Episode Overview:

In this episode, Simon Brown dives into the current economic landscape with a focus on interest rates, inflation, and the state of the South African Rand (ZAR). He also explores asset-light businesses and why they make great investments, followed by a breakdown of the latest market activity and local company results.

Rate Cuts & Inflation Outlook:

• South African CPI (August): 4.4%.
• A possible drop to 3.5% in October discussed with Johan Els, Chief Economist at Old Mutual.
• The need for rate cuts to stimulate the economy, with experts debating between 0.25% and 0.5% cuts.
• Fed decision and its potential market impact.

SA Prime and CPI September 2024

ZAR Strength & Market Trends:

• Rand showing strength, potentially reaching sub-17 levels.
• Global market highs: S&P 500, NASDAQ, and JSE Top 40.
• Consumer confidence in the US and South Africa rising but still negative.

Platinum Group Metals (PGMs) & Palladium:

• A strong bounce in PGM stocks, driven by oversold positions and palladium production cuts.
• Palladium’s recent performance and its potential future breakouts.

Palladium weekly chart | 18 September 2024

Asset-Light Businesses & Their Investment Potential:

• Definition and benefits of asset-light businesses (e.g., Santova, Nvidia).
• Simon breaks down why businesses with fewer physical assets can provide higher returns on equity and efficiency.
• Comparison to asset-heavy businesses like banks and retailers.
• A deep dive into asset-light models like Shein, Temu, and logistics firms.

Company Updates & Local Results:

• Outsurance: Strong financial results and special dividends; analysis of the short-term insurance industry’s ability to reprice premiums annually.
• Altvest IPO: Simon discusses the upcoming Altvest IPO on the JSE and why he's not taking part in it, despite its interesting SME funding model.
• Finbond: A look at the excitement surrounding Finbond’s potential delisting and the company’s moves in the US market.

Noteworthy Quotes:

"Rate cuts are coming, and I think we'll see a short-term sell-off as markets react."
"Asset-light businesses like Santova and Shein are great investment opportunities because they don't carry the heavy burden of owning physical assets."
"Outsurance continues to impress with strong numbers and dividends, proving the strength of short-term insurers."

Chapters
00:00 Economic Landscape and Rate Decisions
03:09 Understanding Asset-Light Businesses
05:54 Market Psychology and Upcoming Events
09:11 Local Results and Investment Insights
11:52 Exploring New Investment Opportunities
15:10 Finbond and Market Speculations
17:59 Larry Ellison and Oracle's Rise

Simon Brown

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Summary

In this episode of JSE Direct, Simon Brown discusses various topics including the troubles faced by Anglo Platinum, the performance of leisure stocks, Anglo Gold Ashanti's* acquisition of an Egyptian gold miner, and the impact of two pot withdrawals. He also touches on the future of PGMs, the growth of electric vehicles, and the psychology of markets. 

Takeaways

• Anglo Platinum is facing challenges as Anglo American wants to get rid of their stake, causing a sell-off in the market.

• Anglo Platinum weekly chart
• The PGMs market is uncertain, with palladium and platinum prices experiencing fluctuations.
• The World Platinum Council projects a second year of meaningful platinum deficits, with jewelry demand expected to rise.
• The growth of electric vehicles is impacting the demand for PGMs, but the market is still uncertain.
• Investors should wait for positive price action before considering investments in PGMs.
• Anglo Gold Ashanti's acquisition of an Egyptian gold miner raises questions about the use of equity and the future of gold prices.
• Two pot withdrawals have resulted in over 4 billion rand being withdrawn from the market.
• Leisure stocks, such as City Lodge and Sun International, have mixed performance, with City Lodge experiencing lower occupancy rates.
• The growth of sports betting raises concerns about its impact on poorer individuals and the fairness of the industry.

Sound Bites

"Anglo Platinum has a problem which is perhaps a little more unique than just the PGMs."

"There is that initial overhang. A whole lot of people will get Anglo-Platinum shares and say, 'I don't want these' and sell it."

"The World Platinum Council is saying we're gonna have deficit again, that's the important point."

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Chapters

00:00 Challenges for Anglo Platinum and the PGMs Market
02:22 The Future of PGMs and the Impact of Electric Vehicles
07:54 The World Platinum Council's Projections
09:16 The Diminishing Role of Internal Combustion Engines
11:09 The Impact of Low Prices on Production
14:55 Anglo Gold Ashanti's Acquisition and the Use of Equity
17:56 Pot Withdrawals and their Effect on the Market
19:18 Performance of Leisure Stocks: City Lodge and Sun International
19:42 Concerns about Sports Betting and its Impact
20:10 Upcoming Events: Investment Goals and the Psychology of Markets

Episode Summary:

In this episode of JSE Direct, Simon Brown delves into the impact of anticipated interest rate cuts and how they may affect various sectors and stocks. He shares his thoughts on potential beneficiaries like consumer stocks, REITs, and companies with high levels of debt. The episode also covers key updates on Nvidia's earnings, Nike's stock valuation, and a new ETF listing by ETFSA.

Interest Rate Cuts and Market Impact:

• Jerome Powell's Jackson Hole Speech: The anticipation of rate cuts as early as September, with an expected reduction of around 75 basis points by the end of the year.
• Benefiting Sectors: Companies with significant debt, consumer stocks (Mr Price, Foschini, Shoprite), and REITs are likely to benefit from lower interest rates.
• Sector-Specific Insights:
  • REITs: Discusses the potential for real estate investment trusts like Storage, Spear, and the concerns around office spaces with high vacancy rates.
  • Consumer Stocks: Simon reiterates his positive outlook on consumer-focused companies and the strong performance of used and new car sales, highlighting stocks like CMH and Motus.

Stock Analysis:

• Nvidia: With results due, Simon highlights the market's expectations and the potential for significant movement based on the earnings report.

• Nvidia | Close 27 aug 24 | Weekly chart
• Nike: Simon discusses Nike’s current valuation, seeing it as a strong buy at its multi-decade support levels, despite its challenges.

Nike | Close 27 aug 24 | Weekly chart

ETF Updates:

• ETFSA's New Actively Managed ETF: Introduction of the Balanced Foundation ETF, which is actively managed due to the lack of a specific index and includes a mix of local and foreign equities, bonds, and property.
• Satrix Nasdaq ETF: The transition from a feeder fund to a standard fund, reducing total expense ratios and offering cost benefits to investors.

Housekeeping:

• No Show Next Week: Simon will be on vacation and the podcast will resume on 12 September.
• Money Summit: Scheduled for 10 September in Johannesburg with free tickets available using the code "MONEYWEBGEST" at MoneySummit.co.za.

Simon Brown

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ETFSA is listing an Actively Managed ETF, The ETFSA Balanced Foundation Prescient AMETF (JSE code: ETFSAB). 

Simon spoke with Gareth Stobie from ETFSA about the ETF, the listing process, where it fits in a portfolio and what it will be holding.

• IPO opens: 26 August 2024
• Listing date: 02 September 2024
• JSE code: ETFSAB
• TER: 0.52%

ETFSAB

In this landmark 600th episode of JSE Direct, Simon Brown reflects on the podcast's journey from its beginnings as a radio show in 2008 to becoming a leading podcast for market insights. The episode covers a range of topics, from South Africa's local CPI and a strengthening Rand to the surprising twists in the gold market and a mixed bag of corporate earnings.

Local Inflation Data:

South Africa's CPI has come in better than expected at 4.6%, fueling speculation on whether the next rate cut by the MPC might be more aggressive than anticipated.

South Africa CPI | July 2024

Rand Strengthens:

The Rand has shown significant strength, dropping below 18 to the dollar, with Simon analyzing the contributing factors, including foreign investment in bonds and a weakening US dollar.

Bull Market Sentiment:

Simon reaffirms the current bull market, highlighting the JSE's all-time highs and advising listeners to stay invested while cautioning against the risks of sitting on the sidelines.

Top40 20 August 2024 | Weekly chart

Gold Market Rally:

Gold prices have surged above $2,500, driven by central banks' increased purchases and concerns about the US dollar's stability. Simon discusses the potential for further gains in the gold market.

Corporate Earnings Recap:

• Coronation Fund Managers: Special dividend announced but falls short of expectations.
• CMH*: Despite low liquidity, the stock continues to climb, reflecting the breadth of the bull market.
• Sasol: Disappointing results with no dividend payout, a situation Simon had previously predicted.
• Spur Corporation: Strong earnings, signaling improving economic conditions.

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Sasol's Struggles:

Simon revisits Sasol's recent production and trading updates. Despite some positive news, the company's financials remain grim due to significant write-downs and a challenging pricing environment, especially in the chemical complex. With a forward PE ratio hovering around 3, Simon questions the actual value in Sasol and advises caution, emphasising the importance of waiting for a stock to show signs of recovery before investing.

Sasol weekly chart | 13 August 2024

ADvTech's* Solid Performance:

Simon provides insights into ADvTech's latest trading update. Despite a voluntary update (not mandated by a 20% variance), the company shows strong growth in earnings per share. He discusses the stock's valuation, historical performance, and why he remains optimistic about its future prospects, even as it trades at a PE ratio of around 15.

ADvTech weekly chart | 13 August 2024

Combined Motor Holdings* (CMH):

Simon shares his thoughts on CMH, a stock he has held for years. Despite a stagnant price movement over the past three years, the stock offers a solid dividend yield. He discusses the broader consumer environment, the potential impact of reduced interest rates, and why he continues to favour CMH over competitors like Motus.

CMH weekly chart | 13 August 2024

Renegen's* Milestone:

After a year and a half of delays, Renergen finally starts producing helium. While the stock has seen a recent uptick, Simon highlights the challenges that still lie ahead, including scaling up production and the company's upcoming NASDAQ listing. He also reflects on the broader sentiment in the junior mining sector.

Coronation's Active ETFs:

Coronation has launched six actively managed ETFs on the JSE, a significant development in the local ETF market. Simon explains the concept of actively managed ETFs and why this move could be a game-changer for both Coronation and the JSE, even if he personally isn't planning to invest in them. Find details here.

US Inflation Update:

The latest US CPI data shows a slight decrease to 2.9% for July, but core inflation remains elevated. Simon discusses the implications for future interest rate cuts by the Federal Reserve and the potential impact on South African monetary policy.

Tribute to Brett Duncan:

Simon pays tribute to Brett Duncan, a former stockbroker and warrants market leader at Standard Bank, who recently passed away. Brett was a key figure in Simon's early career and played a significant role in the South African warrants market. His passing is a significant loss.

Simon Brown

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Apple's Financial Performance and Buffett's Decision:

• Apple's recent financial results showed steady revenue growth across various segments including iPhone, MacBooks, and iPads.
• Warren Buffett's Berkshire Hathaway reduced its stake in Apple by half, sparking market speculation.
• The implications of Apple's valuation and Buffett's strategy in maintaining a significant yet reduced position in Apple were discussed.

Market Movements in Japan:

• The dramatic drop in Japan's Nikkei 225 index, which fell nearly 27% from its recent highs, was analyzed.
• Possible reasons behind the sell-off included the unwinding of the Japanese carry trade and broader market concerns about global economic stability.
• The role of low liquidity in exacerbating the market decline was highlighted.

Nikkei 225

Nedbank's Financial Results:

• Nedbank reported solid financial results with HEP's up 11% and a near 15% return on equity.
• Improvements in impairments and concerns over the cost-to-income ratio were noted.
• The banking index's performance and its implications for Nedbank's stock were discussed.

Anglogold Ashanti's* Performance:

• Anglogold Ashanti's strong production and profitability metrics were reviewed.
• The importance of holding gold miners and gold ETFs in the current market environment was emphasized.

Launch of Ethereum ETFs:

• The approval of Ethereum ETFs by the US SEC was announced, with eight new ETFs available for trading in New York.
• The differences between Ethereum's proof-of-stake blockchain and Bitcoin's proof-of-work blockchain were explained.
• Potential implications for investors and the broader crypto market were discussed.

Simon Brown

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Jerome Powell's Statement:

• Rates left unchanged in the US.
• Possible rate cuts on the table for September.
• US MPC meeting on 19 September.
• Data needed: improving inflation and higher unemployment.

Oil and Gold Market Update:

• Brent Crude:
  • Under pressure, signaling weak global demand.
  • Lower highs trend since June 2022.
  • Support at $72.50 and resistance around $88.

• Brent Oil | 01 August 2024
•  Gold:
  • Trading near all-time highs.
  • Strong central bank buying.
  • Uncertain targets, but bullish sentiment persists.

Gold | 01 August 2024

Potential JSE Delistings:

• Criteria: Dividend yield > 0, market cap < 5 billion ZAR, NAV price > 100, P/E < 10, and profitable.
• Initial search yielded 53 stocks, refined criteria (dividend yield > 5%) narrowed it down to 25.
• Top candidates: African Media Entertainment, Argent, Combined Motor Holdings*, eMedia, Frontier Transport, Home Choice, Mustek, PrimeServe, Transpaco.

Shoprite*:

• Trading at all-time highs.
• 12% revenue increase, 6.3% like-for-like growth, 5.8% inflation.
• Successful new store formats (PetScience, Checkers Outdoor, UNIQ Clothing, Little Me).

Woolies:

• Disappointing trading statement.
• Comparable store sales up 6.9%, inflation at 7%, volume decline.
• Heps down 14-19%, market expectation miss.

RSA Retail Bonds Update:

• New Rates: Two-year at 8.75%, three-year at 9%, five-year at 10.25%.
• Rates have been declining since June.

Simon Brown

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Presidential Vision for Infrastructure Development:

The South African President's recent speech emphasised making the country a hub of construction and infrastructure development.
The potential for public-private partnerships and the types of infrastructure that might be developed, including roads, energy transmission, and public buildings.

Stocks That Could Benefit:

• Construction Stocks: A detailed look at various construction-related companies and their potential to benefit from the President's infrastructure plans.
• PPC: Potential benefits from increased construction activity.
• Murray & Roberts: Despite historical losses, they have a division in infrastructure and renewable power that might benefit.
• Stefanutti Stocks: Focus on their claim against Eskom, which is crucial for their future.
• Wilson Bayly Holmes (WBHO): Expected growth, though a significant portion of their revenue comes from Australia.
• Raubex: Strong performance and solid management, with significant involvement in road construction through Sanral.
• Afrimat: Supplier of construction materials, benefiting from Sanral and Transnet orders.
• Reunert: Involvement in industrial cabling and commercial battery storage, critical for new power facilities.

Market Insights:

• Mr Price* Update: Gaining market share and performing well post-elections and during a late-arriving winter.
• Sasol Production Update: Management's effective handling of controllable factors and slight improvements in Transnet's performance.
• Kumba Iron Ore: Confirmation of slight improvements in Transnet, echoing Sasol's observations.

JSE Listed Construction Stocks | 1 year return | close 23 July 2024

International Market Movements:

• CrowdStrike* Incident: A significant security update issue affected numerous systems, impacting the stock but not signalling an end for the company.
• US Small Cap Stocks: Rotation into small caps like those in the Russell 2000 index, offering a cheaper alternative to large-cap tech stocks.

Simon Brown wraps up the episode by emphasizing the importance of infrastructure development for South Africa's economy and reiterates his top stock picks to benefit from potential future construction projects: Raubex, Afrimat, and Reunert. He also touches on the potential 3% GDP growth for 2025 and the broader market implications.

Simon Brown

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SA GDP Growth Prospects

• IMF's projection: 0.9% GDP for South Africa this year.
• Potential factors for growth next year:
• Reduced load shedding could add 1% to GDP.
• Two-pot system introduction, expected to inject around 40 billion rand into the economy.
• Potential rate cuts: half a percent by the end of the year, possibly 1% by mid-next year.
• Inflation targeting at 4.5%.
• Optimistic outlook with a 60-70% probability of achieving 3% GDP in 2025.

South Africa GDP

Delistings and Market Movements

• Bell and Sasfin delisting announcements.
• Other potential delisting candidates in the small-cap space.
• Importance of constructing a portfolio that can benefit from economic growth and potential takeouts.

Bell weekly chart

Pick n Pay Rights Issue

• Explanation of the rights issue and its implications.
• Instructions for shareholders on handling nil paid letters.
• Simon's perspective on waiting for dust to settle before considering Pick n Pay shares.

Today is the last day to trade before Pick n Pay rights issue kicks in.

° If you hold at close tonight you will receive 51.11 rights per 100 PIK shares, code will be PIKN
° You can sell then in market
° Or pay 1596c per each to get a new PIK share
° HAVE to do so by 30 July

— Simon Brown (@SimonPB) July 16, 2024

Property Stocks and Income ETFs

• Analysis of South African property stocks and their recent performance.
• Attractive yields in local and international income ETFs.
• Recommendation to explore defensive income stocks and ETFs for potential investments.
• Find local ETFs here.

Interest Rate Outlook

• MPC and FOMC meetings' impact on interest rates.
• Simon's forecast on rate cuts in South Africa and the US.

Simon Brown

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Load Shedding Update

• Milestone: 100 days of no load shedding by Friday.
• Factors: New capacity online, Kusile unit 5 (800 MW), upcoming additions from Medupi and Koeberg.

Impact:

• Reduced GDP loss (previously 1.8% of GDP due to load shedding).
• Positive effect on inflation and economic stability.

Winners:

• Retailers: Shoprite*, Pick n Pay, Spar (less expenditure on diesel).
• Manufacturers: Invicta, Hudaco (benefit from increased customer stability).
• Real Estate: REITs with shopping centers, reduced generator use.

Interest Rates

• Jerome Powell's Speech: Potential for a single rate cut in November.
• Impact on Markets: Minimal immediate impact, with expectations already priced in.
• Local MPC Meetings: Predictions for rate changes on 19 September and 21 November.

Market Insights

• Mr Price*: Ex-dividend yet the stock price increased, indicating strong sector performance.

Tesla Analysis

• Market Share: Decline in second-quarter sales but maintains a significant market share (~50%).

Challenges:

• Increased competition from other EV manufacturers.
• Need for cheaper models.
• Significant share dilution over the years.
• Stock Performance: Historical highs and current rebound to 231.
• Future Prospects: Continued relevance in the EV market despite competition.

[caption id="attachment_42560" align="aligncenter" width="849"] Tesla weekly chart | 02 July 2024[/caption]

SARS Tax-Free Changes

• Impact: Minor changes affecting pro rata contributions for part-year taxpayers.

RSA Retail Savings Bonds

• Rate Change: Significant drop in 5-year bond rate from 11.5% to 10.5%.
• Action Required: Reset by the 20th for current holders. The form is here.

Simon Brown

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Key Takeaways

• MultiChoice Trading Opportunity: Potential for profit if the Canal+ deal goes through, despite current low stock prices.
• Futures Trading: Importance of understanding margin, liquidity, and strategy when trading ALSI and ALMI futures.
• Market Conditions: Current cheap valuation of SA Inc stocks presents opportunities, pending political stability and cabinet announcements.

MultiChoice Mis-pricing:

• Discussion on the 125 Rand mandatory offer from Canal+ for MultiChoice.
• Current stock trading at 102 Rand due to poor financial results.
• Analysis of Canal+'s offer document, potential deal completion, and possible trading opportunities.

Index Futures - ALSI and ALMI:

• Detailed overview of trading ALSI (All Share Index) and ALMI (All Share Index Mini) futures.
• Explanation of points trading, margin requirements, and contract specifics.
• Tips on trading strategies, including liquidity considerations and handling overnight gaps.
• Trading as a side hustle, watch the video.

Market and Stock Updates:

• Cabinet Announcement Awaited: Market reactions and fluctuations in the Rand.
• Individual Stocks: Analysis of Mr. Price*, Foschini Group*, Nedbank, Spur, and CMH*.
• Banking Sector: Observations on price to book ratios and the overall market valuation of SA Inc stocks.

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dd

Face-Ripping Rally on the JSE:

• Surge attributed to the formation of a coalition government involving ANC, DA, and IFP.
• Top 40 index rose 3.5%, a significant increase not seen since February 2018.
• The rally, likened to the start of a marathon, suggests potential long-term growth, despite possible volatility.

RAND and Resource Stocks:

• RAND trading under 18, affecting resources positively.
• Potential for RAND to strengthen further, possibly reaching 17.

Coalition Government and Market Impacts:

• The coalition’s stability is uncertain but critical for long-term market confidence.
• JP Morgan upgraded South Africa from underweight to overweight, signaling positive outlooks.

SA Inc Stocks and ETFs:

• Retailers like Shoprite*, Mr. Price*, Foschini Group*, and Truworths hitting 52-week highs.
• ETFs for local investors, focusing on SA Inc..
• Recommendations include avoiding heavy Rand Hedge dual-listed miners in a strong RAND environment.

RSA Retail Savings Bonds:

• Interest rates for RSA Retail Savings Bonds to drop in July.
• Current rates: 11.5% for a 5-year bond, expected to decrease to 10.75%.
• Opportunity to reset bonds before the rate change on the 20th of the month.

Inflation and Interest Rates:

• Local CPI stable at 5.2%, within the target band but aiming for 4.5%.
• US FOMC holds rates steady, hinting at a possible future rate cut.
• Prospects for lower local interest rates and their impact on retail stocks and disposable income.

Market Opportunities:

• Interest in retailers and brokers like Purple Group* and PSG Konsult, considering the potential increase in disposable income and trading volumes.
• Positive long-term outlook, but caution against immediate full investment.

Simon Brown

* I hold ungeared positions.

US Inflation:

• Core Inflation: Came in at 3.4%, lower than the expected 3.5% and previous 3.6%.
• Impact: Positive market reaction, with US Treasuries under pressure, Rand strengthening, and Dollar weakening.
• FOMC Outlook: Potential rate cuts anticipated towards the end of the year, possibly in November and December.

Company Results:

SPAR:

• Performance: Results were as expected, market responded positively.
• Issues: Challenges in Switzerland, discontinued operations in Poland, and ongoing SAP implementation issues.

Foschini Group:

• Performance: Strong results, market reacted favorably.
• Highlights: Good performance in their online platform Bash and general improvement across brands.
• Foschini Group and Clothing Retailers: Potential growth areas and resistance levels in stock prices.

Interesting Stock:

• Contemporary Amperex Technology Company Limited (CATL):
• Sector: Battery technology for EVs and corporate solutions.
• Market Performance: Positive analyst ratings, promising future prospects.

Renergen*:

• Helium Production: Helium is flowing, but further testing is required.
• Challenges: Significant delays and ongoing testing phases, but progress is being made.

Santova:

• Stock Movement: Changes in buyer and seller dynamics impacting stock price.
• Insights: Importance of identifying market movers in stock trading.

Political Developments:

• Coalition Talks: Ongoing with potential for an ANC, DA, IFP coalition.
• Rand Performance: Strengthening in response to political stability and positive US inflation data.

[caption id="attachment_42378" align="aligncenter" width="849"] USDZAR | 12 June 2024[/caption]

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New Two-Pot Pension System:

• Details on the implementation and implications for retirement savings.
• Kicks in 1 September 2024
• Can take up to R30k immediately, but this will be taxed.
• Thereafter 30% of contribution go into a savings pot your can take out, it will be taxed.
• Only use for an emergency, not holidays.

Rainbow's Return to JSE:

• Analysis of Rainbow's re-listing after 17 years.
• RCL Foods will be unbundling later in June
• One Rainbow share for every RCL Foods share
• But is Rainbow the best chicken stock on the JSE?

OPEC+ Impact on Oil Prices:

• Members agreed to cut voluntary production cuts
• Oil crashed
• As did Sasol

[caption id="attachment_42315" align="aligncenter" width="849"] Brent oil | weekly | Koyfin

Q1 GDP Results:

• Negative Q1
• Q2 should be slightly better thanks to reduced load shedding
• But election will have worried investors.

Santova Stock Analysis: 

• Buyer at 750c
• Seller at 760c

[caption id="attachment_42316" align="aligncenter" width="849"] Santova daily | 06 May 2024 | Koyfin

Coalition Talks:

• ANC is talking with everybody
• They seem keen on a governmnt of national unity
• Rand volatile

Recent uploads onto Just One Lap

• Three new Global ETFs from FNB with low TERs
• The Power of Commodities with 1nvest: Navigating Trends and Unlocking Portfolio Diversity

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Election Results Impact on Markets

• Slow ballot counting with three ballots, 18.7% counted.
• CSIR prediction at 5%: ANC 42%, DA 22%, EFF 9%, MK 14%, Patrick Alliance 2%.
• Market concerns about ANC forming a coalition.
• Rand fluctuations: From 18.34 on Tuesday to 18.61 currently.

[caption id="attachment_42259" align="aligncenter" width="849"] Rand | 1pm 30 May 2024[/caption]

Pepkor Results:

• 9.5% revenue growth.
• 24.5% growth in fintech, now 12% of the business.
• Pepkor sells 7 out of 10 smartphones in South Africa.

Woolies (Woolworths) Update:

• Earnings down 20% for the year ending June.
• Challenges in the clothing segment, further deterioration in footfall and discretionary spend.
• Food segment performing better, but overall market reaction negative.

Zeda Results:

• Revenue growth of 19%, HEPs up 12.5%, return on equity at 28.5%.
• Surprise 50 cents dividend despite previous year-end dividend expectations.

BHP Billiton and Anglo American Merger

• BHP walked away from the Anglo-American takeover proposal.
• Speculation about potential offers from Rio Tinto or Glencore.
• Anglo-American's disinvestment plans for De Beers and Anglo Platinum.

Market Insights

• Discussion on Metrofile's challenges with dividend yield falling and pressure on share price.
• SAB Cap Investments' exit from Metrofile.
• South African Reserve Bank MPC rate announcement: No rate changes expected.
• Upcoming central bank meetings: ECB, FOMC, Bank of England, Swiss National Bank.
• Potential for future rate cuts in South Africa if inflation targets are met.

Commodity webcast with Johann Erasmus available on Just One Lap.

• Insights into gold, PGMs, and copper.
• Mention of the cheaper gold ETF from 1nvest compared to Absa GLD.

Changes in 10X ETFs: Local Dividend Aristocrat and Smart Beta merging into a Top 50 ETF.

* I hold ungeared positions.

Nvidia's Financial Performance

• Nvidia's Q1 Results:
• Revenue up 262% year-on-year to $26 billion.
• Net income up 628% year-on-year to $14.9 billion.
• Gross margins at 78.9%.
• Stock Split: 10-for-1 stock split set for 7 June.
• Market Reaction: Stock traded over $1,000 in the aftermarket.

Anglo American and BHP Group

• BHP's Third Offer: Anglo American rejects BHP’s third offer.
• Deal Concerns: Issues with the price and risk of the deal.
• Next Steps: Extended deadline for BHP's offer to 29 May.

Richemont's* Results

• Richemont's Position: Holding steady in a tough luxury market.
• Earnings Growth: Expected around 10% over the next few years.
• Preferred Stock: Richemont favored over LVMH for its focused luxury product line.

Copper Market

• Copper Boom: Strong performance but cautious outlook due to potential price pullbacks.
• Investment Options: Local ETNs and offshore ETFs available for copper investment.

Structured Products

• Educational Video: Power Hour session on structured products by Kevin Swartz from Standard Bank.
• Features: Capital protection and enhanced upside.

Pick n Pay's Plan

• Sales Update: For 52 weeks ending 25 February, bleak results expected.
• Market Reaction: Stock closed 4.5% higher on news of a plan.

South African Economic Indicators

• CPI Inflation: 5.2% for April.
• Primary Surplus: Revenue exceeded expenditure (excluding interest).

Vehicle Sector Analysis

• Companies Covered: Combined Motor Holdings (CMH), WeBuyCars, Motus, and Zeda.
• WeBuyCars showed strong sales growth.
• Motus and CMH had high dividend yields.
• Zeda focuses on car rentals and mobility as a service.
• CMH preferred for its consistent performance and dividend yield.

Home Building Sector Analysis

• Companies Covered: Calgro M3* and Balwin.
• Balwin struggling with higher-priced units.
• Calgro M3's flexible pricing strategy favored in current market conditions.

[caption id="attachment_42201" align="aligncenter" width="849"] Calgro M3 vs Balwin[/caption]

Santova Directors' Selling

• Director Sales: Recent director sales not seen as a significant concern.
• Market Impact: Director selling viewed as a neutral action.

Disclaimer

JSE Direct is an independent broadcast and is not endorsed or affiliated with JSE Limited. Views expressed are solely those of the presenter.

* I hold ungeared positions.

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Anglo-American vs. BHP Group

• Anglo-American rejects BHP Group's offer, unveils its own restructuring plan.
• Anglo-American to divest De Beers, Anglo-American Platinum, coking coal in Western Australia, and reduce spending on UK fertilizer businesses.
• Focus on high-quality iron ore and copper assets.
• Discusses shareholder likelihood of accepting Anglo-American's plan over BHP Group's offer.
• Discussion on lab-grown diamonds and potential impacts on the market.

Market Insights

• Tencent's positive results impact Naspers and Prosus.
• NASDAQ and S&P close at all-time highs.
• Analysis of South African market trends, influenced by gold stocks, Naspers, Prosus, Richemont, and Rand strength.

[caption id="attachment_42112" align="aligncenter" width="849"] Top40 close 15 May 2024[/caption]

• Discussion on upcoming elections' market impact.
• NHI bill signed, causing sell-off in healthcare stocks.
• US imposing more tariffs on China, strategic implications discussed.

Company Highlights

• Positive financial results from Calgro M3* and Raubex.
• Calgro M3 reports good numbers, discusses share buybacks and future prospects.

[caption id="attachment_42113" align="aligncenter" width="849"] Clagro M3 close 15 May 2024[/caption]

• Raubex impresses with strong financial performance, diversification strategies.

Preview of forthcoming corporate earnings announcements and economic data releases.

Notable events include Richemont*, Palo Alto, Netcare, Astral, Famous Brands, Coronation, UK and US inflation data, FOMC minutes, and Nvidia results.

* I hold ungeared positions.

Simon Brown

Introduction:

• Simon Brown kicks off the episode discussing the current state of the Rand, noting its stability leading up to the elections despite fluctuations.
• Speculation around ANC's momentum in the polls and potential coalition scenarios.
• The impact of the dollar's weakness on the Rand's performance.

Structured Products:

• Simon delves into the concept of structured products, which offer capital guarantees and enhanced returns through strategic investment mechanisms like options and bonds.
• Announcement of an upcoming Power Hour with Standard Bank focusing on structured products.
• Brief overview of actively managed certificates, also at next weeks Standard Bank Power Hour.

FNB's New ETNs:

• FNB's introduction of new Exchange Traded Notes (ETNs), including a variety of indices and US-listed stocks.
• Explanation of Compo and Quanto variations, tailored to currency impacts.
• Highlights of recently launched ETNs, such as Nvidia, Booking Holdings, Eli Lilly, and Palo Alto Networks.

Amazon.co.za's Arrival:

• Simon provides insights into Amazon.co.za's debut in South Africa, discussing initial observations and comparisons with local competitors.
• Discussion on the potential impact of Amazon's entry on brick-and-mortar retailers and existing online platforms.

Exploring Small Caps:

• Simon poses the question of whether local small caps on the JSE offer value or pose as value traps.
• Definition and implications of value traps in investments, emphasising the importance of dividends and price appreciation.
• Insights from John Biccard of Investec on potential post-election performance in small caps.
• Examination of various small cap stocks, analysing dividend yields, price-to-book ratios, and earnings potential.
• Simon's perspective on the opportunities and challenges presented by small cap investments, urging caution and strategic analysis.

* I hold ungeared positions.

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Rate Cuts and Economic Outlook

• Jerome Powell's statement from the FOMC meeting: "Inflation remains too high and the path forward is uncertain."
• No rate cut was announced at the FOMC meeting.
• Speculation on upcoming rate cut possibilities and their impact on the economy.
• Local economic outlook and potential changes due to the upcoming election.

BHP Group's Interest in Anglo-American

• BHP Group's* proposal to buy parts of Anglo-American, leading to market speculation.
• Complexities of the deal and potential impact on stock prices.
• Analysis of BHP Group's interest in Anglo-American's assets, particularly in copper
• Potential effects of the deal on the Johannesburg Stock Exchange (JSE) and overall market sentiment.
• Historical context of Anglo-American's significance in South Africa's mining industry.

Chinese Market and Economic Data

• Overview of China's economic challenges and recent data indicating resilience.
• Discussion on Chinese stock market performance and factors influencing consumer sentiment.

Oil Market Dynamics

• Analysis of recent fluctuations in oil prices and underlying supply-demand dynamics.
• Impact of US oil production and global economic conditions on oil prices.
• Implications for South African consumers and petrol prices.

Retail Bonds and Sygnia ETF Changes

• Update on retail bond rates for May and potential changes in June.
• Sygnia's planned changes to ETFs, including the Fourth Industrial Revolution and Fang AI funds.

Clicks Results and Market Analysis

Review of Clicks' financial results and market response.

• Analysis of Clicks' performance in the retail sector and future outlook.
• Discussion on Clicks' valuation and potential investment opportunities.

* I hold ungeared positions.

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Capitec Results:

• Simon analyzes Capitec's recent financial results, highlighting strong metrics such as return on equity, active clients, and app usage.
• However, he notes concerns about the bank's expensive valuation compared to its competitors.

SARB Monetary Policy Review:

Simon discusses the South African Reserve Bank's recent review, indicating a reluctance for rate cuts in the near future due to inflationary pressures and economic uncertainties.

Key takeaway from the bi-annual Monetary Policy Review of the @SAReserveBank:

Don’t bet on a domestic interest rate cut this year. https://t.co/mhRS5vKIFQ pic.twitter.com/sc5p9GPcf5

— Adrian Saville (@AdrianSaville) April 24, 2024

Sasol Woes:

• Simon discusses Sasol's poor performance following a production update, expressing skepticism about its future prospects despite its low stock price.

Other Market Updates:

Simon touches on Tencent's positive performance, gold and oil price movements, and the potential impact on global markets

* I hold ungeared positions.

UK and Local Inflation:

• UK inflation surprises at 3.2%, lowest in over two years.
• US Fed unlikely to cut rates soon, waiting for FOMC meetings.
• South Africa's CPI data for March at 5.3%, showing a positive trend.
• Potential for SA rate cuts, depending on US decisions.

[caption id="attachment_41866" align="aligncenter" width="849"] SA Inflation 5.3% for March 2024[/caption]

China and Commodities:

• China's GDP surpasses expectations at 5.3%, amid concerns over Fitch downgrade.
• Export data reflects overstocking, driving prices down.
• Despite challenges, China's market appears interesting.

[caption id="attachment_41867" align="aligncenter" width="849"] Chinese GDP YearONYear per quarter[/caption]

PGMs, oil, gold, and other commodities.

• Gold remains strong, targeting $2500.
• Recent attack on Israel by Iran affects oil prices.

WeBuyCars listing and potential market impact.

Transaction Capital analysis and investor considerations.

Purple Capital* Results:

• Purple Capital swings back to profit, surprising the market.
• Key financial highlights and insights into EasyEquities performance.
• Exploration of new products and their impact on revenue.
• Analysis of client cohort growth and its implications.
• Positive outlook on Purple Capital's performance.
• Expectations of potential price pullback.

Simon Brown

* I hold ungeared positions.

kk

Sasol Secunda Reprieve

• Recap of Sasol's recent developments.
• Minister's agreement to Sasol's appeal regarding emissions at Secunda.
• Stock bounce and support level analysis.
• Target prices discussion and outlook for Sasol.

PGM Miners' Performance

• Analysis of platinum group metal (PGM) miners' performance.
• Notable increases in stock prices.
• Consideration of factors affecting the industry, including production cuts and demand for catalytic converters.
• Exploration of whether the current uptrend indicates the beginning of a bull market.
• Discussion on supply and demand dynamics in the PGM market.
• Mention of Sibanye Stillwater's* CEO's forecast.
• Reflecting on year-to-date performance of PGMs.
• Insights into the future trajectory of PGM prices and potential risks.

[caption id="attachment_41807" align="aligncenter" width="849"] PGM and miner moves for the month of April up to the 9th[/caption]

Fitch Cuts China's Outlook to Negative

• Overview of Fitch's downgrade of China's outlook.
• Analysis of implications for the Chinese economy.
• Examination of the performance of Chinese stocks.
• Commentary on factors contributing to China's economic struggles.
• Exploration of potential effects on global markets.

WeBuyCars Listing

• Preview of WeBuyCars' upcoming listing.
• Discussion on the valuation and market cap of WeBuyCars.
• Comparison with Transaction Capital.
• Speculation on market demand for second-hand cars and implications for WeBuyCars' growth strategy.
• Evaluation of WeBuyCars' disruptive potential in the automotive industry.

Inflation Targeting Discussion

• Analysis of the South African Reserve Bank's inflation targeting strategy.
• Exploration of the history and purpose of inflation targeting.
• Evaluation of the current inflation target and potential for revision.
• Discussion on the process and implications of lowering the inflation target.
• Advocacy for starting the conversation on revising the inflation target to ensure long-term economic stability.

Simon Brown

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* I hold ungeared positions.

Commodity Market Analysis

• Oil prices are on the rise, currently trading around $89 per barrel, indicating both demand and supply factors at play.
• Factors affecting oil prices include supply disruptions from Russia and Saudi Arabia's production cuts through OPEC+.

• Concerns about inflation are reflected in the rising price of gold, which is currently trading at all-time highs above $2300 per ounce.

• Despite uncertainty, inflation is not expected to decrease soon, especially with increasing energy costs
• Discussion on the delayed rate cuts by the US Federal Reserve and the global outlook on inflation.

Implications of Goldfield's Chilean Mine Production

• Goldfield's Chilean mine is expected to produce gold at significantly reduced costs in the coming years, potentially impacting global gold supply.
• Analysis of the time taken for new mines to commence production, highlighting the challenge of meeting future demand.

Tax Collection Insights from SARS

• SARS reports an additional R10 billion in tax receipts, contributing to a total of R1.7 trillion in tax collections.
• While individual tax collections saw an increase of 8.2%, company tax declined by 9%, reflecting challenges faced by various sectors, including retail and mining.

Performance Review of ETFs (full list here)

• Top performing ETFs in the first quarter of 2024 include those focused on international markets, particularly in technology and Japanese sectors.
• Conversely, local ETFs, especially those tied to South African markets, experienced declines.
• Analysis of factors influencing the performance of specific ETFs and their compound annual growth rates (CAGRs).

Simon Brown

Old Mutual Results:

• Surprisingly strong results from Old Mutual.
• Despite stagnant GDP growth and population decline, Old Mutual shows strong growth, indicating market share acquisition.
• Expansion into banking sector questioned due to market saturation.
• Stock analysis: Trading around 1184, showing potential support at 1150 and resistance at 1240-1280.
• Considered cheap with PE ratio around 7.7 and dividend yield over 7%.
• Market consensus predicts an average price target of 14.81.
• Skepticism remains regarding the bank launch and overall upside potential.

MTN Results and Analysis:

• MTN's earnings affected by Naira devaluation in Nigeria.
• Earnings per share down 72%, impacted by tax issues and currency devaluation.
• Stock analysis: Chart showing positive signs, with potential for short-term growth.
• Market consensus includes three strong sells, five holds, and four buys.
• Telco sector struggles due to price pressures and constant capital expenditure.
• Limited upside potential for telco stocks, including MTN.

ADvTech* Results and Operational Leverage:

• ADvTech demonstrates strong operational leverage.
• Operational margins increase due to improved student occupancy rates.
• Revenue up 13%, HEPS up 19%, and dividend per share up 45%.
• Stock analysis: Notably increased in value but still offers potential growth.
• Expectations for around 15% growth in the future.
• Simon Brown expresses satisfaction as a long-term shareholder in ADvTech.

Monetary Policy Committee (MPC) Meeting Insights:

• MPC meeting concludes with no change in rates.
• Governor's hawkish stance indicates possible rate cuts later in the year.
• Inflationary pressures expected to persist due to global factors.
• Delayed rate cuts expected due to inflation concerns.

SALTA Awards Highlights (full details here):

• Simon Brown attends the SALTA Awards.
• Satrix emerges as the big winner with 10 awards.
• People's Choice Awards highlight popular ETFs, with Satrix Top 40 winning for the seventh consecutive year.
• Introduction of a new award category for foreign ETFs.
• Importance of industry events in highlighting the significance of ETFs and listed trackers.

Simon Brown

* Simon holds ungeared positions.