Cape Town - Here are five shares to watch amid the market selloff, according to an analyst at Overberg Asset Management.
1) Mr Price [JSE:MRP]
Mr Price released their third quarter trading update recently for the period of 27 September 2015 to 26 December 2015. The results were very much below market expectations and the share price has been punished accordingly. Overall sales grew by 6.5% with like for like sales growing by only 3.4%. This is with selling price inflation of 6.6% and weighted average space growth of 3.8%.
The South African Apparel division has performed decently with total sales up 9,2% for the quarter, with 6.2% like for like growth. Outside of South Africa sales declined by 3,2% for the quarter. Mr Price sport grew its sales by 12.4% (5% like for like).
2) Sasol [JSE:SOL]
The decline of the oil price has hurt the share price of Sasol. With oil breaking $30 per barrel, analysts are predicting that oil will go as low as $20 per barrel as sanctions against Iranian exports have been lifted. Sasol is currently trading at lows last seen in December 2012. At these levels some of Sasol`s divisions might well be making a loss even with cost cutting measures employed.
The weak rand will help to counteract the weak oil price to some extent. However, this might not be enough for Sasol to keep its share price from declining further.
3) AB InBev [JSE:ANB]
Last Friday, the Belgian Beer brewer, Anheuser-Busch InBev, listed on the JSE. At the opening bell the price of AB InBev was R1938 per share. When AB InBev decided to buy SAB Miller in October 2015, the SAB share price jumped from R610 to over R900 per share.
Putting the merger in a global context, AB InBev will supply its products to most countries around the world and will be one of the biggest companies in terms of Earnings Before Interest Tax and Dividends (EBITDA). Their EBITDA will be higher than that of Nestlé and Coca Cola. With AB InBev having a dominant position in emerging markets, it will rely on emerging market currencies to strengthen to significantly increase earnings.
4) Arrowhead Properties [JSE:AWA]
Arrowhead Properties has seen its share price decline as the fear of a South African rating downgrade is growing. With bond yields increasing, property shares on the JSE has been declining. Having reached R10.55 in May 2015, the negative sentiment towards the downgrade has pushed the share price down to R7.20.
The selloff in Arrowhead may very well be overdone as they have managed to secure fixed interest payments on their bonds. At around R7 a share, Arrowhead is trading at a yield of over 10%. With their strong portfolio they are likely to keep distributions stable.
5) Holdsport [JSE:HSP]
In November of 2015, Holdport reached R69 per share. Currently it is trading at R49 per share due to the the market selloff and weak rand. At R49, they are paying a 5% dividend which should remain stable. Holdsport has shown a constant increase in revenue annually. The business delivers decent operating margins and their headline earnings per share has also shown steady growth since 2012. Headline earnings for the first half of 2016 was above R2. Historically, the second half of the finical year has been stronger due to Christmas sales.
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* Kirk Swart is an analyst at Overberg Asset Management (OAM), an Authorised Financial Services Provider (No. 783) which specialises in the private management of local and global discretionary portfolios as well as pension products.
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