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SHARE WATCH: Keep an eye on Barclays Africa, Old Mutual

Mar 07 2016 08:43

Cape Town - Among this week's "five shares to watch" are Barclays and Old Mutual, which have announced they'd be selling their African operations or parts thereof.

Overberg Asset Management's Kirk Swart lists his five shares to watch this week.

Barclays Africa [JSE:BGA]

Barclays plc announced recently that it intends to trim its 62% holding in Barclays Africa down to a minority stake over the next three years. According to the bank, it has decided to let go of its African operations and focus solely on its core UK and US businesses.

The announcement led the credit rating agency, Fitch, to downgrade the South African part of Barclays to BBB-. Fitch sights limited support from Barclays plc, in the transition period form majority shareholder to minority shareholder, as the reason for the downgrade.

The opportunities for Barclays to grow in South Africa is clearly not enough to offset the weakening rand and a slowing South African economy.  

Barclays Africa ended Friday 2.12% down on R139 per share.

Old Mutual [JSE:OML]

Old Mutual responded to rumours that it is planning to split into stand alone businesses on Sunday, by announcing that it is considering all options as part of a strategic review. No decision has been made yet. The UK based news agency, Sky News, estimates that the split will be worth £9bn. Sky News reports that Old Mutual will separate Nedbank, the wealth unit, its emerging market unit and its asset management unit.

Old Mutual began in Cape Town in 1845 and listed on the Johannesburg Stock Exchange, as well as the London Stock Exchange in 1999. The 171-year-old company has said that it will take a strategic review of all business assets under the leadership of the newly appointed CE, Bruce Hemphill.

Massmart [JSE:MSM]

Massmart which has businesses such as Makro, Game and Dion Wired in its portfolio, reported an increase in their headline earnings per share of 7.7% for the year ending December 2015. Dividends per share have declined by 38.7% to R2.58. In light of tough trading conditions and the group’s continuous expansion into Africa, management has indicated that it will be increasing its dividend cover to bring it more in line with its peers.

Massmart comprises of nine wholesale and retail chains that operate in 13 countries in sub-Saharan Africa through four operating divisions. These divisions are Massdiscounters, Masswarehouse, Massbuild, and Masscash.

Massmart ended Friday trade 2% higher at R129.80

Santam [JSE:SNT]

The ‘Suid-Afrikaanse Nasionale Trust en Assuransie Maatskappy’ (Santam) has recently, released its results for the year ending 2015. This was a good year for Santam as they managed to increase their headline earnings per share by 28%. Their underwriting margin came in at a 10-year high of 9.6%. Dividends has gone up by 10% and their cash generation improved considerably.

Santam shareholders will be pleased that the top line revenue growth is accompanied by expenses being very much under control. Santam's investment portfolio also increased returns by 31%, which was mostly due to foreign exchange gains and some equity hedges.

Santam ended Friday's trade 0.23% down at R215.50.

Grinrod [JSE:GND]

Grinrod Limited has more than 100 years in the South African freight movement industry under its belt. The holding company has stakes in businesses that transports cargo via road, rail, sea, and air. Due to Grinrod's large exposure to the slowing South African and Southern African economy, Grinrod's recent results for the year ending 31 December 2015, does not make for enjoyable reading.

The reported results show earnings per share losses of 190 cents due to impairments in ship carrying values. Headline earnings per share decreased by 23% and the final dividend were reduced to 6 cents per share.

The share price ended Friday 5.34% higher at R10.85

Do you agree with Kirk's stock picks? Tell us why and send us yours.

* Kirk Swart is a director 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.

Disclaimer: The above article does not constitute financial advice and is not a recommendation. Investors must always seek the advice of professionals and trade with caution. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.


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