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Cape Town - Overberg Asset Management's Kirk Swart shares insight into the week’s main market news and lists his five shares to watch.
1) Capitec [JSE:CPI]
Capitec delivered an excellent set of results for the financial year 2016. The company manged to increase Diluted Headline Earnings Per Share by 26% to R27.81, as well as increasing Return on Equity to 27%. The results are particularly impressive given the lack of economic growth in South Africa. It speaks volumes about management’s ability to respond to the tough conditions. Capitec has seen its market share growing to 21% and active clients growing 16% to 7.3 million. To continue the growth story Capitec should look to add more products and take their banking model outside of South Africa.
2) Master Drilling [JSE:MDI]
Master Drilling is a world leader in raise bore hole drilling and listed three years ago on the JSE. The listing has helped Master Drilling to diversify both geographically and by commodity. The group`s vertically integrated business model helps to maximise synergies from the design phase to operations phase.
For the financial year 2015, Master Drilling has seen its revenue decline by 9% in USD terms. Although revenue declined, Headline Earnings Per Share increased by 14% to 13.8 UScps. The company reports its financials in US Dollars.
3) Metair [JSE:MTA]
For the year ending 2015, Metair reported a decline in Diluted Headline Earnings Per Share of 17.9% and a 12.5% decline in Dividends Per Share to 70cps. The company which is headquartered in Johannesburg, has a portfolio of companies that manufacture and distribute products mainly for the automotive industry. The weak results are due to costs associated with new models that were launched, a decline in recycling, lower lead prices in Romania, and geopolitical problems in export markets. It isn’t expected that the geopolitical tensions are to ease anytime soon, which won’t help Metair`s future results.
4) Grand Parade Investments [JSE:GPL]
Grand Parade, in its recent interim results gave investors their estimated intrinsic Net Asset Value at R6.15. Burger King, SunWest and GPI Slots represent 81% of the NAV. Expect the NAV to change as Grand Parade is set to reduce its stake in GPI Slots to 30% as well as dispose a portion of its SunWest holding.
It is the plan of Grand Parade to move away from gambling and slots into the fast food industry. It has stared this change by the rollout of Burger King South Africa, which is yet to make a profit.
5) Oakbay Resources and Energy [JSE:ORL]
Oakbay Resources has been in the news again last week as the company alerted the market that three politically connected directors resigned. They are Mr Atul Gupta, Mr Varun Gupta and Mr Duduzane Zuma. The company sights a sustained political attack on the company, along with the concern that the “jobs and livelihood” of Oakbay staffwill be in immediate danger if they continue in their respective positions.
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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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