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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: May, 2021
May 26, 2021

JSE Direct with Simon BrownSimon Shares

  • Somebody buying Metrofile (JSE code: MFL). Started late on Tuesday, sending it almost 13% on the day and holding Wednesday.
  • Mediclinic (JSE code: MEI) paid £432m for 29.9% of Spire Healthcare (LSE code: SPI) in 2015. They're now supporting a buyout from a third party valuing that stake at £287.8m.
  • Healthcare stocks earnings remain under pressure as elective surgery remains limited.
  • Afrimat (JSE code: AFT) to acquire R650m manganese mining rights.
  • Gold above US$1,900 and even with Rand strength (currently 13.85) we're finally seeing gold in ZAR moving a little higher.
  • No change to the repo rate at last weeks MPC meeting. All the excitement was that the next move will be up, but we knew that. Of more interest is that the govoner talks bout 4.5% rather than the 3%-6% range. He always has but it seems MPC will based rate decisions on that 4.5%.

* I hold ungeared positions.

Upcoming events;



SAB Zenzele Kabili

Listing on the BEE board of the JSE on 28 May.

No IPO process ahead of that.

R40 listing price.

But trades subject to supply / demand.

I would expect it to boom initially then settle around R40.

No lock-in period, so you can buy / sell as you wish.

This is very much a long-term investment.

Will be ownership of global AB Inbev (JSE code: ANH) shares worth R5.4billion.

AB Inbev market cap is around R1.8trillion. So a small slice of the entire group of less than 1%.

  • Important, you are not just getting SAB, it is the entire global group.

There is debt included, geared about 55% at 70% of prime payable over ten years.

  • Another reason to view it as long-term.
  • 75% of dividends will be used to settle the debt.

This is a long-term investment option and NOT a get rich quick scheme.

We have also seen some BEE schemes fail spectacularly.

Not all stockbrokers are enabling trading in the shares. SAB have a trading desk, call them on 0861 900 903.

Only BEE qualifying investors can buy the shares.

May 19, 2021

Simon Shares

  • Santova (JSE code: SNV) were very solid and they are now truly a global logistics business.
  • Distell (JSE code: DGH) announced that Heineken wants a 'majority' stake in the company. Details are scant with major shareholders being PIC and Remgro (JSE code: REM) both just over 31%. But does the majority mean they want the cider business or +50% of the shares which would trigger a mandatory offer to minorities? This of course after Heineken threatened to take their beer and go home last year during the alcohol ban.

 

  • Balwin (JSE code: BWN) & Calgro M3 (JSE code: CGR) results both showed a tough year. But I like this space. Calgro offering its units at the R500k price point (R4,000 monthly bond costs) while Balwin starts at a little under R1million to around R2million. So different markets.
  • Redefine (JSE code: RDF) results saw loan-to-value (LTV) improving but what struck me is that they value properties twice a year. Most doing it over a rolling three years.
  • Local CPI hit a 14-month high in April, mainly driven by rising transport and food prices. The rate was 4.4%, up from 3.2% in March.
  • Thursday is the MPC rate decision, no change expected.
  • Eurozone April CPI +0.6% on Month, +1.6% on Year. Core CPI +0.5% on Month; +0.7% on Year
  • Crypto crashing, entire crypto market cap is off 20% today on news China is cracking down (again).

* I hold ungeared positions.

Upcoming events;


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What's with the 'special' shares?

Special shares usually with high voting rights and often with limited or zero economic rights.

They enable insiders to retain voting control even while they may not actually control the company.

The most well known are the Naspers~N (JSE code: NPN) A shares that give control to a few parties.

Shoprite* (JSE code: SHP) has the same for Christo Wiese which he tried to sell back to the company. But they have zero economic rights and only are votable by Wiese

More recently it surprised many that while Remgro (JSE code: REM) owns a little over 31% of Distell (JSE code: DGH) they ave a pile of B shares that gives them 56% voting control.

In the older days, companies used pyramid structures, but those have long since largely left the JSE and no new ones can be listed.

The challenge is how to know about them? The annual report will detail them.

Generally, they don't matter massively, until they do. And then they matter. Wiese failed to receive the required number of votes to get back onto the Shoprite board in 2018, but then he used his special shares to basically override shareholders.



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.

May 17, 2021

Offshore

/ US inflation

/ Disney results

/ US pipeline shut down due to ransomware attack

/ UK rejects (softly) Bidens plan for global corporate tax rate

/ Chinese industrial production and retail sales due Monday

Local

/ Naspers / Prosus share swap

/ Raubex results

/ Ascendis swaps debt for assets

/ Clicks buys Pick n Pay pharamacy business

/ Cape Town airport has best month since lockdown, still 40% down from 2019

/ Long4Life results and NAV discount

May 12, 2021

Simon Shares

  • Raubex (JSE code: RBX) results saw the second half record HEPS of some 110c after a loss in the first half. The previous full-year, 2020, HEPS was only 161.7c, so the business is looking good. That said, lots of debt and the expanding order book needs to be converted into profit.
  • Transaction Capital (JSE code: TCP) results see the dividend returning.
  • A super-strong trading update from Lewis (JSE code: LEW) with HEPS more than doubling. At the time of their interim results, they paid a dividend of 133c when the stock was around 2400c. If they can do a 250c dividend (should be easy?) the forward dividend yield sits at around 8%.
  • US inflation data spooked higher than expected, even considering the April base effect. April Consumer Prices +4.2% and Core CPI +3%, highest since 2009. Used cars (stimulus cheques?) were +10% and made up a third of the core CPI increase. Fed will do nothing.
  • Ascendis (JSE code: ASC) has announced they've reached a deal with debt holders. Basically, they're swapping the crown jewels (Remedica) for their large debt pile. The debt cost was R280million for the last six month period ending December and this will improve solvency and keep Ascendis alive. But are the remaining assets attractive enough for investors?

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More Naspers shuffles

Naspers (JSE code: NPN) and Prosus (JSE code: PRX) have announced another deal to try and close the discount between themselves and their holding in Tencent (Hong Kong code: 700).

Prosus will acquire up to 45.4% of Naspers shares via a share swap whereby holders of Naspers can get 2.27 new Prosus shares for every one Naspers share.

This will increase Prosus liquidity (in theory) and markedly reduce Naspers weighting in the Top40 and Swix indices. The latter argument makes sense and is likely a part of the reason for the discount that Naspers experiences. The problem is that with the weighting above 20% most funds are not allowed to hold over a certain percentage (lower than the Naspers weighting), so they can not go overweight, or even match index weight, for Naspers and this reduces potential buyers of the stock.

Will it work? Maybe.

They have tried many other tricks, unbundling Prosus and earlier MultiChoice (JSE code: MCG) and that hasn't worked. But the weighing in the indices is a real problem.

Of course, the very easy fix here is to simple unbundle the Tencent holding - but that's not going to happen any time (aside from some sales every three years as we saw recently).


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.

May 10, 2021

Offshore

/ US jobless claims below 500k, lowest since pandemic started. But overall employment slips to 6.1%, up from 6% in March.

/ Janet Yellen says rates will need to rise

/ ECB Official Calls for Accepting Inflation Overshoot

/ Saudi Aramco Q1 profits +30%

/ Gold +$1,800

Local

/ Moodys skips reviewing SA credit rating

/ MTN update

/ Sibanye Stillwater update

/ Kaap Agri results

/ Karooooo results

/ Anglo American gets coal demerger shareholder approval

May 5, 2021

Simon Shares

  • Purple Group* (JSE code: PPE) now has 1million clients across all platform. A wowzer number.

 

  • Combined Motor Holdings (JSE code: CMH) full year results. Second half saw decent cash flow, back to profit and dividends.
  • Metrofile* (JSE code: MFL) are cancelling 4.18628% of their treasury shares.
  • MTN (JSE code: MTN) first-quarter update, good numbers with group EBITDA +21.3%. Forward PE of around 11x is decent as it's being priced as a utility, albeit was even better back at 6000c when forward PE was c8x.
  • Revego (JSE code: RVG) cancelled the listing.
  • Tax Tuesday: Tax obligations for global citizens

* I hold ungeared positions.

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PGMs Flying, miners not so much

Palladium above US$3,000 (all-time high)

[caption id="attachment_26363" align="aligncenter" width="888"]Palladium weekly chart Palladium weekly chart[/caption]

Platinum above US$1,200 (six-year high)

[caption id="attachment_26365" align="aligncenter" width="888"]Platinum weekly chart Platinum weekly chart[/caption]

Rhodium above US$29,000 (all-time high)

PGMs are considered a 'green' metal in that they help reduce CO2 emissions.

Demand remains above supply.

  • But production will increase.
  • Scrap is increasing (especially with iron ore at records)
  • Rand is strengthening and will likely continue to do so

But the listed miners are languishing nowhere, why?

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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.

May 3, 2021

Offshore

/ April a green month for US indices

/ Palladium almost $3k and copper almost $10k

/ Knock out results; Microsoft, Apple, Alphabet & Amazon

/ US Q1 GDP +6.4%

/ Biden 100 days

Local

/ Resi10 the main local index green in April (midCap & Property did well)

/ Gilbertson quits Gemfields

/ Tongaat update, just misses debt reduction targets

/ Steinhoff to list Pepco in Warsaw

/ Astral update

/ AdaptIT needs another week to decide on the two offers

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