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Our opinion on the current state of TELKOM(TKG)Telkom (TKG) was historically the government-controlled provider of fixed-line telephone connectivity in South Africa. With the advent of cell phones, Telkom had to subsidize the development of its own competition in the form of Vodacom, MTN, and more recently, Cell-C. This subsidy was primarily through termination rates for calls, which are now being phased out. Over the past twenty years, Telkom's CEO, Sipho Maseko, has stated that Telkom has effectively subsidized other networks to the tune of R70bn. Currently listed on the JSE, Telkom is still partially government-controlled, with the government owning 41% and the Government Employees Pension Fund (GEPF) owning 11.9%. Despite this, it operates as an independent organization divided into five divisions: 1. Open Serve: South Africa's primary supplier of wholesale connectivity with the country's largest network. 2. Telkom Consumer: The largest supplier of broadband internet connectivity with a growing mobile phone network. 3. Yellow Pages: Provides advertising and marketing to local businesses. 4. BCX: An ICT solutions company operating in Southern Africa. 5. Swiftnet: Formed in April 2018 to house Telkom's masts, towers, and property interests. Swiftnet owns a diverse portfolio of 1,330 properties, with 40 earmarked for development. Telkom is also impacted by the rulings of the Independent Communications Authority of South Africa (ICASA) regarding "inter-connect" fees. However, Telkom has been well-managed, and its downsizing efforts are expected to improve profitability moving forward. The company is steadily transitioning from fixed-line to mobile services. On 23rd July 2021, CEO Sipho Maseko announced his intention to step down, effective from 30th June 2022. On 22nd March 2024, the company announced the sale of Swiftnet for R6.75bn to a consortium of investors, with the cash intended to reduce Telkom's debt. In its results for the year ending 31st March 2024, Telkom reported group revenue up 1.6% and headline earnings per share (HEPS) up 201.3%. The company stated, "Total headline earnings per share (HEPS) and basic earnings per share (BEPS) increased by more than 100% to 376.0 cents and 385.5 cents, respectively, driven by improved operational performance. Profit for the year also increased by more than 100% to R1.9 billion, boosted by the non-recurrence of once-off restructuring costs and lower depreciation, while higher interest rates increased net finance costs compared to the prior year." In a trading update for the three months ending 30th June 2024, the company reported revenue up 3.9% and EBITDA up 24.1%. The company noted, "Telkom had a good start to the financial year with pleasing performance on the top line benefiting from our data-led strategy and compelling value propositions." Technically, Telkom's share price fell from highs of around R98 in June 2019 to levels around R15.00 in March 2020 and has been moving sideways and down since then. The company has high debt levels compared to its market capitalization, which makes it risky for investors. While the latest results are positive, Telkom is still battling to find a new direction in a very difficult economy and against stiff competition.
JSE:TKG
by PDSnetSA
Our opinion on the current state of CURRO(COH)Curro (COH) is a private education group focused on building and operating schools for children up to matriculation. The company's tertiary division was unbundled and separately listed on the JSE as Stadio (SDO) on 3rd October 2017. Curro has capitalized on the decline in government education since 1994, and it is a spin-off from PSG, which still holds a 17.2% stake. On 30th December 2015, Curro reached an exceptionally high price-to-earnings (P:E) ratio of 245 on the JSE, driven largely by its perceived growth potential. The company's business model seemed limitless as it continued to acquire or build more schools. Currently, Curro operates 178 schools across 76 campuses, with an average of just over 72,000 students. However, Curro has faced challenges, including falling pupil numbers and parents struggling to pay school fees. The company has also impaired the value of its schools by R202 million and increased its bad debts provision. On 1st March 2022, PSG announced that it would unbundle its 63.6% holding in Curro into the hands of PSG shareholders, aiming to release value for those shareholders. Curro has been involved in legal actions with the City of Johannesburg to prevent schools from being classified as businesses for rates purposes. The company won this case on 2nd March 2023. In its results for the year ended 31st December 2023, Curro reported a 32% increase in recurring headline earnings per share (HEPS) and a 15% increase in revenue. The company noted that Curro’s weighted average number of learners for 2023 increased by 2% to 72,031, and revenue grew by 15% to R4,764 million. Tuition fees increased by 12%, supported by growth in learner numbers, price-mix across grades, and annual fee increases. Additionally, ancillary revenue rose by 33%, contributing R120 million more than the previous year. In a trading statement for the six months ending 30th June 2024, Curro estimated that HEPS would increase by between 10.9% and 21.3%. Technically, Curro’s share price has been moving sideways since the COVID-19 impact in March 2020, but there may be signs of a new upward trend emerging. Education is generally considered a good investment because parents tend to prioritize paying for their children's education, which means education companies have lower working capital requirements. While these companies do not typically face union problems, they are capital-intensive, as each school requires significant infrastructure to operate, adding an element of risk.
JSE:COH
by PDSnetSA
$JSEPAN - Pan African Resources: Target Reached, More Upside?See link below for previous analysis. The double bottom target and new all time high of 685 cps has been reached and exceeded. Looking at the price structure from 283 cps, I am now viewing the advance as a five wave impulse that is currently in wave 3 of (5). A correction for wave 4 will set the scene for further advance in wave 5; in commodities and commodity stocks, fifth waves tend to be larger than third waves which is very bullish for PAN. Buy the dips.
JSE:PANLong
by Loyiso_BlaqueSoros_Mpeta
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Our opinion on the current state of AB-INBEV(ANH)Anheuser-Busch, or AB-InBev (ANH), is the world's largest brewer of beer, operating in both first-world countries and emerging markets. ANH trades on the JSE as ANH, the Brussels Stock Exchange as ABI, and the New York Stock Exchange (NYSE) as BUD. The company announced its intention to list its Asia-Pacific arm on the Hong Kong Stock Exchange to raise approximately $10 billion, with the cash aimed at reducing its debt. The company has well-known brands like Budweiser, Stella Artois, Castle, Becks, and Corona. After acquiring SA Breweries, AB InBev became four times the size of the world's next largest brewer, Heineken, leaving limited potential for further meaningful acquisitions. Growth from here on must be organic. Due to its American exposure, the company reports quarterly. In its results for the six months to 30th June 2024, the company reported revenue up 2.7% and underlying earnings per share (EPS) of 90c (US) compared with 72c in the previous period. Headline earnings per share (HEPS) rose to 133c from 100c. The company stated, "Volume growth in our Middle Americas, South America, Europe, and Africa regions was primarily offset by performance in China and Argentina, resulting in an overall volume decline of 0.8%." From a private investor's perspective, this is a massive international blue-chip share, which is also a good rand-hedge. At current levels, it is trading on a P:E of 20.53, which still looks fairly fully priced to us. Technically, the share was in a downward trend from when it listed on the JSE, and we recommended waiting until it broke up through its long-term downward trendline. That happened on 4th November 2022 at 94065c. It has since moved up to 110639c.
JSE:ANH
by PDSnetSA
Our opinion on the current state of ARCMITTAL(ACL)ArcelorMittal (ACL) is South Africa's largest steel-producing company. It has survived while other companies, like Highveld Steel, have disappeared. Arguably, ArcelorMittal felt the impact of the sub-prime crisis more than any other South African company, with its share price falling from a high of R260 in June 2008 to as low as 25c in August 2020. Since then, the share price has rallied strongly and now trades at 1052c. The company has had to contend with the collapse of the local construction industry, which was a major consumer of steel, as well as massive imports of cheap Chinese steel that were dumped onto the South African market. Those imports have slowed down somewhat, and ArcelorMittal was successful in securing certain tariffs to discourage imports. We believe that this company came close to closure in July 2020 when the share price reached 25c. However, it has been rescued by the rising steel price combined with severe cost-cutting measures. In its results for the six months to 30th June 2024, the company reported revenue down 3% and a headline loss of 100c per share compared with a loss of 40c in the previous period. The company stated, "The financial results were negatively impacted by the difficult local and regional trading conditions, and by the negative volume and direct cost impact of operational interruptions of the two blast furnaces at Vanderbijlpark." In an update on 3rd July 2024, the company mentioned, "The Longs steel product operations ("Longs Business") have been operationally stable for H1 2024. The Flats steel product operations ("Flats Business") in Vanderbijlpark experienced notable levels of instability at its blast furnaces in April and May 2024. Due to the intensive cash management actions, the net borrowings position is anticipated to remain within tolerable levels." We recommended waiting for the share to break above its 200-day moving average before investigating further. That happened on 10th July 2024 at 129c per share. Since then, the share has moved up to 136c and looks like it may be entering a new upward trend.
JSE:ACL
by PDSnetSA
Our opinion on the current state of MONDIPLC(MNP)Mondi (MNP) is a massive international paper and packaging company that started in South Africa but now has interests in 30 countries and employs 26,000 people at about 100 sites. It has businesses across the full spectrum of packaging and is extremely professionally managed. The company owns and operates forests, produces wood pulp, paper, and plastic films for the production of a wide variety of packaging solutions. Mondi has been impacted by developments in the Ukraine crisis. In an update on 28th February 2022, the company said, "Mondi has operations in Russia, representing around 12% of the Group's revenue by location of production, including a high margin, cost-competitive, integrated pulp, packaging paper and uncoated fine paper mill located in Syktyvkar (Komi Republic)." The company decided to divest itself of all its Russian holdings, which had a net asset value (NAV) of 687 million euros as of 31st December 2021. On 1st July 2022, the company announced that it had completed the sale of its personal care business for 615 million euros. On 12th August 2022, the company announced that it had sold its Russian subsidiary for about R25 billion. This announcement caused the share price to jump. In its results for the six months to 30th June 2024, the company reported revenue down 4% and earnings per share (EPS) down 30%. The company said, "Our underlying EBITDA of €565 million in the first six months, although lower than the comparable period last year, reflected an encouraging performance, supported by improving market conditions resulting in stronger order books and higher sales volumes." In our opinion, Mondi remains a blue-chip company that looks cheap on a price: earnings multiple (P:E) of 12.37; however, there may be further downward potential. Technically, the share was in a strong upward trend after March 2020, which was derailed by the Ukraine situation in March 2022. Since then, it has been moving sideways, but there is evidence now of a new upward trend emerging. We expect that the upward trend will continue as the worldwide switch to online shopping requires more packaging materials. In March 2024, the company announced that it would acquire 54% of LSE-listed DS Smith Plc for GBP5.14 billion.
JSE:MNP
by PDSnetSA
Our opinion on the current state of MPACT(MPT)Mpact (MPT) is a large producer of paper and plastics packaging in Southern Africa. It recycles paper and cardboard and makes corrugated cardboard containers for a variety of industries as well as polystyrene trays for the food industry. It has 20 manufacturing operations, with South African sales accounting for 86% of its business. It employs over 5000 people. The business is impacted by the general level of consumer spending (which has been depressed because of COVID-19 and was improving at least until the advent of the Ukraine crisis) as well as weather considerations which affect the demand for corrugated containers for fruit and other agricultural products, especially in the Cape. Like many businesses in the current environment, Mpact has been working to preserve cash, but it has benefited from a switch to local suppliers during the pandemic. In its results for the year to 31st December 2023, the company reported headline earnings per share (HEPS) up 8% and net asset value up 11.2% at 3363c per share. The company said, "The weak economy, weighed down further by load shedding and other public infrastructure failures, impacted many businesses and consumers who were already struggling because of high interest rates and a prolonged period of high inflation." In a trading statement for the six months to 30th June 2024, the company estimated that HEPS from continuing operations would fall by between 32.5% and 37.8%. The company said, "The Group's operating profit margin for the six-months ended 30 June 2024 decreased from the high levels achieved in the six months ended 30 June 2023 ('prior period'), which benefited from a strong recovery in Paper margins following selling price increases at the end of 2022." The share fell from a high of R51 in April 2016 to levels around R8 in March 2020 but has since recovered to 2970c. At the current level, it is on an earnings multiple of 5.8 - which looks cheap. Technically, the share looks like it may be entering a new upward trend but it has been moving sideways since August 2022. On 1st August 2024, the company announced that it had sold its Versapak business for R267.7m.
JSE:MPT
by PDSnetSA
Our opinion on the current state of SEBATA(SEB)Sebata (SEB) is an investment holding company with four divisions: software solutions, water technologies, ICT support services, and consulting. - **Software Solutions Division**: This division includes Sebata, which offers IT services to municipalities and public entities; Freshmark, providing IT solutions to fresh produce providers; and Rdata, an accounting package for the public sector. - **Water Technologies Division**: This consists of Utility Systems, which provides electronic water control and pre-payment devices, and Amanzi Meters, which supplies water meters to the residential market. - **ICT Support Services Division**: This division includes Turrito Networks, which offers telecommunications and managed solutions to SMEs and corporate markets, and Dial-a-Nerd, which provides IT support to SMMEs and professionals. - **Consulting Division**: This division consists of Utility Management Services, which assists municipalities with meter reading and debt management, and Mubesko Africa, which consults to local governments, supplying draft policies and long-term financial planning. Sebata primarily serves a market of municipalities, which is known for being poorly managed and for often failing to pay their debts. In its results for the year ending 31st March 2024, the company reported revenue of R33.1 million, up from R28.7 million in the previous period. Despite the increase in revenue, the company posted a headline loss of 101.62 cents per share, a significant increase from the 14.48 cents loss in the previous period. The value traded in Sebata shares is around R20,000 per day on average, making it impractical for even small investments due to low liquidity. Despite this, the company does have some prospects in the UK, which may provide opportunities for growth in the future.
JSE:SEB
by PDSnetSA
Our opinion on the current state of ALTRON-A(AEL)Allied Electronics Corp, or Altron (AEL), is an information and communications technology company founded by Bill Venter in 1965. The company has been re-focusing on its core business by selling its 80% stake in Powertech and its 100% subsidiary, Altech UEC, a developer of set-top boxes. Powertech was sold to a BEE consortium, and Altron is currently in the process of selling CBI Telecom Cables. Altron operates in six African countries, as well as the UK and Australia. The company announced that it had secured key wins in both the public and private sectors, including the Gauteng Broad Band Network phase 2 contract and FNB's data and analytics contract. Additionally, Netstar, a subsidiary of Altron, won a three-year contract with eThekwini for vehicle tracking of 7,000 vehicles. Bytes, a UK-based subsidiary that has now been unbundled and separately listed on both the London Stock Exchange (LSE) and the JSE, secured a five-year contract for Windows 10 with the NHS (UK). Altron has been restructuring its debt to reduce interest expenses and has resumed paying dividends. The company also acquired Phoenix Software in the UK for R698 million. On 17th December 2020, Altron successfully listed its subsidiary Bytes Technology on the LSE at a price of GBP2.70, unlocking significant value for Altron shareholders, though this resulted in a notable drop in the Altron share price chart. In its results for the year to 29th February 2024, the company reported revenue up 8% and headline earnings per share (HEPS) up 36%. The company also reduced its debt by 44% to R313 million during the period. Altron stated that "Increased cash generation supported by a strong balance sheet allowed us to increase our final dividend per share by 74%." In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would rise by at least 20%, citing that "positive momentum has continued into the 2025 financial year ("FY25"), leading to a stronger year-to-date performance in comparison to the Comparative Period, which was negatively impacted by provisions and impairments raised." Technically, the share had been moving sideways between 750c and 1330c from December 2020 until November 2023. It has since entered a new upward trend and has been rising strongly. The share was added to the Winning Shares List on 15th November 2023 at 949c and has since risen to 1720c.
JSE:AEL
by PDSnetSA
Our opinion on the current state of AECI(AFE)AECI (AFE) is a leading producer of chemicals and explosives in South Africa, supplying products for the mining industry, water treatment, animal health, food and beverages, and the industrial sector. The company has a broad international presence, with businesses in Australia, North America, Europe, Asia, and Africa, employing 7,600 people across 22 countries. AECI also has a property division called "Acacia." The company has successfully diversified away from its exposure to South Africa, with only 40% of its total revenue coming from the country. AECI has demonstrated its ability to make acquisitions that boost turnover and profits. However, in its results for the six months to 30th June 2024, the company reported revenue down 4% and headline earnings per share (HEPS) down 57%. The company noted, "Sales volumes of mining chemicals are expected to improve on the back of an anticipated recovery in mining activity in South Africa." On a P/E ratio of 13.39 and a dividend yield (DY) of 0.9%, there is a belief that the share may fall further. Technically, the share has been trending sideways for most of the last ten years, indicating a lack of significant momentum in either direction. Within this broader trend, it appears to be approaching the bottom of a downtrend and may be ready for some recovery.
JSE:AFE
by PDSnetSA
Our opinion on the current state of MERAFE(MRF)This is a ferrochrome operation controlled by Glencore, which operates mines, furnaces, and smelters in Mpumalanga and Limpopo. The Glencore-Merafe joint venture can produce up to 2.3 million tons of ferrochrome per annum. Merafe gets 20.5% of the proceeds, and the balance goes to Glencore. The problem is electricity supply, as smelters require huge amounts of current. The 15.6% increase in Eskom tariffs last year was a major factor, and the current year's increase of just under 10% from 1st April 2022 is a further problem. The company is concerned about Eskom's ability to supply additional power for expansion. Their Lion 3 expansion has accordingly been suspended until this difficulty can be overcome. All smelters except Lydenburg are operating. The availability of trains from Transnet to move its product is another problem. In its results for the year to 31st December 2023, the company reported revenue up 16% and headline earnings per share (HEPS) of 60.1c compared with 56.4c in the previous period. The company said, "Merafe achieved a record profit of R1 753 million despite a challenging economic environment. Demand for ferrochrome was weaker compared to prior years, which resulted in lower sales volumes and lower realised prices, whilst chrome ore sales volumes were significantly elevated and realised prices increased due to buoyant demand and supply constraints." Obviously, this is a commodity share and has risks, but the world's demand for stainless steel did increase with the economic boom in America, which now appears to be coming to an end. In a production update for the six months to 30th June 2024, the company reported ferrochrome production down 17% due to the Rustenburg smelter being out of operation. The company estimated that HEPS would fall by between 23% and 43%. Technically, the share reached a high of 192c on 4th April 2022 and was trending down until a rally in September 2022. It found some brief support at 104c per share and trended up, but the rally was short-lived. It remains a volatile commodity share.
JSE:MRF
by PDSnetSA
Our opinion on the current state of WOOLIES(WHL)The sad fall of the Woolworths share (WHL) price was occasioned by the decision of previous CEO, Ian Moir, and his board to buy David Jones in Australia for AU$2.1bn, which has now had R12bn written off its original purchase price of R20bn in 2014. The only aspect sustaining the Woolworths group was its food sales. Woollies announced on 14th January 2020 that they had appointed Roy Bagattini, from Levi Strauss, to replace Ian Moir as Group CEO with effect from 17th February 2020. Woolies' fashion and clothing section was also not doing that well in a very difficult trading environment. In its results for the six months to 24th December 2023, the company reported group turnover down 16.7% and headline earnings per share (HEPS) down 31%. The company said, "The Group's results for the first half of the 2024 financial year ('current period' or 'period') are not directly comparable to that of the prior period, given the inclusion of the David Jones contribution in the prior period." In a trading statement for the 53 weeks to 30th June 2024, the company estimated that HEPS would fall by between 27% and 32%—partly because of its disposal of David Jones in Australia. We recommend that you only consider Woolies shares when they break up through its current downward trendline. The current P:E is around 14.21, and the shares are still falling but may be stabilizing.
JSE:WHL
by PDSnetSA
Our opinion on the current state of Pan African Resources (PAN)Pan African Resources (PAN) is a London- and JSE-listed re-treatment gold producer. With its Elikhulu plant, it will be able to produce about 700,000 ounces of gold a year at a cost of about R450,564 per kilogram against a current gold price of close to R1m. This means that over its life, it will produce revenue of approximately R15bn, of which R5.3bn will go back into the economy in the form of mine expenses, creating a highly profitable entity with minimal risks. It will also employ 350 people. The company has approved the construction of a 10MW solar power plant. In its results for the six months to 31st December 2023, the company reported gold production up 6.7% and all-in sustaining costs (AISC) of $1287 per ounce (against a gold price of just over $2000). Headline earnings were up 46.4% and earnings per share (EPS) was up 46.1%. The company said, "Liquidity remains healthy, with access to immediately available cash of US$31.3 million (2022: US$33.9 million) and undrawn facilities of US$86.4 million (2022: US$52.1 million) at the reporting period-end." In an operational update for the year to 30th June 2024, the company reported production up 6.2% with an average gold price of $2021 and all-in sustaining costs of $1350 per ounce. The company said, "Net debt at the end of the Reporting Period increased to US$106.4 million (FY2023: US$22.0 million), mainly attributable to construction costs at the MTR Project." On 4th June 2024, the company announced that it signed a five-year wage deal with the National Union of Mineworkers (NUM) for an increase of 5.3% per annum over the period. Technically, the share has been in an upward trend since its low of 288c in June 2023, and we added it to the Winning Shares List (WSL) on 31st January 2024 at 430c. It has since risen to 673c. We see this as a good operation but volatile, which means considerable risk. We would advise investors to be cautious, but with the gold price having broken convincingly above long-term resistance at $2060, it could be a good speculation.
JSE:PAN
by PDSnetSA