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Our opinion on the current state of TELKOM(TKG)Telkom (TKG) historically served as the government-controlled provider of fixed-line telephone services in South Africa. With the rise of mobile networks, Telkom was compelled to subsidize competitors like Vodacom, MTN, and Cell-C through termination rates, which have since been phased out. Over two decades, Telkom CEO Sipho Maseko estimated that these subsidies amounted to R70 billion. Today, Telkom remains 41% government-owned, with an additional 11.9% held by the Government Employees Pension Fund (GEPF), though it operates as an independent entity divided into five divisions: 1. **Open Serve**: South Africa's largest wholesale connectivity provider. 2. **Telkom Consumer**: The leading supplier of broadband internet, with a growing mobile network. 3. **Yellow Pages**: Advertising and marketing services for local businesses. 4. **BCX**: An ICT solutions company operating in Southern Africa. 5. **Swiftnet**: Formed in 2018 to house Telkom's masts, towers, and property interests. In March 2024, Telkom sold Swiftnet for R6.75 billion to reduce debt. Telkom's shift from fixed-line to mobile connectivity is a central aspect of its restructuring efforts. In its results for the six months to 30th September 2024, Telkom reported a 1.9% increase in revenue but a 1.8% decline in headline earnings per share (HEPS). The company attributed its performance to "next-generation broadband offerings," supported by continued investment in its networks. Technically, Telkom's share price fell from highs of around R98 in June 2019 to approximately R15.00 in March 2020. Since then, it has been moving sideways and downwards, but the latest results have triggered a new upward trend. However, the company carries high debt levels relative to its market capitalization, which poses a risk for investors. In our view, while Telkom faces challenges in navigating a difficult economic environment and stiff competition, its strategic investments in broadband and the sale of non-core assets like Swiftnet are positive steps. The company is gradually finding a new direction, but it remains a risky investment due to its debt and competitive pressures.
JSE:TKG
by PDSnetSA
Our opinion on the current state of WEBBUYCAR(WBC)WeBuyCars was separately listed on the JSE on 11th April 2024, following its unbundling from Transaction Capital (TCP) to raise capital and shield it from TCP's challenges in the taxi division. The company has 417.2 million shares in issue, which began trading at around R20 per share, giving it a market capitalisation of just over R8.5 billion. The free float is approximately 57.5% of its issued shares, with notable institutional participation. In its results for the year to 30th September 2024, the company reported a 16.5% increase in revenue but a 62.6% decline in headline earnings per share (HEPS). The drop in HEPS was due to a once-off R45 million listing cost and the de-recognition of a R425 million call option. Buying and selling volumes increased by 17.8% and 16.4%, respectively. The company stated, "WeBuyCars is well-positioned to benefit from lower interest rates, higher levels of consumer confidence, an improvement in new vehicle sales volumes, and cost efficiencies driven by economies of scale." Core headline earnings rose by 23.4%, while core HEPS increased by 9.9%. Despite its current P/E ratio of 43.18, which seems high, the share has potential for steady growth over time. It was added to the Winning Shares List (WSL) on 3rd May 2024 at 2085c and has since increased to 3960c. While the valuation may appear stretched, the company must grow into the high expectations set by investors.
JSE:WBC
by PDSnetSA
Our opinion on the current state of CAFCA(CAC)Previously operating under the name RECM Calibre, Goldrush is engaged in Bingo, Limited Payout Machines (LPM), and Retail Sports Betting. The company has shown improved financial performance and operational growth, particularly in its gaming operations. In its results for the six months ending 30th September 2024, the company reported a 25.9% increase in net asset value (NAV) to 1540 cents per share and headline earnings per share (HEPS) of 113.77 cents, compared with a loss of 243 cents in the prior period. The company noted, "Total Gross Gaming Revenue for the six months was R902.5 million, 5% up from last year. Food and beverage revenue, which is only associated with our Bingo premises, reduced by 15% to R34.2 million as some restaurant areas were outsourced to specialist operators. The gross profit of the gaming operations increased by 2% to R522.8 million, and Goldrush repaid R34 million of its bank debt." Since the listing of Goldrush, trading volume has significantly increased, with the share now trading approximately R137,000 in value daily. The rising share price suggests accumulation and growing investor interest. While it is still early days, these developments indicate that the share has the potential to become a strong performer over time.
JSE:CAC
by PDSnetSA
Our opinion on the current state of CORONAT(CML)Previously operating under the name RECM Calibre, Goldrush is engaged in Bingo, Limited Payout Machines (LPM), and Retail Sports Betting. The company has shown improved financial performance and operational growth, particularly in its gaming operations. In its results for the six months ending 30th September 2024, the company reported a 25.9% increase in net asset value (NAV) to 1540 cents per share and headline earnings per share (HEPS) of 113.77 cents, compared with a loss of 243 cents in the prior period. The company noted, "Total Gross Gaming Revenue for the six months was R902.5 million, 5% up from last year. Food and beverage revenue, which is only associated with our Bingo premises, reduced by 15% to R34.2 million as some restaurant areas were outsourced to specialist operators. The gross profit of the gaming operations increased by 2% to R522.8 million, and Goldrush repaid R34 million of its bank debt." Since the listing of Goldrush, trading volume has significantly increased, with the share now trading approximately R137,000 in value daily. The rising share price suggests accumulation and growing investor interest. While it is still early days, these developments indicate that the share has the potential to become a strong performer over time.
JSE:CML
by PDSnetSA
Our opinion on the current state of GOLDRUSH(GRSP)Previously operating under the name RECM Calibre, Goldrush is engaged in Bingo, Limited Payout Machines (LPM), and Retail Sports Betting. The company has shown improved financial performance and operational growth, particularly in its gaming operations. In its results for the six months ending 30th September 2024, the company reported a 25.9% increase in net asset value (NAV) to 1540 cents per share and headline earnings per share (HEPS) of 113.77 cents, compared with a loss of 243 cents in the prior period. The company noted, "Total Gross Gaming Revenue for the six months was R902.5 million, 5% up from last year. Food and beverage revenue, which is only associated with our Bingo premises, reduced by 15% to R34.2 million as some restaurant areas were outsourced to specialist operators. The gross profit of the gaming operations increased by 2% to R522.8 million, and Goldrush repaid R34 million of its bank debt." Since the listing of Goldrush, trading volume has significantly increased, with the share now trading approximately R137,000 in value daily. The rising share price suggests accumulation and growing investor interest. While it is still early days, these developments indicate that the share has the potential to become a strong performer over time.
JSE:GRSP
by PDSnetSA
Our opinion on the current state of RMBRand Merchant Bank Holdings (RMH) is a company that transitioned from owning a 34.1% stake in FirstRand to focusing primarily on property investments since 2016. Established 41 years ago by GT Ferriera, Laurie Dippenaar, and Paul Harris, RMH listed on the JSE in 1992 and later spun off Rand Merchant Investment Holdings in 2011. RMH Property's portfolio includes stakes in Atterbury (27.5%), Propertuity (34.1%), and Genesis (40%). Following the sale of its FirstRand stake, RMH has been repositioned as a property-focused entity. On 9th April 2021, RMH declared a special dividend of 80 cents per share, resulting from the decision not to proceed with the Bucharest development. In its results for the six months ending 31st March 2024, RMH reported a headline loss of 2.9 cents per share and a 24% decline in net asset value (NAV) to 76.7 cents per share. The company stated, "RMH’s net asset value decreased from R1 449 million as at 30 September 2023 to R1 068 million as at 31 March 2024. This was predominantly as a result of the underlying net asset value of Atterbury Property Holdings Proprietary Limited (Atterbury) remaining static, the payment of the special dividend of R327 million in January 2024, and the further decrease in Divercity’s fair value following the repurchase of RMH’s interest for R50 million on 12 April 2024." In a trading statement for the year ending 30th September 2024, RMH estimated that its NAV would decline by between 27% and 46%. The company has also recently changed its financial year-end from March to September. Technically, the share price has been challenging to analyze due to its recent divestments but has entered an upward trend. The current share price remains significantly below the company's NAV, suggesting it could represent good value at current levels.
JSE:RMH
by PDSnetSA
Our opinion on the current state of TREMATON(TMT)Trematon (TMT) is an investment holding company with subsidiaries, joint ventures, and associate companies, primarily focused in the Western Cape. The company initially concentrated on property investments but has since diversified beyond this sector. One of its notable assets is Club Mykonos. In its financial results for the six months ending 29th February 2024, Trematon reported a modest 2% increase in revenue, while headline earnings per share (HEPS) dropped by 68%. The company's net asset value (NAV) inched up by 1% to 339 cents per share. The company noted, "Total group intrinsic net asset value (INAV) reduced to R912.9 million from R991.8 million as of 31st August 2023, primarily due to the capital distribution paid to shareholders, reflected in the reduction in group cash." In a trading statement for the full year ending 31st August 2024, the company estimated that HEPS would range between 0 cents and a loss of 0.2 cents, compared to a profit of 3.6 cents in the previous period. Currently, Trematon's share is thinly traded, with only about R17,000 worth of shares changing hands daily, which makes it impractical for most private investors. Although the share is in a downward trend, there is potential for a turnaround if the company can successfully expand its investments in the education sector and improve its trading volume. The lifting of pandemic-related restrictions could also create new growth opportunities for the company.
JSE:TMT
by PDSnetSA
Our opinion on the current state of BARWORLD(BAW)Barloworld (BAW) is an international supplier of heavy earth-moving equipment and vehicles to the mining, agriculture, infrastructure, power, automotive, and logistics sectors. Its well-known brands include Caterpillar, Avis, Massey-Ferguson, and Challenger. The company operates in 24 countries, focusing on Southern Africa, Russia, and other emerging markets. This wide diversity in operations and geographical reach offers some insulation against economic recessions. The company has sold its Spanish and Portuguese operations for about R2.5 billion and is now investing in Mongolia with the acquisition of the US-owned Wagner Asia Group. However, the Ukraine crisis has complicated Barloworld’s ability to receive payments from Russian customers and has increased the costs of some commodities. Despite these challenges, the company maintains that it has sufficient funds to navigate the situation, even as its share price has seen a notable decline. In its financial results for the six months ending 31st March 2024, Barloworld reported an 8% decline in revenue and a similar decrease in headline earnings per share (HEPS). However, the company’s net asset value (NAV) increased by 9% to 9111 cents per share. The drop in revenue was mainly due to declines in its Vehicle Trading (VT) division (24% decrease), Equipment Southern Africa (10% decrease), and Ingrain (3% decrease). These declines were partially offset by a 43% increase in revenue from Barloworld Mongolia, driven by government-led infrastructure projects and mineral demand, primarily from China. In a trading update for the 11 months ending 31st August 2024, Barloworld reported a 7.4% drop in revenue and a reduction in net debt to R3.5 billion from R6.3 billion in the prior period. The company attributed the revenue decline to challenging trading conditions in Southern Africa, while its operations in Mongolia benefited from a booming infrastructure expansion and increased mineral exports to China. For the financial year ending 30th September 2024, the company estimated a drop in HEPS of between 20.1% and 21.6%. The company's recent restructuring includes the unbundling and separate listing of its car rental and leasing business, Zeda Limited, on the JSE on 13th December 2022, and the successful disposal of its Logistics business, effective 31st March 2023. Technically, Barloworld’s share price was hit hard in March 2020 due to COVID-19, leading to a prolonged sideways movement in what is referred to as an "island formation." There was an eventual breakout above the island, with the share price also breaching its long-term downward trendline. On 9th April 2024, a strong on-balance-volume (OBV) buy signal was observed, and the share has been trending upward since then. The stock appears undervalued, trading on a price-to-earnings (P:E) ratio of 7.9, making it attractive at current levels. However, geopolitical tensions in Russia and Ukraine remain a significant risk for the company. On 13th September 2024, Barloworld disclosed that it might be in violation of US sanctions against Russia due to exports to its Russian subsidiary, which led to a sharp decline in its share price.
JSE:BAW
by PDSnetSA
Our opinion on the current state of LEWIS(LEW)Lewis (LEW) is a retailer specializing in furniture and electrical appliances, operating through 840 stores under the Lewis, Beares, Best Home, Bedzone, and United Furniture Outlets (UFO) brands. Of these, 138 stores are located in neighboring countries. The company conducts 59.9% of its business on credit, offering customers credit insurance and other financial services. The plan is to expand the UFO brand from its current 39 stores to 70 stores over the next few years. Despite the challenging economic conditions post-COVID-19, Lewis has maintained a debt-free balance sheet, which is remarkable among listed retailers. The stock is currently trading on a price-to-earnings (P:E) ratio of 7.95, and the share price remains significantly below its net asset value (NAV). The company has embarked on a share buy-back program, repurchasing 29.9 million shares at an average price of R34.20 per share, aiming to buy back 10% of its issued capital. This suggests that management believes the share is undervalued. In its financial results for the year ending 31st March 2024, the company reported merchandise sales growth of 4.7% and an increase in headline earnings per share (HEPS) of 7.1%. The company highlighted strong credit sales growth, up 15.8%, while cash sales declined by 11.8%. Credit sales have grown at a compound annual rate of 16.9% over the past three years, now accounting for 66.2% of total merchandise sales (up from 59.9% in the previous year). The company has maintained strict credit criteria, with a credit application decline rate of 35.1%. The results reflect the pressure on consumers due to high-interest rates; however, the anticipated end of loadshedding should provide some relief. In a trading update for the six months ending 30th September 2024, the company estimated that HEPS would increase by between 45% and 55%, driven by growth in other revenue streams and strong credit sales momentum. Lewis has been one of the best-performing retailers on the JSE, demonstrating prudent management and growth strategies despite economic headwinds. Management believes the share is undervalued by at least 30%, a view we find conservative given its performance. We added Lewis to our Winning Shares List (WSL) on 1st December 2023 at a price of 4150c, and since then, the share price has increased by 77% to 7350c. Technically, the share has broken through its long-term downward trendline and is now in a strong upward trend, suggesting further potential for appreciation as the economic environment stabilizes.
JSE:LEW
by PDSnetSA
Our opinion on the current state of JUBILEE(JBL)Jubilee Metals Group (JBL) is a diversified metals recovery company focused on reprocessing mine waste and surface materials. The company is listed on both the London AIM market and the JSE's Alt-X. Its operations span South Africa, the UK, Madagascar, and Australia, with a significant joint venture in Zambia aimed at producing lead, zinc, and vanadium. The company primarily produces platinum group metals (PGM) and chrome. Its key asset is a 63% stake in the Tjate project, which is considered one of the world's largest undeveloped platinum ore blocks, estimated to contain around 65 million ounces on the Western Limb of the Bushveld Igneous Complex. However, in recent years, Jubilee has shifted its focus toward smelting and beneficiation as a strategy to enhance cash flow. The company is investing approximately R154 million to consolidate its PGM retreatment operations, including acquiring a reprocessing plant and chrome processing assets from PlatCro Minerals, along with 1.8 million tons of tailings. This move aims to boost its chrome and PGM production capabilities. In its financial results for the year ending 30th June 2024, Jubilee reported revenue growth of 20.2%, supported by a 20% increase in chrome concentrate production. However, 6E PGM production fell by 14.2%, while copper production rose by 17.1%. The company’s EBITDA decreased by 7.1% to US$27.7 million, mainly due to reduced PGM earnings, which were partially offset by increased chrome output. In its update for the quarter ending 30th September 2024, Jubilee outlined plans to produce 1,800 tonnes of copper in the first half of FY2025, with a target of reaching 4,200 tonnes in the second half, totaling approximately 6,000 tonnes for the full year. This reflects the company's focus on scaling up its copper production, especially in Zambia. Technically, the share remains volatile and is still trading below its long-term downward trendline. We recommend caution and suggest waiting for a clear breakout before considering investment. Despite its potential, particularly with the increased stake in project "G" and securing an additional 2 megawatts of power, the share remains speculative. As of 7th October 2024, Jubilee announced it had increased its stake in project "G" to 65% and secured additional power from an independent power producer, which should support its operations and future growth initiatives.
JSE:JBL
by PDSnetSA
Our opinion on the current state of GRINDROD(GND)Grindrod (GND) is an international freight and financial services company operating across 28 countries. In mid-2018, Grindrod unbundled its loss-making shipping division, Grinship (GSH), resulting in a noticeable drop in its share price at that time. The company now focuses on its two main divisions: freight and financial services. The freight division is bolstered by its strategic assets, including the North-South railway line from Beitbridge to Victoria Falls and port terminals at Richards Bay, Walvis Bay, and Maputo. The company has been particularly optimistic about growth in its financial services segment, which makes up around 30% of its business. Grindrod is expanding its retail banking services to target small and medium-sized enterprises (SMEs). Despite its solid business foundation, Grindrod faces external challenges, particularly in northern Mozambique where ongoing conflicts pose a risk to its operations. Additionally, flooding in Natal earlier this year led to the suspension of five of their sites for several weeks, impacting overall performance. In its financial results for the six months ending 30th June 2024, Grindrod reported a slight 1% decline in revenue and flat headline earnings per share (HEPS). The company highlighted strong performance at the Port of Maputo, which grew volumes handled by 18% to 6.9 million tonnes, driven by increased chrome demand. Dry bulk terminals handled 8.4 million tonnes, while Richards Bay saw a 20% increase in volumes. However, logistics constraints, particularly in container handling and transport, limited overall logistics earnings growth to just 3%. From a technical perspective, the share recently broke out of a rising triple-bottom formation and began an upward trend. We previously recommended waiting for a confirmed break through its long-term downward trendline, which occurred on 15th July 2020 at a price of 340c. Since then, the share has surged to 1512c, achieving a gain of 344% over four years. Despite the company's robust infrastructure and promising growth in logistics and financial services, it remains exposed to geopolitical risks, particularly in Mozambique. This was underscored on 6th November 2024, when Grindrod temporarily shut down all its rail, port, and terminal operations in Mozambique due to violence that led to the closure of the Lebombo border post. Although operations resumed on 8th November 2024 after restrictions were lifted, the incident highlighted the company’s vulnerability to unrest in the region. Looking forward, Grindrod is well-positioned to benefit from a recovery in global trade and economic growth. However, the company’s exposure to regional instability requires caution for investors.
JSE:GND
by PDSnetSA
Our opinion on the current state of ETHOSCAP(EPE)Ethos Capital Partners (EPE) is a private equity fund that focuses on long-term capital appreciation by investing in unlisted companies, primarily in South Africa and across Africa. Incorporated in Mauritius, EPE's investment strategy targets growth sectors, with holdings in companies such as Tymebank, Ster Kinekor, and Brait. Like many investment holding companies, Ethos trades at a discount to its net asset value (NAV). EPE has diversified its portfolio to minimize risk, avoiding excessive concentration in any single investment. The company does not distribute dividends; therefore, investors rely on capital gains for returns. In its latest update for the three months ending 30th September 2024, Ethos reported a 5.6% increase in NAV to 695 cents per share. The growth was primarily driven by unrealized revaluation gains in Optasia, which saw a significant value increase due to a performance improvement highlighted in the company's annual report. The stock is fairly liquid, with an average daily trading volume of over R181,000. After hitting a low of 370 cents on 25th March 2020, EPE shares have shown a recovery as its investments rebounded post-COVID-19 and amid recent global economic pressures like the Ukraine crisis. From our perspective, Ethos Capital Partners could be a solid investment at its current levels, especially considering it is still trading below its NAV. However, the potential for returns will depend on the broader trends in global markets and the performance of its key investments.
JSE:EPE
by PDSnetSA
Our opinion on the current state of SSUSouthern Sun Hotels, previously known as Tsogo Sun Hotels, is a business focused on gaming, hotels, and entertainment. The company underwent a strategic split, separating its gaming and hotel divisions to unlock shareholder value and enable a more concentrated approach in each area. The company has seen benefits from its investments in limited payout machines (LPMs) and electronic bingo terminals (EBTs), primarily located in restaurants and bars. These investments have shown profitability, though they faced challenges during the COVID-19 pandemic. In the financial results for the year ending 31st March 2024, Southern Sun Hotels reported: - Revenue increased by 19%. - Adjusted headline earnings per share (HEPS) rose by 88%. - Free cash flow of R970 million was allocated to share buybacks (R617 million), expansion capital expenditures (R180 million), and debt reduction, bringing net debt down to R1.0 billion with a leverage ratio of 0.7 times EBITDA. In a trading update for the six months ending 30th September 2024: - Occupancy rates improved to 57.1%, up from 55.9% in the previous period. - The average room rate saw a slight increase of 1.7%. - The temporary closure of Southern Sun The Cullinan in June 2024 and Sandton Towers from 26th April 2024 impacted the group’s available room inventory, affecting occupancy, rates, and revenue. The company projects that HEPS for the period will increase by between 33% and 39% compared to the previous year. From a technical perspective, Southern Sun Hotels experienced a prolonged "island formation" pattern following the pandemic. We had advised monitoring for a clear breakout above the downward trendline, which occurred on 21st March 2021 at 175 cents per share. Since then, the share price has surged significantly, reaching current levels of around 840 cents. This reflects a strong recovery, and the share appears to have been previously oversold.
JSE:SSU
by PDSnetSA
Our opinion on the current state of UPARTNERS(UPL)Universal Partners (UPL) is an investment holding company with listings in Mauritius and on the Alt-X of the JSE. Since its inception in 2013, the company has diversified its portfolio with five strategic investments: 1. Dentex Healthcare Group: This investment focuses on dental care, with ownership of 56 dental practices in the UK. 2. Yasa: Initially a distributor of controllers for high power density electric motors. This company was later sold to Mercedes Benz for GBP 42.8 million, generating significant returns. 3. SC Lowy: A market-maker specializing in distressed and high-yield debt, particularly in the Asian markets. 4. Propelair: A supplier of water-efficient toilets in the UK, catering to the growing need for sustainable water solutions. 5. JSA Services: Provides personal service companies, payroll, and umbrella services to temporary workers in the UK, addressing the gig economy’s administrative needs. In its financial results for the year ending 30th June 2024, Universal Partners reported a reduced loss of 0.383 pence per share compared to a loss of 4.21 pence in the previous year, indicating some recovery. For the quarter ending 30th September 2024, the company reported a net asset value (NAV) of 128.2 pence per share, though it still faced a headline loss of 0.97 pence per share. However, despite its diversified portfolio and strategic investments, the share is very thinly traded, making it impractical for private investors looking for liquidity.
JSE:UPL
by PDSnetSA
Thungela Resources Thungela Resources. I will build into it for a trade. In the short-term, it could fall to R108,00, but I'm expecting it to return 20%-40% over the next 6 months. It looks to me, and I'm no professional, that it made a double bottom at a previous resistance turned support. If it does fall in the short-term, again, just my guess, it looks to me that it could create an inverse head and shoulders pattern, indicating that upside returns could materialize. Exit at R170 -R175 Cut losses at R97
JSE:TGALong
by TalkingCents
Our opinion on the current state of HARMONY(HAR)Harmony (HAR) was historically South Africa's most marginal gold miner, but its acquisition of the Mponeng gold mine has significantly strengthened its position. Mponeng is the deepest mine in the world, bringing with it the challenges of ultra-deep-level mining. The development of this mine and its associated processing plant is projected to cost around US$2.8 billion, with Harmony needing to secure approximately R20 billion to cover its share of this expense. In 2021, the company purchased Mponeng for R4.2 billion. Additionally, Harmony is advancing its sustainability initiatives by constructing a 30MW solar park in the Free State, with plans for an additional 80MW of green power capacity. On 6th October 2022, Harmony agreed to acquire the Eva copper project in Australia for R4.1 billion. This acquisition is a strategic move to diversify beyond precious metals. Eva is expected to commence production in about three years, contributing an estimated 260,000 ounces of gold and 1.7 billion pounds of copper to Harmony's reserves, which could potentially transform the company. On 3rd April 2024, Harmony signed a five-year wage agreement with all of its unions, providing stability in its labor relations. In its results for the year ending 30th June 2024, Harmony reported improvements in its underground grade to 6.11 grams per ton, a 6% increase in gold production, and an 11% rise in the US dollar gold price received. This resulted in headline earnings per share (HEPS) of 1852c, up from 800c in the previous year. The company highlighted its focus on investing in higher-grade mines, expanding its surface retreatment operations, and growing its international gold and copper portfolio to de-risk and strengthen its business. In the operational update for the quarter ending 30th September 2024, Harmony reported a slight 1% decline in overall gold production, though Mponeng's output increased by 28%. The recovered grade improved to 6.32 grams per ton, while costs rose by 14%. The average gold price received was up 21% to $2,356 per ounce. The company maintained a robust balance sheet with a net cash position of R6.3 billion (US$362 million) and liquidity of R15.7 billion (US$909 million) in cash and undrawn facilities. Technically, Harmony's share is volatile but currently in a strong upward trend. It is largely influenced by fluctuations in the gold price and the rand/US dollar exchange rate.
JSE:HAR
by PDSnetSA
Our opinion on the current state of LIFEHC(LHC)Life Healthcare (LHC) is the second-largest JSE-listed healthcare company, operating private hospitals, same-day clinics, and healthcare services in South Africa, the UK (through Alliance Medical), and Western Europe. The outgoing CEO, Shrey Viranna, highlighted the group's strategic shift towards day-clinics and non-acute services, along with a focus on self-pay patients rather than solely relying on medical aid schemes. This is evident from their launch of MyLife Clinic, which offers consultations and basic medication for R300. In its results for the year ending 30th September 2023, the company reported revenue growth of 10.3%, although headline earnings per share (HEPS) fell by 16.9%. The company attributed strong demand in its South African operations to being a preferred provider for medical aids, resulting in a 9.5% growth in paid patient days (PPD). For the six months ending 31st March 2024, the company projected earnings per share to increase by over 20% due to the sale of Alliance Medical Group, although this did not impact HEPS. The half-year results showed revenue growth of 7.8% and a 2.3% increase in PPD for acute services. HEPS from continuing operations rose by 29.9%. The company also noted a strong financial position with net debt reduced to a ratio of 0.8 times normalised EBITDA after paying a special dividend in April 2024. In an update for the full year to 30th September 2024, Life Healthcare reported revenue growth of between 12% and 13%, with PPD increasing by 1.6%. The company estimated that HEPS from continuing operations would rise by 55.9% to 60.9%. It highlighted significant debt repayment and a reduction in interest costs by approximately 66% due to positive cash flow from the sale of Alliance Medical. Technically, the share peaked at R47 in September 2014 but entered a long downward trend. It is currently trading around 1700c with a price-to-earnings (P:E) ratio of 20.74. This valuation reflects the company's defensive nature, expected financial improvements, and its overseas diversification, which provides some rand-hedge benefits. Although the share has not yet broken through its long-term downward trendline, it appears to offer reasonable value, especially as dividends have resumed.
JSE:LHC
by PDSnetSA
Our opinion on the current state of Omnia (OMN) is a diversified chemicals company supplying products to the agricultural, chemicals, and mining industries in South Africa and 48 other countries. The Agricultural division is the leader in fertilizers in Southern Africa, supplying granular, liquid, and specialty fertilizers in Southern Africa, Eastern Africa, Australia, New Zealand, and Brazil. The mining division is a leading supplier of explosives in South Africa, Mali, Swaziland, Sierra Leone, Malawi, Senegal, Zambia, Zimbabwe, Botswana, Mozambique, and the DRC. The chemicals division manufactures and distributes specialty, functional, and effect chemicals and polymers across the African continent. The company derives most of its revenue from agriculture (fertilizers) and mining (explosives). In its efforts to diversify away from the South African economy, Omnia acquired Oro Agri in America for $100m and Umongo Petroleum for R780m. Additionally, they commenced constructing a R630m nitro phosphate plant in Sasolburg. Omnia's performance is closely linked to the general performance of the South African economy. The company is well-managed and grows consistently through acquisitions and organically, although it operates in challenging markets, making it difficult to sustain high profit margins. It remains a relatively risky investment due to its dependence on commodity prices and the agricultural sector, though both have recently performed well. In its results for the six months to 30th September 2024, the company reported revenue up 5% and headline earnings per share (HEPS) up 2%. The company said, "Operating profit grew by 17%, supported by enhanced operational efficiency and improved margins. This performance highlights the success of our diversification strategy and the strength of both the Mining and Agriculture businesses." Technically, the share has been in a downward trend since its peak in May 2022. We recommended waiting for it to break up through its long-term downward trendline, which occurred on 18th June 2024 at 6087c. The share has since moved up to 6579c.
JSE:OMN
by PDSnetSA
Our opinion on the current state of RAUBEX(RBX)Raubex (RBX) is a construction company that was started in 1974 and listed on the JSE in 2007. The company has three divisions in construction, materials, and infrastructure. Recently, with the dearth of work in road-building, especially from Sanral (who have halved the value of the tenders which they issue), the company has branched out into solar and wind energy and has won contracts worth R500m in this area, doing work on the Droogfontein photovoltaic farm and the Copperton wind farm in the Northern Cape. The company is bidding for contracts all over Africa and has benefited from the increase in contract work from the South African government, especially Sanral from whom it has won R6bn worth of orders. However, this is a well-managed company that is managing its costs closely and which has a strong balance sheet. The company has businesses in Cameroon, Namibia, Botswana, and Zambia and owns Westforce Construction in Western Australia. Raubex is one of those companies that will benefit directly from any significant improvement in the South African economy. In its results for the six months to 31st August 2024 the company reported revenue up 29,7% and headline earnings per share (HEPS) up 49,8%. The company said, "The cash generated by operations was exceptionally strong, up over 110% compared to the prior period. Although we continued to secure contracts during the period under review, our order book declined marginally to R24.50 billion." The share looks cheap on a PE of 9,97. In our view, this is a share which will benefit directly from the improved economic outlook in South Africa following the advent of the GNU, the end of loadshedding, and falling interest rates. Technically, it has been in a rising trend since March 2023 and has broken up now through resistance at about R30 per share. It was added to the Winning Shares List (WSL) on 21st March 2024 at a price of 3031c and it has now reached 4656c.
JSE:RBX
by PDSnetSA
Our opinion on the current state of VODACOM(VOD)Vodacom (VOD) remains a key player in South Africa's telecommunications industry and holds a dominant position in the market as the largest provider of mobile airtime and data services. As a subsidiary of Vodafone, Vodacom benefits from the backing of a global telecommunications giant but also faces challenges tied to its parent company. The market tends to react to decisions made by Vodafone, which can impact Vodacom's share price, as seen previously when concerns arose about potential sell-offs of non-European assets. Operational Overview: - Vodacom has expanded its operations beyond South Africa to include Mozambique, Tanzania, the DRC, Lesotho, and more recently, Ethiopia. The entry into Ethiopia, Africa's fastest-growing economy, presents a significant growth opportunity given its large population of over 105 million people. - The company has been focusing on mitigating declining voice revenue by shifting towards data services and expanding its financial services offerings. In partnership with Jack Ma's Alipay, Vodacom is developing a "super-app" to enhance its non-voice revenue streams. - Loadshedding remains a challenge in South Africa, leading Vodacom to invest heavily (R4bn) in infrastructure to reduce its impact and ensure network stability. Recent Financial Performance: In its latest results for the six months ending 30th September 2024: - Revenue increased marginally by 1%. - Headline earnings per share (HEPS) were down by 19.4%. - Financial services revenue grew by 7.8% and now contributes 11.4% to group service revenue. - Vodacom reported having a customer base of 206 million, with 83 million using its financial services. The company acknowledged that its bottom line was impacted by several one-off factors but expressed optimism for a stronger performance in the second half of the financial year. Technical Analysis: - Vodacom's share price peaked at 16214c on 1st April 2022 but experienced a downward trend due to regulatory pressures and market conditions. - We recommended waiting for a break above its long-term downward trendline, which occurred on 25th July 2024 at 9836c. - Following the breakout, the share price rose to 11483c but has since retraced due to the disappointing latest results. - Despite the recent decline, the stock appears relatively undervalued at current levels, offering a dividend yield of approximately 4.34%. Investment Outlook: Vodacom continues to demonstrate resilience in a challenging environment marked by regulatory changes, economic pressures, and technological shifts. The company's strategy of diversifying into data and financial services, coupled with its expansion into new markets like Ethiopia, positions it well for future growth. However, the telecommunications sector remains subject to rapid technological changes, regulatory interventions (such as forced reductions in interconnect fees), and economic uncertainties in its key markets. Therefore, while Vodacom appears relatively cheap at current levels, the investment carries inherent risks. Conclusion: Vodacom presents a mix of stability through its established market leadership and potential growth through new initiatives. It may be suitable for investors seeking exposure to telecommunications in Africa with a relatively attractive dividend yield. However, caution is advised due to the evolving regulatory landscape and market dynamics.
JSE:VOD
by PDSnetSA
Our opinion on the current state of WOOLIES(WHL)Woolworths (WHL) has been navigating a challenging few years, primarily due to the ill-fated acquisition of David Jones in Australia for AU$2.1 billion in 2014. This acquisition has resulted in significant write-downs totaling R12 billion, putting immense pressure on the group's financials. The purchase has been widely viewed as a strategic misstep by Ian Moir, the former CEO. Fortunately, Woolworths' food division has remained resilient, contributing positively to the group's overall performance. In January 2020, Woolworths brought in Roy Bagattini from Levi Strauss to replace Moir as Group CEO. Under Bagattini's leadership, the company has focused on cash generation, working capital management, and reducing debt levels. This strategy has helped improve its cash conversion ratio to nearly 95%, with a solid return on capital employed at 18.7%, significantly above its cost of capital. For the fiscal year ending June 30, 2024, Woolworths reported a modest turnover increase of 4% from continuing operations, but headline earnings per share (HEPS) fell by 16.8%. The group's net debt stands at R5.6 billion, with a debt-to-EBITDA ratio of 1.45x, which is within its target range. The Australian segment, despite its historical challenges, is now in a net cash position of A$39 million. In a trading update for the 18 weeks to November 3, 2024, the company reported encouraging growth, especially in its food segment, which saw turnover increase by 12.1%. The Fashion, Beauty, and Home (FBH) division showed signs of recovery, with turnover up by 3.5%. These results suggest a gradual improvement in Woolworths' core business areas, especially as consumer confidence improves. Technical Analysis and Outlook: We previously advised waiting for Woolworths' share to break through its long-term downward trendline before considering it for investment. This breakout occurred on September 19, 2024, at a price of 6654c. Since then, the share price has moved slightly higher to 6768c, indicating the potential beginning of a new upward trend. With a current P/E ratio of around 18.58, the share looks fairly valued given its recent performance improvements. Conclusion: While Woolworths still faces challenges, particularly with its Australian operations, the focus on cash flow, reduced debt, and strong performance in the food division are positive signs. The share now appears to be entering a new upward trend, making it a potential consideration for investors seeking exposure to a well-managed retail stock with improving fundamentals. However, given the company's past missteps, cautious optimism is advised.
JSE:WHL
by PDSnetSA
CML.JSE Coronation Fund Possible Cup & Handle Formation?Coronation Fund Managers looks to Print a Possible Cup & Handle Formation? This is a Bullish Pattern, but has not yet Printed. Conviction is Strong IMO. The Target Price has been Projected Up to identify the possibilities. As always, please get a few outside Expert's Advice before taking Trade or Investment Decisions. Should you appreciate my Chart Studies, Smash That Rocket Boost Button. It's Just a Click away. Regards Graham.
JSE:CMLLong
by hitchcoxg