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Our opinion on the current state of QUANTUM(QFH)Quantum (QFH) is in the chicken business. It has four divisions - Animal Feeds, Eggs and Layers, Broilers, and an African division where it sells related products. Quantum was obviously badly impacted by the drought in Southern Africa, but since that abated and the price of animal feeds came down, it has benefited from the much higher prices of eggs and the lower cost of feeds. In general, the chicken business is a tough business. It is labour-intensive, which creates exposure to union action, it involves large quantities of working capital tied up in stock and, to a lesser extent, debtors, it is subject to unexpected disease threats like avian flu or Newcastle disease, and it has experienced the dumping of cheap chicken onto the South African market from Europe, Brazil, and America. With top-class management, a sustainable profit can be achieved, but the industry is regarded as relatively high-risk by investors, which accounts for its low price-earnings (P:E) multiple and its high dividend yield (DY). The unprotected strike at Kaalfontein Farm has restricted output and cost an estimated R10m. The company suffered an outbreak of HPAI at its Lemoenkloof Farm as well as loadshedding and labour unrest. In its results for the year to 30th September 2024, the company reported revenue down 8.9% and headline earnings per share (HEPS) of 80.4c compared with a loss of 17.4c in the previous period. The company said, "FY2024 will be remembered for the severe impact of highly pathogenic avian influenza (“HPAI”) on our layer farming and egg businesses, the Malmesbury feed mill explosion, leadership changes and dramatic fluctuation in our share price on the back of shareholder activity." In an update for the 4 months to 31st January 2025, the company reported a significant improvement in trading conditions. The company said, "...the Company benefited from improved throughput as a result of a recovery in its layer flock, no loadshedding in South Africa, relatively high egg selling prices and no HPAI outbreaks. Feed costs for the Current Period were relatively stable compared to the Previous Period." Nobody knows what difficulties the business may experience over the next 12-month period. So, if you plan to invest in this share, be prepared for considerable volatility. This company sometimes has difficulty in passing on higher raw materials costs to consumers, especially in the current economic environment.
JSE:QFH
by PDSnetSA
Our opinion on the current state of BATS(BTI)British American Tobacco (BTI) describes itself as a "leading consumer goods company" - which is a euphemistic way of saying that they produce and sell an enormous number of cigarettes and related products worldwide. It is also the second-largest company on the JSE after Naspers. In recent decades, cigarette companies have become increasingly oppressed. Their ability to advertise their products and even package them has been severely curtailed in many countries. They are seen to be exploiting an addiction that is clearly anti-social and very bad for the individual's health, regularly involving them in lawsuits for damages. BAT owns well-known brands like Camel, Peter Stuyvesant, Rothmans, Benson & Hedges, Dunhill, Pall Mall, Kent, and Lucky Strike. In an effort to get away from the negative perceptions of cigarettes, the company has diversified into "new category" products such as vaping and electronic cigarettes, which it claims offer a long-term prospect for growth. Recently, especially in the United States, these products have also come under the spotlight for health reasons, leading to a drop-off in sales. As an investment, the company offers some attractions. Roughly 20% of the world's population still smokes, making a truly massive market. Setting aside our distaste for the business which BAT conducts, the share looks like very good value at current levels. This is one of the shares that has performed well and perhaps even benefited from COVID-19. The CEO says that he aims to double non-combustible sales by the 2023/24 year. It is interesting that BAT considers South Africa's illegal cigarette market to be the largest in the world. On 6th December 2023, *Business Day* reported that BAT had impaired its US operations by GBP25bn (R595bn), leading to a drop of 10% in the BTI share price. In its results for the year to 31st December 2024, the company reported revenue down 5.2% with organic revenue up 1.3%, driven by New Categories, which was up 8.9%. The company said, "Reported profit from operations of £2,736m (2023: loss of £15,751m) with 2024 including a provision of £6.2 billion in respect of the proposed settlement in Canada, while 2023 was negatively impacted by one-off impairment charges largely in the U.S. Adjusted organic profit from operations up 1.4% (at constant rates), driven by AME and APMEA." The share has basically been moving sideways for several years. We do not regard it as a good long-term investment.
JSE:BTI
by PDSnetSA
Our opinion on the current state of IOCO(IOC)Previously called Enterprise Outsourcing Holdings (EOH), Ioco was Africa's largest information technology company with involvement in almost every aspect of computer applications. At one point, the company had 11,000 staff members, but that has now been reduced to 6,151. It was, until August 2015, the darling of the JSE because it had a long track record of steadily improving profits. It made a peak of R178 per share at a P:E of 35. An unsuccessful attempt to exceed that high (i.e., a double top) came a year later in September 2016, and since then, the share has fallen steadily to reach a low of 146c in February 2023. This fall was initially accompanied by allegations that the company was involved in and owed its success to state capture in collaboration with the Guptas. The CEO and founder, Asher Bohbot, resigned in May 2017 and handed over to Zunaid Mayet, who later handed over to Stephen van Coller. Usually, when a company is run by a strong charismatic leader and that leader (like Bohbot) resigns, it is time to sell the share. The company's 200 subsidiaries have been consolidated into three divisions with centralized debt collection and procurement. On 6th July 2021, *Business Day* reported that EOH could possibly be "blacklisted" by the government as a result of its past tender frauds. This would obviously be very negative for the company. On 11th November 2022, the company announced a R500m rights issue and a R100m private placement, mainly to reduce debt. On 13th February 2023, it announced that the offer had been 135.8% oversubscribed. In its results for the year to 31st July 2024, the company reported revenue down 3.1% and a headline loss per share of 0.21c compared with a loss of 21c in the previous year. The company said, "A special board subcommittee was formed in June 2024 to turn EOH around. Key initiatives include business restructure and rationalization plans. Corporate and administration cost restructure successfully completed. Cost savings of between R160 million and R200 million anticipated into FY25." In a trading statement for the six months to 31st January 2025, the company estimated that HEPS would increase to between 19c and 21c compared with a loss of 11c in the previous period. On 31st May 2024, the company announced the resignation of various directors and the appointment of Marius de la Rey as interim CEO. Technically, the share made a "double bottom" in April and May of 2024, after which it began a new upward trend. We believe that it will continue to rise. On 14th February 2025, the company announced that Marius de la Rey had resigned with immediate effect. Directors Rhys Summerton and Dennis Venter have been appointed as joint CEOs and executive directors.
JSE:IOC
by PDSnetSA
Our opinion on the current state of ITLTILE(ITE)Italtile (ITE) is a franchisor of tiles, sanitary ware, flooring, and home finishing products - which it manufactures and wholesales itself. The company is controlled by the Ravazotti family. It has 206 stores and six online web stores. It also has a property portfolio of retail and industrial properties worth about R4.3bn. The company has acquired 95.47% of Ceramic Industries and 71.54% of Ezee Tile, which it styles as its manufacturing business (as opposed to its retail business). The company gained an increased "share of wallet" and improved the management of stockholding and working capital. The company appears to be benefiting from increased sales as people work from home and seek to improve their home environments. It plans to add between 10 and 15 new stores this year. It has also bought back about R240m worth of its own shares at lower levels. The company closed 18 stores in Natal and 16 other stores for ten days during the civil unrest. Two stores at Orange Farm and Spruitview were destroyed. There have also been store closures due to COVID-19 during July 2021. In its results for the year to 30th June 2024, the company reported turnover unchanged and headline earnings per share (HEPS) down 7%. The company's net asset value (NAV) was up 10% at 707.5c per share. The company said, "While our retail operation's full-year results were slightly lower than the prior comparable year, the division recovered market share and performed better in the second half of the period than the first half." In a sales update for the five months to 30th November 2024, the company reported retail turnover up by 2.2%. The company said, "Combined manufacturing sales reported by Ceramic Industries Proprietary Limited ("Ceramic Industries") and Ezee Tile Adhesive Manufacturers Proprietary Limited to both Group and third-party customers declined by 1.6% compared to the Prior Period's decline of 5.9%." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would increase by between 2% and 6.7%. Technically, the share moved sideways for two years until COVID-19 took it down to levels around R10. The share broke up through its long-term downward trendline in June 2024 and rose strongly until the end of that year. Since then, it has been in a downtrend. It will probably benefit from new building activity expected to follow the formation of the new GNU in South Africa.
JSE:ITE
by PDSnetSA
Our opinion on the current state of LABAT(LAB)Labat (LAB) is a 57% black-owned investment holding company that listed on the JSE in 1999. The company buys and improves subsidiaries and then sells them for a profit. At the moment, Labat has two operations - South African Micro-Electronic Systems (SAMES) and Labat Logistics. On 14th April 2020, the company announced that it had acquired 70% of Biodata, an East London-based company that is focused on cannabis healing. The acquisition is to be paid for in shares. The market for cannabis in South Africa in 2020 was expected to be worth around R27bn. On 5th May 2020, the company issued a profit forecast for the years 2021 and 2022 - in which it said it was raising R112m by the issue of shares and that it would generate a profit of R60m in 2021 and R162.3m in 2022, resulting in headline earnings per share (HEPS) of 10.9c and 29.9c respectively. On 8th May 2020, the company announced that it had decided to put Force Fuel into business rescue because of a drop in volumes as a result of COVID-19. In its results for the six months to 30th November 2023, the company reported revenue of R36.6m compared with R24m in the previous period. Headline earnings per share (HEPS) were 0.78c compared with a loss of 1c in the previous period. The company said, "Group revenue for the year increased by 152% to R36.7 million (2022: R24.1 million) compared to the prior year. This increase was driven mainly by the 13 new retail wellness stores that were opened during the year." In a trading statement for the six months to 30th November 2024, the company estimated that HEPS would increase by 98.72%. The company's shares were suspended on the JSE in October 2023 and only commenced trading again on 2nd January 2025 with the publication of the interim results to 30th November 2024. Even when trading, this is a volatile, often loss-making penny stock, so investors should probably leave it alone.
JSE:LAB
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 year to 30th June 2024, the company reported revenue down 18.9% and headline earnings per share (HEPS) down 87.8%. The company said, "Significantly weaker US dollar sales revenue offset the benefit of strong operational delivery in FY2024 - average palladium and rhodium pricing dropped sharply, negating higher sales volumes and compressing operating margins and free cash flow." In an update on the first quarter to 30th September 2024, the company reported production volumes down by 5% but maintained production volume guidance. The company said, "Implats is on track to deliver our previously provided operational, cost and capital expenditure guidance in FY2025." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by between 40% and 49% due to an 8% drop in the rand price of 6E PGMs, which offset cost controls and higher output. 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 load-shedding. It has recovered somewhat since then but remains a volatile commodity share.
JSE:IMP
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, Brimstone 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. In its results for the six months to 30th June 2024, the company reported revenue down 39% and headline earnings per share (HEPS) up 110%. The company's intrinsic net asset value (NAV) fell 5.7% to 1143.6c per share. The company said, "Despite the operating environment, the Group reported headline earnings per share of 71.9 cents (2023: 34.2 cents), up 110% over the comparative period. This was mainly due to fair value gains of R76.2 million compared to fair value losses of R40.3 million in the prior period, and the increase in Brimstone’s share of profits of associate, Oceana, from R94.9 million in the prior period to R187 million in the period under review." The company disposed of its entire stake in Milpark and part-stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. In a trading statement for the year to 31st December 2024, the company estimated that HEPS would be between 46% and 56% higher. We regard the share as too thinly traded for private investors and, unless they begin to unbundle the portfolio, the extra value is likely to remain locked in.
JSE:BRT
by PDSnetSA
Our opinion on the current state of KAPKAP International Holdings (KAP) is a diversified industrial company that produces and markets timber, chemicals (PET and related chemicals), bedding, and car parts. It also has a logistics division. The acquisitions of Safripol and Hosaf were integrated into a polymers business under the Safripol name. The bedding division showed strong growth with new investment in infrastructure and manufacturing capability. Growth in the automotive parts division was muted. This company was 43% owned by Steinhoff, which has now divested completely. The renewal of the government's Automotive Production and Development Programme (APDP) until 2035 will be a boost for KAP's parts manufacturing business. The timber division is ramping up after the lockdown, and demand for its products has remained buoyant. The automotive components division was severely impacted, and the post-lockdown recommencement has been slow. The bedding division was able to operate through the lockdown with strong demand for medical and agricultural needs. Polymers also operated throughout the lockdown. In a report on 20th April 2022 into the flooding in Natal, the company said, "The Company’s operations in the region have experienced some temporary operational and supply chain disruptions, which are in the process of being resolved." In its results for the year to 30th June 2024, the company reported revenue down 2% and headline earnings per share (HEPS) down 4%. The company's net asset value (NAV) increased by 7% to 500c per share. The company said, "...operating profit before depreciation, amortisation and capital items (‘EBITDA’) decreased by 8% to R3 694 million (2023: R4 020 million), while operating profit before capital items decreased by 11% to R2 250 million (2023: R2 523 million) for the year, with the decline mostly attributable to Safripol." In an operational update on the five months to 30th November 2024, the company reported increased operating costs and finance costs. The company said, "Revenue improved due to a c. 50% combined increase in MDF domestic and export sales volumes, primarily attributable to the higher MDF production." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by between 19% and 23%. Technically, the share has been falling since September 2024, and we recommend waiting for it to break up through its downward trendline before investigating further. Obviously, the logistics problems at Transnet have been having an impact. We think it may represent good value at current levels, but it is volatile.
JSE:KAP
by PDSnetSA
Our opinion on the current state of NORTHAM(NPH)Northam (NPH) is a fully empowered platinum mining company that operates in the Bushveld complex. In the current difficult legislative environment, where the 3rd mining charter is regarded as unfriendly from an investment point of view, Northam is probably the only mining house that is buying up new properties. It has come to an arrangement with Anglo American to exploit a property adjacent to its Zondereinde mine (the deepest platinum mine in South Africa). It has also bought Eland Platinum from Glencore for R175m, which it intends to re-start at a cost of R2bn. On 29th October 2019, the company announced the acquisition of Maroelabult for R20m, which is west of the Eland mine with an analogous ore body. This has accelerated the bringing to production of Eland and required very little capital. With the Eland mine, Northam got a concentrator plant that can process up to 250,000 tons a month. In return, Glencore got the right to market all of Northam's chrome. At the same time, Northam has recently commissioned a new smelter to try to process its backlog of platinum ore, which is estimated to be worth about R2.5bn. Zondereinde is a deep-level mine that has all the problems associated with mining at depth, while Booysendal is a shallow mechanised mine that is much easier to manage. Both mines are profitable, but the empowerment structure results in Northam always reporting a loss because of the preference dividend that must be paid. Once Booysendal is complete, the company should generate strong cash flows. The appointment of Mcebisi Jonas (former South African Minister of Finance) and Jean Nel (previously CEO of Aquarius Platinum) as non-executive directors will significantly add to the strength of the board. The company has the stated intention of doubling its workforce as it strives to become a major PGM supplier in the world. With plans to increase production of PGMs over the next few years to 1 million ounces, this is probably one of the better options in the industry. The company has also sold its Impala shares for R3.1bn. The PGM industry is currently navigating significantly depressed PGM prices and high inflation, together with a raft of global geopolitical uncertainties and, locally, Eskom load curtailment events. In its results for the year to 30th June 2024, the company reported revenue down 22.2% and headline earnings per share (HEPS) down 81.6%. In a production update for the six months to 31st December 2024, the company reported refined PGM production up 3.7% and chrome production up 7.5%. The company said, "PGM production from Zondereinde remains on target, despite a stoppage during November as a result of a failure of a primary Eskom feed substation. Chrome concentrate production has benefitted from increased UG2 milling and further incremental improvements in chrome recovery." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by between 44.7% and 54.7%. Since April 2021, there has been a steady decline in the share, which has seen it fall back substantially. Despite this, we see a good future for this company in the longer term, but it remains a volatile commodity share. We recommend waiting for a clear break up through the downward trendline before investigating further.
JSE:NPH
by PDSnetSA
Our opinion on the current state of TRELLIDOR(TRL)RCL is a large producer of food, sugar products, and chicken in South Africa, which is owned 80.4% by Remgro. The company owns a number of very well-known South African brands such as 5 Star maize meal, Farmer Brown, and Yum Yum peanut butter. It competes with overseas imports of sugar, chicken, and other foods. It was impacted by the listeriosis outbreak, which damaged the market for processed meats and caused costs estimated at about R158m. The company has been impacted by the weak economy, low consumer spending, and high unemployment. The company, through the SA Poultry Association, is petitioning the International Trade Administration Commission (ITAC) for an 82% increase in the tariffs on imported chicken. On 2nd December 2020, the company announced that Remgro had increased its stake by buying 100m shares at R8,05 each. On 29th March 2023, the company announced that it had sold Vector Logistics for R1,25bn. On 4th June 2024, the company announced that it would unbundle and separately list Rainbow Chicken. RCL shareholders got 1 Rainbow share for every RCL share that they held on 25th June 2024. On 10th June 2024, the company published Rainbow's pre-listing statement, with the last day to trade being 25th June 2024. In its results for the year to 30th June 2024, the company reported revenue up 6.8% and headline earnings per share (HEPS) from continuing operations up 31%. The company said, "EBITDA from continuing operations increased by 36.8% to R2 300,5 million (2023: R1 681,6 million). This was mainly driven by a strong result in our Sugar business unit and the recovery of service levels in the Pet Food business within Groceries." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would increase by between 31.2% and 38.6%. The company said the increase was, "...largely due to, amongst other items, the current period EPS including the non-cash gain realised on accounting for the unbundling of Rainbow, and the comparative period EPS including the gain on disposal of Vector Logistics." The share has been drifting down since Rainbow was unbundled but may now be at the start of a new upward trend.
JSE:TRL
by PDSnetSA
REN.JSE Renergen Prints a Rounding Bottom.Renergen Prints a Rounding Bottom Pattern which is Bullish. I had parked this one in my Bottom Drawer, almost gave up on any Hope. Last had a look in early January. Seeing the recent price action made have another look, and it's starting to look good. Seems the recent incoming JSE Tide on Commodity Stocks could be lifting many boats. The Chart is self Explanatory. As always, please get a few outside Expert's Advice before taking Trade or Investment Decisions. Should you appreciate my Chart Studies, Smash That Rocket Boost Button. It's Just a Click away. Regards Graham. PV = FV/(1+r)^t Present Value = Future Value / (1 + R Rate of Return ) ^ Time.
JSE:RENLong
by hitchcoxg
Our opinion on the current state of RCLRCL is a large producer of food, sugar products, and chicken in South Africa, which is owned 80.4% by Remgro. The company owns a number of very well-known South African brands such as 5 Star maize meal, Farmer Brown, and Yum Yum peanut butter. It competes with overseas imports of sugar, chicken, and other foods. It was impacted by the listeriosis outbreak, which damaged the market for processed meats and caused costs estimated at about R158m. The company has been impacted by the weak economy, low consumer spending, and high unemployment. The company, through the SA Poultry Association, is petitioning the International Trade Administration Commission (ITAC) for an 82% increase in the tariffs on imported chicken. On 2nd December 2020, the company announced that Remgro had increased its stake by buying 100m shares at R8,05 each. On 29th March 2023, the company announced that it had sold Vector Logistics for R1,25bn. On 4th June 2024, the company announced that it would unbundle and separately list Rainbow Chicken. RCL shareholders got 1 Rainbow share for every RCL share that they held on 25th June 2024. On 10th June 2024, the company published Rainbow's pre-listing statement, with the last day to trade being 25th June 2024. In its results for the year to 30th June 2024, the company reported revenue up 6.8% and headline earnings per share (HEPS) from continuing operations up 31%. The company said, "EBITDA from continuing operations increased by 36.8% to R2 300,5 million (2023: R1 681,6 million). This was mainly driven by a strong result in our Sugar business unit and the recovery of service levels in the Pet Food business within Groceries." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would increase by between 31.2% and 38.6%. The company said the increase was, "...largely due to, amongst other items, the current period EPS including the non-cash gain realised on accounting for the unbundling of Rainbow, and the comparative period EPS including the gain on disposal of Vector Logistics." The share has been drifting down since Rainbow was unbundled but may now be at the start of a new upward trend.
JSE:RCL
by PDSnetSA
Our opinion on the current state of KUMBA-IO(KIO)Kumba (KIO) is a highly successful iron mining operation which is owned (79%) and controlled by Anglo American. The share price fell to as little as R223 in March 2020 because of COVID-19 but recovered to R668 before falling on the March 2022 quarterly results. Importantly, exports make up 94% of the company's total sales - which means that it is not heavily dependent on local sales but is vulnerable to any strengthening of the rand and the effectiveness of rail transport to ports. The company is planning to build a 100MW solar park over the next 3 years to reduce its reliance on Eskom. The company has had to contend with heavy rain and bad rail performance. On 10th October 2022, Kumba announced that, because of the force majeure at Transnet, it would lose about 50,000 tons of production per day, rising to 90,000 tons after 7 days as a direct result of the Transnet force majeure. Furthermore, they said they would lose about 120,000 tons of exports which will cost them about $8.5m a day in production and $11.7m in lost export revenue. The company is considering 490 retrenchments. In its results for the six months to 30th June 2024, the company reported revenue down 6% and headline earnings per share (HEPS) down 26%. The average free-on-board (FOB) price received was $97 per ton with an EBITDA of 44%. The company had a closing cash position of R14.6bn. The company said, "Attributable free cash flow of R9.1 billion supported our Board's decision to declare an interim dividend of R6.0 billion." In an update on the 3 months to 30th September 2024, the company reported production up 3% and sales up 2%. The company said, "...in comparison to Q2 2024, sales decreased by 6% as ship loading was impacted by adverse weather conditions in July 2024 at the Saldanha Bay port. Given this, sales are expected to end the year closer to the lower end of our full year 2024 sales guidance of 36 – 38 Mt, subject to Transnet's logistics performance..." In a trading statement for the year to 31st December 2024, the company estimated that HEPS would fall by between 43% and 48%. The company said, "Ore railed to Saldanha Bay Port decreased by 8% compared to Q3 2024, due to the planned 15-day annual maintenance shutdown and unfortunate train derailments following the re-opening of the Ore Export Channel (OEC). To maintain a balanced and efficient value chain, finished stock at the mines was drawn down and production reduced by 17% compared to Q3 2024, while sales increased by 1% to 9.1 Mt." The share trades at a multiple of 5.62 and a dividend yield (DY) of 9.71% - which seems to compensate the investor to some extent for the commodity risk in this rand-hedge share, but it remains volatile and hence risky. On 28th August 2024, the company announced that it would invest R11.2bn in improved processing technology at Sishen, which would improve premium quality production to 55% from the current level of 18%.
JSE:KIO
by PDSnetSA
Our opinion on the current state of KAL Group(KAL)Previously, Kaap Agri, the KAL Group is an agricultural company owned 40.9% by Zeder, which is, in turn, 43.7% held by PSG. The company operates through over 190 retail outlets offering a wide range of products and services mainly to the farming community. Kaap Agri has seven divisions: (1) Pakmark offers a wide range of packaging materials for the local and export markets, especially to the fruit industry. (2) Agrimark has over 70 stores in South Africa and Namibia offering a wide range of animal feeds, gardening equipment, tools, outdoor and camping equipment, and pet accessories. (3) Liquormark offers a wide range of liquor products from beers to wines, spirits, and mixers. (4) Kaap Agri Mechanisation offers farming machinery and equipment. (5) Wesgraan offers grain handling and management services. (6) Expressmark supplies fuel, especially diesel, mainly to the farming community. It also has convenience stores. (7) The Fuel Company (TFC) aims to be the market leader in the independent fuel retail market in South Africa. The group's product diversity has reduced its exposure to weather conditions in the agricultural sector, especially in the Western Cape, but it remains essentially a retail outlet that focuses on the agricultural sector. As such, its results are impacted by the general level of consumer spending in South Africa and the state of the local economy as well as agricultural conditions. On 4th October 2021, Kaap Agri announced that it had sold its 70.5% stake in TFC Properties for R446m. On 19th January 2022, the company announced the acquisition of PEG Retail Holdings for R1.09bn. This acquisition increases the number of petrol stations which Kaap Agri has from 43 to 84. In its results for the year to 30th September 2024, the company reported revenue down 3% and headline earnings per share (HEPS) down 9.2%. The company said, "The profit after tax of the Group amounted to R451 million (2023: R480 million) while the gross assets decreased to R8,215 million (2023: R8,290 million)." In an update on the 1st quarter to 31st December 2024, the company reported retail turnover up 2.3% and Agri turnover up 5.7%. The company said, "An average 18% decrease in fuel prices impacted turnover but not trading profit. Fuel price gains were R5.2m lower YOY and Group fuel volumes increased by 0.7%." Technically, the share broke down through its trendline on 6th January 2025 at 4952c and has since fallen to 4681c. We see it as a well-managed company that has exposure to South Africa's retail environment, loadshedding, and also to the state of agriculture in this country. It has suffered with falling petrol prices recently. We recommend waiting for the share to begin a new upward trend before investigating further. Issues surrounding expropriation of land without compensation have an impact on the company. However, with a P:E multiple of 8.34, these risks look fully discounted. In its integrated annual report, the group has predicted that it will make over R1bn in pre-tax profits by 2025.
JSE:KAL
by PDSnetSA
Our opinion on the current state of HUDACO(HDC)Hudaco (HDC) is an importer and supplier of "...automotive, industrial and consumer products" mostly in Southern Africa. Its business has two sides: (1) Supplying automotive security, power tools, communications, and business supply products to the consumer market. (2) Supplying mainly the mining and manufacturing industries with mechanical and electrical power transmissions, diesel engines, hydraulics and pneumatics, steel and thermoplastics, and fittings and bearings. The company has a very well-established business with 26 warehouses, 800 international suppliers, and 140 branches. Through this network, they supply about 230,000 products. The company has been battling to export goods because of inefficiencies at South African ports, especially Durban. The group constantly makes bolt-on acquisitions to build and enhance its business. In its results for the year to 30th November 2024, the company reported revenue down 5.8% and headline earnings per share (HEPS) down 6.3%. The company said, "For the five months from the formation of the GNU to the end of the financial year, through strong management of gross profit margin, tight control of expenses and the reduction of inventory, operating profit increased by 0.2%, and headline and comparable earnings per share were up by 3.5% on the equivalent period in the prior year." Hudaco is an extremely well-managed company operating in a difficult economy. As the economy improves, Hudaco's results will benefit directly. The share trades on a P:E of 9.99 and a dividend yield (DY) of 4.08%, which looks cheap to us. In our view, this share should be bought on weakness and offers solid, long-term investment potential as the South African economy improves.
JSE:HDC
by PDSnetSA
Our opinion on the current state of GFIELDS(GFI)Gold Fields (GFI) is a relatively high-cost international gold mining house with a single mine in South Africa - South Deep. South Deep was bought by Gold Fields in 2006, and it has struggled to make the mine profitable, pouring in a total of R32bn (R22bn purchase price plus R10bn in development costs) into it over the past 14 years. Brett Kebble once described South Deep as, "The world's most expensive long drop...". South Deep is 3 kilometres deep and a very difficult mine with many technical complications, but it is the second-largest unmined gold resource in the world - hence Gold Fields' persistence. Gold Fields is working with an independent power producer (IPP) to build a 50MW project in SA. The company has spent a total of $502m over the past two years to ensure that Damang and Gruyere (international operations) would produce 2 million ounces a year for the next ten years. South Deep now has R800m less in costs and R400m less in capital expenditure. The company is focusing on bringing the new Salares Norte gold mine in Chile into production. On 11th July 2022, the company said that it would list on the Toronto Stock Exchange and that it would adopt a dividend policy of paying between 30% and 45% of profits out. Its protracted investment in South Deep is definitely beginning to pay off with output expected to rise by about 25% over the next four years. On 12th August 2024, the company announced that it had acquired the remaining 50% of Osisko Mining for $1.57bn (R29bn). In its results for the six months to 30th June 2024, the company reported attributable production down by 20% at 918,000 ounces. All-in sustaining costs were $2,060 per ounce. Earnings per share (EPS) was down 22% at 40c (US) compared with 51c in the previous period. The company said, "Group performance in H1 2024 was impacted by weather-related events and operational challenges at some of our assets." In a trading statement for the six months to 30th June 2024, the company estimated that HEPS would fall by 21% in rands. The company said, "...the Group generated auction revenues during the period of USD 120.6 million, as well as USD 6.6 million from Fabergé, contributing to another profitable period albeit at a reduced level when compared to the same period last year." In an operational update for the 3 months to 30th September 2024, the company reported production up 12% and all-in sustaining costs down 3%. The company said, "Net debt decreased by US FWB:30M to US$1,123m at the end of September 2024, mainly due to strong cash generation which was partially offset by payment of the interim dividend of US$152m (June 2024: US$153m)." In a trading statement for the year to 31st December 2024, the company estimated that HEPS would increase by between 41% and 52%. Technically, the share is very volatile and subject to shifts in the international price of gold, but it has been in an upward trend over the past five years. It remains a volatile commodity play.
JSE:GFI
by PDSnetSA
Our opinion on the current state of DRDGOLD(DRD)DRDGOLD (DRD) was listed in 1895 and is the JSE's oldest listed company. It was followed by SA Breweries, which was listed in 1897 and has now been acquired by Anheuser Busch. DRD is now a gold surface treatment operation which is at an all-in sustaining cost of extraction of just over R627247 per kilogram which compares to the average received gold price of R917996. They are re-treating surface dumps which still have traces of gold that can be profitably extracted with modern extraction methods. The benefit of this type of operation is that it is far less risky than underground gold mining operations because it has far less union exposure and has none of the expenses or difficulties of an underground operation. Its life and grade, and hence its profitability, are precisely known. The share tends to be volatile because it depends on the current price of gold, but the company has a debt-free balance sheet and strong free cash flows. A deal was concluded for Sibanye to swap out its surface dumps for an additional 265m DRD shares - which took Sibanye to a shareholding of 38%. Then on 10th January 2020, Sibanye announced that it had exercised its option to increase its stake to 50,1% at a cost of R1086m. The CEO of DRD Gold, Niel Pretorius, wants to join up with other tailing projects on the West Rand to create a massive unified re-processing operation. The company is building a 20mw solar and battery facility. In its results for the year to 30th June 2024 the company reported revenue up 14% and headline earnings per share (HEPS) up 4%. Gold production and sales were down 5% while cash operating costs increased by 20% in rands. The company said, "We are now positioning to bring on stream by the financial year ending 30 June 2028 ("FY2028") a combination of reclamation sites designed to lift tonnage throughput to 3 million tonnes per month, and gold production to just over 6 tonnes per annum." In an update on the 3 months to 30th September 2024 the company reported production up 7% and sales up 4%. All in sustaining costs fell by 5% to R933686 per kilogram. The company said, "Cash operating costs per kilogram of gold sold decreased by 4% from the previous quarter to R856,723/kg due to an increase in gold sold, despite an increase in total cash operating costs driven mainly by two months of winter tariffs which Eskom charges between June and August each year." In a trading statement for the 6 months to 31st December 2024 the company estimated that HEPS would increase by between 60% and 70%. The company said, "Group revenue increased by R828.1 million, or 28%, to R3,802.3 million (2023: R2,974.2 million), as a result of a 26% increase in the Rand gold price received, and a marginal increase in gold sold from 2,535kg to 2,567kg." Technically, the share made a high of 2458c on 9th May 2023 and then began a downward trend. It broke up through its long-term downward trendline on 3rd July 2024 at 1673c indicating a new upward trend. It remains a volatile commodity share subject to the international gold price.
JSE:DRD
by PDSnetSA
Our opinion on the current state of ARCMITTAL(ACL)ArcelorMittal (ACL) is South Africa's largest steel-producing company. It has survived where companies like Highveld Steel have disappeared. Arguably, ArcelorMittal felt the impact of the sub-prime crisis more than any other South African company and has fallen from its high of R260 in June 2008 to as low as 25c in August 2020. Since then, it has rallied strongly and now trades at 1052c. It has had to deal with the collapse of the construction industry locally, which was a major consumer of steel, and the massive imports of cheap Chinese steel which were dumped onto our market. Those imports have slowed down somewhat, and ArcelorMittal was successful in getting certain tariffs in place to discourage imports. We believe that this company came close to closure in July 2020 when the share price reached 25c. It has been rescued by the rising steel price combined with severe cost-cutting. In its results for the year to 31st December 2024, the company reported revenue down 7% and a headline loss of R5,1bn compared with a loss of R1,89bn in the previous period. The company recorded an "Operational EBITDA loss - before the Longs Business wind-down charge, severance packages charge and the write-down of inventory – of R1 816 million (2023: R56 million profit), includes R670 million of losses relating to the Q2 2024 Blast Furnace instability and R1 514 million of inventory disposal losses in support of improved liquidity." These results brought the new upward trend to an abrupt halt, taking the shares back down to and through support at around 100c. On 6th January 2025, the company announced that it had taken the decision to wind down and close its Longs steel division, leading to a sharp drop in the share price.
JSE:ACL
by PDSnetSA
Our opinion on the current state of AMPLATS(AMS)Anglo American Platinum (AMS), or Amplats, is the second-largest platinum producer in the world (after Sibanye) and plays a key role in the platinum group metals (PGM) industry. The company is 77.62% owned by Anglo American and has been at the forefront of transitioning from deep-level mining to shallow, mechanized mining, which has significantly improved efficiency and reduced costs. Strategic Developments & Operations Over the past five years, Amplats has reduced its number of mines from 18 to 7, cut overheads by 50%, and halved its workforce. This restructuring has enhanced profitability, particularly through its Mogalakwena open-cast mine, a palladium-rich operation with some of the lowest costs in the industry worldwide. A new project at Mogalakwena is set to increase platinum production by 250,000 ounces and palladium production by 270,000 ounces. Amplats also acquired Glencore’s 40.2% stake in the Mototolo mine and the adjacent Der Brochen property for R1.5 billion, enabling a cost-effective expansion without additional surface infrastructure. However, platinum prices remain under pressure due to an effective recycling industry, which adds about 2 million ounces per year to the supply by recovering metal from old auto catalysts. Despite this, we believe Amplats remains the best of the PGM shares on the JSE, although it is highly volatile as a commodity stock. Key Risks & Challenges - As part of its Mogalakwena expansion, Amplats plans to relocate 1,000 families, which could lead to social unrest. - Loadshedding and falling PGM prices continue to be significant headwinds. - The company announced the retrenchment of 3,700 employees on 19th February 2023. - On 23rd July 2024, Business Day reported that Amplats was considering listing on the London Stock Exchange (LSE). Financial Performance In its results for the six months to 30th June 2024, Amplats reported: - Tonnes milled down 7% - Refined PGM production up 5% - Revenue down 19% - Headline earnings down 18% The company explained, "Realised PGM dollar basket price fell 24% to an average of US$1,442 per PGM ounce due to declining realised palladium and rhodium metal prices, which were 34% and 49% lower, respectively." In its third-quarter update for 30th September 2024, Amplats reported: - PGM production from own-managed mines down 9% - PGM sales volumes up 16% - Maintained 2024 production guidance at 3.3-3.7 million PGM ounces - Increased refined production guidance to 3.7-3.9 million ounces In a trading statement for the year to 31st December 2024, the company estimated HEPS would decline by 36%-46%, stating, "The decrease in earnings compared to 2023 is primarily due to a 13% decline in realised ZAR PGM prices. Most notably, palladium and rhodium realised US dollar prices decreased 24% and 30%, respectively." Technical & Investment View - The share price has been declining since March 2022, driven by loadshedding, weaker PGM prices, and industry challenges. - Recently, it has moved sideways, indicating some stabilization but no clear upward trend yet. - PGM prices remain under pressure, which could limit near-term upside. Conclusion: Amplats remains a high-quality, but highly volatile commodity share. It is largely dependent on PGM prices, making it speculative. While long-term fundamentals remain strong, the current market conditions and price pressures make it risky in the short term. Investors should wait for a clear break above the downward trendline before considering an entry.
A
by PDSnetSA