“It’s difficult to get a man to understand something when his salary depends on not understanding it.” -Upton Sinclair A range of businesses and careers have popped around cryptocurrency and, thus, have to defend its place in society. While I believe that blockchain and decentralized finance (“DeFi”) are wonderful innovations and will likely play a…
JSE Small Cap Showcase
Last week, the JSE hosted one of its small cap showcases. This series is part of a broader initiative to help the flagging smaller capitalization counters on the bourse. Interestingly, the JSE will be also introducing a sell-side market making scheme in the small cap market to help bolster liquidity across the counters. Exchanges around…
Omnia: The Right Chemicals
Following a decade of intensive investment with meager returns and a bloated, debt-laden balance sheet, I was one of the skeptics in 2019 who saw Omnia’s R2bn rights issue as confirmation that they had lost their way as a diversified chemicals group. Normally, issuing equity to pay off debt is a very expensive way of…
Investment Analyst Society launches IAS Portal
The Investment Analysts Society has partnered with the Profile Group, a top financial solutions provider, to create an investment portal that allows access to more market data and increases the network for IAS members. The new IAS portal, launched on 18th May 2022, provides a vital link between the listed companies and the investment community. It…
Hospitals: Overlooked Reopening Trade
Some sales lost during lockdown are lost forever. The money that was not spent on restaurants, hotels, holidays and haircuts during lockdowns will not result in more being spent on these items after lockdowns. On the other hand, those that needed knee replacements, back surgery or other so-called “elective” medical procedures and delayed those due…
Pick of the Education Stocks
Over the last month and a half, the three JSE-listed education stocks have reported their 2021 results (all have December year-ends, so the results are comparable). On the 23rd of February, private schooling group, Curro (COH), reported revenue growth of +15% from +9% learner growth (& fee increases), good cash generation and a strong recovery…
Obvious Value in Grindrod
Well positioned and efficiently operated ports and railways have unique attributes that can make them attractive investments. Firstly, they have natural barriers to entry because once there is an (adequate) port or railway, no one is going to build one right next to it. Secondly, once ports and railways are built, they have a geographic…
Sabvest Capital Keeps Delivering
I have a filter that I apply to investment holding companies (so-called “HoldCo’s”) to see whether it may be worth digging deeper into them: Is there an external ManCo? External ManCo’s can mean a misalignment of interest with shareholders. I want HoldCo’s where management are invested with other shareholders. How expensive is the HoldCo structure?…
Introduction to Fundamental Investing
I recently hosted a four-part introductory course on fundamental investing. It is free and it is available to be watched in your leisure. If you get value from this, please share this wide and far. Part I – Fundamentals Part II – Valuations Part III – Portfolios Part IV – Case Study & Q&A
Sprouts Farmers Market Inc
The ability to economically source, transport and sell fresh (i.e. time-sensitive & easily spoilable) produce at scale is a deeply geographical competitive advantage involving a surprising amount of complexity. Shoprite (SHP) only managed this in Africa by actively building up local supply chains in each of its countries to support its own retail footprint. Likewise,…
How is EOH’s Turnaround Going
Following its dramatic fall from grace, EOH’s new management team have dug in deep, swept clean and driven a commendable operating turnaround. I have full respect for the excellent job they have done here. It is not an easy task to turn a service firm around. Service firms tend to trade based on reputation (services…
Who’s bidding for Long4Life?
Long4Life (code: L4L) published surprisingly good H1:22 results and, importantly, beat many FY 19 high-water marks. The Group has done well over a difficult period. Founder and CEO, Brian Joffe, has also decided to step backwards and into the Chairman’s role (article). Most importantly and probably key to the recent share price rally, the Group…
Questioning RAIN’s Valuation
Empowered investment company, African Rainbow Capital (code: AIL), reported its FY 21 results last week. The Group reported a +16.3% rise in their so-called Intrinsic Portfolio Value to R12.3bn, albeit once the recent dilutive capital raise is excluded, the Group saw its Intrinsic NAV (INAV) fall -8.1% y/y. Plenty has been written about this HoldCo’s…
Master Drilling: Cylinders Starting to Fire
Logically, as shallow, easily mined minerals are exploited, the world’s remaining minerals are getting deeper underground. While these tailwinds are fantastic for those well-positioned businesses that offer solutions to underground miners, the multi-year commodity and mining hiatus has been a tough period for all involved. This is clearly noticeable when looking at the Fochville-based, global…
ADvTech Update Highlights Quality
Listed educational group, ADvTech Ltd (code: ADH) put out a commendable trading statement for their H1:21E period. The Group—that owns Crawford International, Varsity College, & Rosebank College, amongst others—sees all its divisions delivering an increase in operating profit. Perhaps more importantly, if one-offs are excluded, the ADvTech’s profits are expected to be between 28% to…
Is Levi Strauss the next Nike?
The pandemic has accelerated the casualisation of the workplace, since all one has to do is look smart from the waist up in a Zoom meeting: Keith McLachlan from Integral Asset Management. Hear the interview here: LINK
Underappreciated Gold Mine
Of all the JSE-listed gold miners, I get the sense that Pan African Resources Plc (PAN) is just simply underappreciated. Why? Probably because it is relatively small. Yet, size is not necessarily correlated with quality, and the gold junior stacks up well against even the majors. Despite Pan African Resources’ modest R7.5bn market cap, the…
Ready. Set. Huda-GO!
ORIGINALLY APPEARING ON MONEYWEB Hudaco’s H1:21 results look spectacular when compared to H1:20 numbers, but H1:20 was mired in hard lockdown creating a distorted picture. H1:19 is far more comparative as a “normal” trading period. Against H1:19, Hudaco’s H1:21 revenues grew +6.5% p/p, margins expanded seeing Gross Profit rise +9.0% p/p, operating leverage rallied Operating…
Distell’s Worth to Heineken
Previously, I highlighted that Distell Group’s (code: DGH) was on a winning wicket coming out of this pandemic (Distell: Quietly Winning). Subsequently, Distell broke the news that Heineken has approached the Group regarding the acquisition of the majority of Distell’s business (see official SENS here). For the purposes of this article, let us ignore the…
Who Eats Whom
The current debate of whether inflation is transitionary or structural has a sub-argument that references rising soft commodity prices, food inflation and struggling consumers and argues that food producers will be caught in the middle. This narrative makes some sense, rising input costs cannot be fully passed onto struggling end-consumers and someone is going to…
Open Letter to Mining CEOs
Writing this letter occurred to me while listening to Simon Brown’s MoneywebNOW podcast this morning where he and his guests spoke around the current free cash flow most mines are making. What will the miners be doing with all this cash (flow)? It is certainly a topic amongst our team (we are bullish on commodities…
How Much Could EasyEquities Be Worth?
A combination of boredom, lack of dopamine alternatives, stimulus cheques and the gamification of markets led the USA-based online stockbroker, Robinhood, from relative obscurity into a multi-billion dollar empire. This slick operation has amassed an estimated 20 million brokerage accounts and attracted a last-recorded $20bn fair value (even though shares have reportedly traded on the…
Winners in Lower-for-Longer
Mike Schüssler wrote a piece about how the pandemic-induced rate cuts are impacting South Africa (Economic recovery: Low rates are playing a starring role). Taking this further, I am going to build a top-down investment shopping list for those who believe that rates will remain low-for-longer and inflation benign. Simplistically, low interest rates are stimulative…
Company valuations: Why first principles matter most
‘The more variables going into a valuation, the more chance there is that that the outcome is actually rubbish’: Keith McLachlan, Integral Asset Management. I sometimes write better than I speak. Especially at 6am.. For the last answer of this interview, the key point I was trying to make is the following: All successful businesses…
Safer than Houses: Stor-Age Property
About five years ago I pointed out that the local commercial property sector (i.e. REITs) in South Africa was heading for trouble (see Part I and Part II). I would have preferred to be wrong but—and in no small part helped by the pandemic—this has played out as expected and almost every single REIT on…
Profiting Off Delistings
All shares prices on all stock markets around the world are minority valuations. They reflect what markets think an investment without control is worth. The moment an investor takes control of a company, though, they can—effectively—access the cash flows of that business. And, for this reason, that control is worth something. Therefore, bids to take…
How is South Africa Doing (right now)?
Earlier this week, Stats SA published a bleak GDP update for South Africa that saw the domestic economy shrink -7.0% y/y in 2020. Perhaps a little better than expected but still a huge contraction. But that was last year and is old news now. A more relevant question is how we are doing right now?…
Distell: Quietly Winning
Despite having most of its products effectively banned for a little over a fifth of the reporting period, Distell Group Holdings Ltd (code: DGH) published a sterling H1:21 result. Group revenue grew +3.8% y/y with volume growth of +0.8% y/y, profits and cash flows were equally strong and the Group’s balance sheet degeared further. Context…