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Kumba Iron Ore Analysis 10/15/24DISCLOSURE: As of 10/15/24 I have no open positions in Kumba Iron Ore JSE: KIO Introduction: Kumba Iron Ore is a South African Iron Ore mining company. They operate 3 mines in South Africa, all of which are quality assets operating profitably at current Iron Ore prices. The second business segment is logistics, or the transport of minerals across South Africa and internationally. Fundamentals: Looking at the 3 mines and their average costs the company is profitable at any Iron Ore prices about $40/metric ton. Well below the current prices. The return on the company's assets is very high and debt is negligible. The mine's have a long runway of 20+ years before they are at risk of running dry. With a long runway, profitable mines, the company looks attractive on a fundamentals basis. Iron Ore spot price: Current Iron prices are around $100/metric ton. Iron being a commodity tied to the general economy could see a drop in an economic downturn. $50 Iron could be possible atleast in the short term with an upside of $200/metric ton in a good economic environment for Iron. tradingeconomics.com Valuations: Kumba Iron Ore is currently trading at a P/CF and a P/E of 3.67 and 5.69 respectively. By both metrics the company is very cheap relative to the fundamentals. With a dividend yield of 11% easily covered by the company's cash flows Kumba Iron Ore looks very attractive for a long term investor bullish on Iron Ore. If you enjoyed this report follow for more! PM for consulting, portfolio analysis, and research requests.
JSE:KIOLong
by sihen999
UPDATE Murray and Roberts - Th big restest in play before upsideSince the last update, M&R was heading up on a smooth trajectory. The bears probably thought it was going up too quickly and too soon. So there is a temporary pause in the uptrend with the inv cup and handle. We are likely to get an uptrend test to see if there are any sellers around that area. If ther price bounces from there or anywhere around the higher low, we could see it continue with the current target at R4.75
JSE:MURLong
by Timonrosso
Our opinion on the current state of CALGRO-M3(CGR)Calgro (CGR) is a developer of large-scale integrated properties, rental units, and memorial parks. Established in 1995, the company was listed on the JSE in November 2007. Calgro acquires suitable land, plans developments, and then sells or rents residential units or memorial park plots. The company recently secured additional funding of $25 million to finance new development projects. However, one of the challenges it faces is illegal land invasions, which have affected its operations. In its results for the six months to 31st August 2024, Calgro reported a 26.4% decrease in revenue and headline earnings per share (HEPS) of 101.4c, up from 78.88c in the previous period. The company explained, "A decrease in revenue for the period under review was primarily driven by reduced unit sales due to pressure on the already constrained consumer, and delayed transfers. The Group, however, banked over R200 million in cash during the first two weeks of September." Technically, the share has been in a strong upward trend since March 2023. Like many property companies, Calgro is still trading well below its net asset value (NAV), offering substantial value to investors. It was added to the Winning Shares List (WSL) on 15th August 2024 at 356c and has since risen to 660c, reflecting significant growth.
JSE:CGR
by PDSnetSA
Our opinion on the current state of MERAFE(MRF)This ferrochrome operation is controlled by Glencore and operates mines, furnaces, and smelters in Mpumalanga and Limpopo. The Glencore-Merafe joint venture has the capacity to produce up to 2.3 million tons of ferrochrome annually. Merafe receives 20.5% of the proceeds, with the balance going to Glencore. A significant issue for the operation is electricity supply, as smelters require vast amounts of power. The 15.6% increase in Eskom tariffs last year was a major burden, and the current year's increase of just under 10%, effective from 1st April 2022, poses additional challenges. The company is also concerned about Eskom's capacity to supply additional power for future expansions. As a result, the Lion 3 expansion has been suspended until the electricity issue can be resolved. All smelters, except for the Lydenburg smelter, are operational. Another challenge is the availability of trains from Transnet to transport its product. As a commodity share, Merafe faces the inherent risks associated with global demand for ferrochrome and stainless steel. The increase in demand for stainless steel driven by the economic boom in the U.S. has now slowed. In its results for the six months to 30th June 2024, Merafe reported revenue down 0.4% and headline earnings per share (HEPS) of 28.2c, compared to 42c in the previous period. Ferrochrome production was down 17%, though the company's net asset value (NAV) increased by 3%. In a production update for the nine months to 30th September 2024, the company reported attributable ferrochrome production up 2%. Technically, the share reached a high of 192c on 4th April 2022 and trended down until a rally in September 2022. It found brief support at 104c per share before trending upward, though the rally was short-lived. The share remains volatile, as is common for commodity-related stocks.
JSE:MRF
by PDSnetSA
Our opinion on the current state of NUMERAL(XII)Previously known as "Go Life International" (GLI), Numeral is a company listed in Mauritius with a secondary listing on the JSE's Alt-X market. Its focus is on "nutraceuticals," which are products associated with alternative medicine. These products claim to offer health benefits but are not pharmaceuticals. The company was formed to acquire and exploit nutraceutical-producing companies in South Africa and currently owns Go Life Health Products and Gotha Health Products. In its results for the six months to 31st August 2023, the company reported zero revenue and a headline loss per share of 0.0051c (US), compared with a loss of 0.0044c in the previous period. The company noted that its asset base had been completely eroded, necessitating a full write-off of all underlying investments totaling $34,851,774 in 2020. The recapitalization process was completed in the first quarter of 2023, and the board approved subscription agreements for the issue of 465,000,000 new shares, of which 132,500,000 were treasury shares recovered above. In its financials for the nine months to 30th November 2023, the company again reported zero revenue and a headline loss per share of 0.07c (US). The company made a loss of $80,777 in the nine months and has a negative net asset value (NAV). Furthermore, the company has a history of delaying the publication of its financials. Until Numeral can generate revenue, increase the free float, and improve the tradability of its shares, it is not considered a practical investment for private investors. On 6th November 2023, the company's board announced its proposal to change the company's name to "Numeral Limited" from "Go Life International." In a trading statement for the six months to 31st August 2024, the company estimated that headline earnings per share (HEPS) would increase by 292%.
JSE:XII
by PDSnetSA
Our opinion on the current state of SASFIN(SFN)Sasfin (SFN) is a banking group specializing in various types of finance for small businesses and high net-worth individuals. It was listed on the JSE in 1987. The company has been heavily investing in its digital platforms and acquisitions. The share was in a strong downward trend, and investors were advised to wait for a measurable turn in the price, such as an upside break through its long-term trendline, before investigating further. This break has not yet occurred, mainly due to the impact of COVID-19, though there are signs that the share is beginning to recover. On 16th October 2023, the company announced, "Sasfin has entered into binding heads of agreement to dispose of its capital equipment finance and commercial property finance businesses to African Bank Limited." This caused the share price to rise sharply. However, on 27th February 2024, Sasfin announced that it had received a civil summons from the South African Revenue Services (SARS) for a damages claim of R4.782 billion plus interest and penalties related to income tax, value added tax (VAT), and penalties allegedly owed by former foreign exchange clients of the bank. Sasfin has a market capitalization of just R484 million. In its results for the six months to 31st December 2023, Sasfin reported headline earnings per share (HEPS) down 62.39% and net asset value (NAV) up 4.09% to 5191c per share. The company attributed the decline to negative adjustments to the group's fair value loans and private equity portfolio, as well as an increase in credit impairments due to the challenging economic environment for businesses in South Africa. In a trading statement for the year to 30th June 2024, Sasfin estimated that it would make a headline loss of between 181.41c and 200.5c, compared to a profit of 366.18c in the previous year. The expected loss is due to increased expected credit losses, negative fair value adjustments, and high once-off costs, including a provision for administrative sanctions. The share is fairly thinly traded, with only about R85,000 worth of shares changing hands on average each day. On 15th July 2024, Sasfin announced its intention to delist from the JSE. Shareholders will be offered R30 per share, which represents a 66% premium to the 30-day volume-weighted average price (VWAP) as of 12th July 2024.
JSE:SFN
by PDSnetSA
Our opinion on the current state of QUANTUM(QFH)Quantum (QFH) operates in the chicken business, with four key divisions: animal feeds, eggs and layers, broilers, and an African division where it sells related products. The company was significantly impacted by the drought in Southern Africa, but as the drought conditions eased and the price of animal feeds decreased, Quantum benefited from higher egg prices and lower feed costs. The chicken industry is known to be challenging. It is labor-intensive, exposing companies to union action, and it involves substantial working capital tied up in stock and debtors. The industry is also susceptible to unexpected disease outbreaks, such as avian flu or Newcastle disease, and it has faced challenges from the dumping of cheap chicken into the South African market from Europe, Brazil, and America. Despite these challenges, with top-tier management, profitability can be achieved. However, due to the inherent risks, investors generally view the sector as high-risk, which is reflected in Quantum's low price-to-earnings (P:E) multiple and high dividend yield (DY). The unprotected strike at Kaalfontein Farm has restricted output and cost the company an estimated R10 million. Quantum also suffered an outbreak of highly pathogenic avian influenza (HPAI) at its Lemoenkloof Farm, in addition to dealing with loadshedding and labor unrest. In its results for the six months to 31st March 2024, the company reported revenue down 13% and headline earnings per share (HEPS) of 21.7c, compared with 2.9c in the previous period. Quantum said, "During the current reporting period the average price of yellow maize on the South African Futures Exchange (“SAFEX”) decreased by 16.6%; and the average landed price (Cape Town harbour) of soya meal decreased by 5.7%." In a trading statement for the year to 30th September 2024, Quantum estimated that HEPS, "...will be at least 87.4 cents higher than the loss per share of 17.4 cents reported for the financial year ended 30 September 2023." The future remains uncertain, and the chicken business is prone to volatility. Prospective investors should be prepared for fluctuations due to factors such as raw material costs and operational challenges in the current economic environment. On 7th March 2024, the company announced that Astral Foods had sold 9.77% of its stake in Quantum. This sale led to a 73% jump in Quantum's share price, as speculation arose about a potential takeover. However, on 13th March 2024, Quantum announced that it had received a letter from Country Bird Holdings (CBH) indicating that it had no intention of making a takeover bid.
JSE:QFH
by PDSnetSA
Our opinion on the current state of WESIZWE(WEZ)Wesizwe (WEZ) is a miner of platinum group metals (PGMs) through its development of the Bakubung Platinum Mine (BPM). The mine is being developed to access the Merensky and Upper Group 2 (UG2) resources, located near Rustenburg on the Western Limb of the Bushveld Complex. In addition to BPM, the company owns 17.1% of projects 1 and 3 of Maseve Investments. In its results for the six months to 30th June 2024, Wesizwe reported headline earnings per share (HEPS) of 7.36c per share, a significant improvement compared to a loss of 59.63c in the previous period. The company stated, "Administration expenditure increased by 749% to R35.05 million, from R4.13 million in the prior corresponding period. - Net foreign exchange gains of R170 million due to the strengthening of the Rand against the US Dollar (2023: R1.783 billion loss)." The share trades about R145,000 worth on average every day, making it viable for small private investors. However, Wesizwe is a marginal precious metals company, and its performance is heavily dependent on PGM prices, which makes it a risky investment. The share price has fallen from a high of 197c in October 2021 to around 53c following recent results. Given its volatility and risk profile, there are likely better options available in the PGM market for investors.
JSE:WEZ
by PDSnetSA
Our opinion on the current state of CORONAT(CML)Coronation (CML) is one of South Africa's largest asset managers and the only one listed on the JSE. Founded in 1993, the company grew successfully until 2015. At that point, the founding CEO resigned, and Adrian Pillay, a well-qualified individual, took over. However, the company has faced challenges since Pillay's appointment. Coronation was heavily invested in African Bank and Steinhoff, both of which experienced significant financial issues, leading to substantial losses. These missteps have caused the investment community to question Coronation's ability to maintain its past success in selecting strong investments on the JSE and beyond. As a result, the company has seen an outflow of institutional funds, which has negatively impacted confidence in its fund management. In the asset management industry, confidence is crucial, particularly from institutional fund managers who must trust the judgement of asset managers. A solid track record of managing funds is essential, but even the most qualified teams will make mistakes and lose money at times. On 8th February 2023, Coronation announced that it had lost a SARS appeal regarding additional taxes, which could potentially result in the suspension of its dividend. This news caused the share price to drop sharply. However, in its results for the six months to 31st March 2024, the company reported a 4.3% increase in revenue and headline earnings per share (HEPS) of 200.5c, compared with 6.2c in the previous period. Assets under management (AUM) also grew by 5% to R631bn. The company said, "Net outflows for the period were in line with our expectations at 4% of average AUM. This is largely due to the weak SA savings industry, to which Coronation is significantly exposed. It also reflects the experience of the broader industry, as active asset managers around the world experience persistent net outflows." Technically, Coronation's shares rose strongly from 2008 until reaching a peak of R115 per share on 30th December 2014. After that, and under new management, the shares fell to a low of 2541c at the outbreak of COVID-19. A long-term downward trendline was applied, and a clear upside break occurred on 21st June 2024 at 3599c. The share was added to the Winning Shares List (WSL) on 11th May 2024 at 3281c and has since risen to 3900c, with indications that it will rise further. On 21st June 2024, the Constitutional Court ruled in Coronation's favor, meaning the company is not liable for a R794m claim by SARS. The company indicated that the funds set aside for a potential adverse judgement could be returned to shareholders. Additionally, on 13th October 2024, Coronation announced its intention to increase black ownership from the current 31% to 51%, which would help it secure more business from government agencies like the Government Employees Pension Fund (GEPF).
JSE:CML
by PDSnetSA
Our opinion on the current state of ZEDER(ZED)Zeder (ZED) is PSG's listed, 43.7%-held investment holding company in agriculture. Zeder sold its 28.6% stake in Pioneer Foods (PFG) to PepsiCo for a sum-of-the-parts (SOTP) value of R10.7 billion, receiving about R6.41 billion. As a result, Zeder declared a special dividend of 230c. Zeder's largest investment now is its 98% stake in Capespan, which markets fruit both locally and overseas. This is followed by a 93% holding in Zaad, which specializes in seeds and seed production, and a 41% holding in Kaap Agri. In September 2019, Zeder's CEO acquired 40% of East Africa Seeds (EAS) for Zeder subsidiary Zaad, and that holding has since been increased to 97%. The company has warned of rising food prices due to increasing fertilizer and fuel prices following the February 2022 invasion of Ukraine. In its results for the six months to 31st August 2024, the company reported that its net asset value (NAV) had dropped by 17.9% to 215c per share, primarily due to the payment of ad-hoc special dividends of R0.40 per share. The company also made a headline loss of 4.1c, compared to a profit of 3.6c in the previous period. Zeder said, "After a sharp decline in the Agbiz Agribusinesses Confidence Index during Q2 2024, the index has subsequently recovered by 10 points to 48 points." Zeder carries the exposure of agricultural enterprises to drought and other adverse weather conditions, but it is a well-managed company. At 194c, the share looks fairly valued against its NAV of 215c. While volatile, the share has been rising since April 2024.
JSE:ZED
by PDSnetSA
Our opinion on the current state of BELL(BEL)Bell (BEL) is a manufacturer and distributor of heavy equipment and earth-moving machinery used in the mining, construction, agriculture, and waste management industries. It has been directly impacted by the slowdown in construction since 2008 and the collapse of the mining industry. Bell's articulated dump trucks (ADTs) are exported worldwide from South Africa and Germany. The company also holds dealerships for several global manufacturers, giving it a product range of over 120 products. Roughly 60% of its business comes from outside South Africa. Bell employs 3,200 people, of whom 88.6% are based in South Africa. The CEO of Bell, Gary Bell, has indicated to *Business Day* that the company would consider delisting, with 1A Bell making an offer to minority shareholders, though he did not disclose at what price. Some minority shareholders are now arguing that the board has a fiduciary duty to put the company up for sale to the highest bidder. On 18th February 2021, the company announced that a deal had been struck for 1A Bell to buy a further 31.4% of Bell, giving it a 70% stake at R10 per share—a 13% discount to the share price at that time. In its results for the six months to 30th June 2024, the company reported revenue up 6% and headline earnings per share (HEPS) down 6%. Bell stated, "Demand for ADTs in the USA remained surprisingly strong, and despite high inventory levels across the entire industry, which made for a significantly more competitive environment, we were successful in improving our market share position over the period in this strategic market. Certain southern hemisphere markets for our ADT product, including South Africa and Zambia, where demand is traditionally driven by mining, proved more resilient than the northern hemisphere market across Europe and the UK." In a trading statement for the year to 31st December 2024, the company estimated that HEPS would fall by at least 25%. Bell explained, "The expected decrease in earnings for the year ending 31 December 2024 is mainly due to these weaker conditions in most of the markets that the group is active in." The share trades over R3 million worth of shares on average each day, making it suitable for private investors. There was an on-balance-volume (OBV) buy signal on 7th September 2023 at 1752c per share. Since then, the share price has risen to 4200c. On 15th July 2024, the Bell family made a firm offer to buy out the 30% of Bell they did not own at R53 per share—an 82.3% premium to the 30-day volume-weighted average price (VWAP) of 3100c on 11th July 2024. However, the offer was not accepted at a general meeting of shareholders held on 12th September 2024, causing the share price to fall significantly.
JSE:BEL
by PDSnetSA
Our opinion on the current state of MONDIPLC(MNP)Mondi (MNP) is a massive international paper and packaging company that started in South Africa but now operates in 30 countries and employs 26,000 people at about 100 sites. The company covers the full spectrum of packaging and is extremely professionally managed. Mondi owns and runs forests, produces wood pulp, paper, and plastic films for a wide variety of packaging solutions. The company has been impacted by developments in the Ukraine crisis. In an update on 28th February 2022, Mondi stated, "Mondi has operations in Russia, representing around 12% of the Group's revenue by location of production, including a high-margin, cost-competitive, integrated pulp, packaging paper and uncoated fine paper mill located in Syktyvkar (Komi Republic)." Mondi decided to divest itself of all its Russian holdings, which had a net asset value (NAV) of 687 million euros as of 31st December 2021. On 1st July 2022, the company announced that it had completed the sale of its personal care business for 615 million euros. On 12th August 2022, Mondi announced that it had sold its Russian subsidiary for about R25 billion, which caused the share price to jump. In its results for the six months to 30th June 2024, the company reported revenue down 4% and earnings per share (EPS) down 30%. Mondi stated, "Our underlying EBITDA of €565 million in the first six months, although lower than the comparable period last year, reflected an encouraging performance, supported by improving market conditions resulting in stronger order books and higher sales volumes." In our view, Mondi is a blue-chip company, though it operates in a volatile sector due to the nature of the paper and packaging industry. Technically, the share was in a strong upward trend after March 2020, but the Ukraine situation in March 2022 derailed this trend. Since then, the share has been moving sideways, but there is now evidence of a new upward trend emerging. We expect this trend to continue as the global shift to online shopping increases demand for packaging materials. In March 2024, Mondi announced that it would acquire 54% of LSE-listed DS Smith Plc for GBP5.14 billion. On 9th October 2024, Mondi announced that it had acquired the packaging assets of Schumacher Packaging for 634 million euros.
JSE:MNP
by PDSnetSA
Our opinion on the current state of ALTRON-A(AEL)Allied Electronics Corp, or Altron (AEL), is an information and communications technology company that was founded by Bill Venter in 1965. Recently, the company has been re-focusing on its core business and has sold its 80% stake in Powertech and its 100% subsidiary, Altech UEC (a developer of set-top boxes). Powertech was also sold to a BEE consortium, and Altron is in the process of selling CBI Telecom Cables. Altron operates in six African countries, as well as the UK and Australia. The company said it had "...secured key wins in both the public and the private sector...", including the Gauteng Broadband Network phase 2 contract and FNB's data and analytics contract. Netstar won the eThekwini 3-year contract for vehicle tracking for 7,000 vehicles. Bytes, in the UK (which has now been unbundled and separately listed both in the UK and in an inward listing on the JSE), won a 5-year contract for Windows 10 from the NHS (UK). Altron aims to restructure its debt to reduce its interest bill and has resumed paying dividends. The company acquired Phoenix Software in the UK for R698 million. On 17th December 2020, the company announced the successful listing of its subsidiary Bytes Technology on the London Stock Exchange (LSE) at a price of GBP2.70. This unlocked considerable value into the hands of Altron shareholders but resulted in a "cliff" in the Altron share price chart. We believe that this share will continue to perform well going forward. In its results for the year to 29th February 2024, the company reported revenue up 8% and headline earnings per share (HEPS) up 36%. The company reduced debt by 44% to R313 million during the period. The company said, "Increased cash generation supported by a strong balance sheet allowed us to increase our final dividend per share by 74%." In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would rise by between 171% and 189%. The company said, "...positive momentum has continued into the 2025 financial year ("FY25"), leading to a stronger year-to-date performance in comparison to the Comparative Period, which was negatively impacted by provisions and impairments raised." Technically, the share was moving sideways between 750c and 1330c from December 2020 until November 2023. It has since entered a new upward trend and has been rising strongly. It was added to the Winning Shares List on 15th November 2023 at 949c and has since risen to 1799c.
JSE:AEL
by PDSnetSA
Our opinion on the current state of THARISA(THA)Tharisa (THA) is a mining company that mines and beneficiates platinum group metals (PGMs) and chrome. The company is listed in London and on the JSE. The Tharisa mine, located on the south-west limb of the Bushveld Igneous Complex (BIC), is an open pit operation with an estimated life of 17 years. The company owns a subsidiary, Arxo Metals, which beneficiates chrome to produce high-grade chrome concentrates. The company is planning to expand into the Great Dyke area of Zimbabwe. In our view, this is one of the best mining investments on the JSE, with a cost of production well below current metals prices and some good options for expansion. The company has been involved in the Vulcan Plant, which will improve chrome recovery to 82% from 65% at a cost of $54.2m. The target is to reach 200,000 ounces of PGMs (platinum group metals) and 2 million tons of chrome ore production using proprietary technology. The open pit operation is relatively low cost and does not have the problems associated with underground operations. The company is planning to build a 5MW furnace that will enable it to produce iron alloys rich in platinum group metals, which would sell for a far better price. On 5th October 2021, the company announced the cold commissioning of its Vulcan chrome beneficiation plant, which is expected to increase chrome recoveries by 20%. On 4th February 2022, the company announced that it had signed an agreement to implement a solar farm of more than 40 megawatts. On 27th March 2023, the company announced that it had raised $130m (about R2.3bn) in finance from ABSA and Soc Gen. In its results for the year to 30th September 2023, the company reported PGM production down 19.3% and revenue down 5.3%. Headline earnings per share (HEPS) fell 31.1%. The company said, "The decline in reef mined primarily emanates from access restrictions to the open pit due to limitations on mining activities in close proximity to the nearby community, adverse weather conditions experienced as well as the processing of suboptimal reef horizons which were supplemented by purchased ROM ore to maintain plant throughput." In a production update for the year to 30th September 2024, the company reported PGM production of 145,100 ounces compared with 144,700 ounces in the previous year. Chrome production was 1.7 million tons compared with 1.58 million tons in the previous year. This was the company's highest-ever chrome production. The company said, "In our efforts to reduce our carbon emissions and secure energy independence, we entered into a 15-year agreement with Etana Energy, who will be providing up to 44% of the Tharisa Mine's electricity demand via wheeled renewable energy." Technically, the share is well traded, with over R2.6m worth of shares changing hands on average each day. The share has been falling since July 2024 due to declining commodity prices. The share remains a risky commodity counter dependent on the international prices of the commodities which it produces.
JSE:THA
by PDSnetSA
UPDATE ACL Profit target reached at R2.22Since the price broke abbove the W Formation and the Price went above above 20 and 200 THe momentum and buying just took off at an alarming rate. So within ONE week, the price shot up to R2.21 which was even a surprise to me with the speed of the analysis. So what now? Now, it's in a dangerous area. The trend is so steep it can come down just as fast. If the buyers have conviction they will drive the price sideways first before the next buy up. But we'l have to give it some time before we decide.
JSE:ACLLong
by Timonrosso
Our opinion on the current state of INSIMBI(ISB)Insimbi (ISB) is a group that manufactures and supplies specialist products to the industrial sector. They source, buy, package, and process ferrous and non-ferrous alloys, refractory and foundry materials, plastic blow-moulding, and injection moulding. They recycle metal alloys and provide technical support to users of their products. In its results for the year to 29th February 2024, the company reported revenue down 2% and headline earnings per share (HEPS) down 54%. The company said, "Prices for most of our commodities declined during the year. The impact on Insimbi's export and local revenue was partially mitigated by the US$ base pricing of these commodities and an exchange rate that worked in our favour." In a trading statement for the six months to 31st August 2024, the company estimated that it would make a headline loss of between 1.1c and 1.3c compared with a profit of 15.46c in the previous period. Technically, the share was in an upward trend until June 2018 but then fell to a low of 50c on 18th December 2020. After that, it rose to a high of 139c in June 2023 before beginning a new downward trend. In our view, this company will benefit directly from any recovery of the South African economy, but it remains a risky commodity share. Its value traded is an average of about R34,000 per day, making it dangerous for private investors. So it is a thinly traded penny stock producing commodities, which is about as risky as you can get.
JSE:ISB
by PDSnetSA
Our opinion on the current state of AFRIMAT(AFT)Afrimat (AFT) is an open-pit mining company that supplies composites, construction materials, and other commodities to a range of industries in Southern Africa. Until the end of 2015, Afrimat was one of the best-performing shares on the JSE. The share broke up out of a 3-year sideways pattern, which included the COVID-19 crisis. It rose to a peak of R76 on 6th April 2022, but has been declining since then as the commodities cycle came to an end. The acquisition of the Demaneng iron mine in the Northern Cape has insulated Afrimat against the difficulties in the construction industry. The company is also looking to diversify into other base minerals like manganese, chrome, and coal. The CEO, Andries van Heerden, said that Afrimat was known for its success in acquisitions and was still evaluating potential acquisitions. On 26th May 2020, the company announced that it had submitted a non-binding expression of interest to Unicorn Capital Partners (in which it already owns 27%), which runs an anthracite mine. The offer is for 1 Afrimat share for 280 Unicorn shares. The company benefited from rising iron ore prices due to supply constraints in Brazil and rising demand from China. On 17th August 2020, the company announced that it had bought a mining exploration company (Coza Mining) involved in looking for iron and manganese in the Northern Cape for R300m. On 21st May 2021, the company announced the purchase of a manganese mine, Gravenhage, in the Kalahari Manganese Field, 50km from Hotazel for $45m plus R15m. On 10th December 2021, the company announced the acquisition of Glenover Phosphate for R550m. On 20th March 2022, the company announced that its listing had been moved from Basic Materials Construction and Materials to the General Mining sector, which better reflected its business. On 20th June 2023, the company announced that it had acquired 100% of construction materials company, Lafarge, for $6m, less any amounts categorised as leakage under the Share Purchase Agreement. In its results for the year to 29th February 2024, the company reported revenue up 23.9% and headline earnings per share (HEPS) up 24%. The company said, "Operating profit increased by 19.8% to total R1.2 billion (2023: R961.6 million), delivering an operating profit margin for the Group of 18.9%. The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the Group to counter impactful economic headwinds." In a pre-close briefing on the 6th of August 2024, the company said, "In the first quarter (March, April, May) ("Q1") the bulk commodity market was lacklustre. By the second quarter (June, July and the first week of August) ("Q2"), volume increases were evident, as domestic customers with furnaces started up again, and tender activity increased in road, rail and small infrastructure projects." In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would fall by between 75% and 85%. Like all commodity companies, Afrimat's shares have declined with the drop in commodity prices, but this company is well diversified and has very low debt levels, making it good value. On 10th April 2024, the company announced that it had received approval from the Competition Commission for its acquisition of 100% of Lafarge. On a P:E of 11.48, it seems reasonably priced to us. Technically, the share is in a volatile upward trend, which we believe will continue.
JSE:AFT
by PDSnetSA
Our opinion on the current state of DRAGLOBAL(DRA)DRA Global describes itself as a "...multi-disciplinary engineering, project management and operations management group predominantly focused on the mining and minerals resources sector." It is listed on both the Australian Stock Exchange (ASX) and the JSE. It has its headquarters in Perth, Australia, and operates through 20 offices in Asia-Pacific, North and South America, Europe, Middle East, and Africa, with more than 4,500 staff. The company has expertise in mining, minerals, metals processing, and related infrastructure. The company restructured its South African operation so that it now has a BBBEE ownership of 51%. In its results for the year to 31st December 2023, the company reported revenue down 1% and an after-tax profit of R19.7 million. The tangible net asset value (NAV) rose to 344c from 317c. The company had net cash of R127.7 million. Headline earnings per share (HEPS) was 42c, up from a loss of 2c in the previous year. The company said, "The Group delivered a strong FY23 statutory EBIT outcome of $47.9 million, up from $1.5 million in the previous reporting period." The company listed on the JSE on 9th July 2021 and has traded sporadically since then, with many days where there was no volume. The average value traded per day is about R40,000, which makes it barely practical for investment by private investors. On 9th October 2024, the company announced its intention to delist from both the ASX and the JSE once shareholder approvals had been obtained.
JSE:DRA
by PDSnetSA
Our opinion on the current state of BALWIN(BWN)Balwin Properties (BWN) is a developer of secure sectional title properties in South Africa. The company is now turning its attention to renting out some of the properties that it develops to improve its income. The company reports strong demand for its units and is also moving into supplying solar power and internet fibre. The share was listed 5 years ago at R10 per share but trades today for 270c. Obviously, the property development market is a function of consumers' disposable income and the state of the economy. The last three years have been very tough for consumers, and the economy has been in a full-blown recession. In our view, the move to rental is a good one as it will build up a passive income which can be used to meet fixed overheads and contribute to profits. Balwin owns 25% of Balwin Rental, which has the right to buy as many as 4,544 units developed by Balwin. This should help to stabilize the company's income. Eventually, it is expected that Balwin Rentals will be listed. On 4th October 2020, the company launched its Mooikloof Mega City construction project as a R44bn public/private partnership aimed at middle-income South Africans who earn between R3,500 and R22,000 a month (known as the "gap housing market"). This caused the share to rise by 13%. In its results for the year to 29th February 2024, the company reported revenue down 29% and headline earnings per share (HEPS) down 48%. The company's net asset value (NAV) increased 4% to 858.49c per share. The company said, "The annuity business portfolio experienced strong growth off a low base and increased its revenue to R132.5 million, contributing 5.6% (2023: 2.3%) to the total group revenue." The group ended the period with a loan-to-value (LTV) of 40.5%. In a voluntary update on 24th July 2024, the company stated its intention to increase its rental portfolio up to 7,300 units over the next 8 to 10 years. This is seen as complementing its build capacity of 2,000 to 3,000 units per annum. In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would fall by between 54% and 59%. The company said, "Activity in the residential property sector remained under significant pressure during the interim period owing predominantly to the prolonged high-interest rate environment." Technically, the share has been in a long-term downward trend, and we advise waiting for it to break up through its downward trendline before investigating further. That appears to be in the process of happening (27-9-24). We believe it will recover as the economy recovers. It is trading for 25% of its net asset value (NAV) - which looks really cheap.
JSE:BWN
by PDSnetSA