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JSE Direct with Simon Brown

Weekly podcast hosted by Simon Brown covering the JSE and listed companies.
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JSE Direct with Simon Brown
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Sep 15, 2021

Simon Shares

  • Clicks (JSE code: CLS) revised trading update, previous EPS growth was 8%-13%. Now revised to 0%-3%.
  • Afrocentric (JSE code: ACT). Great little stock.
  • Not a bad update from Famous Brands* (JSE code: FBR)
  • US inflation for August was 5.3%.
  • US poverty levels went down in 2020, during the pandemic.
  • AB Inbev (JSE code: ANH) just keeps on falling, why?
  • PGMs getting crushed. Platinum down at US$934, palladium around US$2,000 and rhodium US$13,300. What's happening? When does it reverse?

* I hold ungeared positions.

  •  
Sep 13, 2021

Offshore

/ PayPal announced plans to buy Japanese "Buy Now, Pay Later" BNPL company Paidy Inc. for $2.7B

/ US judge rule against Apple and in Epic Games favour in antitrust lawsuit; judge says Apple's conduct in enforcing anti-steering restrictions is anticompetitive

/ China Evergrande Group default risk ($300bn)

/ U.S. Senate Democrats float stock buyback tax as part of $3.5 trillion bill

/ The World’s Shippers Are Earning The Most Money Since 2008

Local

/ Local Q2 GDP, we’re 1.4% below pre-pandemic levels

/ SARB governor Lesetja Kganyago suggests we work towards a 3% inflation target, with a 2-4% tolerance range

/ FSCA fines Viceroy R50m

/ Result; Shoprite

/ Results; Momentum

/ Results; Bidvest

Sep 8, 2021

Simon Shares

  • Shoprite* (JSE code: SHP) results. Christo Wiese gets R342m in dividends. 21million consumers using their Xtra Savings and 1.5million downloads of the Sixty60 app.
  • The market did not much like the Murray & Roberts* (JSE code: MUR) results.
  • Old Mutual updates 2021 GDP forecast to 5.5%. This is after Stats SA released GDP for Q2 QonQ at 1.2% (YonY 19.3%) and better than expected. The economy remains 1.4% below pre-covid levels.
  • FSCA fines Viceroy R50million. They won't pay.
  • SARB governor Kganyago Lesetja suggests we work towards a 3% inflation target, with a 2-4% tolerance range.
  • New infrastructure ETF from Satrix.

* I hold ungeared positions.

Upcoming events;

Sep 6, 2021

Offshore

/ US jobs data slows. Likely means tapering not just yet even as ECB starts talking tapering.

/ New China restriction, kids gaming limited to one hour a day on Friday, weekend days and public holidays

/ Pfizer has recognized over $10 billion in profits from the COVID-19 vaccine alone, making it the best drug introduction in history.

/ After hurricane Ida oil recovery begins with ports and refineries restarting but most production in the Gulf of Mexico is still shut.

/ Chip shortage holds back German car sales in August

Local

/ SA trade surplus at R37bn July vs R55bn June. YTD R290bn.

/ Mediclinic plans to go green in R2.2bn renewable energy deal

/ Results; Murray & Roberts

/ Results; Discovery

/ Results; Implats

/ Results; Aspen

Sep 1, 2021

Simon Shares

  • Jackson Hole
  • Bonang Mohale and his Serialong trust converts a Purple Group* (JSE code: PPE) loan into 11.46% shares in the group
  • ADvTECH* (JSE code: ADH)
  • Stadio (JSE code: SDO)
  • Cashbuild (JSE code: CSB)
  • Sun International (JSE code: SUI)
  • MAS Real Estate (JSE code: MSP)
  • Motus (JSE code: MTH)
  • Woolies* (JSE code: WHL)

 

* I hold ungeared positions.

Upcoming events;

Aug 30, 2021

Offshore

/ Jackson Hole. Powell says nothing new.

/ TSMC, the world's largest maker of semiconductor chips, says it's raising its prices by about 20%

/ Hurricane Ida heading for the Gulf of Mexico, shutting down oil production.

/ China reportedly weighs ban on U.S. IPOs from domestic tech companies with sensitive data


Local

/ Bonang Mohale and his Serialong trust converts a Purple Group loan into 11.46% shares in the group

/ Unemployment 34.4%

/ South African GDP rebased. The economy is 11% larger than previously measured. It is still the second-largest economy in Africa, after Nigeria.

/ National treasury says KZN July violence will take 0.7%-0.9% off 2021 GDP.

/ Sibanye Stillwater results

/ Woolies results

Aug 25, 2021

Simon Shares

  • Jackson Hole
  • South African GDP rebased. The economy is 11% larger than previously measured. It is still the second-largest economy in Africa, after Nigeria.
  • South Africa unemployment 34.4%.
  • National treasury says KZN July violence will take 0.7%-0.9% off 2021 GDP.
  • New oil & copper ETNs

Upcoming events;

Aug 23, 2021

Offshore

/ New Zealand going into lockdown, the world is getting vaccinated but the pandemic is far from over.

/ Pfizer expected to get full FDA approval for its covid vaccine this week. A whole new business (covid jabs & mRNA possibilities).

/ Tesla wants to build an AI robot

/ Jackson Hole this week

/ China securities regulator signals willingness to work with the US on audits

Local

/ South Africa inflation lower at 4.6% in July 2021.

/ Sasol results

/ Shoprite / Massmart deal

/ ARB Holdings results

/ Metair results

Aug 18, 2021

Simon Shares

  • JSE is broken.
  • 100 MW gazetted.
  • Renergen* (JSE code: REN) update.
  • South Africa inflation lower at 4.6% in July 2021.
  • Tencent (Hong Kong code: 700) results.
  • Resource stocks ex-div. But still lots of pain. Super BHP Group* (JSE code: BHP) results.
  • New Clean energy and water ETNs listed.

* I hold ungeared positions.

Upcoming events;


 

Aug 16, 2021

Offshore

/ US inflation comes in as expected

/ Britain's GDP grew by 4.8% in the second quarter of this year, leaving the economy just 2.2% below its pre-pandemic level

/ Google employees who work from home could lose money

/ US infrastructure bill moving forward

/ India to unveil US$1.35trillion infrastructure bill

Local

/ 100mw power generation laws gazetted

/ Naspers / Prosus swap is unconditional

/ Strong Merafe results

/ MTN results and Sanlam tie up

/ Nedbank results

/ Exxaro and Thungela results

Aug 2, 2021

Offshore

/ US GDP 6.5% , below expectations but the economy now larger than pre-pandemic

/ US moving forward with an infrastructure bill

/ The U.S. debt ceiling officially became operative again on Sunday after a two-year suspension

/ Amazon results see stock down 7%

/ Alphabet results & $50bn buyback

/ Microsoft results, LinkedIn does +$10bn

Local

/ Tencent woes hit JSE (but all-time closing high on Thursday)

/ Results; Anglo Platinum, Kumba Iron Ore and Anglo American

/ Liberty2Degrees results

/ ArcelorMittal South Africa results

/ Treasury considering access to retirement savings

Jul 28, 2021

Simon Shares

  • Wild week for Naspers (JSE code: NPN), Prosus (JSE code: PRX) as Tencent (Hong Kong code: 700) got slapped down by the Chinese government.
  • We're back at level 3, adjusted. Alcohol sales are allowed and Distell (JSE code: DGH) put out another great trading update. No doubt better if no alcohol bans, but the argument that your industry is under threat wears thin after such an update.
  • President Ramaphosa also announced the return of the pandemic grant to the unemployed at R350 a month until March 2022. This pays to some 9.5million South African and means just over R3billion a month into the economy.
    • How do we pay for it? Dividend tax on these super dividends.
  • Apple $21.7billion in profits, almost doubling the previous year.
  • Alphabet nearly tripled its profits to $18.5billion as advertising revenue grew 69%.
  • Microsoft profits hit $19.1B, up 42% from the previous year.
  • The market capitalization of Amazon, Apple, Facebook, Alphabet, and Microsoft is now over 30% of the entire S&P 500 index and over 40% for the Nasdaq100.
  • Tigerbrands (JSE code: TBS) are recalling 20million tins.
  • Two new ETFs coming to market. Global healthcare from Sygnia and a diverse and inclusive ETF from Satrix.

Upcoming events;


Forget super cycle, hello super dividends

  • Anglo Platinum (JSE code: AMS) paid an R175.00 total dividend.
  • Kumba Iron Ore (JSE code: KIO) paid a 7270c.

In both cases, this amounted to a dividend yield (DY) of around 10% at the interim stage.

No share buybacks as Anglo American (JSE code: AGL) own a significant majority of the shares and likely want the dividend back at home.

The question is will other miners be as generous or will they do some share buybacks as well?

If commodity prices stay where they are, we'll see the same again in six months and into 2022?

If prices remain the same to the end of 2022 (big if?) we'll get a 40% return from just dividends?

This is what super profits look like.


 

Jul 26, 2021

Offshore

/ New closing highs for S&P500 & Nasdaq. But Russel2000 is lagging.

/ Apple delays back to the office to October

/ Twitter and Snap - good results

/ China regulator bars Tencent from exclusive rights in online music

/ Big results due this week; Apple & Amazon. So far reported results have been very strong.

Local

/ Rioting impact, retail about 8% of store space impacted. REITs bigger concern.

/ Local inflation drops

/ Anglo Americana and BHP production updates

/ City lodge sells East African assets

/ Cashbuild update

/ Distell update

Jul 21, 2021

Simon Shares

  • We now have updates from listed retailers as to the damage caused by last weeks rioting. Chantal Marx ran the data and says we saw almost 1,700 stores looted or closed due to the rioting and this is about 8% of the retailers' local footprint and some 5% of global footprint. This is a significant number, but considering many are open for trade again, with many opening last weekend already. The impact on earnings is likely to be very modest, if at all.
  • PwC expects last weeks riots to take about 0.4% off local GDP for 2021. They already had a low expectation of under 3%, but that drop of 0.4% does illustrate how listed retailers may be okay, the real pain is in the unlisted and especially the small one-off store.
  • Local CPI dropped a little in June to 4.9% (5.2% in May).
  • The population of South Africa was estimated to be 60.14million at mid-year 2021, an increase of about 604,281 (1.01%) since mid-year 2020.
  • Stellar production updates from Anglo American (JSE code: AGL) and BHP* (JSE code: BHP). They are both firing on all cylinders, even if there have been some issues (iron ore rail line for example). But they're largely debt-free, no massive projects or M&A activity and Greg Katzenellenbogen says the worlds top miners will make almost US$120billion profit this year, double from last year. So massive dividends?
  • Sygnia did not steal your dividend.

* I hold ungeared positions.

Upcoming events;

Risk is good

I got an email from a listener asking about risk free investments on the JSE. Thing is, there is no risk free on the JSE - and that's a good thing.

Without risk there would be no reward.

When I am looking for investments, I always look for the good things about the business. Margins, growth, product and the like.

But I also dig into the risks, competition, input inflation and the like.

The thing is, I like to see risk, I just want risk that I think the company can manage and ultimately maybe even turn into a benefit. For example, new product is absolutely a risk. But what if they disrupt themselves and create a new product that hits sales of their existing product, but creates an entire new category.

Apple did this with the iPhone, killing off the iPod.

When researching into long-term 'til death do us part' investments

I create a short list of the three main features I like in a stock. But I also create a list of the three main risks and I keep a close eye on both lists.

Jul 19, 2021

Offshore

/ US inflation, again above expectations

/ Delta airline results show travel returning

/ US bank earnings as previsions put back into the income statement

/ Netflix looking into gaming

/ QoQ China's GDP increased 1.3% in Q2, 7.9% YoY

Local

/ Rioting impacts as listed companies report details

/ South African Special Risks Insurance Association (Sasria) will cover claims

/ Standard Bank taking out Liberty Holdings

/ Very strong Richemont update

/ Tongaat results

/ Steinhoff increases settlement offer

Jul 14, 2021

Simon Shares

  • I'm recording Wednesday afternoon and the violence of the past week seems to be abating, certainly in Gauteng. It has been a horror week for our country and most importantly; look after yourself if you can somebody else as well and above all else, be kind.
  • US CPI YoY 5.4%. Core YoY 4.5%. Both ahead of expectations.
  • A very strong production update from Pan African (JSE code: PAN) and their 15ha blueberry farm.
  • OPEC+ seems to have reached a compromise between Saudi Arabia and UAE that should see an OPEC+ deal possible.
  • US earnings season has kicked off and is expected to be the best ever - and it needs to be with S&P500 and Nasdaq100 at all-time highs.
  • Gold US$1,825.
  • Lost in all the rioting is another two weeks of level 4 adjusted lockdown, albeit restaurants can seat customers.

Upcoming events;


  • We're starting to see SENS announcements about the impact of the rioting. The worst-hit so far seems to be Cashbuild (JSE code: CSB), they have 36 stores directly impacted by rioting and looting and a further 33 stores closed as a precautionary measure.
  • Ethekwini Region, according to its mayor, Mxolisi Kaunda. R1billion loss of stock has been affected & R15billion rand of damage to property and equipment.
  • Fuel refinery Sapref declares force majeure and shuts the plant.
  • Large parts of N3 remain closed and Durban harbour has thirteen ships waiting for entry (according to VesselFinder.com). To my memory of living in KZN and counting the ships waiting whenever I could, that's about as many as I've ever seen.
  • These will resolve as the rioting quietens down, and evidence is that it peaked on Monday. Longer-term the impact is hard to tell. Certainly, thousands of small businesses are gone and with them jobs. The Rand has fallen to 14.66 after hitting 14.76 early on Wednesday after it was trading at 14.20 on Friday. The JSE is actually up some 3% so far for the week.

Riot insurance

So the answer here is fairly simple, South Africa has an SOE that covers riot insurance - South African Special Risks Insurance Association (Sasria).

They repeatedly have clean audits (financials are here).

Assets under management is a little over R8billion.

But they have reinsurance.

Pretty much any property insurance you have will include a line item for Sasria and it is very cheap.

For corporates, it is a larger cost every month and the question is are corporates 10% insured or have they done some self insuring.

Jul 12, 2021

Offshore

/ US ten year back at 1.36% after peaking at +1.72% in March

/ Jeff Bezos has stepped down as Amazon CEO

/ OPEC+ couldn’t reach an agreement

/ Fed minutes tell us nothing new, except inflation is higher/faster than they expected

/ US extends the economic blacklist of Chinese companies

/ China wants pre-IPO review of all new listings that have large user data

Local

/ Imperial delisting offer at 6600c

/ Sibanye Stillwater bearish on palladium, bullish on platinum & rhodium

/ MultiChoice hit with R63billion tax bill in Nigeria

/ Nedbank WFH policy, 60% in office ie: 2 days WFH each week

/ Prosus shareholders approve share swap

Jul 7, 2021

Markets are as quiet as the street of Jozi, so this week a list of my favourite podcasts, the focus is offshore. I'll return and look at local in a few weeks.

Upcoming events;


Favourite podcasts;

Jul 5, 2021

Offshore

/ US The unemployment rate edged up to 5.9% in June

/ US home prices rose by 14.6% in April, the largest gain in 30 year

/ S&P 500 closes green 7 days in a row, record is 8 days (US markets closed Monday)

/ RobinHood proposed listing ~ $40bn valuation

/ Didi Chuxing lists on NYSE, market cap $69bn & Chinese regulator blocks new accounts

Local

/ Modest Q2 for JSE, TOP0 -1.2% (+11% YTD), Fini15 +6.8% in Q2

/ SARB turned 100 last Wednesday

/ May saw another +R50billion trade surplus tax receipts

/ Invicta results

/ AdaptIT shareholders vote for 700c Volaris delisting offer

/ Etion results. The story is they selling LAWTrust business for R245million when the market cap of the entire company is R22million. CEO says plans to return value and delist

Jun 30, 2021

Simon Shares

  • Level 4 lockdown. Remember the podcast of last week when I delved into the various leisure socks.
  • Argent (JSE code: ART) results. Long a stock not worth covering or owning, but they've changed things up the last few years.
  • Invicta (JSE code: IVT) another successful turnaround and really good results.
  • JSE (JSE code: JSE) trading update, no surprise earnings under pressure.
  • Nike (NYSE code: NKE) results absolutely crushed it last week. Revenue +96%.
  • Anchor Capital published a note showing that the US had increased the number of US$ in circulation (M3) has gone up 33% over the course of the pandemic.
  • Absa’s Q2 2021 manufacturing survey shows very positive manufacturer confidence.
  • EOH (JSE code: EOH) new board suing founder Asher Bohbot for R1.6billion.
  • A US judge kicks out the Federal Trade Commission's (FTC) antitrust case against Facebook. It was requesting that Facebook sell their Whatsapp and Instagram businesses. They can bring the case back again, but the bigger issue is antitrust cases against big tech in the US and EU.
  • SAB Zenzele Kabili (JSE code: SZK) has been coming down, now around R120. Still, double far value.
  • Thungela Resources (JSE code: TGA) trading at almost 4000c. Coal may be dirty and coal may be dead in time. But so far it's been a great investment, but this is probably fair value.
  • South African Reserve Bank (SARB) turned 100 years old on Wednesday 30 June.
  • Euro Zone inflation slipped to 1.9% for June.
  • Popia is live from today.

SA recorded another trade surplus in May of R54.6billion. This is the 3rd month in a row that the surplus has been above R50billion.

Watch ~ Rand, stronger for longer

Jun 28, 2021

Offshore

/ Gold a flat week after the previous weeks sell-off

/ S&P500 and Nasdaq back at all-time highs after the previous week's aggressive sell-off

/ Global shipping remains under severe pressure as Chinese port shut after a covid-19 outbreak

/ US gets an infrastructure bill, but maybe not. It’s messy

Local

/ Omnia results paid special dividend and SARS dispute

/ Growthpoint trading update

/ Old Mutual to spin off third of their Nedbank holding

/ May CPI 5.2% with core inflation at 3.1%

/ +50s can register for vaccines from Thursday

/ Absa’s Q2 2021 Manufacturing Survey shows rising manufacturer confidence

Jun 23, 2021

Simon Shares

  • The announcement by the president that business will be able to build up to 100 megawatts of power without constraints is huge. Aside from the fact that the current limit is 1 megawatt, it will have three direct impacts;
    • Estimates are that at least 4,000 megawatts can be built in 18-24 months. That is level 4 load shedding. So bye-bye load shedding.
    • Tens of billions in spend aiding the construction and allied industries.
    • Savings when using your own power. Goldfields (JSE Code: GFI) is building a 40 megawatt supply for South Deep that they estimate will save them R120million a year.
  • Annual consumer price inflation hit a 30-month high in May, rising to 5.2% from 4.4% in April. Core inflation 3.1% and at the bottom end of the range.
  • Renergen* (JSE code: REN) has spooked the market as they announce a capital raise "raising the proceeds for the completion of the Phase 2 studies of the Virginia Gas Project". Details by the end of the week, but this isn't a massive surprise. Startup miners always need more cash, even for studies never mind the actual building of the facilities.

* I hold ungeared positions.

Upcoming events;


Deep dive hospitality stocks

The third wave of the pandemic in South Africa is so are very much a Gauteng issue as it records higher daily new cases above the peaks from the first and second waves.

This is no surprise to anybody. But what was notable is that lockdown restrictions remain very relaxed (albeit rumours that we'll see tougher restrictions soon). I had expected a harder lockdown for the third wave.

Expecting a harder lockdown I was very cautious on local hospitality stocks.

The Yoco small business turnover index shows activity at 78% of the levels pre-lockdown after hitting 128% at the end of May 2021. So even without harder lockdowns, we are being more cautious but this is still well ahead of the 40% odd we saw during the end of the second waves lockdown.

We also have some Stats SA data on occupancy in tourist accommodation. Here we're back at around 30% for the end of April and that's back where we were before the second wave arrived.

 

Airports Company SA (ACSA) data shows domestic travel picking up to around 60% of pre-pandemic levels. International is at around 15%-20% and regional around 25%-30%.

So in short this new wave is still early days and is hurting, but so far not as bad as I had feared (occupancy data is a month out of date). Certainly ahead of the third wave we were seeing improved tourist activity even if still below the pre-pandemic levels.

So what stocks to look at? I am not rushing in, but they're on a watch list for when we're past this third (and hopefully final) wave.

  • Spur (JSE code: SUR). Sit down dining hurts under lockdown and restaurants are the real spreader risk. But as we pass through this third wave and assuming no significant fourth wave (vaccines rates should be moving higher by then) Spur looks good.
  • Famous Brands* (JSE code: FBR) I like their takeaway as it's more resilient than sit down. But they still have debt issues that will take another two years to fix. So speculative.
  • City Lodge (JSE code: CLH). Their break-even occupancy is around 35% which is a little below the Stats SA data, but that was for tourist data, City Lodge has mostly been business travel. So they need more improvements to start a profit. They also have the sale of East African assets, which if it happens will be a boost. Of course, if that is cancelled, that'll be bad news.
  • Tsogo Sun Gaming (JSE code: TSG) has been running and here consumer spare cash and the third wave are a threat to that run so I'd stay away for now.
  • Tsogo Sun Hotels (JSE code: TGO) has also been running and again I'm not convinced the market is totally right on this one.
  • Sun International (JSE code: SUI) ran hard but then has come under pressure and looks interesting on more weakness.

 

Jun 21, 2021

Offshore

/ Markets spooked by FOMC statement

/ Gold under pressure

/ Brent crude slips but holding above $70

/ TikTok owner ByteDance reports $2.1bn loss

/ Krispy Kreme returning to market with IPO

/ Adobe results

Local

/ Rand under pressure

/ Capitec expects half-year earnings to rise 292%

/ Sephaku update and PPC results

/ Mediclinic to produce own power

/ Alexander Forbes results, retrenchments almost back to ‘normal’ levels

/ Stricter lockdown

Jun 9, 2021

Simon Shares

  • SAB Zenzele Kabili trading at R180, at least 3x fair value?
  • Local GDP for the first quarter was 1.1% QoQ. Kinda middling.
  • Stor-Age* (JSE code: SSS) results.
  • Thungela Resources (JSE code: TGA) lists.
  • AdaptIT (JSE code: ADI) gets an improved offer from Volaris - 700c.
  • Life Healthcare (JSE code: LHC) bouncing again because of the Alzheimer drug. But it a very long road.
  • Sirius Real Estate (JSE code: SRE) results were excellent.

* I hold ungeared positions.

Upcoming events;


Options, futures and CFDs

Options (warrants on the JSE)

  • Complicated
  • Risk is only 100%.
  • Right to buy or sell.
  • Not much offered in SA.
  • Long or short, depending on if call or put.
  • Can trade on Safex, but institutional size trades only.

Futures

  • Exchange-traded
  • Equity, indices, commodities, currencies & agriculture.
  • Long or short.
  • Interest charge and dividends built into the price.
  • Require a Safex broker.
  • You can lose more than you started with.

Contract for Difference (CFDs)

  • Over the counter (OTC) traded.
  • Counterparty risk.
  • Issued on anything.
  • Long or short.
  • Interest paid/earned daily.
  • No expiry.
  • You can lose more than you started with.
Jun 7, 2021

Offshore

/ U.S. economy added 559K jobs in May and unemployment fell to 5.8%

/ G7 nations set the minimum global corporate tax rate at 15%

/ AMC issues shares above the current share price

/ Biden expands blacklist to 59 Chinese companies

/ Apple staff back to work 3 days a week, starting September

Local

/ Volaris ups offer to AdaptIT to 700c

/ Sibayne Stillwater to buy back 5% of shares

/ SARB selling their stake in African Bank

/ Famous Brands results

/ Prosus to buy Stack Overflow of US$1.8billion

/ Mark Barnes sells up to half his Purple Group shares

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