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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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Now displaying: October, 2020
Oct 21, 2020

Simon Shares

  • Distell Group (JSE code: DHG) issued a solid update albeit short on numbers with one exception. They reduced net debt by some R1.7billion which is a massive number.
  • Pick n Pay (JSE code: PIK) is heading into Nigeria and the market is worried as Nigeria is littered with the bodies of corporate South Africa. But they are doing so in smaller regional malls and not going big, so if it fails it won't be costly.
  • The Standard Bank (JSE code: SBK) update fits in with news out of a press conference of last week. 90%-95% of loans that took payment holidays are back and paying. A sold number, but it does show lenders are not yet out of the woods.
  • Absa changing their distribution policy for the NFGOVI (tracking the top 10 bonds issued by the South African Government). Instead of reinvesting they will now payout distributions.
  • Very strong update from Cashbuild (JSE code: CSB) with Q1 revenue up 22% and stock is up some 9% in the news.

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A robust strategy

The US election is some twelve days away and while the pundits have Biden as the clear favourite to become president and the democrats maybe even taking control of the senate. How much should one start adjusting ones portfolio?

Lot's of talking heads are spinning one story or the other as to how to position accordingly, of course, that's if the results go as they expect.

And sure, a Biden win will likely see changes to taxes in the US, a large stimulus come February and maybe a more social friendly budget (such as the Affordable Care Act from Obama).

But these talking heads are firstly short-term traders and really as a trader one should be responding to price action, not trying to predict legislation and the impact?

For a long-term investor chopping and changing every time there is a new president in the White House (or any other house) surely means you're strategy is not robust enough?

What I mean here is that politicians, political parties, polices and the like come and go. Sometimes quickly sometimes slowly. But our long-term portfolio needs to be able to manage all of these changes without having to consistently adjust things.

I always invest with one core long-term theme in mind that guides my investing. A globally growing middle class as people move into the cities and their quality of life and wealth improves.

From here yes tax rates and the like will have an impact. Bu not so significant that I'll have to switch stocks never mind strategy.

As a long-term investor make sure you have a simple and hence robust strategy that is largely immune to the noise emanating from politicians.


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

JSE Direct 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.


 

Oct 14, 2020

Simon Shares

  • PPC (JSE code: PPC) results. The $150million debt in the DRC is the problem. If they solve that they'll do a rights issue. If not they're bankrupt. The president's speech on Thursday should give them some hope as he likely promises lots of energy and infrastructure spending.
  • Balwin (JSE code: BWN) results. Not bad considering, they paid a dividend and I like them at current prices.
  • Coronation* (JSE code: CML) issued a good trading update. With Purple Group* (JSE code: PPE) they are my two preferred financial stocks for the post-pandemic bounce (actually making money during the pandemic.
  • Keillen Ndlovu on local and offshore listed property.

* I hold ungeared positions.



Bankrupt

  • There are a number of listed stocks in business rescue and I am getting asked all the time about when they start trading again.
    Intu
  • Comair
  • Basil Read
  • Phumelela
  • Others I forget about

Short answer, they won't start trading again and you'll get very little or no money back.

First SARS gets paid, then staff and debt holders and if anything is left shareholders will receive a few cents.

Now here's the thing. The company may survive and start trading again. Certainly, Comair and Phumelela look set to continue operations, but with new shareholders.

This is very much part of the business rescue process, the rescue part is about turning debt in equity and also new capital taking new equity. Existing shareholders get left carrying nothing.

Now, sure this sounds way harsh, but this is how investing works. We buy a business and we get all the rewards, reward that is unlimited in how big is can be. But if things hit the wall, we're last in line. So our downside is limited at 100% loss, but the upside is unlimited.


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

JSE Direct 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.


 

Oct 12, 2020

Offshore

/ The Congressional Budget Office estimates that, for the 2020 fiscal year, the U.S. deficit will be $3.13 trillion (15.2% of GDP). This number would cause the total U.S. national debt to come in at 102% of GDP in 2020, the first time since 1946 that the U.S. debt has been larger than its economy.

/ A new stimulus package on or off the table?

/ The U.K. economy grew by 2.1% in August, less than half the pace anticipated

/ JPMorgan says U.S. Capital Gains Tax hike (proposed by Biden) may briefly hit stocks

/ Robinhood says some customer accounts may have become the target of hackers

/ New iPhones expected on Tuesday, with 5G

Local
/ President Cyril Ramaphosa will address both houses of parliament on Thursday to unveil the long-awaited economic recovery plan for the country.

/ PPC results

/ Canal+ buys 6.5% in Multichoice

/ Spur update, strong recovery but early days.

/ FNB lists 20 ETNs over US-listed stocks.

/ Balwin results and the scuffle around Mooikloof

Oct 7, 2020

Simon Shares

  • How to fix the JSE, some great ideas by Keith McLachlan.
  • SARB buys R39.4billion of local government bonds in the secondary market in September.
  • French Canal+ takes 6.5% stake in Multichoice (JSE code: MCG).
  • Shoprite* (JSE code: SHP) says their loyalty program is a huge part of them gaining R4billion in market share? Launched a year ago it has over 5million members.
  • Pick n Pay (JSE code: PIK) date saw "core retail sales - including food, groceries and general merchandise, but excluding liquor, clothing and tobacco - grew 8.7% year-on-year (6.4% like-for-like)."
  • Sasol (JSE code: SOL) sells some LCCP for US$2billion, reduces debt burden to $8billion.
  • Zeder (JSE code: ZED) keeps dividend and says conditions are improving. But no news on the new strategy.
  • AdaptIT (JSE code: ADI) results after I recorded last Wednesday. The stock was at 120c and HEPS expected at +65c. The stock now 250c. The market gets it wrong sometimes, especially in the small-cap space.
  • Fed chair Powell commenting Wednesday evening that more needs to be done and that the risk is not in doing too much stimulus, it is in doing too little. Trump has said no stimulus until after the election. The risk here is he loses and couldn't be bothered to do anything, so then we wait till late January to start talks again.

* I hold ungeared positions.

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Where's the cash?

Cash is always king. Not only is it why we invest, to make cash. But cash is easy to see in the form of dividends and very hard to fake (albeit we have seen businesses take debt to pay a dividend, and if you do see this - run).

I've spoken before about the flood of rights issues hitting the market and we've seen about R50billion so far this year. But now we're hitting the crunch.

Early in the lockdown I warned that investors should have a good hard look at their companies asking if they'd need to raise capital and if the announced capital raise would be enough.

Key for me is that tough times are often tougher in year two. I remember this very clearly from the 2008/9 crisis albeit offset a bit by the world cup in 2010. But for example, Standard Bank retrenched staff in late 2010, some 18 months after markets had bottomed.

The other key point is that this pandemic crisis is far from over. Not only risks of seconds waves (France second wave is way worse than the first and Paris is shutting bars again). Delayed stimulus in the US will hurt the worlds largest economy which is very much experiencing a K shaped recovery.

So take a hard look at a stock cash flow, sure dividends are down or even cancelled. But is there positive cash flow? Is it likely to be increasing or decreasing? How will a tough 2021 impact the cash flows?

In short, will the company survive without a rights issue? Is yes, then it's worth having a look at but they can still mostly expect another 1-2 years of tough trading conditions.


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

JSE Direct 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.


 

Oct 5, 2020

Offshore
/ Trump Covid-19 with elections 4 weeks away.

/ US unemployment 7.9%

/ Disney to lay off 28,000, American Airlines 19,000 & 12,000 United Airlines

/ Palantir lists with direct listing

/ Airbnb listing progressing with $20billion valuation

Local
/ Unemployment numbers

/ August CPI 3.1%

/ Capitec results

/ Alviva results

/ Ascendis Health results (issued, cancelled and re-issued)

/ Remgro results, discount to NAV at 40% (lots of deep discounts to NAV)

/ Sasol sells 50% for $2billion

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