Of course, it's a slightly apples-&-pears comparison: Madison, structured for financial reasons as a property loan stock, is in fact SA's first listed property asset manager. It manages ApexHi, Hyprop and Redefine, three top performers, and only investors in those funds are eligible for the prelisting offer.
Madison's main source of revenue is asset management fees - R118m of a total of R140m in the FY2007 projection - plus consulting and other fees, trading profits on unit sales and interest.
Madison plans to raise R350m in a private placement and R300m in the offer to unit holders, with a minimum total subscription of R472m (none of the offers is underwritten). The proceeds will be used to run down debt and to finance the acquisition of outside interests in the ApexHi management company.
Issue price is R5 per linked unit, with forecast distribution for a full FY2007 of 50,07c. Up to 190m units will be listed, which at the issue price implies a market cap of R950m. As part of the placing, BEE firm Clearwater Capital, owned by the KwaZulu Natal-based Mehta family, will take up 20m units.
It should be noted that tangible net assets are negligible. Madison - Madison Property Fund Managers Holdings, to give its somewhat cumbersome full name - is a service company par excellence, with little need for assets, and dependent on the skills of its management. It was formed by the experienced and highly regarded pair of Wolf Cesman and Marc Wainer in 2000 (Property April 30).
As the FM wrote then, while they have committed to long-term service contracts, the listing will also assist their eventual withdrawal.
Investors must weigh this risk against the attractive yield, plus the risk - which may be small, but is real - that management contracts may not be renewed, especially after Cesman (57) and Wainer (64) retire. Still, on balance it looks an attractive offer.
If I had the opportunity - which I don't, as I don't hold units in any of the qualifying funds - I would be filling in the preferential lemon yellow form. The unit should open at a useful premium.
