Monumentalist

Investment Analysis: AFROCENTRIC INVESTMENT CORPORATION LIMITED (JSE: ACT)

Date: 9 January 2026 Analyst: [Gemini]

Step 1: Data Gathering & Source Verification

Reporting Period: Interim Results for the 6 months ended 30 June 2025 (Published 2 September 2025).
Note on Reporting Cycle: The company changed its financial year-end from June to December to align with its majority shareholder, Sanlam. Consequently, the period ending 30 June 2025 is treated as the Interim period for the 2025 financial year.
SENS Announcements Reviewed (L12M):
Trading Statement (1 Sept 2025) â Warning of mixed operational performance.
Dividend Declaration (March 2025) â Final dividend for the "stub" period ended Dec 2024.
Change in Board Committees (Oct 2025) â Ongoing governance alignment with Sanlam.
Detailed terms regarding disposal of Activo Health (Dec 2025) â Strategic exit from non-core manufacturing assets.

Step 2: Metric Extraction

Market Cap: R1.17 billion
Share Price: 139 cents (R1.39).
Dividend Yield (L12M): 4.3%
Calculation: 6.0 cents (Final declared Mar 2025, paid May 2025). No interim dividend was declared in September 2025.
Liquidity Check: HIGH RISK / ILLIQUID
Average Daily Value: < R100,000 per day.
Flag: Trading is exceptionally thin following Sanlam's acquisition of a controlling stake (~60%). The "free float" is negligible, making this stock difficult to exit.
P/E Ratio: ~9.0x
Calculation: Price (139c) / TTM HEPS (~15.4c).
Breakdown: Earnings are recovering from the lows of 2024 but remain volatile due to contract losses in the retail pharmacy division.
Net Asset Value (NAV): 315 cents per share (Estimated)
Price-to-NAV: 0.44x. The stock trades at a massive 56% discount to NAV, reflecting the market's view that the value is "trapped" within the Sanlam structure.

Step 3: Operational & Strategic Analysis

Business Overview AfroCentric is a diversified healthcare services provider. Its core asset is Medscheme (South Africa's largest medical aid administrator, managing Bonitas and Fedhealth) and Pharmacy Direct (courier pharmacy). Since 2023/24, it has effectively become the healthcare administration arm of Sanlam, focusing on integrating low-cost health insurance and gap cover products.

Performance Trend (Interim June 2025 vs June 2024)

Revenue: Contracting. Revenue decreased by 2.6%, primarily due to the loss of designated service provider (DSP) contracts in the Pharmacy Direct (Retail) cluster.
Profitability: Recovering. The group swung back to a profit before tax of R161 million (vs. a loss of R81 million in the prior comparative period). This turnaround was driven by cost efficiencies and the non-recurrence of goodwill impairments that plagued the 2024 results.
Strategic Shift: The disposal of Activo Health (announced Dec 2025) signals a clear move to shed capital-intensive manufacturing assets and focus purely on services and administration where Sanlam integration synergies exist.

Sector Context

Macro Factor (Healthcare Policy): National Health Insurance (NHI). The looming implementation of the NHI creates existential uncertainty for medical aid administrators. While AfroCentric positions itself as a potential partner to the state (distributing chronic meds via Pharmacy Direct), the sentiment overhang suppresses the valuation of the entire sector.

Step 4: The Verdict

Bull Case (The "Takeout" Option): Sanlam Consolidation. AfroCentric is now deeply integrated into Sanlam's ecosystem. Trading at a >50% discount to NAV and with extremely low liquidity, it makes little sense for Sanlam to keep it listed as a separate entity indefinitely. A minority buyout offer at a premium (e.g., R2.00 - R2.50) is a plausible medium-term scenario to clean up the corporate structure.
Bear Case (The Value Trap): Operational Erosion. The core pharmacy business is losing volume (contract losses), and the medical scheme administration market is stagnant (no membership growth). Without a buyout, you hold an illiquid stock with shrinking revenues and a dividend that was recently cut/passed.
Fair Value Estimate: 200c â 220c
Basis: A conservative 60% of NAV or a 10x multiple on normalized earnings, assuming successful Sanlam integration.
Final Rating: HOLD / SPECULATIVE
Rationale: Do not buy for operations. Buy (or Hold) only if you are betting on a Sanlam minority buyout. If you are a general investor looking for healthcare exposure, this stock is too illiquid and complex; look at Dis-Chem or Life Healthcare instead.