Cape Town - Overberg Asset Management's Kirk Swart looks at three resource
companies, and two companies that are active in the medical field in this week's "five shares to watch".
Discovery [JSE: DSY]:
Discovery last Wednesday released a trading update for the six months ending 31 December 2015. The trading update was below analyst expectations. Some analysts had predicted that Discovery will increase normalised headline earnings per share by 15%. The trading update shows normalised headline earnings per share is expected to increase by between 5% - 10%.
The earnings growth rate is lower than the historical earnings growth rate. Discovery said the slowdown in its earnings is due to increased investments in new enterprises. These increased investments include the expansion of the business model into retail banking, the growth in Ping-An Health, and the management of Bankmed medical scheme.
The company also experienced higher than expected costs with moving VitalityHealth in the UK onto its own infrastructure system.
The Discovery story is a growth story with the company perusing new avenues to grow the business across various geographical regions.
Sibanye Gold [JSE:SGL] and Harmony Gold [JSE:HAR]:
Diamonds, it seems, are no longer only a girl’s best friend. Since the start of this year, gold has been one of the best performing assets, outperforming equity significantly. The gold price broke through the $1 200 per ounce level and it seems to have found a support line. With the gold market ending 2015 in a deficit, as demand has grown faster than supply, the price should react positively. Adding to that, central banks are starting to adopt a negative interest rate policy, which is diminishing the carrying cost of gold.
The share price of Sibanye Gold and Harmony Gold has increased by 257% and 400% respectively from its lows in 2015. Sibanye was trading at R13.16 in August 2015 and is trading at R47 currently. Harmony was trading at R7.92 in November 2015 and is trading at R40 currently. The weak exchange rate and improved production have contributed to the increase. The movement in gold shares is usually a leading indicator of what will happen to the gold price.
Al Noor [JSE:MEI]
Al Noor recently announced that the reverse takeover by Mediclinic International is now complete. Before the completion of the deal, Mediclinic was trading at around R120 per share. The share price is currently R182. The group is now trading under the name, Al Noor Hospital Group, with the share code MEI.
Remgro [JSE:REM], which holds a 42% stake in the new hospital group, should see the healthcare segment of their portfolio increase to over a third of the group's total investment portfolio.
The deal offers a great currency hedge for the company as the bulk of their revenue will be generated offshore. Al Noor's primary listing is now on the London Stock Exchange with a secondary listing on the Johannesburg Stock Exchange.
Anglo American [JSE:AGL]
The Anglo American share price has almost doubled from lows a mere few weeks ago. On 26 January 2016, Anglo American was trading at R50.82 per share. It is currently trading at R96 per share.
Anglo American announced that it intends to dispose of assets in a bid to raise $3bn -$4bn. This includes the selling of Kumba Iron Ore [JSE:KIO]. The company announced that it will focus on diamonds, platinum and copper production only.
The market seems to have welcomed the news of a leaner portfolio. This comes after Moody's downgraded the company to junk status.
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* 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.
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