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SHARE WATCH: Five firms to watch following results

Sep 04 2015 16:05
*Kirk Swart


Company Data


Last traded 184
Change -1
% Change -1
Cumulative volume 11619
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

Sanlam Limited [JSE:SLM]

Last traded 74
Change -1
% Change -1
Cumulative volume 3116051
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA


Last traded 10
Change 0
% Change -1
Cumulative volume 59119
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Mixed bag of 5 stocks to watch this week


Cape Town - September is a month in which a lot of JSE companies release either half-year or full-year results for the period ending June 2015. This week’s five shares to watch focuses on companies that recently released either interim or annual results.

1. Standard bank [JSE:SBK]

Standard Bank, which strives to become the leading retail bank in Africa, has reported a 27% increase in headline earnings per share (HEPS) for the six months ending June 2015 in comparison to June 2014.

Breaking down this 27% increase indicates a once off positive insurance claim regarding aluminium fraud in China as well as the sale of 60% of SBK's Global Market business in London. The Global Market business has been loss making to date, and the sale will allow SBK to increase its focus on Africa.

Stripping out these developments, SBK's results will look a lot more modest with an increase in HEPS between 8% – 12%. These once off developments has led the market to price SBK on a modest price to earnings ratio of 12.

2. Nedbank [JSE:NED]

Nedbank's results ending June 2015 was in line with expectations. Playing catch-up to Standard Bank in terms of its African presence, Nedbank released respectable results nevertheless. 

Diluted HEPS grew by 14.1% to R11.01. With costs being contained and trading income increasing over 30%, Nedbank managed to declare a dividend of R5.37 for the interim period which was an increase of 16.7%.

However, Nedbank's net interest income only grew by a 3.7%, reflecting the squeeze the banking sector faces in interest margins. Outside of the traditional interest business, Nedbank grew non-interest revenue by 10.2%.

Nedbank is trading at a price to earnings ratio of 10.2 which is attractive given a rising rate cycle which could potentially boost interest income.

3. Sanlam[JSE:SLM]

Sanlam, one of South Africa's oldest life insurers and now diversified financial services group, has posted its results for the first half of the 2015 financial year.

Sanlam, which is diversified across Africa, India and Asia and focuses also on asset and investment management,  managed to increase net operating profit by 5% to R1.77 per share. This weak profit growth number was despite good results from Santam, the short term insurer in which it has a controlling stake.

The poor performance came from Sanlam Investments and Sanlam Emerging Markets which reported lower earnings than the comparable 2014 period.

Lower fees and higher costs, especially in India, indicate the problems emerging markets can offer. Sanlam is fairly valued on a price to earnings ratio of 14 and an embedded value of R50. Trading at R60 Sanlam is trading at a slight premium to embedded value.

4. Cashbuild [JSE:CSB]

Cashbuild is a large retailer of building, construction and associated materials and sells directly to cash paying customers in stores across South Africa, Namibia, Lesotho, Botswana, Swaziland and Malawi.

In Cashbuild's full-year 2015 results, the retailer posted an increase in EBIT (Earnings before interest and taxes) of 30% which is exceptional considering the suppressed economic growth rates in South Africa and its neighbouring countries. Cashbuild declared a dividend of R7.12 which was an increase of 35% compared to the 2014 dividend. Cashbuild also sits on cash which is worth R37 per share.

With its cash-only model and further expansion plans, Cashbuild is trading on a price earnings ratio of 21. Cashbuild's results show that the informal economy, which operates on a cash only basis, might be in a stronger position than the formalised economy.

5. Advtech [JSE:ADH]

Advtech, which owns education brands like Crawford, Trinityhouse and Abbotts College and recently bought the Centurus and Maravest Group of schools is a private education company rivalling Curro on the JSE. With 24 000 students at 76 schools and 31 000 tertiary students at 20 campuses, Advtech is by no means small in learner numbers. Advtech has three operating divisions, namely a schools division, a tertiary division and a resources division.

The schools division is the biggest contributor to revenue with 53%, followed by the tertiary division with 39%.

Advtech posted a solid set of results for the first half of 2015 with revenue increasing by 33% year-on-year and headline earnings per share increasing by 26% to 25.2 cents per share. With results like these, expect Curro to launch more bids to acquire Advtech in the future. Advtech trades at a price to earnings ratio of 26.

Agree with Kirk's stock picks? Send us yours and why.

* 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.

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.

nedbank  |  sanlam  |  standard bank  |  advtech  |  markets  |  share watch  |  equities


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