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Merafe really took a HUGE dunk! And more to come to 93 centsMErafe dropped 18% yesterday. Big unexpected move due to an array of events~ First we had Trump pulling funds from SA. Second with the major expropriation bill that is leading to Foreign direct investments to leave SA. Merafe Resources has announced that it may start suspending some of its ferrochrome furnaces in May 2025, leading to a substantial decrease in ferrochrome production in South Africa. This decision follows a business review launched by Merafe, in collaboration with Glencore Operations South Africa through their chrome Pooling and Sharing Venture, as they evaluate possible strategies to tackle ongoing market challenges. Either way, this is a BIG black swan for Merafe and it seems like there is more downside to come with the technicals. M Formation Price<20 and <200MA Target R0.93 RISKY BUSINESS!
JSE:MRFShort
by Timonrosso
Aspen showing upside to R204 despite Trump pulling funds from SAOk this isn't the best formation. We have the price above 20MA but still below 200MA. On the other hand, we have a solid bottom formed and a W Formation along with a Box Formation with it. So with the pull back and the retest, we could get a bounce up which will send the price to potentially R204.60 Even though Trump has pulled funding from South AFrica due to the Expropriation Bill being announced, this will pull funds from Healthcare, to developments and more... But it seems like the Fair value of Aspen is underpriced and the market is likely to turn up from here. SO I am bullish for now.
JSE:APNLong
by Timonrosso
Our opinion on the current state of CAPITEC(CPI)Capitec Bank (CPI) is now South Africa's largest bank by customer numbers, with 21.1 million clients. Originally launched by PSG, Capitec has been a major disrupter in the local banking industry, steadily gaining retail market share from traditional banks by offering a simplified, lower-cost solution—particularly targeting the previously unbanked population. The company continues to expand rapidly, adding approximately 90,000 funeral policies per month. Its annual average HEPS growth of 32.2% per annum since 2003 is an exceptional record, making it a standout performer on the JSE. In our view, Capitec is a "must-have" for any private investor's portfolio. PSG has unbundled its Capitec holding to unlock shareholder value. However, despite its large customer base, Capitec still holds less than 10% of South Africa’s retail deposit base, as most of its clients are in the lower LSM segments. On 19th January 2022, Capitec announced a BBBEE transaction, granting about R1 billion worth of shares to long-term employees who had been with the company since early 2019. While this share issuance caused temporary dilution and a decline in share price, it reflects Capitec’s commitment to transformation and employee retention. Recent Financial Performance In its results for the six months to 31st August 2024, Capitec reported: - Operating profit up 41% - Headline earnings per share (HEPS) up 36% - Return on equity (ROE) at 29% - Credit loss ratio at 7.6% - Value-added services revenue up 79% to R2 billion The company stated, "In August 2019, our ecosystem comprised mainly Personal Banking (Retail Bank). We had 12.6 million clients and offered the GlobalOne transacting and savings accounts, as well as unsecured term loans, credit cards, and credit facilities. Despite challenges such as COVID-19, the war in Ukraine, instability in the Middle East, and poor global and South African macroeconomic conditions, we have grown our active client base to 23.2 million and have built an enhanced ecosystem." Future Outlook In a trading statement for the year to 28th February 2025, Capitec estimates that HEPS will increase between 28% and 32%. The company attributes this to "the improvement in the credit impairment charge and credit loss ratios (CLRs) seen in the second half of the 2024 financial year, which has continued into the 2025 financial year." Technical Analysis The share has been rising steadily since June 2023. It is currently trading at a price-to-earnings (P/E) ratio of 27.93, which is well above the JSE Overall Index (14.51) and higher than other leading banks. Despite this premium valuation, Capitec remains an exceptional long-term investment due to its strong growth trajectory and market position. We believe Capitec should be accumulated on weakness. It was added to the Winning Shares List (WSL) on 4th November 2023 at 185,496c, and since then, it has risen by 60% in just 14 months. Given its robust financials, innovative banking model, and customer growth, Capitec remains one of the best long-term opportunities on the JSE.
JSE:CPI
by PDSnetSA
Our opinion on the current state of TRUWTHS(TRU)Truworths (TRU) is a clothing, footwear, and accessories retailer operating in Southern Africa and the UK. It is listed on both the JSE and the Namibian Stock Exchange. The company generates 70% of its South African sales on credit, making effective credit management a critical factor in its profitability. Truworths operates in a highly competitive retail environment, contending with local players such as Woolworths, Checkers, Pick 'n Pay, Foschini Group, Mr. Price, Ackermans, and Pep, while also facing increasing pressure from international brands like Cotton On. The industry is heavily reliant on consumer confidence and spending, making it highly sensitive to economic conditions. Additionally, Truworths must continuously adapt to the fast-changing fashion landscape to maintain its appeal to consumers. The company maintains a conservative approach, constantly refining its business model. It operates 767 stores in South Africa, 37 stores across the rest of Africa, and 132 stores in the UK, Germany, and Ireland. Truworths has also acquired Barrie Cline Ladieswear, a long-time supplier, and is launching a new low-cost value chain called "Primark" to compete with Mr. Price and Jet. It plans to roll out 15 to 20 new value stores in the coming months. On 9th November 2023, Truworths reported that retail sales for the first 17 weeks to 29th October 2023 were up 10.9%, while online sales grew by 41%, now accounting for 4.7% of total sales. The company also noted strong UK-based Office sales, which increased by 18.9% in GBP terms and 38.8% in Rand terms. For the six months to December 2023, Business Day reported an 8% increase in sales. However, in a trading statement for the 52 weeks to 30th June 2024, Truworths estimated HEPS would decline by 5% to 9%, while retail sales increased by 3.6%. The company attributed the decline in earnings to a reversal of previously recognized impairment losses on the Office trademarks, an indirect tax settlement in the prior period, and other once-off factors. In an update for the 18 weeks to 3rd November 2024, the company reported a 2.8% increase in sales, with credit sales making up 46% of total revenue. While business and consumer sentiment in South Africa had improved following the formation of a government of national unity earlier in 2024, Truworths noted that this optimism had not yet translated into meaningful improvements in disposable incomes. In a trading statement for the 26 weeks to 29th December 2024, the company estimated that HEPS would decline by 4% to 8%, while sales increased by 2.4%. Technically, the share price declined significantly during COVID-19. We previously advised waiting for a break above its downward trendline, which occurred on 4th September 2020 at a price of 3,195c. The stock then reached a high of 11,212c on 4th November 2024 before entering a new downward trend. Current advice: Truworths remains a solid retailer but is facing macroeconomic pressures, including constrained consumer spending. As the stock is now in a new downward trend, we recommend waiting for a clear break above the trendline before considering any new investment.
JSE:TRU
by PDSnetSA
Our opinion on the current state of GEMFIELDS(GML)The Gemfields Group (GML), previously known as the Palinghurst Group, is a mining company focused on gemstone production. The group has two major projects: 1. Kagem – The world's largest producer of emeralds, located in Zambia. 2. Montepuez – A major ruby mine in Mozambique. Additionally, the company was previously involved in Jupiter Mines, a South African manganese producer. However, in line with its strategic focus on gemstones, Gemfields disposed of 60% of its stake in Jupiter Mines when it listed on the Australian Stock Exchange (ASX) in April 2018. The company is led by Brian Gilbertson, a former CEO of BHP Billiton, who identified the semi-precious stones market as an underdeveloped industry with potential for professional management and consolidation. Gemfields has carved out a niche for itself in this specialized sector, where competition remains relatively limited. Like all commodity shares, however, it carries risks, with its success tied to the fluctuating prices of emeralds and rubies in international markets, as well as geopolitical and operational risks associated with mining in third-world countries. On 24th October 2022, Gemfields announced that operations at Montepuez had resumed after an insurgent attack on a mine 12km away on 20th October 2022. Security concerns remain a factor in the region. On 7th August 2023, the company announced plans to construct a new processing plant that would triple ruby output from the Montepuez mine. In its results for the six months to 30th June 2024, Gemfields reported revenue of $128 million, down from $153.6 million in the previous period. Headline earnings per share (HEPS) fell by 25%. The company commented, *"Gemfields is working through a complex year, balancing the availability of cash with the considerable investments we're making at the Kagem emerald mine in Zambia, the Montepuez ruby mine in Mozambique, and our development assets."* In an operational update for the full year ending 31st December 2024, Gemfields reported total revenue of $196 million and net debt of $80.5 million. The company stated, "Emerald exports are, since 1 January 2025, paused while Zambia's reintroduced 15% export duty remains in place. Kagem anticipates that the duty may be revoked and allow a commercial-quality emerald auction to go ahead in Q1 2025." A strategic update on 23rd December 2024 cited lower revenue from recent auctions due to: 1. Oversupply of Zambian emeralds by a competitor. 2. Lower production of premium rubies at Montepuez. 3. Weaker luxury and gemstone market conditions. This share tends to be volatile, largely due to fluctuations in the luxury goods market and the nature of the gemstones it sells. Technically, Gemfields' share price rose strongly from an island formation, entering a solid upward trend until July 2023 when the trendline was broken. At present, the share remains in a downward trend, and we recommend waiting for a break above the new downward trendline before considering entry. While the company has long-term potential, it remains subject to both market-driven and operational risks.
JSE:GML
by PDSnetSA
Our opinion on the current state of VODACOM(VOD)Vodacom (VOD) is South Africa's largest provider of airtime and data services for mobile phones. It operates as a subsidiary of the international telecom company Vodafone. Its main competitors include MTN, Cell-C, and Telkom. The mobile industry has faced continuous pressure from declining voice revenue, partially offset by a sharp increase in data usage. One disadvantage of investing in Vodacom is its foreign ownership. This was highlighted when its share price dropped 7% in two days due to concerns that Vodafone might be forced to sell its non-European subsidiaries. Vodacom has operations in Mozambique, Tanzania, the DRC, and Lesotho. The company is also looking to expand into Ethiopia, Africa’s fastest-growing economy, with a population of 105 million. On 2nd December 2019, the Competition Commission ruled that Vodacom and MTN must cut their interconnect fees by between 30% and 50%. Since interconnect fees represent a significant portion of Vodacom's revenue, this led to a 5% drop in its share price. To diversify its revenue streams, Vodacom is launching a "super-app" in partnership with Jack Ma’s Alipay to boost non-voice income. Additionally, the company has spent R4 billion to mitigate the impact of loadshedding. We believe that while Vodacom has strong fundamentals, it may take some time for the share to regain its former highs. In its results for the six months to 30th September 2024, Vodacom reported a 1% increase in revenue, but headline earnings per share (HEPS) declined by 19.4%. Financial services revenue grew by 7.8%, contributing 11.4% to group service revenue. The company had 206 million customers and provided financial services to 83 million. Vodacom stated, "While our bottom line was impacted by various one-offs, I am confident that we are poised for a stronger second half performance." In a trading update for the three months to 31st December 2024, Vodacom reported revenue up 1.6%, with service revenue rising by 11.6%. The company noted, "...the quarter was positively impacted by accelerated growth in South Africa's prepaid market, in addition to another stellar performance in Egypt and Tanzania, while network operators in Mozambique, including Vodacom, have been hampered by post-election tensions since October 2024." Technically, the share fell from its high of 16,214 cents on 1st April 2022. We previously advised waiting for a clear break above its downward trendline, which occurred on 25th July 2024 at 9,836 cents. Since then, it has climbed to 11,611 cents, although it dipped slightly after the latest results. At current levels, Vodacom appears relatively cheap, offering a dividend yield (DY) of around 3.93%. However, it operates in a dynamic environment where technology advancements and regulatory shifts present ongoing risks. While Vodacom remains a solid dividend payer and a stable telecom business, investors should be aware of potential regulatory and industry changes that could impact future performance.
JSE:VOD
by PDSnetSA
Our opinion on the current state of PEPKORH(PPH)Pepkor Holdings (PPH), previously known as Pep, is 71.01% owned by Steinhoff International. Following the collapse of the Steinhoff group due to admitted "accounting irregularities," the directors decided to revert to the name Pepkor Holdings to distance the company from negative publicity. The group operates well-known retail brands, including Ackermans, PEP Stores, Bradlows, and HiFi Corporation. Since the Steinhoff scandal in December 2017 and the impact of the COVID-19 pandemic, Pepkor's share price fell to as low as R10 per share in May 2020. However, the company staged a strong recovery over the next year, more than doubling in value. To strengthen its financial position, Pepkor raised R1.9 billion through an accelerated book-build, using the proceeds to reduce debt as a precautionary measure. On 3rd February 2022, Pepkor announced the acquisition of 87% of the Brazilian clothing retailer Avenida, expanding its international footprint. However, in April 2022, the company's Isipingo distribution center suffered significant flood damage in KwaZulu-Natal, leading to a temporary closure. The company confirmed that it had adequate insurance to cover the losses. In its results for the year to 30th September 2024, Pepkor reported revenue growth of 7.8%, with headline earnings per share (HEPS) increasing by 10.3% on a comparable basis. However, its net asset value (NAV) fell slightly by 1% to 1,588.5 cents per share. The company highlighted, "The Clothing and General Merchandise segment (CGM) increased revenue by 5.2% to R61.4 billion (7.0% on a 52-week basis), while the Furniture, Appliances and Electronics segment (FAE) increased revenue by 4.5% to R11.0 billion." In a trading update for the three months to 31st December 2024, Pepkor reported group revenue up 12.1%, with traditional retail sales increasing by 9.5%. The company stated, "Performance was driven by robust sales growth and market share gains in traditional retail, with significant growth sustained in fintech. Gross profit margin improved, mainly driven by the growth in the Fintech segment." Technically, the share has been in a strong upward trend since May 2023, and this momentum appears likely to continue. While Pepkor remains a high-quality investment, it is potentially vulnerable to declines in consumer spending. A significant development occurred on 23rd September 2024 when Pepkor was added to the JSE Top 40 index, replacing Amplats. This inclusion is expected to attract increased institutional interest, further strengthening its position in the market.
JSE:PPH
by PDSnetSA
Our opinion on the current state of MPACT(MPT)Mpact (MPT) is a leading producer of paper and plastics packaging in Southern Africa. The company specializes in recycling paper and cardboard, manufacturing corrugated cardboard containers for various industries, and producing polystyrene trays for the food industry. It operates 20 manufacturing facilities and employs over 5,000 people, with South African sales accounting for 86% of its revenue. Mpact's business is influenced by consumer spending, which has been under pressure due to COVID-19 and more recently affected by the Ukraine crisis. Additionally, weather patterns impact the demand for corrugated containers used in fruit and other agricultural products, particularly in the Cape region. The company has prioritized cash preservation in the current economic climate but has benefited from a shift to local suppliers during the pandemic. In its results for the six months to 30th June 2024, Mpact reported revenue slightly down at R6.17 billion, while headline earnings per share (HEPS) fell to 144.6 cents from 211.6 cents in the prior period. However, the company’s net asset value (NAV) increased by 9% to 3,411 cents per share. The company stated, "The uncertain socio-political environment leading up to the national elections, high levels of loadshedding that continued until the end of March, high inflation, and interest rates all contributed to weak consumer and business sentiment." Mpact’s share price declined from a high of R51 in April 2016 to as low as R8 in March 2020 but has since recovered to 2,902 cents. At this level, it is trading on an earnings multiple of 5.66, which appears cheap. While the share has been moving sideways since August 2022, there are indications that it may be entering a new upward trend. On 1st August 2024, Mpact announced the sale of its Versapak business for R267.7 million as part of its strategic portfolio adjustments. Additionally, on 3rd February 2024, the company announced that its shares would begin trading on the A2X exchange from 11th February 2024, providing investors with an alternative trading platform. Overall, Mpact remains a well-managed company with strong fundamentals. Its low valuation presents a potential opportunity for long-term investors, particularly if consumer spending improves and the company’s upward trend materializes. However, economic uncertainties, loadshedding, and inflationary pressures remain key risks to monitor.
JSE:MPT
by PDSnetSA
Our opinion on the current state of ARCMITTAL(ACL)ArcelorMittal (ACL) is South Africa's largest steel producer and has managed to survive in an industry where competitors like Highveld Steel have disappeared. The company was severely impacted by the sub-prime crisis, with its share price falling from a high of R260 in June 2008 to as low as 25 cents in August 2020. Since then, it has staged a strong recovery, reaching 1,052 cents before recent challenges reversed its upward momentum. The company has had to navigate multiple challenges, including the collapse of the local construction industry, once a major consumer of steel, and the influx of cheap Chinese steel being dumped onto the South African market. While imports have slowed, ArcelorMittal successfully secured tariffs to discourage further dumping. At its lowest point in July 2020, the company appeared close to closure, but it was rescued by a rising steel price and severe cost-cutting measures. In its results for the six months to 30th June 2024, the company reported a 3% decline in revenue and a headline loss of 100 cents per share, compared to a loss of 40 cents in the previous period. The company cited "difficult local and regional trading conditions, and the negative volume and direct cost impact of operational interruptions of the two blast furnaces at Vanderbijlpark" as major factors affecting financial performance. In an update on 3rd July 2024, ArcelorMittal reported that the Longs steel product operations ("Longs Business") had remained operationally stable in the first half of 2024. However, the Flats steel product operations ("Flats Business") in Vanderbijlpark had suffered from significant instability at its blast furnaces in April and May 2024. The company emphasized that "intensive cash management actions" had kept net borrowings within tolerable levels. In its third-quarter update for 2024, the company reported an EBITDA loss of R466 million, compared to a profit of R52 million in Q3 2023. This loss was primarily driven by the Longs Business. In a trading statement for the full year ending 31st December 2024, ArcelorMittal estimated a headline loss of between 450 cents and 466 cents per share, significantly worse than the previous period's loss of 170 cents. These results abruptly ended the company's new upward trend, sending the share price back down towards support at around 100 cents. On 6th January 2025, ArcelorMittal announced its decision to wind down and close its Longs steel division, leading to a sharp drop in the share price. This move signals further financial strain and restructuring efforts as the company attempts to stabilize its operations. While ArcelorMittal has previously recovered from extreme lows, the recent setbacks highlight its vulnerability to steel prices, operational challenges, and weak local demand. The stock remains highly volatile and should be approached with caution until clearer signs of stability and profitability emerge.
JSE:ACL
by PDSnetSA
Our opinion on the current state of HARMONY(HAR)Harmony (HAR) was historically considered South Africa’s most marginal gold mining operation until it successfully integrated Mponeng gold mine into its portfolio. The development of Mponeng and its processing plant is expected to cost around US$2.8 billion, and Harmony has yet to secure its share of the required capital, which amounts to approximately R20 billion. In 2021, the company acquired Mponeng for R4.2 billion. As the world’s deepest mine, Mponeng presents all the challenges associated with ultra-deep-level mining. Despite these difficulties, it has become a key asset in Harmony’s portfolio. The company is also investing in renewable energy, having built a 30MW solar park in the Free State, with further plans to expand green power capacity by an additional 80MW. On 6th October 2022, Harmony announced the acquisition of 100% of the Eva copper project in Australia for R4.1 billion. This move signals a strategic shift, potentially reducing the company’s reliance on precious metals over time. Eva is expected to commence production in three years, adding an estimated 260,000 ounces of gold and 1.7 billion pounds of copper to Harmony’s reserves. On 3rd April 2024, Harmony announced that it had signed a five-year wage agreement with all of its unions, providing labor stability. In its results for the year to 30th June 2024, Harmony reported an underground grade of 6.11 grams per ton, a 6% increase in gold production, and an 11% rise in the US dollar gold price received. Headline earnings per share (HEPS) surged to 1,852 cents, up from 800 cents in the previous period. The company stated, "By investing in our higher-grade gold mines, expanding our surface retreatment business, and growing our international gold and copper assets, we will continue to transform and de-risk Harmony as we go from strength to strength." In an operational update for the three months to 30th September 2024, Harmony reported gold production down by 1%, although Mponeng’s production increased by 28%. The recovered grade improved to 6.32 grams per ton, while costs rose by 14%. The gold price received increased 21% to $2,356 per ounce. Harmony also reported a "strong, flexible balance sheet with net cash position increasing to R6.3 billion (US$362 million) and liquidity of R15.7 billion (US$909 million) in cash and undrawn facilities." For the six months to 31st December 2024, Harmony estimated gold production of between 790,000 and 805,000 ounces, with higher recovered grades. The company stated, "All of our underground operations (except Target 1, which is still in a turnaround process after being recapitalized) generated meaningful positive operating free cash flows." Technically, while the share remains volatile, it is in a strong upward trend. It is highly sensitive to movements in the gold price and the rand/US dollar exchange rate. Harmony was added to the Winning Shares List (WSL) on 16th November 2023 at 9,920 cents. It is now trading at 22,067 cents, reflecting strong investor confidence and the company’s positive operational momentum.
JSE:HAR
by PDSnetSA
Our opinion on the current state of LEWIS(LEW)Lewis (LEW) is a retailer specializing in furniture and electrical appliances, operating through 840 stores under the Lewis (498 stores), Beares (150 stores), Best Home (170 stores), Bedzone (12 stores), and United Furniture Outlets (39 stores) brands. Of these, 138 stores are located in neighboring countries. The company conducts 59.9% of its business on credit, offering customers credit insurance and other financial products. It plans to expand the number of UFO stores from 39 to 70 in the coming years. At its current levels, Lewis is trading at a price-to-earnings (P/E) ratio of just 7.95, with a share price significantly below its net asset value (NAV). Remarkably, the company remains debt-free, a rarity among listed retailers in the post-COVID-19 period. Lewis is currently executing a share buy-back program, aiming to repurchase 10% of its issued share capital. So far, it has bought back 29.9 million shares at an average price of R34.20 per share. We have consistently noted that Lewis represents a bargain investment opportunity. It is poised to benefit directly from any increase in consumer spending. The company is tightly managed, operates a vast store footprint, and has grown both organically and through acquisitions. While its position as a furniture and white goods retailer makes it vulnerable to economic downturns, the current valuation makes it an attractive buy. Among South African retailers, Lewis stands out as one of the few performing well under challenging economic conditions. In its results for the six months to 30th September 2024, Lewis reported revenue growth of 13.6% and a 49.1% increase in headline earnings per share (HEPS). The company highlighted, "The strong credit sales growth trend continued, with credit sales increasing by 16.9% and cash sales declining by 6.7%. Credit sales accounted for 69.4% of total merchandise sales (H1 2024: 64.4%)." In a trading update for the nine months to 31st December 2024, the company reported total revenue up 13.6%, with credit sales increasing by 13.1% and cash sales rising by 14.4% in the final quarter. Black Friday sales were notably strong, reflecting robust consumer spending at the close of 2024. This share remains one of the best-managed businesses on the JSE. The company believes its valuation on the JSE is underestimated by 30%, which we consider a conservative estimate. Lewis was added to the Winning Shares List (WSL) on 1st December 2023 at a price of 4150c and is now trading 86.9% higher at 7756c. Technically, the share is in a strong upward trend and continues to present a compelling investment opportunity for private investors seeking well-managed, undervalued stocks with solid growth potential.
JSE:LEW
by PDSnetSA
Our opinion on the current state of AYOAYO is a black-owned technology company spun out of AEEI, which still holds a 49.4% stake in the business. The company has faced significant controversy, particularly surrounding a massive R4.3 billion investment by the Public Investment Corporation (PIC). This investment has been the subject of legal action, which was finally settled on 31st March 2023, with AYO agreeing to pay the PIC R619 million. The settlement has left many questioning the financial integrity of the deal, with allegations that PIC pensioners lost billions of rands. AYO shares listed at R43 but dropped dramatically, reaching a low of 105c. The share has since recovered slightly and is currently trading around 305c after its latest results. However, trading volumes remain extremely thin, with many days seeing no activity at all. The company employs approximately 1,400 people, and a significant portion of its income appears to come from interest on the remaining PIC funds. Concerns about AYO’s governance and financial reporting have persisted for years. Former financial director Siphiwe Nodwele testified before the Mpati Commission that the company is likely only worth R700 million. Former CFO Naahied Gamieldien also admitted to adjusting margins to artificially inflate profits, resulting in the company’s profit doubling. These admissions, along with other governance issues, have cast doubt on the company’s reported financials. In October 2019, the Financial Sector Conduct Authority (FSCA) raided the offices of Iqbal Survé, who is associated with AYO, as part of an ongoing investigation. In addition, FNB closed AYO's bank accounts due to reputational risks. While AYO announced on 30th April 2021 that it had put in place "alternative third-party solutions" to enable continued trading, these actions have not alleviated investor concerns. On 1st June 2021, British Telecom (BT) severed ties with Sekunjalo, citing "misrepresentation of facts" presented to Parliament’s Standing Committee on Finance. Further governance lapses were highlighted on 10th February 2022, when the JSE barred two AYO directors from serving as directors of listed companies for five years due to their failure to ensure accurate financial reporting. On 22nd December 2022, the JSE publicly censured AYO for engaging in related-party transactions without complying with listing requirements. In its results for the year to 31st August 2024, AYO reported revenue down by 17% and a headline loss per share of 71.81c, an improvement from the previous year’s loss of 176.46c per share. Despite these figures, trust in the company’s reporting remains low, and we cannot recommend the share to private investors. On 6th September 2023, the JSE publicly censured AYO director Khalid Abdulla for breaching listing requirements and failing to fulfill his fiduciary duties. He was fined R2 million, while AYO was fined R6.5 million. On 14th June 2024, AYO announced the appointment of Dr. N.A. Ramatlhodi as Chairperson. Most recently, on 24th January 2025, AYO disclosed that a shareholder with a 0.13% stake in the company had filed a court application for its liquidation. AYO is opposing this application, further adding to the company's challenges. Given its history of governance failures, legal controversies, and unreliable reporting, we strongly advise private investors to avoid this share. The ongoing uncertainties, legal battles, and reputational risks make it a highly speculative and potentially dangerous investment.
JSE:AYO
by PDSnetSA
Our opinion on the current state of REINET(RNI)Reinet (RNI) is an investment holding company whose primary asset was a 2.12% holding in British American Tobacco (BAT), valued at approximately $1.8 billion, which accounted for 31% of its net asset value (NAV). This figure has decreased significantly from 85% ten years ago, largely due to a decline in BAT's share price. This decline reflects increasing legal challenges for the tobacco industry, particularly in the US, where the FDA is considering changes to menthol cigarette regulations. Despite this, Reinet showed little urgency to divest from BAT as it continued to receive strong dividends from growth in developing markets, even as cigarette sales declined in developed countries. As BAT's value decreased, other assets in Reinet's portfolio became more prominent. The largest of these is its 46% stake in Pension Insurance Corporation (Penscorp), which now represents 36.8% of its portfolio. Additionally, the company owns a variety of private equity investments accounting for approximately 15% of its portfolio. Since March 2009, Reinet has achieved a compound growth rate of 8.8% per annum. In its results for the six months to 30th September 2024, Reinet reported a NAV of 3625 euro cents per share, up from 3089 euro cents a year earlier. The company emphasized that it has no direct exposure to Russia, Ukraine, or the Middle East through its underlying investments or banking relationships and has not faced significant direct impacts from interest rate fluctuations or inflation. The share is considered a rand-hedge investment. While it fell from a high of R343 in February 2020 to lows in January 2021, we recommended waiting for a break above its long-term downward trendline. That break occurred on 16th September 2019 at R270 per share, and the share is now trading at R480.31. It faced a setback after BAT announced a GBP25 million write-down of its US operations, which caused a 10% fall in BAT's share price. On 13th January 2025, Reinet announced the sale of its entire BAT holding, which accounted for 24% of its total portfolio, for GBP 1.221 billion. This marked a significant shift in the company's asset composition. Subsequently, on 22nd January 2025, Reinet announced that its NAV as of 31st December 2024 was 40.46 euros based on 171.3 million shares in issue. However, in a quarterly report on 24th January 2025, the company adjusted its NAV figure to 38.12 euros as of the same date. This share benefits from any weakness in the rand, and investors should carefully consider the currency's future prospects before making decisions. With the sale of its BAT holding, Reinet’s portfolio diversification and growth strategy will be a key area for investors to monitor going forward.
JSE:RNI
by PDSnetSA
Our opinion on the current state of TFGThe Foschini Group (TFG) is an international retailer with a portfolio of 28 fashion brands. The company operates 4,083 trading outlets in 32 countries worldwide, including divisions in London, Australia, and a substantial presence in South Africa. One of TFG’s standout achievements has been its ability to establish a successful business in Australia, where many other retailers, such as Woolworths, have struggled. In 2017, TFG acquired the Retail Apparel Group (RAG) in Australia for just over $300 million and has allowed the Australian management team significant autonomy, refraining from micromanaging the business from South Africa. Over the long term, TFG has consistently performed well in the challenging retail clothing sector in South Africa, where it faces stiff competition from both overseas brands and local retailers. It is regarded as the best of the retail clothing companies on the JSE and is well-diversified internationally, offering a valuable rand-hedge element. Although retail is typically sensitive to the business cycle, the TFG board has demonstrated an impressive ability to manage the company profitably, even in challenging environments where others have failed. In its results for the six months to 30th September 2024, TFG reported revenue down 1.4% and headline earnings per share down 5.6%. Despite this, online sales grew by 9.9%, contributing 10.7% to total turnover, with its Bash online platform in South Africa achieving impressive growth of 47.9%. The company stated, "...the improvement from the 3.5% decline reported in our 21-week guidance in September 2024 highlights the noticeable improvement in trading activity experienced in all territories since September 2024, and through to November 2024." In an update on the three months to 28th December 2024, TFG reported group sales up 8.4%, with online sales surging 47.2%. From June 2023, the share has been in a new upward trend, indicating growing investor confidence. On 27th October 2024, TFG announced the acquisition of the UK fashion and lifestyle retailer White Stuff for an undisclosed amount, further expanding its international footprint. TFG continues to be a well-managed and resilient company, capitalizing on both its strong international diversification and growing online presence. The company’s ability to adapt to market challenges and expand strategically positions it as a compelling investment. We believe TFG should be accumulated during periods of market weakness for long-term growth potential.
JSE:TFG
by PDSnetSA
Our opinion on the current state of SASOL(SOL)Sasol (SOL) is a large international chemicals and energy company with roots in the oil-from-coal technology developed during apartheid-era South Africa. Approximately 50% of the company’s profits are tied directly to the oil price. Sasol’s two main growth areas are its 50% stake in the ethane cracker plant in Louisiana, America, known as the Lake Charles Chemical Project (LCCP), and its development of gas resources in Mozambique. Sasol was awarded two new licenses in Mozambique to explore for gas in an onshore area of approximately 3,000 square kilometers, which could significantly expand its existing gas projects in the Rovuma province. One significant challenge for Sasol is its status as the largest producer of greenhouse gases in South Africa and on the JSE. Globally, it is listed among the 100 fossil-fuel companies responsible for more than 70% of greenhouse gas emissions. The company faces mounting international pressure to address its carbon emissions effectively. Sasol’s share price saw a dramatic recovery after the COVID-19 pandemic, but this upward trend was interrupted by the decline in commodity prices, particularly oil. On 7th April 2024, the company announced that the Minister of the Environment, Barbara Creecy, had upheld its appeal against a decision by the national air quality officer, safeguarding continued operations at its Secunda oil-from-coal plant, which faced potential closure due to environmental concerns. The company operates six coal mines, supplying 10 million tonnes of thermal coal feedstock annually to its operations in Secunda and Sasolburg, as well as to the export market. However, the massive Secunda plant, which accounts for 84% of Sasol’s scope 1 and 2 emissions, is under scrutiny. A study by Wits Business School, reported on 22nd October 2024, found that the plant could not be modified to meet emissions regulations and might have to close, with its fate now resting on government decisions. In its results for the year to 30th June 2024, Sasol reported a 66% decline in headline earnings per share (HEPS) and a 16% drop in net asset value (NAV). These results were heavily impacted by a R58.9 billion impairment of the Chemicals America Ethane value chain, a R5.3 billion impairment of Chemicals Africa, and a R7.8 billion impairment of Secunda. The company stated, "The business benefitted from a weaker R/US$ average exchange rate, and a favourable rand oil price, however constrained margins impacted negatively on our fuels and chemicals businesses. The financial results were further impacted by various operational challenges across the business." In a production and sales update for the six months to 31st December 2024, Sasol reported, "The civil unrest in Mozambique affected the Central Processing Facility (CPF), leading to reduced production rates in December 2024. On 4 January 2025, a fire occurred at the Natref refinery that caused damage to supporting piping and infrastructure around the Crude Distillation Unit. International Chemicals revenue improved compared to H1 FY24, though the overall business environment remains challenging." On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the Board with immediate effect. Sasol remains a highly volatile commodity share and is currently in a long-term downward trend. Investors are advised to wait for the share to break up through its downward trendline before considering further investigation. Its future will largely depend on commodity price recovery, operational stability, and regulatory developments related to its emissions and environmental impact.
JSE:SOL
by PDSnetSA
Our opinion on the current state of BHP(BHG)BHP is a global commodities company headquartered in Melbourne, Australia, with operations focused on minerals, oil, and gas. It employs approximately 62,000 people, primarily in the Americas and Australia. The company produces copper, iron, coal, oil, and gas, and holds significant stakes in some of the world's most prominent mining and resource projects. BHP owns 57.5% of the Escondida mine in Chile, one of the largest copper producers globally, which also produces gold and silver. In Peru, it has a 33.75% interest in Antamina, which produces copper and zinc. Additionally, it owns 100% of Pampa Norte, a copper cathode producer in Chile's Atacama Desert. In Brazil, it holds a 50% stake in Samarco, which produces iron ore, and a one-third interest in Cerrejon, an open-pit coal mine in Colombia. The company also has mineral rights in Saskatchewan, Canada, home to one of the world's largest undeveloped potash deposits. In Australia, it owns Olympic Dam, one of the world's largest copper, uranium, and gold ore bodies, as well as Western Australia Iron Ore (WAIO), a system of five mines connected by over 1,000 km of railway. BHP's Australian coal assets include Queensland Coal, comprising the Mitsubishi Alliance and Mitsui Coal, and the Mt. Arthur open-pit coal mine in New South Wales. Additionally, it owns Nickel West, a nickel operation with smelters, concentrators, and a refinery. In petroleum, BHP owns high-quality resources in the Gulf of Mexico, Australia, and Trinidad and Tobago. In its results for the six months to 31st December 2023, the company reported revenue up 6% and headline earnings per share (HEPS) down 48%. The tangible net asset value (NAV) per share was $8.68, compared to $8.91 in the prior period. The company stated, "At our Western Australia Iron Ore operations, we remain the lowest-cost major producer globally and in copper we set new production records at our operations in South Australia and Chile. In South Australia, our consolidated copper province has performed strongly and we are pursuing future growth options. In Canada, we’ve sanctioned Jansen Stage 2, which will almost double our planned potash production capacity. We’ve seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot." In a report for the three months to 30th September 2024, BHP reported strong production growth across all major commodities, with copper production up 4% due to higher grades and recoveries at Escondida, and WAIO production up 3%. On 25th April 2024, BHP announced a share offer for the entire issued share capital of Anglo American, contingent on Anglo unbundling Amplats and Kumba. This offer was rejected by Anglo, as were two subsequent improved offers, but negotiations continue. The offer could potentially spark a bidding war with Rio Tinto and Glencore. In an operations update for the six months to 31st December 2024, the company reported copper volumes up 10% and steelmaking coal up 14%. BHP stated, "We are well positioned to continue strong momentum into the second half with a number of assets now expected to deliver production in the upper half of their respective ranges, while maintaining tight cost control." BHP is a diversified international mining company that is directly impacted by commodity prices and any recovery in the global economy. The share experienced steady growth following the upward turn of the commodity cycle in January 2016 but saw a sharp decline during the coronavirus pandemic, forming a V-bottom in March 2020. It subsequently resumed its strong upward trend but has been pressured by falling commodity prices since the start of 2024. While it remains in a long-term upward trend, it is a volatile commodity share subject to market cycles.
JSE:BHG
by PDSnetSA
Our opinion on the current state of CLICKS(CLS)Clicks (CLS) describes itself as a retail-led healthcare group and operates several well-known brands, including Clicks, GNC, and The Body Shop. The Clicks chain has 782 stores, of which 585 include pharmacies, making it the largest pharmacy chain in Southern Africa. While more retail outlets are incorporating pharmacies, Clicks' main competitor remains the listed Dis-Chem. One historical drawback for the company was its involvement with the now-closed 59 Musica stores. On 10th May 2021, Clicks announced the acquisition of Pick n Pay's pharmacy business, which included 25 in-store pharmacies. These have since been rebranded as Clicks stores, further solidifying the company's dominance in the pharmacy retail sector. Technically, Clicks has been a standout performer on the JSE over the past two decades, with its share price rising by more than 2500% since its listing—a remarkable achievement compared to the JSE's average over the same period. Clicks is considered one of the best blue-chip shares on the JSE. It has demonstrated resilience through economic downturns and continues to perform well, proving itself to be more or less recession-proof. In its results for the year to 31st August 2024, the company reported a 9.2% increase in group turnover and a 14.2% rise in headline earnings per share (HEPS). The company highlighted, "The Clicks chain recorded market share gains across all core health and beauty product categories, with the Clicks ClubCard loyalty programme growing to 11.8 million active members." In an update for the 20 weeks to 12th January 2025, Clicks reported turnover growth of 8.1% and the granting of 27 new retail pharmacy licences. The company stated, "Sales in comparable stores increased by 5.9% (2024: 8.4%), with selling price inflation averaging 3.5% (2024: 7.5%) and volume growth of 2.4% (2024: 0.9%) for the period." Despite its high price-to-earnings ratio (P/E) of 30.02, Clicks remains a compelling medium-term investment. Its consistent performance and resilience make it a "must-have" for private investors. Often referred to as a "diagonal" share, its long-term price chart has a consistent upward trajectory, moving from the bottom left-hand corner to the top right-hand corner of the screen. Clicks should be considered a staple in any private investor's portfolio and is an excellent candidate for accumulation during periods of market weakness.
JSE:CLS
by PDSnetSA
Our opinion on the current state of THUNGELA(TGA)Thungela (TGA) represents Anglo American's former coal assets, which were unbundled and separately listed on the JSE and LSE to align with Anglo's policy of divesting from carbon-based fossil fuels. Anglo sold its final 8% stake in Thungela on 25th March 2022 for R1.67 billion. Thungela is a significant exporter of thermal coal in South Africa, employing over 7,500 people and exporting coal to Asia, India, Southeast Asia, and East and North African countries. The company owns 50% of Phola, which operates a coal processing plant, and holds a 23.22% interest in the Richards Bay Coal Terminal (RBCT). It has the capacity to produce over 90 million tons of coal annually and operates seven mines in South Africa, consisting of four open-cast and three underground operations. In its results for the six months to 30th June 2024, Thungela reported revenue up 17%, though headline earnings per share (HEPS) declined by 58%. The company noted, "Group capital expenditure of R1.5 billion, reflecting the disciplined execution of the life extension projects in South Africa - Profit of R1.2 billion, including R419 million from Australia, demonstrating the benefits from the Group's geographic diversification." In a pre-close statement for the year ending 31st December 2024, the financial director expressed confidence in exceeding the full-year export saleable production guidance in South Africa and Australia. The company stated, "The various Transnet Freight Rail (TFR) initiatives, supported by the coal industry, have allowed for the annualised run rate to 30 November 2024 to increase to approximately 52Mt, or 56Mt." Thungela's share began trading on the JSE on 7th June 2021, dropping from an initial price of 2600 cents to 2190 cents. Initially estimated to be worth a minimum of 4400 cents, the share climbed to a high of 37,752 cents on 16th September 2022. Since then, it has moved sideways and downward, influenced by lower coal prices and challenges with Transnet. As a single-commodity share, it is inherently volatile and heavily reliant on Transnet's ability to transport coal to ports. The company has committed to paying out at least 30% of its "adjusted operating free cash flow" in dividends. However, its performance is likely to remain subdued, drifting sideways unless coal prices experience a meaningful increase. On 21st January 2025, Thungela announced that its CEO, July Ndlovu, will retire in July 2025 and will be succeeded by Moses Madondo, who will assume the role on 1st August 2025. This leadership transition adds an element of uncertainty to the company's strategic direction as it continues to navigate the challenges of its operating environment.
JSE:TGA
by PDSnetSA
Our opinion on the current state of SOUTH32(S32)South32 (S32) was spun out of BHP Billiton in 2015, inheriting all of BHP's South African coal assets. It has since established itself as a diversified miner of base metals and minerals, including zinc, coal, aluminium, silver, lead, nickel, and manganese. The company operates in South Africa, South America, and Australia. In 2020, South32 separated its South African coal assets, particularly those supplying Eskom, into a separate entity, which was sold to Seriti on 1st June 2020. Concurrently, the company acquired the remaining 83% of Arizona Mining, which it did not already own. Arizona Mining holds extensive interests in zinc, manganese, and silver, described by South32's CEO, Graham Kerr, as "...one of the most exciting base metal projects in the world." This move reflects South32's broader strategy to distance itself from South Africa due to administrative and legislative uncertainties, a trend also observed with BHP and Anglo American. Kerr has stated that "...mining exploration is out of the question in South Africa until the new mining charter is finalised." Despite moving away from South African investments, South32 retains ownership of its South Deep mine for the time being. The company has also committed to a $1.4 billion share buy-back program. As part of its sustainability goals, South32 is transitioning its Hillside smelter to renewable energy sources, aiming to reduce reliance on Eskom over the next decade. In its results for the year to 30th June 2024, South32 reported a 3% decline in revenue and headline earnings per share (HEPS) of 6.5 cents (US), down from 22.6 cents in the previous year. The company stated, "Improved operating performance, disciplined cost management, and higher prices for our key commodities lifted our financial results to finish the year. As a result, we recorded FY24 Underlying EBITDA of US$1.8 billion and Underlying earnings of US$380 million." In a report for the three months to 30th September 2024, South32 announced the completion of the sale of Illawarra Metallurgical Coal, receiving upfront cash proceeds of US$964 million. The company expanded its capital management program by US$200 million and commenced an on-market share buy-back. It maintained FY25 production guidance for all operations, with aluminium production increasing by 5% as Hillside Aluminium tested its maximum technical capacity. In an update for the three months to 31st December 2024, South32 reported a 14% increase in quarterly alumina production and returned US$169 million to shareholders through dividends and share buy-backs. The company highlighted its strong balance sheet and platform for growth in minerals and metals critical to the global energy transition, stating, "Having successfully divested Illawarra Metallurgical Coal in the September 2024 quarter, we have a strong balance sheet and platform for growth in minerals and metals critical to the world's energy transition." Technically, the share experienced an upward trend following the COVID-19 pandemic but has been in decline since March 2022 due to falling commodity prices. South32 remains a volatile commodity share, influenced by global commodity price trends and its strategic positioning in the energy transition market.
JSE:S32
by PDSnetSA
Our opinion on the current state of M&R-HLD(MUR)Murray and Roberts (MUR) is a large South African construction company that has faced significant challenges over the years, including the sub-prime crisis and a slump in construction spending following the 2010 World Cup. These issues caused the share price to fall from a double-top formation around R100 per share to a low below R5 in May 2020. The company has since focused on consolidating and reducing costs. It has rebranded itself as a "multinational engineering and construction Group focused on the natural resources market sectors," with three primary business platforms: underground mining, oil & gas, and power & water. On 27th March 2023, the company announced the sale of its Australian operations (65% of Insig Technologies) for A$1, effectively disposing of A$7 million in liabilities. On 8th December 2023, it was reported that the company would reduce its debt from R2 billion in April 2023 to R350 million, aided by Cementation Canada Inc.'s renewed banking facility agreement with a Canadian bank, providing CAD40 million. In its results for the year to 30th June 2024, the company reported revenue of R13.5 billion, up from the previous year's R12.5 billion, but an attributable loss of R138 million. The net asset value fell to 350 cents per share, down from the previous year's 407 cents. The company noted, "Reduced diluted continuing headline loss per share 24 cents (FY2023: 71 cents loss) - Net cash, including advance payments and working capital improvements R0.4 billion (FY2023: R0.3 billion net debt)." In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by at least 20%, causing the share price to enter a new downward trend. Despite these struggles, the company announced on 15th July 2024 that it had secured a $200 million multi-year contract in Latin America, providing a potential lifeline for its operations. On 22nd November 2024, the company's board of directors announced that MUR met the Companies Act definition of being "financially distressed" and that the best course of action was to enter into business rescue. As a result, trading in the company's shares was suspended on the JSE. On 20th January 2025, the company reported that it had secured an additional R250 million in funding, which may provide some relief as it navigates its financial difficulties. However, MUR remains a high-risk investment with significant debt and operational challenges.
JSE:MUR
by PDSnetSA
Our opinion on the current state of MERAFE(MRF)This is a ferrochrome operation controlled by Glencore, which operates mines, furnaces, and smelters in Mpumalanga and Limpopo. The Glencore-Merafe joint venture can produce up to 2.3 million tons of ferrochrome per annum. Merafe gets 20.5% of the proceeds, and the balance goes to Glencore. The problem is electricity supply, because smelters require huge amounts of current. The 15.6% increase in Eskom tariffs last year was a major factor, and the current year's increase of just under 10% from 1st April 2022 is a further problem. The company is concerned about Eskom's ability to supply additional power for expansion. Their Lion 3 expansion has accordingly been suspended until this difficulty can be overcome. All smelters except Lydenburg are operating. The availability of trains from Transnet to move its product is another problem. Obviously, this is a commodity share and has risks, but the world's demand for stainless steel did increase with the economic boom in America, but that now appears to be coming to an end. In its results for the six months to 30th June 2024, the company reported revenue down 0.4% and headline earnings per share (HEPS) of 28.2c compared with earnings of 42c in the previous period. Ferrochrome production was down 17%, and the company's net asset value (NAV) increased 3%. In a production update for the nine months to 30th September 2024, the company reported attributable ferrochrome production up 2%. A production report for the year to 31st December 2024 showed ferrochrome production up 0.3% on the year and down to 70 kilotons in the quarter from the previous quarter's 75 kilotons. Technically, the share reached a high of 192c on 4th April 2022 and was trending down until a rally in September 2022. It has found some brief support at 104c per share and then trended up—but the rally was short-lived. It remains a volatile commodity share.
JSE:MRF
by PDSnetSA