Indholdsfortegnelse for 10/8/2020 i Finweek - English

recently, while watching a documentary on the Roman Empire, I was reminded of the origin of the term “milestone”. One of the key elements to the success of their empire was to connect it by building roads. They placed stone pillars called “obelisks” along these roadways, typically as mile markers. Milestones then. On 25 September, South Africa hit day 183 of the Covid-19-induced lockdown. The official six-month mark. Beyond the lockdown “milestone” of half a year, the end of September also ushered in the fourth quarter of this annus horribilis – with plenty of data being released to illustrate the impact this pandemic has had on our economy. But, as lockdown measures ease and we seem to be maintaining a nearly 90% recovery rate as we enter summer, there is…

tharisa, a company listed in London and Johannesburg, has gone under the radar, according to a UK brokerage that thinks the South African firm’s exposure to the chrome market, and platinum group metals (PGMs), positions it for a value lift over the next two years. Peter Mallin-Jones and Tim Huff, analysts for investment bank Peel Hunt, say Tharisa must still benefit from a full year of PGM prices, assuming their current, elevated levels are maintained, especially in palladium and rhodium. Bear in mind the basket price for Tharisa’s PGM mix has increased from $900 an ounce in early 2018 to $2 300/oz today. In fact, Tharisa’s future PGM contribution to revenue could match the entire revenue number of chrome and PGMs of recent years. That provides a sense of the…

blue Label Telecoms’ revenue decreased 10% to R21.1bn for the year through 31 May. This excludes gross purchases of electricity, airtime and other prepaid services by customers. The company slashed its debt to R2.3bn from R3.2bn a year earlier after selling assets. Outlook: Blue Label breached the resistance trendline of its long-term bear trend in November 2019 after announcing that it would sell off 85% of its stake in subsidiary Blue Label Mobile for R450m. Despite its ill-fated investment in Cell C, the company’s other divisions have been delivering substantial returns. On the charts: Blue Label’s share price has been trading sideways between 377c/share and 150c/share since November. Within that consolidation, it formed an inverted head-and-shoulders, which is a bullish reversal pattern. Go long: The neckline of the pattern is…

as the country moves to lockdown level 1, South Africans seem to be heading out and getting on with life again. As we rush between back-to-back virtual meetings, predictions of the “death of the office” abound. Surveys seem to indicate that most office workers would prefer to work from home – though it seems that it’s not necessarily being at our offices that we are trying to avoid, but rather getting to and from them. One sector that has benefitted from lockdown measures is online shopping and related fulfilment activities – Amazon is in talks to convert failed department store space into last-mile distribution hubs. Surprisingly, it is still highly profitable in SA to distribute many items through physical locations, even when compared with online retail. Another area within the…

Have we come full circle? There is a solid investment case for a shift back to directly owning real estate. in the 1990s, the South African property market was largely directly owned and managed by insurance companies and pension funds, while the listed market was in its infancy at the time. But over the last 25 years, the listed market has ballooned from owning R1.5bn of SA property assets in 1995, to R320bn now. The sector transformed from simple businesses owning SA property to complex global structures, resulting in many property portfolios becoming unfocused. In addition, governance issues and high debt levels have been material headwinds in recent times. These factors, together with elevated levels of volatility for listed property, have sparked renewed interest in direct property as an asset…

it is reasonable to think that the future of real estate investments is doomed. The massive growth in Zoom’s (the videoconferencing supplier) revenue at its last set of results would be cause for concern for investors in real estate investment trusts (Reits) when thinking of office exposure. Furthermore, the collapse in the UK of retail-focused Hammerson and Intu, gives investors good reason to fear that online Reits, such as retail is finally delivering the hammer blow to the sector. In the case of South Africa, the market perception is that the migration to online retail will present a huge risk for retail landlords. It may not be obvious – but for many malls in SA, the economics still favour bricks-and-mortar relative to online channels. There are still material risks; however,…

the choice between buying or renting a place to live is an important one – especially to those planning on moving into their first abode. Let’s look at an example of two young professional couples who are considering the option of buying their first property. Assuming these couples work in one of the cities around the country, they are likely to want to live in the bustle of Green Point in Cape Town, Umhlanga Rocks in Durban, Bryanston in Johannesburg or Summerstrand in Port Elizabeth. Now, each of these places can cater to the elites, but the average no-frills rental price of approximately R13 000 per month for a two-bedroom apartment is possible. An example of property prices in these areas would differ quite dramatically per square metre, but for…

since 1994, the South African government’s national housing programme has completed an estimated 3.4m housing units and handed these over to the lowest-income families in the nation. An estimated 2m of these houses are formally registered on the deeds registry, and subsidy housing stock now accounts for just under one-third of all formally registered residential properties in SA. For the households who were fortunate enough to receive a subsidised house, it is probably the most valuable asset they will ever own. In the context of Covid-19, this asset could provide valuable support to low-income households, improving their resilience and broadening their options for responding to the crisis. It could also be the key to unlocking productivity growth and private investment in an economy afterCovid-19 – something we will very clearly…

despite some pullback from recent highs, the big technology stocks have remained resilient in the face of many challenges. Global tech companies have made a quicker recovery from the 2020 pandemic slump compared with the market setback of 2009. Back then the recovery was slow and hesitant. It took four years for the S&P 500 to reach a new high after 2009 as the reversal affected a broad-based range of stocks, including big tech. This year, it took six months for the S&P 500 to again trade at its previous high. But now it has stalled in what some analysts describe as a healthy correction. Although the technology-rich Nasdaq Composite Index has gained 60% since its March lows, bouts of negativity may yet cause the index to stumble to lower…

“At all times we prefer our liquidity buffers to be more than 10%. Our policy for dividend growth contains a good guideline of 67% reinvestment.” since 1994, South Africa’s former agricultural cooperatives have generally transformed themselves into well-managed agribusinesses. In fact, they are still undergoing a process of further consolidation, capital formation and value creation for shareholders. But the coronavirus pandemic means this is happening against a backdrop of the worst crisis and disruption since World War II. Besides the rearrangements taking place on the field on which agribusinesses play, it is interesting to also take note of the latest economic indicators (see box on p.43). Business playing field Francois Strydom, CEO of the agribusiness Senwes, points out that the field on which the country’s large agribusinesses play is increasingly…

most South Africans currently experience some form of distress – when there is no break from stress. Although it can be a positive energy that gets us out of bed and going during the day, the red flags shoot up when stress becomes distress. The Covid-19 pandemic, prolonged periods of physical confinement and increased levels of anxiety pushed many people from being distressed to being burn out. The World Health Organization has reclassified burnout as an occupational phenomenon rather than a medical condition. This has huge implications for the workplace, says Danie du Toit, registered industrial psychologist. “Burnout is likely to become an occupational disease caused by work-related stress. Employers are thus likely to be held responsible for it, like an accident at work.” The symptoms to look out for…

Jack Appleby @JuiceboxCA Googling symptoms only tells you which diseases have the best SEO. Michael Saylor @michael_saylor No one can buy a pizza with their stocks, bonds, real estate, gold, or derivatives. No one cares. #Bitcoin does not need to be a medium of exchange. Zlatan Ibrahimović @Ibra_official I tested negative for Covid yesterday and positive today. No symptoms whatsoever. Covid had the courage to challenge me. Bad idea. Zerohedge @zerohedge Dear fraud CEOs: Going forward, please announce your “surprise” resignations on Friday evening, not on Monday just before stocks open. The Dad @thedad I told my son we couldn’t afford something, and he asked why I didn’t have more money, and I wanted to be like, “You, dude. You are entirely the reason I don’t have more money.” Chester…

one of the most influential mathematicians of all time, Sir Isaac Newton, lost a fortune by investing in the South Sea Bubble of 1720. When asked why, with all his mathematical prowess, he could not foresee the collapse of the stock, he is reputed to have said that ‘he could not calculate the madness of the people’. And who can blame him for being unable to understand the seemingly irrational behaviour of hundreds or thousands or, sometimes, millions of people – the madness of crowds, as the journalist Charles Mackay coined the phrase in an 1841 bestseller on financial bubbles. Mackay’s nineteenth century interpretation for why bubbles occur is still how most of us would explain the spectacular and seemingly inexorable rise of asset prices during a bubble. Think of…

Harmony Gold’s declaration that it would retool its African growth strategy seems interestingly timed as executives throughout the industry have adopted a position of ‘watchful, but doubtful’ over merger and acquisition activity. That’s because the current price of gold means this might be the top of the market, making potential targets expensive to buy. That would ruin Harmony’s recent track record. Its purchase of Mponeng and Mine Waste Solutions from AngloGold Ashanti for a total cash and revenue share of $470m was equal to $83 per equivalent gold ounce reserve. This compares with $98/oz reserve paid by Newmont Mining, a US company, for Goldcorp and $277/oz paid by Chinese firm Zijn for Continental Gold. According to a report by McKinsey & Co, a consultancy, top among the CEO in-tray in…

I always like the idea of a fishing business: it’s a cheap protein for consumers and catch quotas create a moat around the industry. The JSE has three fishing stocks, but Premier Fishing has lagged since listing three years ago, and Oceana is a serial disappointer. Recently, Sea Harvest’s results for the six months ended June showed a solid performance. The pandemic hurt its operations, despite being categorised as an essential service. Overall, the cost of Covid-19 during the reporting period was around R30m. As we move into less strict lockdown levels, this expense should reduce, and profit improve. Even with increased costs from the pandemic, gross margins remained in place at around 33%. The company’s aquaculture division is still making a loss, but by the end of the financial…

CONVENOR Anne Cabot-Alletzhauser Head of Alexander Forbes Research Institute EDITORIAL ADVISORY COMMITTEE Jonathan Brummer Investment Consultant at RisCura Kelly de Kock Chief Operating Officer at Old Mutual Wealth Trust Company Lindelwa Farisani Head of Equity Sales South Africa at UBS Investment Bank Professor Evan Gilbert Associate professor at USB and research analyst at Momentum Investments Delphine Govender Chief Investment Officer at Perpetua Investment Managers Craig Gradidge Executive Director at Gradidge Mahura Investments David Kop Executive Director at the Financial Planning Institute of Southern Africa Monika Kraushaar Senior Consultant at RisCura Deslin Naidoo Founder of NEBULA SI Nerina Visser ETF Strategist and Adviser Muitheri Wahome Financial Services Professional…

In 2013, new legislation was introduced allowing for the creation of a new listed property investment structure, a real estate investment trust (Reit), thereby replacing property unit trusts (PUTs) and property loan stocks (PLSs). The Reit structure aligned the South African listed property sector to international standards, creating a globally comparable asset class. Equally important, Reits provide a tax-efficient scheme that is attractive to shareholders. At its peak, around three years ago, following a two-decade bull market, the SA listed property sector had a market capitalisation of around R600bn compared with about R100bn in 2006, representing a compound annual growth rate of close to 17.5%. Listed real estate has always been perceived as a liquid, stable investment with a predictable, growing income stream, coupled with potential capital growth. The predictable…

the South African listed property sector declined by 47.3% this year. At its trough, it was down 56%. Over three years, the sector shed an annualised 23.8%, underperforming bonds, cash and equities. Listed property has been in decline since 2018. In that year, allegations of wrongdoing against some companies brought to light corporate governance and capital structure issues. Despite clearance from authorities, the sector failed to attract interest as concerns around fundamentals took centre stage. Even before Covid-19, SA was in a recession, fuelled partly by inconsistent electricity generation. Despite high unemployment, rapid acceleration in municipal costs and shrinking disposable income, developers pushed supply higher and rentals continued to escalate by more than inflation. Covid-19 exemplified much of the pressures facing the sector. While the economic damage from the lockdown…

on 18 September 2020, Goldman Sachs strategist Zach Pandl released a report in which he referred to this coming November as a “November to remember”. US voters will, for the 59th time, on 3 November decide who will be their next president. I definitely don’t want to use my space in this column to discuss who I think will win this election, but I do want to focus on a few troubling matters that Pandl pointed out in his report, should Trump’s competitor, Joe Biden, be elected as the new US president. In short, the report mentioned that if Biden wins, this will most likely lead to an acceleration in the weakening of the US dollar. There are three important reasons for this. Firstly, Biden indicated that a victory for…

HYPROP R4bn drop in asset valuation Hyprop’s results for the year ending 30 June saw the devaluation of its property by R4bn, which is equal to its current market cap. Distributions to shareholders were cut, but the company remained within its debt covenants. Overall, property companies’ results released so far have mostly not been as bad as expected, and foot traffic and rental payments have improved markedly since the hard government-imposed lockdown of April and May. But this remains a sector that I am mostly staying away from. New rental agreements are under pressure, both in terms of the rates being charged but also, I would suspect, in terms of finding new tenants. We may still see property values decreasing and that puts more pressure on their loan-to-value metrics. However,…

■ According to Stats SA, the agricultural sector grew by 15.1% in the second quarter of the year and is the only sector that made a positive contribution to GDP, of 0.3 percentage points.■ This followed on the sector’s first quarter growth of 27.8%, according to Wandile Sihlobo, chief economist at the Agricultural Business Chamber.■ This performance was thanks to an increase in summer grain, fruit and animal production after better rains.■ A weaker rand-dollar exchange rate is assisting exports.■ The maize crop of 15.5m tonnes is the second-largest in SA history. Even when taken in real terms, it has the highest rand value ever.■ The slaughtering of livestock has dropped owing to the lockdown, but is expected to recover in the third quarter. At the time of writing this…

when economic growth grounded to a halt in the aftermath of the global recession in 2009, competition for scarce resources intensified between South Africans and immigrants, contributing to the resentment of the latter, who are often accused of stealing jobs from the locals. This resentment sparks sporadic xenophobic attacks, some of which have been deadly and resulted in the displacement of foreign nationals. These attacks, which occurred in 2008, 2015, and 2019, are more pronounced in poor communities who live in squatter camps, townships, and the inner cities. These communities are usually plagued by high unemployment, poverty, crime, corruption, and inept service delivery. However, in recent months the anti-immigrant sentiment has reared its ugly head again, this time spreading to sections of society not normally associated with xenophobia. The popular…

jSE-listed Balwin Properties is no stranger to developing large sectional title estates. But its next project, Mooikloof Mega City, is on a scale rarely seen. In what could be the world’s largest sectional title development, with a value of around R44bn, the colossal inclusionary housing project located east of Pretoria could count a total of 50 000 apartments. Asked how confident he is the 50 000-figure will be met, Balwin Properties CEO Steve Brookes replies: “100%.” Mooikloof Mega City, a green-model development supported by government as a strategic integrated project, has been designed specifically for the gap housing market. It means housing opportunities for people earning a combined monthly income between R3 501 and R18 000. These income earners earn too much to get a free house from government and…

Transaction Capital (TCP) is an active strategic investor in high-potential businesses in credit recovery and related services. The company’s segments include SA Taxi and Transition Capital Risks Services (TCRS). SA Taxi finances, sells and repairs minibus taxis, and TCRS is a debt collection service that accounts for almost half of Transaction’s earnings. Its principal investment in Australia is Recoveriescorp, which is a professional debt purchase and debt recovery service. Transaction Capital announced in September that it concluded a subscription deal to buy a 49.9% stake in automotive retailer WeBuyCars.co.za for R1.84bn. Chief executive David Hurwitz described the investment as value-accretive that will convert interest income on the company’s deployed capital into higher-yielding operating earnings, which will accelerate Transaction Capital’s earnings growth rate. How to trade it: TCP traded out of…

opportunity cost is an economic concept meaning that when you make a choice, you forego an alternative one. There is finite ability, money, and time. For example, you decide on a beach holiday, which means you couldn’t have gone to the mountains. Now sure, the mountains are still there, and you could go next time. But whatever happened at the beach – whether the sun shone, or the rain poured down – was a choice you made with the concomitant benefits or pitfalls. With investing, the opportunity cost is even more acute as we really have finite money and we can’t buy everything. Sure, we could buy both Standard Bank and FirstRand and, if we wanted to, also Absa and Nedbank. But eventually we run out of cash and end…

there’s something about investing in property that seems to pull at our heartstrings: property, housing and home. There are myriad dimensions of property investments that can confound even the most seasoned asset manager. To begin with, investors would be right to be confused about what kind of asset it actually is. Is it equity-like? Or bond-like? Is it a diversifier or highly correlated to some other asset class? Is it liquid or illiquid, volatile or stable? Does it require high or low maintenance as an investment? The answer is: it depends. There’s a property-related investment for every permutation identified above. So, let’s get a bit more insight into the basics here, and hopefully introduce you to some aspects about investing in property, housing or homes that you may not have…

Amazon is in talks with Simon Property Group, the largest retail mall owner in the world, on potentially converting failed department store space into last-mile distribution hubs. Lord & Taylor’s flagship department store in Manhattan will soon house office workers for Amazon, and a tourist destination in the heart of Hollywood is getting a $100m facelift that includes converting underused retail spaces into offices. Globally, a desire for additional space, flexible working, and record-low mortgage rates are causing families to purchase or rent homes further away from cities. An ageing millennial cohort and lower taxes outside of the dense urban areas are further reasons for the flight to the suburbs. These factors are creating headwinds for high-cost urban apartment owners, which is in stark contrast to single-family rental companies that…

nonofo Kgoroeadira is a newly-qualified actuary who was recently re-enthused into the investment industry by a chance encounter with her high school friend, Ludwig Magadla. She had always thought her friend was “awfully smart”, but “too edgy” and “reading too much into things”. The two had an opportunity to touch base at the funeral of Ludwig’s uncle in Alexandra township, a former PAC APLA military wing general who had succumbed to Covid-19-related illness. There are few better opportunities for re-anchoring such as the death of a loved one under the circumstances such as in Alexandra: the hypocrisy of social distancing in an urban concentration camp; the evidence of the erosion of fiscal governance by the ruling party, its subversion to self-enrichment and the preeminence of oiling of party machinery. A…

just over a year ago I wrote about negative yields after having been scratching my head about the concept for some time. My conclusion was that a negative yield wasn’t that uncommon. Gold, for example, had an effective negative yield due to storage and insurance expenses. But I did conclude that negative yields were ultimately nonsensical and would, surely, in time revert to normal. I haven’t changed my mind on the first point, but the reverting to normal part has at best been delayed for many years. US Federal Reserve (Fed) chairman Jerome Powell has said the bank will be keeping rates at zero until at least 2023, while the Bank of England said in its latest rate announcement it is exploring negative interest rates. This is because of the…

there should be more opportunities to make money from gold and gold shares, judging by the pronouncements of Citigroup. The international banking group is predicting the gold price to reach new record levels before the end of the year. It reached an all-time high in August, but has since lost about 10%. Citigroup believes gold is in the middle of its current bull cycle. The JSE’s gold index has, however, weakened by some 25%, which confirms that speculators – as always when gold is on the move – are active in gold shares. Citigroup says the new high could partly be a result of risks related to the US presidential election. The election “could be an extraordinary catalyst” for the gold price late in the fourth quarter. The bank believes…