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Our opinion on the current state of LESAKA(LSK)Lesaka (previously known as Net1 UEP Technologies), listed on the Nasdaq and JSE (LSK), is a fintech company offering payment solutions across multiple countries. Their Universal Electronic Payment System (UEPS) provides biometrically secure smart cards that facilitate real-time, offline transactions, enabling users to transact at any moment. In the third quarter ending on 31st March 2024, Lesaka reported revenue of R2.6 billion, an increase from R2.4 billion in the previous quarter, alongside a net loss of R76.4 million. They noted, "Fundamental earnings per share (a non-GAAP measure), positive for a second successive quarter, increased to $0.02 (ZAR 0.45)(1) compared to a fundamental loss per share of $0.02 (ZAR 0.35)(1) in Q3 2023." Despite trading an average of R21,000 worth of shares daily, the company occasionally experiences days without trading activity. On 5th December 2023, they announced that Chris Meyer would step down as CEO in February 2024. Shortly after, on 6th February 2024, Lesaka acquired Touchsides, a distributor of alcohol to shebeens and informal taverns.
JSE:LSK
by PDSnetSA
Our opinion on the current state of PAN-AF(PAN)Pan African Resources (PAN) is a gold producer listed on both the London and Johannesburg Stock Exchanges. With its Elikhulu plant, it is set to produce approximately 700,000 ounces of gold annually at a cost of roughly R450,564 per kilogram, against a current gold price near R1 million. Over its lifespan, the plant is projected to generate around R15 billion in revenue, with R5.3 billion of that reinvested into the economy via mining expenses. The operation is also expected to 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 a 6.7% increase in gold production with all-in sustaining costs (AISC) of $1,287 per ounce, compared to a gold price exceeding $2,000. Headline earnings rose by 46.4%, and earnings per share (EPS) climbed by 46.1%. The company stated, "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 a revised production guidance for the year ending 30th June 2024, the company anticipated production of 186,000 to 190,000 ounces at an AISC ranging from $1,325 to $1,350 per ounce. Technically, the share has been in an upward trend since reaching a low of 288c in June 2023. While this is a promising operation, the volatility means there are considerable risks. Therefore, investors should proceed cautiously. However, with the gold price having convincingly broken above the long-term resistance of $2,060, this could be a favorable speculative opportunity.
JSE:PAN
by PDSnetSA
Our opinion on the current state of RHODES(RFG)Rhodes (RFG) is a Western Cape manufacturer of convenience foods, started by Cecil John Rhodes in 1896. It has several well-known South African brands like Bisto, Bull Brand, and Hinds. It operates 15 manufacturing plants in South Africa and a fruit processing plant in Swaziland. In its results for the year to 1st October 2023, the company reported revenue up 8.7% and headline earnings per share (HEPS) up 35.3%. The company's debt-to-equity ratio improved to 21.3% from 36.2%, and price inflation was at 12.9%. The company said, "Slower consumer spending and competitor promotional activity resulted in volume pressure in certain product categories as total group volumes declined by 8.3%. The rate of volume decline slowed as the year progressed, with regional volumes down 6.6% for the full year after declining by 8.0% for the first half." In a trading update for the five months to 29th February 2024, the company reported a revenue increase of 5.1%, with price inflation of 7.9% and volumes down by 5.2%. The company said, "After reporting good revenue growth for the first quarter of the financial year to December 2023, sales of long-life foods in particular slowed in January and into February. The meat products category has sustained the turnaround reported in the previous financial year, with the vegetable and salads categories reporting an improved performance. The fruit juice and dry foods categories both delivered good growth." In a trading statement for the six months to 31st March 2024, the company estimated that HEPS would increase by between 18% and 23%. Technically, the share has fallen from a high of 2900c in October 2016 due to a bear trend. We suggested waiting for it to break up through its long-term downward trendline, which happened on 13th November 2023 at a share price of 1220c. It is on a P/E of 6.99, which looks reasonably priced, even cheap. We believe that the share will recover over time as the economy and rand improve and as the war in Ukraine is resolved. Sales of tinned foods to China declined sharply in the short term.
JSE:RFG
by PDSnetSA
Our opinion on the current state of ENXGROUP(ENX)The enX Group (ENX) is a "...diversified industrial group that provides branded products and services to the petrochemical, fleet management, logistics and industrial sectors." It includes Austro, which distributes wood-working equipment and tooling. Finally, it includes New Way Power, which manufactures, installs, and maintains diesel generators. Its fleet division engages in fleet management and logistics as well as vehicle tracking. Then ENX Petrochemicals produces and markets oil lubricants, plastics polymers, rubber, and specialty chemicals in Southern Africa. The company disposed of the EIE group with effect from 1st April 2022. On 15th July 2019, the company announced that it had sold Eqstra, a fleet management company, to Bidvest for R3.1bn. On 15th April 2021, the company announced that it had sold its British fork-lift and container business for GBP31m. The proceeds will be used to pay down debt. This is clearly a company that will benefit directly from any improvement in the South African economy, but which is making acquisitions both locally and in the UK to ensure growth, no matter what happens. On 4th April 2022, the company announced a special dividend of 200c per share as a result of the sale of its subsidiary, EIE. On 1st August 2022, the company announced a special dividend of R1.50 per share as a result of the disposal of Impact Forktrucks and EIE Group. In its results for the year to 31st August 2023, the company reported revenue up 26% and headline earnings per share (HEPS) from continuing operations up 16%. The company said, "The results for the year ended 31 August 2023 reflect continued strong performance in all our business units notwithstanding the challenging economic conditions experienced." In a trading statement for the six months to 29th February 2024, the company estimated that HEPS would be between 192c and 200c compared with 70c in the prior period. The share is trading an average of R108,000 worth of shares changing hands each day, which makes it practical for private investors. It has also been in an upward trend recently.
JSE:ENX
by PDSnetSA
Our opinion on the current state of SAPPI(SAP)Sappi (SAP) is an international manufacturer specializing in paper, dissolving wood pulp (DWP), and paper pulp. The company supplies products to over 150 countries. DWP, a primary component used for clothing and packaging products, is crucial to Sappi's future profitability, although its price fluctuated sharply until demand from China surged in 2021. Civil unrest in July 2021 caused a loss of R220 million in profit, and additional challenges included Durban port backlogs and rising energy costs. In April 2022, severe flooding in Natal led to the temporary closure of three mills, a loss of 23,000 tons of production, and damage to 45,000 tons of inventory. Sappi filed a $28 million insurance claim and resumed operations shortly after. The company has faced significant challenges recently. In its quarterly update to March 1, 2023, Sappi's HEPS dropped by 67%, citing weak global economic conditions and a decline in paper and pulp markets. By June 30, 2023, sales had fallen 18%, and HEPS was down 43%. The company's net asset value (NAV) had increased by 6% to 446 cents per share. Sappi's EBITDA for that quarter was US$106 million. In the annual report ending on September 30, 2023, Sappi revealed a 20% decrease in sales and a 62% drop in HEPS (in USD), while the NAV increased by 5% to 438 cents per share. This decrease was attributed to global economic instability and challenges in key markets. An update to December 31, 2023, highlighted a further 23% drop in sales and a 22-cent (USD) headline loss per share, contrasting with a profit of 34 cents the previous year. Production was significantly affected by planned maintenance at major mills. By March 31, 2024, sales were down 6%, and HEPS decreased by 58%. The company's NAV dropped 13% to 387 cents per share. Despite these figures, operating performance exceeded expectations, delivering a 10% increase in EBITDA to US$183 million. Sappi's share price has been on an upward trend since August 2023, reaching 5325 cents after being included in the Winning Shares List (WSL) at 4729 cents on March 7, 2024. While the company remains in an upward trajectory, it's still a commodity share, which introduces some risk due to market volatility.
JSE:SAP
by PDSnetSA
Our opinion on the current state of SANTOVA(SNV)Santova (SNV) is an international logistics company with a presence across seven countries. The firm specializes in designing and managing global supply chain activities using a client-centric information system. This technology provides enhanced inventory management and more than just tracking and tracing services. Santova has offices in Southeast Asia (Thailand, Vietnam, and Malaysia), Europe (Germany, the Netherlands, and the UK), major South African cities, Mauritius, and Sydney, Australia. In its financial results for the six months ending August 31, 2023, Santova reported a 3.3% increase in revenue but a 22.9% decline in headline earnings per share (HEPS). Its tangible net asset value (NAV) saw a 30.8% increase to 546.5 cents per share. The company highlighted a significant drop in freight rates during the past six months due to easing congestion and a slowdown in global economic growth. The Drewry World Container Index, a benchmark for shipping rates, fell from about $9,700 per 40-foot container in January 2022 to $1,400 in September 2023, now below pre-pandemic 2019 levels. In a trading statement for the fiscal year ending February 29, 2024, the company predicted that HEPS would decrease by 18.6% to 23.6%. This forecast factored in a one-time gain of R18.3 million due to fair valuation adjustments. Technically, Santova has been in a steady upward trend since May 2020, although recent price movements suggest the trend may be topping out. After reaching 980 cents between May and August 2023, the share price fell to 735 cents. Despite this dip, the share remains well-traded and could benefit from an improvement in the South African and UK economies.
JSE:SNV
by PDSnetSA
Our opinion on the current state of RENERGEN(REN)Renergen (REN) brands itself as an "integrated alternative energy business" focused on renewable energy projects in Africa. Listed on the JSE in June 2015, the company has incurred consistent losses, contributing to its declining share price. Investing in liquefied natural gas (LNG) and helium, Renergen accessed additional funding through a R125 million rights issue and a R218 million loan facility. Its IPO on the Australian Stock Exchange (ASX) was oversubscribed by over two times. The company claims proven helium reserves exceeding 6 billion cubic feet. Helium was identified as a critical resource for U.S. national security in 2018, significantly boosting prices. In 2020, Renergen announced the development of an aluminum case capable of maintaining vaccines at low temperatures for up to 30 days, which has the potential to be a significant innovation. The company also reported a 1.1% helium discovery at Evander in June 2021 and a major gas strike in the Karoo in March 2021. Additionally, in April 2021, it secured its first helium sales deal. In November 2021, a 620% increase in 1P helium reserves was announced, leading to a spike in the share price. Despite these positive developments, Renergen's share price remains in a long-term downtrend. Further funding of $750 million was secured in June 2023 for the Virginia Gas project (VGP), which is its primary asset. In its latest financial results for the year ending February 29, 2024, the company reported a 128.4% increase in revenue but a headline loss of 75.07 cents per share, compared to a 19.89 cents loss previously. Renergen acknowledged operational challenges at the VGP, which remains risky and volatile. Investors should approach with caution and consider a break above the long-term downward trendline before delving further, though such a breakout does not appear imminent.
JSE:REN
by PDSnetSA
Our opinion on the current state of AB-INBEV(ANH)Anheuser-Busch InBev (AB InBev), the world's largest brewer, operates in both developed and emerging markets. Listed on the JSE as ANH, the Brussels Stock Exchange as ABI, and the NYSE as BUD, AB InBev announced its intention to list its Asia-Pacific arm on the Hong Kong Stock Exchange to raise around $10 billion, with proceeds aimed at reducing debt. The company holds notable beer brands such as Budweiser, Stella Artois, Castle, Beck's, and Corona. Following its acquisition of SABMiller, AB InBev is four times larger than its closest competitor, Heineken, leaving limited room for significant acquisitions and requiring the company to focus on organic growth. For the year ending December 31, 2023, AB InBev reported a 7.8% increase in revenue and earnings per share (EPS) of 305 cents (USD) compared to 303 cents in the prior year. The company noted that in the fourth quarter, normalized EBITDA grew by 6.2% to $4.877 billion, and the EBITDA margin contracted by 2 basis points to 33.7%. For the full year 2023, normalized EBITDA rose by 7% to $19.976 billion, with an EBITDA margin contraction of 23 basis points to 33.6%. In its first quarter update, AB InBev saw revenue increase by 2.6%, with a slight volume decline of 0.6%. The company reported a 5.4% increase in EBITDA with margin expansion and a 16% growth in underlying EPS. From a private investor's viewpoint, AB InBev remains a massive international blue-chip stock with strong rand-hedge characteristics. With a current P/E ratio of 21.88, the stock appears fully priced. Technically, it had been in a downtrend since listing on the JSE, but a break above the long-term downward trendline occurred on November 4, 2022, at 94,065 cents. Since then, the share price has risen to 117,900 cents.
JSE:ANH
by PDSnetSA
Our opinion on the current state of MC-GROUP(MCG)MultiChoice (MCG) is one of Africa's leading entertainment companies and one of the world's fastest-growing pay-TV broadcasters, with a subscriber base of 21.1 million across 50 countries. The 90-day active subscriber base is split between 8.9 million (42%) in South Africa and 12.2 million (58%) in the rest of Africa. MultiChoice was spun out of Naspers and listed on the JSE on February 27, 2019. This company is close to an ideal investment due to its diversified client base and annuity income primarily generated via debit orders. As a service provider with minimal inventory requirements and a lean workforce, MultiChoice operates with minimal working capital needs. However, it faces competition from 5G internet access and free online streaming platforms. Icasa's (Independent Communications Authority of South Africa) regulatory changes to promote competition in the pay-TV market may affect MultiChoice's exclusive sports contracts, which have been a key differentiator. In partnership with Sky News and NBC Universal, the company aims to expand the Showmax service to strengthen its market position in Africa. The home entertainment sector received a significant boost from COVID-19 lockdowns, but the company’s results for the six months ending September 30, 2023, showed revenue down by 1% and headline earnings per share (HEPS) down by 5%. MultiChoice attributed this decline to high levels of loadshedding that impacted the South African business. On February 5, 2024, Canal+ increased its stake in MultiChoice to 35.01%, triggering a mandatory offer to buy out the remaining shareholders at R105 per share. MultiChoice rejected this offer as too low. The Takeover Regulation Panel (TRP) confirmed Canal+ was required to make an offer, which was subsequently raised to R125 per share. By April 24, 2024, Canal+ had acquired 41.6% of MultiChoice's issued shares. As of May 8, 2024, Canal+ increased its stake to 43.54%. Technically, MultiChoice shares had been declining since March 6, 2023. A recommendation was made to wait for a break above the 65-day exponential moving average before purchasing. This happened on December 19, 2023, at 7,440 cents, and since then, the share price has risen to 11,950 cents.
JSE:MCG
by PDSnetSA
Our opinion on the current state of GFIELDS(GFI)Gold Fields (GFI) is a gold mining company that operates internationally, with only one mine in South Africa—South Deep. Acquired by Gold Fields in 2006, South Deep has been challenging to turn profitable, requiring a total investment of R32 billion (R22 billion purchase price and R10 billion development costs) over the past 14 years. Despite these difficulties, South Deep holds one of the largest unmined gold resources globally, and the company is determined to make it a success. Gold Fields collaborates with an independent power producer (IPP) to establish a 50MW energy project in South Africa. Over the last two years, the company has invested $502 million to ensure that its Damang and Gruyere operations maintain an annual production level of 2 million ounces for the next decade. Recent cost-saving measures have reduced South Deep's costs by R800 million and capital expenditure by R400 million. Gold Fields is also focused on developing the Salares Norte gold mine in Chile and intends to list on the Toronto Stock Exchange while adopting a policy of paying out 30-45% of profits as dividends. The extensive investment in South Deep is starting to yield results, with production anticipated to increase by 25% over the next four years. In its financial results for the year ending December 31, 2023, the company reported headline earnings per share (HEPS) of 94 cents (USD) compared to 119 cents in the previous year. The rand/US dollar exchange rate weakened by 13%, and debt increased by $320 million to $1.024 billion. For the first quarter of 2024, Gold Fields reported attributable production of 464,000 ounces at an all-in sustaining cost of $1,738 per ounce. Production was affected by adverse weather conditions and operational challenges at the Gruyere, St Ives, South Deep, and Cerro Corona mines, resulting in a YoY drop of 18% in production. Gold Fields remains a volatile commodity investment due to fluctuations in the global gold market, but it has maintained an upward trend over the past five years. It remains a valuable yet unpredictable commodity play.
JSE:GFI
by PDSnetSA
Our opinion on the current state of Combined Motor Holdings Combined Motor Holdings (CMH) operates 43 car dealerships, offering 28 brands such as Nissan, Volvo, Toyota, Opel, Subaru, Lexus, Mazda, Isuzu, and Ford. It sells both new and used vehicles, making it sensitive to economic conditions since consumers can extend the lifespan of their vehicles in times of recession. The company has planned significant cuts in its car rental division due to COVID-19, reducing staff by a third, the fleet by 40%, and closing 20 branches. Business confidence and Eskom-related power outages have negatively impacted operations, yet the car hire segment has been gradually recovering. For the financial year ending February 29, 2024, CMH reported revenue growth of 3.3%, while headline earnings per share (HEPS) decreased by 12.2%. Its net asset value (NAV) rose by 8.2% to 1828 cents per share. The company noted, "Operating profit, before goodwill write-off in the previous year, is only marginally down from R791 million to R781 million. The hike in interest rates distinguishes the two years, with finance costs rising by R87 million from R193 million to R280 million." Technically, the share formed a "V-top" at 3350 cents on May 10, 2018, before dropping significantly to around 950 cents in May 2020 due to COVID-19. After breaking its long-term downward trendline at 1489 cents on February 2, 2021, the share price has steadily risen to 2720 cents, trading at a price-to-earnings (P/E) ratio of 5.02. At these levels, CMH appears to offer good value.
JSE:CMH
by PDSnetSA
Our opinion on the current state of EASTPLATS(EPS)East Plats (EPS) is a mining exploration and development company operating in the platinum group metals (PGM) and chrome markets in South Africa. Listed on both the Toronto Stock Exchange (TSX) and the JSE, the company has three key projects: 1. **Crocodile River Mine:** Ceased operations in 2012 and is now under care and maintenance. 2. **Zandfontein Tailings Project:** Focuses on retreating and storing tailings to recover chrome, with Sound Mine Solutions conducting an independent technical report. 3. **Zandfontein Tailings Retreatment Project:** A chrome retreatment project operated with Union Goal. On February 11, 2019, East Plats announced its first shipment of 10,000 tons of chrome concentrate from the Zandfontein operation. However, it anticipates significant cash flow uncertainties over the next year, which raises concerns about its "going concern" status. For the year ending December 31, 2023, the company reported revenue growth of 98.3% and earnings per share of 8 cents (US) compared to a loss of 1 cent in the previous period. Despite this, auditors highlighted concerns over the company's financial stability. As of December 31, 2023, East Plats held cash and short-term investments worth $21,349,000 (US) but had a working capital deficit of $15,504,000 (US). The low trading volume (around R3,100 worth of shares daily) makes it difficult for private investors to participate in this stock effectively.
JSE:EPS
by PDSnetSA
Our opinion on the current state of CALGRO-M3(CGR)Calgro (CGR) is a developer specializing in large-scale integrated properties, rental units, and memorial parks. Established in 1995 and listed on the JSE in November 2007, the company identifies suitable land, develops it, and then sells or rents the resulting residential or memorial park units. Recently, it secured $25 million in funding to support new development projects. A significant challenge has been illegal land invasions, which resulted in a loss of around 25% of turnover for the half-year ending August 2019. However, in its results for the six months ending August 31, 2023, Calgro reported a 13.5% increase in revenue and headline earnings per share (HEPS) of 78.88c, up from 57c in the prior period. The company stated that it handed over 949 units during the period, compared to 1,193 units in the previous year. Currently, 2,118 units are under construction, with over half expected to be completed by February 2024. The company has 1,937 serviced units available, and another 3,398 are being serviced. In a trading statement for the year ending February 29, 2024, Calgro estimated that HEPS would increase by 20.2% to 27.7%. The company noted a reduction in its issued ordinary shares due to a share repurchase program, which reduced the total from 121.4 million to 95.5 million shares. Technically, the share price has been in a strong upward trend since March 2023. Like many other property companies, Calgro is currently trading well below its net asset value (NAV), presenting a potentially attractive investment opportunity.
JSE:CGR
by PDSnetSA
Our opinion on the current state of NETCARE(NTC)The Netcare Group (NTC) operates healthcare facilities across South Africa and Lesotho. With 59 hospitals (including four public-private partnerships), it employs approximately 22,000 staff and manages 10,600 beds. Additionally, Netcare 911, its emergency response unit, operates from 79 locations with over 1,000 paramedics. While healthcare typically remains stable regardless of economic downturns due to unavoidable medical expenses, Netcare faces challenges stemming from the competitive medical aid sector, which often demands lower prices. On March 23, 2021, Netcare received notice from the Lesotho government terminating its contract to manage Queen Mamohato Hospital in Maseru following a wildcat strike by nurses. Most Netcare hospitals are equipped with full island capacity, enabling them to operate independently of the electrical grid. They also have uninterrupted power supply (UPS) systems and over 200 backup diesel generators. In its financial results for the year ending September 30, 2023, Netcare reported a 9.5% increase in revenue and a 36.5% rise in headline earnings per share (HEPS). Total paid patient days (PPDs), including acute and mental health care, grew by 6.7%, with average occupancy rising to 64.4%. An operational update covering the five months ending February 29, 2024, indicated that total PPDs increased by 0.3% compared to the previous period. Acute patient day activity remained above 94% of pre-pandemic levels, and the average acute occupancy reached 69.4% in February 2024, the highest since February 2020. Revenue per PPD increased by 6.2% in the first quarter of the fiscal year, while mental health services reported an 82.4% occupancy rate in February. A voluntary update for the six months ending March 31, 2024, revealed a 4.2-4.4% increase in revenue. However, PPDs declined by 0.8% compared to the prior period but increased by 0.4% in the subsequent seven months up to April. Technically, Netcare's share price has been declining since its peak at R43 in March 2015. After bottoming out at around R12 in March 2020, the share has mostly traded sideways, hitting a new low of 1,104c on May 2, 2024. It remains vulnerable, trading at a P/E ratio of 11.29, and could decline further unless it breaks above the 1,713c resistance level.
JSE:NTC
by PDSnetSA