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Our opinion on the current state of GRANPRADE(GPL)Grand Parade Investments (GPL) is an investment holding company primarily involved in the gaming industry. As a BEE company, it has been listed on the JSE since 2008. The company decided to exit its food franchises, including Dunkin' Doughnuts and Baskin Robbins in February 2019, and Burger King in February 2020. Additionally, GPL sold its remaining 10% stake in Spur Corporation back to Spur in June 2019. On 15th June 2022, GPL announced the unbundling of its 9.28% shareholding in Spur, where shareholders received 1 Spur share for every 56 GPL shares they held as of 10th June 2022 (the unbundling record date). In its financial results for the six months ending 31st December 2023, GPL reported revenue of R12.7m and headline earnings per share (HEPS) increased to 11.9c from 9.8c in the previous period. The company attributed the improvement to a 34% reduction in net central costs, which dropped to R7.9m due to a restructuring of operations, the write-back of R11m in prescribed dividends, and various cost-saving initiatives. On 20th October 2022, GPL gave a strong on-balance-volume (OBV) buy signal amid rumors of a potential takeover. On 25th October 2022, GBM Liquidity, a private company, acquired a 27.88% stake in GPL, later increasing this to 35.14%. Additionally, on 11th November 2022, Sun International boosted its stake to 10.56%. Another OBV buy signal emerged on 8th November 2022 at 330c, signaling heightened activity. Subsequently, on 11th April 2023, GPL announced that GBM Liquidity Corporation, a family trust of Greg Bortz, had secured control with 53.65% of the company's issued capital. In a trading statement for the year ending 30th June 2024, GPL estimated HEPS between 18.94c and 19.46c, a significant improvement compared to 2.56c in the prior year. This improvement was largely driven by a reduction in restructuring costs associated with the exit from non-core investments in the previous year. Despite these developments, GPL's share price has been moving sideways since 2017. From a technical perspective, it does not appear to offer a particularly compelling investment opportunity at this time.
JSE:GPL
by PDSnetSA
Our opinion on the current state of BELL(BEL)Bell (BEL) is a manufacturer and distributor of heavy equipment, primarily for the mining, construction, agriculture, and waste management industries. It has been impacted by the global slowdown in construction since 2008 and the collapse of the mining sector. Bell's articulated dump trucks (ADTs) are exported worldwide from its manufacturing bases in South Africa and Germany. In addition to its own products, Bell also distributes equipment for global manufacturers, offering a range of over 120 products. Approximately 60% of the company's business comes from outside South Africa. Bell employs 3,200 people, of whom 88.6% are in South Africa. CEO Gary Bell has indicated that the company might consider delisting, with 1A Bell (the Bell family entity) making an offer to minority shareholders. However, some of these shareholders believe the board has a fiduciary duty to put the company up for sale to the highest bidder. On 18th February 2021, the company announced that 1A Bell would buy a further 31.4% of Bell, giving it a 70% stake at R10 per share, a 13% discount to the share price at that time. In its results for the six months to 30th June 2024, the company reported revenue up 6% but headline earnings per share (HEPS) down 6%. The company highlighted strong demand for ADTs in the USA, where it improved its market share despite a highly competitive environment and high inventory levels across the industry. Southern hemisphere markets like South Africa and Zambia, driven by mining demand, proved more resilient than northern hemisphere markets like Europe and the UK. The stock trades over R3m worth of shares on average each day, making it suitable for private investors. There was an on-balance-volume (OBV) buy signal on 7th September 2023 at 1752c per share, and since then, the share has moved up to 2480c. On 15th July 2024, the company announced that the Bell family had made a firm offer to buy out the remaining 30% of Bell, which it did not own, at R53 per share. This offer represents an 82.3% premium to the 30-day volume-weighted average price (VWAP) of the share price on 11th July 2024 (3100c). The share will be delisted once the transaction is completed.
JSE:BEL
by PDSnetSA
Our opinion on the current state of CAPITEC(CPI)Capitec Bank (CPI), now the country's largest bank by customer numbers (21,1m), was launched by PSG and has been a major disrupter in the South African banking system. It has steadily taken retail market share from the other banks by offering a cheaper and easier solution, especially for the previously unbanked section of the population. The company is adding about 90 000 funeral policies every month. In our view, this share is a "must-have" for any private investor's portfolio. Its parent company, PSG, has now unbundled its holding of Capitec shares to release shareholder value. Capitec's client base is mostly in the lower living standards measure (LSM) levels, so it has just less than 10% of the retail deposit base despite its enormous number of clients. Capitec's annual average growth in HEPS for the past 19 years since 2003 is 32,2% per annum – an incredible record. On 19th January 2022, the company announced that it intends to conduct a BBBEE transaction by giving about R1bn worth of its shares to staff who have been working at the company since the beginning of 2019 or earlier. The issue is expected to dilute the share and caused the share price to fall. In its results for the year to 29th February 2024, the company reported headline earnings per share (HEPS) up 16% and return on equity (ROE) of 26%. The bank increased its number of active clients by 10% to 22,2 million. The company said, "Non-interest income made a significant contribution to the 16% growth in headline earnings for the 2024 financial year and increased to 72% of income from operations after credit impairments." In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would increase by between 35% and 37%. The company said, "The lower CLRs have persisted into the 2025 financial year and the net transaction and commission income, including value-added services, has continued to contribute to strong growth in non-lending income." Technically, the share has been rising since June 2023. It is now on a multiple of 32,21 – which is still well above the JSE Overall Index (14,88) and other leading banks. Despite this, in our view, Capitec remains excellent value. This is a share you should accumulate on weakness.
JSE:CPI
by PDSnetSA
Our opinion on the current state of AVIAnglovaal Industries (AVI) is a generalised producer of consumer products in the food, cosmetics, and apparel sectors. It has a diverse range of very well-known South African brands such as I&J fish, Five Roses tea, Salticrax, Frisco, Provita, Yardley, Spitz, and Kurt Geiger. The company announced that it had sold its Australian seafood company, Simplot, for R633m, yielding a net after-tax profit of about R370m. Over the decades, this share has undoubtedly been one of the best blue chips trading on the JSE. Its share price has shown a remarkable rise over the past twenty years. Twenty years ago, the share was trading for around 150c, and today it trades for about R65 at a cyclical low point. It has been a steady payer of dividends throughout that period. An investment in Anglovaal is an investment in the South African economy, but one which has shown itself to be virtually recession-proof until COVID-19. The coronavirus had an impact on consumer spending, and the AVI share price fell quite heavily because of this. More recently, it has been falling due to the crisis in Ukraine. In its results for the year to 30th June 2024, the company reported revenue up 6,3% and headline earnings per share (HEPS) up 24,1%. The company said, "Gross margins recovered to pre-COVID levels - Strong cost control and efficiencies support operating leverage - Group operating profit for the year increased by 21,7%." On a P:E of 15,18 and a dividend yield (DY) of 4,53%, the share looks reasonably priced, even cheap. In our view, this company will improve as the South African economy improves, and it should be accumulated on any significant weakness. We advised waiting for a clear break above its long-term downward trendline, which happened on 8th November 2023 at a price of 7418c per share. The share has subsequently moved up to 10429c.
JSE:AVI
by PDSnetSA
Our opinion on the current state of SUNINT(SUI)Sun International (SUI) is a casino and hotel operator with interests in South Africa, Chile, Peru, and recently, Argentina. The depressed economy in South Africa impacted the performance of South African casinos and hotels even before COVID-19. The company increased its stake in Sun Dreams in Peru by 10% to 65%. It also bought a hotel and casino in Argentina for $25,5m. The company invested R4bn in the Time Square casino near Pretoria, which was beginning to perform before COVID-19. The group also owns well-known South African casino/hotel operations like Sun City, Carnival City, and Grand West. The share has fallen from a high of R142 in February 2015 to current levels around R18.24. At this level, its debt was close to double its market capitalisation. The company plans to sell its Nigerian interests and has received a number of offers. It has not paid any dividend in the past two years and only expects to resume dividends in a further two years or so. The company retrenched 2,195 staff, and its debt fell sharply. In its results for the six months to 30th June 2024, the company reported income up 5% and adjusted headline earnings per share (HEPS) up 9,1%. The company said, "The group's 5.0% increase in income, combined with effective cost control, yielded a continuing adjusted EBITDA margin of 27.3% which was in line with the prior period. This consistency highlights the effectiveness of cost optimisation initiatives implemented by the group and lower diesel costs following the reduction in load shedding. The group is in a strong financial position with South African debt (excluding IFRS 16 lease liabilities) at R5.4 billion." Technically, the share has been in an upward trend since its low point in March 2020. It should continue to recover.
JSE:SUI
by PDSnetSA
Our opinion on the current state of MOMMET(MTM)Momentum Metropolitan (MTM) is an insurance company listed on the JSE and the Namibian stock exchanges. It was formed by the merger of Momentum and Metropolitan in December 2010. The company participates in all aspects of short and long-term insurances and various financial services. The company was the first insurance company to achieve level 1 BBBEE status. The company is closing its businesses in Mozambique, Mauritius, Zambia, Tanzania, and Swaziland. At the time of the merger between Momentum and Metropolitan, they had a combined 24% of the life insurance market in South Africa. Today that has been reduced to just 17%. The company paid out almost R4bn in death claims in the 1st quarter of 2021 - three times higher than it anticipated, mainly due to the 2nd wave of the virus. The company said that it would consider managing with about 60% of its current office space because of the move to work-from-home as a result of COVID19. On 26th May 2023, Business Day reported that Jeanette Marais would take over from Hilgard Meyer as CEO on 30th September 2023. In its results for the year to 30th June 2023, the company reported net income of R125bn, up from the previous year's R70,1bn. Earnings per share (EPS) increased to 313,3c compared with 260,6c in the previous year. The company said, "During July 2022, the Group, through its wholly owned subsidiary, Metropolitan International Holdings (Pty) Ltd, disposed of its entire shareholding in Metropolitan Cannon Life Assurance Ltd and Metropolitan Cannon General Insurance Ltd. A loss on disposal of R112 million was recognised. During October 2022, the Group’s holding in Aditya Birla Health Insurance Company Ltd (ABHI) was diluted from 49% to 44.1% with the introduction of a new shareholder as a partner in the business. As a result, a gain on deemed disposal of R563 million was recognised. The Group bought back a total of 73 million shares (for a cost of R1 250 million including transaction costs) during the current year. These shares were cancelled prior to 30 June 2023." In an operational update for the 3 months to 30th September 2023, the company reported new business premiums up 18% and a claim ratio of 66% - down from the previous period's 70%. The company said, "As at 20 November 2023, the Group had bought back 24 million shares, of which 16.5 million have been cancelled, for a total consideration of R498 million." In the nine months to 31st March 2024, the company reported recurring premium income down 15% and single premiums up 32%. Assets under management (AUM) were up 14% at R265bn. In a trading statement for the year to 30th June 2024, the company estimated that HEPS would increase by between 41% and 46%. Technically, the share has begun to move up in recent months and may be entering a new upward trend. On a P:E of 10,54 and a dividend yield (DY) of 3,8%, it looks reasonably priced to us.
JSE:MTM
by PDSnetSA
$JSESSW - Sibanye: 1756 cps Invalidated, Now What?See link below for previous analysis The break below 1756 cps has prompted an update of the wave count. A minor wave count adjustment shows wave 3 of (C) extended into five sub-waves and wave 5 is now currently unfolding and looks to break below the March 2020 low of 1537 cps. The momentum is still to the downside but wave (C), which began in January of 2023 looks to be at a mature stage so I will not recommend shorts at this late stage of the downtrend. The MACD is still giving buy convergence signals.
JSE:SSW
by Loyiso_BlaqueSoros_Mpeta
Our opinion on the current state of PAN-AF(PAN)Pan African Resources (PAN) is a gold mining company listed on both the London and Johannesburg Stock Exchanges, with a focus on re-treatment gold production. With the Elikhulu plant, it has significantly enhanced its production capacity, with the potential to produce approximately 700,000 ounces of gold annually at a cost of around R450,564 per kilogram. Given the current gold price hovering around R1 million per kilogram, this presents a substantial profit margin for the company. The Elikhulu plant is expected to generate approximately R15 billion in revenue over its life, with R5.3 billion contributing back to the economy. This has established Pan African Resources as a highly profitable entity with relatively low operational risks, especially given that re-treatment operations typically have fewer uncertainties compared to traditional mining. The company has also embraced renewable energy by approving the construction of a 10MW solar power plant, which should help reduce its reliance on grid electricity and lower operating costs in the long term. In its financial results for the six months ending 31st December 2023, Pan African Resources reported gold production up 6.7% and all-in sustaining costs (AISC) of $1287 per ounce, against a gold price of just over $2000 per ounce. This margin underscores the company's profitability. Headline earnings increased by 46.4%, while earnings per share (EPS) were up 46.1%. At the reporting period-end, the company had access to $31.3 million in cash and $86.4 million in undrawn credit facilities, maintaining a healthy liquidity position. For the year ending 30th June 2024, the company continued to perform well, with production up 6.2% and AISC at $1350 per ounce. The average gold price over the period was $2021 per ounce. Net debt increased to $106.4 million due to construction costs at the MTR project. On 4th June 2024, the company secured a five-year wage agreement with the National Union of Mineworkers (NUM) for an annual increase of 5.3%, which provides stability in its labor costs. In its trading statement for the year ending 30th June 2024, the company estimated a headline earnings per share (HEPS) increase of between 27% and 37%, driven by a 16.8% increase in revenue, mainly due to higher gold sales and an 11.3% increase in the average US dollar gold price. Technically, the share has been in an upward trend since reaching a low of 288c in June 2023. It was added to the Winning Shares List (WSL) on 31st January 2024 at 430c and has since risen to 692c, representing strong growth. While Pan African Resources presents a good investment opportunity, especially given the upward momentum of the gold price, investors should remain cautious due to the inherent volatility of the gold market and the company's exposure to fluctuating gold prices. However, with gold breaking above long-term resistance at $2060, it could offer a speculative opportunity for those willing to take on some risk.
JSE:PAN
by PDSnetSA
Our opinion on the current state of SANLAM(SLM)Sanlam (SLM) is one of the largest and most established insurance and financial services groups in South Africa, with a rich history dating back to 1918. The company demutualised in 1998 and is listed on both the JSE and the Namibian Stock Exchange. Sanlam has a wide range of operations spanning South Africa, the UK, the USA, Europe, India, Australia, and several African countries. Its product offerings include general insurance, life insurance, asset management, banking, credit, health, and bancassurance. Sanlam's business is divided into four key divisions: 1. Sanlam Investment Holdings (SIH) – Now 25% owned by African Rainbow Capital. 2. Sanlam Emerging Markets – This includes an 84.5% stake in Saham, which operates in 33 French-speaking countries. 3. Sanlam Personal Finance – This is a core area contributing about 50% of Sanlam's profits, primarily focusing on the South African market. 4. Santam – Sanlam owns a 61% stake in Santam, the largest short-term insurer in South Africa. Sanlam also has international interests, including a 26% stake in Shriram, a prominent provider of insurance products in India, and various other investments in the UK, Ireland, and Malaysia. Saham is a significant part of its African operations, with 3,000 staff members across 700 branches. The company's partnership with African Rainbow Capital (ARC) is aimed at growing its presence in the lower- and middle-income markets, with Sanlam providing R2 billion in seed capital for these efforts. This partnership is expected to help expand its business to underserved markets. In its financial results for the six months ending 30th June 2024, Sanlam reported a strong performance with headline earnings per share (HEPS) rising by 40%. The company showed solid growth across its core businesses, with net result from financial services (NRFFS) up 14%, driven by a 14% rise in life and health insurance, 16% in general insurance, 10% in investment management, and 9% in credit and structuring operations. This reflects broad-based operational strength and earnings momentum. Sanlam continues to be one of the JSE's blue-chip stocks, with a long track record of consistent growth. Its current price-to-earnings (P:E) ratio of 12.17 makes it an attractive value proposition at current levels, especially as it continues to expand its operations both locally and internationally. On 18th June 2024, Sanlam announced a significant acquisition, agreeing to buy 60% of Multichoice's insurance business for R1.2 billion in cash. This deal should further bolster its insurance operations and provide new opportunities for growth.
JSE:SLM
by PDSnetSA
Our opinion on the current state of WOOLIES(WHL)The fall of Woolworths' (WHL) share price can largely be attributed to the costly acquisition of David Jones in Australia for AU$2.1 billion in 2014, which has since resulted in a R12 billion write-down from the original purchase price of R20 billion. Woolworths' food division has been the primary support for the group, while its fashion and clothing section has struggled in challenging trading conditions. On 14th January 2020, Woolworths appointed Roy Bagattini, from Levi Strauss, as Group CEO, replacing Ian Moir, with effect from 17th February 2020. Bagattini has been tasked with steering the company back to profitability, especially in the non-food sectors. In the results for the year ended 30th June 2024, Woolworths reported a 4% increase in turnover from continuing operations, but a 16.8% decline in headline earnings per share (HEPS). The company ended the year with net borrowings of R5.6 billion, though its Australian subsidiaries held a net cash position of AU$39 million. Woolworths achieved a net debt-to-EBITDA ratio of 1.45 times, within its targeted gearing ratio, and reported a Return on Capital Employed (ROCE) of 18.7%, well above its weighted average cost of capital (WACC) of 13.9%. We advise caution and suggest considering Woolworths shares only if they break upward through their current downward trendline. The current price-to-earnings (P:E) ratio stands at around 16.78, but the shares are still falling, although they may be stabilizing.
JSE:WHL
by PDSnetSA
Our opinion on the current state of BIDVEST(BVT)Bidvest (BVT) is a highly diversified South African company with numerous subsidiaries, organized into six main divisions: Services, Freight, Automotive, Office, Print & Commercial Products, Financial Services, and Electrical. The company operates with a decentralized management structure, allowing directors of each operating company significant autonomy as long as they produce good returns. This strategy contrasts with most listed companies that typically focus on a single area of business and divest non-core assets. Bidvest's diversification reduces risk by balancing performance across its divisions, with some performing well even when others may not be. Bidvest's notable investments include a 66% stake in Bidvest Namibia, which also owns a large property portfolio leased to various Bidvest companies, and a 56.13% stake in Adcock Ingram. The company's ongoing strategy includes regular acquisitions to drive growth. The acquisition of PHS, the UK's largest cleaning service provider, was particularly well-timed, as it preceded a significant increase in demand for cleaning services following the COVID-19 pandemic. Bidvest's investment in alternative energy sources is also viewed as a promising area for future profits. On 3rd July 2024, Bidvest announced its intention to seek buyers for Bidvest Bank and FinGlobal, alongside its acquisition of Citron Hygiene LP. In its results for the year ended 30th June 2024, Bidvest reported revenue growth of 6.7% and a 6.6% increase in headline earnings per share (HEPS). The company attributed its success to top-line growth, effective gross margin management, and excellent expense control, which resulted in an 8.5% increase in group trading profit. Additionally, cash flow from operating activities grew strongly by 18.7%. Bidvest currently trades at a price-to-earnings (P:E) ratio of 14.92, which, despite the recent performance, still suggests good value at these levels. Technically, the share has just emerged from an island formation and is on a strong recovery path, indicating potential for continued growth.
JSE:BVT
by PDSnetSA
Our opinion on the current state of SUNINT(SUI)Sun International (SUI) is a casino and hotel operator with interests in South Africa, Chile, Peru, and recently Argentina. The company has been impacted by the depressed South African economy, which affected the performance of its South African casinos and hotels even before the onset of COVID-19. Despite these challenges, Sun International increased its stake in Sun Dreams in Peru by 10% to 65% and expanded its portfolio by purchasing a hotel and casino in Argentina for $25.5 million. Additionally, the company invested R4 billion in the Time Square casino near Pretoria, which was beginning to show promise before the pandemic hit. The group also owns several well-known South African casino/hotel operations, including Sun City, Carnival City, and Grand West. The share price has fallen significantly from a high of R142 in February 2015 to current levels around R18.24. At this level, the company's debt was nearly double its market capitalization. Sun International has been working on reducing its debt, including by retrenching 2,195 staff and considering the sale of its Nigerian interests, for which it has received several offers. The company has not paid any dividends in the past two years and does not expect to resume dividend payments for another two years. In its results for the year ended 31st December 2023, Sun International reported a 7% increase in income and an 88.1% rise in headline earnings per share (HEPS). The company noted that the South African gaming market grew for a third consecutive year to R55.8 billion in gross gaming revenue. Gaming income, which constitutes 76.8% of the group's total income, showed sustained growth, with an overall increase of 3.3%. However, casino income decreased slightly by 1.0%, and Sun Slots' operations were negatively impacted by load shedding. In a trading statement for the six months to 30th June 2024, the company estimated that HEPS would increase by between 5.4% and 12.4%. Sunbet, the company's online gaming division, has maintained exceptional growth and is exceeding its targets. Urban casino income from larger properties has continued to grow and protect margins, while resorts and hotels have shown robust growth in income and a significant improvement in the adjusted EBITDA margin. Technically, the share has been in an upward trend since its low point in March 2020 and is expected to continue recovering as economic conditions improve.
JSE:SUI
by PDSnetSA
Our opinion on the current state of SIBANYE-S(SSW)Sibanye (SSW) is a mining house that has been aggressively expanding through acquisitions, accumulating platinum and gold mines in South Africa and America, and now diversifying into base metals and "green" minerals. The company is led by Neal Froneman, a well-respected figure in the mining industry known for his toughness, expertise, and experience. Froneman has stated his intention to retire around 2024/5 but aims to double the size of the company before stepping down. Sibanye is also considering expanding into base minerals used in motor vehicle batteries, such as vanadium, copper, nickel, and lithium. On 1st June 2021, the company announced a share buy-back program to repurchase up to 5% of its issued shares. On 30th June 2022, Sibanye announced its intention to increase its stake in Keliber, a Finnish lithium producer, to 80% at a cost of about R7,7bn. More recently, on 9th November 2023, the company announced the acquisition of Reldan, a US-based metals recycler, for $211,5m. The company is well-positioned under Froneman's leadership, and there is potential for it to reach new all-time highs due to strategic management. Froneman believes that Sibanye shares are undervalued, a sentiment that may hold merit, although the company's success is heavily dependent on metal prices. On 25th October 2023, the company initiated section 189 consultations for the retrenchment of 4095 employees, and on 6th November 2023, it secured a five-year wage agreement with AMCU at its Kroondal PGM operation, guaranteeing a minimum 6% per annum wage increase. However, on 21st November 2023, Sibanye announced the issuance of a $500m convertible bond with a 4% to 4.5% yield until conversion in 2028. This announcement led to some shareholders selling their shares, resulting in a 20% drop in the share price. For the year ending 31st December 2023, the company reported revenue down 18% and a significant loss of R37,4bn. Despite this, the CEO expressed confidence that the PGM price weakness seen in 2023 is temporary rather than a structural change, and there are signs of a better demand outlook. On 11th April 2024, the company began section 189 consultations for the retrenchment of 3107 employees and around 900 contractors at its gold mines. By 3rd July 2024, Business Day reported that Sibanye had retrenched 11,000 workers over 18 months. In an update on the three months to 31st March 2024, Sibanye reported a 3% increase in 4E PGM production. The company noted that Sandouville nickel production increased by 42%, and the nickel equivalent sustaining cost was reduced by 36%. The Keliber lithium project is progressing on budget and on schedule, and the Reldan acquisition has been successfully integrated. However, in a trading statement for the six months to 30th June 2024, the company estimated that HEPS would fall dramatically to between 4.6c and 5c compared with 208c in the previous period. Technically, the share has been in a downward trend since March 2022, primarily due to falling commodity prices. It would be prudent to wait for the share to break upward through its downward trendline before considering further investigation.
JSE:SSW
by PDSnetSA
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Our opinion on the current state of SHOPRIT(SHP)Shoprite (SHP) is the largest grocery retailer and consumer goods company in Africa. The company has faced intense price competition, which has prevented supermarkets from fully passing on price increases to consumers. The share price experienced a significant decline from a high of R275 in March 2018 to levels around R100 in July 2020. However, it has since recovered strongly and is expected to benefit directly from any improvement in the South African economy. Chairman Christo Wiese's major stake in Shoprite has been reduced to just over 10% of the ordinary shares, but he still holds 265 million deferred shares, effectively giving him 42% control of the company. Shoprite has exited several African markets, including Uganda, Madagascar, Nigeria, and Kenya. The company agreed to purchase 56 Cambridge and Rhino food stores from Massmart, which could strengthen its market position. As the South African and African economies recover, particularly post-COVID-19, Shoprite is well-positioned to benefit from increased consumer spending. In a report on the unrest and looting, the company stated that out of the 1,189 supermarkets trading under the Shoprite, Usave, Checkers, and Checkers Hyper banners, 119 stores were severely impacted by looting and/or fire damage. In its results for the 52 weeks ending 30th June 2024, Shoprite reported merchandise sales up 12% and headline earnings per share (HEPS) up 7.2%. The company generated R23.6 billion in cash from operations during the year and directed R7.8 billion towards its "Smarter Shoprite" strategy, which includes investments in new stores, store upgrades, digital and e-commerce, information technology, sustainability, and supply chain improvements. Technically, the share price broke above its 200-day moving average on 2nd September 2020, when it was trading at 11,696c. Since then, the share has appreciated to 29,500c, representing a gain of 152% over four years. The company is expected to continue benefiting from the end of loadshedding and the potential formation of a government of national unity (GNU) in South Africa.
JSE:SHP
by PDSnetSA
Our opinion on the current state of RCLRCL Foods (RCL) is a major South African producer of food, sugar products, and chicken, with an 80.4% ownership stake held by Remgro. The company owns a portfolio of well-known South African brands, including 5 Star maize meal, Farmer Brown, and Yum Yum peanut butter. RCL competes with overseas imports of sugar, chicken, and other foods, facing significant challenges in these markets. The company was notably impacted by the listeriosis outbreak, which harmed the market for processed meats and led to costs estimated at approximately R158 million. RCL has been further affected by the weak South African economy, low consumer spending, and high unemployment rates. The company, through the South African Poultry Association, is petitioning the International Trade Administration Commission (ITAC) for an 82% increase in tariffs on imported chicken. On 2nd December 2020, Remgro increased its stake in RCL by purchasing 100 million shares at R8,05 each. On 29th March 2023, RCL announced the sale of Vector Logistics for R1,25 billion. A significant development for the company occurred on 4th June 2024, when RCL announced the unbundling and separate listing of Rainbow Chicken. RCL shareholders received one Rainbow share for every RCL share they held as of 25th June 2024. The company's pre-listing statement for Rainbow was published on 10th June 2024, with the last day to trade being 25th June 2024. In its results for the year ending 30th June 2024, RCL reported a 6.8% increase in revenue and a 31% rise in headline earnings per share (HEPS) from continuing operations. The company stated, "EBITDA from continuing operations increased by 36.8% to R2 300,5 million (2023: R1 681,6 million). This was mainly driven by a strong result in our Sugar business unit and the recovery of service levels in the Pet Food business within Groceries." Since the unbundling of Rainbow, RCL's share price has been drifting downwards, but it is expected to perform better once interest rates begin to fall. The company's future performance may also be bolstered by the eventual recovery of the South African economy and a potential favorable outcome in their petition for increased tariffs on imported chicken.
JSE:RCL
by PDSnetSA
Our opinion on the current state of MOTUS(MTH)Motus (MTH) was unbundled from Imperial (IPL) and separately listed on the JSE on 22nd November 2018. It is a company that owns motor dealerships in South Africa, the UK, and Australia. The company operates through four divisions: import and distribution, retail and rental, motor-related financial services, and aftermarket parts. It imports and sells more than 80,000 vehicles per annum and runs 356 dealerships and 134 rental outlets for Tempest and Europcar. In addition, Motus offers vehicle finance and fleet management services in South Africa, catering to 730,000 clients. The company also retails parts and accessories for older vehicles through 720 franchised outlets. With a 20% share of the South African retail vehicle market, Motus sells approximately 100,000 vehicles per year. It is the importer of brands such as Hyundai, Kia, Mitsubishi, and Renault. The CEO, Osman Arbee, has indicated that the company plans to pay generous dividends, leveraging its strong cash flows. The company generates 65% of its turnover in South Africa and 93% of its operating profit from this region. On 1st October 2021, Motus announced the acquisition of FAI Automotive in the UK for R550 million. In its results for the year ending 30th June 2024, the company reported a 7% increase in revenue, although headline earnings per share (HEPS) fell by 28%. The company noted, "The automotive industry is impacted by various factors, including higher-than-normal vehicle and parts price inflation, volatility in the SA Rand against major currencies, high interest rates, and high cost-of-living in all geographies we operate in. These challenges contributed to a strain on consumer disposable income." Technically, the share price fell from a high above R130 in September 2022 to levels around R80 in April 2024. It has since recovered to R117. With a P:E ratio of 7.91, the share is reasonably priced in our estimation. Motus is a well-established blue-chip company that is somewhat dependent on the state of the economy and consumer spending levels. We believe it will prove to be a good investment, particularly as the economy improves, especially with the anticipated end of load-shedding and the advent of the new government of national unity (GNU).
JSE:MTH
by PDSnetSA
Our opinion on the current state of ASCENDIS(ASC)Ascendis Health (ASC) is a South African company that manufactures products aimed at promoting health in animals, plants, and people. On 30th January 2020, the company stated, "As Remedica continues to be a high performing asset that delivers considerable earnings and margin growth to the Ascendis group, the Board is not supportive of the disposal of Remedica at a price that is not reflective of its market value." The company's strategy is to focus on four core businesses: pharmaceuticals, medical, consumer health, and animal health. On 25th January 2021, Ascendis announced that it was negotiating with two companies, L1 Health and Blantyre Capital, to recapitalize the company rather than selling off Remedica. These two companies acquired 75% of Ascendis' debt, and on 12th May 2021, they struck a deal in which they exchanged €447 million of debt, a €20 million draw-down facility, and a €15 million loan for 100% of Remedica and Sunwave, 49% of Farmalider, and the proceeds from the sale of Animal Health, Biosciences, and Respiratory Care Africa. The company stated, "The Proposed Transaction represents the best opportunity to protect the business and is also considered better than placing the Group in Business Rescue, the likely result if an agreement was not reached. An important part of the Group Recapitalisation framework is Ascendis Health’s access to sufficient liquidity to operate in the future." Following the approval by 98% of shareholders on 4th October 2021 of the recapitalization scheme, Ascendis Health now only has assets within South Africa. On 19th July 2021, the company announced the sale of its Animal Health division, valued at approximately R770 million, with the proceeds used to reduce debt. After the recapitalization, the company is considering de-listing from the JSE. In its results for the year ended 30th June 2024, Ascendis reported revenue of R1.472 billion, down from the previous year's R1.535 billion. The company made a headline loss of 1.4 cents per share, compared with a loss of 41.5 cents in the previous year. The company stated, "The Group's balance sheet remains robust, with tangible net asset value growing by 15.8% to R571 million (R493 million in the prior year)." Technically, Ascendis' share price peaked at 2,880 cents in October 2016 and subsequently fell to as low as 36 cents in March 2020. Since then, the share has moved more or less sideways, showing no signs of a new upward trend. Now trading at around 71 cents following the debt agreement, the stock remains a risky penny stock, moving sideways on relatively thin volumes.
JSE:ASC
by PDSnetSA
Our opinion on the current state of ASPEN(APN)Aspen (APN) is a global pharmaceutical company that operates in 150 countries, offering a wide range of specialty and branded products designed to address various acute and chronic medical conditions. The company has 25 manufacturing facilities across 15 sites, with its primary product categories including thrombosis, anesthetics, cytotoxics, and nutritionals. Pharmaceuticals, as a sector, are generally considered defensive because they tend to perform well even during economic downturns, as people need to continue purchasing medications for chronic conditions. For Aspen, the strength of the South African rand is a significant factor, given the company's international operations. In the long term, Aspen anticipates that its business interests in China could surpass those in South Africa. Currently, the company’s operations are heavily focused on emerging markets, which are expected to drive future growth. In its results for the year ended 30th June 2024, Aspen reported a 10% increase in revenue, though headline earnings per share (HEPS) were down by 3%. The company highlighted its achievement of the highest-ever 6-month normalized EBITDA in the second half of 2024, which grew by 17% over the first half. This performance marks a significant milestone in Aspen’s pursuit of sustainable growth. The company also noted robust cash generation from earnings, evidenced by a cash conversion ratio exceeding 100%, supported by a sustainably lower working capital investment. Aspen’s price-to-earnings (P:E) ratio of 15.19 is not considered high for a solid, international, blue-chip, rand-hedge stock like this. Additionally, the company's CEO, Stephen Saad, and his deputy, Gus Attridge, have demonstrated confidence in Aspen's future by purchasing about R110 million worth of shares at lower levels, suggesting they believe the shares were undervalued. Aspen's share price broke above its long-term downward trendline on 1st September 2022, at around R156 per share. After moving sideways, the share price has since increased to R206, indicating a positive trend. Given these factors, Aspen appears to be a good investment at current levels.
JSE:APN
by PDSnetSA