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SHARE WATCH: Interesting company results

Sep 27 2016 07:25
Kirk Swart

Cape Town - Overberg Asset Management analyst Kirk Swart looks at shares that released interesting results in this week's five shares to watch.

Sasol [JSE:SOL]

Sasol's FY 2016 results showed evidence of numerous cost reductions. With the oil price at a decade low, companies exposed to the oil industry have all embarked on a cost cutting drive. The initial cost saving target was R3bn over a three-year period starting in 2014. Due to the success of the venture, management has increased the target to R5.4bn by 2018.

Another aspect to take note of is the US LCCP project. This is a risk for Sasol should the company fail to successfully complete the project within budget. The uncertainty over the project, along with the low oil price has caused Sasol's share price to remain under pressure.

Sasol managed to deliver headline earnings per share of R41 for the financial year 2016. This is a 17.47% decrease on 2015's R49.80.

Remgro [JSE:REM]

Remgro's FY 2016 results are very subdued compared to their performance in the past. Headline earnings per share was down 26.4%. When excluding once-off items the headline earnings are only down by 7.5%.

Remgro's net asset value has increased by 8% largely due to good performance in its unlisted assets. Unilever SA increased by 22%, CIV by 13% and Wispeco by 15%.

On the listed investment side, Mediclinic's acquisition of Al Noor saw Mediclinic growing at 40%. Remgro has a 44.6% stake in Mediclinic.

Remgro is trading at a discount to NAV of about 21%. The NAV per share is around R306.

Advanced Health Care [JSE:AVL]

Advanced Health Care (AVL) strives to be the industry leader in day hospitalisation in South Africa and Australia. Currently AVL has nine day hospitals in South Africa and four in Australia.

This growth in the number of facilities is in line with their target of having 20 day hospitals in South Africa and 6 in Australia by 2020.

The full year results for 2016 indicates operational losses at 6 facilities that has been brought on line.

For the financial year 2016, revenue grew by 34% but Ebitda was R4.4m lower. The Ebitda loss can be attributed to the start-up losses at the 6 new facilities. Management indicated that each facility will break even within one to three years.

MMI Holdings [JSE:MMI]

MMI holding released their results recently for the year ending June 2016. The results reflect the tough economic conditions in South Africa with core headline earnings per share decreasing by 16% to R3.2bn. The company puts the decline down to lower underwriting profits and muted investment markets. Due to the higher discount rates, new business value declined by 11%. On a like for like basis the value of new business increased by 13%.

The tough economic times has led to MMI driving a cost saving initiative in which the company aims to reduce expenses by R750m by 2019 - R104m has already been saved in 2016, putting the company ahead of target.

Santam [JSE:SNT]

Santam is continuing its decent underwriting performance although not as aggressively as in the previous period. The underwriting margin for the first half of 2016 came in at 6.4% which is 3.2 percentage points lower than 2015's 9.6%.

Despite the underwriting margin, headline earnings per share came in 29% lower. The decrease is due to a higher claims ratio and lower returns in the investment portfolio. Investment income on shareholder funds decreased by 66%. The majority of the claim increases came from property, engineering and farming.

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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