Election Results Impact on Markets

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

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

Pepkor Results:

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

Woolies (Woolworths) Update:

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

Zeda Results:

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

BHP Billiton and Anglo American Merger

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

Market Insights

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

Commodity webcast with Johann Erasmus available on Just One Lap.

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

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

* I hold ungeared positions.

Nvidia's Financial Performance

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

Anglo American and BHP Group

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

Richemont's* Results

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

Copper Market

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

Structured Products

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

Pick n Pay's Plan

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

South African Economic Indicators

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

Vehicle Sector Analysis

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

Home Building Sector Analysis

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

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

Santova Directors' Selling

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

Disclaimer

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

* I hold ungeared positions.

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Anglo-American vs. BHP Group

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

Market Insights

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

 

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

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

Company Highlights

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

 

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

• Raubex impresses with strong financial performance, diversification strategies.

Preview of forthcoming corporate earnings announcements and economic data releases.

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

* I hold ungeared positions.

Simon Brown

Introduction:

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

Structured Products:

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

FNB's New ETNs:

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

Amazon.co.za's Arrival:

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

Exploring Small Caps:

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

* I hold ungeared positions.

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Rate Cuts and Economic Outlook

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

BHP Group's Interest in Anglo-American

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

Chinese Market and Economic Data

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

Oil Market Dynamics

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

Retail Bonds and Sygnia ETF Changes

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

Clicks Results and Market Analysis

Review of Clicks' financial results and market response.

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

* I hold ungeared positions.

 

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Capitec Results:

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

SARB Monetary Policy Review:

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

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

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

— Adrian Saville (@AdrianSaville) April 24, 2024

 

Sasol Woes:

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

Other Market Updates:

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

* I hold ungeared positions.

 

UK and Local Inflation:

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

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

China and Commodities:

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

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

PGMs, oil, gold, and other commodities.

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

WeBuyCars listing and potential market impact. Transaction Capital analysis and investor considerations. Purple Capital* Results:

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

Simon Brown

* I hold ungeared positions.

 

kk

Sasol Secunda Reprieve

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

PGM Miners' Performance

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

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

Fitch Cuts China's Outlook to Negative

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

WeBuyCars Listing

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

Inflation Targeting Discussion

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

Simon Brown

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* I hold ungeared positions.

 

Commodity Market Analysis

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

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

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

Implications of Goldfield's Chilean Mine Production

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

Tax Collection Insights from SARS

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

Performance Review of ETFs (full list here)

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

Simon Brown

 

 

Old Mutual Results:

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

MTN Results and Analysis:

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

ADvTech* Results and Operational Leverage:

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

Monetary Policy Committee (MPC) Meeting Insights:

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

SALTA Awards Highlights (full details here):

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

Simon Brown

* Simon holds ungeared positions.