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In our continued efforts to give our readers a broad number of views, opinions and information, we continue to provide PSG's daily market updates and add our own daily inputs in at the end.
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Short summary of PSG's market commentary for 30 October 2019
South Africa
Tuesday was a flat trading day for the local bourse as investors awaited the outcome of the US Federal Reserve’s (Fed) monetary policy decision as well as the local medium-term budget policy statement (MTBPS) to be delivered by Finance Minister Tito Mboweni later today. At the closing bell, the All Share had lost 0.08%.
United States
It was a mixed Tuesday for Wall Street as upbeat earnings reports from Pfizer and Merck boosted the market, but disappointing results from Alphabet capped gains.
Europe
Most European markets were hit on Tuesday by weak earnings reports, which weighed heavily on investor sentiment. It was the first drop in seven sessions. At 18h45 the STOXX 600 was down by 0.18%.
Hong Kong
Asian indices closed down on Tuesday due to profit taking and warnings that “Hong Kong could record negative growth for the full 2019 year”. At the close of trade, the Shanghai Composite Index was 0.87% in the red.
Japan
The Nikkei extended gains on Tuesday after US President Donald Trump said on Monday that he expected “to sign a significant part of the trade deal with China ahead of schedule,” boosting investor sentiment. The Nikkei closed up 0.47%.
Rand
The local currency fought hard on Tuesday after a special paper, released ahead of the MTBPS later today, touched on an Eskom bailout plan of R59 billion. At 18h45, a dollar traded at R14.59.
Precious metals
Gold prices fell to a one-week low as traders believe there's a 94% chance that the Fed will cut the US interest rate by 25 basis points later this week, boosting risk-on trade. At 18h45, gold traded at $1 488.80 per ounce.
Oil
The oil price steadied on Tuesday as investors were optimistic that the trade war between the US and China could ease up in the coming month. A barrel of Brent crude traded at $61.81 at 18h45.
Tuesday was a flat trading day for the local bourse as investors awaited the outcome of the US Federal Reserve’s (Fed) monetary policy decision as well as the local medium-term budget policy statement (MTBPS) to be delivered by Finance Minister Tito Mboweni later today. At the closing bell, the All Share had lost 0.08%.
United States
It was a mixed Tuesday for Wall Street as upbeat earnings reports from Pfizer and Merck boosted the market, but disappointing results from Alphabet capped gains.
Europe
Most European markets were hit on Tuesday by weak earnings reports, which weighed heavily on investor sentiment. It was the first drop in seven sessions. At 18h45 the STOXX 600 was down by 0.18%.
Hong Kong
Asian indices closed down on Tuesday due to profit taking and warnings that “Hong Kong could record negative growth for the full 2019 year”. At the close of trade, the Shanghai Composite Index was 0.87% in the red.
Japan
The Nikkei extended gains on Tuesday after US President Donald Trump said on Monday that he expected “to sign a significant part of the trade deal with China ahead of schedule,” boosting investor sentiment. The Nikkei closed up 0.47%.
Rand
The local currency fought hard on Tuesday after a special paper, released ahead of the MTBPS later today, touched on an Eskom bailout plan of R59 billion. At 18h45, a dollar traded at R14.59.
Precious metals
Gold prices fell to a one-week low as traders believe there's a 94% chance that the Fed will cut the US interest rate by 25 basis points later this week, boosting risk-on trade. At 18h45, gold traded at $1 488.80 per ounce.
Oil
The oil price steadied on Tuesday as investors were optimistic that the trade war between the US and China could ease up in the coming month. A barrel of Brent crude traded at $61.81 at 18h45.
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Our daily update
Earlier we covered the latest financial results of Famous Brands, the struggling fast food, take-away and restaurant operator. Below a few extracts from the article
Fish Away's meal, Fish Away's is one of Famous Brands' best known brands
- Revenue: R3.569 billion (down from R3.583 billion)
- Cost of sales: R1.809 billion (up from R1.667 billion)
- Profit for the period: R192.4 million (up from a loss of almost R600 million due to GBK write offs)
- Headline earnings per share: R1.59 (up from -R5.70 for the same period of the previous year)
- Cash generated from operations: R296.4 million
- Cash generated per share: R2.91
- Cash on balance sheet: R427.6 million
- Cash on balance sheet per share: R4.21 (or 5.4% of share price)
- Net asset value per share: R16.24 (so the group is trading at4.85 times its book value)
- Interim dividend: R0.90 a share
- Dividend yield: 2.28%
- PE ratio: 24.7(which is well above the overall market average PE ratio)
At this point in time, we would not recommend buying into the fast food/ casual dining market. South African consumers are struggling, the Food and Beverages sector has been spinning its wheels in South Africa for a while now, and FBR with their issues in the UK will be focused on trying to get that fixed, which according to us will leave management with less time to focus on South Africa and expanding their business and footprint here, in a market that is already struggling. They not the biggest dividend payer, they trading on a very high PE ratio, but on the positive side they have extremely strong cash generation. But overall we recommend staying away from FBR at this point in time.
But if you really want a benchmark or target price for Famous Brands (FBR), taking all their financials, their brands, their markets and their current issues and obstacles into account, our valuation model places a value of R71.20 per share on FBR (up slightly from our last full year financial results valuation of Famous Brands). Based on Famous Brands' current price feel that they are overvalued and would not recommend investing in them or any other company active in the sector right now.
Read the full Famous Brands financial overview and valuation here.
Our JSE All Share index daily performance calendar
Visit our JSE Calendar tracker page for a expanded version of the calendar below
The graphic below provides the daily returns of the JSE All Share Index (J203) on a calendar chart. Provides a great overview of the All share index over the course of the month. It will be updated daily with our daily investment update as received from PSG.
So for the month September 2019 the JSE All Share Index ended the month down -2.01%. Midway through the trading month of October 2019 and the JSE All Share Index is up by 2.31%. With only a few days to go it looks like October will be a positive month for the JSE All Share Index. the calendar above shows that during October 2019 there were more negative than positive trading days, but the magnitude of the positive trading days outweighed that of the negative trading days.
For more on daily market movements see our 2019 Calendar tracker.
But we as South African investors are losing out in Dollar terms. Largely due to continued Rand weakness not only over the short term but over the last couple of years. We continue to advise investors to take money out of South Africa and invest it offshore. Looking for ideas for investments to make? Go read this article
For more on daily market movements see our 2019 Calendar tracker.
But we as South African investors are losing out in Dollar terms. Largely due to continued Rand weakness not only over the short term but over the last couple of years. We continue to advise investors to take money out of South Africa and invest it offshore. Looking for ideas for investments to make? Go read this article