Our opinion on the current state of AMPLATS(AMS)Anglo American Platinum (AMS), commonly known as Amplats, is the world's second-largest platinum producer, after Sibanye, and plays a significant role in the platinum group metals (PGM) industry. Owned 77.62% by Anglo American, Amplats has undergone a significant transformation over the past few years, moving away from deep-level mining toward more efficient, mechanized operations. This shift has seen the company reduce its number of mines from 18 to 7 and cut overheads and employee numbers by 50%, making its operations more streamlined and cost-effective.
Amplats' Mogalakwena open-cast mine is a particularly standout operation due to its palladium-rich deposits and production costs, which are among the lowest in the global PGM industry. The company's ongoing projects at Mogalakwena aim to boost platinum production by 250,000 ounces and palladium production by 270,000 ounces. Additionally, Amplats acquired Glencore's 40.2% stake in their joint venture at the Mototolo mine and the adjacent Der Brochen property for R1.5 billion. The Mototolo operation is highly mechanized and shallow, allowing for efficient expansion into Der Brochen without the need for extensive new infrastructure.
Despite its successes, the platinum market faces challenges from the recycling industry, which recovers approximately 2 million ounces annually from old auto catalysts, contributing to downward pressure on prices. While Amplats is considered the best of the PGM shares on the JSE, it remains highly volatile due to its exposure to commodity price fluctuations.
In its plans to boost production at Mogalakwena, the company intends to relocate 1,000 families, which could lead to unrest among workers and communities. In December 2021, Amplats announced a R3.9 billion extension to the life of its Mototolo/De Brochen mines, projecting operations to continue beyond 30 years. The company also faced a significant leadership change with the resignation of CEO Natascha Viljoen in February 2023, although she will serve out her 12-month notice period.
Amplats' financial performance for the six months ending 30th June 2024 reflected challenging market conditions:
- Tonnes milled down 7%
- Production of refined PGMs up 5%
- Revenue down 19%
- Headline earnings down 18%
The company attributed this performance to the 24% decline in the PGM dollar basket price, driven by lower prices for palladium (down 34%) and rhodium (down 49%).
In an update for the third quarter to 30th September 2024, the company reported:
- PGM production from own-managed mines down 9%
- PGM sales volumes up 16%
- Production guidance for 2024 remained at 3.3-3.7 million PGM ounces, while refined production guidance was revised up to 3.7-3.9 million ounces.
The stock remains highly speculative and volatile, closely tied to international PGM prices. Technically, the share had been falling since March 2022 due to challenges like load shedding and declining PGM prices. However, a technical upward break through the long-term downward trendline occurred on 4th October 2024 at 66,766c. Since then, the share price has risen to 74,957c.
On 19th February 2023, Amplats announced potential retrenchments of 3,700 employees, and on 23rd July 2024, Business Day reported that Amplats was considering a listing on the London Stock Exchange (LSE). This potential move could increase its visibility and attractiveness to international investors, providing further opportunities for growth.
Our opinion on the current state of AFRIMAT(AFT)Afrimat (AFT) is an open-pit mining company supplying composites, construction materials, and other commodities to various industries across Southern Africa. Historically, Afrimat was one of the top-performing shares on the JSE until the end of 2015. After a period of consolidation and navigating through the COVID-19 crisis, the stock broke out of a 3-year sideways pattern, peaking at R76 on 6th April 2022. However, it has since declined due to the downturn in the commodity cycle.
The acquisition of the Demaneng iron mine in the Northern Cape has helped buffer Afrimat from challenges in the construction industry. Afrimat has been actively pursuing diversification into other base minerals such as manganese, chrome, and coal. The company's CEO, Andries van Heerden, has stated that Afrimat is known for its successful acquisitions and is constantly evaluating new opportunities.
Some of Afrimat's significant acquisitions and developments include:
- On 26th May 2020, Afrimat expressed interest in Unicorn Capital Partners, which operates an anthracite mine.
- On 17th August 2020, Afrimat purchased Coza Mining, involved in iron and manganese exploration, for R300 million.
- On 21st May 2021, Afrimat acquired the Gravenhage manganese mine in the Kalahari Manganese Field for $45 million.
- On 10th December 2021, Afrimat announced the acquisition of Glenover Phosphate for R550 million.
- On 20th March 2022, Afrimat's listing was moved to the General Mining sector, reflecting its diversified business.
- On 20th June 2023, Afrimat acquired Lafarge, a construction materials company, for $6 million.
In its latest financial results for the six months ending 31st August 2024, Afrimat reported:
- Revenue up 44.3%.
- Headline earnings per share (HEPS) down to 53c, from 263.4c in the previous period.
- Net asset value (NAV) increased by 10.5% to 3038c per share.
Afrimat highlighted several challenges during this period, including a declining iron ore price, a strengthening Rand, export limitations on rail lines, and losses in its cement business. The company also dealt with reduced offtake from large industrial customers. Despite these challenges, Afrimat’s low debt levels and diversified portfolio across multiple commodities help mitigate some of the risks posed by fluctuating commodity prices.
The company received approval from the Competition Commission on 10th April 2024 for its full acquisition of Lafarge.
With a price-to-earnings (P:E) ratio of 11.63, Afrimat appears reasonably priced. Although the company has faced setbacks due to commodity price drops, its diversification and low debt levels make it a compelling value opportunity. Technically, the share is in a volatile upward trend, and there is confidence that the trend will continue in the near term, supported by the company’s strong fundamentals and acquisition-driven strategy.
Our opinion on the current state of EOHEnterprise Outsourcing Holdings (EOH) was once Africa's largest information technology company, involved in almost every aspect of computer applications. At its peak, the company had 11,000 staff members, though this number has since been reduced to 6,151. EOH was a star performer on the JSE until August 2015, with a long history of steady profit growth. Its share price peaked at R178 per share with a P:E ratio of 35. However, after an unsuccessful attempt to exceed that high in September 2016, the share price began a steady decline, reaching a low of 146c in February 2023.
The fall in share price coincided with allegations of involvement in state capture in collaboration with the Gupta family. The company's founder and CEO, Asher Bohbot, resigned in May 2017, handing over leadership to Zunaid Mayet, and later to Stephen van Coller. Bohbot's departure was seen as a major blow, as the company had been strongly driven by his leadership. Following the leadership changes, EOH's 200 subsidiaries were consolidated into three divisions with centralized debt collection and procurement.
In July 2021, Business Day reported that EOH could potentially be "blacklisted" by the South African government due to past tender fraud, which would have severely impacted the company's future prospects.
To address its financial difficulties, on 11th November 2022, EOH announced a R500 million rights issue and a R100 million private placement, primarily to reduce its debt. By 13th February 2023, the rights issue had been 135.8% over-subscribed, reflecting strong investor interest. However, in its results for the year ending 31st July 2024, EOH reported a 3.1% decline in revenue and a headline loss per share of 0.21c, compared to a loss of 21c the previous year.
The company has undertaken a turnaround plan, with a special board subcommittee formed in June 2024 to oversee restructuring and rationalization initiatives. EOH expects cost savings of between R160 million and R200 million going into FY25, thanks to the successful restructuring of corporate and administrative costs.
On 31st May 2024, several directors resigned, and Marius de la Rey was appointed as interim CEO, adding further to the company's ongoing transformation.
From a technical perspective, the share made a "double bottom" in April and May 2024, indicating a potential reversal of its long-term downward trend. Following this, the share began an upward trend, which suggests that the company may be on the road to recovery. If the restructuring efforts prove successful, EOH has the potential for further growth, especially as it works to stabilize and rebuild its business.
Our opinion on the current state of FAMBRANDS(FBR)Famous Brands (FBR) is Africa's largest branded fast-food franchisor, operating 2925 restaurants across seventeen brands, with 2574 restaurants in South Africa, 62 in the UK, and 76 in other parts of Africa and the Middle East. The company owns iconic South African brands such as Wimpy, Debonairs Pizza, and Steers. For the last two years, even before COVID-19, Famous Brands has faced challenges in a tough economic environment, with South African consumers hit hard by rising fuel costs, load shedding, unemployment, and high indebtedness. The retail fast-food industry has become increasingly competitive, further complicating the company's growth prospects.
Famous Brands has been working to grow its signature brands, but these have not yet performed as well as its leading brands like Wimpy and Steers. The acquisition of Gourmet Burger Kitchen (GBK) in the UK in 2016, just before the Brexit vote, proved to be a major misstep. Purchased for R2.3 billion, GBK's performance was disappointing, and Famous Brands was forced to write off the value of the acquisition and cease financing it in April 2020. On 14th October 2020, the company announced that GBK was placed into administration in the UK.
During the COVID-19 lockdown, many of Famous Brands' restaurants were not allowed to trade, which further impacted its operations. In response, the company has simplified its menus to focus on the most profitable offerings and improved its take-away and delivery options.
In its results for the six months ending 31st August 2024, Famous Brands reported:
- Revenue up 2%
- Headline earnings per share (HEPS) up 9%
The company attributed these results to prudence in managing its cost base, although its operating profit margins were impacted by lower volumes and overhead cost pressures. The share has been performing well since hitting a low on 10th June 2024 (at 4774c), starting a new upward trend.
With a P:E ratio of 13.76 and a dividend yield of 3.77%, the share is still considered reasonable value. As a leading player in South Africa's fast-food industry, Famous Brands serves as a barometer of consumer confidence and spending, making it a key stock to watch in the South African market.
Our opinion on the current state of WEBBUYCAR(WBC)WeBuyCars was listed separately on the JSE on 11th April 2024, having been unbundled from Transaction Capital (TCP) to raise capital and shield itself from the challenges TCP faces in its taxi division. The company issued 417.2 million shares, which began trading at around R20 per share, giving it an initial market capitalisation of just over R8.5 billion. WeBuyCars has a free float of about 57.5%, with significant institutional investor participation, signaling confidence in the stock.
In its financial results for the six months ending 31st March 2024, WeBuyCars reported impressive growth:
- Revenue increased by 15.9%
- Core headline earnings per share (HEPS) rose by 26.1%
The company highlighted its strong balance sheet, which is conservatively geared, and its high cash conversion rates. Net cash generated by operating activities stood at R267 million, representing a 96.6% increase over the comparable period.
In a trading statement for the year ending 30th September 2024, WeBuyCars estimated that HEPS would rise by between 7% and 12%. Given its strong performance and steady growth outlook, WeBuyCars is viewed as an excellent blue-chip share with the potential to grow consistently over time. Its conservative gearing, cash flow strength, and institutional backing further reinforce its position as a solid long-term investment opportunity.
Our opinion on the current state of SASOL(SOL)Sasol (SOL) is an international chemicals and energy company, historically rooted in South Africa's oil-from-coal technology, and about 50% of its profits are linked to oil prices. Sasol has two major growth areas: its 50% stake in the Lake Charles Chemical Project (LCCP) in Louisiana, USA, and its expanding gas exploration efforts in Mozambique. Recently, Sasol was awarded two new gas exploration licenses in Mozambique, covering approximately 3,000 square kilometers, which could bolster its existing projects in the Rovuma province.
A major concern for Sasol is its environmental footprint, as it is the largest producer of greenhouse gases in South Africa and one of the top 100 fossil fuel companies worldwide, responsible for over 70% of global greenhouse gas emissions. Sasol is under increasing international pressure to reduce its carbon emissions, as its operations, especially in South Africa, heavily depend on coal.
Sasol's share price experienced a significant recovery after the COVID-19 pandemic but has since been affected by declining commodity prices, particularly oil. On 7th April 2024, the South African Minister of the Environment, Barbara Creecy, upheld Sasol's appeal against a ruling by the national air quality officer that could have jeopardized the continued operation of its Secunda oil-from-coal plant. This plant, along with the company's other coal operations, delivers 10 million tonnes of thermal coal feedstock annually to its Secunda and Sasolburg facilities, as well as for export.
In its results for the year ending 30th June 2024, Sasol reported a 66% drop in headline earnings per share (HEPS) and a 16% decline in net asset value (NAV). The financial results were significantly impacted by large impairments, including a R58.9 billion impairment on the Chemicals America Ethane value chain, a R5.3 billion impairment on Chemicals Africa, and a R7.8 billion impairment related to Secunda. While Sasol benefited from a weaker rand and a favorable rand oil price, its margins were constrained, leading to negative impacts on its fuels and chemicals businesses. Additionally, operational challenges across its portfolio further contributed to the disappointing financial performance.
In a production and sales update for the quarter ending 30th September 2024, Sasol reported that international chemical sales were negatively affected by the East Cracker in the US remaining offline. Mining saleable production was down 1% in the quarter and 4% compared to the previous year.
Sasol remains a volatile commodity stock in a long-term downward trend, and potential investors are advised to wait for a clear break above this trendline before considering any investments.
On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the board, effective immediately. More recently, on 22nd October 2024, Business Day reported that a study by Wits Business School found that the future of Sasol's Secunda plant, which produces 84% of Sasol’s scope 1 and 2 emissions, rests in the hands of the government. The study concluded that the plant is unlikely to be modified to meet emissions regulations and may face closure. This adds significant uncertainty to the company’s future, especially given the growing regulatory and environmental challenges.
Our opinion on the current state of SASFIN(SFN)Sasfin (SFN) is a banking group specializing in financing services for small businesses and high-net-worth individuals. Listed on the JSE in 1987, Sasfin has been investing in its digital platforms and making strategic acquisitions. The share had been in a long-term downward trend, with investors advised to wait for a decisive upward break through its trendline before considering further investment. The impact of COVID-19 slowed the recovery, though there have been signs of improvement recently.
On 16th October 2023, Sasfin announced that it had entered into binding agreements to sell its capital equipment finance and commercial property finance businesses to African Bank Limited. This announcement led to a sharp rise in the share price. However, on 27th February 2024, the company received a civil summons from the South African Revenue Services (SARS) for a damages claim of R4.782 billion, plus interest and penalties, related to income tax, VAT, and penalties allegedly owed by former foreign exchange clients of the bank. This legal issue has raised concerns for investors.
In its results for the year ending 30th June 2024, Sasfin reported a headline loss of 190.96c, compared to a profit of 366.18c in the previous year. The loss was attributed to an increase in expected credit losses, a decline in non-interest income due to negative fair value adjustments in the Private Equity portfolio, and a provision raised for administrative sanctions. Sasfin’s market capitalization currently stands at R484 million.
Trading in the share is relatively thin, with an average of around R85,000 worth of shares changing hands daily. On 15th July 2024, Sasfin announced its intention to delist from the JSE, offering shareholders R30 per share, which represents a 66% premium to the 30-day volume-weighted average price (VWAP) as of 12th July 2024.
However, on 16th October 2024, Business Day reported that the JSE had placed Sasfin on notice of suspension due to its failure to produce financial statements within three months of the end of its financial year. This ongoing issue adds a layer of uncertainty to the company’s outlook, and investors should approach with caution until further clarity is provided on its financial status and the outcome of the delisting process.
Our opinion on the current state of ADCORP(ADR)Adcorp (ADR) is an employment services company with subsidiaries in South Africa and Australia. The company has focused on improving its operations through (1) defining and refining its core business, (2) reducing costs, (3) strengthening its brand, and (4) transforming its internal culture. These efforts are aimed at positioning the company for growth, despite the challenging economic environment in South Africa and Australia.
In its results for the year ending 29th February 2024, Adcorp reported a 7.7% increase in revenue from continuing operations and a headline earnings per share (HEPS) of 83.8c, up from 61.1c in the prior year. The company highlighted the growing demand for its services in South Africa, driven by persistent load shedding and infrastructure issues, which prompted companies to seek more flexible staffing solutions. In Australia, ongoing blue-collar labor shortages increased demand for Adcorp’s contingent staffing services.
However, in a trading statement for the six months ending 31st August 2024, Adcorp estimated that HEPS would decrease by between 9.7% and 19.7%, primarily due to one-off restructuring costs of R25.6 million incurred during the period. The company emphasized that this decrease in earnings should be viewed in the context of these non-recurring costs.
Technically, the share has been drifting sideways and downward for the past 40 months, although it saw a spike in late May 2023 due to the prospect of a special dividend. The company has faced headwinds from South Africa’s high unemployment rate and the effects of COVID-19, which have further strained the economy and business activity.
Despite these challenges, the new management team appears to be making progress in stabilizing the company and positioning it for growth. With a price-to-earnings (P:E) ratio of 5.85 and a dividend yield (DY) of 6.58%, Adcorp's stock is relatively cheap, and there is potential for growth as the management continues to execute its turnaround strategy.
Given the company's restructuring efforts and strong demand for its services in both South Africa and Australia, Adcorp may offer value to investors, although the economic conditions in its key markets present ongoing risks.
Our opinion on the current state of SOUTH32(S32)South32 (S32) was spun out of BHP Billiton in 2015, inheriting BHP's South African coal assets. Today, it is a diversified miner of base metals and minerals, including zinc, coal, aluminium, silver, lead, nickel, and manganese, with operations in South Africa, South America, and Australia. In June 2020, South32 sold its South African coal assets to Seriti, reflecting its strategic move away from coal and a general distancing from South Africa due to the country's administrative and legislative uncertainty. The company is also focusing on other assets and growth opportunities globally.
South32 made a significant acquisition by purchasing the remaining 83% of Arizona Mining, which has extensive interests in zinc, manganese, and silver. This acquisition positions South32 to capitalize on what CEO Graham Kerr described as "one of the most exciting base metal projects in the world." Like BHP and Anglo, South32 is moving away from South African investments until the new mining charter is finalized, focusing on more stable jurisdictions.
South32 is actively reshaping its portfolio by selling off its South African coal interests while retaining its South Deep mine for now. The company has also committed to a $1.4 billion share buy-back program and is working to transition its Hillside smelter in South Africa away from reliance on Eskom by adopting renewable energy sources over the next decade.
For the year ending 30th June 2024, South32 reported a 3% drop in revenue and headline earnings per share (HEPS) of 6.5 US cents, down from 22.6 US cents in the previous year. The company highlighted strong operational performance, disciplined cost management, and higher prices for its key commodities, contributing to FY24 underlying EBITDA of $1.8 billion and underlying earnings of $380 million.
In its report for the three months ending 30th September 2024, South32 noted the completion of the sale of Illawarra Metallurgical Coal, with upfront cash proceeds of $964 million. The company expanded its capital management program by $200 million and continued its on-market share buy-back. South32 also maintained its FY25 production guidance for all operations, with a 5% increase in aluminium production at Hillside Aluminium as it tested its maximum technical capacity.
Technically, South32's share price trended upward after the COVID-19 recovery, but it has been declining since March 2023 due to falling commodity prices. As a commodity-driven stock, it remains volatile, reflecting global fluctuations in base metal prices. While the company has strong potential, particularly as base metal prices recover, its exposure to market volatility makes it a higher-risk investment.
Overall, South32 remains a well-managed mining conglomerate with growth potential in the medium term, especially as it expands its presence in base metals outside of South Africa.
Our opinion on the current state of SASOL(SOL)Sasol (SOL) is a large international chemicals and energy company that originated from the oil-from-coal technology developed in South Africa during the apartheid era. Around 50% of Sasol's profits are tied directly to the oil price, and the company has two key growth areas: its 50% stake in the Lake Charles Chemical Project (LCCP) in Louisiana, USA, and the development of gas resources in Mozambique. Sasol was recently awarded two new gas exploration licenses in Mozambique, covering approximately 3,000 square kilometers, which could significantly enhance its gas projects in the Rovuma province.
One major concern for Sasol is its significant contribution to greenhouse gas emissions, being South Africa’s largest producer and listed among the top 100 global fossil-fuel companies responsible for over 70% of greenhouse gas emissions worldwide. The company faces international pressure to reduce its carbon footprint and address its environmental impact.
Sasol experienced a dramatic recovery after the COVID-19 pandemic but has since been affected by the decline in commodity prices, particularly oil. On 7th April 2024, the South African Minister of the Environment, Barbara Creecy, upheld Sasol's appeal against a ruling by the national air quality officer that could have threatened operations at its Secunda oil-from-coal plant. Secunda is a key facility for Sasol, with six coal mines delivering 10 million tonnes of thermal coal feedstock to both Secunda and Sasolburg for their operations and for export.
In its results for the year ending 30th June 2024, Sasol reported a 66% drop in headline earnings per share (HEPS) and a 16% decline in net asset value (NAV). These declines were driven by a significant R58.9 billion impairment of the Chemicals America Ethane value chain, a R5.3 billion impairment in Chemicals Africa, and a R7.8 billion impairment related to Secunda. Despite benefiting from a weaker rand against the US dollar and a favorable rand oil price, constrained margins and various operational challenges negatively affected Sasol’s fuels and chemicals businesses.
Sasol’s share price remains volatile due to its exposure to commodity prices, particularly oil, and it is currently in a long-term downward trend. Investors are advised to wait for the share to break through its downward trendline before considering further action.
On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the Board with immediate effect. On 22nd October 2024, *Business Day* reported on a new study by academics at Wits Business School, revealing that Sasol’s massive Secunda plant, which accounts for 84% of the company’s scope 1 and 2 emissions, may not be modifiable to comply with emissions regulations. This means that its future could now depend on government intervention, with the possibility of closure looming if compliance cannot be achieved.
Our opinion on the current state of 4SIGHT(4SI)4Sight (4SI) is a Mauritian-based company that focuses on investing in technologies related to the "4th Industrial Revolution," which includes developments in cyber-physical systems such as cloud computing, the Internet of Things (IoT), and smart factories. The company operates in two main areas: mining and manufacturing, and software, cloud, and enterprise solutions. It employs around 400 people and serves 3,000 customers across 30 countries, with 42% of its income coming from outside South Africa.
Since listing in October 2017, 4Sight's share price fell sharply from 235c to around 13c by September 2019. However, the stock has rallied since then, reaching 31c. The company does not currently pay dividends, which is common for high-growth, tech-focused companies.
4Sight's business model, focused on the technologies driving the 4th Industrial Revolution, makes it a challenging company to evaluate without a deep understanding of these sectors. Therefore, a strict stop-loss strategy is recommended for investors. On 6th October 2020, 4Sight announced that it had bought back 30.6% of its issued ordinary shares and finalized the sale of Digitata for just over R90 million, strengthening its financial position.
In its results for the six months ending 31st August 2024, 4Sight reported a 20.1% increase in revenue and a 35.5% rise in headline earnings per share (HEPS). The company noted a significant rise in demand for its innovative AI solutions, reflecting a growing trend among its customers to prioritize AI integration and technological innovation in their business strategies.
The share was added to the Winning Shares List on 3rd August 2023 at 31c and has since risen as high as 110c on 14th March 2024. Technically, 4Sight is a penny stock, but it is showing potential for a new upward trend, and it trades around R126,000 per day on average, making it suitable for private investors. There is also evidence that the stock is beginning to attract the attention of institutional investors, which could further boost its prospects.
Our opinion on the current state of NEPIROCK(NRP)Nepi-Rockcastle (NRP) is a R124 billion real estate investment trust (REIT) that operates over 56 shopping malls across nine central and eastern European countries. The company's portfolio is concentrated mostly in Poland (24%), Romania (35%), Slovakia (9%), Bulgaria (8%), Croatia (5%), and Hungary (11%). Nepi-Rockcastle has a total portfolio valued at €6.3 billion (R124 billion), making it the largest property share on the JSE.
The share price has experienced significant volatility in recent years. It fell sharply following the release of the 360ne report in January 2018, which affected the entire Resilient group. The share dropped from its high of R217 in December 2017 to as low as R99 in November 2018. The COVID-19 pandemic further impacted the stock, driving it down to under R55 in March 2020. However, since then, the share has recovered, trading around R103.06 recently.
On 1st February 2022, Nepi-Rockcastle announced it was ordered to pay €30 million following a civil judgment by the Arbitral Tribunal in Poland. Despite this, the company has continued to perform well. In its results for the six months ending 30th June 2024, it reported a 13.5% increase in net income and a 3.56% rise in headline earnings per share (HEPS). The vacancy rate remained low at 2.7%, and the loan-to-value (LTV) ratio was 32.2%. Property operating expenses decreased by 3.3%, thanks to lower energy costs and operational efficiencies, while the recovery rate improved from 93% to 94%. The company also reported a strong liquidity position of almost €1.3 billion, including €672 million in cash and cash equivalents and €620 million in undrawn credit facilities.
Technically, the share has been in a strong upward trend since 1st November 2023 and is viewed as good value at current levels. The upward trend is expected to continue.
On 18th October 2024, the company raised €300 million by selling 41.7 million ordinary shares, representing 6.2% of its issued share capital, at €7.191 (R137.85) per share. This represented a discount of 4.36% to the previous closing price of R144.13 on 17th October 2024. Despite the discount, the capital raise is seen as a positive move to strengthen its liquidity and support future growth.
Overall, Nepi-Rockcastle remains a solid investment, particularly for those seeking exposure to European property markets, and continues to recover from past volatility.
Our opinion on the current state of RENERGEN(REN)Renergen (REN) is an integrated alternative energy company focused on renewable energy projects in Africa, particularly in liquified natural gas (LNG) and helium. Listed on the JSE in June 2015, Renergen has faced ongoing financial challenges, reflected in consistent losses and a falling share price. Despite this, the company has been making strategic investments to position itself as a key player in the energy and helium sectors.
The company raised R125 million through a fully underwritten rights issue, enabling access to a R218 million loan facility. Its initial public offering (IPO) on the Australian Stock Exchange (ASX) was more than twice oversubscribed. Renergen claims to have proven helium reserves of over 6 billion cubic feet, and the US government identified helium as critical to national security in 2018, driving up prices by 135%.
Notable developments include:
- 10th December 2020: Announcement of the development of an aluminium case that can keep vaccines cold for up to 30 days, a potential game-changer for the company.
- 21st June 2021: Helium discovery at Evander with a concentration of 1.1%.
- 9th March 2021: Significant gas strike in the Karoo.
- 12th April 2021: First deal to sell helium was concluded.
- 3rd November 2021: A 620% increase in 1P helium reserves was announced, causing a share price spike.
- 7th June 2023: Renergen secured $750 million in additional funding from Standard Bank and the International Development Finance Corporation for the Virginia Gas Project (VGP).
In its results for the year ending 29th February 2024, Renergen reported revenue growth of 128.4%, but a headline loss of 75.07c per share, up from a loss of 19.89c in the previous period. The company cited unexpected operational challenges at the VGP, its primary asset, related to LNG and helium operations. Despite these challenges, the company now holds 94.5% of the VGP after selling a 5.5% stake to MGE.
For the six months ending 31st August 2024, Renergen projected a headline loss of between 42.7c and 48.7c per share, compared with a loss of 29.87c in the previous period. The company remains a speculative investment, given its volatility and the operational risks it faces.
On 12th August 2024, Renergen announced that it was fully online and producing liquid helium for sale, which caused the share price to jump and break above its long-term downward trendline. However, this break was short-lived, and the stock remains in a volatile and uncertain position.
Investors should exercise caution, particularly in the short term, and consider waiting for more stable signals of growth before further investigation. Renergen may offer speculative opportunities, but its risks are significant.
Our opinion on the current state of SANTOVA(SNV)Santova (SNV) is an international logistics company with a presence in 19 offices across 7 countries. The company goes beyond traditional logistics by offering comprehensive supply chain management services, which include the design, implementation, coordination, control, and monitoring of international supply chains. Through a virtual client-centric information system, Santova facilitates inventory management and provides enhanced tracking and tracing services.
Santova has a global reach, with offices in key regions: in the East (Thailand, Vietnam, Malaysia), Europe (Germany, the Netherlands, the UK), major cities in South Africa, as well as Mauritius and Sydney, Australia.
In its financial results for the year ending 29th February 2024, Santova reported revenue of R617.7 million, down from R654.4 million in the previous period. Earnings per share (EPS) was 111.81c, compared to 154.74c in the prior period. In a trading statement for the six months ending 31st August 2024, the company projected that headline earnings per share (HEPS) would decline by between 16.9% and 21.9%.
Technically, the share had been in a steady upward trend from May 2020, which ended in August 2023. The share price has since fallen to 720c per share, but it may now be at the start of a new upward trend. The stock is relatively well-traded, making it practical for private investors, and it stands to benefit from improvements in both the South African and UK economies.
Santova's global presence and ability to manage complex supply chains position it well for future growth, though it faces short-term pressures due to economic factors impacting revenue and earnings.
Our opinion on the current state of STANBANK(SBK)Standard Bank (SBK), founded 160 years ago, is South Africa's second-largest bank by market capitalisation, after First National Bank. The bank has significant operations across Africa, which now contribute 34% of its headline earnings. 20% of Standard Bank's shares are owned by the Industrial and Commercial Bank of China (ICBC), and it owns 40% of ICBC Standard Bank (ICBCS), previously Standard Bank Plc in the UK.
The bank has faced operational challenges due to load-shedding in South Africa and the residual effects of the COVID-19 pandemic, during which about 70% of its staff worked remotely. Despite these challenges, Standard Bank remains an excellent long-term investment for private investors, particularly as the economic recovery following COVID-19 is expected to boost profits.
On 15th July 2021, Standard Bank announced an offer to acquire the ordinary shares and preference shares of Liberty Holdings (LBH). Liberty shareholders received 0.5 Standard Bank shares and R25.50 in cash for each LBH ordinary share, giving an implied valuation of just under R90 per share, a 33% premium to its pre-announcement price of R67.48.
The bank has benefited from an increase in client numbers and rising interest rates. For the six months ending 30th June 2024, Standard Bank reported a 4% increase in headline earnings per share (HEPS) and a return on equity (ROE) of 18.5%. The company's net asset value (NAV) also grew by 5%, reaching 14,564c per share. The bank noted that its strong performance was driven by franchise growth in its banking business and robust earnings growth in its insurance and asset management divisions.
In a filing for ICBC for the nine months ending 30th September 2024, Standard Bank reported continued strong organic growth, supported by mid-teens growth in banking earnings and a strong rebound in insurance and asset management earnings. However, the South African rand strengthened against almost all group-related currencies in the three months to 30th September 2024, limiting headline earnings growth to mid-single digits in rand terms.
The share made a cyclical low at 16,707c on 17th April 2024 and has been in a strong upward trend since then. With a price-to-earnings (P:E) ratio of 9.06 and a dividend yield (DY) of 4.94%, Standard Bank offers good value, especially for long-term investors looking to capitalize on Africa's growing banking sector and the bank's diverse operations.
Our opinion on the current state of REINET(RNI)Reinet (RNI) is an investment holding company with its primary asset being a 2.12% stake in British American Tobacco (BAT), valued at around $1.8 billion, which now represents 31% of its net asset value (NAV). This is a significant decrease from the 85% share of NAV BAT held ten years ago. The reduction in BAT's contribution is largely due to the decline in its share price, driven by a more challenging legal environment for tobacco, particularly in the US, where the Food and Drug Administration is considering regulatory changes to menthol cigarettes.
Despite these challenges, Reinet has not shown urgency in divesting its BAT stake, as BAT continues to provide substantial dividends, especially from its growth in emerging markets, while cigarette sales in developed markets decline. The lower valuation of BAT has also increased the significance of Reinet’s other assets, particularly its 46% stake in Pension Insurance Corporation (Penscorp), which now represents 36.8% of its portfolio. In addition to Penscorp, Reinet holds a range of private equity investments that account for about 15% of its portfolio.
Since March 2009, Reinet has achieved a compound annual growth rate of 8.8%. The company reported an NAV of 3669 euro cents at 30th June 2024, and by 30th September 2024, its NAV had increased to 3848 euro cents.
Reinet is considered a rand-hedge stock, meaning it benefits from any weakness in the South African rand. After falling from its high of R343 in February 2020, the share reached lows in January 2021. Investors were advised to wait for a break through the long-term downward trendline, which occurred on 16th September 2019 at R270 per share. The share is now trading at R451.42.
The share was negatively affected by a 10% drop in BAT’s share price after BAT announced it was writing down the value of its US operations by GBP25 million (R595 billion). Investors should consider the future prospects of the rand when evaluating Reinet, as further weakness in the currency could benefit the stock's performance.
Probabilities of further upside on JSE's Vodacom share price?JSEVOD fell off a cliff from its all-time high of R186.99 in August 2017 and left a gap between R177.10 and R168.81 while going on a downward trajectory, reaching lows of R90.70 around March 2020. We then saw a bounce rally taking us to R163.48 before sellers stepped in around April 2022 to have price sniff R85.44 by April 2024.
We have seen a positive recovery since then, with price painting what seems to be an Inverse Head & Shoulders pattern. The bullish crossover of the 50 and 200 Day EMA has also already occurred with the Daily RSI firmly in bullish territory. Since August 2024 a bullish flag seems to also be developing as the right shoulder of the H&S pattern, giving added confluence to probabilities of further upside.
Seeing that price is still only hanging around the 50 Day EMA, there is a slight possibility that sellers might have their last and final show of strength from a zone around R110.00 ~ R111.00 to pull price back to R99.20 where we expect conservative buyers to pick the stock up for a rally to R138.86 and beyond. Earnings data coming out on 11 November 2024 might, if positive, act as a catalyst for buys up to a resistance zone around R116.22 which will need to be overcome and positively retested for aggressive buyers to step in.
Recommended BUY Position:
R99.20 (Conservative) with a Stop Loss of R96.00
R117.20 (Aggressive after testing R116.22) With a Stop Loss of R113.30
Take Profit 1: R138.86
Take Profit 2: R156.30
Take Profit 3: R188.80
Take Profit 4: R430.00 (Much later in life)
Our opinion on the current state of PSG-KST(KST)PSG Fin (previously PSG Konsult) is a well-established financial services group that originated from PSG's stockbroking business and now offers a broad range of financial services, including financial planning, unit trusts, healthcare, short-term insurance, and estate planning. PSG retains a 60% stake in the company.
In its results for the six months ending 31st August 2024, PSG Fin reported a 28% increase in recurring headline earnings per share (HEPS) and a 16% rise in assets under management (AUM) to R435.7 billion. Gross written premiums also grew by 10%. The company noted that while operating conditions remained challenging, more favorable equity markets and sustained high interest rates positively impacted its results during the period.
The share currently trades on an earnings multiple (P:E) of 22.81, which suggests that it is not cheap. However, PSG Fin is a high-quality company with a proven ability to deliver solid returns, even in difficult economic conditions. Technically, the share has been in an upward trend since March 2020, indicating good value at current levels.
On 1st March 2022, PSG announced that it would be unbundling its 60.8% holding in PSG Konsult to its shareholders, a move aimed at releasing value. PSG Fin (KST) was added to the Winning Shares List (WSL) on 23rd May 2024 at a price of 1610c, and the share has since risen to 1850c. Given its solid track record and growth potential, it appears poised for further gains.
Our opinion on the current state of PREMIER(PMR)Premier is a food producer that was spun out of Brait (BAT) through an initial public offering (IPO) and separately listed on 24th March 2023. The IPO raised R3.6 billion at a share price of 5382c per share, with Brait retaining a 47.1% stake in Premier. Despite challenges, Premier has successfully mitigated the impact of loadshedding on its operations, and the associated costs did not significantly affect its financial performance.
In its results for the year ending 31st March 2024, Premier reported revenue growth of 3.6% and headline earnings per share (HEPS) up 17.4%. The company attributed this growth to both the Millbake and Groceries and International categories, which saw revenue increases of 3.7% and 3.3%, respectively. Premier noted that the softening to single-digit revenue growth was expected due to the significant soft commodity inflation in the prior year and its subsequent stabilization.
In a trading statement for the six months ending 30th September 2024, Premier estimated that HEPS would increase by between 25% and 33%. The improvement in operational earnings was driven by margin management, cost-saving initiatives, and the delivery of material operational efficiencies.
Following its listing in March 2023, the share price initially moved sideways and slightly upward. However, since July 2024, the share has risen steeply. Premier is expected to be a blue-chip operation, attracting institutional investors, making it a solid, though not particularly high-growth, investment for private investors.
Premier was added to the Winning Shares List (WSL) on 21st August 2024 at 7635c, and it has since risen to 10617c, demonstrating strong upward momentum.
Our opinion on the current state of PICKNPAY(PIK)Pick 'n Pay (PIK) is a retail grocery chain with over 2,000 stores, primarily in South Africa but also operating in other parts of Africa. The company was founded by Raymond Ackerman in 1967 and became the dominant grocery retailer in the country before being surpassed by Shoprite/Checkers. Richard Brasher previously served as CEO, but Sean Summers, who led the company from 1999 to 2007, has returned to the role of CEO in an effort to restore the company's competitive edge.
In its results for the 52 weeks ending 25th February 2024, Pick 'n Pay reported a 5.4% increase in turnover but posted a headline loss of 203.06c per share, compared to a profit of 259.25c in the previous year. The company highlighted a significant decline in trading profit, which fell 87.4% to R385 million. This was largely due to a R1.5 billion trading loss from Pick 'n Pay, a sharp reversal from FY23's R1.3 billion profit. Meanwhile, Boxer contributed R1.9 billion in trading profit, compared to R1.8 billion in the previous year. The company also faced a substantial 198.8% increase in net interest paid, reaching R701.8 million, driven by higher gearing and increased interest rates.
Technically, Pick 'n Pay has been in a long-term downward trend since 2016, having lost significant market share to Shoprite. The company has been working to catch up in the online shopping market through partnerships with Mr. D and Takealot.
To recapitalise the business, Pick 'n Pay plans to list its Boxer division separately and conduct a rights issue to raise R4 billion by mid-2024. The rights issue was approved by shareholders at a general meeting on 26th June 2024. The company issued 252.2 million nil paid letters of allocation (NPLs) in the ratio of 51.11 NPLs for every 100 Pick 'n Pay shares held, resulting in a 33.8% dilution. The take-up price was set at 1586c per share, representing a discount of approximately 32.48%. The rights offer was more than 100% oversubscribed, but the rights issue caused the share price to fall on 17th July 2024. The Ackerman family had to inject R1 billion to maintain their 25% stake in the company.
In a trading statement for the 26 weeks ending 25th August 2024, Pick 'n Pay estimated that headline earnings per share (HEPS) would decline by between 20% and 30%. The company reported that like-for-like sales grew by just 0.1% for Pick 'n Pay, while Boxer saw stronger growth, with sales increasing by 13.5%. Internal sell price inflation was 4.3%.
We previously recommended applying a 200-day simple moving average and waiting for a clear upside break before further investigation. That break occurred on 27th May 2024 at a price of 2558c, with the share rising to 2850c before the rights issue. However, by the end of August 2024, the share was trading at 2392c. Given the company's challenges, the share remains risky for investors at this stage.
Our opinion on the current state of MONDIPLC(MNP)Mondi (MNP) is a large international paper and packaging company that originated in South Africa but now operates in 30 countries, employing 26,000 people across approximately 100 sites. The company is involved in the full spectrum of packaging, including owning and managing forests, and producing wood pulp, paper, and plastic films for a wide variety of packaging solutions. Mondi is known for its professional management and broad operational scope.
The company was impacted by the Ukraine crisis. On 28th February 2022, Mondi reported that around 12% of its revenue came from its Russian operations, including its high-margin, cost-competitive pulp and paper mill in Syktyvkar. However, Mondi decided to divest all of its Russian assets, which had a net asset value (NAV) of €687 million at the end of 2021. On 12th August 2022, Mondi completed the sale of its Russian subsidiary for about R25 billion, which led to a sharp increase in the share price. Prior to this, Mondi had sold its personal care business for €615 million on 1st July 2022.
For the six months ending 30th June 2024, Mondi reported revenue down 4% and earnings per share (EPS) down 30%. Despite these declines, the company highlighted an underlying EBITDA of €565 million, which was lower than the previous period but still reflected an encouraging performance supported by improving market conditions, stronger order books, and higher sales volumes. In its update for the third quarter ending 30th September 2024, Mondi reported underlying EBITDA of €223 million, down from €351 million in Q2 2024, primarily due to planned maintenance shutdowns and a forestry fair value loss.
Mondi remains a blue-chip company, but the paper and packaging business is challenging, which makes the stock volatile. Technically, Mondi’s share price had been in a strong upward trend after March 2020 but was derailed by the Ukraine situation in March 2022. Since then, the stock has been moving sideways and upward with significant volatility.
In March 2024, Mondi announced the acquisition of 54% of LSE-listed DS Smith Plc for GBP5.14 billion, and on 9th October 2024, the company further expanded by acquiring the packaging assets of Schumacher Packaging for €634 million. These acquisitions indicate Mondi's strategic efforts to grow its presence in the global packaging sector, despite the challenging environment.
While Mondi is fundamentally strong, its exposure to global economic cycles, particularly in the packaging and commodities sector, means the stock will continue to be volatile.
Our opinion on the current state of INSIMBI(ISB)Insimbi (ISB) is a group that manufactures and supplies specialist products to the industrial sector. The company is involved in sourcing, buying, packaging, and processing ferrous and non-ferrous alloys, refractory and foundry materials, as well as plastic blow-moulding and injection moulding. Insimbi also recycles metal alloys and provides technical support to users of its products.
In its results for the six months ending 31st August 2024, the company reported an 11% decrease in revenue and a headline loss of 1.22c per share, compared to a profit of 15.46c in the previous period. The company cited challenging operating conditions, partly due to volatile prices for key commodities such as copper, aluminium, nickel, and steel.
Technically, the share was in an upward trend until June 2018 but fell to a low of 50c on 18th December 2020. It subsequently rose to a high of 139c in June 2023 before entering a new downward trend.
Insimbi could benefit from a recovery in the South African economy, but it remains a risky commodity share. The stock is thinly traded, with an average of about R36,000 worth of shares changing hands daily, making it illiquid and potentially dangerous for private investors. As a result, Insimbi remains a high-risk penny stock, especially given its exposure to volatile commodity prices.
Our opinion on the current state of DRDGOLD(DRD)DRDGOLD (DRD) is the JSE's oldest listed company, having been listed in 1895. It has evolved into a gold surface treatment operation, focusing on re-treating surface dumps with traces of gold that can be profitably extracted using modern methods. DRDGOLD's all-in sustaining cost of extraction is just over R627,247 per kilogram, compared to an average received gold price of R917,996. The nature of surface treatment operations presents lower risk than traditional underground gold mining, as it has less union exposure and avoids the costs and challenges associated with underground mining. The company's profitability is more predictable, given the known life and grade of its operations.
The share is known for its volatility, largely tied to fluctuations in the international gold price. However, DRDGOLD has a debt-free balance sheet and generates strong free cash flows. A significant development occurred when Sibanye swapped its surface dumps for an additional 265 million DRD shares, increasing its stake to 38%. On 10th January 2020, Sibanye further exercised its option to increase its shareholding to 50.1% at a cost of R1.086 billion.
DRDGOLD’s CEO, Niel Pretorius, aims to join other tailings projects on the West Rand to create a massive unified reprocessing operation. The company is also building a 20MW solar and battery facility to enhance operational efficiency and sustainability.
In its results for the year ending 30th June 2024, DRDGOLD reported revenue up 14%, with headline earnings per share (HEPS) up 4%. However, gold production and sales were down 5%, and cash operating costs increased by 20% in rands. The company announced plans to lift tonnage throughput to 3 million tonnes per month and gold production to over 6 tonnes per annum by FY2028.
For the three months to 30th September 2024, DRDGOLD reported a 7% increase in production and a 4% increase in sales. All-in sustaining costs dropped 5% to R933,686 per kilogram. Cash operating costs per kilogram of gold sold decreased by 4% to R856,723/kg, despite winter tariffs from Eskom during June to August driving up total cash operating costs.
Technically, DRDGOLD's share price reached a high of 2,458c on 9th May 2023, before entering a downward trend. However, it broke through its long-term downward trendline on 3rd July 2024 at 1,673c, signaling a new upward trend. While the stock remains volatile, given its sensitivity to international gold prices, DRDGOLD’s debt-free position and stable operations make it an attractive, albeit risky, commodity investment.
