marketplace Simon says
@finweek finweek finweekmagazine finweek^ 19 March 2020^31Pho
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Oil prices have been under pressure over
coronavirus (Covid-19) fears. An attempt by
the Organization of the Petroleum Exporting
Countries (OPEC) to get Russia to cut
production also failed (see p.13). Reports
surfaced that Saudi Arabia is selling oil at up
to $10 per barrel under the spot price to try
and force Russia to agree to production cuts.
The idea is that the lower oil prices will hurt
Russia and bring them to the table. For now,
that sees a much lower oil price with Brent
crude oil down at $32 a barrel (a slump of
30% on 9 March).Tiger, TFG out
of Top 40
The JSE recently announced index changes
that are effective by the close of trading on
20 March. Among the FTSE/JSE Top 40
Index’s constituents, Northam Platinum and
Reinet Investments kicked Tiger Brands and
TFG out. Northam also goes into the
FTSE/JSE Resources 10 Index, thereby
replacing Exxaro. In the FTSE/JSE Industrial
25 Index, Telkom drops out and Pick n Pay is
in. There were no changes to the FTSE/JSE
Financial 15 Index.JSE
Market shrugs
at education
Stadio published strong results with student
numbers 7% higher, revenue up 29% and
HEPS 9% stronger for the year ending
31 December, according to its financial
statements. Core HEPS, which removes
acquisition-related costs and is used by the
board, rose 26%. The company said that over
400 000 students matriculate every year but
state capacity for tertiary education is less
than 200 000, which leaves a large scope
for private tertiary education. The company
is also busy building two new campuses.
The Centurion campus is planned to open
in January 2021 and the Durbanville one in- This is a great business model and,
while I prefer ADvTECH* as it also includes
schools, the sector has huge potential. The
ADvTECH trading update released during
the first week of March, indicates that HEPS
is estimated to increase by 17% to 23% for
the year ended 31 December. However, the
market is not interested, with ADvTECH
trading at 2015 share price levels and Stadio
at all-time lows. Concerns are that student
numbers are shrinking due to the tough
economy and emigration – the latter is a
real, but small concern. In general, though,
parents are prepared to make sacrifices in
order to get their children the best education.
STADIO
Act of God
hits smelter
AMPLATS
The stock looks very cheap
at aroundR110
per share, but the market remains
scared of anything related
to SA Inc.SA Inc spooks
Shoprite’s* interim results for the 26 weeks to
29 December were better than expected with
HEPS only 2.6% lower (partly due to IFRS 16
lease charges) and the dividend was kept
unchanged. The grocer gained market share
and its local supermarkets did very well while
even the rest of Africa swung into a modest
profit. Many commentators, however, expected
the rest of Africa to continue to deliver losses.
Local operating margins held at above 5% and
they generated massive free cash. Despite
that, though, after an initial 10% rally, the stock
faded to close flat. It got another boost from
the Budget before fading again. The stock looks
very cheap at around R110 per share, but the
market remains scared of anything related to
SA Inc. ■
[email protected]
*The writer owns shares in Shoprite, Sibanye-Stillwater and
ADvTECH.SHOPRITE
Oilfield near Almetyevsk, Tatarstan, Russia.Oil price slump
knocks Sasol
Anglo American Platinum (Amplats) has
declared a force majeure after having to close its
Rustenburg-based Anglo Converter Plant due
to an earlier explosion and problems getting the
backup plant in operation (see p.12). The direct
impact is that they’ve reduced their expected
2020 production of platinum group metals
(PGMs) by 900 000 ounces, which is a little
under a quarter of their expected production this
year. Sibanye-Stillwater* also uses Anglo’s plant
and hence is also impacted by the temporary
closure. They, luckily, also have local plants and
their North American operations. In a tight PGM
market, with some existing supply shortages,
this should see the PGM prices higher and
helping Amplats’ competitors.GLOBAL MARKETS