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Investment Analyst Society launches IAS Portal

Posted on 18/05/202218/05/2022 by Keith McLachlan

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

Posted on 17/05/202203/05/2022 by Keith McLachlan

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

Posted on 12/04/202230/03/2022 by Keith McLachlan

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

Posted on 21/03/202204/03/2022 by Keith McLachlan

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

Posted on 31/01/202202/02/2022 by Keith McLachlan

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

Posted on 14/01/2022 by Keith McLachlan

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

Posted on 09/11/2021 by Keith McLachlan

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

Posted on 09/11/202129/10/2021 by Keith McLachlan

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?

Posted on 26/10/202115/10/2021 by Keith McLachlan

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

Posted on 29/09/202115/09/2021 by Keith McLachlan

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

Posted on 14/09/202105/09/2021 by Keith McLachlan

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

Posted on 23/08/202112/08/2021 by Keith McLachlan

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?

Posted on 04/08/2021 by Keith McLachlan

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

Posted on 26/07/202116/07/2021 by Keith McLachlan

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!

Posted on 13/07/202106/07/2021 by Keith McLachlan

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

Posted on 09/06/202101/06/2021 by Keith McLachlan

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

Posted on 06/06/2021 by Keith McLachlan

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

Posted on 31/05/202131/05/2021 by Keith McLachlan

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?

Posted on 18/05/202107/05/2021 by Keith McLachlan

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

Posted on 18/05/202110/05/2021 by Keith McLachlan

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

Posted on 14/05/202114/05/2021 by Keith McLachlan

‘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

Posted on 19/04/202112/04/2021 by Keith McLachlan

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

Posted on 24/03/202115/03/2021 by Keith McLachlan

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)?

Posted on 22/03/202115/03/2021 by Keith McLachlan

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

Posted on 09/03/202102/03/2021 by Keith McLachlan

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…

Is Inflation Picking Up?

Posted on 04/03/202104/03/2021 by Keith McLachlan

As with most of the world, South Africa’s inflation rate has been falling for a number of years. This becomes incredibly clear when you see it visually: Yet, globally bond yields are lifting, yield curves are pushing out, soft and hard commodities are rallying & energy prices are rising. All the indications are that inflation…

JSE-listed Preference Shares

Posted on 19/02/202110/02/2021 by Keith McLachlan

Preference shares are an underappreciated asset class, particularly for income-seeking private investors who are less constrained than institutions when it comes to liquidity. But what are preference shares? Preference shares are shares with special rights attaching to them. Each preference share is unique but most have the following characteristics: Dividends: Preference shares typically pay a…

Trellidor: Building up to a Rally

Posted on 07/02/202102/02/2021 by Keith McLachlan

Originally published over here. Cashbuild (CSB) recently indicated that their sales till end of December 2020 had jumped +24% y/y. Massmart too has indicated a strong second-half recovery in their Builders Warehouse sales with Spar’s BuildIT outfit echoing the same sentiment. While these are great results, they are not unique. Building materials, DIY and home…

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