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Renegen Limited (JSE: REN) | Potential Bullish Reversal?Overview: Renegen Limited has recently made headlines by successfully bringing its liquid helium (LHe) production train online at the Virginia Gas Project in South Africa. This is a significant milestone, positioning the country among a select few capable of producing liquid helium for the global market. With the Phase 1 plant now fully operational and accumulating inventory for imminent sales, Renergen's fundamental outlook has improved considerably. Technical Analysis: 🔍 Current Trend: The stock has been in a persistent downtrend since July 2022, forming lower highs (LH) and lower lows (LL). However, a recent change of character (CHoCH) near the Discount zone around 1,149 ZAR could suggest the beginning of a trend reversal. 💡 Key Levels to Watch: Resistance: The Equilibrium level around 2,500 ZAR serves as a crucial resistance point. A strong break above this level with volume could signal a shift towards bullish momentum. Support: The Discount zone between 1,250 ZAR and 1,750 ZAR acts as a strong support area where buyers have shown interest before. Trade Idea: Given the promising fundamental developments and the technical setup, a potential long trade could be considered if Renegen breaks above the 2,500 ZAR resistance level. Targets could be set around the Premium zone between 3,750 ZAR and 4,200 ZAR, with a stop loss just below the Equilibrium level to manage risk. Risk Management: The stock is still in a broader downtrend, so a cautious approach is advised. Consider waiting for confirmation of the breakout before entering the trade, and always manage your risk by setting appropriate stop-loss levels. Fundamental Catalyst: The successful operationalization of the liquid helium plant and the upcoming sales could drive investor interest, leading to potential upside in the stock price.
JSE:REN
by Mike_SnD
Our opinion on the current state of BLUETEL(BLU)Blue Label Telecoms (BLT) is a company with a primary focus on selling secure tokens of value, such as airtime, starter packs, and electricity. A significant aspect of its business strategy has been its involvement with Cell-C, in which it acquired a 45% stake in September 2016. The performance of Blue Label's results has been heavily influenced by the financial health of Cell-C. In April 2019, S&P Global Ratings downgraded Cell-C's debt to CCC- from CCC+, citing an "unsustainable" capital structure. The acquisition of Cell-C has been a substantial investment for Blue Label, costing R7.55 billion, of which R3.9 billion was financed through the issuance of 272 million shares. The high level of debt at Cell-C, which stands at R8.9 billion, presents a significant challenge, especially considering that this debt is almost three times Blue Label's market capitalization, which is under R3 billion. On 25th August 2021, Blue Label announced that it had secured new financing for Cell-C, providing some relief to the company. On 22nd September 2022, the company further announced that Cell-C would undergo a recapitalization with a R1.03 billion injection from Blue Label, raising its stake in Cell-C to 49.5%. This announcement had a positive impact on Blue Label's shares, reflecting investor optimism. Despite the challenges, Blue Label has managed to achieve positive cash flows and benefited from the sale of its 3G handset division, which contributed to a reduction in debt levels. In its results for the year ended 31st May 2024, Blue Label reported a 23% decline in revenue, but headline earnings per share (HEPS) increased to 76.08c from 45.55c in the previous year. The company attributed the decline in core headline earnings at Cell-C to factors such as the expiration of certain elements of the revenue-sharing agreement in November 2022, increased expenditure related to the distribution agreement, and higher amortization of handset subsidies. We had recommended waiting for a break through the downward trendline before considering an investment. That breakthrough occurred on 29th February 2024 at a price of 360c. Since then, the share price has risen to 525c, representing a gain of 45.8% over six months. This upward movement indicates positive momentum, but the share remains influenced by the ongoing developments at Cell-C and the broader financial health of the company.
JSE:BLU
by PDSnetSA
Our opinion on the current state of IMPLATS(IMP)Impala Platinum Holdings (IMP), commonly known as Implats, is the world's third-largest producer of platinum group metals (PGMs). The company has faced significant challenges over the past seven years, primarily due to aggressive union action and legislative uncertainty in South Africa. The CEO has indicated that Implats is focused on developing a portfolio of long-life, low-cost, shallow, modern, mechanized mining assets, similar to the strategy pursued by Anglo American Platinum over the past decade. The market for platinum itself has been adversely affected by a reduction in demand for auto catalysts, particularly for diesel trucks. While palladium and rhodium continue to have strong markets, platinum has been oversupplied on global markets, leading to downward pressure on prices. Implats has been working to diversify and grow its production, particularly from its operations in Zimbabwe, where it expects a 14% increase in production with the Mupani shaft coming on stream in 2022. The company's recent acquisition of Canadian operations is also expected to contribute to increased production. On 20th July 2023, Implats announced that it had acquired 56.52% of RB Plats as a result of its mandatory offer. Northam Platinum subsequently decided to sell its 34.5% holding in RB Plats to Implats, further consolidating Implats' position. On 28th June 2022, the company reached a significant milestone by securing a 5-year wage deal with its major union, the Association of Mine Workers and Construction Union (AMCU), for an average wage increase of 6.6% per annum. However, the company faced a tragic incident on 28th November 2023, when 11 people died, and 75 were hospitalized following an incident at its No. 11 shaft in Rustenburg. This incident highlighted the ongoing challenges in ensuring safety in deep-level mining operations. In its results for the year ended 30th June 2024, Implats reported a significant decline in financial performance, with revenue down 18.9% and headline earnings per share (HEPS) down 87.8%. The company attributed these results to significantly weaker US dollar sales revenue, which offset the benefits of strong operational performance during the fiscal year. The sharp drop in average palladium and rhodium prices, despite higher sales volumes, compressed operating margins and free cash flow. Technically, Implats' share price was in a downward trend from March 2022 to March 2024, driven by lower PGM prices, increased operational costs, and the impact of loadshedding. Although the share price has recovered somewhat since March 2024, it remains highly volatile, reflecting the inherent risks associated with commodity shares, particularly in the PGM sector.
JSE:IMP
by PDSnetSA
Our opinion on the current state of KUMBA-IO(KIO)Kumba (KIO) is a highly successful iron mining operation, with 79% ownership and control by Anglo American. The company's share price experienced a significant drop to R223 in March 2020 due to the COVID-19 pandemic but later recovered to R668 before facing declines following the March 2022 quarterly results. Kumba's reliance on exports, which constitute 94% of its total sales, makes it less dependent on local sales but exposes it to risks related to the strengthening of the rand and the effectiveness of rail transport to ports. To reduce its reliance on Eskom, the company plans to build a 100 MW solar park over the next three years. However, Kumba has faced challenges such as heavy rainfall and poor rail performance. On 10th October 2022, Kumba announced that due to a force majeure at Transnet, it would lose about 50,000 tons of production per day, increasing to 90,000 tons after seven days. This disruption was expected to result in a loss of around 120,000 tons of exports, costing the company approximately $8.5 million in production and $11.7 million in lost export revenue per day. The company is also considering 490 retrenchments. In its results for the six months ending 30th June 2024, Kumba reported a 6% decline in revenue and a 26% drop in headline earnings per share (HEPS). The average free-on-board (FOB) price received was $97 per ton, with an EBITDA margin of 44%. The company maintained a strong closing cash position of R14.6 billion and declared an interim dividend of R6.0 billion, supported by attributable free cash flow of R9.1 billion. Kumba's share currently trades at a multiple of 5.81 and offers a dividend yield (DY) of 9.39%, which provides some compensation to investors for the commodity risk associated with this rand-hedge share. However, it remains volatile and thus carries a degree of risk. Additionally, the potential offer by BPH to buy Anglo American, which includes the unbundling of Kumba, adds an element of uncertainty to the company's future. On 28th August 2024, Kumba announced plans to invest R11.2 billion in improved processing technology at its Sishen mine, which aims to increase premium quality production to 55% from the current level of 18%.
JSE:KIO
by PDSnetSA
Our opinion on the current state of SANTAM(SNT)Santam (SNT) is South Africa's largest short-term insurer, commanding approximately 22% of the market. Unlike insurers that offer endowment policies, annuities, or investment-linked products, Santam specializes in insuring tangible assets such as buildings and vehicles, as well as offering coverage for personal risks like disability or death that could result in loss of income. The company employs over 6,000 people and holds a level 1 BEE status. Santam's business model involves paying the first R150 million of any claim, with the remainder covered by its reinsurance policies. The company has demonstrated resilience, particularly in light of challenges such as the Ma-Afrika judgment, which led to an increase of R1.7 billion in its provision for contingent business interruption (CBI) claims. Additionally, the company was impacted by the civil unrest in July 2021, but it continues to maintain its position as one of the JSE's most reliable quality shares. In its results for the six months ending 30th June 2024, Santam reported a 10% increase in insurance revenue and a 35% rise in headline earnings per share (HEPS). The company attributed its resilient performance to the progress made with its FutureFit 2030 strategy and its diversified portfolio across market segments, insurance classes, and geographies, despite the challenging operating environment in its primary market. Santam currently trades on a P/E ratio of 15.45, which reflects its status as a blue-chip stock with a strong balance sheet and a long history of steadily improving earnings. The share price has shown a consistent upward trend over the past 39 years, from trading at 90 cents in 1985 to around R348 today. Given its solid track record and dependable performance, Santam is a recommended addition to any private investor's portfolio.
JSE:SNT
by PDSnetSA
Our opinion on the current state of METROFILE(MFL)Metrofile (MFL) is a company specializing in records storage and management, image processing, and backup services. Listed since 1995, the company has a 57.4% Black ownership, with the Mineworkers Investment Company holding 38.64% and Sanlam owning 5%. Metrofile's record management division operates 52 facilities across 27 locations, encompassing over 100,000 square meters of office and warehouse space. Previously, Housatonic Partners, a U.S. company, made an offer to buy 100% of Metrofile for 330c per share. However, the deal was delayed due to COVID-19, with Housatonic Partners indicating a desire to review the end-June 2020 results and observe "three months of normal trade" before reconsidering the acquisition. Despite the delay, Housatonic Partners assured their intention to continue discussions regarding the possible transaction. In its results for the six months ending 31st December 2023, Metrofile reported a 2% increase in revenue, but a 13% decline in headline earnings per share (HEPS). The company noted that while the financial year started positively with strong demand for services, general market conditions softened during the second quarter. In a trading statement for the year ending 30th June 2024, Metrofile estimated that HEPS would fall by between 41% and 52%. The weaker results were attributed to lower-than-expected volumes in its physical storage and filing operations in South Africa, challenges in its South African scanning centers, delays in the implementation of contested tender wins, margin pressure in its Middle East operations, and the impact of high interest rates. Metrofile is a solid small business, but it is currently struggling in a challenging economic environment. Although the company seems poised for a potential recovery, it has indicated that all takeover prospects are now off the table. Technically, the share appears to be entering a new downward trend, reflecting the current difficulties the company faces.
JSE:MFL
by PDSnetSA
Our opinion on the current state of ORIONMIN(ORN)Orion Minerals (ORN) is an Australian exploration company listed on both the JSE (since September 2017) and the Australian Stock Exchange in Sydney. The company is focused on securing funding for its copper and zinc mine in Prieska, South Africa. The Prieska mine was originally operated by Anglovaal, which ceased operations in 1990 after extracting more than 1 million tons of zinc and 430,000 tons of copper concentrate over 20 years. A significant challenge for Orion is the flooding of the mine, which will require the removal of nearly 9 million cubic meters of water from the existing structure before production can commence, which is anticipated to begin in 2024. Orion aims to exploit the Prieska resource using a mechanized approach with minimal labor. Vedanta Resources, which operates the nearby Gamsberg mine, is considering building a smelter that could serve all the mines in the area, including Orion's resources and those from Namibia. However, mining exploration, especially for a penny stock like Orion, is inherently risky. On 8th September 2022, Orion announced that it had secured R34.5 million from the Industrial Development Corporation (IDC) for a 43.75% stake in its new Okiep copper mining company. On 21st October 2022, the company further announced a R250 million line of credit from the IDC. In its results for the six months ending 30th June 2023, Orion reported a loss of A$15.2 million, unchanged from the previous period, with a headline loss per share of 31c, slightly improved from a 33c loss in the prior period. The company highlighted that the IDC had become a strategic funding partner for both the Okiep Copper Project and the Prieska Copper Zinc Mine, with pre-development funding agreements totaling ZAR 284.58 million. In a report for the quarter ending 30th September 2023, Orion updated its Prieska Copper Zinc Mine (PCZM) resource, increasing it to 2.3Mt at 1.7% Cu and 1.6% Zn, including an Indicated Resource of 1.9Mt at 1.82% Cu and 1.70% Zn. This brought the total PCZM Mineral Resource to 31Mt grading 1.2% Cu and 3.6% Zn. As of 30th September 2023, the company had $15.74 million in cash. On 17th April 2024, Orion confirmed the fulfillment of the majority of outstanding conditions for the acquisition of the Okiep mineral rights, first announced on 2nd February 2021. Shortly after, on 22nd April 2024, Orion reported a "Spectacular High-Grade Copper Intercept at Okiep Copper Project," with results of 49m at 4.89% Cu, including 10.23m at 12.47% Cu, which caused the share price to jump from 19c to 24c. Investors are advised to approach this volatile penny stock with caution and maintain a strict stop-loss strategy. Further strong assay results were reported on 24th June 2024, including 9.27m at 3.01% Cu and 15m at 4.80% Cu within a broader zone averaging 1.57% Cu at the Flat Mine East within the Okiep Copper Project. An update for the quarter ending 30th June 2024 revealed that Orion had completed a capital raising of A$7.7 million (~ZAR92.3 million) in July 2024, with funds allocated primarily to progress the development of the Prieska Copper Zinc Mine and advance permitting and infrastructure development. On 25th June 2024, the company requested an immediate halt to trading in its shares pending an announcement, and on 28th August 2024, Orion announced that it had been granted a key water use license for the Okiep copper mine.
JSE:ORN
by PDSnetSA
Our opinion on the current state of SANLAM(SLM)Sanlam (SLM) is one of the largest insurance and financial services groups in South Africa, with a rich history dating back to its establishment in 1918. The company demutualised in 1998 and subsequently listed on both the JSE and the Namibian Stock Exchange. Sanlam operates across multiple geographies, including South Africa, the UK, America, Europe, India, Australia, and various African countries. Its extensive product range covers general insurance, life insurance, asset management, banking, credit, health, and bancassurance. The business is organized into four key divisions: 1. Sanlam Investment Holdings (SIH): Now 25% owned by African Rainbow Capital. 2. Sanlam Emerging Markets: This includes its 84.5% interest in Saham, a leading insurer in French-speaking African countries. 3. Sanlam Personal Finance: Primarily based in South Africa, this division contributes about 50% of the company's profits. 4. Santam: In which Sanlam owns a 61% stake. Sanlam’s operations outside of South Africa span 11 other African countries and Malaysia. Saham, its subsidiary, operates in 33 French-speaking countries, employing 3,000 staff members across 700 branches and offering a similar product mix to Sanlam. The company also owns a 26% stake in Shriram, a prominent insurance and financial services provider in India. Additionally, Sanlam has acquired 69% of Catalyst Fund Managers, a Cape Town-based manager of listed property assets, and 100% of CIG Fund Management, an Irish company. Sanlam’s South African operations are significantly impacted by the low levels of consumer spending and the country's economic recession. The company is 18% black-owned and has partnered with African Rainbow Capital (ARC) to focus on lower- and middle-income consumers and small businesses. Sanlam committed R2 billion in seed capital for this partnership. On 14th June 2021, Sanlam acquired the Alexander Forbes group risk and retail life business for R100 million. Additionally, the company announced that it would require its employees to be vaccinated against COVID-19 starting in 2022, similar to Discovery. In its results for the six months to 30th June 2023, Sanlam reported a net result from financial services up 26% and headline earnings per share (HEPS) up 118%. The company noted that cash net results from financial services increased by 30%, with broad-based improvements across all divisions, including a 38% increase in net results from general insurance and a 28% increase in life insurance. In an operational update for the nine months to 30th September 2023, Sanlam reported new business volumes up 13% and operational earnings up 35%. The group maintained a strong solvency position, with a solvency cover ratio of 170%. A trading statement for the year to 31st December 2023 estimated that HEPS would increase by between 43% and 53%, driven by higher investment returns on the shareholder capital portfolio. Further, in an update for the three months to 31st March 2024, the company reported a 14% increase in cash flow and a 15% increase in investment returns. A trading statement for the six months to 30th June 2024 estimated that HEPS would rise by between 35% and 45%, highlighting strong growth across all lines of business, particularly in life and general insurance. Sanlam is recognized as one of the JSE's foremost blue-chip shares, with a history of steady growth. After recovering somewhat from the market declines caused by the COVID-19 pandemic, the stock is currently trading at a P/E ratio of 12.69, which is considered good value at these levels. In a joint announcement on 18th June 2024, Sanlam agreed to acquire 60% of Multichoice's insurance business for R1.2 billion in cash, further expanding its footprint in the financial services sector.
JSE:SLM
by PDSnetSA
Our opinion on the current state of BRIMSTON(BRT)Brimstone (BRT) is a black-controlled investment holding company with a diverse portfolio of investments across various sectors. Its significant holdings include: 1. 54.2% of Sea Harvest: A listed fishing company with a market capitalization of just over R4.5 billion. 2. 100% of Lion of Africa: A loss-making insurance company that decided to cease operations in November 2018. 3. 100% of House of Monatic: A loss-making clothing manufacturer. 4. 24% of Oceana: The largest fishing company in South Africa, with a market capitalization of R8.6 billion. Brimstone is increasing its shareholding by acquiring 8 million shares from Tiger Brands, which will take its holding to 22.9%. 5. 6.1% of Grindrod. 6. 18% of Aon Re Africa. 7. 25% of South African Enterprise Development. 8. 49.8% of Vuna Fishing Company. 9. 12.8% of Milpark Education (although it has disposed of its entire stake recently). 10. 25% of Obsidian: A black-owned investment holding firm positioned to benefit from the roll-out of the NHI, which Brimstone increased to 80% for R35.7 million in January 2020. 11. Various smaller shareholdings in property, healthcare, 3.9% of Long4Life, and 5.3% of Stadio. Brimstone has been actively selling down its stakes in several companies, including Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi, using the proceeds to pay down R1 billion of its debt. In its results for the six months to 30th June 2024, Brimstone reported a 39% decline in revenue, but a 110% increase in headline earnings per share (HEPS). The company's intrinsic net asset value (NAV) fell by 5.7% to 1143.6 cents per share. The company attributed the increase in HEPS primarily to fair value gains of R76.2 million compared to fair value losses of R40.3 million in the prior period and an increase in Brimstone’s share of profits from Oceana, rising from R94.9 million in the prior period to R187 million in the period under review. Brimstone also disposed of its entire stake in Milpark and partial stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. Both the ordinary and "N" shares are thinly traded, with the ordinary shares being more illiquid, making them less suitable for private investors. Unless Brimstone begins to unbundle its portfolio, the additional value within the company is likely to remain locked in, limiting the potential upside for investors.
JSE:BRT
by PDSnetSA
Our opinion on the current state of INSIMBI(ISB)Insimbi (ISB) is a diversified industrial group specializing in the manufacturing and supply of specialist products to various sectors. The company’s offerings include ferrous and non-ferrous alloys, refractory and foundry materials, as well as plastic blow-moulding and injection moulding. Insimbi is also involved in the recycling of metal alloys and provides technical support to its clients. In its financial results for the year ending 29th February 2024, Insimbi reported a 2% decrease in revenue and a significant 54% drop in headline earnings per share (HEPS). The company attributed this decline to falling commodity prices, which negatively impacted both its export and local revenue streams. However, the impact was somewhat mitigated by the favorable exchange rate and US dollar-based pricing for some of its commodities. Looking ahead, Insimbi issued a trading statement for the six months ending 31st August 2024, estimating that HEPS would fall by at least 20%. This suggests that the company is continuing to face challenges, likely due to ongoing commodity price pressures and possibly other market factors. Technically, the share had been in an upward trend until June 2018, after which it declined sharply to a low of 50c on 18th December 2020. It then recovered to a high of 139c in June 2023 before entering a new downward trend. While Insimbi stands to benefit from any recovery in the South African economy, it remains a risky investment, particularly given its reliance on commodity markets. For private investors, Insimbi's average daily trade value of around R1,1m makes it a practical option, though the inherent risks associated with commodity price volatility and the broader economic environment should be carefully considered.
JSE:ISB
by PDSnetSA
Our opinion on the current state of MASTDRILL(MDI)Master Drilling (MDI) is a South African company specializing in drilling exploration and other services for the mining industry, with a diversified portfolio that now includes drilling for hydro-electric projects and construction. The company has strategically shifted its focus away from the South African mining sector, extending its services to North and South America, Europe, and other regions globally. A key innovation from Master Drilling is its development of new horizontal drilling technology, or tunnel boring machines, which could potentially revolutionize the mining industry worldwide. This technology facilitates the drilling of horizontal tunnels or tunnels inclined at up to 12 degrees, offering a faster and more cost-effective alternative to traditional blast-and-clear methods. Currently, this technology requires three operators, but the company is actively working towards a fully automated, remote-controlled version. In its results for the six months ending 30th June 2024, Master Drilling reported a 17.3% increase in revenue but a 3.2% decline in headline earnings per share (HEPS) in US dollars. The company's net asset value (NAV) increased by 8% to 135c per share. However, operating profit decreased significantly by 67.6% to USD 6.9 million, primarily due to impairment losses on reverse circulation and mobile tunnel-boring equipment. Despite this, the company is currently trading at about 52% of its NAV and has a price-to-earnings (P:E) ratio of 4.39, suggesting it may be undervalued. The company's horizontal drilling technology holds promise as a disruptive force in the mining industry, with the potential to extend the life of some mines and make others viable again. While the share carries risk, particularly due to its links to the commodities markets, the potential for strong growth is evident as the new technologies gain traction. In our view, Master Drilling is an intriguing company with significant growth potential, particularly as its horizontal boring machine continues to prove its value in the industry. This could make it a worthwhile consideration for investors looking for exposure to innovative mining technologies.
JSE:MDI
by PDSnetSA
Our opinion on the current state of ADVTECH(ADH)ADvTECH (ADH) is one of three listed commercial educational companies on the JSE, alongside Curro and its separately listed sister company, Stadio. ADvTECH operates two primary divisions: a schools division, which includes prominent names like Crawford, Trinity House, and Abbots, and a tertiary division, featuring institutions such as Varsity College, Rosebank College, and various specialist tertiary offerings. The group encompasses 109 schools and 33 campuses, serving approximately 78,500 students. Historically, ADvTECH was predominantly supported by its schools division. However, in recent years, increased competition in this sector has squeezed margins, shifting the primary source of the company's profits to its tertiary division. A significant development in this shift was the company's acquisition of Monash College, which added 6,500 students and a state-of-the-art facility in the West Rand, complete with laboratories, residences, and sports facilities. In its results for the six months ending 30th June 2024, ADvTECH reported a 9% increase in revenue and a 16% rise in headline earnings per share (HEPS). Total group enrolments grew by 6%. The company stated, "Group operating profit increased by 15% to R865 million (2023: R754 million) with the education division’s operating profit increasing by 16%. Resourcing’s operating profit increased by 3%, notwithstanding the decline in revenue. The group operating margin improved to 20.2% (2023: 19.2%). The operating margin in the education divisions improved to 23.5% (2023: 22.8%)." Technically, the share has been in a strong upward trend since the end of May 2020. It is currently trading at a price-to-earnings (P:E) ratio of 19.12, which suggests there is still upside potential. In our view, ADvTECH is a solid, blue-chip company with strong medium-term prospects, and it remains relatively inexpensive. Any significant improvement in the South African economy will directly benefit this company, and it is poised to gain from the newly appointed Government of National Unity (GNU). Moreover, education is traditionally seen as a defensive sector, with parents often willing to make significant sacrifices to pay for their children's education, making this share resilient even in times of low economic growth.
JSE:ADH
by PDSnetSA
Our opinion on the current state of HARMONY(HAR)Harmony (HAR) was once considered South Africa's most marginal gold mine until it managed to get the Mponeng gold mine working effectively. The development of Mponeng and its processing plant is expected to cost around US$2.8 billion, and at this stage, Harmony does not have its share of that cash (approximately R20 billion). In 2021, the company purchased Mponeng gold mine for R4.2 billion. Mponeng is the world’s deepest mine, and it comes with all the challenges associated with ultra-deep level mining. Despite these challenges, Harmony is making significant investments in renewable energy, including a 30 MW solar park in the Free State and plans to build an additional 80 MW of green power. On 6th October 2022, Harmony announced that it had agreed to buy 100% of the Eva copper project in Australia for R4.1 billion. While Harmony remains a volatile gold producer and thus risky, these recent acquisitions could significantly change its direction, potentially moving the company out of exclusive reliance on precious metals. The Eva project is expected to commence production in three years and add 260,000 ounces of gold and 1.7 billion pounds of copper to Harmony's reserves. In its results for the six months ending 31st December 2023, Harmony reported a 14% increase in the amount of gold produced and an 8% decline in the rand, leading to an 18% increase in the average price received. This resulted in a 226% increase in headline earnings per share (HEPS) and a dividend declaration of 147c per share. The company stated, "Mponeng extension project approved, extending mine life from 7 to 20 years and increasing margins - Hidden Valley generated operating free cash flow of R1,769 million (US$95 million), due to excellent recovered grades." In an update for the nine months ending 31st March 2024, Harmony reported an 8% increase in recovered underground grades to 6.16 grams per ton and a 10% increase in gold production. Gold revenue increased by 26% due to a 17% increase in the rand price of gold. The company has net cash of R1.544 billion. On 3rd April 2024, Harmony announced that it had signed a wage deal with all its unions for the next five years. On 19th June 2024, Harmony announced that it would meet its guidance for the year ending 30th June 2024 regarding production, grade, and costs. The company stated, "Exceptional operating free cash flow generation continues due to improved recovered grades, a higher rand gold price received, and sustained operational excellence." In a trading statement for the six months ending 30th June 2024, Harmony estimated that HEPS would increase from 45c (US) to 98c. The company reported, "Group production for this reporting period increased by 6% to 48,578 kg (1,561,815 oz) from 45,651 kg (1,467,715 oz) in FY23. This was mainly due to higher recovered grades at Mponeng, Hidden Valley, and Mine Waste Solutions." On 24th August 2024, the company confirmed that it would meet its cost guidance for the 2024 year, with total production expected to exceed the FY24 guidance of 1,550,000 ounces (48,210 kg), and all-in-sustaining costs expected to be comfortably below R920,000/kg. Technically, Harmony's share is in a strong upward trend, driven by the gold price and the rand/US dollar exchange rate. The share remains a volatile play on these factors but shows significant potential for growth.
JSE:HAR
by PDSnetSA
Our opinion on the current state of ITLTILE(ITE)Italtile (ITE) is a franchisor specializing in tiles, sanitary ware, flooring, and home finishing products, which it manufactures and wholesales. The company is controlled by the Ravazotti family and operates 206 stores along with 6 online web stores. It also boasts a property portfolio of retail and industrial properties valued at approximately R4,3bn. The company has expanded its manufacturing capabilities by acquiring 95,47% of Ceramic Industries and 71,54% of Ezee Tile, further enhancing its product offerings and operational efficiency. Italtile has been benefiting from increased sales driven by the trend of people improving their home environments while working from home. The company has plans to expand by adding 10 to 15 new stores this year. Additionally, it has repurchased about R240m worth of its own shares at lower levels, which may support its stock price. The company faced challenges during the civil unrest in Natal, where it had to close 18 stores, and another 16 stores were closed for 10 days. Two stores at Orange Farm and Spruitview were destroyed, and there were also store closures due to COVID-19 in July 2021. In its results for the year ending 30th June 2024, Italtile reported that turnover remained unchanged while headline earnings per share (HEPS) were down 7%. The company's net asset value (NAV) increased by 10% to 707,5c per share. Italtile stated, "While our retail operation's full-year results were slightly lower than the prior comparable year, the division recovered market share and performed better in the second half of the period than the first half." Technically, the share moved sideways for two years before COVID-19 took it down to levels around R10. However, the share broke up through its long-term downward trendline on 28th June 2024 at a price of 1107c and has since risen to 1305c. It is likely to benefit from new building activity expected to follow the formation of the new Government of National Unity (GNU) in South Africa.
JSE:ITE
by PDSnetSA
Our opinion on the current state of STADIO(SDO)Stadio (SDO) is a tertiary education institution that offers a wide range of post-school training. The company provides higher education through five universities, offering qualifications ranging from higher certificates to degrees, master's, and PhD programs. Currently, it has over 46,000 students enrolled across six faculties, offering more than 50 accredited training programs. Notably, 86% of these students are studying online, aligning with the company's vision of growing its student base to 100,000, with a significant portion expected to be distance learning students. In its results for the six months ending 30th June 2024, Stadio reported a 16% increase in revenue and a 20% rise in headline earnings per share (HEPS). The company's net asset value (NAV) also increased by 2% to 216c per share. The company noted, "The STADIO Group grew first semester students by 10% to 47,024 as at 30 June 2024 (30 June 2023: 42,874), with distance learning student numbers reflecting good overall growth of 10% to 40,702 at 30 June 2024 (30 June 2023: 37,067). Strong demand in professional qualifications continued to drive healthy growth in registrations for the period." Given the challenges faced by government tertiary education in South Africa, Stadio is well-positioned to capitalize on the increasing demand for private education. The company has demonstrated strong growth and appears to be in a robust upward trend, making it a promising investment. We remain bullish on its prospects.
JSE:SDO
by PDSnetSA
Our opinion on the current state of ARM(ARI)African Rainbow Minerals (ARI) is a diversified mining company controlled by Patrice Motsepe, engaged in various mining ventures, including platinum group metals (PGM), iron ore, manganese, chrome, coal, and copper. The company also owns a 12.2% stake in Harmony Gold, leading to some speculation about possible acquisitions or strategic partnerships. One potential acquisition could involve the Wafi-Golpu copper and gold resource, jointly owned by Harmony and Australian mining company Newcrest. Harmony is seeking financial support to cover its share of the development cost for this massive resource, estimated at around R21bn, and ARM could potentially be part of that solution. In addition to this, ARM is looking for acquisitions of "green metals" mines—those that produce metals used in efforts to avert climate change, which aligns with the global move towards sustainability. In its results for the year ending 31st December 2023, ARM reported a 43% decrease in headline earnings and net cash of R7,935m. Despite an 8% weakening of the average rand exchange rate against the US dollar and a 6% increase in export iron ore sales, the company faced challenges. ARM Platinum, in particular, experienced a significant downturn, with headline earnings 121% lower, resulting in a R282 million loss compared to R1,330 million in earnings for the first half of the previous financial year. This was attributed to depressed commodity prices and above-inflation unit cost increases. In a trading statement for the year ending 30th June 2024, ARM estimated that headline earnings would decrease by between 40% and 50%. The decline in earnings was primarily due to a decrease in the average US dollar 6E PGM basket price and lower thermal coal prices. Technically, the share has been declining since the beginning of 2023 due to falling commodity prices but may be nearing a bottom. ARM is a strong mining company with stability gained from its diversification into base metals. However, it remains a risky investment, especially if the board decides to venture into new areas like Wafi-Golpu, which would require significant long-term commitment.
JSE:ARI
by PDSnetSA
Our opinion on the current state of GFIELDS(GFI)Gold Fields (GFI) is a relatively high-cost international gold mining house with a single mine in South Africa, South Deep. Acquired by Gold Fields in 2006, South Deep has struggled to achieve profitability, with the company investing a total of R32bn (R22bn for the purchase and R10bn for development) over the past 14 years. Brett Kebble famously described South Deep as "The world's most expensive long drop..." due to its challenges, being 3 kilometres deep and technically complex. Despite these difficulties, South Deep holds the second-largest unmined gold resource in the world, which is why Gold Fields continues to invest in it. Gold Fields is collaborating with an independent power producer (IPP) to build a 50MW power project in South Africa. Additionally, the company has invested $502m over the past two years to ensure that its international operations, particularly at Damang and Gruyere, would sustain a production of 2 million ounces annually for the next decade. Recent developments at South Deep have led to a reduction in costs by R800m and a decrease in capital expenditure by R400m. The company is also focused on bringing the new Salares Norte gold mine in Chile into production. On 11th July 2022, Gold Fields announced that it would list on the Toronto Stock Exchange and adopt a dividend policy of paying between 30% and 45% of profits. The protracted investment in South Deep is beginning to pay off, with output expected to increase by approximately 25% over the next four years. On 12th August 2024, Gold Fields announced the acquisition of the remaining 50% of Osisko Mining for $1.57bn (R29bn). In its results for the six months ending 30th June 2024, the company reported a 20% decline in attributable production, down to 918,000 ounces. The all-in sustaining costs were $2060 per ounce, while earnings per share (EPS) dropped by 22% to 40c (US), compared with 51c in the previous period. The company noted that "Group performance in H1 2024 was impacted by weather-related events and operational challenges at some of our assets." Technically, the share is very volatile and subject to fluctuations in the international price of gold, but it has been in an upward trend over the past five years. It remains a volatile commodity play.
JSE:GFI
by PDSnetSA
Our opinion on the current state of GRINDROD(GND)Grindrod (GND) is an international freight and financial services company operating in twenty-eight countries. In mid-June 2018, Grindrod unbundled and separately listed its loss-making shipping division, Grinship (GSH), which accounts for the significant drop in the share price at that time. The company is now focused on its two remaining divisions—freight and financial services. Grindrod owns the North-South railway line from Beitbridge to Victoria Falls and operates port terminals in Richards Bay, Natal, Walvis Bay, Namibia, and Maputo. The company is optimistic about the growth potential of its financial services division, which comprises about 30% of its business, with a focus on engaging its retail banking division with small and medium-sized businesses. However, the conflict in northern Mozambique poses a challenge for Grindrod, along with the flooding in Natal that resulted in the suspension of five of their sites for several weeks. In its results for the six months ending 30th June 2024, the company reported revenue down by 1% and headline earnings per share (HEPS) flat. The company stated, "Port of Maputo grew its own handled volumes by 18% to 6.9 million tonnes underpinned by strong demand for chrome. Grindrod's dry bulk terminals handled 8.4 million tonnes. Richards Bay volumes rebounded to 1.6 million tonnes for the period, reflecting a 20% growth on prior period. Ships agency and clearing and forwarding businesses achieved strong headline earnings growth of 38% on the back of a higher customer base and port calls. This growth was, however, dampened by the continuing negative impact of logistics constraints on the container handling depot throughput and transport resulting in the overall logistic earnings growth of only three percent." Technically, the share completed a rising triple-bottom and has risen off this base into a new upward trend. It was recommended to wait for an upward break through its long-term downward trendline before considering a buy. That break occurred on 15th July 2020 at a price of 340c. The share has since moved up strongly to 1512c, representing a gain of 344% in just over four years. Grindrod should benefit directly from the recovery in the global economy and the steady rise in international trade. We believe that this share still represents value.
JSE:GND
by PDSnetSA
Our opinion on the current state of HARMONY(HAR)Harmony (HAR) was historically considered South Africa's most marginal gold mine until it effectively brought the Mponeng gold mine into operation. The development of Mponeng and its processing plant is expected to cost approximately US$2.8 billion, and Harmony currently lacks its share of the required capital, around R20 billion. In 2021, the company purchased Mponeng gold mine for R4.2 billion. Mponeng is the world's deepest mine, presenting all the challenges associated with ultra-deep level mining. Harmony is also making strides in renewable energy, with a 30MW solar park under construction in the Free State and plans to build an additional 80MW of green power. On 6th October 2022, Harmony announced its agreement to purchase 100% of the Eva copper project in Australia for R4.1 billion. While Harmony remains a volatile and risky gold producer, these recent acquisitions, particularly the Eva project, could significantly shift its strategic direction, potentially moving it out of a sole focus on precious metals. The Eva project is not expected to commence production for another three years but is projected to add 260,000 ounces of gold and 1.7 billion pounds of copper to Harmony's reserves. In its results for the six months ending 31st December 2023, Harmony reported a 14% increase in gold production and an 8% decline in the rand, leading to an 18% increase in the average price received. This resulted in a 226% increase in headline earnings per share (HEPS) and a declared dividend of 147c per share. The company highlighted the approval of the Mponeng extension project, which will extend the mine's life from 7 to 20 years and increase margins. Additionally, the Hidden Valley mine generated operating free cash flow of R1,769 million (US$95 million), driven by excellent recovered grades. In an update on the nine months ending 31st March 2024, the company reported an 8% increase in recovered underground grades to 6.16 grams per ton and a 10% increase in gold production. Gold revenue increased by 26%, thanks to a 17% rise in the rand price of gold. Harmony also reported having net cash of R1.544 billion. On 3rd April 2024, the company announced the signing of a wage deal with all of its unions for the next five years. On 19th June 2024, Harmony confirmed that it would meet its production, grade, and cost guidance for the year ending 30th June 2024, citing exceptional operating free cash flow generation due to improved recovered grades, a higher rand gold price, and sustained operational excellence. Further, on 24th August 2024, the company announced that it would comfortably meet its cost guidance for the 2024 year, with total production expected to exceed the FY24 guidance of 1,550,000 ounces (48,210kg), and all-in-sustaining costs projected to come in below R920,000/kg. Technically, the share is in a strong upward trend, making it a play on the gold price and the rand/US dollar exchange rate.
JSE:HAR
by PDSnetSA
Our opinion on the current state of ADCOCK(AIP)Adcock (AIP) is a leading supplier of pharmaceuticals to both the private and public sectors in South Africa, with diversification into India and other sub-Saharan countries. The pharmaceutical industry in South Africa is heavily influenced by the government's "single exit price" (SEP) mechanism, which determines the price for each type of medicine. In 2019, Adcock was only permitted to increase its prices by 1.3% on regulated medicines. This "cost-plus" pricing approach limits the company's ability to generate significant profits by pricing at market rates, and it also makes the company vulnerable to fluctuations in the strength of the rand, particularly since some ingredients are imported. To secure government contracts for supplying medicines, Adcock has achieved level 1 B-BBEE empowerment status for its continuing operations. Bidvest holds a controlling interest in Adcock (50.1%) and effectively controls its board of directors. Bidvest has been attempting to sell this interest to a Black empowerment entity but has faced challenges, as no potential buyers have sufficient capital to acquire the share for R4.8bn. In response to the constraints imposed by the SEP mechanism, Adcock is exploring diversification into unregulated products, such as baby care products, to reduce its reliance on the regulated pharmaceutical market. In its results for the year ending 30th June 2024, Adcock reported revenue growth of 6% and headline earnings per share (HEPS) growth of 10%. The company attributed its success to a strong trading performance coupled with excellent cost control, which facilitated double-digit HEPS growth. Additionally, strong cash generation allowed the company to return value to shareholders, including the repurchase of 6 million shares and a 10% increase in dividends. Technically, the share had been in a long-term downward trend that ended in September 2021. A breakout above the long-term downward trendline occurred on 3rd September 2021 at a price of 4548c, and since then, the share price has risen to 6596c. Given its defensive nature and current valuation, with a P:E ratio of 10.7, Adcock appears to be a solid investment for private investors.
JSE:AIP
by PDSnetSA
Our opinion on the current state of CASHBIL(CSB)Cashbuild (CSB) is the largest retailer of building materials and related hardware in Southern Africa, focusing primarily on the home improvement market. In the context of the currently depressed economies in the region, much of the company's growth has been driven by the opening of new stores. This strategy positions Cashbuild to survive the economic downturn and benefit from any general recovery in Southern Africa's economic conditions. In its results for the six months ending 24th December 2023, the company reported a revenue increase of 2%, while headline earnings per share (HEPS) decreased by 20%. The company's net asset value (NAV) fell by 16% to 7757c per share. The company noted that revenue from stores that existed prior to July 2022 (312 stores) increased by 1%, and its nine new stores contributed an additional 1% to growth. However, the gross profit margin decreased slightly from 25.3% to 24.7%, with selling price inflation at 3.2% by December 2023 compared to the previous year. In a subsequent update on the third quarter ending 31st March 2024, the company reported a 3% increase in revenue, with the nine new stores again contributing 1% growth. Selling inflation during this period was 2.4%. By the fourth quarter ending 30th June 2024, Cashbuild reported a 4% revenue increase compared to the same quarter of the previous year. For the full financial year, existing stores contributed a 3% revenue increase, while the 12 new stores added 1% growth. In a trading statement for the 53 weeks ending 30th June 2024, Cashbuild estimated that HEPS would decrease by between 20% and 30%. Technically, the share experienced a steady downward trend from March 2018, bottoming out at R120 per share in March 2020. It subsequently rose to R337 in February 2021 before beginning another downward trend, with the current price around R164. The stock is now trading at a P:E ratio of 15.19 and offers a dividend yield of 3.2%. Cashbuild is widely regarded as an extremely well-managed company, well-positioned to capitalize on any future improvement in local economic conditions. However, it operates in a tough and highly competitive industry, and even at current levels, it may still appear a bit expensive.
JSE:CSB
by PDSnetSA
Our opinion on the current state of GTCSA(GTC)GTC is a property group operating in Central and Eastern Europe with a diverse portfolio of properties in key cities such as Warsaw, Bucharest, Budapest, Belgrade, Sofia, and Zagreb. The company manages forty-seven office buildings and six retail properties with a gross lettable area (GLA) of 829,000 square meters, valued at approximately 2,35 billion euros. GTC is listed on both the Warsaw Stock Exchange (WSE) and the JSE. In its results for the six months ending 30th June 2024, GTC reported rental revenue up 3%, with occupancy at 86%. The company's loan-to-value (LTV) ratio stood at 48,2%. The company noted that while the direct impact of the war in Ukraine on its operations has not been material, the situation remains highly volatile. GTC is monitoring developments closely and analyzing potential impacts on both individual projects and its long-term investment plans. However, the share is extremely thinly traded on the JSE, making it impractical for private investors to engage with this stock.
JSE:GTC
by PDSnetSA