other products. In its results for the six months to 1st December 2022 the company reported revenue up 1,2% and headline earnings per share (HEPS) down 19%. The company said, "...the muted growth has been affected by the marginal membership growth, membership buy down of options, slowdown of the pharmaceutical sales, reduced adherence to chronic medicine by patients, reduction in SEP and reduction in sales of preventative medicine". On 11-10-22 Sanlam made an offer to buy between 36,9% and 43,9% of Afrocentric for R6 per share. This caused the share price to rise sharply. In a trading statement for the year to 30th June 2023 the company estimated that HEPS would fall by between 30% and 40%. The company said, "The decline in earnings for the current reporting period is mainly attributed to once off costs associated with various corporate activities and business unit restructuring". Technically, the share has been volatile since the Sanlam offer. We expect that to continue.