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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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Now displaying: June, 2021
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

Jun 2, 2021

JSE Direct with Simon BrownSimon Shares

  • Sibanye Stillwater* (JSE code: SSW) announced they'll buy back 5% of their shares.
  • Shoprite* (JSE code: SHP) exits Nigeria.
  • AdaptIT (JSE code: ADI) gets an upgraded offer from Huge (JSE code: HUG) but still likes the 650c cash from Volaris, even as that is below the independent board's fair value of 700c - 909c.
  • Barloworld (JSE code: BAW) completes R1billion sale of motor retail unit and will also, in time, sell its Avis car rental and leasing business.
  • Brent oil is above US$70 for the first time since early 2019. OPEC+ says it will maintain its policy of gradually increasing supply.
  • A very strong trading update from Standard Bank (JSE code: SBK). Banks locally have risks, but look cheap, I have a position in the Satrix Fini ETF* JSE code: STXFIN).* I hold ungeared positions.

[caption id="attachment_29849" align="aligncenter" width="888"]Fini15 ~ weekly Fini15 ~ weekly[/caption]


Upcoming events;

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