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Our opinion on the current state of LIFEHC(LHC)Life Healthcare (LHC) is the second-largest healthcare company listed on the JSE main board, operating private hospitals, same-day clinics, surgeries, and healthcare companies in South Africa, the UK (Alliance Medical), and Western Europe. The outgoing CEO, Shrey Viranna, has indicated that the group is shifting its focus from conventional hospitals to day clinics and non-acute services. Additionally, there is an effort to diversify from reliance on medical aid schemes towards serving individuals who pay for medical services out of pocket. This is exemplified by the launch of MyLife Clinic, which offers consultations and basic medication for R300. In its annual results for the year ending 30th September 2023, Life Healthcare reported a revenue increase of 10.3% but a decrease in headline earnings per share (HEPS) by 16.9%. The company attributed this performance to "The Group's SA operations experienced strong demand for their services in the current year driven by the Group being the preferred network provider for medical aids. This led to higher utilisation of the Group's hospitals and complementary services which delivered PPD growth of 9.5%." For the six months ending 31st March 2024, a trading statement projected that earnings per share would increase by more than 20%, a boost largely due to the disposal of Alliance Medical Group. However, this disposal would not impact HEPS. The subsequent results for this period reflected a revenue increase of 7.8% and a 2.3% rise in paid patient days (PPD) in the acute section. HEPS from continuing operations saw a significant increase of 29.9%. The company noted, "The Group is in a net cash position as at 31 March 2024 due to the proceeds received from the sale of AMG. The Group remains in a strong financial position with net debt to normalized EBITDA (as per bank covenant definitions) of 0.8 times after the payment of the special dividend on 8 April 2024." Technically, Life Healthcare’s shares peaked at R47 in September 2014 but have since been in a long downward trend. Currently trading around 1130c, the shares have a P/E ratio of 13.85, reflecting the company's expectation of improved results, its defensive nature, and its overseas diversification, which offers some rand-hedge characteristics. Given these factors, Life Healthcare shares appear to offer reasonable value, particularly now that the company has resumed paying dividends. This positions the shares as a potentially attractive option for investors looking for exposure in the healthcare sector with a blend of local and international operations.
JSE:LHC
by PDSnetSA
Our opinion on the current state of 4SIGHT(4SI)4Sight is a Mauritian company that specializes in investing in technologies and companies associated with the "4th Industrial Revolution." This revolution is characterized by cyber-physical systems that integrate cloud computing and the internet of things, exemplified by the development of "smart factories." The company operates in two main areas: mining & manufacturing, and software, cloud, and enterprise solutions. It employs 400 people and serves 3000 customers across 30 countries, with 42% of its income derived from outside South Africa. Since its listing in October 2017, 4Sight's share price has experienced significant volatility. Initially listed at 235c, the share price plummeted to around 13c by September 2019 but has since rallied to 31c. The company does not yet pay dividends, reflecting its growth-focused strategy. On 6th October 2020, the company announced a significant buyback of 30.6% of its issued ordinary shares and finalized the sale of Digitata for just over R90 million. In its financial results for the year ending 31st December 2023, 4Sight reported a 34.9% increase in revenue and a 127.8% rise in headline earnings per share (HEPS). The company attributed the increase in other income mainly to forex currency gains of R2.9 million, compared to a loss of R1.2 million in the prior period. Total operating expenses for the period rose by 24.1% to R348.6 million from R280.8 million in the previous year. For the 14 months ending 29th February 2024, 4Sight estimated that HEPS would range between 5.742c and 6.128c, compared with 2.379c per share for the period ended 31 December 2022. Notably, the company has changed its financial year-end to 29th February from 31st December. We added this share to the Winning Shares List on 3rd August 2023 at 31c, and it has since climbed to 79c. Technically, the share qualifies as a penny stock, with an average daily trade value of about R158,000, making it accessible to private investors. It entered a strong uptrend following its latest results, although this uptrend may have temporarily plateaued. As such, 4Sight represents a challenging investment to evaluate without a deep understanding of the technologies driving the 4th industrial revolution, suggesting the use of a strict stop-loss strategy to manage investment risk.
JSE:4SI
by PDSnetSA
Our opinion on the current state of AFORBES(AFH)Alexander Forbes (AFH) is a prominent financial services company that provides asset management, insurance, healthcare, retirement consulting, and wealth management to both corporate and private clients. It operates not only in South Africa but also has a presence in five other African countries: Namibia, Nigeria, Botswana, Uganda, and Zambia. Historically, the company's share price has experienced a significant drop, falling from just over R10 in February 2015 to around 430c today. This decline was largely attributed to the leadership of its former CEO, Andrew Darfoor, who was said to have lost the confidence of the board and institutional investors, compounded by the resignation of the financial director, Naidene Ford-Hoon, after less than a year with the company. Changes to the board have been significantly influenced by Patrice Motsepe's African Rainbow Capital (ARC). In its financial results for the year ending 31st March 2023, Alexander Forbes reported an 8% increase in operating income and a 22% rise in headline earnings per share (HEPS) from continuing operations. The company highlighted, "The group balance sheet remains robust, supported by the strong cash flow generated from continuing operations, with a sound regulatory surplus position of R1,516 million and available cash of R933 million." Subsequent trading statements further reflect the company's recovery and growth: for the six months to 30th September 2023, HEPS was estimated to increase by between 85% and 105%, attributed in part to the base effects from the performance of discontinued operations in the prior year. Looking ahead to the year ending 31st March 2024, the company anticipated that HEPS would increase by between 23% and 33%. This optimistic forecast is attributed to "solid growth in operating income owing to acquisitions and new business." Currently, the company trades at a P/E ratio of 10.77 and has recently sold its group risk and retail life business for R100 million, potentially to fund further acquisitions. Given these factors, Alexander Forbes is considered to be reasonably valued at current levels and is seen as being in a steady upward trend. This assessment suggests that the company could be a worthwhile investment, especially for those looking at financial services stocks within the South African and broader African markets.
JSE:AFH
by PDSnetSA
Our opinion on the current state of COLLINS(CPP)Collins, previously known as Tradehold, boasts a portfolio of over 140 properties with a total gross lettable area of 1.6 million square meters. Most of these properties are industrial, including major distribution centers and industrial complexes let on long-term triple-net leases to leading corporate clients. Additionally, Collins manages Tradehold’s Namibian portfolio, which includes a number of sought-after properties in major towns such as Windhoek, Walvis Bay, and Gobabis. Originally, Tradehold was a real estate investment company in Southern Africa, 48% owned by Christo Wiese. More than 40% of its assets were in the UK, managed through its 100% holding of the Moorgarth Group, which owned 23 properties in the UK and has now been sold. It owns 100% of Tradehold Africa, which owns properties in Africa outside of South Africa, and 100% of the Collins Group, which owns 153 properties inside South Africa. Tradehold has spun off its financial services business interests into a separately listed entity, Mettle, now listed on the Alt-X of the JSE. The South African economy has faced significant challenges, including the repercussions of 10 years of state capture and corruption, the impact of COVID-19, and recent civil unrest. In a report on the unrest, the company disclosed that a total of 21 of Tradehold’s properties in KwaZulu-Natal were damaged, with the estimated cost of damage at R41 million, excluding loss of rental. This represents approximately 0.5% by value of Tradehold’s property portfolio in South Africa. In its results for the six months to 31st August 2023, the company reported revenue of R581 million, up from R570 million in the previous period, and an attributable profit of R108 million compared with a loss of R958 million. The company noted, "The disposal of the Company's UK assets in the second half of 2022 formed part of an extensive restructuring of the business over the past six months." In a trading statement for the year to 29th February 2024, the company estimated that the distribution per share (DPS) would increase by between 33.33% and 53.33%. Technically, the share has been in a downward trend since April 2016 and is now trading at a significant discount to its net asset value (NAV) per share. In our view, this share is mostly a local property play which will probably perform better as the SA economy recovers, but we do not see it as an exciting investment prospect. The company is also selling off its Mozambique properties. While it is cheap at current prices, and volumes are around R80,000 of shares changing hands each day, making it just practical for private investors.
JSE:CPP
by PDSnetSA
Our opinion on the current state of CORONAT(CML)Coronation (CML) is one of South Africa's largest asset managers and the only one listed on the JSE. Founded in 1993, the company experienced significant growth until 2015. At that point, the founding CEO resigned and was replaced by Adrian Pillay. Despite Pillay's qualifications, the company has faced challenges under his leadership, particularly due to significant losses from investments in African Bank and Steinhoff. These missteps have led to a re-evaluation of Coronation's ability to select winning investments, resulting in an outflow of institutional funds. The fund management business relies heavily on confidence, and these events have shaken the trust that institutional fund managers place in Coronation. On 8th February 2023, Coronation announced it had lost a SARS appeal, which may result in the suspension of its dividend, causing the share price to drop sharply. However, in its results for the six months ending on 31st March 2024, the company reported a revenue increase of 4.3% and headline earnings per share (HEPS) of 200.5c, compared with 6.2c in the previous period. Assets under management (AUM) grew by 5% to R631bn. The company noted, "Net outflows for the period were in line with our expectations at 4% of average AUM. This is largely due to the weak SA savings industry, to which Coronation is significantly exposed. It also reflects the experience of the broader industry, as active asset managers around the world experience persistent net outflows." From a technical perspective, Coronation's shares experienced strong growth from 2008 until they peaked at R115 per share on 30th December 2014. Under the new management, the share value fell to a low of 2541c during the COVID-19 outbreak. A long-term downward trendline was observed, with a potential upside break appearing imminent. The share was added to our Winning Shares List (WSL) on 11th May 2024 at 3281c. Since then, it has risen to 3415c and appears poised for further increases.
JSE:CML
by PDSnetSA
Our opinion on the current state of FINBOND(FGL)Finbond is a micro-lending and insurance operation with a presence in South Africa and America. The company is ambitiously planning to expand in the US, aiming for 70% to 80% of its income to come from that country within the next 3 to 5 years. Currently, 66% of its income is already sourced from the US, a market Finbond views as having significant growth opportunities. Including its operations in South Africa, Finbond operates a total of 694 branches. In its financial results for the six months ending on 31st August 2023, Finbond reported that loans advanced were up by 23.2% and headline earnings per share (HEPS) increased by 72.4%. However, the company's net asset value (NAV) saw a slight decrease of 2.6% to R1.13 billion. The company commented on its performance, stating, "Sales volumes have continued to increase in both South Africa ('SA') and North America and are ahead of the corresponding reporting period, and significantly ahead of pre-COVID and Illinois regulatory change volumes." Looking ahead, in a trading statement for the year ending 29th February 2024, Finbond estimated that HEPS would increase by between 88% and 108% compared with a restated loss of 19.1c in the previous period. Despite these positive projections, the share has been in a long-term downward trend and has been drifting sideways since March 2022. It trades about R229,000 worth of shares each day on average. Given the current market dynamics and the stock's performance, it appears that there may be better investment options available than this penny stock.
JSE:FGL
by PDSnetSA
Our opinion on the current state of HCI(HCI)Hosken Consolidated Investments (HCI) is a BEE investment holding company owned by the South African Clothing and Textile Workers' Union. HCI has a diverse portfolio that spans across various sectors including gaming, hotels, media, transport, mining, and property. Notably, it owns 47% of a suite of gaming companies including JSE-listed Tsogo Sun, which operates casinos and hotels, as well as Galaxy Bingo and Vukani Gaming, which operates gaming machines. Additionally, HCI owns the JSE-listed E-Media group, which encompasses ENCA, Openview HD, and E-Sat TV. In the transport sector, HCI holds a 74% stake in Hosken Passenger and Logistics, which owns Golden Arrow Bus Services. It also owns 52% of Niveus Investments and 84% of Deneb, alongside 100% of HCI Coal—a junior coal mining operation with two operational mines. In the property segment, HCI Properties manages a portfolio that includes conference and exhibition properties like the Gallagher Convention Centre. Moreover, HCI owns a 40% stake in a technology company called BSG. On 26th April 2022, HCI announced that a prospecting company, in which it has an effective 10% share, made a significant light oil discovery, leading to an initial surge in its share price. For the six months ending on 30th September 2023, HCI reported a 6% increase in revenue but a 13% decline in headline earnings per share (HEPS). The company's net asset value (NAV) saw a substantial increase of 21%, reaching 23990c per share. HCI noted, "The Group’s television and radio advertising revenue increased by 1%, while its market share decreased slightly from 36% to 35% during the current period. Casino revenue and net gaming win combined increased by 9%, assisted by strong growth in food and beverage, and rooms revenue. Normalized revenue, adjusted for the prior comparative period receipt of the hotel management agreement cancellation fee of R399 million from Tsogo Sun (TSG), increased by 34% to R2 790 million, following significant increases in rooms (41%) and food and beverage (29%) revenue and rental income (38%)." In a trading statement for the year ending on 31st March 2024, HCI estimated that HEPS would fall by between 24.1% and 34.1%. The company explained, "Headline earnings per share has been negatively impacted by equity losses of R528 million in respect of Impact Oil and Gas, which included an effective R483 million in equity losses in respect of its investment in Africa Energy Corp." HCI's investment portfolio is diverse and somewhat unfocused, currently trading on a P/E of 9.34. We previously suggested that this share was cheap at R80 in February 2022, and it has since risen to R178 and may climb further.
JSE:HCI
by PDSnetSA
Our opinion on the current state of SALUNGANO(SLG)Salungano, formerly known as Wescoal, is involved in the mining and trading of coal, having commenced production in 2021 with coal sourced from its Moabsvelden mine primarily for Eskom. The company has grown substantially, now producing 300 million tons from five coal mines, with mining operations constituting 82% of its revenue. Additionally, Salungano holds a 50% stake in the Arnot Mine and is exploring opportunities to expand its business into other energy sectors. In its financial report for the year ending 31st March 2023, published on 21st May 2024, Salungano reported a decline in revenue to R4.79 billion from R5.14 billion the previous year, along with a headline loss of 58.65 cents per share, significantly wider than the loss of 6.13 cents per share in the prior period. The company attributed the disappointing results to "notably lower" production and sales volumes across its operations due to various operational challenges, which led to a 6.8% decrease in revenue. The global energy market's volatility, particularly with the looming threat of a recession, is impacting Salungano's performance. Additionally, the company is working to lift the suspension of its shares on the JSE, initiated following the publication of its financial results and the interim financial results for FY2024. Compounding the company's challenges, on 4th July 2023, three directors resigned, triggering a sharp decline in the share price. Subsequently, on 21st August 2023, trading of Salungano shares was suspended by the JSE. The confluence of operational difficulties, leadership changes, and market conditions suggests a period of significant uncertainty for Salungano.
JSE:SLG
by PDSnetSA
Our opinion on the current state of THARISA(THA)Tharisa (THA) is a mining company that mines and beneficiates platinum group metals (PGMs) and chrome. The company is listed in London and on the JSE. The Tharisa mine on the south-west limb of the Bushveld Igneous Complex (BIC) is an open pit operation with an estimated life of 17 years. The company owns a subsidiary, Arxo Metals, which beneficiates chrome to produce high-grade chrome concentrates. The company is planning to expand into the Great Dyke area of Zimbabwe. In our view, this is one of the best mining investments on the JSE with a cost of production which is well below current metals prices and some good options for expansion. The company has been involved in the Vulcan Plant which will improve chrome recovery to 82% from 65% and cost $54.2 million. The target is to reach 200,000 ounces of PGMs and 2 million tons of chrome ore production using proprietary technology. The open pit operation is relatively low cost and does not have the problems associated with underground operations. The company is planning to build a 5MW furnace that will enable it to produce iron alloys which are rich in platinum group metals and would sell for a far better price. On 5th October 2021, the company announced the cold commissioning of its Vulcan chrome beneficiation plant which is expected to increase chrome recoveries by 20%. On 4th February 2022, the company announced that it had signed an agreement to implement a solar farm of more than 40 megawatts. On 27th March 2023, the company announced that it had raised $130 million (about R2.3 billion) in finance from ABSA and Soc Gen. In its results for the year to 30th September 2023, the company reported PGM production down 19.3% and revenue down 5.3%. Headline earnings per share (HEPS) fell 31.1%. The company said, "The decline in reef mined primarily emanates from access restrictions to the open pit due to limitations on mining activities in close proximity to the nearby community, adverse weather conditions experienced as well as the processing of suboptimal reef horizons which were supplemented by purchased ROM ore to maintain plant throughput." In a production update on the 3 months to 31st December 2023, the company reported mill throughput for PGMs and chrome up 8.7% with chrome at a record 462.8 kilotons. The CEO, Phoevos Pouroulis, said, "We have made good operational improvements, with waste mining advances leading to a better mining and plant performance, resulting in record quarterly chrome production." In a production report for the second quarter ending on 31st March 2024, the company reported PGM output unchanged and the basket price received slightly down. At the end of the quarter, the company had cash of $184.6 million and debt of $114 million. The CEO said, "Operationally we performed well, building on a record first quarter and on track to meet guidance." In a trading statement for the six months to 31st March 2024, the company estimated that HEPS would fall by between 23.3% and 29%. Technically, the share trades an average of R228,000 per day, which makes it practical for private investors. It was in a strong upward trend until April 2022 but then turned down in line with commodity prices. Since March 2024 the share price has been rising in line with the improved prospects for PGMs. We recommended waiting at least for a break up through the downward trendline before investigating further. That break came on 26th March 2024 at 1405c and the share has since moved up to 1800c. The share remains a risky commodity counter dependent on the international prices of the commodities which it produces.
JSE:THA
by PDSnetSA
Our opinion on the current state of Transaction Capital (TCP) is a company with two divisions—minibus taxis and risk services. It has unbundled and separately listed WeBuyCars (WBC). Its subsidiary, SA Taxi, specializes in financing, repairing, insuring, and selling minibus taxis in South Africa and completely dominates the entire value chain associated with the minibus taxi industry. The company listed in June 2012 and until 2023, the company generated an annual compound growth in earnings per share of 21% since 2014. That ended abruptly in 2023 when the company revealed that it had to make a R1.8 billion provision for bad debts in its minibus taxi division. About 69% of South African households use taxis with more than 15 million trips per day. Most of this is non-discretionary, which means that this industry tends to be defensive and not generally impacted by the state of the economy at large. The South African Taxi Council (Santaco) acquired a 25% stake in SA Taxi for R1.7 billion in 2018, which is benefiting both parties. The directors of TCP own 32% of the company. The company is also involved in debt collection in South Africa and Australia through Transaction Capital Risk Services (TCRS). Following the impact of COVID-19, the taxi industry has suffered from a perfect storm of rising interest rates, rising fuel costs, and lower consumer spending resulting in a massive increase in TCP's bad debt provision. The average taxi owner was unable to afford to make repayments of around R6000 a month in the face of steep increases in the fuel price, rising interest rates, and declining commuter traffic. The result was that SA Taxi stopped financing and buying as many as 600 new Toyota minibuses a month and was reduced to selling between 180 and 200 refurbished taxis. The company was owed about R17 billion by taxi owners, most of whom were behind on their repayments. On 15th March 2023, the company reported that the controlling Hurwitz family trust had sold 1.6 million shares in December 2022. In a report in the Business Day on the 12th of December 2023, the company reported that it will no longer finance new minibus taxis—only second-hand ones. SA Taxi attributes its problems to: "...elevated fuel prices, high interest rates, increasing cost of parts and maintenance, record levels of load shedding, persistently lower commuter volumes as a result of depressed economic activity, and taxi operators' inability to increase fares given already financially stretched consumers." On 12th September 2023, the company announced that its CEO, David Hurwitz, would resign with effect from 31st December 2023. On 22nd March 2023, the company announced that it had sold its holding in Nutun Australia for A$58.3 million. On 11th April 2024, with the separate listing of WeBuyCars, the Transcap share fell to 361c as expected. In its results for the six months to 31st March 2024, the company reported revenue of R981 million down from R1.295 billion and a headline loss of 164.9c per share compared with a loss of 224.6c in the previous period. The company said, "The key highlight of the half year ended 31 March 2024 ('H1 2024') was the successful unbundling, placement, and separate listing of WeBuyCars on the main board of the JSE Limited ('JSE'). This allowed Transaction Capital to return R5.2 billion to shareholders through the distribution of 256.3 million WeBuyCars shares. The group further raised R1.0 billion via the placement." In our view, the share remains risky and difficult to assess. Much will depend on growth in the South African economy following the elections.
JSE:NTU
by PDSnetSA
SLMTuesday 21-May-2024.This is a high risk idea thus smaller positions will apply. The share has developed a 'V-shaped' reversal, with aggressive buying in recent weeks, however, the current rating reflects excessively overbought conditions into overhead resistance. Failure to hold the prior session highs would be indicative of a early price weakness and could lead to the start of a topping structure followed by a bearish reversal. As always, traders could consider the following if/when the prices approaches the target: bank/take profit, partially scale out, adjust the stop-loss to protect profits. Time Stop: Wednesday, 28 August 2024. Entry: 7428 Target: 7015 Stop-loss: 7625
JSE:SLMShort
by techpers
Our opinion on the current state of ALTRON-A(AEL)Allied Electronics Corp, or Altron (AEL), is an information and communications technology company founded by Bill Venter in 1965. Recently, the company has been refocusing on its core business, which has involved selling its 80% stake in Powertech and its 100% subsidiary, Altech UEC (a developer of set-top boxes). Powertech was also sold to a BEE consortium. Altron is currently in the process of selling CBI Telecom Cables. The company operates in six African countries, as well as the UK and Australia. Altron has reported "...secured key wins in both the public and the private sector...", including the Gauteng Broadband Network phase 2 contract and FNB's data and analytics contract. Netstar, another Altron venture, won a three-year contract for vehicle tracking for 7000 vehicles in eThekwini. Bytes, in the UK, which has now been unbundled and separately listed both in the UK and in an inward listing on the JSE, secured a 5-year contract for Windows 10 from the NHS (UK). Altech is restructuring its debt to reduce its interest bill and has resumed paying dividends. They acquired Phoenix Software in the UK for R698m. On 17th December 2020, Altron announced the successful listing of its subsidiary Bytes Technology on the London Stock Exchange (LSE) at a price of GBP2.70. This event unlocked considerable value for Altron shareholders but resulted in a "cliff" in the Altron share price chart. In its financial results for the six months to 31st August 2023, Altron reported a revenue increase of 4% and headline earnings per share (HEPS) up 19%. The company noted, "Altron Group results were impacted by provisions and impairments (collectively referred to as the 'Non-Cash Adjustments') raised in two non-core subsidiaries, namely Altron Nexus of R334 million, in relation to the restructuring of Altron Nexus due to the loss of the Gauteng Broadband Network contract and the City of Tshwane exposure, and Altron Document Solutions of R95 million. This includes the goodwill impairment raised at Altron Group level of R33 million in relation to Altron Nexus." In a trading statement for the year to 29th February 2024, Altron estimated that HEPS from continuing operations would increase by between 35% and 38%. The company elaborated, "Normalising for the sale by Altron Managed Solutions of its ATM Hardware and Support Business (the 'ATM Business'), which was effective 1 July 2023, the Group's Continuing Operations are delivering year-to-date revenue growth, with double-digit growth in EBITDA and Operating Profit." Technically, the share has been moving sideways between 750c and 1330c since December 2020. At its current price, it is trading below its net asset value (NAV), but it is now in an upward trend.
JSE:AEL
by PDSnetSA
Our opinion on the current state of ISA Holdings (ISA) ISA Holdings (ISA) is a small Alt-X listed IT company that operates in sub-Saharan Africa, specializing in network, internet, and information security. The company is recognized for employing some of the leading IT security specialists in the region and boasts a robust set of tools and experience to deliver effective information security solutions. In its financial results for the six months ending on 31st August 2023, ISA reported a significant turnover increase of 42% and an earnings per share (EPS) increase of 27%. The company noted, "Profit before other income and expenses increased by 22% during the current reporting period to R23.1 million, representing a gross margin of 47% compared to 55% in the prior reporting period." Looking ahead, in a trading statement for the year ending on 29th February 2024, ISA estimated that headline earnings per share (HEPS) would increase by between 25% and 45%. This projection underscores the company's ongoing profitability and resilience, despite recent challenges. However, a potential issue for investors is the limited liquidity of ISA's shares; with only about R36,000 worth of shares traded on average each day, it can be risky for private investors to acquire a significant stake. Nevertheless, with a price-to-earnings (P/E) ratio of 11.21 and a dividend yield of 7.14%, ISA's shares appear to offer good value, attracting those looking for investment opportunities in the IT sector.
JSE:ISA
by PDSnetSA
Our opinion on the current state of NASPERS-N(NPN)Naspers (NPN), Africa's largest company, is a massive international social media, gaming, and IT company whose main asset is a 73% stake in Prosus (PRX), which in turn owns 26% of Tencent—a Hong Kong-listed company providing social media services and gaming in China. Tencent boasts 10 of China's top 20 mobile applications, reaching over 1.1 billion users. Naspers itself maintains an archaic capital structure dominated by its 907,128 unlisted "A" ordinary shareholders. Each "A" ordinary share has 1,000 times the voting power of the 438.3 million "N" shares listed, effectively controlling the company with 67.4% of the vote. Naspers has many other interests, primarily in e-commerce, operating in 120 countries worldwide. It recently invested an additional $500 million in Letgo—an American classifieds platform with over 100 million users. It also owns Takealot and Mr. D Food in South Africa, among other interests—though these are overshadowed by its stake in Tencent. The discount of the share to its inherent value is mainly due to its "N" share structure, which is frowned upon in the investment community. On 11th September 2019, Naspers separately listed Prosus on the Euronext in Amsterdam, housing all its international assets, including its stakes in Tencent, Mail.Ru, and other internet brands. Naspers held 73% of Prosus, with a 25% free float. The Euronext listing mitigates the risk inherent in the rand, elevating Prosus to become Europe's largest consumer internet company. Tencent continued to grow throughout the pandemic as more people turned to online gaming. On 27th January 2023, Bloomberg announced that Naspers intended to retrench about 30% of its workforce. In its financial results for the six months ending 30th September 2023, the company reported a 9% increase in revenue from continuing operations and a 90% increase in core headline earnings. The company stated, "This was primarily due to improved profitability of our e-commerce consolidated businesses and equity-accounted investments, particularly Tencent, and higher net interest income during the period. At 30 September 2023, the ongoing open-ended share repurchase programme has reduced the Naspers net share count by 14% and generated US$25 billion for our shareholders." Technically, since October 2022, the share has staged a recovery but has been moving sideways since March 2023. We still regard this share as underpriced at current levels. On 18th September 2023, the company announced that Bob van Dijk would resign as CEO with immediate effect. On 17th May 2024, the company announced that Fabricio Bloisi would take over as CEO of both Naspers and Prosus, effective from 1st July 2024.
JSE:NPN
by PDSnetSA
Our opinion on the current state of PROSUS(PRX)On 11th September 2019, Naspers (NPN) separately listed Prosus (PRX) on the Euronext in Amsterdam to house all its international assets including its stake in Tencent, Mail.Ru, and other internet brands. Naspers holds 73% of Prosus, and there is a 25% free float. One of the benefits of the Euronext listing is that it removes the risk inherent in the rand, making Prosus a rand-hedge which rises when the rand weakens and vice versa. Prosus is now Europe's largest consumer internet company. The main asset of Prosus is a 26% stake in Tencent - a Hong Kong-listed company that provides social media services and gaming in China. Tencent operates 10 of China's top 20 mobile applications, reaching over 1.1 billion users. However, Tencent remains vulnerable to the authoritarian regulators in China and their involvement in the gaming industry. Prosus describes itself as, "...a global consumer internet group operating across a variety of platforms and geographies and is one of the largest technology investors in the world. The Prosus Group's businesses and investments serve more than 1.5 billion people in 89 markets and are the market leaders in 77 of those markets. The Prosus Group's consumer internet services span the core focus segments of Classifieds, Payments and Fintech as well as Food Delivery, plus other online businesses including Etail and Travel." On 18th May 2022, Tencent issued a statement saying that its profit in the March 2022 quarter was half of what it had been in 2021, leading to a negative impact on Prosus shares. On 24th June 2022, the company said that it intended to sell some of its Tencent shares to finance an extended open-ended share buy-back program. This caused the share price to jump up. On 24th October 2022, the re-election of Chinese leader Xi Jinping for a third term caused Prosus shares to fall heavily, as Jinping is part of a faction in Chinese politics which aims to keep the "disorderly expansion of capital" under control. In its results for the six months to 30th September 2023, the company reported revenue up 13% and headline earnings up 85%, "...primarily due to improved profitability of our e-commerce consolidated businesses and equity-accounted investments, particularly Tencent, and higher net interest income during the period." Core headline earnings per share (HEPS) almost doubled to 76c per share. Technically, the Prosus share has been trending up in November 2023. We still believe that the share is undervalued at current levels. On 18th September 2023, the company announced that CEO, Bob van Dijk, would resign with immediate effect. On 17th May 2024, the company announced that Fabricio Bloisi would take over as CEO of both Naspers and Prosus with effect from 1st July 2024.
JSE:PRX
by PDSnetSA
Our opinion on the current state of RICHEMONT(CFR)Richemont (CFR), controlled by the Rupert family in Stellenbosch, is the world's second-largest supplier of luxury goods. The company's sales are entirely located overseas, making it an excellent rand-hedge. Its prestigious luxury brands include Mont Blanc, Cartier, Lancel, Jaeger-LeCoultre, Van Cleef, and Piaget. Richemont has significantly enhanced its online sales, which now constitute 21% of its turnover. This increase was facilitated by the acquisition of Yoox-Net-A-Porter (YNAP) and Watchfinder, a UK online group, as well as by entering into a joint venture with Alibaba to develop apps to penetrate the Chinese market and offer its line of luxury goods. Additionally, its products are available through Alibaba's Tmall Luxury Pavilion. Richemont's business is closely tied to the global economic recovery post-pandemic. Although the company's sales were negatively impacted by COVID-19, they are expected to continue rising, particularly due to its aggressive online sales strategies. However, the share is influenced by the economic slowdown in China and developments in Central and Eastern Europe. It stands to benefit from the global economic recovery but remains susceptible to fluctuations in the strength of the rand. In its financial results for the year ending 31st March 2024, Richemont reported a sales increase of 3%, and 8% in constant currencies. However, headline earnings per "A" share decreased by 4%. The company highlighted that its "Jewellery Maisons are delivering a 33.1% operating margin, with sales up 6% at actual exchange rates (+12% at constant exchange rates).” Richemont also reported a strong net cash position of EUR 7.4 billion, with a significant increase in cash flow generated from operating activities, which rose to EUR 4.7 billion. The share experienced an "island" formation in October and November of 2023 before it began a new upward trend. While Richemont is clearly an effective rand hedge, its performance is highly dependent on the Chinese consumer market. Despite this, the company is expected to perform well, although it is important to note that with a price-to-earnings (P/E) ratio above 22, its shares are not cheap.
JSE:CFR
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 located in the Western Cape. The company engages in investing both in listed and unlisted shares. Initially, most of Trematon's investments were related to property, but its portfolio has since diversified beyond this sector. Among its holdings is Club Mykonos. In its financial results for the six months ending on 29th February 2024, Trematon reported a 2% increase in revenue. However, its headline earnings per share (HEPS) decreased by 68%. Despite this, the company's net asset value (NAV) experienced a modest increase of 1% to 339c per share. The company stated, "Total group INAV reduced to R912.9 million from R991.8 million at 31 August 2023. This is in line with the capital distribution paid to shareholders and is reflected in the decrease in group cash." The trading volume of Trematon shares is relatively low, with only about R31,000 worth of shares changing hands each day, making it less practical for private investors. Despite the current downward trend in its share price, there is a belief that Trematon could become a worthwhile investment, particularly if it can expand its growth in the education sector, now that the pandemic is substantially behind us.
JSE:TMT
by PDSnetSA