JSE Calendar Performance Tracker 2019
Category: Johannesburg Stock Exchange and Financial Markets
Last Updated: 7 January 2020
Last Updated: 7 January 2020
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The aim om the JSE Calender Tracker is to provide readers with a snapshot of the JSE movements for a particular month or year. We will also aim to provide details of significant events moving the markets during particular days, weeks or months.
For a a daily update of the monthly JSE All share performance tracker, and general market overview see our Daily Investment Update pages. |
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JSE Calendar Tracker 2020
We will update this graphic continuously to track the movements of the JSE All share index in a calendar chart. And where significant market events take place they will be highlighted below the JSE All Share calendar chart.
First half of 2019
Second half of 2019
27 November 2019: The extract below takes a look at the latest business cycle indicators for South Africa
1 November 2019 : Earlier today we covered the latest weekly market wrap from Peregrine Treasury Services. Below an extract of that article
South African economy looking weaker
Closer to home, the MTBPS and pending Moody’s credit rating announcement veiled the country in a slight tone of gloom this week. To add a “cherry on the top” of the morbid economic climate, the South African unemployment rate hit its worst level in 11 years at 29.1% during Q3. Youth unemployment now sits at a devastatingly high 58.2%. With 16.4 million SA residents now unemployed, where did the South African economy shed the jobs? Mainly within the construction, manufacturing, trade and utilities sectors.
The SA producer price index numbers (PPI), for September, came in lower than expected at 4.1% vs 4.3% year-on-year.
The MTBPS seemed to rattle South Africa on a more foundational level than originally expected. One of the key influencers seeing the rand lose around 3.66% against the USD was the downward revision of SA’s growth rate to 0.5% for the 2019 fiscal year, from an initial 1.5% in February 2019.
A general focus was placed on tax compliance by citizens with the following key topics being discussed in the speech:
More volatility on the horizon
The week ahead is certain to be an exciting one, particularly if Moody’s decides to share its thoughts about the SA economy over the weekend. Monday may potentially bring turbulence for traders and longer-term investors alike. When casting one’s eyes further offshore, focus can still be placed on the US-China trade war, Brexit and US earnings. For the moment, however, the health of the South African landscape will more than likely dictate the direction of the JSE next week.
Read the full weekly market wrap here
- The composite leading business cycle indicator decreased by 0.6% on a month-to-month basis in September 2019. Decreases in four of the nine available component time series outweighed increases in the remaining five. The largest negative contributions to the movement in the composite leading business cycle indicator in September came from a decrease in the number of residential building plans approved and a deceleration in the twelve-month percentage change in job advertisement space. The largest positive contributions came from an increase in the volume of orders in manufacturing and the US dollar-based South African export commodity price index.
- The composite coincident business cycle indicator decreased by 0.7% on a month-to-month basis in August 2019
- The composite lagging business cycle indicator remained unchanged in August 2019.
1 November 2019 : Earlier today we covered the latest weekly market wrap from Peregrine Treasury Services. Below an extract of that article
South African economy looking weaker
Closer to home, the MTBPS and pending Moody’s credit rating announcement veiled the country in a slight tone of gloom this week. To add a “cherry on the top” of the morbid economic climate, the South African unemployment rate hit its worst level in 11 years at 29.1% during Q3. Youth unemployment now sits at a devastatingly high 58.2%. With 16.4 million SA residents now unemployed, where did the South African economy shed the jobs? Mainly within the construction, manufacturing, trade and utilities sectors.
The SA producer price index numbers (PPI), for September, came in lower than expected at 4.1% vs 4.3% year-on-year.
The MTBPS seemed to rattle South Africa on a more foundational level than originally expected. One of the key influencers seeing the rand lose around 3.66% against the USD was the downward revision of SA’s growth rate to 0.5% for the 2019 fiscal year, from an initial 1.5% in February 2019.
A general focus was placed on tax compliance by citizens with the following key topics being discussed in the speech:
- The budget shortfall is R52.5 billion, lower than anticipated
- SA’s economic growth is slowing and unemployment is rising
- Almost half of the country’s three-year spend (R6.3 trillion) will be allocated to education, social grants and healthcare
- The budget deficit is rising and both debt and debt-service costs are increasing
- Government will cut costs within the ranks of parliament
- National Treasury agreed to further assist embattled state-owned enterprise, Eskom
- e-tolls are to remain in place and payment will be enforced
More volatility on the horizon
The week ahead is certain to be an exciting one, particularly if Moody’s decides to share its thoughts about the SA economy over the weekend. Monday may potentially bring turbulence for traders and longer-term investors alike. When casting one’s eyes further offshore, focus can still be placed on the US-China trade war, Brexit and US earnings. For the moment, however, the health of the South African landscape will more than likely dictate the direction of the JSE next week.
Read the full weekly market wrap here
30 October 2019: Earlier today we covered the latest financial results form Famous Brands. Below a short extract from the article
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.
24 October 2019: Yesterday we covered the latest inflation rate of South Africa for September 2019. The summary below shows South Africa's inflation rate per province and nationally.
The summary below shows the inflation rates per province in South Africa for September 2019. And surprise surprise the inflation rate of Limpopo is the highest of any province. The first time in 30 months its not been the Western Cape
So for the last 30 months, the Western Cape has had the highest inflation rate of any of South Africa's provinces, and this month its the first time in 31 months that another province recorded an inflation rate higher than that of the Western Cape. Western Cape's persistently higher inflation rate has been attributed to the growth rate in their property rent. See more regarding this in our Cape Town Property Bubble article.
Other noteworthy inflation numbers for South Africa in September 2019
The extremely low rates of inflation for durable and semi-durable goods (all goods expected to last between a year and 5 years such as appliances, and clothing and footwear etc) shows that retailers are struggling to sell these type of goods thus very little price increases are levied on such goods else retailers wont be able to move the stock as consumers wont buy it. It is a manifestation of the weak economic conditions and struggling consumer demand in South Africa. So the question is what excuse will the South African Reserve Bank (SARB) monetary policy committee (MPC) come up with now not to cut interest rates at their next MPC meeting?
Read more about South Africa's inflation rate here
8 October 2019: At the time of the release of the group’s interim results on 17 April 2019, shareholders were advised via SENS that diluted headline earnings per share (HEPS) for the year ending 31 August 2019 (“the period”) was forecast to increase by between 10% and 15% over the 2018 financial year.
Following a stronger retail performance by Clicks in the second half, UPD benefiting from gaining new distribution contracts and further improvements in working capital management across the business, the group is revising its earnings forecast range upwards. The directors now expect that diluted HEPS for the period will increase by between 15% and 18% over the 2018 financial year, to between 661.6 and 678.9 cents. Shareholders should note that diluted HEPS for the 2018 financial year was restated to 575.3 cents following the adoption of IFRS 9 and IFRS 15.
Clicks Group’s annual results for the year ended 31 August 2019 will be released on SENS on Thursday, 24 October 2019.
Read the full article here
19 September 2019: The summary below shows the inflation rates per province in South Africa for August 2019. And surprise surprise the inflation rate of the Western Cape was the highest once again. For the30th month in a row
So for the last 30 months, the Western Cape has had the highest inflation rate of any of South Africa's provinces. And it is attributed to the growth rate in their property rent. See more regarding this in our Cape Town Property Bubble article.
The extremely low rates of inflation for durable and semi-durable goods (all goods expected to last between a year and 5 years such as appliances, and clothing and footwear etc) shows that retailers are struggling to sell these type of goods thus very little price increases are levied on such goods else retailers wont be able to move the stock as consumers wont buy it. It is a manifestation of the weak economic conditions and struggling consumer demand in South Africa. With the SARB monetary policy committee meeting today and tomorrow to decide on South Africa's interest rates one wonders if another interest rate cut is coming considering the inflation rate is still well within the 3% and 6% target.
17 September 2019: Our sister site covered the latest earnings report of La-Z-Boy the maker of the famous recliner seats.
About
La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The La-Z-Boy Upholstery segment companies are England and La-Z-Boy. The Casegoods segment consists of three brands: American Drew®, Hammary®, and Kinca id®. The company-owned Retail segment includes 155 of the 352 La-Z-Boy Furniture Galleries® stores. Joybird is an e-commerce retailer and manufacturer of upholstered furniture.
The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 352 stand-alone La-Z-Boy Furniture Galleries® stores and 554 independent Comfort Studio® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units
Valuation
So based on the earnings report of La-Z-Boy (NYSE: LZB) and their fiscal outlook provided for 2020 what do we value LZB stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for La-Z-Boy (LZB) at $26.30 a stock. We therefore feel that the stock is overvalued Long term fundamental or value investors should not be buying into LZB at its current price, but rather look to buy into the stock at 10% below our target (full value) price. So we suggest looking to buy at levels around $23.70 or below
Read the full article here
13 September: Yesterday we covered the latest financial results released by Spur Corporation, the owner of food franchise brands such as RocoMama's, Spur Steak Ranches, John Dory's etc. Below an extract from the financial review of Spur Corporation
Currently Rocomamas revenue is about 14.6% that of the group's biggest brand Spur Steak Ranches. So Rocomams is now a bigger contributor to Spur's revenues than John Dory's who only contributes 9.2% of the revenues that Spur Steak Ranches brings in. Rocomamas might soon bring in more revenues than Panarotti's and Casa Bela's combined
Read the full article here
11 September 2019: We covered the latest financial results of AVI the consumer brands group that includes brands such as SaltiCrax and Five Roses Tea
Based on the latest financial results from AVI, our valuation model gives a full value price for AVI shares at R77.20. We therefore believe that AVI stock is overvalued at its current price and we would not recommend long term fundamental or value investors buy into the share at its current price. But rather buy into it at at least 10% below our target price. So a good entry point into AVI would be below
Read the full article here
5 September 2019: So ever wondered what McDonalds shares are worth? Well our sister website covered Mcdonalds 2nd quarter earnings report for 2019 and valued the stock at $198 a share. A short extract of that article follows.
So based on Mcdonald's latest earnings report, what is our target price for Mcdonalds? And the question is given its strong stock price run in recent months and years is there still value in the company's stock price? We value the group's stock at $198 a share. We therefore believe from a fundamental investing and value perspective the stock price of Mcdonald's is overvalued and we would not recommend buying into the stock at its current price, but rather at levels about 10% below our target price. So we would suggest looking to buy Mcdonalds at close to $180 a share
Read the full article here
- 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.
24 October 2019: Yesterday we covered the latest inflation rate of South Africa for September 2019. The summary below shows South Africa's inflation rate per province and nationally.
The summary below shows the inflation rates per province in South Africa for September 2019. And surprise surprise the inflation rate of Limpopo is the highest of any province. The first time in 30 months its not been the Western Cape
- Limpopo: 4.8%
- Western Cape: 4.6%
- Northern Cape: 4.1%
- South Africa: 4.1%
- Free State: 4.0%
- Gauteng: 4.0%
- KwaZulu-Natal: 4.0%
- Mpumalanga: 3.7%
- Eastern Cape: 3.7%
- North West: 3.6%
So for the last 30 months, the Western Cape has had the highest inflation rate of any of South Africa's provinces, and this month its the first time in 31 months that another province recorded an inflation rate higher than that of the Western Cape. Western Cape's persistently higher inflation rate has been attributed to the growth rate in their property rent. See more regarding this in our Cape Town Property Bubble article.
Other noteworthy inflation numbers for South Africa in September 2019
- Pensioners inflation: 4.2%
- Inflation for services: 4.2%
- Inflation for all goods: 4.0%
- Inflation for durable goods: 2.4%
- Inflation for semi-durable goods: 2.1%
- Inflation for non durable goods: 4.5%
The extremely low rates of inflation for durable and semi-durable goods (all goods expected to last between a year and 5 years such as appliances, and clothing and footwear etc) shows that retailers are struggling to sell these type of goods thus very little price increases are levied on such goods else retailers wont be able to move the stock as consumers wont buy it. It is a manifestation of the weak economic conditions and struggling consumer demand in South Africa. So the question is what excuse will the South African Reserve Bank (SARB) monetary policy committee (MPC) come up with now not to cut interest rates at their next MPC meeting?
Read more about South Africa's inflation rate here
8 October 2019: At the time of the release of the group’s interim results on 17 April 2019, shareholders were advised via SENS that diluted headline earnings per share (HEPS) for the year ending 31 August 2019 (“the period”) was forecast to increase by between 10% and 15% over the 2018 financial year.
Following a stronger retail performance by Clicks in the second half, UPD benefiting from gaining new distribution contracts and further improvements in working capital management across the business, the group is revising its earnings forecast range upwards. The directors now expect that diluted HEPS for the period will increase by between 15% and 18% over the 2018 financial year, to between 661.6 and 678.9 cents. Shareholders should note that diluted HEPS for the 2018 financial year was restated to 575.3 cents following the adoption of IFRS 9 and IFRS 15.
Clicks Group’s annual results for the year ended 31 August 2019 will be released on SENS on Thursday, 24 October 2019.
Read the full article here
19 September 2019: The summary below shows the inflation rates per province in South Africa for August 2019. And surprise surprise the inflation rate of the Western Cape was the highest once again. For the30th month in a row
- Western Cape: 4.9%
- Limpopo: 4.7%
- Northern Cape: 4.6%
- Mpumalanga: 4.4%
- South Africa: 4.3%
- Free State: 4.2%
- Gauteng: 4.1%
- KwaZulu-Natal: 4.1%
- Eastern Cape: 4.0%
- North West: 3.8%
So for the last 30 months, the Western Cape has had the highest inflation rate of any of South Africa's provinces. And it is attributed to the growth rate in their property rent. See more regarding this in our Cape Town Property Bubble article.
- Pensioners inflation: 4.4%
- Inflation for services: 4.7%
- Inflation for all goods: 3.9%
- Inflation for durable goods: 2.6%
- Inflation for semi-durable goods: 2.0%
- Inflation for non durable goods: 4.5%
The extremely low rates of inflation for durable and semi-durable goods (all goods expected to last between a year and 5 years such as appliances, and clothing and footwear etc) shows that retailers are struggling to sell these type of goods thus very little price increases are levied on such goods else retailers wont be able to move the stock as consumers wont buy it. It is a manifestation of the weak economic conditions and struggling consumer demand in South Africa. With the SARB monetary policy committee meeting today and tomorrow to decide on South Africa's interest rates one wonders if another interest rate cut is coming considering the inflation rate is still well within the 3% and 6% target.
17 September 2019: Our sister site covered the latest earnings report of La-Z-Boy the maker of the famous recliner seats.
About
La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The La-Z-Boy Upholstery segment companies are England and La-Z-Boy. The Casegoods segment consists of three brands: American Drew®, Hammary®, and Kinca id®. The company-owned Retail segment includes 155 of the 352 La-Z-Boy Furniture Galleries® stores. Joybird is an e-commerce retailer and manufacturer of upholstered furniture.
The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 352 stand-alone La-Z-Boy Furniture Galleries® stores and 554 independent Comfort Studio® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units
Valuation
So based on the earnings report of La-Z-Boy (NYSE: LZB) and their fiscal outlook provided for 2020 what do we value LZB stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for La-Z-Boy (LZB) at $26.30 a stock. We therefore feel that the stock is overvalued Long term fundamental or value investors should not be buying into LZB at its current price, but rather look to buy into the stock at 10% below our target (full value) price. So we suggest looking to buy at levels around $23.70 or below
Read the full article here
13 September: Yesterday we covered the latest financial results released by Spur Corporation, the owner of food franchise brands such as RocoMama's, Spur Steak Ranches, John Dory's etc. Below an extract from the financial review of Spur Corporation
- Revenue: R944.779 million (up 5.9% from R891.797 million for the same period of the previous year)
- Profit for the period: R173. 105 million (up 6.6% from R162.459 million for the same period of the previous year)
- Diluted earnings per share: R1.73 (up from R1.61 for the same period of the previous year)
- PE ratio: 12.89
- Dividend declared: R0.73
- Dividend yield: 3.27%
- Cash and equivalents: R283.979 million
- Cash and equivalents per share: R2.61
- Cash and equivalents makes up 11.7% of Spur's market capital
- Cash and equivalents makes up 27.3% of Spur's total assets
- Shareholders equity in Spur: R865.715 million
- Shareholders equity per share: R7.97
- So Spur is trading at 2.79 times its shareholders equity
- Cash generated from operations: R244.9 million
- Cash generated from operations per share: R2.25
Currently Rocomamas revenue is about 14.6% that of the group's biggest brand Spur Steak Ranches. So Rocomams is now a bigger contributor to Spur's revenues than John Dory's who only contributes 9.2% of the revenues that Spur Steak Ranches brings in. Rocomamas might soon bring in more revenues than Panarotti's and Casa Bela's combined
Read the full article here
11 September 2019: We covered the latest financial results of AVI the consumer brands group that includes brands such as SaltiCrax and Five Roses Tea
Based on the latest financial results from AVI, our valuation model gives a full value price for AVI shares at R77.20. We therefore believe that AVI stock is overvalued at its current price and we would not recommend long term fundamental or value investors buy into the share at its current price. But rather buy into it at at least 10% below our target price. So a good entry point into AVI would be below
Read the full article here
5 September 2019: So ever wondered what McDonalds shares are worth? Well our sister website covered Mcdonalds 2nd quarter earnings report for 2019 and valued the stock at $198 a share. A short extract of that article follows.
So based on Mcdonald's latest earnings report, what is our target price for Mcdonalds? And the question is given its strong stock price run in recent months and years is there still value in the company's stock price? We value the group's stock at $198 a share. We therefore believe from a fundamental investing and value perspective the stock price of Mcdonald's is overvalued and we would not recommend buying into the stock at its current price, but rather at levels about 10% below our target price. So we would suggest looking to buy Mcdonalds at close to $180 a share
Read the full article here
29 August 2019: Yesterday our sister website covered the latest earnings report of Brown-Forman the owner of Jack Daniels and el Jimador tequila. Below a few extracts from the article.
Fiscal Year 2020 Outlook
Growing uncertainty around the global economic and geopolitical environment combined with the competitive landscape in the developed world could impact our future results. Despite these factors, the company is reaffirming its prior full year fiscal 2020 guidance of:
1. Underlying net sales growth of 5% to 7%.
2. Underlying operating income growth of 3% to 5%.
3. Diluted earnings per share of $1.75 to $1.85
Based on the group's earnings report for the first quarter of their 2010 fiscal year as well as the earnings guidance provided we value the group's stock at $41.90 a share. At its current price we do feel the group's stock is overvalued and we would prefer to buy into the group and their quality assets at a price close to or below the $40 mark. Our target price for Brown-Forman of $41.90 is based on their current earnings as well as their expected earnings per share guidance provided.
Read the full Brown-Forman review here
28 August 2019: Our sister website covered the latest financial review from Nike Inc. And since South Africans can invest in offshore stocks via various platforms we provide a brief extract from the latest Nike results here.
So what do we value one of the worlds biggest clothing and apparel brands stock at? Based on Nike's latest financial results for the last quarter of their 2019 fiscal year and the numbers for the full 2019 fiscal year we value Nike stock at $61.50 a share. We therefore feel the group's stock is overvalued and would not advise long term fundamental investors to invest in Nike Inc shares at this point in time as the value proposition is not present in Nike at the moment.
Read the full article here
27 August 2019: Yesterday our sister website covered the latest financial review from Walt Disney Company (owners of the very popular theme parks and the Marvel Studios) which has been a hit in recent years with all its super hero movies. Below a short extract from the article.
Based on the group's latest financial result, the market they operate in and the competition they face in the entertainment sector in general against other content providers such as Netflix we value the group's stock at $125.20 a share so we expect the group's shares to pul back towards levels closer to our target price of $125.20. We therefore recommend long term investors to wait it out and look the buy The Walt Disney Company shares at levels closer to 10% below our target price, so look to buy at levels closer to the $110 a share.
Read the full article here
22 August 2019: The summary below shows the inflation rates per province in South Africa for July 2019. And surprise surprise the inflation rate of the Western Cape was the highest once again. For the 29th month in a row
So for the last 29 months, the Western Cape has had the highest inflation rate of any of South Africa's provinces. And it is attributed to the growth rate in their property rent. See more regarding this in our Cape Town Property Bubble article.
The extremely low rates of inflation for durable and semi-durable goods (all goods expected to last between a year and 5 years such as appliances, and clothing and footwear etc) shows that retailers are struggling to sell these type of goods thus very little price increases are levied on such goods else retailers wont be able to move the stock as consumers wont buy it. It is a manifestation of the weak economic conditions and struggling consumer demand in South Africa.
Read the full article here
Fiscal Year 2020 Outlook
Growing uncertainty around the global economic and geopolitical environment combined with the competitive landscape in the developed world could impact our future results. Despite these factors, the company is reaffirming its prior full year fiscal 2020 guidance of:
1. Underlying net sales growth of 5% to 7%.
2. Underlying operating income growth of 3% to 5%.
3. Diluted earnings per share of $1.75 to $1.85
Based on the group's earnings report for the first quarter of their 2010 fiscal year as well as the earnings guidance provided we value the group's stock at $41.90 a share. At its current price we do feel the group's stock is overvalued and we would prefer to buy into the group and their quality assets at a price close to or below the $40 mark. Our target price for Brown-Forman of $41.90 is based on their current earnings as well as their expected earnings per share guidance provided.
Read the full Brown-Forman review here
28 August 2019: Our sister website covered the latest financial review from Nike Inc. And since South Africans can invest in offshore stocks via various platforms we provide a brief extract from the latest Nike results here.
So what do we value one of the worlds biggest clothing and apparel brands stock at? Based on Nike's latest financial results for the last quarter of their 2019 fiscal year and the numbers for the full 2019 fiscal year we value Nike stock at $61.50 a share. We therefore feel the group's stock is overvalued and would not advise long term fundamental investors to invest in Nike Inc shares at this point in time as the value proposition is not present in Nike at the moment.
Read the full article here
27 August 2019: Yesterday our sister website covered the latest financial review from Walt Disney Company (owners of the very popular theme parks and the Marvel Studios) which has been a hit in recent years with all its super hero movies. Below a short extract from the article.
Based on the group's latest financial result, the market they operate in and the competition they face in the entertainment sector in general against other content providers such as Netflix we value the group's stock at $125.20 a share so we expect the group's shares to pul back towards levels closer to our target price of $125.20. We therefore recommend long term investors to wait it out and look the buy The Walt Disney Company shares at levels closer to 10% below our target price, so look to buy at levels closer to the $110 a share.
Read the full article here
22 August 2019: The summary below shows the inflation rates per province in South Africa for July 2019. And surprise surprise the inflation rate of the Western Cape was the highest once again. For the 29th month in a row
- Western Cape: 4.8%
- Limpopo: 4.7%
- Northern Cape: 4.5%
- Mpumalanga: 4.1%
- South Africa: 4.0%
- Free State: 3.9%
- Gauteng: 3.8%
- KwaZulu-Natal: 3.7%
- Eastern Cape: 3.8%
- North West: 3.6%
So for the last 29 months, the Western Cape has had the highest inflation rate of any of South Africa's provinces. And it is attributed to the growth rate in their property rent. See more regarding this in our Cape Town Property Bubble article.
- Pensioners inflation: 4.1%
- Inflation for services: 4.7%
- Inflation for all goods: 3.4%
- Inflation for durable goods: 2.4%
- Inflation for semi-durable goods: 1.7%
- Inflation for non durable goods: 4.0%
The extremely low rates of inflation for durable and semi-durable goods (all goods expected to last between a year and 5 years such as appliances, and clothing and footwear etc) shows that retailers are struggling to sell these type of goods thus very little price increases are levied on such goods else retailers wont be able to move the stock as consumers wont buy it. It is a manifestation of the weak economic conditions and struggling consumer demand in South Africa.
Read the full article here
21 August 2019: Yesterday we covered the latest financial results from Shoprite Holdings, Africa's biggest retailer. Below a short extract from the article.
So what exactly are Shoprite (SHP) shares worth? Based on the groups latest financial results, their strong balance sheet and cash generation capacity, the decent margins they held on to during the tough economic climate, their cost containment measures and strong footprint across South Africa and the rest of Africa we value Shoprite shares at R143.98 a share
Read the full Shoprite financial review here
20 August 2019: Yesterday we covered the latest financial results from City Lodge Hotel Group, in which the group's commentary on their financial results were pretty depressing and worrying, especially if you are a South African. During the period covering their financial results they had a occupancy rate of just 58%. Which is relatively low. Below an extract of the article from yesterday.
So what are City Lodge Hotel Group shares worth when all things are considered? Based on their current financial results and their short to medium term prospects we value their shares at R99.20 a share. Thus at its current price we believe that the group's shares are fully valued right now. We would therefore not recommend buying at the current levels but rather look to buy into the group's shares at around R90 a share or at least 10% less than our valuation price.
Read full article here
19 August 2019: On Friday we covered the latest weekly world markets wrap from Peregrine Treasury Services. Below an extract of that article pertaining to South African equities.
SA equities haven’t enjoyed the best of months so far, within the turmoil of the global political chess game being played. With the risk-off environment being witnessed, it’s been tough to find any one company that’s been able to hold themselves together, especially where business operations utilize rands. For the month of August, let’s have a look at some of the carnage that’s been happening:
ABSA bank reported a three percent increase in headline earnings to R8.3 billion for the six months to end June. These are promising and positive results for the bank, especially considering the current pressured economic climate, and the rollout of the companywide reorganization strategy seems to have been successfully managed so far. Although ABSA still has a way to go before achieving its long-term growth strategies, it appears to be heading in the right direction. ABSA opened Friday’s trading day at R152.10 per share
Gaining support, through a handful of financing arrangements, Steinhoff have managed to keep their heartbeat going until at least 2021. The heavily debt-laden company, due to one of the biggest South African corporate scandals ever, will now focus wholly on becoming a holding company focusing on retail businesses vs an actual operating retail business. For the foreseeable future, Steinhoff will continue selling off assets in order to claw its way out of its hairy debt situation, as underlying revenues from their current business operations aren’t enough to make a dent. Steinhoff opened Friday’s Trading day at R1.18 per share.
Year-to-date, the JSE All Share index is up 2.09% and the Top 40 up 2.98%. Sector-wise, industrials have now returned 9.06%, resources 3.56% and financials -9.92% for the 2019 year so far.
Read the full Peregrine Treasury Services weekly market wrap here
So what exactly are Shoprite (SHP) shares worth? Based on the groups latest financial results, their strong balance sheet and cash generation capacity, the decent margins they held on to during the tough economic climate, their cost containment measures and strong footprint across South Africa and the rest of Africa we value Shoprite shares at R143.98 a share
Read the full Shoprite financial review here
20 August 2019: Yesterday we covered the latest financial results from City Lodge Hotel Group, in which the group's commentary on their financial results were pretty depressing and worrying, especially if you are a South African. During the period covering their financial results they had a occupancy rate of just 58%. Which is relatively low. Below an extract of the article from yesterday.
So what are City Lodge Hotel Group shares worth when all things are considered? Based on their current financial results and their short to medium term prospects we value their shares at R99.20 a share. Thus at its current price we believe that the group's shares are fully valued right now. We would therefore not recommend buying at the current levels but rather look to buy into the group's shares at around R90 a share or at least 10% less than our valuation price.
Read full article here
19 August 2019: On Friday we covered the latest weekly world markets wrap from Peregrine Treasury Services. Below an extract of that article pertaining to South African equities.
SA equities haven’t enjoyed the best of months so far, within the turmoil of the global political chess game being played. With the risk-off environment being witnessed, it’s been tough to find any one company that’s been able to hold themselves together, especially where business operations utilize rands. For the month of August, let’s have a look at some of the carnage that’s been happening:
- All Share and Top 40 indices: down around 5.47%
- Resources: down 5.86%
- Industrials: down 4.17% (Naspers: down 4.42%)
- Financials: down 6.64%
ABSA bank reported a three percent increase in headline earnings to R8.3 billion for the six months to end June. These are promising and positive results for the bank, especially considering the current pressured economic climate, and the rollout of the companywide reorganization strategy seems to have been successfully managed so far. Although ABSA still has a way to go before achieving its long-term growth strategies, it appears to be heading in the right direction. ABSA opened Friday’s trading day at R152.10 per share
Gaining support, through a handful of financing arrangements, Steinhoff have managed to keep their heartbeat going until at least 2021. The heavily debt-laden company, due to one of the biggest South African corporate scandals ever, will now focus wholly on becoming a holding company focusing on retail businesses vs an actual operating retail business. For the foreseeable future, Steinhoff will continue selling off assets in order to claw its way out of its hairy debt situation, as underlying revenues from their current business operations aren’t enough to make a dent. Steinhoff opened Friday’s Trading day at R1.18 per share.
Year-to-date, the JSE All Share index is up 2.09% and the Top 40 up 2.98%. Sector-wise, industrials have now returned 9.06%, resources 3.56% and financials -9.92% for the 2019 year so far.
Read the full Peregrine Treasury Services weekly market wrap here
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16 August 2019: Yesterday we covered the latest financial results from Truworths International (TRU) and below a short extract from the article published yesterday.
Based on Truworths financial results, their issues in the UK, their strong balance sheet and cash generation capacity and the healthy dividend yield of 6.6% all things considered we value Truworths International (TRU) at R80.68 a share. So at the current price we do believe the group offers value. Its recent decline due to the news about their problems in the UK has created a great buying opportunity for long term investors. The group's share price has declined almost as much in the last month as it has over the last 5 years. We think there is strong long term gains to be made if the shares are bought and the current price and the fat divided yield doesn't hurt either.
Read full article here
15 August 2019: Yesterday we covered the latest financial results from Curro Holdings (COH) and below a short extract from the article published yesterday.
So in our previous valuation in February 2019 we valued Curro shares at around R40 a share. Based on their latest financial results, their capex plans, cash generated per share, their gearing ratio (which needs to be watched as it has increased sharply) we value COH shares at R38.80 a share and we do believe they offer long term investors an excellent entry point into a business with strong future prospects. While sentiment towards COH is overwhelmingly negative (as shown on the massive share price decline over the last number of years) we are of the opinion that they offer great value at their current levels and should their learner numbers, profits and number of campuses continue to expand we see no reason why COH cannot trade at our valuation of R38.80 a share.
Read full article here
Based on Truworths financial results, their issues in the UK, their strong balance sheet and cash generation capacity and the healthy dividend yield of 6.6% all things considered we value Truworths International (TRU) at R80.68 a share. So at the current price we do believe the group offers value. Its recent decline due to the news about their problems in the UK has created a great buying opportunity for long term investors. The group's share price has declined almost as much in the last month as it has over the last 5 years. We think there is strong long term gains to be made if the shares are bought and the current price and the fat divided yield doesn't hurt either.
Read full article here
15 August 2019: Yesterday we covered the latest financial results from Curro Holdings (COH) and below a short extract from the article published yesterday.
So in our previous valuation in February 2019 we valued Curro shares at around R40 a share. Based on their latest financial results, their capex plans, cash generated per share, their gearing ratio (which needs to be watched as it has increased sharply) we value COH shares at R38.80 a share and we do believe they offer long term investors an excellent entry point into a business with strong future prospects. While sentiment towards COH is overwhelmingly negative (as shown on the massive share price decline over the last number of years) we are of the opinion that they offer great value at their current levels and should their learner numbers, profits and number of campuses continue to expand we see no reason why COH cannot trade at our valuation of R38.80 a share.
Read full article here
8 August 2019: We coverd MTN's latest financial results this morning. Below an extract of the full article
In our March 2019 valuation of MTN we valued the group's shares at R94.52 a share. This was at a time when they were trading in the mid R80's per share. So the MTN share price has certainly recovered strongly since then. The question is has it gone up to fast? And does their current financial results warrant a share price of R112.70 that it is trading at now?
Well their balance sheet is strong, they have a decent net profit margin. They do however continue to have regular clashes with the Nigerian authorities regarding penalties they need to pay and cash being repatriated out of the country, In addition to this they have a big market in Iran, from which they struggle to repatriate cash too since sanctions are often imposed on the country.
But with this all being said, their tougher markets are the more lucarative and their biggest markets so should there be no issues in these markets over the next couple of years MTN could see bumper profits coming from these countries which should be good for its share price. Based on current financials and future prospects our valuation model places a target price of R101.50 on MTN based on their latest set of financial results. While it is an increase on our valuation done in March 2019, its still lower than their current share price by about 10%, so we believe MTN is currently overvalued around 10%
Read full article here
5 August 2019: We take a look at Peregrine Treasury Services latest weekly market wrap, and below an extract from the weekly market wrap focusing on South African equities.
SOUTH AFRICAN EQUITY
South African markets took on a very slow start to the week, with no more than R11 billion (average - R22 billion) trickling through the All Share index on Monday’s trading day. Relatively petty news came out of Old Mutual’s slight bickering with their ‘suspending’ CEO, Peter Moyo, and the legal battle that ensues. With a world of more materially important news, this headline is not worth wasting one’s time on - if anything, its more brand-damaging on Old Mutual and Moyo himself. Mondi reported more favorable results, when looking at their counterpart. Some of the numbers coming out of the paper-based producing firm were as follows:
Shoprite’s share price rallied by 9%, after the retailer reported that its core business, Supermarkets RSA, increased its sales by 4.9% for the 52 weeks ending 30 June 2019. In general, the move wouldn’t necessarily have been linked to guidance and results being in-line with expectations. The positive move seen in the share price is likely due to stronger sales growth for the period versus the headline earnings numbers which Shoprite actually gave negative guidance on.
Shoprite’s African business seems to be battling it’s way through the dark-and-dreary woods, especially in Angola, where hyper-inflation is veiling the country. Whether Shoprite decides to keep these kinds of countries within their portfolio, or not, could be a large factor, when looking at the firm’s forward-looking trajectory.
For the moment, both declining sales coupled with hyperinflation in Angola is, and will continue to be, a challenging situation for Shoprite to navigate. Currency instability in Angola or any other of Shoprite’s African business operations may force the company to examine its strategic geographic business locations on the continent in the longer run.
Read full article here
2 August 2019: Woolworths released an updated trading statement yesterday. Below a short extract.
A strategic review of the David Jones store portfolio has also identified stores with onerous leases resulting in an additional provision of A$22.4 million at period end. The impairment reflects the economic headwinds and the accelerating structural changes affecting the Australian retail sector as well as the performance of the business, which has fallen short of expectations.
The WHL Board believes that the valuation of David Jones is realistic and reflective of its prospects. EPS, HEPS and adjusted diluted HEPS for the pro forma 52 weeks ended 23 June 2019 are expected to be within the ranges reflected in the table below:
June 2018 June 2019 (expected increase/decrease) in % June 2019
EPS (cents) -369.5 60.0% to 70.0% -110.8 to -147.8
HEPS (cents) 346.3 -7.5% to -2.5% 320.3 to 337.6
Adjusted diluted HEPS (cents) 364.1 -5.0% to 0% 345.9 to 364.1
Read the full article here
31 July 2019: Yesterday saw retail and wholesale giant Massmart shares plunge more than 15% after releasing their latest operational and trading update. Below a small extract from the announcement
Given the above performances, it is estimated with reasonable certainty that for the six months to June 2019 the Group will report an operating loss, before non-trading items, foreign exchange movements and net interest, of between Rnil and R30m. This disappointing performance was caused by softer than expected sales, margin weakness and expense growth of approximately 12% (comparable 9%). New stores representing 3.1% additional trading space have been opened since June 2018 and this impacted on employment, depreciation and occupancy costs in addition to cost-inflation. African currency weakness has resulted in foreign exchange losses anticipated to be R81m, in comparison to a foreign exchange gain of R23m in the prior period. The losses are caused primarily by recent currency weakness in Zambia and Nigeria. Net interest costs will be approximately 18% higher than the prior period figure of R300m. The tax charge has been adversely impacted by an inability to raise deferred tax assets in certain ex-South African tax entities and impairing deferred tax assets in some South African and non-South African tax entities.
Consequently, excluding the impact of IFRS 16, shareholders are advised that Massmart anticipate, with reasonable certainty, the following for the six months to June 2019:
Read the full article here
29 July 2019: We take a look at the latest Peregrine Treasury Services Weekly Markets wrap and focus on the part of the weekly wrap that covers South African equities
SOUTH AFRICAN EQUITY
Closer to home, local equity markets have largely been directed by the indecisive rand, which has been seen trying to navigate the turbulent oceans shrouded with treacherous siren songs in the form of the public protector saga, the voting-in of Boris Johnson - as U.K.’s next Prime Minister, the surprisingly strong US earnings season and the dragging effect created by the US China trade war, which has seemingly turned stale, in terms of progression or any form of conclusive agreement. With the above challenges veiling the last week, both the All Share index and Top 40 were seen moving fractionally higher, to the tune of around 0.35% respectively, for the last five trading days.
Last Friday, AB Inbev (ANH) agreed to sell their Australian operations, Carlton & United Breweries, to Japan’s Asahi for $11.3 billion. The disposal of ANH’s Australian operations will definitely assist the company in chipping away at its debt pile, albeit at a slower rate than a successful IPO would have achieved. The fact that ANH’s debt burden is now topping the $100 billion mark, coupled with the recent cancellation of its Asian IPO, means that the sale of its Australian business is definitely a step in the right direction. Although one might think that the entire proceeds from the sale would be directed towards alleviating the company’s debt burden, there is a greater possibility of the proceeds being split between repaying its debt and targeting strategic buyouts and expansions within emerging markets, namely the buoyant Asia-Pacific region.
On Tuesday, Kumba Iron Ore (KIO) was seen reporting some extremely good, yet murky sim-month results, which saw the stock actually take a tumble on the day by around 2.93%. Once could say that investor expectations were potentially too high going into earnings. What one saw on the day, was simply the effect of an over-reaction cooling off. Some of their numbers were as follows:
Mondi Ltd (MND) have announced that they will be delisting their local version of the stock, while flipping its primary listing over to their London’s Mondi PLC (MNP) listing. Shareholders holding MND previously will now have their shares converted into the secondary listed MNP on the JSE. On MND’s final day of trading, around R6.7 billion in JSE daily volume was pushed through the stock alone.
If any investor held MND, and is uncertain about the way forward, here’s the conversion timelines advised by the company:
Read the full article here
25 July 2019: Yesterday we covered the latest maritime transport review published by the United Nations Conference on Trade and Development (UNCTAD). Below a short extract
Growing seaborne trade
Global seaborne trade is doing well, supported by the 2017 upswing in the world economy. Expanding at 4 percent, the fastest growth in five years, global maritime trade gathered momentum and raised sentiment in the shipping industry. Total volumes reached 10.7 billion tons, reflecting an additional 411 million tons, nearly half of which were made of dry bulk commodities. Global containerized trade increased by 6.4 per cent, following the historical lows of the two previous years. Dry bulk cargo increased by 4.0 per cent, up from 1.7 per cent in 2016, while growth in crude oil shipments decelerated to 2.4 per cent. Reduced shipments from exporters of the Organization of Petroleum Exporting Countries were offset by increased trade flows originating from the Atlantic basin and moving eastward towards Asia. This new trend has reshaped crude oil trade patterns, which became less concentrated on usual suppliers from Western Asia. Supported by the growing global refining capacity – especially in Asia – and the appeal of gas as a cleaner energy source, refined petroleum products and gas increased by a combined 3.9 per cent in 2017. Prospects for seaborne trade are positive; UNCTAD projects volume increases of 4 per cent in 2018, a rate equivalent to that of 2017. Contingent on continued favourable trends in the global economy, UNCTAD is forecasting a 3.8 per cent compound annual growth rate between 2018 and 2023. Volumes across all segments are set to grow, with containerized and dry bulk commodities expected to record the fastest growth at the expense of tanker volumes. UNCTAD projections for overall seaborne trade are consistent with historical trends, whereby seaborne trade increased at an annual average rate of 3.5 per cent between 2005 and 2017. Projections of rapid growth in dry cargo are in line with a five-decade-long pattern that saw the share of tanker volumes being displaced by dry cargoes, dropping from over 50 per cent in 1970 to less than 33 per cent in 2017
Read the full article here
24 July 2019: Yesterday we covered the latest financial results from Kumba Iron Ore who benefited greatly from a sharp increase in global iron ore prices. Below an extract from the article
- Fatality free since May 2016 - EBITDA margin up 22 percentage points to 58%
- Strong balance sheet with net cash of R18.8 billion - Average realised export price up 57% to US$108/tonne
- Headline earnings up 239% to R10.1 billion or R31.51 per share
- Interim cash dividend of R30.79 per share
Read the full article here
23 July 2019: Yesterday we covered the latest Johannesburg Stock Exchange (JSE) trading statistics for the week ending 19 July 2019. Below an extract from the article
Number of trades:
Number of trades (2019): 1 430 229
Number of trades (2018): 960 873
% change year on year: 48.85%
Volume traded:
Volume traded (2019): 1 413 399 000
Volume of traded (2018): 1 387 557 000
% change year on year: 1.86%
Value of trades:
Value of trades (2019): R87 357 789 000
Value of trades (2018): R84 594 506 000
% change year on year: 3.27%
Foreign purchase/selling:
Net sales/Purchases (2019): R1 765 196 000
Net sales/Purchases (2018): -R1 074 747 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R33.52 billion
Net sales/Purchases (2018): R14.49 billion
Read the full article here
In our March 2019 valuation of MTN we valued the group's shares at R94.52 a share. This was at a time when they were trading in the mid R80's per share. So the MTN share price has certainly recovered strongly since then. The question is has it gone up to fast? And does their current financial results warrant a share price of R112.70 that it is trading at now?
Well their balance sheet is strong, they have a decent net profit margin. They do however continue to have regular clashes with the Nigerian authorities regarding penalties they need to pay and cash being repatriated out of the country, In addition to this they have a big market in Iran, from which they struggle to repatriate cash too since sanctions are often imposed on the country.
But with this all being said, their tougher markets are the more lucarative and their biggest markets so should there be no issues in these markets over the next couple of years MTN could see bumper profits coming from these countries which should be good for its share price. Based on current financials and future prospects our valuation model places a target price of R101.50 on MTN based on their latest set of financial results. While it is an increase on our valuation done in March 2019, its still lower than their current share price by about 10%, so we believe MTN is currently overvalued around 10%
Read full article here
5 August 2019: We take a look at Peregrine Treasury Services latest weekly market wrap, and below an extract from the weekly market wrap focusing on South African equities.
SOUTH AFRICAN EQUITY
South African markets took on a very slow start to the week, with no more than R11 billion (average - R22 billion) trickling through the All Share index on Monday’s trading day. Relatively petty news came out of Old Mutual’s slight bickering with their ‘suspending’ CEO, Peter Moyo, and the legal battle that ensues. With a world of more materially important news, this headline is not worth wasting one’s time on - if anything, its more brand-damaging on Old Mutual and Moyo himself. Mondi reported more favorable results, when looking at their counterpart. Some of the numbers coming out of the paper-based producing firm were as follows:
- 8% increase earnings per share of EUR 0.962 cents per share.
- Profit before tax came in at EUR 632 million (up from the previous period by 29%)
- Earnings before interest, tax, depreciation and amortisation (six months) came in at EUR 894 million (beating the last period by five percent)
- Ordinary interim dividend of EUR 0.27 cents per share.
Shoprite’s share price rallied by 9%, after the retailer reported that its core business, Supermarkets RSA, increased its sales by 4.9% for the 52 weeks ending 30 June 2019. In general, the move wouldn’t necessarily have been linked to guidance and results being in-line with expectations. The positive move seen in the share price is likely due to stronger sales growth for the period versus the headline earnings numbers which Shoprite actually gave negative guidance on.
Shoprite’s African business seems to be battling it’s way through the dark-and-dreary woods, especially in Angola, where hyper-inflation is veiling the country. Whether Shoprite decides to keep these kinds of countries within their portfolio, or not, could be a large factor, when looking at the firm’s forward-looking trajectory.
For the moment, both declining sales coupled with hyperinflation in Angola is, and will continue to be, a challenging situation for Shoprite to navigate. Currency instability in Angola or any other of Shoprite’s African business operations may force the company to examine its strategic geographic business locations on the continent in the longer run.
Read full article here
2 August 2019: Woolworths released an updated trading statement yesterday. Below a short extract.
A strategic review of the David Jones store portfolio has also identified stores with onerous leases resulting in an additional provision of A$22.4 million at period end. The impairment reflects the economic headwinds and the accelerating structural changes affecting the Australian retail sector as well as the performance of the business, which has fallen short of expectations.
The WHL Board believes that the valuation of David Jones is realistic and reflective of its prospects. EPS, HEPS and adjusted diluted HEPS for the pro forma 52 weeks ended 23 June 2019 are expected to be within the ranges reflected in the table below:
June 2018 June 2019 (expected increase/decrease) in % June 2019
EPS (cents) -369.5 60.0% to 70.0% -110.8 to -147.8
HEPS (cents) 346.3 -7.5% to -2.5% 320.3 to 337.6
Adjusted diluted HEPS (cents) 364.1 -5.0% to 0% 345.9 to 364.1
Read the full article here
31 July 2019: Yesterday saw retail and wholesale giant Massmart shares plunge more than 15% after releasing their latest operational and trading update. Below a small extract from the announcement
Given the above performances, it is estimated with reasonable certainty that for the six months to June 2019 the Group will report an operating loss, before non-trading items, foreign exchange movements and net interest, of between Rnil and R30m. This disappointing performance was caused by softer than expected sales, margin weakness and expense growth of approximately 12% (comparable 9%). New stores representing 3.1% additional trading space have been opened since June 2018 and this impacted on employment, depreciation and occupancy costs in addition to cost-inflation. African currency weakness has resulted in foreign exchange losses anticipated to be R81m, in comparison to a foreign exchange gain of R23m in the prior period. The losses are caused primarily by recent currency weakness in Zambia and Nigeria. Net interest costs will be approximately 18% higher than the prior period figure of R300m. The tax charge has been adversely impacted by an inability to raise deferred tax assets in certain ex-South African tax entities and impairing deferred tax assets in some South African and non-South African tax entities.
Consequently, excluding the impact of IFRS 16, shareholders are advised that Massmart anticipate, with reasonable certainty, the following for the six months to June 2019:
- Headline (loss)/ earnings (Rm) (530.0) to (550.4) which reflects a change of (359.7%) to (369.7%) compared to previous period
- HEPS (cents) (240.5) to (249.8) which reflects a change of (353.7%) to (363.5%) compared to the previous period
- Net (loss)/ earnings (Rm) (582.4) to (602.0) which reflects a change of (397.6%) to (407.6%) compared to the previous period
- Basic EPS (cents) (264.3) to (273.2) which reflects a change of (390.7%) to (400.5%) compared to the previous period
Read the full article here
29 July 2019: We take a look at the latest Peregrine Treasury Services Weekly Markets wrap and focus on the part of the weekly wrap that covers South African equities
SOUTH AFRICAN EQUITY
Closer to home, local equity markets have largely been directed by the indecisive rand, which has been seen trying to navigate the turbulent oceans shrouded with treacherous siren songs in the form of the public protector saga, the voting-in of Boris Johnson - as U.K.’s next Prime Minister, the surprisingly strong US earnings season and the dragging effect created by the US China trade war, which has seemingly turned stale, in terms of progression or any form of conclusive agreement. With the above challenges veiling the last week, both the All Share index and Top 40 were seen moving fractionally higher, to the tune of around 0.35% respectively, for the last five trading days.
Last Friday, AB Inbev (ANH) agreed to sell their Australian operations, Carlton & United Breweries, to Japan’s Asahi for $11.3 billion. The disposal of ANH’s Australian operations will definitely assist the company in chipping away at its debt pile, albeit at a slower rate than a successful IPO would have achieved. The fact that ANH’s debt burden is now topping the $100 billion mark, coupled with the recent cancellation of its Asian IPO, means that the sale of its Australian business is definitely a step in the right direction. Although one might think that the entire proceeds from the sale would be directed towards alleviating the company’s debt burden, there is a greater possibility of the proceeds being split between repaying its debt and targeting strategic buyouts and expansions within emerging markets, namely the buoyant Asia-Pacific region.
On Tuesday, Kumba Iron Ore (KIO) was seen reporting some extremely good, yet murky sim-month results, which saw the stock actually take a tumble on the day by around 2.93%. Once could say that investor expectations were potentially too high going into earnings. What one saw on the day, was simply the effect of an over-reaction cooling off. Some of their numbers were as follows:
- EBITDA margin up to 58%
- Headline EPS was up 239% vs an expected 160% increase (due to iron ore’s 57% run in 2019)
- Interim dividend of R30.79 per share
- Revenue numbers up 77% for the period
Mondi Ltd (MND) have announced that they will be delisting their local version of the stock, while flipping its primary listing over to their London’s Mondi PLC (MNP) listing. Shareholders holding MND previously will now have their shares converted into the secondary listed MNP on the JSE. On MND’s final day of trading, around R6.7 billion in JSE daily volume was pushed through the stock alone.
If any investor held MND, and is uncertain about the way forward, here’s the conversion timelines advised by the company:
- Last day to trade in MND: Tuesday, 23 July
- Listing of MND suspended from: Wednesday, 24 July
- Response deadline for elections: Wednesday, 24 July
- Scheme record date: Friday, 26 July
- Scheme pay date: Monday, 29 July
- Listing of MND terminated on: Monday, 29 July
- Impala Platinum: up 102.07%
- Kumba Iron Ore: up 68.78%
- Sibanye Gold: up 85.03%
- Rebosis Property Fund: down 78.07%
- Omnia: down 59.61%
- Brait: down 48.30%
Read the full article here
25 July 2019: Yesterday we covered the latest maritime transport review published by the United Nations Conference on Trade and Development (UNCTAD). Below a short extract
Growing seaborne trade
Global seaborne trade is doing well, supported by the 2017 upswing in the world economy. Expanding at 4 percent, the fastest growth in five years, global maritime trade gathered momentum and raised sentiment in the shipping industry. Total volumes reached 10.7 billion tons, reflecting an additional 411 million tons, nearly half of which were made of dry bulk commodities. Global containerized trade increased by 6.4 per cent, following the historical lows of the two previous years. Dry bulk cargo increased by 4.0 per cent, up from 1.7 per cent in 2016, while growth in crude oil shipments decelerated to 2.4 per cent. Reduced shipments from exporters of the Organization of Petroleum Exporting Countries were offset by increased trade flows originating from the Atlantic basin and moving eastward towards Asia. This new trend has reshaped crude oil trade patterns, which became less concentrated on usual suppliers from Western Asia. Supported by the growing global refining capacity – especially in Asia – and the appeal of gas as a cleaner energy source, refined petroleum products and gas increased by a combined 3.9 per cent in 2017. Prospects for seaborne trade are positive; UNCTAD projects volume increases of 4 per cent in 2018, a rate equivalent to that of 2017. Contingent on continued favourable trends in the global economy, UNCTAD is forecasting a 3.8 per cent compound annual growth rate between 2018 and 2023. Volumes across all segments are set to grow, with containerized and dry bulk commodities expected to record the fastest growth at the expense of tanker volumes. UNCTAD projections for overall seaborne trade are consistent with historical trends, whereby seaborne trade increased at an annual average rate of 3.5 per cent between 2005 and 2017. Projections of rapid growth in dry cargo are in line with a five-decade-long pattern that saw the share of tanker volumes being displaced by dry cargoes, dropping from over 50 per cent in 1970 to less than 33 per cent in 2017
Read the full article here
24 July 2019: Yesterday we covered the latest financial results from Kumba Iron Ore who benefited greatly from a sharp increase in global iron ore prices. Below an extract from the article
- Fatality free since May 2016 - EBITDA margin up 22 percentage points to 58%
- Strong balance sheet with net cash of R18.8 billion - Average realised export price up 57% to US$108/tonne
- Headline earnings up 239% to R10.1 billion or R31.51 per share
- Interim cash dividend of R30.79 per share
Read the full article here
23 July 2019: Yesterday we covered the latest Johannesburg Stock Exchange (JSE) trading statistics for the week ending 19 July 2019. Below an extract from the article
Number of trades:
Number of trades (2019): 1 430 229
Number of trades (2018): 960 873
% change year on year: 48.85%
Volume traded:
Volume traded (2019): 1 413 399 000
Volume of traded (2018): 1 387 557 000
% change year on year: 1.86%
Value of trades:
Value of trades (2019): R87 357 789 000
Value of trades (2018): R84 594 506 000
% change year on year: 3.27%
Foreign purchase/selling:
Net sales/Purchases (2019): R1 765 196 000
Net sales/Purchases (2018): -R1 074 747 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R33.52 billion
Net sales/Purchases (2018): R14.49 billion
Read the full article here
22 July 2019: So in a week that saw more cray politics in South Africa with the Public Protector continuing to go after Pravin Gordhan and President Ramaphosa in what is believe the Zuma faction of the ANC fighting back, looking to get another shot at looting state coffers. The week also so the South African Reserve Bank finally cutting interest rates. But the size of the cut was so marginal the cost of implementing the cut probably outways the effect it will have on the economy. We still believe the South African Reserve Bank is well behind the "8 ball" when it comes to interest rates and South Africans should have seen a lot sharper decline in interest rates than a mere 25 basis points.
16 July 2019: JSE Trading Statistics for the week ending 12 July 2019
Number of trades:
Number of trades (2019): 1 357 079
Number of trades (2018): 923 042
% change year on year: 47.02%
Volume traded:
Volume traded (2019): 1 137 916 000
Volume of traded (2018): 1 569 960 000
% change year on year: -27.52%
Value of trades:
Value of trades (2019): R76 907 457 000
Value of trades (2018): R82 986 108 000
% change year on year: -7.32%
Foreign purchase/selling:
Net sales/Purchases (2019): -R2 712 590 000
Net sales/Purchases (2018): -R603 843 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R35.278 billion
Net sales/Purchases (2018): R16.034 billion
Read the full article here
15 July 2019: As is the case every monday on our daily investment update, we take a look at Peregrine Treasury services summary of South African equities for the previous week. The extract below
SOUTH AFRICAN EQUITY
With the local political landscape having had a relatively calm two weeks, all eyes were, once again, focused on the Fed’s testimony which was delivered on Wednesday afternoon. In essence, the ebb and flow of the US dollar, vs the local rand, has been the major driver of South African listed stocks. Where resources had a great run last week, this week saw the precious metal sector cooling off by just over one percent. Most other sectors were seen climbing little more than 0.50% in the last five trading days - an extremely tricky trail to navigate.
ArcelorMittal (ACL) were seen releasing a gloomy six-month trading update on Wednesday which stated that the company had been hampered by rigidly high costs which lie outside of the company’s control, including the likes of raw materials, electricity, and rail and port costs. The company is also likely to face additional headwinds, as it navigates the formal consultation process, which will assess the feasibility and impact of the 2,000 job losses potentially being considered as part of the firm’s cost-cutting strategy. ACL were seen closing 15.80% down on the day of the release of this news, closing at a market price of R2.93 per share on Wednesday. Thursday morning saw the stock touching lows of around R2.71 per share. ACL opened Friday’s trading day at R2.90 per share.
Woolworths (WHL) finally caught a much-needed break after having spent most of 2019 under the R50.00 a share mark, due to unfavourable news coming out from its David Jones clothing business in Australia earlier in the year. Thursday morning saw WHL releasing a surprisingly positive trading update for the 53 weeks ending 30 June 2019. Key figures that influenced Woolworths’ stronger-than-expected performance:
Here’s some of the bigger movers on the JSE for the 2019 year so far, painting a relatively clear picture that investors are tending to lean toward the, historically-defined, safer haven segment:
Read the full article here
12 July 2019: The Governor of the South African Reserve Bank (SARB) has been appointed for another term by the President of South Africa, Cyril Ramaphosa. In addition to this two new deputy governors have been appointed, one of which was the former head of economic statistics at Statistics South Africa
Read the full article here
11 July 2019: Yesterday we looked at the latest Price to Earnings ratio (PE) of the JSE All Share Index. Below an extract from that article
So since January 2011, the JSE All Share average PE ratio is sitting at 17.78 As at the end of June 2019, the JSE All Share PE ratio was sitting at 18.14 (so just above the average levels since the start of 2011).
And the longer term PE ratio as measured by the 13 month moving average (which has been in constant decline for some time now), came in at 18.04, at just below the level that the latest PE ratio of the markets came in at. So what does it tell us about the markets and its valuation? Well market valuations have certainly come down strongly since late 2016 when the market PE ratio was around the 23 mark. Since then company profits and earnings have been disappointing sending share prices tumbling down and dragging down PE ratios with them.
It is handy to know what the overall market PE currently is, what it's longer term trend and average value is and when looking at the valuations and PE ratios of individual shares listed on the JSE one can compare individual company PE ratios and see how they compare to the overall market average PE.
Read the full article here
10 July 2019: Yesterday we covered South Africa's exports to and imports from the United States for 2019 so far (January 2019 to May 2019). And the bulk of South Africa's exports to the USA is precious metals and stones such as gold, platinum and diamonds.
The treemap below shows the main product category exports from South Africa to the United States for 2019 so far (covering the months January 2019 to May 2019). As the image shows the bulk of South African exports to the United States falls under Precious Metals, with it making up just under 30% of South Africa's total exports to the USA so far during 2019. This category includes gold, platinum and diamonds.
Read the full SA exports to and imports from the USA article here
16 July 2019: JSE Trading Statistics for the week ending 12 July 2019
Number of trades:
Number of trades (2019): 1 357 079
Number of trades (2018): 923 042
% change year on year: 47.02%
Volume traded:
Volume traded (2019): 1 137 916 000
Volume of traded (2018): 1 569 960 000
% change year on year: -27.52%
Value of trades:
Value of trades (2019): R76 907 457 000
Value of trades (2018): R82 986 108 000
% change year on year: -7.32%
Foreign purchase/selling:
Net sales/Purchases (2019): -R2 712 590 000
Net sales/Purchases (2018): -R603 843 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R35.278 billion
Net sales/Purchases (2018): R16.034 billion
Read the full article here
15 July 2019: As is the case every monday on our daily investment update, we take a look at Peregrine Treasury services summary of South African equities for the previous week. The extract below
SOUTH AFRICAN EQUITY
With the local political landscape having had a relatively calm two weeks, all eyes were, once again, focused on the Fed’s testimony which was delivered on Wednesday afternoon. In essence, the ebb and flow of the US dollar, vs the local rand, has been the major driver of South African listed stocks. Where resources had a great run last week, this week saw the precious metal sector cooling off by just over one percent. Most other sectors were seen climbing little more than 0.50% in the last five trading days - an extremely tricky trail to navigate.
ArcelorMittal (ACL) were seen releasing a gloomy six-month trading update on Wednesday which stated that the company had been hampered by rigidly high costs which lie outside of the company’s control, including the likes of raw materials, electricity, and rail and port costs. The company is also likely to face additional headwinds, as it navigates the formal consultation process, which will assess the feasibility and impact of the 2,000 job losses potentially being considered as part of the firm’s cost-cutting strategy. ACL were seen closing 15.80% down on the day of the release of this news, closing at a market price of R2.93 per share on Wednesday. Thursday morning saw the stock touching lows of around R2.71 per share. ACL opened Friday’s trading day at R2.90 per share.
Woolworths (WHL) finally caught a much-needed break after having spent most of 2019 under the R50.00 a share mark, due to unfavourable news coming out from its David Jones clothing business in Australia earlier in the year. Thursday morning saw WHL releasing a surprisingly positive trading update for the 53 weeks ending 30 June 2019. Key figures that influenced Woolworths’ stronger-than-expected performance:
- Sales for the year-ending 30 June: up 5.90%
- Food sales growth: up 9.80%, for the 52 weeks (maybe the firm should focus more on this business? Imagine an even higher-end Whole Foods-like division, to the already-loved WHL fresh fruit, veg and meat selection. With the robust brand they’ve created, would a risk in venturing into a brand new pioneering segment (within South Africa) be fruitless? Definitely something to think about)
- General sales prices were up by 1.80% for the year
- Clothing segment, David Jones, continued to add its adverse drag: one percent increase in local (Australian) sales, for the period
Here’s some of the bigger movers on the JSE for the 2019 year so far, painting a relatively clear picture that investors are tending to lean toward the, historically-defined, safer haven segment:
- Impala Platinum: up 102.29%
- Kumba Iron Ore: up 66.57%
- Sibanye Gold: up 66.67%
- Rebosis Property Fund: down 71.75%
- Omnia: down 64.50%
- Brait: down 39.33%
Read the full article here
12 July 2019: The Governor of the South African Reserve Bank (SARB) has been appointed for another term by the President of South Africa, Cyril Ramaphosa. In addition to this two new deputy governors have been appointed, one of which was the former head of economic statistics at Statistics South Africa
Read the full article here
11 July 2019: Yesterday we looked at the latest Price to Earnings ratio (PE) of the JSE All Share Index. Below an extract from that article
So since January 2011, the JSE All Share average PE ratio is sitting at 17.78 As at the end of June 2019, the JSE All Share PE ratio was sitting at 18.14 (so just above the average levels since the start of 2011).
And the longer term PE ratio as measured by the 13 month moving average (which has been in constant decline for some time now), came in at 18.04, at just below the level that the latest PE ratio of the markets came in at. So what does it tell us about the markets and its valuation? Well market valuations have certainly come down strongly since late 2016 when the market PE ratio was around the 23 mark. Since then company profits and earnings have been disappointing sending share prices tumbling down and dragging down PE ratios with them.
It is handy to know what the overall market PE currently is, what it's longer term trend and average value is and when looking at the valuations and PE ratios of individual shares listed on the JSE one can compare individual company PE ratios and see how they compare to the overall market average PE.
Read the full article here
10 July 2019: Yesterday we covered South Africa's exports to and imports from the United States for 2019 so far (January 2019 to May 2019). And the bulk of South Africa's exports to the USA is precious metals and stones such as gold, platinum and diamonds.
The treemap below shows the main product category exports from South Africa to the United States for 2019 so far (covering the months January 2019 to May 2019). As the image shows the bulk of South African exports to the United States falls under Precious Metals, with it making up just under 30% of South Africa's total exports to the USA so far during 2019. This category includes gold, platinum and diamonds.
Read the full SA exports to and imports from the USA article here
9 July 2019: Yesterday we covered the latest JSE trading statistics for the week ending 5 July 2019. Below an extract from yesterday's trading statistics article
Number of trades:
Number of trades (2019): 1 267 363
Number of trades (2018): 1 029 998
% change year on year: 23.05%
Volume traded:
Volume traded (2019): 1 128 809 000
Volume of traded (2018): 1 693 539 000
% change year on year: -33.35%
Value of trades:
Value of trades (2019): R84 238 103 000
Value of trades (2018): R82 729 074 000
% change year on year: 1.82%
Foreign purchase/selling:
Net sales/Purchases (2019): -R3 409 324 000
Net sales/Purchases (2018): -R877 185 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R32.66 billion
Net sales/Purchases (2018): R16.637 billion
So a year ago foreigners were net buyers of SA listed shares to the value of R16.637 billion for the YTD while this year they have been net sellers to the tune of -R32.66 billion in the year to date (YTD). That is a massive R49.3 billion swing in fortunes of foreigners being net buyers or sellers over the course of the last 12 months.
JSE total market capitalisation:
Market Cap (2019): R16.337 trillion
Market Cap (2018): R14.715 trillion
% change year on year: 11.02%
So as shown in the JSE total market capitalisation above, the overall stock market of South Africa has increased substantially over the course of the last 12 months (and it would have been even higher if it wasn't for the tariff war between the USA and China). The markets had a particularly positive start to the year, with all four months of the year ending in positive territory. While May ended the month strongly in the negative. June fought back and ended the months 4.55% in the green. But July is off to a pretty shaky start with the JSE All share ending down just over -1% for the first trading week of the second half of the year
Read the full JSE trading stats article for the week ending 5 July 2019 here
8 July 2019: Below a summary from Peregrine Treasury Services weekly wrap as published on Friday. We highlight the part that specificially speaks about South African equities.
SOUTH AFRICAN EQUITY
Down around 2.96% since last Friday, Truworths share price was seen falling over nine percent over the course of Tuesday and Wednesday, based on the back of news that the retail firm would be looking to restructure their debt pile, which now sits at around R800 million. Over the last 18 months, foot traffic through most retail stores has declined by more than two percent, mainly due to a slowing global economy. Truworths’ U.K. shoe wear company called Office, generated around 27.00% of the company’s revenue and ten percent of their overall profit, but remains the main contributor to the company’s growing debt pile in an extremely competitive footwear industry. Truworths opened Friday’s trading day at R68.49
Anheuser-Busch InBev have made a move to list on the Hong Kong Stock Exchange in order to sell off parts of its Asia Pacific beer unit. Trading of the shares will officially commence on 19 July 2019. AB Inbev opened Friday’s trading day at R1,315.00
Quilter is said to be mulling over the sale of their Old Mutual Wealth Life Assurance business in the U.K. The potential sale of the Old Mutual Wealth Life Assurance is not necessarily related to the net outflows witnessed in 2018, if connected at all. This decision rather forms part of the company’s long-term strategy to strip non-core assets from out its business model, as Old Mutual Wealth Life Assurance has never been part of Quilter’s main strategic focus. Should the sale occur, a special dividend could possibly be distributed to shareholders, while any remaining profits from the sale would be invested into bettering the company’s vertical integration as a whole. This would potentially mean a positive outcome for all parties. Quilter opened Friday’s trading day at R25.90
Here’s some of the bigger movers on the JSE for the 2019 year so far, painting a relatively clear picture that the resource sector’s performance stands head and shoulders above most others:
Read the full weekly market wrap here
4 July 2019: Yesterday we covered the latest trade statistics numbers published by the South African Revenue Service (SARS) for May 2019. Below the top 5 export destinations for South African goods as well as the top 5 import origins for goods imported into South Africa during May 2019.
Exports
The top 5 export destinations for South African exports during May 2019:
So just over 10% of South Africa's exports in May 2019 headed to China, with just over 7% heading to the United Sates.
Imports
The top 5 import origins in South Africa during May 2019:
Almost 20% of South Africa's imports came from China, 9.1% from Germany (most cars and machinery and equipment), and 7.3% of South Africa's imports came from the USA.
Read more about South Africa's Trade data here
Number of trades:
Number of trades (2019): 1 267 363
Number of trades (2018): 1 029 998
% change year on year: 23.05%
Volume traded:
Volume traded (2019): 1 128 809 000
Volume of traded (2018): 1 693 539 000
% change year on year: -33.35%
Value of trades:
Value of trades (2019): R84 238 103 000
Value of trades (2018): R82 729 074 000
% change year on year: 1.82%
Foreign purchase/selling:
Net sales/Purchases (2019): -R3 409 324 000
Net sales/Purchases (2018): -R877 185 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R32.66 billion
Net sales/Purchases (2018): R16.637 billion
So a year ago foreigners were net buyers of SA listed shares to the value of R16.637 billion for the YTD while this year they have been net sellers to the tune of -R32.66 billion in the year to date (YTD). That is a massive R49.3 billion swing in fortunes of foreigners being net buyers or sellers over the course of the last 12 months.
JSE total market capitalisation:
Market Cap (2019): R16.337 trillion
Market Cap (2018): R14.715 trillion
% change year on year: 11.02%
So as shown in the JSE total market capitalisation above, the overall stock market of South Africa has increased substantially over the course of the last 12 months (and it would have been even higher if it wasn't for the tariff war between the USA and China). The markets had a particularly positive start to the year, with all four months of the year ending in positive territory. While May ended the month strongly in the negative. June fought back and ended the months 4.55% in the green. But July is off to a pretty shaky start with the JSE All share ending down just over -1% for the first trading week of the second half of the year
Read the full JSE trading stats article for the week ending 5 July 2019 here
8 July 2019: Below a summary from Peregrine Treasury Services weekly wrap as published on Friday. We highlight the part that specificially speaks about South African equities.
SOUTH AFRICAN EQUITY
Down around 2.96% since last Friday, Truworths share price was seen falling over nine percent over the course of Tuesday and Wednesday, based on the back of news that the retail firm would be looking to restructure their debt pile, which now sits at around R800 million. Over the last 18 months, foot traffic through most retail stores has declined by more than two percent, mainly due to a slowing global economy. Truworths’ U.K. shoe wear company called Office, generated around 27.00% of the company’s revenue and ten percent of their overall profit, but remains the main contributor to the company’s growing debt pile in an extremely competitive footwear industry. Truworths opened Friday’s trading day at R68.49
Anheuser-Busch InBev have made a move to list on the Hong Kong Stock Exchange in order to sell off parts of its Asia Pacific beer unit. Trading of the shares will officially commence on 19 July 2019. AB Inbev opened Friday’s trading day at R1,315.00
Quilter is said to be mulling over the sale of their Old Mutual Wealth Life Assurance business in the U.K. The potential sale of the Old Mutual Wealth Life Assurance is not necessarily related to the net outflows witnessed in 2018, if connected at all. This decision rather forms part of the company’s long-term strategy to strip non-core assets from out its business model, as Old Mutual Wealth Life Assurance has never been part of Quilter’s main strategic focus. Should the sale occur, a special dividend could possibly be distributed to shareholders, while any remaining profits from the sale would be invested into bettering the company’s vertical integration as a whole. This would potentially mean a positive outcome for all parties. Quilter opened Friday’s trading day at R25.90
Here’s some of the bigger movers on the JSE for the 2019 year so far, painting a relatively clear picture that the resource sector’s performance stands head and shoulders above most others:
- Impala Platinum: up 99.59%
- Kumba Iron Ore: up 79.83%
- Sibanye Gold: up 59.18%
- Tongaat Hulett: down 76.32% (trade halted)
- Rebosis Property Fund: down 74.35%
- Omnia: down 62.66%
- Brait: down 36.33%
Read the full weekly market wrap here
4 July 2019: Yesterday we covered the latest trade statistics numbers published by the South African Revenue Service (SARS) for May 2019. Below the top 5 export destinations for South African goods as well as the top 5 import origins for goods imported into South Africa during May 2019.
Exports
The top 5 export destinations for South African exports during May 2019:
- China (11.0%)
- United States (7.2%)
- Germany (6.8%)
- United Kingdom (6.1%)
- Japan (5.4%)
So just over 10% of South Africa's exports in May 2019 headed to China, with just over 7% heading to the United Sates.
Imports
The top 5 import origins in South Africa during May 2019:
- China (18.5%)
- Germany (9.1%)
- United States (7.3%)
- India (4.9%)
- Nigeria (4.6%)
Almost 20% of South Africa's imports came from China, 9.1% from Germany (most cars and machinery and equipment), and 7.3% of South Africa's imports came from the USA.
Read more about South Africa's Trade data here
3 July 2019: We will just leave the following statement here. The South African government doesn't have an income problem, it has a spending problem. It earns more than enough in the way of taxes collected. But its spending is extremely inefficient and it wastes a lot of money in the process of delivering its duties.
2 July 2019: Bidcorp announced over SENS yesterday that JP Morgan Chase & co now holds over 10% of the group's issued share capital. One wonders if they still see value in the group's shares as we think at its current price Bidcorp is close to fully valued.
Read the full article here
1 July 2019: Over the weekend we did a valuation of MultiChoice (MCG) after their latest financial results. Below an extract from the valuation
Well you might be wondering why buy a share when they made a loss. In the group's defence if you strip out the exchange rate losses and the empowerment transaction fees the group would have made a profit of R2.78 billion (or earnings per share of R6.33 a share), which would place the group on PE ratio of 21 and a forward dividend yield of 4.2%. While the PE is well above the market average PE ratio the dividend yield is fairly strong. And as we mentioned in an earlier update on MultiChoice group three big asset management firms in South Africa owns over 20% of the group alone. They are:
So looking past the loss they made in this financial year and focusing on their future and prospects and the underlying results after removing the exchange rate losses and the empowerment transaction cost, what are MultiChoice shares actually worth? Looking at their strong balance sheet and expected dividends to be paid in future, we value the shares at R111.30 a share. We therefore feel the shares are overvalued and we don't share the sentiment and love that some of South Africa's biggest asset managers have for MultiChoice. We just believe that their future is riddled with difficulties from a more ever connected and streamed world. We took this opinion of ours into account when valuing their future cash flows as we believe it will not grow at a particularly fast rate in the next few years and this has affected our valuation. At our current valuation the group will trade at a forward PE of 17.6 (which is more inline with the overall All Share PE ratio and a forward dividend yield of 4.7%. We therefore feel R111.30 is a fair valuation for MultiChoice shares.
Read the full article here
28 June 2019: Yesterday we covered the latest South African banking sector information which showed that South African banks are writing off around 3.8% of loans and debt that has been issued, as consumers and businesses struggle to pay back their outstanding debts. Below an extract from the article yesterday.
In total South African banks wrote off or impaired loans that have been advanced to the value of R161.12 billion during April 2019. This is an increase of 22% on the R131.85 billion that was impaired by banks during April 2018. Impairments growing a lot faster than the new gross loans and advances that are being issued. And this will affect banks balance sheets and their overall profitability. Currently as at April 2019, 3.79% of all loans and advances made by South African banks are being impaired (or written off). This is up from 3.39% a year ago. If banks, South African's, government of the South African Reserve Bank needed a sign that South African consumers are really struggling this is it. South African's are struggling to pay back and service all their debt. And South Africa needs a more expansionary or accommodating monetary policy, not only to assist ailing South Africa consumers but to give South Africa's economy a boost.
Read the full article here
27 June 2019: Yesterday we covered another two well known shares listed in the United States. We looked at the financial results of both FedEx and Johnson & Johnson. Read the stock valuations of FedEx and Johnson & Johnson by clicking on any of the links below
FedEx
Johnson & Johnson
26 June 2019: Yesterday we decided to focus on the valuation of a few of the more well known US listed equities. We completed stock valuations on the following shares listed in the USA yesterday, The Home Depot, United Parcel Service (better known as UPS) and Netflix. Click on the links below to read the valuations
The Home Depot
United Parcel Service
Netflix
25 June 2019: We finally got round to covering Starbuck (SBUX) latest financial results. Below an extract from the full financial review
Well with their ever expanding number of retail outlets, their continued growth in China and Asia pacific and their already strong footprint in the USA and Europe on cannot help but be tempted to buy SBUX shares purely based on their global presence and their expanding presence across the globe. We cannot help but think continued growth for SBUX in future will come from buying out a few of the smaller competitors. We do see consolidation coming in the space they operate in. Their share buy back program will provide and has already provide future value for shareholders as future earnings and dividends are divided among fever shares (see above where we discuss the increase in net earnings per share while total earnings remained relatively flat for the group). With additional share buy backs this benefit will be amplified. With all things considered regarding their expansion plans, their share buy back program that is in full force and their current financial position, which includes a PE ratio around 40 and a dividend yield of around 1.7% our valuation models places a value of $76.96 on SBUX shares. We therefore belief the company shares are currently overvalued.
Read the Starbucks Financial Review here
24 June 2019: The summary below comes from Peregrine Treasury Services weekly market wrap and pertains to South African equities.
The South African equity market gained some momentum on Wednesday in line with global equity markets, with the JSE top 40 closing 0.81% higher on Thursday to trade at 52 960.80 points.
The charge was led by:
Read full weekly review here.
21 June 2019: President Cyril Ramaphosa delivered the State of the Nation (SONA) address last night, and to be honest it was more of the same. We hear all this talk about stimulating economic growth, ensuring ESKOM keeps the lights on, crime will be reduced, fruitless and wasteful expenditure will be dealt with and and and. But the thing is talk is cheap. We need to see actions by government that it is serious in rooting out corruption, fighting crime and growing the South African economy. Until such time the country and its economy will stumble along as it has been for years.
20 June 2019: South Africa's latest inflation rate for May 2019 came in right in the middle of the South African Reserve Bank (SARB) 3% to 6% inflation target, at 4.5%. With inflation well within target range and economic growth falling off a cliff, we believe monetary policy will become more expansionary in South Africa very soon, in order to assist growth.
Read the full article here
19 June 2019: Yesterday we covered the latest JSE trading statistics for the week ended 14 June 2019. Below some of the highlights
Number of trades:
Number of trades (2019): 1 517 456
Number of trades (2018): 1 291 940
% change year on year: 17.46%
Volume traded:
Volume traded (2019): 1 420 247 000
Volume of traded (2018): 2 019 469 000
% change year on year: -29.6%
Value of trades:
Value of trades (2019): R95 738 879 000
Value of trades (2018): R117 289 717 000
% change year on year: -18.3%
Foreign purchase/selling:
Net sales/Purchases (2019): R 2 142 740 000
Net sales/Purchases (2018): -R3 258 559 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R26.04 billion
Net sales/Purchases (2018): R8.45 billion
Read the full article here
18 June 2019: South African equity markets have held up surprisingly well over the last five trading days, with a material amount of support being gifted by Naspers and many of the other larger dual-listed companies on the local securities exchange. Cigarette maker, British American Tobacco (BTI), gave guidance on their expectation of cigarette sales numbers, which they expect to slow down by around 3.50% globally. Cigarette sales in the US dropped 5.00% alone, while the actual market price of BTI dropped around 5.00% during the course of the week. BTI opened Friday’s trading day at R548.91
Tsogo Sun saw the unbundling of their hotel business which will now be called Tsogo Sun Hotels Limited and trade under the ticker TGO. Tsogo Sun’s share price dipped by around 18.00%, but this was mainly attributed to the unbundling of their hotel business, which ended its first solo trading day at R4.00, valuing the new hotel business at around R4.20 billion. Tsogo Sun (TSH) will now be known as Tsogo Sun Gaming and will look after the casino side of the business along with other alternative forms of gaming. The whole idea of the unbundling the hotel business from the gaming business may potentially bring in more interest and liquidity, from the likes of Shariah funds, to the hotel side of the business.
Naspers saw their core headline earnings (HEPS) coming in up to 31% - 32% stronger than the previous period, while HEPS, excluding MultiChoice, came in between 24% and 26% stronger. Naspers look to list on the Amsterdam stock exchange in July in order to create further liquidity and easier access for its European investors. Naspers opened Friday’s trading day at R3,485.00 – over 3.00% up for the week. Going into Thursday’s closing auction, the general feel was that foreign investors may be stepping in to add some pressure on SA Inc. companies, along with the rand. One will have to see what happens today on local markets, but the feel is relatively sombre.
Here’s some of the
bigger movers on the JSE for the 2019 year so far, as at Friday morning:
Read the full article here
14 June 2019: Motor Trade sales released yesterday by Statistics South Africa showed the following growth for the various motor trade categories:
Read the full article here
13 June 2019: Total retail trade sales showed moderate growth year on year for April 2019. While the first quarter was a real struggle for the sector one wonders if the modest growth recorded in April is the start of a turn around in the sector? We doubt it, but with our struggling economy any form of good news will be taken right now. The summary below shows the year on year growth rate in retail trade sales for April 2019 for both current prices and constant prices (effects of inflation have been removed).
Based on the latest retail trade sales data the relative size of various retail outlet types are as follows:
Read the full article here
12 June 2019: We covered the latest electricity usage per province in South Africa yesterday. And Gauteng is by far the biggest user of electricity (with it using roughly 25% of SA's power) , with KwaZulu-Natal being the second biggest user of electricity in South Africa (around 18%). And it is no real surprise that the Northern Cape is the province that uses the least amount of power in South Africa.
Read the full article here
11 June 2019: Every monday we cover the latest JSE trading statistics as published by the JSE, the stock exchange operator. Below a summary of some of the main trading statistics for the week ending 7 June 2019
Number of trades:
Number of trades (2019): 1 505 338
Number of trades (2018): 1 438 043
% change year on year: 4.68%
Volume traded:
Volume traded (2019): 1 460 682 000
Volume of traded (2018): 1 722 297 000
% change year on year: -15.19%
Value of trades:
Value of trades (2019): R102 416 120 000
Value of trades (2018): R98 951 653 000
% change year on year: 3.50%
Foreign purchase/selling:
Net sales/Purchases (2019): R7 684 063 000
Net sales/Purchases (2018): -R632 114 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R28.182 billion
Net sales/Purchases (2018): R11.714 billion
Read the full article here
10 June 2019: So after four very positive months on the markets the month of May bucked the trend and saw half the gains made during the first four months of the year on the JSE wiped out in one month. While the South African Rand has really been struggling the Rand hedges on the JSE has been pushing the local stock market higher, with the first week of June recording 5 positive trading days in a row. The JSE All Share Index ended the week higher by 4.37%
The Rand was trading at R14.96 against the US Dollar and the JSE All Share Index ended Friday up by 1.77%
7 June 2019: We take a look at South Africa's trade with the EU for the first quarter of 2019. And based on the numbers Germany is both our biggest export destination in the EU as well as the biggest supplier of imports from the EU. With it making up just over a third of South Africa's exports to and imports from the EU. The United Kingdom is a distant second place with around 16% of our exports to the EU going to the UK and about 10% of our imports from the EU coming from the UK
Read the full article here
6 June 2019: After the very poor GDP numbers released on Tuesday, we revisited our estimate of Taylor's rule which is a formula to estimate where a country's interest rates should be at. And with all the news swirling around the South African Reserve Bank and potential changes to their mandate to include employment and growth, we ask if the Reserve Bank is actually fulfilling its mandate or does it have a blind fixation on inflation targeting only? The results from Taylor's Rule is clear. Based on it South African interest rates are at least 200 basis points to high
Read the full article here
The JSE All Share Index ended they day up by 1.05% and the Rand was trading at R14.88 against the US dollar
5 June 2019: Statistics South Africa published South Africa's latest GDP numbers yesterday. The quarter on quarter annualised growth rates (fancy speak for assuming growth in the economy from Q1:2019 over Q4:2018 will continued for a full year) for the various sectors of South Africa is summarised below:
South African economists got this horribly wrong as they expected a contraction of around -1.6%, in the end the contraction ended up being twice that size. The numbers above shows that hardly any sector in the economy was spared during the first quarter of 2019. A horrible number for the South African economy and the millions of people in South Africa looking for jobs and hoping the economy starts growing so that they can find employment. The only lights in this dark economic tunnel of South Africa were the Finance, Real Estate and Business Services sector, Personal services and government grew a small amount The rest of the sectors suffered.
For more on South Africa's GDP read here.
2 July 2019: Bidcorp announced over SENS yesterday that JP Morgan Chase & co now holds over 10% of the group's issued share capital. One wonders if they still see value in the group's shares as we think at its current price Bidcorp is close to fully valued.
Read the full article here
1 July 2019: Over the weekend we did a valuation of MultiChoice (MCG) after their latest financial results. Below an extract from the valuation
Well you might be wondering why buy a share when they made a loss. In the group's defence if you strip out the exchange rate losses and the empowerment transaction fees the group would have made a profit of R2.78 billion (or earnings per share of R6.33 a share), which would place the group on PE ratio of 21 and a forward dividend yield of 4.2%. While the PE is well above the market average PE ratio the dividend yield is fairly strong. And as we mentioned in an earlier update on MultiChoice group three big asset management firms in South Africa owns over 20% of the group alone. They are:
- Allan Gray: 10%
- Prudential Asset Management: 5.37%
- Coronation: 5.1%
So looking past the loss they made in this financial year and focusing on their future and prospects and the underlying results after removing the exchange rate losses and the empowerment transaction cost, what are MultiChoice shares actually worth? Looking at their strong balance sheet and expected dividends to be paid in future, we value the shares at R111.30 a share. We therefore feel the shares are overvalued and we don't share the sentiment and love that some of South Africa's biggest asset managers have for MultiChoice. We just believe that their future is riddled with difficulties from a more ever connected and streamed world. We took this opinion of ours into account when valuing their future cash flows as we believe it will not grow at a particularly fast rate in the next few years and this has affected our valuation. At our current valuation the group will trade at a forward PE of 17.6 (which is more inline with the overall All Share PE ratio and a forward dividend yield of 4.7%. We therefore feel R111.30 is a fair valuation for MultiChoice shares.
Read the full article here
28 June 2019: Yesterday we covered the latest South African banking sector information which showed that South African banks are writing off around 3.8% of loans and debt that has been issued, as consumers and businesses struggle to pay back their outstanding debts. Below an extract from the article yesterday.
In total South African banks wrote off or impaired loans that have been advanced to the value of R161.12 billion during April 2019. This is an increase of 22% on the R131.85 billion that was impaired by banks during April 2018. Impairments growing a lot faster than the new gross loans and advances that are being issued. And this will affect banks balance sheets and their overall profitability. Currently as at April 2019, 3.79% of all loans and advances made by South African banks are being impaired (or written off). This is up from 3.39% a year ago. If banks, South African's, government of the South African Reserve Bank needed a sign that South African consumers are really struggling this is it. South African's are struggling to pay back and service all their debt. And South Africa needs a more expansionary or accommodating monetary policy, not only to assist ailing South Africa consumers but to give South Africa's economy a boost.
Read the full article here
27 June 2019: Yesterday we covered another two well known shares listed in the United States. We looked at the financial results of both FedEx and Johnson & Johnson. Read the stock valuations of FedEx and Johnson & Johnson by clicking on any of the links below
FedEx
Johnson & Johnson
26 June 2019: Yesterday we decided to focus on the valuation of a few of the more well known US listed equities. We completed stock valuations on the following shares listed in the USA yesterday, The Home Depot, United Parcel Service (better known as UPS) and Netflix. Click on the links below to read the valuations
The Home Depot
United Parcel Service
Netflix
25 June 2019: We finally got round to covering Starbuck (SBUX) latest financial results. Below an extract from the full financial review
Well with their ever expanding number of retail outlets, their continued growth in China and Asia pacific and their already strong footprint in the USA and Europe on cannot help but be tempted to buy SBUX shares purely based on their global presence and their expanding presence across the globe. We cannot help but think continued growth for SBUX in future will come from buying out a few of the smaller competitors. We do see consolidation coming in the space they operate in. Their share buy back program will provide and has already provide future value for shareholders as future earnings and dividends are divided among fever shares (see above where we discuss the increase in net earnings per share while total earnings remained relatively flat for the group). With additional share buy backs this benefit will be amplified. With all things considered regarding their expansion plans, their share buy back program that is in full force and their current financial position, which includes a PE ratio around 40 and a dividend yield of around 1.7% our valuation models places a value of $76.96 on SBUX shares. We therefore belief the company shares are currently overvalued.
Read the Starbucks Financial Review here
24 June 2019: The summary below comes from Peregrine Treasury Services weekly market wrap and pertains to South African equities.
The South African equity market gained some momentum on Wednesday in line with global equity markets, with the JSE top 40 closing 0.81% higher on Thursday to trade at 52 960.80 points.
The charge was led by:
- AngloGold Ashanti (+6.2%)
- Bidvest Group (+2.39%)
- Discovery Holdings(+1.63%)
- Aspen Pharmacare Holdings ( +1.17%)
Read full weekly review here.
21 June 2019: President Cyril Ramaphosa delivered the State of the Nation (SONA) address last night, and to be honest it was more of the same. We hear all this talk about stimulating economic growth, ensuring ESKOM keeps the lights on, crime will be reduced, fruitless and wasteful expenditure will be dealt with and and and. But the thing is talk is cheap. We need to see actions by government that it is serious in rooting out corruption, fighting crime and growing the South African economy. Until such time the country and its economy will stumble along as it has been for years.
20 June 2019: South Africa's latest inflation rate for May 2019 came in right in the middle of the South African Reserve Bank (SARB) 3% to 6% inflation target, at 4.5%. With inflation well within target range and economic growth falling off a cliff, we believe monetary policy will become more expansionary in South Africa very soon, in order to assist growth.
Read the full article here
19 June 2019: Yesterday we covered the latest JSE trading statistics for the week ended 14 June 2019. Below some of the highlights
Number of trades:
Number of trades (2019): 1 517 456
Number of trades (2018): 1 291 940
% change year on year: 17.46%
Volume traded:
Volume traded (2019): 1 420 247 000
Volume of traded (2018): 2 019 469 000
% change year on year: -29.6%
Value of trades:
Value of trades (2019): R95 738 879 000
Value of trades (2018): R117 289 717 000
% change year on year: -18.3%
Foreign purchase/selling:
Net sales/Purchases (2019): R 2 142 740 000
Net sales/Purchases (2018): -R3 258 559 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R26.04 billion
Net sales/Purchases (2018): R8.45 billion
Read the full article here
18 June 2019: South African equity markets have held up surprisingly well over the last five trading days, with a material amount of support being gifted by Naspers and many of the other larger dual-listed companies on the local securities exchange. Cigarette maker, British American Tobacco (BTI), gave guidance on their expectation of cigarette sales numbers, which they expect to slow down by around 3.50% globally. Cigarette sales in the US dropped 5.00% alone, while the actual market price of BTI dropped around 5.00% during the course of the week. BTI opened Friday’s trading day at R548.91
Tsogo Sun saw the unbundling of their hotel business which will now be called Tsogo Sun Hotels Limited and trade under the ticker TGO. Tsogo Sun’s share price dipped by around 18.00%, but this was mainly attributed to the unbundling of their hotel business, which ended its first solo trading day at R4.00, valuing the new hotel business at around R4.20 billion. Tsogo Sun (TSH) will now be known as Tsogo Sun Gaming and will look after the casino side of the business along with other alternative forms of gaming. The whole idea of the unbundling the hotel business from the gaming business may potentially bring in more interest and liquidity, from the likes of Shariah funds, to the hotel side of the business.
- TGO opened Friday’s trading day at R4.43
- TSH opened up Friday’s trading day at R16.20
Naspers saw their core headline earnings (HEPS) coming in up to 31% - 32% stronger than the previous period, while HEPS, excluding MultiChoice, came in between 24% and 26% stronger. Naspers look to list on the Amsterdam stock exchange in July in order to create further liquidity and easier access for its European investors. Naspers opened Friday’s trading day at R3,485.00 – over 3.00% up for the week. Going into Thursday’s closing auction, the general feel was that foreign investors may be stepping in to add some pressure on SA Inc. companies, along with the rand. One will have to see what happens today on local markets, but the feel is relatively sombre.
Here’s some of the
bigger movers on the JSE for the 2019 year so far, as at Friday morning:
- Impala Platinum: up 84.43% (8.07% in the last five trading days)
- Kumba Iron Ore: up 69.66%
- Tongaat Hulett: down 76.32%
- Rebosis Property Fund: down 67.66%
- Delta Property Fund: down 53.78%
Read the full article here
14 June 2019: Motor Trade sales released yesterday by Statistics South Africa showed the following growth for the various motor trade categories:
- Fuel sales: 11.65%
- Sales of accessories: 11.65%
- Total: 10.38%
- New vehicle sales: 10.17%
- Used vehicle sales: 9.95%
- Workshop income : 8.16%
- Convenient store sales: 1.48%
Read the full article here
13 June 2019: Total retail trade sales showed moderate growth year on year for April 2019. While the first quarter was a real struggle for the sector one wonders if the modest growth recorded in April is the start of a turn around in the sector? We doubt it, but with our struggling economy any form of good news will be taken right now. The summary below shows the year on year growth rate in retail trade sales for April 2019 for both current prices and constant prices (effects of inflation have been removed).
- Total retail trade sales (constant prices): 2.39%
- Total retail trade sales (current prices): 4.56%
Based on the latest retail trade sales data the relative size of various retail outlet types are as follows:
- General dealers: 42.6%
- Textiles,clothing,footwear and leather goods: 17.9%
- All other: 11.7%
- Pharmaceutical and medical goods,cosmetics and toiletries: 8.6%
- Food, beverages and tobacco in specialised stores: 8.2%
- Hardware,paint and glass: 7.2%
- Household furniture,appliances and equipment: 3.9%
Read the full article here
12 June 2019: We covered the latest electricity usage per province in South Africa yesterday. And Gauteng is by far the biggest user of electricity (with it using roughly 25% of SA's power) , with KwaZulu-Natal being the second biggest user of electricity in South Africa (around 18%). And it is no real surprise that the Northern Cape is the province that uses the least amount of power in South Africa.
Read the full article here
11 June 2019: Every monday we cover the latest JSE trading statistics as published by the JSE, the stock exchange operator. Below a summary of some of the main trading statistics for the week ending 7 June 2019
Number of trades:
Number of trades (2019): 1 505 338
Number of trades (2018): 1 438 043
% change year on year: 4.68%
Volume traded:
Volume traded (2019): 1 460 682 000
Volume of traded (2018): 1 722 297 000
% change year on year: -15.19%
Value of trades:
Value of trades (2019): R102 416 120 000
Value of trades (2018): R98 951 653 000
% change year on year: 3.50%
Foreign purchase/selling:
Net sales/Purchases (2019): R7 684 063 000
Net sales/Purchases (2018): -R632 114 000
So year to date (YTD) foreigners have been net seller/buyers:
Net sales/Purchases (2019): -R28.182 billion
Net sales/Purchases (2018): R11.714 billion
Read the full article here
10 June 2019: So after four very positive months on the markets the month of May bucked the trend and saw half the gains made during the first four months of the year on the JSE wiped out in one month. While the South African Rand has really been struggling the Rand hedges on the JSE has been pushing the local stock market higher, with the first week of June recording 5 positive trading days in a row. The JSE All Share Index ended the week higher by 4.37%
The Rand was trading at R14.96 against the US Dollar and the JSE All Share Index ended Friday up by 1.77%
7 June 2019: We take a look at South Africa's trade with the EU for the first quarter of 2019. And based on the numbers Germany is both our biggest export destination in the EU as well as the biggest supplier of imports from the EU. With it making up just over a third of South Africa's exports to and imports from the EU. The United Kingdom is a distant second place with around 16% of our exports to the EU going to the UK and about 10% of our imports from the EU coming from the UK
Read the full article here
6 June 2019: After the very poor GDP numbers released on Tuesday, we revisited our estimate of Taylor's rule which is a formula to estimate where a country's interest rates should be at. And with all the news swirling around the South African Reserve Bank and potential changes to their mandate to include employment and growth, we ask if the Reserve Bank is actually fulfilling its mandate or does it have a blind fixation on inflation targeting only? The results from Taylor's Rule is clear. Based on it South African interest rates are at least 200 basis points to high
Read the full article here
The JSE All Share Index ended they day up by 1.05% and the Rand was trading at R14.88 against the US dollar
5 June 2019: Statistics South Africa published South Africa's latest GDP numbers yesterday. The quarter on quarter annualised growth rates (fancy speak for assuming growth in the economy from Q1:2019 over Q4:2018 will continued for a full year) for the various sectors of South Africa is summarised below:
- Agriculture/forestry and fishing: -13.2 %
- Mining: -10.8%
- Manufacturing: -8.8%
- Electricity/water and gas supply: -6.9%
- Construction: -2.2%
- Trade (wholesale, retail and motor trade): -3.6%
- Transport: -4.4%
- Finance, Real Estate and business services: 1.1%
- Government: 1.2%
- Personal services: 1.1%
- Actual GDP for Q1:2012: -3.2%
South African economists got this horribly wrong as they expected a contraction of around -1.6%, in the end the contraction ended up being twice that size. The numbers above shows that hardly any sector in the economy was spared during the first quarter of 2019. A horrible number for the South African economy and the millions of people in South Africa looking for jobs and hoping the economy starts growing so that they can find employment. The only lights in this dark economic tunnel of South Africa were the Finance, Real Estate and Business Services sector, Personal services and government grew a small amount The rest of the sectors suffered.
For more on South Africa's GDP read here.
4 June 2019: Yesterday we covered the financial results of clothing retailer Mr Price group. They released their results on Friday and the market liked it as the stock jumped 11% on the day. Below an extract from our financial review of Mr Price Group
So based on MRP's latest financial results, is it a good time to buy there shares? Or did the massive jump in the share price on Friday take away any potential gains for investors looking to buy undervalued quality stocks? While the numbers reported were good, one has to remember it is coming off a lower base, and that the South African economy is growing very slowly and the competition in the sectors they operate in is very tough. The group's inventories increased sharply, possibly due to new stock coming in before change of seasons, or the more sinister answer could be the group is struggling to move stock so inventories are building up?
Based on their current financial results, their profit margins, their revenue growth, their strong balance sheet and cash generating capacity we value the group's shares at R203.60 a share. So at their current price we feel that Mr Price shares are close to being fully valued
Read the full article here.
3 June 2019: As we do every Friday, we provide readers with Peregrine's Weekly Markets Wrap. Below the extract that covers South African equities for last week.
SOUTH AFRICAN EQUITY
Local markets sold into the cabinet reshuffle this week, pointing toward a material amount of investors not being too confident in the thinking of Ramaphosa - most interestingly, David Mabuza being appointed as an MP.
Sibanye Gold saw their shareholders voting overwhelmingly in favour of the buyout of Lonmin, indicating that the risk appetite is big enough to venture into the likes of palladium and platinum, where they previously hadn’t. Shortly after this announcement the Sibanye chairman announced his retirement. Neal Froneman will now take center stage and ensure the success of the takeover.
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
Read the full article here.
31 May 2019: Yesterday we covered South Africa's crude oil imports inflation and the impact this has on overall levels of inflation and ultimately South Africa's monetary policy. Below an extract from the article
A worry for monetary policy officials who keep an eye on inflation is the erratic crude oil price which in turn affects the fuel price, as its hard to predict the this it is hard to estimate the overall longer term trends in inflation, which could lead to the monetary policy committee of the South African Reserve Bank (SARB), making policy decisions based on dodgy prediction models of crude, fuel and in the end inflation. They should therefore be careful to place to much emphasis on prediction models and continue to look at actual rates of inflation measured and focus on core inflation (which excludes volatile items such as crude oil and electricity and other erratic prices).
Read the full article here.
The JSE ended the day up by 1.28% and the Rand was trading at R14.69 against the US Dollar. Added to that the Proteas lost their opening game of the Cricket World Cup in England. They were comprehensively beaten unfortunately
30 May 2019: Yesterday we covered struggling fast food and casual dining group , Famous Brands' latest financial results. Below a short extract from the article.
GROUP PERFORMANCE
Our key strategic focus areas during the review period were to:
In the Leading (mainstream) brands portfolio, we made good progress in aligning our supply chain and cost drivers to provide better support for the brands, to ensure they are positioned to deliver like-for-like growth ahead of food inflation. In the Signature (niche) brands portfolio, following our sustained investment over recent years, our interventions were directed at significantly improving our own operating margins in this division.
Across the Leading and Signature brands, we continued to review and optimise our footprint in terms of trading relevance, rental viability, changes in footfall, and competitor activity. Our goal to deliver sustainable returns to our shareholders is underpinned by ensuring that GBK Restaurants Limited ("GBK") outperforms the UK casual dining market and delivers ahead of our targeted performance. On 11 December 2018 we notified shareholders that GBK UK had completed a Company Voluntary Arrangement (CVA) aimed at improving the financial viability of the business. Management is optimistic that remedial actions underway to ensure the long term sustainability of the business are gaining momentum, reflected by the stronger trading results reported for the second half of the year compared to the first half, and the positive like-for-like sales recorded in the period since year-end.
Read the full article here.
The JSE ended the day 1.05% higher and the Rand was trading at R14.74 against the US dollar
29 May 2019: Yesterday we took a look at the latest General Household Survey (GHS) results and focused on the languages spoken in South Africa by race group both inside and outside of the house. In South Africa as a whole the language spoken most inside the house is isiZulu, with English only ranking as the 5th most spoken language inside homes, however when looking at the langauge spoken most outside the house, English is the second most spoken language in South Africa behind isiZulu.
Read the full article here.
The JSE All Share Index ended the day down by -0.12% and the Rand was trading at R14.72 against the US Dollar
28 May 2019: Yesterday we focused on inbound tourism statistics for South Africa, and in particular the number of tourists arriving in South Africa during the month of March 2019 from Europe. And the bulk of the 146 000 odd tourists arriving in South Africa from Europe came from the United Kingdom and Germany. Read the full article here.
The JSE All Share index ended the day up by 0.28% and the Rand was trading at R14.44 against the US Dollar
27 May 2019: Below Peregrine Treasury services weekly market wrap covering South African equities over the past week.
SOUTH AFRICAN EQUITY
Is South Africa becoming an entirely uninviting investment destination?
South African equities have taken a massive blow this week, due to the tidal waves sent through emerging markets, following the US China scuffle. With SA’s political landscape still trying to find a way forward, the global slowdown and now the decay of emerging markets through the trade war, things aren’t looking too bright on SA shores when it comes to the equity market. And to top this all off, the almost clandestine behavior seen in a growing amount of South African listed entities has seen liquidity drying up on the Johannesburg Securities Exchange (JSE) in 2019.
This week saw Massmart, Brait and Sasol all experiencing devastating 10.00% down days – a trend that seems to be becoming a normal daily event on the JSE.
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
Read the full article here.
24 May 2019: Yesterday we took a look at the inflation rate of various meat types and showed how pork and bacon prices are increasing rapidly world wide and in South Africa due to African swine flu affecting China and more recently the US. This is affecting supply while demand is still high, leading to prices being increased.
Read the full article here.
The JSE All Share Index ended the day down by -1.74% and the Rand was trading at R14.45 against the US dollar.
23 May 2019: Yesterday the stock market news was ruled by SASOL (SOL) who provided an update on their Lake Charles Chemicals Project (LCCP) in the USA. The update provided a lot of detail regarding the project but the main take away from the announcement is the fact that LCCP will cost an estimated $1.1 billion more than originally estimated. This sent shares plunging. And according to JohannBierman on Twitter (note data available used by Johann only goes back as far as 1990) it was the second worst trading day for SASOL since 1990. See Johann Biermann's tweet below.
The full update on SASOL's LCCP can be found here.
So based on MRP's latest financial results, is it a good time to buy there shares? Or did the massive jump in the share price on Friday take away any potential gains for investors looking to buy undervalued quality stocks? While the numbers reported were good, one has to remember it is coming off a lower base, and that the South African economy is growing very slowly and the competition in the sectors they operate in is very tough. The group's inventories increased sharply, possibly due to new stock coming in before change of seasons, or the more sinister answer could be the group is struggling to move stock so inventories are building up?
Based on their current financial results, their profit margins, their revenue growth, their strong balance sheet and cash generating capacity we value the group's shares at R203.60 a share. So at their current price we feel that Mr Price shares are close to being fully valued
Read the full article here.
3 June 2019: As we do every Friday, we provide readers with Peregrine's Weekly Markets Wrap. Below the extract that covers South African equities for last week.
SOUTH AFRICAN EQUITY
Local markets sold into the cabinet reshuffle this week, pointing toward a material amount of investors not being too confident in the thinking of Ramaphosa - most interestingly, David Mabuza being appointed as an MP.
Sibanye Gold saw their shareholders voting overwhelmingly in favour of the buyout of Lonmin, indicating that the risk appetite is big enough to venture into the likes of palladium and platinum, where they previously hadn’t. Shortly after this announcement the Sibanye chairman announced his retirement. Neal Froneman will now take center stage and ensure the success of the takeover.
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
- Impala Platinum: up 54.85%
- Kumba Iron Ore: up 60.70% (up 7.00% in the last week)
- Lonmin: up 51.13% (up almost 20.00% in the last week due to Sibanye takeover)
- Tongaat Hulett: down 67.56%
- Rebosis Property Fund: down 69.52%
- Delta Property Fund: down 56.00% (more than 10.00% in the last week)
Read the full article here.
31 May 2019: Yesterday we covered South Africa's crude oil imports inflation and the impact this has on overall levels of inflation and ultimately South Africa's monetary policy. Below an extract from the article
A worry for monetary policy officials who keep an eye on inflation is the erratic crude oil price which in turn affects the fuel price, as its hard to predict the this it is hard to estimate the overall longer term trends in inflation, which could lead to the monetary policy committee of the South African Reserve Bank (SARB), making policy decisions based on dodgy prediction models of crude, fuel and in the end inflation. They should therefore be careful to place to much emphasis on prediction models and continue to look at actual rates of inflation measured and focus on core inflation (which excludes volatile items such as crude oil and electricity and other erratic prices).
Read the full article here.
The JSE ended the day up by 1.28% and the Rand was trading at R14.69 against the US Dollar. Added to that the Proteas lost their opening game of the Cricket World Cup in England. They were comprehensively beaten unfortunately
30 May 2019: Yesterday we covered struggling fast food and casual dining group , Famous Brands' latest financial results. Below a short extract from the article.
GROUP PERFORMANCE
Our key strategic focus areas during the review period were to:
- enhance the profitability of our franchise partners and the viability of the franchise model;
- ensure the improvement of returns for stakeholders through refining and implementing our long-term strategy in the UK; and
- optimise allocation of capital in the business.
In the Leading (mainstream) brands portfolio, we made good progress in aligning our supply chain and cost drivers to provide better support for the brands, to ensure they are positioned to deliver like-for-like growth ahead of food inflation. In the Signature (niche) brands portfolio, following our sustained investment over recent years, our interventions were directed at significantly improving our own operating margins in this division.
Across the Leading and Signature brands, we continued to review and optimise our footprint in terms of trading relevance, rental viability, changes in footfall, and competitor activity. Our goal to deliver sustainable returns to our shareholders is underpinned by ensuring that GBK Restaurants Limited ("GBK") outperforms the UK casual dining market and delivers ahead of our targeted performance. On 11 December 2018 we notified shareholders that GBK UK had completed a Company Voluntary Arrangement (CVA) aimed at improving the financial viability of the business. Management is optimistic that remedial actions underway to ensure the long term sustainability of the business are gaining momentum, reflected by the stronger trading results reported for the second half of the year compared to the first half, and the positive like-for-like sales recorded in the period since year-end.
Read the full article here.
The JSE ended the day 1.05% higher and the Rand was trading at R14.74 against the US dollar
29 May 2019: Yesterday we took a look at the latest General Household Survey (GHS) results and focused on the languages spoken in South Africa by race group both inside and outside of the house. In South Africa as a whole the language spoken most inside the house is isiZulu, with English only ranking as the 5th most spoken language inside homes, however when looking at the langauge spoken most outside the house, English is the second most spoken language in South Africa behind isiZulu.
Read the full article here.
The JSE All Share Index ended the day down by -0.12% and the Rand was trading at R14.72 against the US Dollar
28 May 2019: Yesterday we focused on inbound tourism statistics for South Africa, and in particular the number of tourists arriving in South Africa during the month of March 2019 from Europe. And the bulk of the 146 000 odd tourists arriving in South Africa from Europe came from the United Kingdom and Germany. Read the full article here.
The JSE All Share index ended the day up by 0.28% and the Rand was trading at R14.44 against the US Dollar
27 May 2019: Below Peregrine Treasury services weekly market wrap covering South African equities over the past week.
SOUTH AFRICAN EQUITY
Is South Africa becoming an entirely uninviting investment destination?
South African equities have taken a massive blow this week, due to the tidal waves sent through emerging markets, following the US China scuffle. With SA’s political landscape still trying to find a way forward, the global slowdown and now the decay of emerging markets through the trade war, things aren’t looking too bright on SA shores when it comes to the equity market. And to top this all off, the almost clandestine behavior seen in a growing amount of South African listed entities has seen liquidity drying up on the Johannesburg Securities Exchange (JSE) in 2019.
This week saw Massmart, Brait and Sasol all experiencing devastating 10.00% down days – a trend that seems to be becoming a normal daily event on the JSE.
- Massmart: headline earnings guidance said to almost halve for the six months to June 2019. New CEO also appointed, Mitchell Slape – from US’ Walmart.
- Sasol: Lake Charles project cost increases to around 50.00% more than initially planned. Total expected cost of the project to come in at around $12.75 billion – $1 billion more than expected three months ago.
- Brait: Net asset value of their business to fall between 23.4% and 27.00%. This sending the share price to seven-year-lows of around R20.45.
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
- Impala Platinum: up 47.38%
- Kumba Iron Ore: up 52.36%
- Lonmin: up 33.73%
- Tongaat Hulett: down 65.51%
- Rebosis Property Fund: down 66.91%
- Delta Property Fund: down 48.44%
Read the full article here.
24 May 2019: Yesterday we took a look at the inflation rate of various meat types and showed how pork and bacon prices are increasing rapidly world wide and in South Africa due to African swine flu affecting China and more recently the US. This is affecting supply while demand is still high, leading to prices being increased.
Read the full article here.
The JSE All Share Index ended the day down by -1.74% and the Rand was trading at R14.45 against the US dollar.
23 May 2019: Yesterday the stock market news was ruled by SASOL (SOL) who provided an update on their Lake Charles Chemicals Project (LCCP) in the USA. The update provided a lot of detail regarding the project but the main take away from the announcement is the fact that LCCP will cost an estimated $1.1 billion more than originally estimated. This sent shares plunging. And according to JohannBierman on Twitter (note data available used by Johann only goes back as far as 1990) it was the second worst trading day for SASOL since 1990. See Johann Biermann's tweet below.
The full update on SASOL's LCCP can be found here.
The JSE All Share Index ended the day in the red by -0.49% and the Rand was trading at R14.28 against the US Dollar
22 May 2019: We have a number of updates today. They include Bidcorp trading statement, Reinet shares repurchase program and Coronation's latest assets under management.
Lets start with Bidcorp that released a trading update yesterday. Below a short summary of the trading update.
Current trading performance and overall market conditions of continuing operations
• Trading to the end of April F2019 continues to be positive (measured in home currencies). The Easter holidays fell in mid-April versus late March in F2018. Performance achieved by the Group remains on trend. Our large UK, European and Australasian businesses continue to perform well. Angliss China and South Africa remain challenging geographies however monthly performance is starting to improve against last year.
• Sales have continued to show real growth, with the gross margin percentage increasing. This has offset higher operating costs impacted by rising wage costs (due to full employment levels in numerous economies) and higher fuel and energy expenses. Overall trading margins are being maintained.
• Economic growth in the UK, Europe and Australasia remains supportive of the foodservice industry. Food inflation remains relatively benign across most markets. • Currency volatility has positively impacted Bidcorp’s rand translated results. The rand translated results are approximately 4,5% higher than the constant currency results to the end of April 2019. • Acquisition opportunities are being limited by unrealistic vendor valuation expectations at this stage of the cycle, a consequence of which is that fewer bolt-on acquisitions have been concluded. Focus remains on extracting the benefits from some of the more recent acquisitions, most notably in Australia, Iberia and Germany.
• We continue to invest in organic growth through ongoing capex spend, with the focus on having more but smaller depots closer to the customer base.
• Further evolution (not revolution) of our ecommerce and CRM platforms continue to provide competitive advantage across all businesses in the Group. Our global procurement initiatives are expanding both in Asia and Europe, the benefits of which reflect in each individual business.
• Bidcorp’s strategy remains focused on growth – organically in current markets through real sales growth focussed on the correct customer base; via in-territory bolt-on acquisitions to expand geographic reach and product ranges; and via strategic acquisitions as the group enters new markets. • Management’s expectations for F2019 remain unchanged.
Read the full article here
The next update covers an update on Reinet (RNI) share repurchase program released yesterday:
Reinet Investments S.C.A. has repurchased 201 599 ordinary shares in the period 13 to 17 May 2019. The shares were repurchased on the Johannesburg Stock Exchange at an average price of ZAR 230.27 per share (highest price: ZAR 236.05; lowest price: ZAR 225.13) for a total consideration of some ZAR 46.42 million (EUR 2.9 million), plus transaction costs.
These repurchases were made as part of the share buyback programme announced on 6 February 2019. The total number of shares repurchased under this programme to date is 3 056 416 ordinary shares for a total consideration of some ZAR 710.05 million (EUR 44.2 million), plus transaction costs.
So on average RNI has spent R232.29 a share to buy back their own shares since the share repurchase program was announced in February. We asked then if the group feels that there is no value in the markets , if it is using its cahs to buy back it's own shares instead of investing in new assets. We still believe that RNI doesn't see value in other assets, so they are using their cash to buy back their own shares.
Read the full financial results review and share repurchase program update here.
22 May 2019: We have a number of updates today. They include Bidcorp trading statement, Reinet shares repurchase program and Coronation's latest assets under management.
Lets start with Bidcorp that released a trading update yesterday. Below a short summary of the trading update.
Current trading performance and overall market conditions of continuing operations
• Trading to the end of April F2019 continues to be positive (measured in home currencies). The Easter holidays fell in mid-April versus late March in F2018. Performance achieved by the Group remains on trend. Our large UK, European and Australasian businesses continue to perform well. Angliss China and South Africa remain challenging geographies however monthly performance is starting to improve against last year.
• Sales have continued to show real growth, with the gross margin percentage increasing. This has offset higher operating costs impacted by rising wage costs (due to full employment levels in numerous economies) and higher fuel and energy expenses. Overall trading margins are being maintained.
• Economic growth in the UK, Europe and Australasia remains supportive of the foodservice industry. Food inflation remains relatively benign across most markets. • Currency volatility has positively impacted Bidcorp’s rand translated results. The rand translated results are approximately 4,5% higher than the constant currency results to the end of April 2019. • Acquisition opportunities are being limited by unrealistic vendor valuation expectations at this stage of the cycle, a consequence of which is that fewer bolt-on acquisitions have been concluded. Focus remains on extracting the benefits from some of the more recent acquisitions, most notably in Australia, Iberia and Germany.
• We continue to invest in organic growth through ongoing capex spend, with the focus on having more but smaller depots closer to the customer base.
• Further evolution (not revolution) of our ecommerce and CRM platforms continue to provide competitive advantage across all businesses in the Group. Our global procurement initiatives are expanding both in Asia and Europe, the benefits of which reflect in each individual business.
• Bidcorp’s strategy remains focused on growth – organically in current markets through real sales growth focussed on the correct customer base; via in-territory bolt-on acquisitions to expand geographic reach and product ranges; and via strategic acquisitions as the group enters new markets. • Management’s expectations for F2019 remain unchanged.
Read the full article here
The next update covers an update on Reinet (RNI) share repurchase program released yesterday:
Reinet Investments S.C.A. has repurchased 201 599 ordinary shares in the period 13 to 17 May 2019. The shares were repurchased on the Johannesburg Stock Exchange at an average price of ZAR 230.27 per share (highest price: ZAR 236.05; lowest price: ZAR 225.13) for a total consideration of some ZAR 46.42 million (EUR 2.9 million), plus transaction costs.
These repurchases were made as part of the share buyback programme announced on 6 February 2019. The total number of shares repurchased under this programme to date is 3 056 416 ordinary shares for a total consideration of some ZAR 710.05 million (EUR 44.2 million), plus transaction costs.
So on average RNI has spent R232.29 a share to buy back their own shares since the share repurchase program was announced in February. We asked then if the group feels that there is no value in the markets , if it is using its cahs to buy back it's own shares instead of investing in new assets. We still believe that RNI doesn't see value in other assets, so they are using their cash to buy back their own shares.
Read the full financial results review and share repurchase program update here.
Lastly we take a look at Coronation's latest financial results, and to be honest they dont look to good. Group has been hit by poor market performances which means they earn less and less performance fees. Pressure from cheaper ETF/ETN products also starting to put a squeeze on their margins. The image below shows their assets under management per quarter.
21 May 2019: Yesterday Pioneer Foods Group (PFG) published their latest set of financial results and the market didn't like it at all. The stock price was down as much as 15% yesterday during the day's trade. Revenue showed strong growth but profit declined as operating margins continued to be squeezed in a difficult economic environment. Below the group's own opinion regarding their outlook for the future.
OUTLOOK
The macro environment is expected to remain challenging and will continue to place pressure on consumer demand with resulting muted spending. Cost inflation in key raw materials and other operational input costs remains present although it is starting to level off. With pricing recovery still constrained by lower consumer demand and retailer competitive intensity, pressure on operating margins is expected to continue. The Group will continue efforts to optimise costs and efficiencies whilst ensuring its brands remain available and relevant to customers and consumers, thus strengthening the base for continued growth.
Read the full article here
The JSE ended yesterday down by -1.01% and the Rand was trading at R14.38 against the US Dollar.
20 May 2019: Below a short summary from Peregrine Treasury Services Weekly market wrap, covering South African equities.
SOUTH AFRICAN EQUITY
With many local investors having pinned their hopes on another ‘Ramaphoria’ type-of scenario, following the recent national elections, a definitive direction of both SA stocks and the rand alike didn’t seem to come to fruition in any convincing manner this week. An underwhelming interest in the rand and SA equity market was shown over the last few trading days, while it’s fair to say that the US China trade war also put a dampener on the trajectory of our local currency and equity market, following the elections.
Some of the bigger highlights this week were seen coming out of the pharmaceutical sector, namely Dis-Chem and Aspen Pharmacare. Aspen assured that they are on track to meet their 31 May 2019 deadline when it comes to the sale of their New Zealand based infant-formula business. Investor confidence was once again breathed into the stock, assisting the share’s at least 9.00% rise over the course of Wednesday and Thursday.
On Thursday morning, Dis-Chem released their provisional reviewed annual condensed consolidated results for the 12 months ended 28 February 2019. Although the stock’s share price seemed to shudder almost 5.00% downward on the back of the news, the negative sentiment was defused after investors swallowed the fact that the miss in earnings was primarily influenced by unforeseen once-off events, such as strikes and legislation restrictions. In general, Dis-Chem did alright.
Read the full article here
The JSE All Share index closed by -0.63% on Friday and the Rand was trading at R14.20 against the US Dollar
17 May 2019: Yesterday, Dis-chem published their results for the financial year, and according to the group, industrial action towards the end of 2018 had a significant impact on their financial results. They had the following to say regarding the industrial action in their financial results.
The industrial action that affected the Group for close to a third of the financial year, had both a direct and indirect impact on the financial performance of the Group. R50.4 million of additional direct costs were incurred, the primary contributing costs include:
- Increased investment in security at all our distribution centres, our head office and certain targeted stores to ensure our consumers, our employees and our assets were protected;
- Employment and training of temporary staff in our distribution centres to fill the void in the wholesale segment left by striking employees;
- Relocating head office staff to other premises to ensure their safety;
- Inability to invoice logistic fees as certain suppliers had to deliver inventory straight to stores and not through our distribution centres; and
- Related legal costs incurred. Indirect costs were estimated between R22.3 million and R26 million.
In December, which was the most impacted trading month, retail revenue growth was only 6.2% with comparable store revenue of negative 2.5%, which was well below our expectations. Although contingency plans were in place to ensure minimal disruption at our retail stores, we experienced lost opportunity sales primarily due to stock supply challenges.
Read our financial review of Dis-chem's latest results here
16 May 2019: Yesterday we launched a page dedicated to South Africa's mining industry, in which we will provide statistics and information relating to mining in South Africa as new information becomes available. The image below shows that mining production fell 3.4% in the first quarter of 2019 when compared to the first quarter of 2018. Our page dedicated to South Africa's mining industry can be found here.
OUTLOOK
The macro environment is expected to remain challenging and will continue to place pressure on consumer demand with resulting muted spending. Cost inflation in key raw materials and other operational input costs remains present although it is starting to level off. With pricing recovery still constrained by lower consumer demand and retailer competitive intensity, pressure on operating margins is expected to continue. The Group will continue efforts to optimise costs and efficiencies whilst ensuring its brands remain available and relevant to customers and consumers, thus strengthening the base for continued growth.
Read the full article here
The JSE ended yesterday down by -1.01% and the Rand was trading at R14.38 against the US Dollar.
20 May 2019: Below a short summary from Peregrine Treasury Services Weekly market wrap, covering South African equities.
SOUTH AFRICAN EQUITY
With many local investors having pinned their hopes on another ‘Ramaphoria’ type-of scenario, following the recent national elections, a definitive direction of both SA stocks and the rand alike didn’t seem to come to fruition in any convincing manner this week. An underwhelming interest in the rand and SA equity market was shown over the last few trading days, while it’s fair to say that the US China trade war also put a dampener on the trajectory of our local currency and equity market, following the elections.
Some of the bigger highlights this week were seen coming out of the pharmaceutical sector, namely Dis-Chem and Aspen Pharmacare. Aspen assured that they are on track to meet their 31 May 2019 deadline when it comes to the sale of their New Zealand based infant-formula business. Investor confidence was once again breathed into the stock, assisting the share’s at least 9.00% rise over the course of Wednesday and Thursday.
On Thursday morning, Dis-Chem released their provisional reviewed annual condensed consolidated results for the 12 months ended 28 February 2019. Although the stock’s share price seemed to shudder almost 5.00% downward on the back of the news, the negative sentiment was defused after investors swallowed the fact that the miss in earnings was primarily influenced by unforeseen once-off events, such as strikes and legislation restrictions. In general, Dis-Chem did alright.
- Revenue up to R21.4 billion (10% increase)
- Earnings per share and headline earnings per share up 7.40% to 85.4cents. (expected 87 cents)
- National strike cost the company around R75 million
- Retail revenue growth to R19.6 billion (9.70% increase)
- Wholesale revenue growth to R14.5 billion (11.20% increase)
- Comparable store revenue growth only up 3.40%.
Read the full article here
The JSE All Share index closed by -0.63% on Friday and the Rand was trading at R14.20 against the US Dollar
17 May 2019: Yesterday, Dis-chem published their results for the financial year, and according to the group, industrial action towards the end of 2018 had a significant impact on their financial results. They had the following to say regarding the industrial action in their financial results.
The industrial action that affected the Group for close to a third of the financial year, had both a direct and indirect impact on the financial performance of the Group. R50.4 million of additional direct costs were incurred, the primary contributing costs include:
- Increased investment in security at all our distribution centres, our head office and certain targeted stores to ensure our consumers, our employees and our assets were protected;
- Employment and training of temporary staff in our distribution centres to fill the void in the wholesale segment left by striking employees;
- Relocating head office staff to other premises to ensure their safety;
- Inability to invoice logistic fees as certain suppliers had to deliver inventory straight to stores and not through our distribution centres; and
- Related legal costs incurred. Indirect costs were estimated between R22.3 million and R26 million.
In December, which was the most impacted trading month, retail revenue growth was only 6.2% with comparable store revenue of negative 2.5%, which was well below our expectations. Although contingency plans were in place to ensure minimal disruption at our retail stores, we experienced lost opportunity sales primarily due to stock supply challenges.
Read our financial review of Dis-chem's latest results here
16 May 2019: Yesterday we launched a page dedicated to South Africa's mining industry, in which we will provide statistics and information relating to mining in South Africa as new information becomes available. The image below shows that mining production fell 3.4% in the first quarter of 2019 when compared to the first quarter of 2018. Our page dedicated to South Africa's mining industry can be found here.
Image shows growth in mining production per mineral type in South Africa for Q1:2019 compared to Q1:2018. Picture credit: Statistics South Africa
15 May 2019: In the latest Quarterly Labour Force Survey (QLFS) published by Statistics South Africa for the first quarter of 2019 it is reported that the official unemployment rate as at Q1:2019 was sitting at 27.6%, a deterioration from the 27.1% reported in the 4th quarter of 2018. The image to the left below as obtained from Stats SA shows the unemployment rate of South Africa over time.
Even more concerning for South Africans is the amount of people classified as NEET. NEET is an acronym for not in employment education or training and covers youths between the ages of 15-24. As we discussed at length in our Education Statistics Page, this is one of the single biggest problems facing South Africa. The image to the right below shows the percentage male and female youths (between the ages of 15-24) that are seen as part of NEET.
Read the full article here.
Even more concerning for South Africans is the amount of people classified as NEET. NEET is an acronym for not in employment education or training and covers youths between the ages of 15-24. As we discussed at length in our Education Statistics Page, this is one of the single biggest problems facing South Africa. The image to the right below shows the percentage male and female youths (between the ages of 15-24) that are seen as part of NEET.
Read the full article here.
South Africa's unemployment rate over time
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Number of youths in South Africa not in employment, education or training
|
14 May 2019: Global Growth Is Set to Moderate in the Near Term, Then Pick Up Modestly
As a result of these developments, global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020. Growth for 2018 was revised down by 0.1 percentage point relative to the October 2018 World Economic Outlook (WEO), reflecting weakness in the second half of the year, and the forecasts for 2019 and 2020 are now marked down by 0.4 percentage point and 0.1 percentage point, respectively. The current forecast envisages that global growth will level off in the first half of 2019 and firm up after that.
The projected pickup in the second half of 2019 is predicated on an ongoing buildup of policy stimulus in China, recent improvements in global financial market sentiment, the waning of some temporary drags on growth in the euro area, and a gradual stabilization of conditions in stressed emerging market economies, including Argentina and Turkey. Improved momentum for emerging market and developing economies is projected to continue into 2020, primarily reflecting developments in economies currently experiencing macroeconomic distress—a forecast subject to notable
uncertainty. By contrast, activity in advanced economies is projected to continue to slow gradually as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group. Beyond 2020, global growth is set to plateau at about 3.6 percent over the medium term, sustained by the increase in the relative size of economies, such as those of China and India, which are projected to have robust growth by comparison to slower-growing advanced and emerging market economies (even though Chinese growth will eventually moderate). As noted in previous WEO reports, tepid labor productivity growth and slowing expansion of the labor force amid population aging will drag advanced economy growth lower over the projection horizon.
Growth across emerging market and developing economies is projected to stabilize slightly below 5 percent, though with variations by region and country. The baseline outlook for emerging Asia remains favorable, with China’s growth projected to slow gradually toward sustainable levels and convergence in frontier economies toward higher income levels. For other regions, the outlook is complicated by a combination of structural bottlenecks, slower advanced economy growth and, in some cases, high debt and tighter financial conditions. These factors, alongside subdued commodity prices and civil strife or conflict in some cases, contribute to subdued medium-term prospects for Latin America; the Middle East, North
Africa, and Pakistan region; and parts of sub-Saharan Africa. In particular, convergence prospects are bleak for some 41 emerging market and developing economies, accounting for close to 10 percent of global GDP in purchasing-power-parity terms and with total population close to 1 billion, where per capita incomes are projected to fall further behind those in advanced economies over the next five years.
Read the full article here.
The JSE All share index ended the day down by -0.72% and the Rand was trading at R14.28 against the US dollar
13 May 2019: So now that the elections are over and the results are in, lets hope South African politicians can set aside their differences and start growing South Africa's economy, to ensure the millions of unemployed gets employed and people are lifted out of poverty. It is desperately needed. On the markets front the JSE had it's worst week in over a year after the Donald Trump administration slapped more tariffs on goods imported from China, this while trade discussions are ongoing, which one can only assume soured trade discussions.
The JSE All Share Index increased by 0.5% on Friday and the Rand was trading at R14.34 against the US Dollar
10 May 2019: With election results trickling through the real surprise for us is the fact that the DA once again failed to gain votes while the ANC lost votes. Most of the votes that left the ANC moved over to the EFF, and votes that would have gone to the DA seems to have moved to the FF+. Interesting times for SA politics. But the one thing is clear, the DA just cannot take advantage of ANC weakness. In previous elections votes that left the ANC went to COPE and not the DA, and now its going to EFF instead of the DA.
The JSE All Share Index declined by a massive -2.67% yesterday and the Rand was trading at R14.34 against the US Dollar
9 May 2019: Yesterday we covered an opinion piece of Allan Gray Asset Managers regarding the value and investment potential of African frontier markets. Below the summary of their article.
Conclusion
The challenges of operating in Africa aren’t new or exceptional. Multiple global companies have steadily built thriving businesses in countries across the continent: Unilever, Nestlé, MTN, Shoprite and Standard Bank. Undoubtedly, there are countless others that didn’t survive. What differentiates the winners in frontier markets? From Lagos to Hanoi, success often owes much to the openness and willingness to adapt business models and products to fit constrained household budgets and appeal to the familiar yet aspirational ways of life.
We continue to find attractively valued opportunities and believe frontier African markets are well-suited to a patient, contrarian investment approach.
Read the full article here.
The Markets were closed on 8 May 2019 for National and Provincial elections
6 May 2019: Every Friday we provide readers with Peregrine Treasury Services latest weekly markets wrap. Below an extract of the latest weekly markets wrap which focuses on SA equities.
SOUTH AFRICAN EQUITY
While the JSE has proposed changes to the current listing requirements, it's newly established competitor is making headway, obtaining its first retail listing,as Mr Price shares becoming trade-able on A2X as from the beginning of May. Mr price has attributed this secondary listing as an effort to deliver value to shareholders. The listing boosts the number of A2X listings to 19, with a combined market capitalisation of R2.4trn
Mr price formed part of the most traded shares on the local exchanges during the course of Thursday, along with British American Tabacco, Glencore and Multichoice.
As with every market, for every winner there is a loser, and the same goes for equities, some of the top performers for Thursday included:
Read the full article here.
On Friday the JSE All Share Index closed higher by 1.01% and the Rand was trading at R14.39 against the US dollar
3 May 2019: Yesterday we covered Foord Asset's managements principles for long-term investing growth. A small extract from yesterday's article can be found below.
Valuation — buy at the right price. Superior returns come from buying good companies at reasonable valuations. A company’s valuation can be compared to peers and to the market using the price-to-earnings (PE) ratio. The PE is a simple valuation metric calculated by dividing a share’s price by its EPS. While high quality firms do not typically trade at discounted PEs, it is nevertheless important to not overpay for an investment. An overpriced asset can materially reduce long-term returns. Exit a losing investment quickly. All investors, including professionals, make mistakes. But successful investors usually admit their mistakes early, exit those positions and replace them with even better prospects.
Read the full article here.
As a result of these developments, global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020. Growth for 2018 was revised down by 0.1 percentage point relative to the October 2018 World Economic Outlook (WEO), reflecting weakness in the second half of the year, and the forecasts for 2019 and 2020 are now marked down by 0.4 percentage point and 0.1 percentage point, respectively. The current forecast envisages that global growth will level off in the first half of 2019 and firm up after that.
The projected pickup in the second half of 2019 is predicated on an ongoing buildup of policy stimulus in China, recent improvements in global financial market sentiment, the waning of some temporary drags on growth in the euro area, and a gradual stabilization of conditions in stressed emerging market economies, including Argentina and Turkey. Improved momentum for emerging market and developing economies is projected to continue into 2020, primarily reflecting developments in economies currently experiencing macroeconomic distress—a forecast subject to notable
uncertainty. By contrast, activity in advanced economies is projected to continue to slow gradually as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group. Beyond 2020, global growth is set to plateau at about 3.6 percent over the medium term, sustained by the increase in the relative size of economies, such as those of China and India, which are projected to have robust growth by comparison to slower-growing advanced and emerging market economies (even though Chinese growth will eventually moderate). As noted in previous WEO reports, tepid labor productivity growth and slowing expansion of the labor force amid population aging will drag advanced economy growth lower over the projection horizon.
Growth across emerging market and developing economies is projected to stabilize slightly below 5 percent, though with variations by region and country. The baseline outlook for emerging Asia remains favorable, with China’s growth projected to slow gradually toward sustainable levels and convergence in frontier economies toward higher income levels. For other regions, the outlook is complicated by a combination of structural bottlenecks, slower advanced economy growth and, in some cases, high debt and tighter financial conditions. These factors, alongside subdued commodity prices and civil strife or conflict in some cases, contribute to subdued medium-term prospects for Latin America; the Middle East, North
Africa, and Pakistan region; and parts of sub-Saharan Africa. In particular, convergence prospects are bleak for some 41 emerging market and developing economies, accounting for close to 10 percent of global GDP in purchasing-power-parity terms and with total population close to 1 billion, where per capita incomes are projected to fall further behind those in advanced economies over the next five years.
Read the full article here.
The JSE All share index ended the day down by -0.72% and the Rand was trading at R14.28 against the US dollar
13 May 2019: So now that the elections are over and the results are in, lets hope South African politicians can set aside their differences and start growing South Africa's economy, to ensure the millions of unemployed gets employed and people are lifted out of poverty. It is desperately needed. On the markets front the JSE had it's worst week in over a year after the Donald Trump administration slapped more tariffs on goods imported from China, this while trade discussions are ongoing, which one can only assume soured trade discussions.
The JSE All Share Index increased by 0.5% on Friday and the Rand was trading at R14.34 against the US Dollar
10 May 2019: With election results trickling through the real surprise for us is the fact that the DA once again failed to gain votes while the ANC lost votes. Most of the votes that left the ANC moved over to the EFF, and votes that would have gone to the DA seems to have moved to the FF+. Interesting times for SA politics. But the one thing is clear, the DA just cannot take advantage of ANC weakness. In previous elections votes that left the ANC went to COPE and not the DA, and now its going to EFF instead of the DA.
The JSE All Share Index declined by a massive -2.67% yesterday and the Rand was trading at R14.34 against the US Dollar
9 May 2019: Yesterday we covered an opinion piece of Allan Gray Asset Managers regarding the value and investment potential of African frontier markets. Below the summary of their article.
Conclusion
The challenges of operating in Africa aren’t new or exceptional. Multiple global companies have steadily built thriving businesses in countries across the continent: Unilever, Nestlé, MTN, Shoprite and Standard Bank. Undoubtedly, there are countless others that didn’t survive. What differentiates the winners in frontier markets? From Lagos to Hanoi, success often owes much to the openness and willingness to adapt business models and products to fit constrained household budgets and appeal to the familiar yet aspirational ways of life.
We continue to find attractively valued opportunities and believe frontier African markets are well-suited to a patient, contrarian investment approach.
Read the full article here.
The Markets were closed on 8 May 2019 for National and Provincial elections
6 May 2019: Every Friday we provide readers with Peregrine Treasury Services latest weekly markets wrap. Below an extract of the latest weekly markets wrap which focuses on SA equities.
SOUTH AFRICAN EQUITY
While the JSE has proposed changes to the current listing requirements, it's newly established competitor is making headway, obtaining its first retail listing,as Mr Price shares becoming trade-able on A2X as from the beginning of May. Mr price has attributed this secondary listing as an effort to deliver value to shareholders. The listing boosts the number of A2X listings to 19, with a combined market capitalisation of R2.4trn
Mr price formed part of the most traded shares on the local exchanges during the course of Thursday, along with British American Tabacco, Glencore and Multichoice.
As with every market, for every winner there is a loser, and the same goes for equities, some of the top performers for Thursday included:
- York Timber Holdings +20.57%
- Kaydav Group surging +20%
- ELB Group +15.33%
- Adcock Ingram Holdings -36.7%
- Aveng -33.33%
- Esor -25%
Read the full article here.
On Friday the JSE All Share Index closed higher by 1.01% and the Rand was trading at R14.39 against the US dollar
3 May 2019: Yesterday we covered Foord Asset's managements principles for long-term investing growth. A small extract from yesterday's article can be found below.
Valuation — buy at the right price. Superior returns come from buying good companies at reasonable valuations. A company’s valuation can be compared to peers and to the market using the price-to-earnings (PE) ratio. The PE is a simple valuation metric calculated by dividing a share’s price by its EPS. While high quality firms do not typically trade at discounted PEs, it is nevertheless important to not overpay for an investment. An overpriced asset can materially reduce long-term returns. Exit a losing investment quickly. All investors, including professionals, make mistakes. But successful investors usually admit their mistakes early, exit those positions and replace them with even better prospects.
Read the full article here.
2 May 2019: Yesterday we covered trade between South African and Japan for the first quarter of 2019. During the period January 2019 to March 2019 South Africa had a net trade balance/ trade surplus with Japan of R4.9 billion. So South Africa exported R4.9 billion more to Japan during the period in question than what they imported from Japan. Read the full article here.
The JSE All Share Index ended Tuesday before the public holiday in the red by -0.23% and the Rand was trading at R14.33 against the US Dollar
30 April 2019: Below a snippet of of the latest JSE market trading statistics for the week ending 26 April 2019. We update the latest trading statistics as published by the JSE on weekly basis and track number of traders, volumes and values traded to name but a few statistics. See more below.
Number of trades:
Number of trades (2019): 853 011
Number of trades (2018): 907 133
% change year on year: -5.97%
Volume traded:
Volume traded (2019): 763 930 000
Volume of traded (2018): 1 071 438 000
% change year on year: -28.70%
Value of trades:
Value of trades (2019): R59 229 648 000
Value of trades (2018): R76 499 897 000
% change year on year: -22.58%
Read the full article here.
The JSE All Share index ended the day down by -0.39% and the Rand was trading at R14.32 against the US dollar.
29 April 2019: Below a snippet of Peregrine Treasury Services Weekly Market wrap regarding South African equities
The medical sector continues to remain under pressure, as Life Healthcare was seen slipping over 8.00% (down around R25.00 per share on the day) on Wednesday on the back of a poor earnings numbers for the six months ending 31 March 2019. Added strain continues to flow toward the sector, as medical aid companies start to heavily address the high costs that patients incur within the walls of these medical institutions. Life Healthcare opened up Friday’s trading day at R26.47 per share, now almost flat for the year.
Some of April’s bigger movers on the JSE, as at Friday morning:
Read the full article here.
The JSE All Share ended Friday up by 0.15% and the Rand was trading at R14.38 against the US dollar
26 April 2019: Yesterday we provided readers with insights from Coronation Fund Managers regarding their views on South Africa's economy and our economic policies. A short snippet of the article follows.
WE STARTED THE year cautiously optimistic that a cyclical recovery, driven by some acceleration in consumer spending, was a reasonable expectation for the year ahead. However, we cautioned that anything more durable needed a commitment to accelerated policy reform and that time to deliver was short. We also cautioned that Eskom remained the biggest, most immediate threat to growth. At the end of the first quarter of 2019, we must reset these expectations. We still expect consumer spending to be the biggest driver of growth, and for growth to be marginally better than last year, but the starting point has weakened, time is even more of the essence and Eskom has indeed become the biggest threat to growth.
Read the full article here.
25 April: Yesterday we covered the latest FNB/BER consumer confidence numbers and the story it tells about the South African consumer is not a good one. But it is no real surprise that consumer confidence in Q1:2019 took a beating. We had load shedding, higher sin taxes and fuel levies announced in the budget speech, a weaker exchange rate and higher oil prices which lead to higher fuel prices. All leading to consumers in SA struggling more and more. Read the full article here.
The JSE All Share Index ended the day down by -0.74% and the Rand was trading at R14.43 against the US Dollar
24 April 2019: Yesterday we covered the latest monetary policy review presentation released by the South African Reserve Bank and what it says about the state of the global economy, South Africa's economy and the forecast for South Africa's inflation rate and interest rates. The image below shows the expectations of Emerging Market central banks regarding whether they will hike, hold or cut rates over the course of 2019 (right hand bar chart), and the current inflation rate of emerging markets (the left hand line graphic). See the full article here.
The JSE All Share Index ended Tuesday before the public holiday in the red by -0.23% and the Rand was trading at R14.33 against the US Dollar
30 April 2019: Below a snippet of of the latest JSE market trading statistics for the week ending 26 April 2019. We update the latest trading statistics as published by the JSE on weekly basis and track number of traders, volumes and values traded to name but a few statistics. See more below.
Number of trades:
Number of trades (2019): 853 011
Number of trades (2018): 907 133
% change year on year: -5.97%
Volume traded:
Volume traded (2019): 763 930 000
Volume of traded (2018): 1 071 438 000
% change year on year: -28.70%
Value of trades:
Value of trades (2019): R59 229 648 000
Value of trades (2018): R76 499 897 000
% change year on year: -22.58%
Read the full article here.
The JSE All Share index ended the day down by -0.39% and the Rand was trading at R14.32 against the US dollar.
29 April 2019: Below a snippet of Peregrine Treasury Services Weekly Market wrap regarding South African equities
The medical sector continues to remain under pressure, as Life Healthcare was seen slipping over 8.00% (down around R25.00 per share on the day) on Wednesday on the back of a poor earnings numbers for the six months ending 31 March 2019. Added strain continues to flow toward the sector, as medical aid companies start to heavily address the high costs that patients incur within the walls of these medical institutions. Life Healthcare opened up Friday’s trading day at R26.47 per share, now almost flat for the year.
Some of April’s bigger movers on the JSE, as at Friday morning:
- EOH: up around 83.60%
- Telkom: up around 13.82%
- Bidvest: up around 11.97%
- Price: up around 10.65%
- Tiger Brands: down around 9.35%
- Life Healthcare: down around 2.32%
Read the full article here.
The JSE All Share ended Friday up by 0.15% and the Rand was trading at R14.38 against the US dollar
26 April 2019: Yesterday we provided readers with insights from Coronation Fund Managers regarding their views on South Africa's economy and our economic policies. A short snippet of the article follows.
WE STARTED THE year cautiously optimistic that a cyclical recovery, driven by some acceleration in consumer spending, was a reasonable expectation for the year ahead. However, we cautioned that anything more durable needed a commitment to accelerated policy reform and that time to deliver was short. We also cautioned that Eskom remained the biggest, most immediate threat to growth. At the end of the first quarter of 2019, we must reset these expectations. We still expect consumer spending to be the biggest driver of growth, and for growth to be marginally better than last year, but the starting point has weakened, time is even more of the essence and Eskom has indeed become the biggest threat to growth.
Read the full article here.
25 April: Yesterday we covered the latest FNB/BER consumer confidence numbers and the story it tells about the South African consumer is not a good one. But it is no real surprise that consumer confidence in Q1:2019 took a beating. We had load shedding, higher sin taxes and fuel levies announced in the budget speech, a weaker exchange rate and higher oil prices which lead to higher fuel prices. All leading to consumers in SA struggling more and more. Read the full article here.
The JSE All Share Index ended the day down by -0.74% and the Rand was trading at R14.43 against the US Dollar
24 April 2019: Yesterday we covered the latest monetary policy review presentation released by the South African Reserve Bank and what it says about the state of the global economy, South Africa's economy and the forecast for South Africa's inflation rate and interest rates. The image below shows the expectations of Emerging Market central banks regarding whether they will hike, hold or cut rates over the course of 2019 (right hand bar chart), and the current inflation rate of emerging markets (the left hand line graphic). See the full article here.
Emerging Markets Monetary Policy Stance for 2019
The JSE All Share Index ended the day up by 0.54% and the Rand tanked after news of ESKOM emergency bail out and was trading at R14.32 against the US Dollar
23 April 2019: So back to business after the Easter holidays. Yesterday we provided readers with a detailed economic and investment outlook from Citadel Wealth Management. Below a snippet of the article.
South Africa’s year ahead will be divided into two halves, namely pre- and post-elections. Pre-elections, the focus is likely to remain on politics rather than economics, with the usual political jostling and campaigning dominating headlines. However, the February Budget Speech will be key in assessing South Africa’s economic progress over the past year, as well as judging how well the ruling party and Finance Minister Tito Mboweni will handle the challenges of a rising budget deficit, falling tax revenue, an excessive government wage bill and poorly performing State-Owned Enterprises (SOEs). Thus far, South Africa has managed to satisfy credit rating agencies – especially Moody’s, which has retained its investment-grade rating for the country – through avoiding such populist measures as nationalising assets or proceeding with the nuclear deal, while taking the very unpopular step of raising the VAT rate from 14% to 15%.
However, this is an election year and it may prove more challenging to avoid similar moves. Mboweni will need to balance social deliverables with the very low growth environment, the poor tax revenue that it yields and avoid a deficit blowout in order to continually satisfy the ratings agencies. The country’s direction after the elections will depend on the election outcome. If the ANC wins back 60% or more of the country’s votes, representing a strong vote of confidence in Ramaphosa’s leadership, he will finally have the mandate needed to implement the policies necessary to boost the economy, and business and consumer confidence will likely rebound, which should be positive for financial markets. However, economic growth wouldn’t be expected to recover significantly even in this scenario, as these policies would take time to deliver results. We would therefore probably only see their real benefits a few years down the line. Add to this scenario the possibility that the US Fed hikes rates less than expected, the US and China reach a mutually beneficial trade agreement, and that China possibly takes the decision to strongly stimulate its economy, we could also see some welcome relief for South Africa, the JSE and the currency in the second half of the year.
However, if the ANC fails to achieve the desired result, we could see a repeat of 2018, with an economy slowly going nowhere, which could possibly place the currency under further pressure. With this in mind, we expect South Africa to achieve growth of around 1.2% in 2019, and given stable inflation rates and our muted growth outlook, the South African Reserve Bank (SARB) is unlikely to continue hiking rates during the course of this year. If, however, Ramaphosa and government are able to begin implementing the right policies, economic growth could rise to 2% over the next two to three years. See the full article here.
The JSE All Share index ended the 18th of April up by 0.53% and the Rand was trading at R14.06 to the US Dollar
18 April 2019: Yesterday we covered an analysis by Coronation Fund Managers on five global stocks they have invested in or use to hold in the past. We found their summary of Tata Motors pretty interesting (and concerning for Tata Motors shareholers). Their summary on Tata Motors below.
Tata Motors (owner of Jaguar Land Rover; 0% of strategy).
This was a poor investment and a mistake in our view, and we sold out of the position during 2018. A combination of internal factors (including poor cost control measures and mediocre new product launches) and external factors (such as Brexit, EU emissions legislation and US-China trade wars) led to a sharp decline in profits. Given the very thin current margins, combined with high debt levels and an uncertain future, both in terms of alternative vehicles and Brexit (the UK represents 20% of sales, with a large part of the manufacturing base being in the UK), we felt that the risk/reward became unattractive and sold the position.
See the full article here.
The JSE All Share index ended the day higher by 0.01% and the Rand was trading at R13.99 against the US Dollar
17 April 2019: Yesterday we embattled IT group, EOH's latest financial results and the market's reaction to it. We were however reluctant to place a value on the company shares considering all their corporate issues they need to resolve. A big concern for us with regards to EOH is the fact that goodwill makes up over R3 billion worth of their assets. And with a company who is regularly in the news for all the wrong reasons we wonder if the value of their goodwill will continue to decline, as it dropped by almost R1.2 billion in the last year. Read more about EOH's latest financial results here.
The JSE ended the day up by a substantial 1.14% and the Rand was trading at R14.02 against the US Dollar
16 April 2019: Yesterday we covered the latest trading update from Kaap Agri in which the group showed strong revenue growth for the 6 months ended March 2019, they did however state that gross profits did not grow at the same rate as revenue, and cited margin pressure, sales mix and higher fuel prices as reasons for this. Read more here.
The JSE All Share ended the day down by -0.27% and the Rand was trading at R14.03 to the US Dollar
15 April 2019: We suggest readers head over the our Peregrine Treasury Services weekly wrap page to get a detailed overview of the events on world markets, economics and politics for the last week. Read all about it here.
The JSE All Share Index ended Friday up 0.38% while the Rand was trading at under R14 to a dollar at R13.96.
12 April 2019: Yesterday saw the release of manufacturing output numbers by Statistics South Africa, and the numbers painted a gloomy picture of South Africa's manufacturing sector. The following snippet was taken from Moneyweb.
South Africa‘s manufacturing output rose 0.6% year-on-year in February after increasing by a revised 0.9% in January, the statistics agency said on Thursday. Economist polled by Reuters had forecast a rise of 0.5% year-on-year in February. On a month-on-month basis factory production fell by 1.8% in February, Statistics South Africa.
The JSE All Share index ended the day down by -0.39% while the Rand was trading at R14.02 against the US Dollar
11 April 2019: According to Bloomberg, Nissan is promising to invest a further R3 billion in its South African plant as it preps the plant to build the new Nissan Navara Pickup, or bakkie as known in South Africa. The following extract was take off sharenet regarding the news on the Navara pickup.
Nissan Motor plans to invest a further R3 billion in its South African plant to prepare for production of the latest version of the Navara pickup. The decision by the Japanese carmaker may add 30 000 units to the plant’s current annual volume of 35 000, Mike Whitfield, managing director of Nissan Africa, said at the factory north of Pretoria on Wednesday. The manufacture of the Navara from 2020 will also create jobs in a country where more than one in four of the population are unemployed.
“Automotive is already the largest part of South Africa’s manufacturing sector, contributing around 7% of gross domestic product annually and accounting for a third of manufacturing output,” South African President Cyril Ramaphosa said at the Nissan facility in Rosslyn. Nissan’s investment is the first significant commitment by an automaker since international firms agreed with the government late last year to extend a manufacturing incentive programme through 2035. The plan has also seen the likes of Toyota Motor, Volkswagen AG and BMW AG operate plants in the country, in return for generous tax breaks. The majority of vehicles are produced for export.
Nissan plans to more than double its industrial reach in the Middle East, Africa and India by 2022 by adding more factories, Peyman Kargar, chairman of the car-maker’s operations in those three territories, said in an interview last month. “By 2022 we want to double our presence in Africa and South Africa is the most important base for this growth,” Kargar said on Wednesday. “We export to more than 45 countries from South Africa and with the new Navara this will be even more.”
23 April 2019: So back to business after the Easter holidays. Yesterday we provided readers with a detailed economic and investment outlook from Citadel Wealth Management. Below a snippet of the article.
South Africa’s year ahead will be divided into two halves, namely pre- and post-elections. Pre-elections, the focus is likely to remain on politics rather than economics, with the usual political jostling and campaigning dominating headlines. However, the February Budget Speech will be key in assessing South Africa’s economic progress over the past year, as well as judging how well the ruling party and Finance Minister Tito Mboweni will handle the challenges of a rising budget deficit, falling tax revenue, an excessive government wage bill and poorly performing State-Owned Enterprises (SOEs). Thus far, South Africa has managed to satisfy credit rating agencies – especially Moody’s, which has retained its investment-grade rating for the country – through avoiding such populist measures as nationalising assets or proceeding with the nuclear deal, while taking the very unpopular step of raising the VAT rate from 14% to 15%.
However, this is an election year and it may prove more challenging to avoid similar moves. Mboweni will need to balance social deliverables with the very low growth environment, the poor tax revenue that it yields and avoid a deficit blowout in order to continually satisfy the ratings agencies. The country’s direction after the elections will depend on the election outcome. If the ANC wins back 60% or more of the country’s votes, representing a strong vote of confidence in Ramaphosa’s leadership, he will finally have the mandate needed to implement the policies necessary to boost the economy, and business and consumer confidence will likely rebound, which should be positive for financial markets. However, economic growth wouldn’t be expected to recover significantly even in this scenario, as these policies would take time to deliver results. We would therefore probably only see their real benefits a few years down the line. Add to this scenario the possibility that the US Fed hikes rates less than expected, the US and China reach a mutually beneficial trade agreement, and that China possibly takes the decision to strongly stimulate its economy, we could also see some welcome relief for South Africa, the JSE and the currency in the second half of the year.
However, if the ANC fails to achieve the desired result, we could see a repeat of 2018, with an economy slowly going nowhere, which could possibly place the currency under further pressure. With this in mind, we expect South Africa to achieve growth of around 1.2% in 2019, and given stable inflation rates and our muted growth outlook, the South African Reserve Bank (SARB) is unlikely to continue hiking rates during the course of this year. If, however, Ramaphosa and government are able to begin implementing the right policies, economic growth could rise to 2% over the next two to three years. See the full article here.
The JSE All Share index ended the 18th of April up by 0.53% and the Rand was trading at R14.06 to the US Dollar
18 April 2019: Yesterday we covered an analysis by Coronation Fund Managers on five global stocks they have invested in or use to hold in the past. We found their summary of Tata Motors pretty interesting (and concerning for Tata Motors shareholers). Their summary on Tata Motors below.
Tata Motors (owner of Jaguar Land Rover; 0% of strategy).
This was a poor investment and a mistake in our view, and we sold out of the position during 2018. A combination of internal factors (including poor cost control measures and mediocre new product launches) and external factors (such as Brexit, EU emissions legislation and US-China trade wars) led to a sharp decline in profits. Given the very thin current margins, combined with high debt levels and an uncertain future, both in terms of alternative vehicles and Brexit (the UK represents 20% of sales, with a large part of the manufacturing base being in the UK), we felt that the risk/reward became unattractive and sold the position.
See the full article here.
The JSE All Share index ended the day higher by 0.01% and the Rand was trading at R13.99 against the US Dollar
17 April 2019: Yesterday we embattled IT group, EOH's latest financial results and the market's reaction to it. We were however reluctant to place a value on the company shares considering all their corporate issues they need to resolve. A big concern for us with regards to EOH is the fact that goodwill makes up over R3 billion worth of their assets. And with a company who is regularly in the news for all the wrong reasons we wonder if the value of their goodwill will continue to decline, as it dropped by almost R1.2 billion in the last year. Read more about EOH's latest financial results here.
The JSE ended the day up by a substantial 1.14% and the Rand was trading at R14.02 against the US Dollar
16 April 2019: Yesterday we covered the latest trading update from Kaap Agri in which the group showed strong revenue growth for the 6 months ended March 2019, they did however state that gross profits did not grow at the same rate as revenue, and cited margin pressure, sales mix and higher fuel prices as reasons for this. Read more here.
The JSE All Share ended the day down by -0.27% and the Rand was trading at R14.03 to the US Dollar
15 April 2019: We suggest readers head over the our Peregrine Treasury Services weekly wrap page to get a detailed overview of the events on world markets, economics and politics for the last week. Read all about it here.
The JSE All Share Index ended Friday up 0.38% while the Rand was trading at under R14 to a dollar at R13.96.
12 April 2019: Yesterday saw the release of manufacturing output numbers by Statistics South Africa, and the numbers painted a gloomy picture of South Africa's manufacturing sector. The following snippet was taken from Moneyweb.
South Africa‘s manufacturing output rose 0.6% year-on-year in February after increasing by a revised 0.9% in January, the statistics agency said on Thursday. Economist polled by Reuters had forecast a rise of 0.5% year-on-year in February. On a month-on-month basis factory production fell by 1.8% in February, Statistics South Africa.
The JSE All Share index ended the day down by -0.39% while the Rand was trading at R14.02 against the US Dollar
11 April 2019: According to Bloomberg, Nissan is promising to invest a further R3 billion in its South African plant as it preps the plant to build the new Nissan Navara Pickup, or bakkie as known in South Africa. The following extract was take off sharenet regarding the news on the Navara pickup.
Nissan Motor plans to invest a further R3 billion in its South African plant to prepare for production of the latest version of the Navara pickup. The decision by the Japanese carmaker may add 30 000 units to the plant’s current annual volume of 35 000, Mike Whitfield, managing director of Nissan Africa, said at the factory north of Pretoria on Wednesday. The manufacture of the Navara from 2020 will also create jobs in a country where more than one in four of the population are unemployed.
“Automotive is already the largest part of South Africa’s manufacturing sector, contributing around 7% of gross domestic product annually and accounting for a third of manufacturing output,” South African President Cyril Ramaphosa said at the Nissan facility in Rosslyn. Nissan’s investment is the first significant commitment by an automaker since international firms agreed with the government late last year to extend a manufacturing incentive programme through 2035. The plan has also seen the likes of Toyota Motor, Volkswagen AG and BMW AG operate plants in the country, in return for generous tax breaks. The majority of vehicles are produced for export.
Nissan plans to more than double its industrial reach in the Middle East, Africa and India by 2022 by adding more factories, Peyman Kargar, chairman of the car-maker’s operations in those three territories, said in an interview last month. “By 2022 we want to double our presence in Africa and South Africa is the most important base for this growth,” Kargar said on Wednesday. “We export to more than 45 countries from South Africa and with the new Navara this will be even more.”
10 April 2019: According to an article on Moneyweb, S&P expects South Africa to continue with policy reforms after the elections in South Africa that is to be held on the 8th of May 2019. The following is an extract from the original article.
S&P Global Ratings expects South Africa’s ruling party to continue with policy reforms after the May 8 election, and that’s why it has a stable outlook on the nation’s credit rating.
“We think the new administration will continue on the path that they have started,” sovereign analyst Gardner Rusike said Tuesday at a conference in Johannesburg. “The best-case scenario” is that the African National Congress wins and continues with the reforms that it started, he said. “Reforms will encourage investment.”
S&P cut South Africa’s debt assessment to sub-investment grade in April 2017 after former President Jacob Zuma changed the cabinet and appointed a new finance minister and deputy minister. After Cyril Ramaphosa replaced Zuma as leader of the ANC and the country, he has taken steps to root out mismanagement at state firms such as power utility Eskom and pledged policy reforms to boost economic growth and lure investment into the country.
9 April 2019: Yesterday retail giant Pick 'n Pay brought out their latest trading update, and based on the share price performance the market liked it. Below a small snippet of their trading update. Read the full update here.
Shareholders are advised that Pick n Pay Stores Limited (“the Group”) is in the process of finalising its 2019 financial results for the 53 weeks* ended 3 March 2019, which are expected to be published on 26 April 2019.
The Group delivered turnover growth of 9.6% in the 53 weeks of the 2019 financial year. On a comparable 52-week basis, turnover increased by 7.1%, with like-for-like turnover growth of 4.8%. With selling price deflation of 0.3% over the year, the Group achieved like-for-like volume growth of 5.1%. The Group’s core South Africa division delivered comparable turnover growth of 7.4%. Through a combination of its Pick n Pay and Boxer brands, the Group demonstrated consistent market share gains across the year.
The JSE All Share Index ended the day up by 0.36% and the Rand was trading at R14.14 against the US Dollar yesterday
8 April 2019: On Friday, the JSE recorded its best week since February in light of positive local news (as Moody’s held off reviewing SA’s credit rating) and global news (US President Donald Trump announced a trade deal is about four weeks away). The All Share closed 0.11% higher while the Rand was trading at R14.06 to the US Dollar on Friday, 5 April 2019
5 April 2019: Yesterday we did an article discussing South African firms and their love hate affair with Nigeria, with it being a large and lucrative market but Nigerian regulators looking to take advantage of foreign firms by slapping massive penalties and fines on foreign companies. Read more regarding this here.
We also covered the latest JSE All share PE ratio and the long term trend in the JSE All Share PE ratio. For more on this read here.
The JSE All Share Index ended the day down by -0.37% and the Rand was trading at R14.12 against the US Dollar yesterday
4 April 2019: Yesterday we covered fashion brand Superdry's boardroom issues and the company's share price decline over the last couple of years as the shares slumped following the news that its founder, got voted back onto the board of directors and soon after that was elected the interim CEO of the group. The image below shows the share price performance of Superdry Plc (LON: SDRY) yesterday. For more on the Superdry boardroom issues read here.
The JSE All Share Index ended the day up by 1.34% and the Rand was trading at R14.13 against the US Dollar yesterday
3 April 2019: The summary below shows the total income earned by small firms per sector of the South African economy (excl agriculture), based on the 4th quarter 2018 QFS survey results as published by Statistics South Africa. The results are sorted from highest to lowest
The JSE All Share Index ended the day up by 0.08% and the Rand was trading at R14.21 against the US Dollar
2 April 2019: Yesterday we covered the latest trading statistics as published by the Johannesburg Stock Exchange (JSE). Below a small snippet from the article. See the full article here.
Number of trades:
Number of trades (2019): 1 481 905
Number of trades (2018): 1 203 669
% change year on year: 23.12%
Volume traded:
Volume traded (2019): 2 295 939 000
Volume of traded (2018): 1 555 316 000
% change year on year: 47.62%
Value of trades:
Value of trades (2019): R103 145 339 000
Value of trades (2018): R97 733 761 000
% change year on year: 5.54%
We also covered the latest fuel prices that South Africans will be paying from the 3rd of April 2019. And fuel prices will be very close to record highs after latest fuel levy and road accident fund levy increases announced in the February budget speech is officially implemented.
The JSE All Share Index ended April's fools day up by 1.15% (no jokes) and the Rand was trading at R14.27 against the US Dollar
1 April 2019: At the end of last week we took a deeper look into a report published by Statistics South Africa regarding South Africa's food security, in which it focused on the percentage of households active in agricultural activities per province as well as breaking down the numbers to ask of those involved in agricultural activities how many are involved in it as its their main source of food. And the numbers are worrying. Read the article here.
The JSE All Share Index ended Friday 29 March up by 0.72% and the Rand was trading at R14.59 against the US Dollar
29 March 2019: Yesterday we covered the latest Quarterly Financial Statistics (QFS) results published by Statistics South Africa and we focused on the contribution of SMME's to total income earned by various industries. Below a snippet from yesterday's article:
So the Trade industry earned the most, with the manufacturing a relatively close second. And the Real estate and business services industry a distant 3rd position. The summary below shows the percentage contribution of the various firms to total income earned by the selected industries
So lets focus on the contribution of the various firm sizes to overall income earned. Just how much is smaller firms contributing to the total income earned by companies in South Africa?
The JSE All Share Index ended yesterday lower by -0.16% and the Rand was trading at R14.68 against the US Dollar
28 March 2019: So in a relatively quiet news day on the markets yesterday we decided to continue our average prices of commodities series. So we decided to take a look at peanut butter prices. I mean who doesnt like peanut butter? Yesterday we compared the average price paid per 400g tub of peanut butter per province and found the following. The average price per 400g tub of peanut butter per province for February 2019 (from highest price to lowest price)
See the full article here.
27 March 2019: EOH released a SENS on 25 March providing investors with an update regarding their Microsoft Channel Agreement that was cancelled by Microsoft supposedly due to concerns regarding EOH's business ethics and practices. In their SENS they gave their opinion on the impact the cancellation of this agreement will have on them. It follows below.
The impact of the latest notices is still being assessed, but early indications are that:
- Our Microsoft related bespoke application development, its largest business, will be predominantly unimpacted.
- Any long-term impact on the IP businesses, including the core IP that has been developed for re-sale utilising Microsoft technologies, can be mitigated through migration to other cloud providers.
- Our CRM (Dynamics 365) and Productivity Solutions business will be impacted in terms of access to partner support portals.
- Our Microsoft-related managed services business and clients will experience no impact as these services are provided on client infrastructure and platforms.
- Our Cloud business and platform business and the re-sale of Azure cloud offerings will be impacted in the short-term and EOH is in discussions to find a solution to ensure continuity of service and revenue streams.
While EOH's assessed impact of the latest notification on profit before tax is estimated at less than R20 million during the current financial year, this will bring the total impact of Microsoft exposure to R30 million profit before tax. Moreover, there is an overall medium to long-term go-to-market and credential impact and risk in not retaining Microsoft Gold Partner status. EOH apologises for any uncertainty and inconvenience caused and will continue to use our best endeavours to ensure there are no outages or disruptions to any client services as a result of the terminations.
For more on the EOH/Microsoft Sage see our EOH/Microsoft page
26 March 2019: Yesterday we looked at the latest trading statistics released by the JSE. And it showed that for once foreigners were net buyers of SA listed shares. All be it very small net buyers. But for the year to date (YTD) they remain strong net sellers of JSE listes stocks. Find out more about the latest JSE trading statistics here.
The JSE All Share Index ended lower by -1.44% yesterday and the Rand was trading at R14.48 against the US Dollar
25 March 2019: According to Statistics South Africa, the February 2019 inflation rate of 4.1% was nudged higher from 4% in January 2019 by medical aid and transport costs. And with the new levies and taxes on various products such as alcohol and tobacco and fuel levies and road accident fund levies announced by Minister Mboweni in the budget speech set to kick in in April, we expect to see inflation continue ticking up from current levels. We do however expect the South Africa Reserve Bank (SARB) to hold on raising interest rates due to the struggling economy. For more on South Africa's latest inflation drivers see here.
The JSE All Share Index ended Friday lower by -0.07% and the Rand was trading at R14.34 against the US Dollar on Friday 22 March 2019
22 March 2019: According to the trading statistics released by the JSE for the week ending 15 March 2019, foreigners continue to be net sellers of JSE listed shares. And the value of the net sale of JSE listed shares for the year to date (YTD) compared to last year over the same time period.
So a year ago foreigners were net buyers of SA listed shares to the value of R21.340 billion for the YTD while this year they have been net sellers to the tune of R27.384 billion in the year to date (YTD). A significant swing and a clear sign of sentiment towards South Africa, its stock market and its economy. See the full article here.
The JSE All Share Index ended Wednesday lower by -1.24% and the Rand was trading at R14.48 against the US Dollar on Wednesday 20 March 2019
20 March 2019: Yesterday we covered the release of the survey of employers and self employed, a survey conducted by Statistics South Africa on non-VAT registered businesses. It highlighted a key number of interesting facts and figures regarding South Africa's informal business sector. We highlight a few below:
The JSE All Share Index ended yesterday higher by 0.25% and the Rand was trading at R14.41 against the US Dollar on Tuesday 19 March 2019
19 March 2019: Yesterday we focused on South Africa's mining industry and showed how Coal is the new "Gold" in South Africa, with value of coal sales for January 2019 being far greater than the value of South Africa's gold sales. It is clear that the gold mining industry ins in its sunset years and it wont be long before the industry in South Africa starts dying all together. The sad reality is mines are to deep and expensive to run profitably, and a lack of stable electricity supply wont help mines and mine safety either. See the full article regarding the coal and gold sales values here.
The JSE All Share Index ended yesterday higher by 1.3% and the Rand was trading at R14.43 against the US Dollar on Friday
18 March 2019: On Friday we covered Exxaro's latest financial results, and it showed the company had a bumper year, but they did state they are struggling to compete against other coal players in the market such as Colombia, which is concerning for them if other firms are eating away at their market share. They also mentioned declining demand from South Korea, one of their biggest markets. See the full results update from Exxaro here.
The JSE All Share Index ended the day higher by 0.45% and the Rand was trading at R14.44 against the US Dollar on Friday
15 March 2019: So yesterday news broke that Standard Bank is looking to cut jobs. Standard Bank will cut around 1,200 jobs and close 91 branches as part of efforts to digitise its retail and business bank, it said. Not good considering South Africa's unemployment rate is sitting at around 27.5%. See our unemployment page for more.
14 March 2019: So yesterday the Bureau of Economic Research (BER) released their RMB/BER business confidence index for quarter 1, 2019 and it does not make for good reading. Below a short executive summary as provided by the BER.
A broad-based weakening in activity pushed confidence down to worrying lows. The RMB/BER BCI declined by a further three points to 28 in the first quarter of 2019. This is the lowest level since the 27 index points recorded in the second quarter of 2017, and before that, the deep recession of 2009. Striking in the first quarter results is how broad-based the weakness in activity has become. Since taking over the reins, President Ramaphosa has launched several initiatives to help reverse South Africa's decline. But more than this is necessary to get South Africa out of its low-growth bind. Forceful, and in some instances, unpopular structural reforms must also form part of the mix.
The JSE All Share Index ended the day higher by 0.23% and the Rand was trading at R14.28 against the US Dollar yesterday.
13 March 2019: Yesterday news was ruled by Brexit and the UK parliamentary vote on Prime Minister Theresa May's "revised" brexit deal. The results of the vote came in late last night and it voted against the deal. So the risk of a "no deal Brexit" is still there.
The JSE All Share Index ended the day higher by 0.21% and the Rand was trading at R14.36 against the US Dollar yesterday.
12 March 2019: Yesterday Famous Brands brought out a trading statement which the market is not loving today. We covered the the trading statement as well as the "Rise and Fall" of Famous Brands this morning. Read full article here. As at 12:50 the FBR share price was down -6.8% for the day.
The JSE ended yesterday up by 0.17% and the Rand was trading at R14.28 against the US Dollar.
11 March 2019: Over the weekend we covered the massive plunge in Aspen Pharmacare (APN) share price following the release of their financial results, which really disappointed the markets. Their gearing being the main concern for the market as the cost of debt ballooned on debt held outside of South Africa due to a weaker exchange rate. The share price ended the day down by 28.69% And over the last year the share price has lost -62.55% of its value. Not good news for Aspen investors. For more on Aspen's latest financial results read here.
The JSE All Share Index declined by -0.69% on Friday and the Rand was trading at R14.54 against the US Dollar
8 March 2019: Yesterday saw MTN, release their financial results for the year ending December 2018. And the markets absolutely loved the results, this after they hated the trading update a couple of days ago from the group. Just shows how quick markets are to react and over react. MTN's share price over the last year lost more than a quarter of its total value, as the markets kept pricing in disaster in their financial results. When the results released yesterday came out and it wasn't all doom and gloom the market was elated and MTN shares skyrocketed 18.06% for the day. Thats right, it almost increased one fifth of its value in one trading day. But the results weren't fantastic either, they just wasn't as bad as the markets were expecting. We value the company based on yesterday's results at around R92 a share. See our article on MTN's latest financial results here.
The JSE All Share Index ended the day down -0.39% and the Rand was trading at R14.28 against the US Dollar
7 March 2019: Yesterday we updated our South African GDP page and focussed on the relative contribution made by various industries to South Africa's overall GDP. By far the biggest industry in South Africa is the Finance, Real Estate and Business Services Industry. Government the second biggest industry in South Africa's economy and the Trade industry (wholesale, retail and motor trade) rounding out the top 3. The summary below shows the total value and relative size of the various industries in South Africa's economy for 2018.
See more about South Africa's GDP at our South Africa GDP page
The JSE All Share Index was 0.71% higher yesterday and the Rand was trading at R14.20 against the US Dollar
6 March 2019: Statistics South Africa (Stats SA) released South Africa's GDP numbers for the 4th quarter of 2018. Growth came in at 1.4% quarter on quarter seasonally adjusted and annualised. Giving South Africa an economic growth rate in 2018 of 0.8%. The market expected between 1.1% and 1.2% so the 1.4% beat estimates, and this is 1.4% growth on an upwards revised Q3:2018 growth from 2.2% to 2.6% making the 4th quarter 2018 growth slightly more impressive
See our South Africa GDP page for the latest GDP numbers.
JSE ended the day down -0.71 and the Rand strengthened against the dollar after the GDP numbers to trade at R14.18
5 March 2019: A relatively quiet day on the market with not much happening. Today however sees the release of South Africa's latest GDP, 4th quarter 2018 numbers, and the consensus is for growth to be between 1.1% and 1.2% quarter on quarter annualised and seasonally adjusted. Our worry is the increased tax burden as announced during the budget speech which will have an impact on South African consumers ability to spend, think increased fuel levy and road accident fund levy as well as increased sin taxes.
As we saw yesterday that Distell, the maker of Amarula, Klipdrift and Savanna showed volumes decline in the second half of 2018, and this will probably continue in 2019 thanks to all the added taxes imposed on citizens. And it not only affects citizens but also companies operating in South Africa. For more on Distell's financial results read here.
4 March 2019: On Friday MTN released a further trading statement regarding their expected headline earnings per share for the year ending December 2018. And based on the price action in the share the market expected a lot better from the group. With their current profit expectations they are trading at a very steep PE ratio of around 24, which is excessive for the group especially considering all their troubles in recent years with the Nigerian telecoms regulators, issues with getting cash out of Iran due to sanctions against the country etc.
Read more on MTN's latest trading statement here.
1 March 2019: A pretty quiet day on the JSE yesterday. New "dog" of the JSE, Steinhoff provided a quarterly update. To be honest we didn't read it as we are not sure if anything contained in it is true or not. With all the fraud and shady dealings there one can never be to sure.
Operator of the Johannesburg Stock Exchange (JSE), the JSE Ltd reported earnings yesterday including a special dividend which makes the full year dividends for 2018 including the special dividend R8.40 for the year. Which puts them on a dividend yield of 5%.
The first trading day of February ended in the red. In contrast to January in which every Friday ended the day in the green,. The JSE All Share has increased by 3.42% for the month of February 2019. So two consecutive months of positive returns on the JSE All Share Index
The JSE All Share ended they day down -0.53% and the Rand/Dollar was sitting at R13.95
28 February 2019: So yesterday saw the listing of MultiChoice Group (MCG) after it was unbundled from Naspers (NPN). The stock traded very actively with total value traded surpassing R3billion yesterday. By midday it traded almost R1 billion more than Naspers. For more on MultiChoice's listing see our MultiChoice listing article here
A short summary regarding MultiChoice that we wrote at the end of January 2019. "So while MultiChoice has seen strong subscriber numbers growth over the last three years, infact 29.4%, while revenue over the same period only grew by 1.4%. Their trading profit margins are in decline too. But looking at the number of shares MultiChoice plans on issuing, their trading profits and placing a PE ratio of 15 on MultiChoice shares, it will give the company a valuation of R94.8 billion (which will make MultiChoice the 21st largest firm listed on the JSE) or around R211 a share
Note we do not think that MultiChoice will trade at a PE of 15. We merely used it as a benchmark PE ratio as it is close to the overall market average. We believe in the long run MultiChoice group will trade at a PE of around 8, due to the struggling segment they are operating in. Competition from online pay per view companies such as Netflix eating into their subscriber base. At a PE of 8 we see them trading at around R112 a share.
But dont be surprised if on listing the price surges as large funds tracking the Top 40 (and dont have a lot of exposure in NPN) needs to buy the share to have it in their funds. A gradual decline after the feeding frenzy mayhem of listing will then probably set in and MCG we predict will be trading at a PE of around 7/8 a few months after listing.
The JSE All Share ended they day up 0.1% and the Rand/Dollar was sitting at R13.84
27 February 2019: Yesterday saw listed chemicals group AECI (AFE) release financial results for their year ending December 2018. And the results released looked pretty solid. With them trading at around R94.80 currently it places them on a PE of around 9 and a dividend yield of 5.4%, and this while they have cash on hand of around R14 a share (or almost 15% of the current share price). See our update on AECI's results here.
Another company that released results yesterday was Shoprite (SHP). At the end of January they released a trading statement in which they warned about declining profits and tough economic conditions, at the time they were trading at R178 a share. After the results release yesterday they were trading at around R165 (down almost 7.5% since their trading statement at the end of January 2019. To be honest the results released did not look as bad as many market participants expected and the share closed up 4.9% at R169.75. See our update in Shoprite's results here.
The JSE All Share ended they day up 0.65% and the Rand/Dollar was sitting at R13.85
26 February 2019: Yesterday saw listed petrochemicals giant, SASOL release financial results, and while they continue to struggle with delays at the Lake Charles Chemicals Project in the USA, their net profit and profit per share surged over 100% compared to the previous year. Profits driven mainly by a higher oil price than the previous year. However President Trump'a twitter attack on OPEC saw oil prices decline yesterday.
SASOL themselves said the following regarding their expectations of their operational performance and the oil price up to June 2019:
The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign exchange movements are outside our control and may impact our results, our focus remains firmly on managing factors within our control, including volume growth, cost optimisation, effective capital allocation, focused financial risk management and maintaining an investment grade credit rating. We expect an overall improved operational performance for the year ending 30 June 2019, with:
- Average Brent crude oil prices to remain between US$60/bbl and US$65/bbl.
See more regarding SASOL's financial results release yesterday here
Rand/Dollar exchange rate was sitting at R13.84 yesterday.
25 February 2019: Friday was a relatively quiet day on the markets and no real economic news being released during the day, so we spent it looking at the average price of various cuts of meat that people tend to braai over the weekends. By far the most expensive cut of meat to braai being lamb chops and the cheapest being Chicken. For more on the average cost per kilogram of various cuts of meats across all of South Africa's provinces read here.
One thing that would have come as a relief to many people was the December 2018 inflation rate, coming in at 4% year on year, making one question the rate hike announced by the South African Reserve Bank (SARB) during November 2018 even more. Based on the inflation numbers released since the rate hike announcement in November it seems that the monetary policy committee (MPC) got it wrong and we believe they increased rates in November to protect the currency rather than curb inflation. This move will stunt future economic growth and this during a period of cost push inflation (inflation caused by external cost factors ) instead of demand pull inflation (inflation caused by increased demand of consumers). One has to question the policy setting and decision making of the South African Reserve Bank Monetary Policy Committee.
22 February 2019: So yesterday saw on of South Africa's biggest listed retailers, Woolworths (WHL) release their interim financial results. And the company ended the day -2.91% down. A clear sign that the market didn't love the results. While Woolworths foods had a good run, their fashion home and beauty division is struggling. We feel they do offer excellent long term value, as our Woolworths interim results article shows, but investors will have to be very patient as the SA retail sector is really struggling. Large pharmaceuticals company, Adcock Ingram also released results yesterday and they ended the day up by 2.29%, A sign the market liked their results. So did we, see our Adcock Ingram interim results article. As our calendar shows, yesterday the market ended down by -0.37%. Rand had a good day moving from R14.00 to R13.90 (markets reacting positively) to the fact that SA's finance minster stated in the budget speech that it will NOT take on ESKOM's R400 billion in debt.
21 February: Yesterday was dominated by the Budget 2019 speech delivered by Finance Minister Tito Mboweni. The state of South Africa's government finances are dire. The image below shows the expected expenditure and revenue for government over the next three years, from 2019/2020 up to 2021/2022. And it does not make for good reading.
S&P Global Ratings expects South Africa’s ruling party to continue with policy reforms after the May 8 election, and that’s why it has a stable outlook on the nation’s credit rating.
“We think the new administration will continue on the path that they have started,” sovereign analyst Gardner Rusike said Tuesday at a conference in Johannesburg. “The best-case scenario” is that the African National Congress wins and continues with the reforms that it started, he said. “Reforms will encourage investment.”
S&P cut South Africa’s debt assessment to sub-investment grade in April 2017 after former President Jacob Zuma changed the cabinet and appointed a new finance minister and deputy minister. After Cyril Ramaphosa replaced Zuma as leader of the ANC and the country, he has taken steps to root out mismanagement at state firms such as power utility Eskom and pledged policy reforms to boost economic growth and lure investment into the country.
9 April 2019: Yesterday retail giant Pick 'n Pay brought out their latest trading update, and based on the share price performance the market liked it. Below a small snippet of their trading update. Read the full update here.
Shareholders are advised that Pick n Pay Stores Limited (“the Group”) is in the process of finalising its 2019 financial results for the 53 weeks* ended 3 March 2019, which are expected to be published on 26 April 2019.
The Group delivered turnover growth of 9.6% in the 53 weeks of the 2019 financial year. On a comparable 52-week basis, turnover increased by 7.1%, with like-for-like turnover growth of 4.8%. With selling price deflation of 0.3% over the year, the Group achieved like-for-like volume growth of 5.1%. The Group’s core South Africa division delivered comparable turnover growth of 7.4%. Through a combination of its Pick n Pay and Boxer brands, the Group demonstrated consistent market share gains across the year.
The JSE All Share Index ended the day up by 0.36% and the Rand was trading at R14.14 against the US Dollar yesterday
8 April 2019: On Friday, the JSE recorded its best week since February in light of positive local news (as Moody’s held off reviewing SA’s credit rating) and global news (US President Donald Trump announced a trade deal is about four weeks away). The All Share closed 0.11% higher while the Rand was trading at R14.06 to the US Dollar on Friday, 5 April 2019
5 April 2019: Yesterday we did an article discussing South African firms and their love hate affair with Nigeria, with it being a large and lucrative market but Nigerian regulators looking to take advantage of foreign firms by slapping massive penalties and fines on foreign companies. Read more regarding this here.
We also covered the latest JSE All share PE ratio and the long term trend in the JSE All Share PE ratio. For more on this read here.
The JSE All Share Index ended the day down by -0.37% and the Rand was trading at R14.12 against the US Dollar yesterday
4 April 2019: Yesterday we covered fashion brand Superdry's boardroom issues and the company's share price decline over the last couple of years as the shares slumped following the news that its founder, got voted back onto the board of directors and soon after that was elected the interim CEO of the group. The image below shows the share price performance of Superdry Plc (LON: SDRY) yesterday. For more on the Superdry boardroom issues read here.
The JSE All Share Index ended the day up by 1.34% and the Rand was trading at R14.13 against the US Dollar yesterday
3 April 2019: The summary below shows the total income earned by small firms per sector of the South African economy (excl agriculture), based on the 4th quarter 2018 QFS survey results as published by Statistics South Africa. The results are sorted from highest to lowest
- Trade (includes wholesale, retail and motor trade sales) : R 326 257 000 000
- Manufacturing: R 163 499 000 000
- Finance and business services: R 156 329 000 000
- Transport: R 52 333 000 000
- Construction: R 24 448 000 000
- Personal care and community services: R 24 135 000 000
- Mining and quarrying: R 7 151 000 000
- Electricity, water and gas: R 1 460 000 000
The JSE All Share Index ended the day up by 0.08% and the Rand was trading at R14.21 against the US Dollar
2 April 2019: Yesterday we covered the latest trading statistics as published by the Johannesburg Stock Exchange (JSE). Below a small snippet from the article. See the full article here.
Number of trades:
Number of trades (2019): 1 481 905
Number of trades (2018): 1 203 669
% change year on year: 23.12%
Volume traded:
Volume traded (2019): 2 295 939 000
Volume of traded (2018): 1 555 316 000
% change year on year: 47.62%
Value of trades:
Value of trades (2019): R103 145 339 000
Value of trades (2018): R97 733 761 000
% change year on year: 5.54%
We also covered the latest fuel prices that South Africans will be paying from the 3rd of April 2019. And fuel prices will be very close to record highs after latest fuel levy and road accident fund levy increases announced in the February budget speech is officially implemented.
The JSE All Share Index ended April's fools day up by 1.15% (no jokes) and the Rand was trading at R14.27 against the US Dollar
1 April 2019: At the end of last week we took a deeper look into a report published by Statistics South Africa regarding South Africa's food security, in which it focused on the percentage of households active in agricultural activities per province as well as breaking down the numbers to ask of those involved in agricultural activities how many are involved in it as its their main source of food. And the numbers are worrying. Read the article here.
The JSE All Share Index ended Friday 29 March up by 0.72% and the Rand was trading at R14.59 against the US Dollar
29 March 2019: Yesterday we covered the latest Quarterly Financial Statistics (QFS) results published by Statistics South Africa and we focused on the contribution of SMME's to total income earned by various industries. Below a snippet from yesterday's article:
So the Trade industry earned the most, with the manufacturing a relatively close second. And the Real estate and business services industry a distant 3rd position. The summary below shows the percentage contribution of the various firms to total income earned by the selected industries
- Trade: 34.79%
- Manufacturing: 31.75%
- Real estate and other business services: 12.43%
- Transport: 9.85%
- Mining and quarrying: 7.55%
- Construction: 3.63%
So lets focus on the contribution of the various firm sizes to overall income earned. Just how much is smaller firms contributing to the total income earned by companies in South Africa?
- Large: 62.32%
- Medium: 9.73%
- Small: 27.95%
The JSE All Share Index ended yesterday lower by -0.16% and the Rand was trading at R14.68 against the US Dollar
28 March 2019: So in a relatively quiet news day on the markets yesterday we decided to continue our average prices of commodities series. So we decided to take a look at peanut butter prices. I mean who doesnt like peanut butter? Yesterday we compared the average price paid per 400g tub of peanut butter per province and found the following. The average price per 400g tub of peanut butter per province for February 2019 (from highest price to lowest price)
- Free State: R 29.09
- KwaZulu-Natal: R 29.03
- North West: R 28.72
- Mpumalanga: R 28.58
- Gauteng: R 28.00
- Western Cape: R 27.68
- Northern Cape: R 27.37
- Eastern Cape: R 27.24
See the full article here.
27 March 2019: EOH released a SENS on 25 March providing investors with an update regarding their Microsoft Channel Agreement that was cancelled by Microsoft supposedly due to concerns regarding EOH's business ethics and practices. In their SENS they gave their opinion on the impact the cancellation of this agreement will have on them. It follows below.
The impact of the latest notices is still being assessed, but early indications are that:
- Our Microsoft related bespoke application development, its largest business, will be predominantly unimpacted.
- Any long-term impact on the IP businesses, including the core IP that has been developed for re-sale utilising Microsoft technologies, can be mitigated through migration to other cloud providers.
- Our CRM (Dynamics 365) and Productivity Solutions business will be impacted in terms of access to partner support portals.
- Our Microsoft-related managed services business and clients will experience no impact as these services are provided on client infrastructure and platforms.
- Our Cloud business and platform business and the re-sale of Azure cloud offerings will be impacted in the short-term and EOH is in discussions to find a solution to ensure continuity of service and revenue streams.
While EOH's assessed impact of the latest notification on profit before tax is estimated at less than R20 million during the current financial year, this will bring the total impact of Microsoft exposure to R30 million profit before tax. Moreover, there is an overall medium to long-term go-to-market and credential impact and risk in not retaining Microsoft Gold Partner status. EOH apologises for any uncertainty and inconvenience caused and will continue to use our best endeavours to ensure there are no outages or disruptions to any client services as a result of the terminations.
For more on the EOH/Microsoft Sage see our EOH/Microsoft page
26 March 2019: Yesterday we looked at the latest trading statistics released by the JSE. And it showed that for once foreigners were net buyers of SA listed shares. All be it very small net buyers. But for the year to date (YTD) they remain strong net sellers of JSE listes stocks. Find out more about the latest JSE trading statistics here.
The JSE All Share Index ended lower by -1.44% yesterday and the Rand was trading at R14.48 against the US Dollar
25 March 2019: According to Statistics South Africa, the February 2019 inflation rate of 4.1% was nudged higher from 4% in January 2019 by medical aid and transport costs. And with the new levies and taxes on various products such as alcohol and tobacco and fuel levies and road accident fund levies announced by Minister Mboweni in the budget speech set to kick in in April, we expect to see inflation continue ticking up from current levels. We do however expect the South Africa Reserve Bank (SARB) to hold on raising interest rates due to the struggling economy. For more on South Africa's latest inflation drivers see here.
The JSE All Share Index ended Friday lower by -0.07% and the Rand was trading at R14.34 against the US Dollar on Friday 22 March 2019
22 March 2019: According to the trading statistics released by the JSE for the week ending 15 March 2019, foreigners continue to be net sellers of JSE listed shares. And the value of the net sale of JSE listed shares for the year to date (YTD) compared to last year over the same time period.
- Net sales/Purchases (2019): -R27.384 billion
- Net sales/Purchases (2018): R21.340 billion
So a year ago foreigners were net buyers of SA listed shares to the value of R21.340 billion for the YTD while this year they have been net sellers to the tune of R27.384 billion in the year to date (YTD). A significant swing and a clear sign of sentiment towards South Africa, its stock market and its economy. See the full article here.
The JSE All Share Index ended Wednesday lower by -1.24% and the Rand was trading at R14.48 against the US Dollar on Wednesday 20 March 2019
20 March 2019: Yesterday we covered the release of the survey of employers and self employed, a survey conducted by Statistics South Africa on non-VAT registered businesses. It highlighted a key number of interesting facts and figures regarding South Africa's informal business sector. We highlight a few below:
- Unemployment was the main reason why most people started their businesses, accounting for more than 60% of the business owners
- Seven in every ten persons running non-VAT registered businesses used their own money to start the business.
- More than 70% of non-VAT registered businesses did not keep financial records. In 2017, 67,8% of persons running these businesses had less than matric qualification.
- More than 90% of persons who ran informal businesses did so without a licence or permit, and the majority of those who had licences or permits (40,2%) obtained them from a municipality/ provincial authority.
- Gauteng (28,6%), followed by Limpopo (16,5%) and KwaZulu-Natal (14,7%), had the highest share of informal businesses.
The JSE All Share Index ended yesterday higher by 0.25% and the Rand was trading at R14.41 against the US Dollar on Tuesday 19 March 2019
19 March 2019: Yesterday we focused on South Africa's mining industry and showed how Coal is the new "Gold" in South Africa, with value of coal sales for January 2019 being far greater than the value of South Africa's gold sales. It is clear that the gold mining industry ins in its sunset years and it wont be long before the industry in South Africa starts dying all together. The sad reality is mines are to deep and expensive to run profitably, and a lack of stable electricity supply wont help mines and mine safety either. See the full article regarding the coal and gold sales values here.
The JSE All Share Index ended yesterday higher by 1.3% and the Rand was trading at R14.43 against the US Dollar on Friday
18 March 2019: On Friday we covered Exxaro's latest financial results, and it showed the company had a bumper year, but they did state they are struggling to compete against other coal players in the market such as Colombia, which is concerning for them if other firms are eating away at their market share. They also mentioned declining demand from South Korea, one of their biggest markets. See the full results update from Exxaro here.
The JSE All Share Index ended the day higher by 0.45% and the Rand was trading at R14.44 against the US Dollar on Friday
15 March 2019: So yesterday news broke that Standard Bank is looking to cut jobs. Standard Bank will cut around 1,200 jobs and close 91 branches as part of efforts to digitise its retail and business bank, it said. Not good considering South Africa's unemployment rate is sitting at around 27.5%. See our unemployment page for more.
14 March 2019: So yesterday the Bureau of Economic Research (BER) released their RMB/BER business confidence index for quarter 1, 2019 and it does not make for good reading. Below a short executive summary as provided by the BER.
A broad-based weakening in activity pushed confidence down to worrying lows. The RMB/BER BCI declined by a further three points to 28 in the first quarter of 2019. This is the lowest level since the 27 index points recorded in the second quarter of 2017, and before that, the deep recession of 2009. Striking in the first quarter results is how broad-based the weakness in activity has become. Since taking over the reins, President Ramaphosa has launched several initiatives to help reverse South Africa's decline. But more than this is necessary to get South Africa out of its low-growth bind. Forceful, and in some instances, unpopular structural reforms must also form part of the mix.
The JSE All Share Index ended the day higher by 0.23% and the Rand was trading at R14.28 against the US Dollar yesterday.
13 March 2019: Yesterday news was ruled by Brexit and the UK parliamentary vote on Prime Minister Theresa May's "revised" brexit deal. The results of the vote came in late last night and it voted against the deal. So the risk of a "no deal Brexit" is still there.
The JSE All Share Index ended the day higher by 0.21% and the Rand was trading at R14.36 against the US Dollar yesterday.
12 March 2019: Yesterday Famous Brands brought out a trading statement which the market is not loving today. We covered the the trading statement as well as the "Rise and Fall" of Famous Brands this morning. Read full article here. As at 12:50 the FBR share price was down -6.8% for the day.
The JSE ended yesterday up by 0.17% and the Rand was trading at R14.28 against the US Dollar.
11 March 2019: Over the weekend we covered the massive plunge in Aspen Pharmacare (APN) share price following the release of their financial results, which really disappointed the markets. Their gearing being the main concern for the market as the cost of debt ballooned on debt held outside of South Africa due to a weaker exchange rate. The share price ended the day down by 28.69% And over the last year the share price has lost -62.55% of its value. Not good news for Aspen investors. For more on Aspen's latest financial results read here.
The JSE All Share Index declined by -0.69% on Friday and the Rand was trading at R14.54 against the US Dollar
8 March 2019: Yesterday saw MTN, release their financial results for the year ending December 2018. And the markets absolutely loved the results, this after they hated the trading update a couple of days ago from the group. Just shows how quick markets are to react and over react. MTN's share price over the last year lost more than a quarter of its total value, as the markets kept pricing in disaster in their financial results. When the results released yesterday came out and it wasn't all doom and gloom the market was elated and MTN shares skyrocketed 18.06% for the day. Thats right, it almost increased one fifth of its value in one trading day. But the results weren't fantastic either, they just wasn't as bad as the markets were expecting. We value the company based on yesterday's results at around R92 a share. See our article on MTN's latest financial results here.
The JSE All Share Index ended the day down -0.39% and the Rand was trading at R14.28 against the US Dollar
7 March 2019: Yesterday we updated our South African GDP page and focussed on the relative contribution made by various industries to South Africa's overall GDP. By far the biggest industry in South Africa is the Finance, Real Estate and Business Services Industry. Government the second biggest industry in South Africa's economy and the Trade industry (wholesale, retail and motor trade) rounding out the top 3. The summary below shows the total value and relative size of the various industries in South Africa's economy for 2018.
- Finance, real estate and business services: R640 368 228 613 (22.39%)
- General government services: R478 692 538 116 (16.74%)
- Trade, catering and accommodation: R431 668 773 614 (15.10%)
- Manufacturing: R386 883 873 805 (13.53%)
- Transport, storage and communication: R273 192 556 983 (9.55%)
- Mining and quarrying: R230 514 386 567 (8.06%)
- Personal services: R170 530 340 058 (5.96%)
- Construction: R107 665 136 484 (3.77%)
- Agriculture, forestry and fishing: R74 157 433 156 (2.59%)
- Electricity, gas and water: R65 931 792 241 (2.31%)
See more about South Africa's GDP at our South Africa GDP page
The JSE All Share Index was 0.71% higher yesterday and the Rand was trading at R14.20 against the US Dollar
6 March 2019: Statistics South Africa (Stats SA) released South Africa's GDP numbers for the 4th quarter of 2018. Growth came in at 1.4% quarter on quarter seasonally adjusted and annualised. Giving South Africa an economic growth rate in 2018 of 0.8%. The market expected between 1.1% and 1.2% so the 1.4% beat estimates, and this is 1.4% growth on an upwards revised Q3:2018 growth from 2.2% to 2.6% making the 4th quarter 2018 growth slightly more impressive
See our South Africa GDP page for the latest GDP numbers.
JSE ended the day down -0.71 and the Rand strengthened against the dollar after the GDP numbers to trade at R14.18
5 March 2019: A relatively quiet day on the market with not much happening. Today however sees the release of South Africa's latest GDP, 4th quarter 2018 numbers, and the consensus is for growth to be between 1.1% and 1.2% quarter on quarter annualised and seasonally adjusted. Our worry is the increased tax burden as announced during the budget speech which will have an impact on South African consumers ability to spend, think increased fuel levy and road accident fund levy as well as increased sin taxes.
As we saw yesterday that Distell, the maker of Amarula, Klipdrift and Savanna showed volumes decline in the second half of 2018, and this will probably continue in 2019 thanks to all the added taxes imposed on citizens. And it not only affects citizens but also companies operating in South Africa. For more on Distell's financial results read here.
4 March 2019: On Friday MTN released a further trading statement regarding their expected headline earnings per share for the year ending December 2018. And based on the price action in the share the market expected a lot better from the group. With their current profit expectations they are trading at a very steep PE ratio of around 24, which is excessive for the group especially considering all their troubles in recent years with the Nigerian telecoms regulators, issues with getting cash out of Iran due to sanctions against the country etc.
Read more on MTN's latest trading statement here.
1 March 2019: A pretty quiet day on the JSE yesterday. New "dog" of the JSE, Steinhoff provided a quarterly update. To be honest we didn't read it as we are not sure if anything contained in it is true or not. With all the fraud and shady dealings there one can never be to sure.
Operator of the Johannesburg Stock Exchange (JSE), the JSE Ltd reported earnings yesterday including a special dividend which makes the full year dividends for 2018 including the special dividend R8.40 for the year. Which puts them on a dividend yield of 5%.
The first trading day of February ended in the red. In contrast to January in which every Friday ended the day in the green,. The JSE All Share has increased by 3.42% for the month of February 2019. So two consecutive months of positive returns on the JSE All Share Index
The JSE All Share ended they day down -0.53% and the Rand/Dollar was sitting at R13.95
28 February 2019: So yesterday saw the listing of MultiChoice Group (MCG) after it was unbundled from Naspers (NPN). The stock traded very actively with total value traded surpassing R3billion yesterday. By midday it traded almost R1 billion more than Naspers. For more on MultiChoice's listing see our MultiChoice listing article here
A short summary regarding MultiChoice that we wrote at the end of January 2019. "So while MultiChoice has seen strong subscriber numbers growth over the last three years, infact 29.4%, while revenue over the same period only grew by 1.4%. Their trading profit margins are in decline too. But looking at the number of shares MultiChoice plans on issuing, their trading profits and placing a PE ratio of 15 on MultiChoice shares, it will give the company a valuation of R94.8 billion (which will make MultiChoice the 21st largest firm listed on the JSE) or around R211 a share
Note we do not think that MultiChoice will trade at a PE of 15. We merely used it as a benchmark PE ratio as it is close to the overall market average. We believe in the long run MultiChoice group will trade at a PE of around 8, due to the struggling segment they are operating in. Competition from online pay per view companies such as Netflix eating into their subscriber base. At a PE of 8 we see them trading at around R112 a share.
But dont be surprised if on listing the price surges as large funds tracking the Top 40 (and dont have a lot of exposure in NPN) needs to buy the share to have it in their funds. A gradual decline after the feeding frenzy mayhem of listing will then probably set in and MCG we predict will be trading at a PE of around 7/8 a few months after listing.
The JSE All Share ended they day up 0.1% and the Rand/Dollar was sitting at R13.84
27 February 2019: Yesterday saw listed chemicals group AECI (AFE) release financial results for their year ending December 2018. And the results released looked pretty solid. With them trading at around R94.80 currently it places them on a PE of around 9 and a dividend yield of 5.4%, and this while they have cash on hand of around R14 a share (or almost 15% of the current share price). See our update on AECI's results here.
Another company that released results yesterday was Shoprite (SHP). At the end of January they released a trading statement in which they warned about declining profits and tough economic conditions, at the time they were trading at R178 a share. After the results release yesterday they were trading at around R165 (down almost 7.5% since their trading statement at the end of January 2019. To be honest the results released did not look as bad as many market participants expected and the share closed up 4.9% at R169.75. See our update in Shoprite's results here.
The JSE All Share ended they day up 0.65% and the Rand/Dollar was sitting at R13.85
26 February 2019: Yesterday saw listed petrochemicals giant, SASOL release financial results, and while they continue to struggle with delays at the Lake Charles Chemicals Project in the USA, their net profit and profit per share surged over 100% compared to the previous year. Profits driven mainly by a higher oil price than the previous year. However President Trump'a twitter attack on OPEC saw oil prices decline yesterday.
SASOL themselves said the following regarding their expectations of their operational performance and the oil price up to June 2019:
The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign exchange movements are outside our control and may impact our results, our focus remains firmly on managing factors within our control, including volume growth, cost optimisation, effective capital allocation, focused financial risk management and maintaining an investment grade credit rating. We expect an overall improved operational performance for the year ending 30 June 2019, with:
- Average Brent crude oil prices to remain between US$60/bbl and US$65/bbl.
See more regarding SASOL's financial results release yesterday here
Rand/Dollar exchange rate was sitting at R13.84 yesterday.
25 February 2019: Friday was a relatively quiet day on the markets and no real economic news being released during the day, so we spent it looking at the average price of various cuts of meat that people tend to braai over the weekends. By far the most expensive cut of meat to braai being lamb chops and the cheapest being Chicken. For more on the average cost per kilogram of various cuts of meats across all of South Africa's provinces read here.
One thing that would have come as a relief to many people was the December 2018 inflation rate, coming in at 4% year on year, making one question the rate hike announced by the South African Reserve Bank (SARB) during November 2018 even more. Based on the inflation numbers released since the rate hike announcement in November it seems that the monetary policy committee (MPC) got it wrong and we believe they increased rates in November to protect the currency rather than curb inflation. This move will stunt future economic growth and this during a period of cost push inflation (inflation caused by external cost factors ) instead of demand pull inflation (inflation caused by increased demand of consumers). One has to question the policy setting and decision making of the South African Reserve Bank Monetary Policy Committee.
22 February 2019: So yesterday saw on of South Africa's biggest listed retailers, Woolworths (WHL) release their interim financial results. And the company ended the day -2.91% down. A clear sign that the market didn't love the results. While Woolworths foods had a good run, their fashion home and beauty division is struggling. We feel they do offer excellent long term value, as our Woolworths interim results article shows, but investors will have to be very patient as the SA retail sector is really struggling. Large pharmaceuticals company, Adcock Ingram also released results yesterday and they ended the day up by 2.29%, A sign the market liked their results. So did we, see our Adcock Ingram interim results article. As our calendar shows, yesterday the market ended down by -0.37%. Rand had a good day moving from R14.00 to R13.90 (markets reacting positively) to the fact that SA's finance minster stated in the budget speech that it will NOT take on ESKOM's R400 billion in debt.
21 February: Yesterday was dominated by the Budget 2019 speech delivered by Finance Minister Tito Mboweni. The state of South Africa's government finances are dire. The image below shows the expected expenditure and revenue for government over the next three years, from 2019/2020 up to 2021/2022. And it does not make for good reading.
So lets break down the expected revenue and expenditure of the South African government as shown in the image above.
2019/2020
2020/2021
2021/2022
At R252 billion SA's government will borrow roughly R1.14 billion a day! Let that sink in. Imagine how many houses government could build for the poor with just the interest that will be paid on all these borrowings. See more regarding South Africa's Fiscal policy here.
Rand liked the budget as it strengthened on the back of the announcement that government will not take on ESKOM's R400 billion in debt, but is setting aside R69billion over the next three years for its restructuring. Rand currently at R14.00/$1
2019/2020
- Revenue: R1.583 trillion
- Expenditure: R1.826 trillion
- Deficit: R243 billion
2020/2021
- Revenue: R1.696 trillion
- Expenditure: R1.949 trillion
- Deficit: R253 billion
2021/2022
- Revenue: R1.837 trillion
- Expenditure: R2.089 trillion
- Deficit: R252 billion
At R252 billion SA's government will borrow roughly R1.14 billion a day! Let that sink in. Imagine how many houses government could build for the poor with just the interest that will be paid on all these borrowings. See more regarding South Africa's Fiscal policy here.
Rand liked the budget as it strengthened on the back of the announcement that government will not take on ESKOM's R400 billion in debt, but is setting aside R69billion over the next three years for its restructuring. Rand currently at R14.00/$1
20 February: So today is #budget2019 day. In which the Finance Minister provides details and plans regarding South Africa's government's income earned, and planned expenses as well as potential borrowings in the year to come. On the main agenda will be taxes taxes and more taxes, as we suggested in our update from yesterday below. EOH continued its slide ending the day down a further -16.4%. It is now down 89% over the last 3 years, and this year alone its down by -52%.
On the positive side Kumbo Iron Ore released results yesterday that looked pretty good, especially considering the strong increase in iron ore prices since the start of the year has not filtered through to their financial results yet. See more about Kumba's latest financial results here.
19 February: So EOH continues to hog the stock market headlines, with the share declining a further 10.4% to close at R17.47 a share after providing a SENS update regarding Microsoft's intention to cancel its channel partner agreement. The SENS to be honest did not provide a lot of details though. See more about EOH's woes here.
Be prepared to see loads of articles today discussing what could potentially happen in tomorrow's budget speech. We can summarize it quickly as follows:
That pretty much summarizes what will happen in South Africa's budget speech tomorrow. Rand/$ exchange rate is currently sitting at R14.10/$1
17 February: While mainstream news in South Africa was dominated by ESKOM and its loadshedding, the possibility of its imminent collapse, conspiracy theories regarding whether the crises is manufactured at ESKOM so that IPP's can get a foot in the door into power supply agreements with ESKOM, or sabotage due to SONA statement from the president of South Africa stating that ESKOM will be split into 3 entities, the news of a collapse of EOH's share price was to a large extent overlooked. EOH and Microsoft is at loggerheads and it seems like Microsoft withdrew EOH's license to sell and supply services to Microsoft users. This saw the share price of EOH, which was already under pressure melt down completely. The screen shots below shows EOH was the most viewed share on Sharenet on Friday, and the other screenshot shows the share price decline of EOH during the last couple of days. In the last 3 years EOH lost -87% of their value, and year to date the stock is down -44.8%. Not a good year if you a EOH investor.
On the positive side Kumbo Iron Ore released results yesterday that looked pretty good, especially considering the strong increase in iron ore prices since the start of the year has not filtered through to their financial results yet. See more about Kumba's latest financial results here.
19 February: So EOH continues to hog the stock market headlines, with the share declining a further 10.4% to close at R17.47 a share after providing a SENS update regarding Microsoft's intention to cancel its channel partner agreement. The SENS to be honest did not provide a lot of details though. See more about EOH's woes here.
Be prepared to see loads of articles today discussing what could potentially happen in tomorrow's budget speech. We can summarize it quickly as follows:
- Increased "sin taxes", fuel levies, road accident fund levies
- Little to no tax bracket creep relief
- Continued money set aside for bailing out ESKOM and SAA
- Possibly higher personal income tax rates for the higher income earners
- Increased government wage bill as agreements with unions are sitting at projected inflation +1% for lower income earners
- Moaning about poor tax collection due to compliance and weak economy
- Tighten the belt tough times ahead
That pretty much summarizes what will happen in South Africa's budget speech tomorrow. Rand/$ exchange rate is currently sitting at R14.10/$1
17 February: While mainstream news in South Africa was dominated by ESKOM and its loadshedding, the possibility of its imminent collapse, conspiracy theories regarding whether the crises is manufactured at ESKOM so that IPP's can get a foot in the door into power supply agreements with ESKOM, or sabotage due to SONA statement from the president of South Africa stating that ESKOM will be split into 3 entities, the news of a collapse of EOH's share price was to a large extent overlooked. EOH and Microsoft is at loggerheads and it seems like Microsoft withdrew EOH's license to sell and supply services to Microsoft users. This saw the share price of EOH, which was already under pressure melt down completely. The screen shots below shows EOH was the most viewed share on Sharenet on Friday, and the other screenshot shows the share price decline of EOH during the last couple of days. In the last 3 years EOH lost -87% of their value, and year to date the stock is down -44.8%. Not a good year if you a EOH investor.
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15 February: Valentines day provided to be a pretty boring trading day on the JSE yesterday with the market ending down -0.03%. So basically it went nowhere yesterday. News sites were dominated by the claims from COPE leader Terror Lekota that current president Cyril Ramaphosa sold out his comrades to the special branch which saw them being sent to Robin Island. In the response to this allegation the president took on the leader of COPE in his response to his #SONAdebate. In the meantime loadshedding stage 2 continues while ESKOM struggles along. Bad news for the South African government's finances as they will probably take on more of ESKOM's debt which could lead to further investment downgrades for South Africa as the markets fear that government will fail on their debt obligations as tax revenues struggle to grow due to poor economic growth. Ratings downgrades leads to increased borrowing costs for South Africa's government which in turn means a greater chunk of future taxes collected goes towards servicing debt instead of paying for services to be delivered to the people of South Africa.
14 February: ESKOM continues with loadshedding. A slight improvement is the fact that loadshedding Stage 2 is being implemented on Valentines day 2019. Yesterday private schools company, Curro Holdings, which was spun off years ago from Paladin Capital (PSG Group's former private equity arm) reported financial results for the year ending December 2018. As at end of December 2018 they had 51 300 learners on their book, and the reported a net profit of R240 odd million, which equates to a net profit of around R4700 per learner. They also announced the maiden dividend of 12c a share, a very very modest dividend to start off with we might add. See more on Curro's financial results announced here.
13 February: ESKOM continues with their program of loadshedding. Currently sitting at Stage 3 loadshedding. This will hurt South Africa's Q1:2019 GDP growth numbers. And not good for an economy that is struggling to gain positive momentum and creating jobs. The latest unemployment rate was announced and came in at 27.1% See our unemployment page.
On a positive note, SPAR (SPP) is the one retailer bucking the trend of not seeing a share price slump after a trading update. Spar's trading update was well received by the market. Read more about their trading update here.
12 February 2019: So as South Africa woke up on Monday morning 11 February 2019 they were greated by thy announcement by ESKOM that stage 2 load shedding will be implemented due to a lack of diesel and water resources. A few hours later ESKOM plunged South Africa into even deeper crisis when it announced stage 4 loadshedding as 7 more power generation units tripped within a 5 hour period. This is what you get when cadres are deployed to run massive complex and critical businesses such as ESKOM, and those in charge are allowed to loot and plunder to their hart's content.
January 2019 saw a large number of South African listed retailers provide trading updates and the market did not like what they were seeing. Massive retailers such as Mr Price, Woolworths, Massmart all saw significant share price declines after profit announces. But it wasn't just limited to the retailers. Vodacom for example reported relatively weak earnings and they got smacked for it. Companies finding the going very tough in South Africa right now.
14 February: ESKOM continues with loadshedding. A slight improvement is the fact that loadshedding Stage 2 is being implemented on Valentines day 2019. Yesterday private schools company, Curro Holdings, which was spun off years ago from Paladin Capital (PSG Group's former private equity arm) reported financial results for the year ending December 2018. As at end of December 2018 they had 51 300 learners on their book, and the reported a net profit of R240 odd million, which equates to a net profit of around R4700 per learner. They also announced the maiden dividend of 12c a share, a very very modest dividend to start off with we might add. See more on Curro's financial results announced here.
13 February: ESKOM continues with their program of loadshedding. Currently sitting at Stage 3 loadshedding. This will hurt South Africa's Q1:2019 GDP growth numbers. And not good for an economy that is struggling to gain positive momentum and creating jobs. The latest unemployment rate was announced and came in at 27.1% See our unemployment page.
On a positive note, SPAR (SPP) is the one retailer bucking the trend of not seeing a share price slump after a trading update. Spar's trading update was well received by the market. Read more about their trading update here.
12 February 2019: So as South Africa woke up on Monday morning 11 February 2019 they were greated by thy announcement by ESKOM that stage 2 load shedding will be implemented due to a lack of diesel and water resources. A few hours later ESKOM plunged South Africa into even deeper crisis when it announced stage 4 loadshedding as 7 more power generation units tripped within a 5 hour period. This is what you get when cadres are deployed to run massive complex and critical businesses such as ESKOM, and those in charge are allowed to loot and plunder to their hart's content.
January 2019 saw a large number of South African listed retailers provide trading updates and the market did not like what they were seeing. Massive retailers such as Mr Price, Woolworths, Massmart all saw significant share price declines after profit announces. But it wasn't just limited to the retailers. Vodacom for example reported relatively weak earnings and they got smacked for it. Companies finding the going very tough in South Africa right now.