Our opinion on the current state of BLU.

Blue Label Telecoms (BLT) is a company which has interests in selling secure tokens of value - such as airtime, starter packs and electricity. It bought 45% of Cell-C in September 2016 thus its results have been substantially determined by that company's results. In April 2019, S&P Global Ratings downgraded Cell-C's debt to CCC- from CCC+ because its capital structure was "unsustainable". The total cost of acquiring its stake in Cell-C was R7,55bn, R3,9bn of which was paid for by the issue of the 272m shares. Obviously, much depends on its ability to improve the profitability of Cell-C. Debt levels at Cell-C are up to R8,9bn. So Cell-C's debt is almost three times Blue Label's market capitalisation which is less than R3bn. On 25th August 2021 the company announced that it had obtained new financing for Cell-C. I On 22nd September 2022 the company announced that Cell-C would be re-capitalised with a R1,03bn injection from Bluetel bringing its stake in Cell-C up to 49,5%. The announcement caused Bluetel shares to rise. The company has been achieving positive cash flows and had the benefit of the sale of its 3G handset division - which helped to bring down debt levels. In its results for the six months to 30th November 2022 the company reported revenue up 8% and headline earnings per share (HEPS) up 14%. The company said, "Excluding the extraneous contributions of R421 million in the current period and non-recurring income of R148 million in the prior period, as illustrated in the underlying tables, core headline earnings increased by R55 million (14%) from R400 million to R455 million. Core headline earnings per share increased by 13% from 45.68 cents per share in the prior period to 51.72 cents per share". In a trading statement for the year to 31st May 2023 the company estimated that HEPS would decline by bwteen 62% and 66% as a result of the recapitalisation of Cell-C. Technically, the share has been falling since August 2022. We recommend waiting for a break through the downward trendline. On 23rd March 2023 the company announced that Douglas Stevenson had resigned as CEO of Cell C with effect from 31st March 2023.