One of the major criticisms of the JSE relates to its lack of diversity in terms of access to South African technology assets. One of the deals which didn’t get a lot of media coverage but appears to offer some interesting potential is the Cognition Holdings and Private Property transaction.
For those not familiar with Cognition, it is the old “Foneworx” business who cut their teeth in the unlikely field of Fax2Email before moving into research and analytics (BMi Research) and a variety of digital businesses involved in sponsorship, personal data management and loyalty initiatives.
The business has a market capitalization of R165m, turns over R350m in a year and generates about R28m in profit while sitting with R100m of cash in the bank. The group has also traditionally been a good dividend payer and currently sits on an historic yield of 8.3%.
In 2017, it was part of a potential 3 way tie-up between Caxton owned Moneyweb and radio group African Media Entertainment which eventually fell through. Caxton owns 30% of Cognition.
Private Property Transaction
In October 2018, the company announced it would be acquiring Caxtons 50.1% stake in Private Property for R127m. For the previous 12 months, Private Property had delivered an attributable profit to shareholders of R24m.
While the transaction is largely a “shuffling of the deck” for Caxton, Cognition now provides investors with a digital investment holding company with another interesting (and profitable) asset.
Liquidity will remain a problem for the share – the 30 day average trading volume is just 7700 shares – but the Cognition management are conservative in their roll out and for the patient investor, it might be worth watching.