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Our opinion on the current state of TCPTransaction Capital (TCP) is a company which has three divisions - minibus taxis, risk services, and 75% of WeBuyCars (WBC). Its subsidiary, SA Taxi, specialises in financing, repairing, insuring and selling minibus taxis in South Africa. It completely dominates the entire value chain associated with the minibus taxi industry. The company listed in June 2012 and since then and until 2023, the company generated an annual compound growth in earnings per share of 21% since 2014. That ended abruptly in 2023 when the company revealed that it had to make a R1,8bn provision for bad debts in its minibus taxi division. About 69% of South African households use taxis with more than 15m trips per day. Most of this is non-discretionary - which means that this industry tends to be defensive and not generally impacted by the state of the economy at large. The South African Taxi Council (Santaco) acquired a 25% stake in SA Taxi for R1,7bn in 2018 which is benefiting both parties. The directors of TCP own 32% of the company. The company has had a compound growth in earnings of 20% per annum for the past five years and was partially derailed by COVID-19. The company is also involved in debt-collection in South Africa and Australia through Transaction Capital Risk Services (TCRS). It is apparent that the taxi industry has suffered from a perfect storm of rising interest rates, rising fuel costs and lower consumer spending resulting in a massive increase in TCP's bad debt provision. The average taxi owner was unable to afford to make repayments of around R6000 a month in the face of steep increases in the fuel price, rising interest rates and declining commuter traffic. The result was that SA Taxi stopped financing and buying as many as 600 new Toyota minibuses a month and was reduced to selling between 180 and 200 refurbished taxis. The company was owed about R17bn by taxi owners most of whom are behind on their repayments. On 15th March 2023 the company reported that the controlling Hurwitz family trust had sold 1,6m shares in December 2022 - since then the share has halved in price. To us, the sell-off in TCP shares since the beginning of May 2022 and the sharp 40% drop following its results presented a buying opportunity. Notably, the company announced on 23rd March 2023 that Coronation had increased its holding in TCP to 16,57% of the issued shares. In its results for the year to 30th September 2023 the company reported a headline loss of R3,7bn mainly because of a R1,1bn write down of repossessed taxis. Much now depends on SA Taxi's debt funders and it is expected that a deal with them to re-finance will be in place by March 2024. WBC earnings fell by 14% and Nutun's earnings increased by 10%. The group made a headline loss of 99c per share down from the previous year's profit of 224,4c. In a report in the Business Day on the 12th of December 2023, the company reported that it will no longer finance new minibus taxis - only second hand ones. SA Taxi attributes its problems to: "...elevated fuel prices, - high interest rates, - increasing cost of parts and maintenance, - record levels of load shedding, - persistently lower commuter volumes as a result of depressed economic activity, and - taxi operators' inability to increase fares given already financially stretched consumers." Hopefully, if you were holding the shares, you sold out on your stop back in May 2022 at prices above R40 per share. On 13th May 2023 we recommended that you apply a 65-day exponentially smoothed moving average to the Transcap share price and wait for a break above that. That happened on 6th November 2023 at 577c per share. Since then it has moved up to 826c - a gain of over 43% in 3 months. On 12th September 2023 the company announced that its CEO, David Hurwitz, would resign with effect from 31st December 2023. The news caused the share price to drop sharply. We see this share as a potential turnaround that is probably cheap at current levels. On 31st January 2024 the company announced that it intended to unbundle and separately list WeBuyCars due to the poor performance of the taxi business in 2023. On 19th March 2024 the company announced that they had raised R902,7m through the issue of 40m new WBC shares and the sale of 8,145m WBC shares by Transcap. It also reported that during the 4 months WeBuyCars had increased revenue by 16% and core earnings by 20%. The company said, "Revenue continues to grow in line with the growth in number of vehicles sold as the existing branch network matures. WBC is consistently expanding its market share in a highly fragmented market." Our view is that WeBuyCars will be a solid investment when it comes to the JSE.
JSE:NTU
by PDSnetSA
Our opinion on the current state of GPLGrand Parade Investments (GPL) is an investment holding company primarily focused on the gaming industry, operating as a Black Economic Empowerment (BEE) entity. Listed on the JSE in 2008, the company has undergone significant changes in its portfolio over the years. Notably, it terminated its franchises with Dunkin' Doughnuts, Baskin Robbins, and Burger King in February 2019 and February 2020, respectively. Furthermore, GPL sold its remaining 10% stake in the Spur Corporation back to Spur in June 2019. On June 15, 2022, GPL announced the unbundling of its 9.28% shareholding in Spur, with shareholders receiving 1 Spur share for every 56 GPL shares held on the unbundling record date of June 10, 2022. In its financial results for the six months ending December 31, 2023, GPL reported revenue of R12.7 million, with headline earnings per share (HEPS) increasing to 11.9c from 9.8c in the previous period. The company attributed the decrease in central costs to operational restructuring and cost-saving initiatives implemented during the review period. Significant changes occurred in GPL's ownership structure, with GBM Liquidity, a private company, acquiring a 27.88% stake in the company on October 25, 2022, later increased to 35.14%. Additionally, Sun International increased its holding to 10.56% on November 11, 2022. On April 11, 2023, GBM Liquidity Corporation, a family trust of Greg Bortz, obtained control with 53.65% of the company's issued capital. Despite these ownership changes and potential takeover rumors, GPL's share performance has been relatively stagnant since 2017, moving sideways and not presenting an attractive investment opportunity from a technical perspective.
JSE:GPL
by PDSnetSA
Our opinion on the current state of INLInvestec (INL) operates as a specialist banking and asset management firm with a global presence spanning South Africa, Australia, Europe, the UK, and several other countries. Over the past four years, the company has faced pressure on its shares due to the uncertainties surrounding Brexit in the UK. However, Investec's decision to separately list its asset management division as Ninety-One has been instrumental in unlocking shareholder value, a trend that is becoming increasingly apparent as the effects of the pandemic subside. The separate listing of Ninety-One posed a significant challenge for Investec, particularly in convincing investors of its international asset management capabilities rather than being solely reliant on the South African market. To expand its client base, Investec targets individuals with an annual income of at least GBP300,000 and assets exceeding GBP3 million. Currently, the company has approximately 6000 such clients and aims to increase this number to 9000. In its latest financial results for the six months ending September 30, 2023, Investec reported a notable increase in headline earnings per share (HEPS) by 15.3%. Additionally, the company raised its credit loss impairment by 57.7% and conducted a share buyback worth R6.8 billion. In a pre-close update for the fiscal year ending March 31, 2024, Investec projected a further increase in HEPS ranging between 4.8% and 10.6%. The company highlighted that its UK business, including Rathbones Group, is expected to achieve adjusted operating profit growth of at least 15.0% compared to the previous year. Furthermore, the Southern African business anticipates adjusted operating profit to be at least 10.0% higher in Rands compared to the prior year. From a technical standpoint, Investec's shares are on a strong upward trend, which is anticipated to continue. With a price-to-earnings ratio (P:E) of 7.62 and a dividend yield (DY) of 5.11%, the company appears undervalued among blue-chip companies trading on the JSE. Given these factors, Investec is poised to continue its strong performance in the market.
JSE:INL
by PDSnetSA
Our opinion on the current state of SOHSouth Ocean (SOH) operates as a manufacturer of low-voltage electrical cables and an importer of light fittings and electrical accessories. The company's primary manufacturing plant, located in Alrode, employs approximately 400 individuals. Additionally, South Ocean functions as an investment holding company with two operating subsidiaries specializing in the production of low-voltage electrical cables. It also holds property for investment purposes, including Anchor Park, a property company under its ownership. The company has experienced fluctuations in its share price over the years, with notable highs and lows in its trading history. For instance, in December 2010, South Ocean's share price reached as high as 245c. However, persistent losses led to a significant decline in its share price, trading at around 22c, albeit on very thin volumes. In its latest financial report for the year ending December 31, 2023, South Ocean reported a noteworthy improvement in its financial performance, with revenue increasing by 26% and headline earnings per share (HEPS) surging by 99%. The company attributed this growth to expanded distribution channels and the enlargement of its customer base. Despite this positive momentum reflected in the share price, which has risen to 147c, it remains unsuitable for private investors due to the persistently low trading volumes. The lack of liquidity in the market makes it challenging for investors to buy and sell shares efficiently, rendering South Ocean's stock ill-suited for investment by private individuals. Therefore, it is advisable for investors to exercise caution and seek alternative investment opportunities with better liquidity and trading activity.
JSE:SOH
by PDSnetSA
Our opinion on the current state of WKFWorkforce (WKF) operates as a comprehensive labor broker, offering recruitment, specialist staffing, training, consulting, employee health management, and financial and insurance products. The landmark "Assign" case decision by the Constitutional Court clarified the relationship dynamics within the labor broker industry, establishing a tri-partite relationship between the labor broker, the employee, and the client. According to this ruling, temporary employees would be deemed permanent after three consecutive months of employment, providing much-needed clarity to the status of temporary workers. Workforce has strategically diversified its offerings beyond labor broking into insurance and other ancillary products, which has been advantageous for its business. However, in its results for the six months ending June 30, 2023, the company reported a 7% increase in revenue but a significant decline in headline earnings per share (HEPS), dropping to 1.7c from 14.7c in the previous period. The company attributed this decline to various factors including low economic activity, load shedding, high interest rates, decreased client confidence, and reduced demand for personnel services. Additionally, overhead costs rose by 12% due to inflation rates and operating expenses. To mitigate these challenges, Workforce has initiated a workforce reduction plan, aiming to decrease staff by 10% to 15%. However, despite these efforts, the company projected a headline loss for the year ending December 31, 2023, estimating between 11.36c and 16.04c loss per share compared to a profit of 46.8c in the previous year. One notable limitation of investing in Workforce from a private investor's perspective is its thinly traded nature. With only 8% of its issued shares available to the public and sporadic trading activity, the share lacks the liquidity necessary to justify investment. As a result, it may not be a viable option for private investors seeking to enter the market. Therefore, we do not recommend investing in this share due to its limited liquidity and trading activity.
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by PDSnetSA
ANG: Automating InformationWednesday 20 March 2024, 06h30 | ANG Anglogold Ashanti | This year’s highest end-of-day close for the share was on Monday 11 March at 42373c. At the end of that trading day, the Tactical Trading Guide gave you the following reading: “Strong upside move but momentum is slowing, with sellers becoming active”. During the next trading session, the share was lower by 4.28% and has since declined further, testing a low of 38239c during yesterday’s session. Below is the updated chart as of yesterday’s close, shown with the reading on the day which the share peak. Below the chart is yesterday’s end of day reading from the Tactical Trading Guide. For long re-entries, the previous breakout level at the 50-day EMA is a confluence zone. As you’ll note the medium term time frame (2 to 4 weeks) states that traders could watch the 50-day EMA as a range for a rebound buy/long. For active traders, there are plenty of opportunities.
JSE:ANG
by techpers
Our opinion on the current state of SBKStandard Bank (SBK), a stalwart in South Africa's financial landscape with a 160-year history, stands as the country's second-largest bank by market capitalization, trailing only behind First National Bank. Its footprint extends across Africa, with operations in various countries on the continent contributing 34% of its headline earnings. Notably, 20% of its shares are held by the Industrial and Commercial Bank of China (ICBC), and the bank itself owns 40% of ICBC Standard Bank. The bank has adapted to the challenges posed by the COVID-19 pandemic, with approximately 70% of its staff transitioning to remote work arrangements. However, it continues to grapple with issues such as load-shedding in South Africa and the lingering effects of the coronavirus on the economy. Despite these challenges, Standard Bank presents an enticing long-term investment opportunity for private investors, particularly as economic conditions improve post-COVID-19. Standard Bank's strategic moves, such as its offer for the ordinary and preference shares in Liberty Holdings (LBH) announced on July 15, 2021, have bolstered its position. Liberty shareholders received 0.5 Standard Bank shares and R25.50 in cash for each LBH ordinary share, implying a valuation of just under R90 per LBH share—a 33% premium to its pre-announcement price. The bank's financial performance for the year ending December 31, 2023, reflects its resilience and growth trajectory. Headline earnings per share (HEPS) surged by 26%, accompanied by a robust return on equity (ROE) of 18.8%. Additionally, the company's net asset value (NAV) rose by 8% to 14269c per share. A significant driver of this performance is the bank's Africa Regions franchise, which contributed 42% to group headline earnings. Notable contributors include operations in Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, Zambia, and Zimbabwe. Standard Bank benefits from the current high interest rate environment and its diversification into African markets. From a technical standpoint, Standard Bank's share price has been on a strong upward trend since hitting a low at 14910c on May 30, 2023. With a price-to-earnings ratio (P:E) of 7.18 and a dividend yield (DY) of 6.12%, the stock is considered to offer good value to investors.
JSE:SBK
by PDSnetSA
Our opinion on the current state of YRKYork Timber Holdings (YRK) is a prominent forestry company in South Africa, boasting ownership of plantations, processing plants, and a wholesaling distribution network. Established by Russian immigrant Herman Katzenellenbogen in 1916, the company has been listed on the JSE since 1946 and holds a significant position in the country's plywood and timber market. Over the years, York Timber Holdings has faced challenges stemming from the construction industry's downturn, particularly since the onset of the sub-prime crisis in 2008. Despite reaching a peak in July 2007 with shares valued at R40, the company has experienced a downward or sideways trend in its share price since then. Recent announcements have further impacted investor sentiment. A strike at the company's Escarpment operations, responsible for 51% of its revenue, was reported on May 13, 2022, contributing to production disruptions. Additionally, a decision to conduct a rights issue to raise R250 million, announced on December 5, 2022, led to a sharp decline in the share price. In its financial results for the year ending June 30, 2023, York Timber Holdings reported a 9% decrease in revenue and a headline loss per share of 76c, compared to a restated profit of 53c in the previous period. The company attributed the loss to various factors, including costs related to load shedding, diesel, external log purchases, and reduced sales, resulting in a decline in net asset value (NAV) from 857c to 579c per share. Despite these challenges, York Timber Holdings remains accessible to private investors, with approximately R183,000 worth of shares traded daily. However, the company's technical outlook indicates a downward trend since the beginning of 2022, underscoring its volatility and its sensitivity to construction-related factors. In a trading statement for the six months ending December 31, 2023, the company projected a further decline in headline earnings per share (HEPS) by 62% to 67%, citing expectations of significantly lower cash generated from operations compared to the previous comparative period. Investors should consider these factors when evaluating York Timber Holdings as an investment opportunity.
JSE:YRK
by PDSnetSA
Our opinion on the current state of CLIClientele Life (CLI) operates as a small insurance company specializing in the sale of short- and long-term policies and underwriting insurance products. The company distributes its products through agents, brokers, and tele-sales channels. In its financial results for the year ending 30th June 2023, Clientele Life reported a 15% increase in headline earnings per share (HEPS) and achieved a return on average shareholders' interest of 43%. Additionally, the company attained a return on embedded value of 12%. Clientele Life highlighted the challenging trading environment marked by factors such as low economic growth, persistent load-shedding, and difficulties in premium collections. On 3rd November 2023, Clientele Life announced the acquisition of 1Life Insurance for R1.914 billion, to be funded by issuing 117,815,756 ordinary shares in Clientele. Despite anticipating a decline in HEPS ranging between 37% and 57% in the trading statement for the six months ending 31st December 2023, the company emphasized its sound solvency and liquidity position, with continued strong positive cash flows. Trading at a price-to-earnings (P:E) ratio of 7.8, the company's shares appear attractively priced. Moreover, Clientele Life's shares witness sufficient trading activity to accommodate most private investors. From our perspective, the current valuation offers reasonable value, with potential for direct benefits as the South African economy shows signs of improvement. Investors should consider these factors when evaluating investment opportunities in Clientele Life.
JSE:CLI
by PDSnetSA
Our opinion on the current state of MCZMC Mining (previously "Coal of Africa") (MCZ) operates as a small metallurgical coal-mining company primarily focused on its single producing mine, Uitkomst. In addition to Uitkomst, the company is actively developing several projects including the Makhado project, the Vele colliery, and MbeuYashu. Among these, the Makhado project stands out as the flagship operation situated in the Limpopo province. This opencast mine boasts a projected lifespan of 16 years with the potential for extension. A significant milestone for the Makhado project was reached in January 2019 with the announcement of the acquisition of surface rights, crucial for its viability. Production at Makhado is anticipated to commence by the end of 2020, aiming to produce 800,000 tons of hard coking coal and 1 million tons of export thermal coal. This acquisition substantially reduces risks associated with the project, enhancing its attractiveness as an investment opportunity. To support the Makhado project, the Industrial Development Corporation (IDC) has provided R245 million in funding, yet an additional R530 million is still required. The company holds a 69% stake in Baobab Mining and Exploration, the entity that owns the Makhado project. In its financial results for the six months ending 31st December 2023, MC Mining reported a remarkable 80% increase in revenue. However, the company experienced a headline loss of 145c (US) per share, a significant increase from the loss of 50c in the previous period. Despite challenging international thermal coal prices, Uitkomst Colliery delivered encouraging results, generating revenue of $16.3 million and operating cash flows of $5.1 million for the period. From a technical perspective, the share price of MC Mining exhibited a spike between July and September 2022, followed by a subsequent decline to lower levels. As a volatile commodity share, MC Mining faces inherent risks associated with mining exploration and development, coupled with high debt levels. On average, approximately R280,000 worth of shares change hands each day, indicating relatively low liquidity in the market for this stock. Investors should carefully consider these factors before making investment decisions.
JSE:MCZ
by PDSnetSA