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SHARE WATCH: Focus on international dealmakers

Cape Town - Overberg Asset Management analyst Kirk Swart looks at shares which made interesting international movements in this week's five shares to watch.

1. Hulamin [JSE:HLM]

Hulamin is the South African aluminium producer which recently made headlines after it came to light that they are to supply a key component to Tesla, powering their vehicles. Tesla, a major electric car manufacturer in the US, is planning to sell 500 000 electric vehicles by 2018. Hulamin's management expect the deal to double export sales as the demand for Tesla's vehicles are increasing.

These positive developments with Tesla has to be viewed in light of Hulamin being a very small aluminium player by global standards and are effectively a price taker. With China oversupplying the market, Hulamin has little power to change the unit price of its sales. At this stage, the Tesla deal is still a very small part of Hulamin’s overall business.

Hulamin is trading at R5.50 with a price earnings ratio of 14.8 and a dividend yield of 1.2%.

2. MTN [JSE:MTN]

Rob Shuter, a former Vodacom executive, has been named MTN’s new president and CEO. This follows the resignation of former CEO, Sifiso Dabengwa. Dabengwa resigned after MTN’s Nigerian business received a record breaking fine due to the company’s failure to deactivate unregistered sim cards.

READ: Former MTN CEO in R24m golden handshake

The search for a new CEO has been a long one, with the chair Phuthuma Nhleko leading the company in the interim. Shuter is set to start his tenure at MTN only in mid-2017, when his current contract with Vodafone ends.

3. General Motors

The decline in the South African economy has forced the US motor vehicle giant, General Motors (GM), to trim output levels at its South African plant due to a drop in local vehicle sales. The company is even making reference to possible job losses.  

The company which manufactures brands such as Chevrolet, Opel, Buick and Hummer has seen its share price decline for the year to date by 14%. This is an indication that new vehicle sales are under pressure worldwide, not just in South Africa.

GM might be attractive for investors that are looking for a decent yield in a very low yielding environment. At $29 per share, GM is looking cheap on a price earnings ratio of 5.63 and a dividend yield of 5.2%.

4. J Sainsbury

J Sainsbury is a UK retailer that was found in 1869 and operates across 1 200 supermarkets and convenience stores. The retailer also provides customers with online facilities that enable them to do all their shopping online.

Outside of the core retail business, the company has two property joint ventures with Land Securities and The British Land Company. Add a banking, insurance and energy division, the company are diversifying their revenue streams in a tough operating environment.

For the first quarter ending June 4 2016, retail sales only increased by 0.3%. Recently the retailer went head to head with Steinhoff for the acquisition of home retailer Argos. Steinhoff eventually withdrew their offer. According to the company the takeover will be completed by the third quarter of 2016.

The possibility of a Brexit has led to investors selling J Sainsbury. The price is languishing at 239 pence per share on a price earnings ratio of 9.77. It is offering a dividend yield of 5.66%.

5. Steinhoff [JSE:SHF]

Ever since its Frankfurt listing, Steinhoff has been on the acquisition trail in Europe to grow their footprint. After Steinhoff withdrew their bid for home retailer Argos earlier this year, I predicted that it will definitely not deter Steinhoff from making more acquisitions.

The Frankfurt listing gives them access to bigger capital markets. With the European and UK economies struggling, Steinhoff is acquiring businesses at the bottom of the retail cycle.

READ: Markus Jooste – On losing bids, building Steinhoff and drawing inspiration

The UK retailer Poundland is the latest retailer in the sights of Steinhoff. It has silently acquired 23% of the retailer and is looking to take full control of the company in a hostile takeover.

The market does not seem to like the deal as the share price has subsequently come down from R94 and is trading at R86 per share.

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.


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