Long
Long
Our opinion on the current state of SANTOVA(SNV)Santova (SNV) is an international logistics company with a presence across seven countries. The firm specializes in designing and managing global supply chain activities using a client-centric information system. This technology provides enhanced inventory management and more than just tracking and tracing services. Santova has offices in Southeast Asia (Thailand, Vietnam, and Malaysia), Europe (Germany, the Netherlands, and the UK), major South African cities, Mauritius, and Sydney, Australia.
In its financial results for the six months ending August 31, 2023, Santova reported a 3.3% increase in revenue but a 22.9% decline in headline earnings per share (HEPS). Its tangible net asset value (NAV) saw a 30.8% increase to 546.5 cents per share. The company highlighted a significant drop in freight rates during the past six months due to easing congestion and a slowdown in global economic growth. The Drewry World Container Index, a benchmark for shipping rates, fell from about $9,700 per 40-foot container in January 2022 to $1,400 in September 2023, now below pre-pandemic 2019 levels.
In a trading statement for the fiscal year ending February 29, 2024, the company predicted that HEPS would decrease by 18.6% to 23.6%. This forecast factored in a one-time gain of R18.3 million due to fair valuation adjustments.
Technically, Santova has been in a steady upward trend since May 2020, although recent price movements suggest the trend may be topping out. After reaching 980 cents between May and August 2023, the share price fell to 735 cents. Despite this dip, the share remains well-traded and could benefit from an improvement in the South African and UK economies. Our opinion on the current state of RENERGEN(REN)Renergen (REN) brands itself as an "integrated alternative energy business" focused on renewable energy projects in Africa. Listed on the JSE in June 2015, the company has incurred consistent losses, contributing to its declining share price. Investing in liquefied natural gas (LNG) and helium, Renergen accessed additional funding through a R125 million rights issue and a R218 million loan facility. Its IPO on the Australian Stock Exchange (ASX) was oversubscribed by over two times. The company claims proven helium reserves exceeding 6 billion cubic feet. Helium was identified as a critical resource for U.S. national security in 2018, significantly boosting prices.
In 2020, Renergen announced the development of an aluminum case capable of maintaining vaccines at low temperatures for up to 30 days, which has the potential to be a significant innovation. The company also reported a 1.1% helium discovery at Evander in June 2021 and a major gas strike in the Karoo in March 2021. Additionally, in April 2021, it secured its first helium sales deal. In November 2021, a 620% increase in 1P helium reserves was announced, leading to a spike in the share price.
Despite these positive developments, Renergen's share price remains in a long-term downtrend. Further funding of $750 million was secured in June 2023 for the Virginia Gas project (VGP), which is its primary asset. In its latest financial results for the year ending February 29, 2024, the company reported a 128.4% increase in revenue but a headline loss of 75.07 cents per share, compared to a 19.89 cents loss previously.
Renergen acknowledged operational challenges at the VGP, which remains risky and volatile. Investors should approach with caution and consider a break above the long-term downward trendline before delving further, though such a breakout does not appear imminent. R
Our opinion on the current state of AB-INBEV(ANH)Anheuser-Busch InBev (AB InBev), the world's largest brewer, operates in both developed and emerging markets. Listed on the JSE as ANH, the Brussels Stock Exchange as ABI, and the NYSE as BUD, AB InBev announced its intention to list its Asia-Pacific arm on the Hong Kong Stock Exchange to raise around $10 billion, with proceeds aimed at reducing debt. The company holds notable beer brands such as Budweiser, Stella Artois, Castle, Beck's, and Corona. Following its acquisition of SABMiller, AB InBev is four times larger than its closest competitor, Heineken, leaving limited room for significant acquisitions and requiring the company to focus on organic growth.
For the year ending December 31, 2023, AB InBev reported a 7.8% increase in revenue and earnings per share (EPS) of 305 cents (USD) compared to 303 cents in the prior year. The company noted that in the fourth quarter, normalized EBITDA grew by 6.2% to $4.877 billion, and the EBITDA margin contracted by 2 basis points to 33.7%. For the full year 2023, normalized EBITDA rose by 7% to $19.976 billion, with an EBITDA margin contraction of 23 basis points to 33.6%. In its first quarter update, AB InBev saw revenue increase by 2.6%, with a slight volume decline of 0.6%. The company reported a 5.4% increase in EBITDA with margin expansion and a 16% growth in underlying EPS.
From a private investor's viewpoint, AB InBev remains a massive international blue-chip stock with strong rand-hedge characteristics. With a current P/E ratio of 21.88, the stock appears fully priced. Technically, it had been in a downtrend since listing on the JSE, but a break above the long-term downward trendline occurred on November 4, 2022, at 94,065 cents. Since then, the share price has risen to 117,900 cents. Our opinion on the current state of MC-GROUP(MCG)MultiChoice (MCG) is one of Africa's leading entertainment companies and one of the world's fastest-growing pay-TV broadcasters, with a subscriber base of 21.1 million across 50 countries. The 90-day active subscriber base is split between 8.9 million (42%) in South Africa and 12.2 million (58%) in the rest of Africa. MultiChoice was spun out of Naspers and listed on the JSE on February 27, 2019.
This company is close to an ideal investment due to its diversified client base and annuity income primarily generated via debit orders. As a service provider with minimal inventory requirements and a lean workforce, MultiChoice operates with minimal working capital needs. However, it faces competition from 5G internet access and free online streaming platforms. Icasa's (Independent Communications Authority of South Africa) regulatory changes to promote competition in the pay-TV market may affect MultiChoice's exclusive sports contracts, which have been a key differentiator.
In partnership with Sky News and NBC Universal, the company aims to expand the Showmax service to strengthen its market position in Africa. The home entertainment sector received a significant boost from COVID-19 lockdowns, but the company’s results for the six months ending September 30, 2023, showed revenue down by 1% and headline earnings per share (HEPS) down by 5%. MultiChoice attributed this decline to high levels of loadshedding that impacted the South African business.
On February 5, 2024, Canal+ increased its stake in MultiChoice to 35.01%, triggering a mandatory offer to buy out the remaining shareholders at R105 per share. MultiChoice rejected this offer as too low. The Takeover Regulation Panel (TRP) confirmed Canal+ was required to make an offer, which was subsequently raised to R125 per share. By April 24, 2024, Canal+ had acquired 41.6% of MultiChoice's issued shares. As of May 8, 2024, Canal+ increased its stake to 43.54%.
Technically, MultiChoice shares had been declining since March 6, 2023. A recommendation was made to wait for a break above the 65-day exponential moving average before purchasing. This happened on December 19, 2023, at 7,440 cents, and since then, the share price has risen to 11,950 cents. M
Short
Short
Our opinion on the current state of GFIELDS(GFI)Gold Fields (GFI) is a gold mining company that operates internationally, with only one mine in South Africa—South Deep. Acquired by Gold Fields in 2006, South Deep has been challenging to turn profitable, requiring a total investment of R32 billion (R22 billion purchase price and R10 billion development costs) over the past 14 years. Despite these difficulties, South Deep holds one of the largest unmined gold resources globally, and the company is determined to make it a success.
Gold Fields collaborates with an independent power producer (IPP) to establish a 50MW energy project in South Africa. Over the last two years, the company has invested $502 million to ensure that its Damang and Gruyere operations maintain an annual production level of 2 million ounces for the next decade. Recent cost-saving measures have reduced South Deep's costs by R800 million and capital expenditure by R400 million.
Gold Fields is also focused on developing the Salares Norte gold mine in Chile and intends to list on the Toronto Stock Exchange while adopting a policy of paying out 30-45% of profits as dividends. The extensive investment in South Deep is starting to yield results, with production anticipated to increase by 25% over the next four years.
In its financial results for the year ending December 31, 2023, the company reported headline earnings per share (HEPS) of 94 cents (USD) compared to 119 cents in the previous year. The rand/US dollar exchange rate weakened by 13%, and debt increased by $320 million to $1.024 billion. For the first quarter of 2024, Gold Fields reported attributable production of 464,000 ounces at an all-in sustaining cost of $1,738 per ounce. Production was affected by adverse weather conditions and operational challenges at the Gruyere, St Ives, South Deep, and Cerro Corona mines, resulting in a YoY drop of 18% in production.
Gold Fields remains a volatile commodity investment due to fluctuations in the global gold market, but it has maintained an upward trend over the past five years. It remains a valuable yet unpredictable commodity play. Our opinion on the current state of Combined Motor Holdings Combined Motor Holdings (CMH) operates 43 car dealerships, offering 28 brands such as Nissan, Volvo, Toyota, Opel, Subaru, Lexus, Mazda, Isuzu, and Ford. It sells both new and used vehicles, making it sensitive to economic conditions since consumers can extend the lifespan of their vehicles in times of recession. The company has planned significant cuts in its car rental division due to COVID-19, reducing staff by a third, the fleet by 40%, and closing 20 branches. Business confidence and Eskom-related power outages have negatively impacted operations, yet the car hire segment has been gradually recovering.
For the financial year ending February 29, 2024, CMH reported revenue growth of 3.3%, while headline earnings per share (HEPS) decreased by 12.2%. Its net asset value (NAV) rose by 8.2% to 1828 cents per share. The company noted, "Operating profit, before goodwill write-off in the previous year, is only marginally down from R791 million to R781 million. The hike in interest rates distinguishes the two years, with finance costs rising by R87 million from R193 million to R280 million."
Technically, the share formed a "V-top" at 3350 cents on May 10, 2018, before dropping significantly to around 950 cents in May 2020 due to COVID-19. After breaking its long-term downward trendline at 1489 cents on February 2, 2021, the share price has steadily risen to 2720 cents, trading at a price-to-earnings (P/E) ratio of 5.02. At these levels, CMH appears to offer good value. 
Short
Our opinion on the current state of EASTPLATS(EPS)East Plats (EPS) is a mining exploration and development company operating in the platinum group metals (PGM) and chrome markets in South Africa. Listed on both the Toronto Stock Exchange (TSX) and the JSE, the company has three key projects:
1. **Crocodile River Mine:** Ceased operations in 2012 and is now under care and maintenance.
2. **Zandfontein Tailings Project:** Focuses on retreating and storing tailings to recover chrome, with Sound Mine Solutions conducting an independent technical report.
3. **Zandfontein Tailings Retreatment Project:** A chrome retreatment project operated with Union Goal.
On February 11, 2019, East Plats announced its first shipment of 10,000 tons of chrome concentrate from the Zandfontein operation. However, it anticipates significant cash flow uncertainties over the next year, which raises concerns about its "going concern" status. For the year ending December 31, 2023, the company reported revenue growth of 98.3% and earnings per share of 8 cents (US) compared to a loss of 1 cent in the previous period. Despite this, auditors highlighted concerns over the company's financial stability.
As of December 31, 2023, East Plats held cash and short-term investments worth $21,349,000 (US) but had a working capital deficit of $15,504,000 (US). The low trading volume (around R3,100 worth of shares daily) makes it difficult for private investors to participate in this stock effectively. Our opinion on the current state of REDEFINE(RDF)Redefine (RDF) is South Africa's second-largest real estate investment trust (REIT) after Growthpoint, with assets totaling R72.9 billion and a market capitalization of R25.1 billion. The company's portfolio is primarily composed of industrial and office properties, with significant investments in Poland, the UK, and Australia. As a REIT, Redefine is closely tied to the performance of the South African economy and political climate, particularly elections. Despite these challenges, Redefine remains stable and well-managed, trading at a valuation considerably lower than the book value of its assets.
Redefine has expressed interest in acquiring a controlling stake in the Polish property company, EPP. In its results for the six months ending February 29, 2024, the company reported revenue growth of 8.2%, while headline earnings per share (HEPS) declined by 14.6%. Redefine's loan-to-value (LTV) ratio stood at 42.6%, and its net asset value (NAV) was 780.3 cents per share, compared to a share price of 394 cents.
Technically, Redefine's share price has been on a downward trend from its peak of 1250 cents in April 2015, dropping to approximately 600 cents before plummeting to 159 cents with the onset of the COVID-19 pandemic. Although it has since recovered, the share has been moving sideways and slightly downward since November 2021. It currently trades at around 50.5% of its NAV.
Despite this, Redefine still appears undervalued, offering an attractive opportunity for investors. However, its relatively high LTV remains a point of concern. Our opinion on the current state of CALGRO-M3(CGR)Calgro (CGR) is a developer specializing in large-scale integrated properties, rental units, and memorial parks. Established in 1995 and listed on the JSE in November 2007, the company identifies suitable land, develops it, and then sells or rents the resulting residential or memorial park units. Recently, it secured $25 million in funding to support new development projects.
A significant challenge has been illegal land invasions, which resulted in a loss of around 25% of turnover for the half-year ending August 2019. However, in its results for the six months ending August 31, 2023, Calgro reported a 13.5% increase in revenue and headline earnings per share (HEPS) of 78.88c, up from 57c in the prior period. The company stated that it handed over 949 units during the period, compared to 1,193 units in the previous year. Currently, 2,118 units are under construction, with over half expected to be completed by February 2024. The company has 1,937 serviced units available, and another 3,398 are being serviced.
In a trading statement for the year ending February 29, 2024, Calgro estimated that HEPS would increase by 20.2% to 27.7%. The company noted a reduction in its issued ordinary shares due to a share repurchase program, which reduced the total from 121.4 million to 95.5 million shares.
Technically, the share price has been in a strong upward trend since March 2023. Like many other property companies, Calgro is currently trading well below its net asset value (NAV), presenting a potentially attractive investment opportunity. Our opinion on the current state of ACCPROP(APF)Accelerate Property (APF) is a real estate investment trust (REIT) with a portfolio of 56 properties valued at R12.7 billion. These are primarily retail (70%), with the rest consisting of office (15%) and industrial (15%) properties across six South African provinces. Its flagship property, which it co-owns with a 50% stake, is the expanded Fourways Mall, a large-scale retail center spanning 178,000 square meters. This expansion aims to position the mall as a competitor to Sandton City and potentially the largest shopping center in Africa. Additionally, it includes "Kidzania," a children's activity center that had not yet launched operations as of November 2021. Accelerate also owns the Cedar Square complex and adjacent land for development.
The original target date for completion of the Fourways Mall expansion was September 2018, later adjusted to April 2019, and finally opening in August 2019, though the site remains incomplete. Despite aiming to compete with online shopping trends, the project's long-term success remains uncertain, given the global pivot toward e-commerce that has been accelerated by the COVID-19 pandemic.
Accelerate seeks to transform Fourways Mall into a comprehensive business center incorporating office, retail, and entertainment spaces. However, concerns persist over whether this investment will be profitable over the long term. Accelerate acknowledged these risks by selling the Leaping Frog shopping center for R130 million to reduce its debt. The sale price was 7.1% below the book value.
In its results for the six months ending September 30, 2023, Accelerate reported a 5% increase in revenue but a headline loss of 2.08c per share compared to a profit of 17.11c in the prior period. Vacancies were down to 17.7% from 19.9%, yet the loan-to-value (LTV) ratio rose to 47.7% from 42.1%. The net asset value (NAV) also decreased from 500c to 406c per share.
Despite the share trading at a significant discount to its NAV, currently at 69c compared to the NAV of 405c, the REIT's rising debt and a challenging retail environment make it a risky investment. Its ability to recover losses from a R1 billion lawsuit against insurers over COVID-19-related losses at Fourways Mall will significantly impact its future performance. Our opinion on the current state of NETCARE(NTC)The Netcare Group (NTC) operates healthcare facilities across South Africa and Lesotho. With 59 hospitals (including four public-private partnerships), it employs approximately 22,000 staff and manages 10,600 beds. Additionally, Netcare 911, its emergency response unit, operates from 79 locations with over 1,000 paramedics. While healthcare typically remains stable regardless of economic downturns due to unavoidable medical expenses, Netcare faces challenges stemming from the competitive medical aid sector, which often demands lower prices.
On March 23, 2021, Netcare received notice from the Lesotho government terminating its contract to manage Queen Mamohato Hospital in Maseru following a wildcat strike by nurses. Most Netcare hospitals are equipped with full island capacity, enabling them to operate independently of the electrical grid. They also have uninterrupted power supply (UPS) systems and over 200 backup diesel generators.
In its financial results for the year ending September 30, 2023, Netcare reported a 9.5% increase in revenue and a 36.5% rise in headline earnings per share (HEPS). Total paid patient days (PPDs), including acute and mental health care, grew by 6.7%, with average occupancy rising to 64.4%.
An operational update covering the five months ending February 29, 2024, indicated that total PPDs increased by 0.3% compared to the previous period. Acute patient day activity remained above 94% of pre-pandemic levels, and the average acute occupancy reached 69.4% in February 2024, the highest since February 2020. Revenue per PPD increased by 6.2% in the first quarter of the fiscal year, while mental health services reported an 82.4% occupancy rate in February.
A voluntary update for the six months ending March 31, 2024, revealed a 4.2-4.4% increase in revenue. However, PPDs declined by 0.8% compared to the prior period but increased by 0.4% in the subsequent seven months up to April.
Technically, Netcare's share price has been declining since its peak at R43 in March 2015. After bottoming out at around R12 in March 2020, the share has mostly traded sideways, hitting a new low of 1,104c on May 2, 2024. It remains vulnerable, trading at a P/E ratio of 11.29, and could decline further unless it breaks above the 1,713c resistance level. Our opinion on the current state of MONDIPLC(MNP)Mondi (MNP) is a major international paper and packaging company that originated in South Africa. It operates in over 30 countries and employs 26,000 people across roughly 100 sites. Its operations span the entire packaging value chain, managing forests and producing wood pulp, paper, and plastic films for various packaging solutions. The company has been impacted by the Ukraine conflict, given that 12% of its revenue by production location was generated in Russia. Mondi owned an integrated pulp, packaging paper, and uncoated fine paper mill in Syktyvkar (Komi Republic).
To mitigate the impact of the conflict, Mondi decided to divest its Russian operations, valued at 687 million euros in net asset value as of December 2021. The company completed the sale of its personal care business for 615 million euros in July 2022 and announced the sale of its Russian subsidiary for around R25 billion in August 2022. This divestment positively affected the share price.
In its financial results for the year ending December 31, 2023, Mondi reported an 18% decrease in revenue and a 45% decline in headline earnings per share (HEPS). Underlying EBITDA of 1,201 million euros was lower than the previous year's strong performance, but cash generation remained higher at 1,312 million euros. In a trading update for the three months ending March 31, 2024, the company highlighted improved market conditions and higher sales volumes. The quarter's underlying EBITDA was 214 million euros, including a 32 million euro one-time loss from the devaluation of the Egyptian pound.
Mondi remains a highly regarded blue-chip company, currently trading at a P/E ratio of 12.44. Despite the potential for further downside, the company has shown signs of a new upward trend after stabilizing from the challenges of the Ukraine crisis. The global shift to online shopping is driving demand for packaging materials, which bodes well for Mondi's growth.
In March 2024, Mondi announced its intention to acquire a 54% stake in DS Smith Plc, an LSE-listed company, for GBP 5.14 billion, further strengthening its position in the packaging industry. 
Long
Our opinion on the current state of WEBBUYCAR(WBC)WeBuyCars was recently spun off from Transaction Capital and listed separately on the JSE on April 11, 2024. This move was designed to raise capital and shield the company from the financial challenges facing Transaction Capital's taxi division. At its debut, WeBuyCars issued 417.2 million shares, opening at about R20 per share, which values the company at just over R8.5 billion. The public owns approximately 57.5% of the company’s shares, with substantial institutional investment.
The company issued a trading statement for the first half of 2024, projecting that headline earnings per share (HEPS) could range from -19.7c to -21.7c, a significant drop from 20c in the corresponding period last year. However, core headline earnings are anticipated to increase by 24% to 29%. This forecast includes R45 million in one-time costs associated with professional, legal, and JSE listing fees due to its recent public offering. Despite these initial expenses, the share price responded positively to the earnings forecast.
WeBuyCars is considered a strong blue-chip stock with potential for steady growth over time, especially given its successful market entrance and solid institutional backing. Our opinion on the current state of LIFEHC(LHC)Life Healthcare (LHC) is a major player in the healthcare sector, listed on the JSE, operating private hospitals, day clinics, and healthcare services across South Africa, the UK, and Western Europe. The company is strategically shifting from traditional hospitals to day-clinics and non-acute services, and broadening its customer base beyond those covered by medical aids to include out-of-pocket payers. This pivot includes initiatives like MyLife Clinic, offering affordable medical consultations.
For the fiscal year ending September 30, 2023, Life Healthcare reported a 10.3% increase in revenue, though headline earnings per share (HEPS) fell by 16.9%. This was attributed to robust demand within its South African operations and preferred provider status with medical aids, boosting hospital utilization and services.
A recent trading update for the first half of fiscal 2024 indicated a projected EPS increase of over 20% following the sale of Alliance Medical Group. However, this transaction will not impact HEPS. Operational updates for the same period showed revenue growth of 7-8% and a 2.3% rise in paid patient days (PPD) for acute services, though normalized EBITDA from continuing operations was expected to drop by 2.3%-3.3%.
From a technical perspective, Life Healthcare's share price has been in a long-term decline since peaking at R47 in September 2014, currently trading around 1004c with a P/E ratio of 15.83. This valuation reflects anticipated improvements in performance, the defensive nature of the healthcare sector, and the company's international diversification, which offers some protection against rand volatility.
The company is also looking to expand its footprint significantly by acquiring 51 clinics in South Africa, Eswatini, and Namibia within the next year, signaling continued growth and diversification efforts. Despite a sideways trend in its share price, Life Healthcare appears to be a reasonable value proposition, especially with the resumption of dividend payments.
