Simon Shares

• Thursday 29 September is the last day for SABMiller (JSE code: SAB). Shareholders approved the take over and it will be suspended and delisted from close on 29th. It has been listed on the JSE since 1897 Index changes; IMP into Top40, AVI into Indi25 & FFA/B into Findi.
• There is a chart floating around of Lehman Brothers just before they hit the wall and one of Deutsche Bank over laid on each other. Nice to look at but in no way telling us anything worth being told.
  • Deutsche Bank is the largest German bank, fourth largest European bank, and 11th largest bank in the world with assets of over $1.9 trillion – equal to half the size of the German economy. (source Sparkfin.com)
• Remgro (JSE code: REM) is doing another rights issue at R192.50, a decent discount to the current price of some R240. That said the book value of Remgro in the most recent results was R153.17 (intrinsic value was R306.44).
• MTN, more woes in Nigerian. I remain a happy ex-shareholder.
• What happens to bonds and bond ETFs if we get downgraded?

Can we trust Capitec?

Capitec (JSE code: CPI) results were decent enough albeit Keith McLachlan pointed out on Twitter "Quick calc: If Capitec had kept Arrears Coverage Ratio flat at 239% (not dropping it to 229%), Basic Earnings would've been R1504m =only +2%"

Capitec defines Arrears Coverage Ratio as "The provision/arrears coverage ratio expresses the provision for doubtful debts as a percentage of the loans in arrears. The ratio is therefore affected by the arrears performance of the month in which it is measured, while the impairment model is used to determine the provision for doubtful debts over the loan period. The ratio should therefore not be considered in isolation."

We Get Mail

• Samuel
  • If you own CSEW40 do you get invited to the different companies AGM? Who makes decisions for all the investors shares?
• Alec
  • Points out the very marked difference between saving and investing.

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Reviewing small cap results with Keith McLachlan

Simon Shares

• Wells Fargo is the sort of stock that if I owned it, I would sell it as management totally failed and refuse to accept any blame.
• There is a theory that equal weight ETFs have higher costs because they have to rebalance every stock every quarter. But checking the STXIND over the last four quarters. Twice every stock changed weight and twice only two stocks did not change weightings.
• Harmony (JSE code: HAR) buys the half of the Hidden Valley mine in Papua New Guinea for US$1!
• PPC (JSE code: PPC) rights offer was 92% taken up but with excess allocation requests of another 509%. Some serious big hitters thinking this a great deal.
• Sasfin (JSE code: SFN) nonperforming loans more than doubled. They operate in the small-and medium-sized enterprises so it is a telling number. The economy is seriously struggling and while I have seen some economists upgrading GDP expectations for 2016, none have us at above 1% for the year. So better but not close enough to good.
• Moody's says a one third chance of a downgrade but what really matters is Fitch and Standard and Poors as they have us just above junk status. Things are looking a bit better but I still think we're on track for a downgrade to junk.
• Proptrax SAPY ETF from CoreShares.
• Trading Master Class, reversal patterns video is online. Follow up webcast (live on the IG platform) is 5th October 1pm (book here).

Keith McLachlan small / mid cap fund manager at Alpha Wealth

Tough conditions for SA inc. but we've seen some great results from small and mid cap listed companies. Simon chats to Keith about recent results from;

• Afrocentric (JSE code: ACT)
• Rolfes (JSE code: RLF)
• Acendis Health (JSE code: ACS)
• Master Drilling (JSE code: MDI)

We Get Mail

• Sarel
  • SAB Options. Any strong opinions regarding these two options?

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Reviewing results

Simon Shares

• Feedback on making sense of SENS
• AVI (JSE code: AVI) results show good numbers in a tough market. People tend to look to Pioneer (JSE code: PFG) or TigerBrands (JSE code: TBS) but this is the real gem in the space with a dividend yield of 4%.
• Holdsport (JSE code: HSP) trading update shows increased comparable sales growth, but after inflation they're going backwards. I never been a fan of this business albeit the share is up some 100% in the last five years, around 15% a year which is nice, but average? But then add a chunky dividend that currently yields 5%, can they hold the dividend or even increase it? I suspect they can but I still not interested.
• Clover (JSE code: CLR) were good considering the tough times with drought yet they had an over supply of milk? I used to own this stock but they weren't growing and expanding as I had expected so I exited.
• Sasol (JSE code: SOL) results came in as expected albeit with help from translations gains (FX moving in their favour) and a tax issue in Nigeria together adding almost R2.7billion. Point is they make a profit even at the low point of the cycle, that's impressive. Lake Charles remains their massive deal. I continue to hold Sasol and below R400 it is cheap but I am not buying more until Lake Charles is completed and we see if starting to make money rather than cost money.
• Richemont (JSE code: CFR) update is ugly, sales down across the board with operating profit for the six months ending September expected to be down 45%! Some of this is restructuring but sales are weak. I hold the stock and continue to hold but it not fun right now. Adding to this is the SENS on the AGM voting, no real disclosure just "all other matters on the agenda were also approved by the shareholders by an overwhelming majority.". Not good enough.
• Burger King, owned by Grand Parade (JSE code: GPL) saw average monthly sales per store decline 20% to R800k / month. That is a massive drop. They also have the brand rights to Dunkin' Donuts and Baskin-Robbins, neither of which excites me. The leader in this space remains Famous brands and that's the one I own.
• Last week Wealth Creation 101 video is online. Go watch it.
• Next Tuesday, 20th, we have our third Trading Master Class with IG focusing on reversal patterns.

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares

• Local GDP came in better then expected and importantly positive, so no technical recession. Manufacturing and mining were the strong sectors but we need a lot more very strong quarters to get out of the bad spot we find ourselves in and a down grade is still very much on the cards in December.
• Discovery (JSE code: DSY) has so many moving parts but for me the key is Vitality is now in 14 markets around the world. I remain a happy shareholder albeit they've done very little over the last year or so.
• We have a lot of shopping malls in South Africa, b some reports more per capita than any other country. Hyprop (JSE code: HYP) is by far the best of the bunch with regard local malls as they own high traffic top end malls.
• Mr Price (JSE code: MRP) seems to have lost the mantle. They have now had three reporting seasons over the last year and all disappointed. Is it just bad buying and the weather? I suspect they're seriously struggling under the weight on new competition from the likes of H&M and Cotton On. This is a biggie and if I was a shareholder I would be looking to exit.
• Capitec (JSE code: CPI) trading update sees HEPS 17%-20% higher. Wth a historic PE of almost 22x a little light but well ahead of consensus that was looking for single digit growth.
• Does volatility give you indigestion? Kristia reviews the CoreShares LowVoltrax ETF with expert commentary from Warren Ingram.
• Tonight, going back to basics with wealth creation 101 at the JSE.
• The Fat Wallet Show did the follow up about buying a house vs. renting.

Stock Exchange News Service (SENS)

Some listed companies seem to use it as marketing (witness the Sibanye proudly announcing their inclusion into the Top40 later this month and CarTrack announcing 550k subscribers) while other publish the bare bones (Comiar and Master Drilling just giving numbers in previous years). Others like Steinhoff seem to have moved onto Europe forgotten about us and just push links through SENS.

I would also like to see a standard applied by the JSE. For example all results have to have the top four points (HEPS, Dividend, revenue & debt) right up front so you can't hide.

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.