Cape Town - Alongside rand-hedge stocks, and Naspers in particular, Overberg Asset Management analyst Kirk Swart looks at recent results and news making shares in this week's five shares to watch.
1. The Foschini Group [JSE:TFG]
The Foschini Group is one of South Africa’s leading clothing retailers. Retailers in SA are currently facing tough trading conditions due to high inflation and interest rates that have forced consumers to tighten their belt.
In an attempt to diversify their revenue base, the group bought an 85% stake in the UK retailer Phase Eight. Excluding the UK retailer, the group managed to grow their revenue with 11.6%. Including the UK retailer, their revenue grew by 31.2%. The group targets a 50/50 split between cash and credit sales. The share is trading at a PE ratio of 13.
READ: UK boost for Foschini sales
2. MediClinic [JSE:MDC]
MediClinic recently moved its primary listing to London, following its merger with Al Noor. This is part of its strategy to grow globally, already having a foot in the door in both the UK and Switzerland.
The group has grown to 73 hospitals and has 45 clinics worldwide. This is proof that although it is in a defensive industry, the private health service provider is still actively looking to increase earnings. Recent results showed revenue to have grown by 6.6% while tax profit fell by 25%.
By merging with Al Noor, MediClinic will aim to improve their revenue and earnings going forward.
READ: Catapulting Mediclinic into FTSE 100 – the deals which transformed it
3. Netcare [JSE:NTC]
In 2015, Netcare embarked on an expansion programme, in which just fewer than 600 new beds were added in SA. This was done along with a major restructuring of its European operation.
All of this has led to revenue growing by 15.4% and net profit growing by 20.7%. However, this growth is somewhat overshadowed by a weakening in the rand/pound exchange rate of 24.7%.
Netcare declared an interim dividend of 38 cents per share, while headline earnings grew to 90.3 cents per share. The shares are currently trading on a PE ratio of 18.
4. Quantum Foods [JSE:QFH]
The poultry producer, Quantum Foods which unbundled from Pioneer Foods has not had it easy. Rising input cost and cheaper import alternatives has made the SA poultry industry uncompetitive.
In its interim results, tax profits fell by 2% and headline earnings per share fell by 44%. This decline in earnings is in spite of top line revenue growing by 7.9%. Quantum, which has business units in Africa saw its African revenue decline by 24.2%.
Quantum Foods is currently trading at a PE ratio of 6.
5. Arcelor Mittal [JSE:ACL]
Arcelor Mittal South Africa (AMSA), under the leadership of Paul O'Flaherty, tried its best to restore its relationship with the South African government. These efforts proved to be successful when the government agreed to protect the steel producer by increasing steel import tariffs by 10%.
However, following the resignation of O'Flaherty as AMSA's CEO in December of last year, relations between the company and the government has begun to decline once more.
The import tariff agreement between AMSA and the government states that AMSA will not increase the prices of their steel in the near future. Recently it came to light that AMSA has in fact done exactly that. The company increased steel prices by 30% this year. This increase will more than likely provoke a reaction from government.
Do you agree with Kirk's stock picks? Send us yours and tell us why.
* Kirk Swart is an analyst at Overberg Asset Management, 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.