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Cape Town - Overberg Asset Management share analyst Kirk Swart looks at notable companies to watch following recent results in this week's five shares to watch.
1. Stor-Age [JSE:SSS]
Stor-Age is a self-storage business. It has operations across South Africa and is expanding rapidly. It is the biggest self-storage business in South Africa. Where in the United States, self-storage has reached maturity, in South Africa it is still very much in the infant phase. It has a lot of growth potential in a country where urbanisation is escalating and houses are getting smaller.
Stor-Age has a strategy to add 4 to 6 stores every year until 2020. They have 48 properties countrywide and are targeting 60 properties by 2020.
Stor-Age has a presence in Cape Town, Johannesburg, Bloemfontein, Pretoria, Durban and Port Elizabeth.
2. Rand Merchant Bank Holdings (RMH)
Rand Merchant Bank Holdings (RMH) has a 34% investment in Firstrand. In 2016 RMH also added property to their portfolio by investing in Atterbury, Propertuity and Genesis.
The investment in Firstrand gives them exposure to businesses like First National Bank, Rand Merchant Bank, Wesbank and Ashburton.
Recently RMH released their unaudited interim results for the six months ending 31 December 2016. Normalised earnings was up 6% to R2.75 with dividends growing at 8% to R1.53 per share. RMH remains one of the blue chip banking shares in South Africa.
3. Bowler Metcalf [JSE:BCF]
Bowler Metcalf is a packaging and soft drinks company that was founded in 1972 and listed on the JSE in 1987. The company is segregated into two operating divisions namely Plastics and Filling.
The Plastics division specialises in the manufacturing of rigid plastic packaging for the toiletry, cosmetic, household, pharmaceutical and food markets.
The Filling division manufactures and distributes carbonated soft drinks under their own household brands.
Bowler Metcalf recently released their unaudited interim results for the six month ending December 2016. As with all packaging companies in South Africa, the results did not make for good reading. Although revenue grew by 14%, the group showed an after tax loss of R36.8m. The biggest loss was in the Filling division with a loss of R20.1m.
4. Aspen [JSE:APN]
Aspen is an international pharmaceutical company with more than 60 operations in approximately 50 countries. The company has a model of acquiring new businesses and integrating them into the Aspen stable.
Aspen's next target market is the US. The US is a very competitive market with lower margins. Acquisitions and integration on such a big scale takes time to come to fruition and it places a drag on cash generation.
In the unaudited results for the six months ending 31 December 2016, Aspen was hit by the strengthening rand and sterling weakness. Revenue was up 13% while headline earnings per share was only up 6%.
In future, Aspen will look to report their earnings in a hard currency.
Aspen is looking forward to a better second half of the financial year with cash generation picking up.
5. Sanlam [JSE:SLM]
Sanlam released their audited results for the year ending 31 December 2016 recently. It made for interesting reading. Some of Sanlam's funds have a 35% offshore exposure limit. After Nenegate, with a rapidly depreciating currency, Sanlam was forced to repatriate money to fall back within the 35% offshore limit. Added to Sanlam's frustration is the fact that the rand has subsequently strengthened.
For the year ending 31 December 2016, Sanlam managed to increase diluted HEPS by 6% while normalised earnings per share was down 6%.
Sanlam cited negative foreign currency translations and weak equity market performance as the biggest culprits for their lacklustre results.
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.
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