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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, because 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. 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, but that now appears to be coming to an end. In its results for the year to 31st December 2024, the company reported revenue down 9% and headline earnings per share (HEPS) down 29%. The company said, "Weaker commodity prices and increasing costs made for a challenging year for Merafe. Earnings slumped by 62% to R667 million, after the full impairment of the Boshoek smelter of R575 million. Ferrochrome prices were impacted by surplus supply as a result of new Chinese production capacity." The company's net asset value (NAV) decreased by 7%. Technically, the share reached a high of 192c on 4th April 2022 and was trending down or moving sideways since then. It has found some brief support at 104c per share. It remains a volatile commodity share.
JSE:MRF
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 2024, the company reported revenue up 3,6% and headline earnings per share (HEPS) down 29,9%. The company said, "Trading was hampered by a weak economy underpinned by high interest rates, cost inflation, load shedding and other service delivery failures, negatively affecting consumer and business confidence." The share fell from a high of R51 in April 2016 to levels around R8 in March 2020 but has since recovered to R29. At the current level, it is on an earnings multiple of 8,43 - 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.
JSE:MPT
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 dividends in the past two years and only expects to resume dividends in a further two years or so. The company retrenched 2195 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." In a trading statement for the year to 31st December 2024, the company estimated that HEPS would increase by between 14,1% and 19,8%. The company said, "Sun International retains a strong financial position as it continues to de-gear, with debt (excluding IFRS 16 lease liabilities) decreasing from R5.7 billion in FY23 to R5.2 billion as at 31 December 2024." Technically, the share has been in a volatile upward trend since its low point in May 2020. It should continue to recover.
JSE:SUI
by PDSnetSA
Our opinion on the current state of Sea Harvest (SHG) is South Africa's most popular frozen fish brand with about 38% of the market. It was controlled by Brimstone, which had a 54,92% stake. Sea Harvest catches, processes, and freezes fish for local and export consumption. They acquired the business of Viking, which began 40 years ago and now employs 1 600 people with a fleet of 30 vessels operating in Cape Town, Durban, Hout Bay, Mossel Bay, and Maputo. Viking catches, processes, and sells horse mackerel, hake, pilchards, anchovy, prawns, tuna, and rock lobster. As part of this deal, they have also acquired 50% of Viking's aquaculture business, which is one of the largest in South Africa. The cost was a total of R565m, of which R315m was paid in cash and the balance through the issue of 19,2m Sea Harvest shares. Sea Harvest announced the acquisition of the Ladismith Cheese Company for R527m. This company produces cheese, butter, and related products and signals Sea Harvest's intention to diversify away from the fishing industry. The price paid seems quite high since it is based on Ladismith's R58m after-tax profit for the year to January 2018. On 8th March 2023, the company announced that it was increasing its stake in Viking Aquaculture to 82% for R210m. In its results for the year to 31st December 2024, the company reported revenue up 16% and headline earnings per share (HEPS) down 45%. The company said, "The Sea Harvest Group experienced its most challenging year since listing in 2017, impacted by hake catch rates at historical lows, weak market conditions in abalone, continued soft global prawn pricing, and high interest rates. This was offset by strong demand and improved pricing in hake, a solid performance from the newly acquired Sea Harvest Pelagic business, and a firm result from Ladismith despite challenges from foot-and-mouth disease (FMD), resulting in the Group delivering EBIT of R609 million (2023: R577 million, up 6%) and HEPS of 55 cents (2023: 100 cents, which included a once-off gain on purchased loans of R93 million that contributed 34 cents to HEPS)." The Sea Harvest share is fairly volatile, with reasonable volume traded. From its listing in March 2017, the share has moved mostly sideways and more recently downward since June 2022. Obviously, the Viking acquisition has changed the nature of this business substantially, but it remains subject to the weather (which affects the catch) and the regulatory environment (where quotas can be changed by the government). In our view, given the volatility, the share remains fairly fully priced. On 15th May 2024, the company announced that the acquisition of 100% of Terrasan had received approval from the Competition Tribunal.
JSE:SHG
by PDSnetSA
Our opinion on the current state of HARMONY(HAR)Harmony (HAR) was probably South Africa's most marginal gold mine until it got Mponeng gold mine working effectively. The development of this mine and its processing plant are expected to cost around US$2,8bn - and Harmony does not at this stage have its share of that cash (about R20bn). During 2021 the company purchased Mponeng gold mine for R4,2bn. Mponeng is the world’s deepest mine and has all the problems of ultra-deep level mining. The company is building a 30mw solar park in the Free State and has plans to build a further 80mw of green power. On 6th October 2022, the company announced that it had agreed to buy 100% of the Eva copper project in Australia for R4,1bn. Harmony remains a volatile gold producer and hence risky - although recent acquisitions could change its direction significantly, taking it out of precious metals. Eva is only expected to commence production in 3 years and is expected to add 260 000 ounces of gold and 1,7 billion pounds of copper to Harmony's reserves. On 3rd April 2024 the company announced that it had signed a wage deal with all of its unions for the next five years. In its results for the six months to 31st December 2024 the company reported gold revenue up 19% and headline earnings per share (HEPS) up 33%. The company said, "Operating free cash flow, up 46% to R10 392 million (US$579 million) driven by the high average gold price received. Strong, flexible balance sheet in a record net cash position of R7 283 million (US$386 million)." Technically, the share, while volatile, is in a strong upward trend. It is a play on the gold price and the rand/US dollar exchange rate. It was added to the Winning Shares List (WSL) on 16-11-23 at 9920c. It is now trading for 18586c. On 5th February 2025 the company announced that two employees had lost their lives at the company's mines.
JSE:HAR
by PDSnetSA
Our opinion on the current state of MUSTEK(MST)Mustek (MST) is South Africa’s largest assembler of personal computers under its *Mercer* brand and also imports various computer products, including Samsung, Acer, and Microsoft. Historically, the company has traded well below its net asset value (NAV). The company has been exploring growth opportunities in the fibre-to-the-home market and has seen strong sales in cables supporting this sector. CEO David Kan has expressed optimism about the potential exponential growth in this area. Additionally, Mustek is positioned to benefit from increased demand for remote education and work-from-home technologies post-COVID-19. However, in its results for the year to 30th June 2024, Mustek reported revenue down 16% and headline earnings per share (HEPS) down 82.1%. The company attributed this decline to weak corporate and government spending and the sudden end of the *green energy boom*, which had previously driven strong sales. Mustek found itself with surplus stock in an environment of high interest rates and declining demand for alternative energy products. In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by between 70% and 80%, citing *"the adverse impacts of the prevailing local and economic challenges."* Despite these negative results, the share appears undervalued. It has recently broken above its 200-day moving average, which could signal the beginning of a recovery. If economic conditions improve and corporate/government spending resumes, Mustek may see better performance in the medium to long term.
JSE:MST
by PDSnetSA
Our opinion on the current state of HOMCHOICE(HIL)HomeChoice (HIL) is South Africa's largest home shopping retailer, operating through two divisions: retail and financial services. It offers a broad range of home appliances, clothing, fashion, footwear, and related products through showrooms and online channels. The share is tightly held, with over 92% of issued shares controlled by Richard Garrat and his family. A planned share issue, which would have improved liquidity, was shelved due to challenging retail sector conditions. This has left the stock thinly traded, making it unsuitable for most private investors despite its potential as an investment if liquidity improves. HomeChoice has been expanding into brick-and-mortar retail, with five stores already open and another twenty-five planned. These stores help attract new customers for both retail sales and micro-loans. The company has also extended its financial services offering to include micro-loans, insurance products, and funeral cover. Given the tough economic climate, it has had to increase provisions for impairments on both its retail credit and micro-loan books. The company primarily serves women in Living Standards Measure (LSM) categories 4 to 8 and has over 870,000 active customers. It continues investing in its digital platform to enhance online shopping and financial services. Online loans are seeing strong growth, with 20,000 new customers signing up each month. Additionally, it is rolling out "bright pink" container shops in townships, allowing customers to collect online orders or apply for business loans. In its results for the six months to 30th June 2024, HomeChoice reported revenue up 14.6% and headline earnings per share (HEPS) up 37%. The company said, *"HIL has delivered a strong financial performance, with exceptional growth from Weaver Fintech, which is contributing 95% of the group's operating profit. Our digital-first approach continues to provide scalability and efficiency to our businesses and outstanding customer convenience."* In a trading statement for the year to 31st December 2024, the company estimated that HEPS would increase by between 20% and 30%. While the company shows strong financial performance and growth potential, its limited trading volume makes it highly risky for private investors.
JSE:HIL
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, it has a 57.4% Black ownership, with the Mineworkers Investment Company holding 38.64% and Sanlam 5%. The company's record management division operates 52 facilities across 27 locations, offering over 100,000 square meters of office and warehousing space. A US-based firm, Housatonic Partners, made an offer to buy 100% of Metrofile at 330c per share but delayed the transaction due to COVID-19, awaiting financial results and market stability before proceeding. In its results for the six months to 31st December 2024, Metrofile reported revenue down 7% and headline earnings per share (HEPS) down 38%. The company said, *"Revenue decreased by 7% to R537 million (1HFY2024: R577 million), mainly due to the reduction in product sales following the exit of the Tidy Files manufacturing operation. Excluding the Tidy Files contribution, revenue was up by 4%, mainly due to growth in secure storage and cloud services."* While Metrofile remains a high-quality small business, it is facing challenges in a difficult economic climate. Technically, the share appears to be in a new downward trend. On 5th September 2024, the company announced that CEO Pfungwa Serima would resign, effective 30th September 2024, and be replaced by Thabo Seopa.
JSE:MFL
by PDSnetSA
Our opinion on the current state of SANTAM(SNT)Santam (SNT) is South Africa's largest short-term insurer, holding about 22% of the market. Unlike life insurers, it does not engage in endowment insurance, annuities, or investment-linked policies. Instead, Santam insures assets such as buildings and vehicles, as well as individuals against risks they cannot afford, such as income loss due to disability or death. The company covers the first R150m of any claim before relying on its reinsurance policy. It has Level 1 BEE status and employs over 6000 people. Following the Ma-Afrika judgement, Santam increased its provision for contingent business interruption (CBI) claims by R1,7bn. Santam is widely regarded as one of the JSE's most reliable and high-quality shares. The company was impacted by the civil unrest in July 2021 but has continued to show resilience. In its results for the year to 31st December 2024, the company reported revenue up 12% and headline earnings per share (HEPS) up 51%. The company said, *"Conventional insurance net earned premium (NEP) growth of 10% to R32.2 billion. Conventional insurance net underwriting margin of 7.6% (3.5% in December 2023). Alternative risk transfer (ART) profit before tax of R781 million (R516 million in December 2023). Return on shareholders' funds of 31.9%."* The share trades on a P:E of 11,46. Santam exemplifies a blue-chip stock with a strong balance sheet and a long history of steadily improving earnings. Its share price has followed a consistent upward trajectory for the past 39 years—trading at 90c in 1985 and now around R398. Given its stability and long-term performance, Santam remains a solid choice for any private investor's portfolio.
JSE:SNT
by PDSnetSA
Our opinion on the current state of AFRO-C(ACT)Afrocentric (ACT) is a black-owned investment holding company that focuses on health administration and insurance. Sanlam recently acquired 28,7% of the company, which will help with its financing and marketing. The group owns: - 100% of Pharmacy Direct (a courier company). - 100% of Curasana (a pharmaceutical wholesaler). - 100% of Activo Health, having recently acquired the remaining 74% for R588m in cash and shares, at a multiple of 9,3 times Activo's most recent after-tax profit (R63m). Its largest asset is its controlling stake in Medscheme, which administers medical schemes covering 3,2m lives in South Africa, Namibia, Kenya, Botswana, Zimbabwe, and Swaziland. Afrocentric is intent on leveraging the Medscheme client base to sell its other products. On 11th October 2022, Sanlam made an offer to buy between 36,9% and 43,9% of Afrocentric for R6 per share, causing the share price to rise sharply. In its results for the six months to 31st December 2024, the company reported revenue down 51,8% and headline earnings per share (HEPS) down 90,6%. The company said, *"The directors have no reason to believe that the Group will not be a going concern in the foreseeable future based on review of forecasts and budgets and available cash resources."* Technically, the share bounced off support at around 280c, but the recent results disappointed, and it has fallen further to 143c. We advise waiting for it to break up through its downward trendline before investigating further.
JSE:ACT
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 holdings. It owns: 1. 54,2% of Sea Harvest, which is a listed fishing company and has a market capitalisation of just over R4,5bn. 2. 100% of Lion of Africa, a loss-making insurance company, which decided in November 2018 to cease operations and close its doors. 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 capitalisation of R8,6bn. Brimstone is increasing its shareholding by buying 8m 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. 10. 25% of Obsidian (a black-owned investment holding firm positioned to benefit from the roll-out of the NHI), which, in January 2020, it increased to 80% for R35,7m. Additionally, it holds a variety of other smaller shareholdings in property, healthcare, 3,9% of Long4Life, and 5,3% of Stadio. The company has been selling down its stakes in Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi. It has used the proceeds to pay down R1bn of its debt. The company disposed of its entire stake in Milpark and part-stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. In its results for the year to 31st December 2024, the company reported revenue down 66% due to the deconsolidation of Sea Harvest and headline earnings per share (HEPS) up 51%. The company undertook a share buy-back of 4,5m shares for R21,7m and, in the current financial year, has bought a further 861 325 shares for R4,3m. We regard the share as too thinly traded for private investors; however, they have been unbundling and releasing value, so volumes are improving.
JSE:BRT
by PDSnetSA
Our opinion on the current state of DISCOVERY(DSY)Discovery (DSY), developed and built by Adrian Gore over the past 25 years, offers the A/B income group of people a matrix of financial services that are inter-linked and cross-selling. Thus, a customer can begin with his/her medical aid and then add a variety of insurance products and, most recently, personal banking products. Discovery's "Vitality" concept, which rewards clients for looking after their health in various ways, is extended to their driving record and a rewards system that ensures attractive benefits for taking the full range of Discovery debit-order products. The Vitality platform tracks over 1000 customer activities and 50 biometrics a minute using the Apple Watch in South Africa, the UK, China, Europe, and the US to ensure a process of healthy aging and retirement planning. Discovery's Chinese company, Ping An Health, in which Discovery has a 25% stake, saw membership grow by 60% over the year, and written premiums increased by 87% to $753m. Ping An is rapidly developing into Discovery's "Tencent." Discovery's move into banking offers existing clients a range of banking and credit card facilities. The banking license was approved in November 2017 and should significantly increase the profits generated by the group in time. This is a disruptive development that will seriously shift the banking of A/B income group consumers away from existing banks. Discovery Bank's aim was to bring in 1000 new accounts per day from the end of August 2019. The company has seen a drop in car accident claims and medical insurance claims since the lockdown. This is a highly rated share despite the decline in its share price over the past two years. Discovery Bank has now reached 700 000 active clients, and those clients are mostly of very high quality—but the progress has been relatively slow, partly because of the pandemic. Discovery shares remain expensive, but we regard this as one of the best shares for a private investor to hold for long-term growth. CEO Adrian Gore says, "I am a great believer that opportunities are not in good times," indicating his belief that growth comes from investing during the difficult times South Africa is currently experiencing. Gore has also stated that the NHI, as it is proposed, is unaffordable for South Africa and that there are insufficient medical resources to implement it. Discovery became the first large, listed company to require all its staff to be vaccinated. On 20th June 2022, the bank reported that it had more than 1 million accounts and was taking on about 750 new accounts per day. In its results for the six months to 31st December 2024, the company reported total revenue up 42% and headline earnings per share (HEPS) up 33%. The company said, "Capital ratios remained strong across every business and liquidity at each regulated entity, and at the centre, remains well in excess of the required buffers. The cash conversion ratio remained steady at 75% of after-tax normalised operating profit compared with the prior period, notwithstanding the strong growth in normalised profit from operations." Technically, the share has been in a strong upward trend since June 2024. We added it to the Winning Shares List (WSL) on 1st August 2024 at 14280c. It has subsequently moved up to 20882c. Due to the quality of its management and business model, we see this as a "must-have" share for any private investor's portfolio.
JSE:DSY
by PDSnetSA
Our opinion on the current state of CLIENTELE(CLI)Clientele Life (CLI) is a small insurance company selling short- and long-term policies and underwriting insurance products. Their products are sold through agents and brokers as well as through tele-sales. On 3rd November 2023, the company announced that it had acquired 1Life Insurance for R1,914bn, to be paid by issuing 117,815,756 ordinary shares in Clientele. In its results for the year to 30th June 2024, the company reported headline earnings per share (HEPS) and net profit down 4%. The company said, "The total net insurance service result increased by 4% to R171.6 million. The total net investment result of R254.9 million is double the prior year figure. Net insurance finance income is 19% higher than the prior year at R207.3 million. Revenue from contracts with customers increased by 11% to R380.4 million." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would increase by between 2% and 17%. The company said, "...shareholders are encouraged to appreciate the noteworthy impact of the once-off recognition of a bargain purchase gain of R469 million arising from the fair value measurement at the date of acquisition of 1Life." The share trades on a P:E of 12,7, which seems cheap to us. The share is heavily traded enough for most private investors. In our opinion, this share continues to represent reasonable value at the current P:E. It should benefit directly as and when the South African economy improves as a result of the newly appointed government of national unity (GNU).
JSE:CLI
by PDSnetSA
Our opinion on the current state of NAMPAK(NPK)Nampak (NPK) is Africa's largest packaging company, operating in South Africa and ten other African countries. About 60% of its turnover comes from South Africa, but only 36% of its trading profit. The rest of Africa accounts for 59% of trading profit and only 31% of turnover. The company also has small interests in the UK and Ireland. Nampak produces four kinds of packaging products—plastics, metals, paper, and glass. The majority of its trading profits come from metals, primarily beverage cans. The company has successfully repatriated R3,5bn (US$265m) of surplus cash from Zimbabwe, Nigeria, and Angola, demonstrating strong management in navigating African markets. However, it has halted its African expansion strategy after writing down its businesses in Angola and Nigeria by R3bn. The company was affected by COVID-19 and the decline in the oil price, impacting its operations in Nigeria and South Africa. However, it avoided selling assets or conducting a rights issue to pay down debt of nearly R6bn. The announcement of a R1,35bn rights issue to reduce debt caused a 30% drop in the share price. This was later reduced from R2bn to R1,5bn, and shareholders approved raising up to R1bn on 30th June 2023. On 20th April 2023, CEO Eric Smuts resigned with immediate effect and was replaced by Phil Roux. On 16th May 2024, the company announced the sale of its entire Nigerian operation for $68,5m. In its results for the year to 30th September 2024, the company reported revenue from continuing operations up 1% and headline earnings per share (HEPS) of 3361,1c, compared with a loss of 39004,6c in the previous period. The company said, "The Beverage category continues to grow, in particular beverage in cans, a format which is growing in terms of consumer preference. Challenges faced in the second half relating to the installation of the new 500ml production line at Springs meant that Nampak was unable to fully capitalise on this increased demand." On 31st January 2025, the company announced the sale of Bevcan Nigeria for $68,2m. The share remains in an upward trend but is a volatile commodity share, and the trend may be coming to an end.
JSE:NPK
by PDSnetSA
Our opinion on the current state of SABCAP(SBP)Sabvest Capital (SBV) is an investment holding company that listed on the JSE in 1988. Previously, the company had both ordinary and "N" shares, which were very thinly traded. To rectify this situation, a new company was registered called Sabcap, and the shares of Sabvest were swapped out for Sabcap shares. This happened on 12th May 2020. Sabcap has investments in five private companies, by far the largest of which is SA Bias, where its investment is 60% and worth R673m. SA Bias is predominantly involved in the textiles industry but also has an interest in a company involved in handling equipment and parts. The other private companies in which it has an interest are: Classic Food Brands (30%), Flexo Line Products (47,5%), Mandarin Holdings (30%), JAA Holdings (35,7%), and Sunspray Food Ingredients (28,2%). Aside from this, Sabvest has a listed portfolio worth about R700,000 and offshore investments worth about R573,000. It also owns 11,7% of Metrofile, worth R82,3m, 300,000 shares in Net1 UEPS, and 31% of Rolfes. In its results for the six months to 30th June 2024, the company reported net asset value (NAV) up 7,8% to 11,786c per share. Headline earnings per share (HEPS) increased by 63,2%. The company said, "The compounded annual growth rate in NAV per share over 15 years with dividends reinvested was 18,5%." In a trading statement for the year to 31st December 2024, the company estimated that the company's NAV would increase by between 17% and 21%. This share is very difficult to analyze because of its diverse and constantly changing portfolio. The restructuring of the business does appear to have increased the volumes traded a little, with an average of about R248,000 worth of shares changing hands each day, and the share does appear to be in an upward trend. Like most investment holding companies, it trades at a significant discount to its NAV.
JSE:SBP
by PDSnetSA
Our opinion on the current state of SALUNGANO(SLG)Salungano, previously Wescoal, engages in the mining and trading of coal. The company began production in 2021, producing coal from its Moabsvelden mine for Eskom. Today, the company produces 300 million tons from five coal mines. Mining accounts for 82% of revenue, but it owns 50% of the Arnot Mine and is looking to broaden its business into other parts of energy. In its financials for the six months to 30th September 2023, the company reported revenue down 30% and a headline loss of 90c per share compared with a loss of 19,64c in the previous period. The company's net asset value fell to 37c per share from 178c in the previous period. The company said, "The Group continued to operate with only one Eskom contract, with the Elandspruit and Vanggatfontein Collieries continuing to supply Eskom through rectification into the Neosho contract." The company will apply for the lifting of the suspension now that the FY2023 financial results and integrated annual report, as well as the FY2024 interim financial results, have been published, but that has not yet happened. On 4th July 2023, the company announced that three of its directors had resigned, resulting in a sharp drop in the share's price. On 21st August 2023, trading was suspended in Salungano shares by the JSE. It appears from a quarterly update that the 2024 financials are now only expected to be published by 30th June 2025—so the share remains suspended.
JSE:SLG
by PDSnetSA
Our opinion on the current state of THUNGELA(TGA)Thungela (TGA) is Anglo American's coal assets which has been unbundled into the hands of Anglo shareholders and separately listed on the JSE and the LSE because of Anglo's policy of moving away from carbon-based fossil fuels like coal. Anglo sold its last 8% of Thungela on 25th March 2022 for R1,67bn. Thungela is a major thermal coal exporter in South Africa. It has over 7500 employees and exports coal to Asia, India, SEA, and East and North African countries. The company owns 50% of Phola, which operates a coal processing plant, and it has a 23,22% interest in the Richards Bay Coal Terminal (RBCT). The company has the capacity to produce over 90m tons of coal per annum. The company operates seven mines in South Africa, four open cast and three underground. In its results for the six months to 30th June 2024, the company reported revenue up 17% and headline earnings per share (HEPS) down 58%. The company said, "Group capital expenditure of R1.5 billion, reflecting the disciplined execution of the life extension projects in South Africa - Profit of R1.2 billion, including R419 million from Australia, demonstrating the benefits from the Group's geographic diversification." In a pre-close statement on the year to 31st December 2024, the financial director said, "...we are confident that we will exceed the full-year export saleable production guidance in South Africa and Australia. The various Transnet Freight Rail (TFR) initiatives, supported by the coal industry, have allowed for the annualised run rate to 30 November 2024 to increase to approximately 52Mt, or 56Mt." The share began trading on the JSE on 7th June 2021 and immediately fell to 2190c from 2600c. It was originally estimated to be worth a minimum of 4400c but reached a high of 37752c on 16th September 2022. Since then, it has been moving sideways and downwards with lower coal prices and problems with Transnet. Obviously, it is also subject to the volatility of being a single commodity share and dependent on Transnet to get its product to port. The company has committed to paying out at least 30% of "...adjusted operating free cash flow" in the form of a dividend. In a trading statement for the year to 31st December 2024, the company estimated that HEPS will be between 24% and 31% lower than in the comparable period. It will drift sideways until the price of coal increases—if it ever does. On 21st January 2025, the company announced that its CEO, July Ndlovu, will retire in July 2025 and be replaced by Moses Madondo on 1st August 2025.
JSE:TGA
by PDSnetSA
Our opinion on the current state of HARMONY(HAR)Harmony (HAR) was probably South Africa's most marginal gold mine until it got Mponeng gold mine working effectively. The development of this mine and its processing plant are expected to cost around US$2,8bn – and Harmony does not at this stage have its share of that cash (about R20bn). During 2021, the company purchased Mponeng gold mine for R4,2bn. Mponeng is the world’s deepest mine and has all the problems of ultra-deep level mining. The company is building a 30MW solar park in the Free State and has plans to build a further 80MW of green power. On 6th October 2022, the company announced that it had agreed to buy 100% of the Eva copper project in Australia for R4,1bn. Harmony remains a volatile gold producer and hence risky – although recent acquisitions could change its direction significantly, taking it out of precious metals. Eva is only expected to commence production in three years and is expected to add 260 000 ounces of gold and 1,7 billion pounds of copper to Harmony's reserves. On 3rd April 2024, the company announced that it had signed a wage deal with all of its unions for the next five years. In its results for the year to 30th June 2024, the company reported an underground grade of 6,11 grams per ton, a 6% increase in gold produced, and an 11% increase in the US dollar price received. Headline earnings per share (HEPS) were 1852c (SA) compared with 800c in the previous period. The company said, "By investing in our higher-grade gold mines, expanding our surface retreatment business, and growing our international gold and copper assets, we will continue to transform and de-risk Harmony as we go from strength to strength." In an operational update for the three months to 30th September 2024, the company reported gold production down 1%, with Mponeng production up 28%. The recovered grade was 6,32 grams per ton, and costs rose by 14%. The gold price received rose 21% to $2356 per ounce. The company said, "Strong, flexible balance sheet with net cash position increasing to R6.3 billion (US$362 million) and liquidity of R15.7 billion (US$909 million) in cash and undrawn facilities." In an update on the six months to 31st December 2024, the company reported gold production of between 790 000 ounces and 805 000 ounces with higher recovered grades. The company said, "All of our underground operations (except Target 1, which is still in a turnaround process after being recapitalised) generated meaningful positive operating free cash flows." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would increase by between 24% and 42%. The company said, "The average gold price received increased by 23% to R1 405 020/kg in H1FY25 from R1 141 424/kg in H1FY24." Technically, the share, while volatile, is in a strong upward trend. It is a play on the gold price and the rand/US dollar exchange rate. It was added to the Winning Shares List (WSL) on 16-11-23 at 9920c. It is now trading for 18887c. On 5th February 2025, the company announced that two employees had lost their lives at the company's mines.
JSE:HAR
by PDSnetSA
Our opinion on the current state of IMPLATS(IMP)Impala Platinum Holdings (IMP), or Implats, is the world's third-largest platinum group metals (PGM) producer. It has been suffering over the past seven years from aggressive union action and legislative uncertainty. The CEO says that they are focused "...on developing a portfolio of long-life, low-cost, shallow, modern, mechanised mining assets." This is similar to what Anglo American Platinum has been doing for the past ten years. The market for platinum itself has been damaged by a reduction in auto catalyst demand recently, especially for diesel trucks. Palladium and rhodium still have strong markets, but platinum has been oversupplied on world markets. The company plans to grow its production from Zimbabwe by 14% due to the Mupani shaft coming on stream in 2022. Its newly acquired Canadian operation should also increase production. On 20th July 2023, the company announced that it had acquired 56,52% of RB Plats as a result of its mandatory offer. Northam also announced its decision to sell its 34,5% holding to Implats. On 28th June 2022, the company announced that it had reached a five-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. On 28th November 2023, the company reported that 11 people had died and 75 were hospitalised following an incident at its No. 11 shaft in Rustenburg. In its results for the six months to 31st December 2024, the company reported refined and saleable 6E production up 2% and sales up 5%, with rand revenue down by 8%. Headline earnings per share (HEPS) fell by 43,6%. The company said, "Group profitability remained challenged by lacklustre rand PGM pricing. The benefit of strong operational delivery, higher sales volumes and cost containment were negated by lower revenue." Technically, the share was in a downward trend from March 2022 to March 2024, mainly as a result of lower PGM prices, increased costs, and loadshedding. It has recovered somewhat since then but remains a volatile commodity share.
JSE:IMP
by PDSnetSA
1
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 has four divisions – import and distribution, retail and rental, motor-related and 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. It offers vehicle finance and fleet management in South Africa with 730,000 clients. It retails parts and accessories for older vehicles through 720 franchised outlets. Altogether, it has a 20% share of the South African retail vehicle market, selling roughly 100,000 vehicles per annum. It is the importer of Hyundai, Kia, Mitsubishi, and Renault. The CEO, Osman Arbee, said that the company plans to pay generous dividends because of its strong cash flows. The company generates 65% of its turnover in South Africa and 93% of its operating profit. On 1st October 2021, the company announced that it had acquired FAI Automotive in the UK for R550m. In its results for the year to 31st December 2024, the company reported revenue down 2% and headline earnings per share (HEPS) up 3%. The company said, "The business experienced a challenging first quarter on the back of a slowdown in the economies in which we operate and an improved performance for the second quarter. The second quarter was supported by improved business confidence, lowering of interest rates, and the introduction of the two-pot retirement system in SA." Technically, the share fell from a high above R130 in September 2022 to levels around R80 in April 2024. It has subsequently recovered to R127 by mid-December 2024 but has been in a downward trend since then. The latest results caused the share price to drop sharply. It is now on a P:E of 6.57 – which makes it reasonably priced in our estimation. We see this as a very well-established company that is to some extent dependent on the state of the economy and the level of consumer spending. We think it will turn out to be a good investment, especially as the economy improves with the end of loadshedding and the new government of national unity (GNU).
JSE:MTH
by PDSnetSA
Our opinion on the current state of OUTSURE(OUT)OUTsurance (OUT) took over the listing of Rand Merchant Insurance (RMI) with effect from 7th December 2022. RMI unbundled its stakes in Discovery (DSY) and Momentum (MTM) and sold its 30% stake in Hastings Plc for R14,6bn. By March 2023, all that was left was the insurance business of OUTsurance. In its results for the year to 30th June 2024, the company reported earnings up 20.3% and a special dividend of 40c per share. Earnings per share (EPS) rose to 265.5c compared to 194.5c in the previous period. The company said, "The Group sold its stake in AutoGuru, an Australian-based associate, for R68 million. OHL acquired Youi shares from a minority shareholder for AUS$42.5 million, thereby increasing its stake in Youi from 92% to 94.6%. The Group capitalised its Irish subsidiary with a total of R1 870 million (€91.1 million)." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would increase by between 42% and 48% due to, "...significantly lower natural perils claims incurred compared to the six months ended 31 December 2023 (comparative period) by particularly Youi and also OUTsurance SA; the strong premium growth of the operating segments." Technically, the share has been climbing steadily since the unbundling, and we believe it will continue to perform. We added it to the Winning Shares List (WSL) on 15th June 2024 at a price of 4457c. It has since risen to 7034c - a gain of 57.8% in just over 8 months.
JSE:OUT
by PDSnetSA