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Cape Town - Overberg Asset Management share analyst Kirk Swart looks at share movements after major company developments in this week's share watch.
Murray & Roberts [JSE:MUR]
The construction group Murray & Roberts saw its share price climb by more than 40% on Monday as it became public that German private investment holding, Aton, intends to make a takeover bid for the local company.
The offer is a cash offer of R15 per share. On Friday the share closed at R9.64. Aton already has a 30% shareholding in Murray & Roberts, so the deal is to acquire the remainder of the shares.
Allan Gray, which owns 10.9% of Murray & Roberts, indicated that it will accept the R15 per share offer.
Amplats [JSE:AMS]
The platinum sector has again been hit by the perfect storm. The platinum price is below $1 000 per ounce. With the rand strengthening and demand for platinum declining, platinum miners are seeing margins decline. The rise of electric cars and phasing out of diesel engines by most car manufacturers is believed to be the final shot.
Amplats is one of South Africa's premium platinum producers. In November 2017, the share price hit R420 per share. Today it is trading at just above R320 per share following a spending freeze on all new developments.
However, it is always darkest before dawn. Kumba Iron Ore [JSE:KIO] was trading at around R25 in January 2016 when the outlook for iron ore was at its lowest. Today it is trading at around R300. Investors will do well to look beyond the cyclical cycles and buy at the bottom.
Gold
A recent article by Steven Pressman, Professor of Economics at the Colorado State University and Robert H. Scott III, argues that the market selloff we had in February is a precursor to a much bigger selloff and recession.
In the article they argue that as in 2008, household debt is increasing while real household income isn't keeping up with the debt. This is despite the 4.1% unemployment rate. They cite the gradual increase in the Fed rate as the trigger.
If they are correct, investors will run to gold as gold has traditionally been a safe-haven. Trading at $1 350 per ounce, gold is increasing steadily. Last year this time, gold was trading at $1 250 per ounce.
Grindrod [JSE:GND]
Grindrod recently released its results for the year ending December 2017. It didn't make for pleasant reading. Revenue from continuing operations was lowered to R3.1bn from R3.3bn. Earnings before interest, tax, depreciation and amortisation decreased to R426.1m from R456.7m.
On a positive note the company mentions that global markets are continuing to show signs of improvement and the business will benefit from it in the second half of 2018. Furthermore, the company will list its shipping business on the Nasdaq in the second half of 2018 with a secondary listing on the JSE.
Tencent
Tencent shares fell more than 4% on Friday following a 5% fall on Thursday. The decline follows after Tencent reported better than expected profits but missed revenue expectations. Naspers [JSE:NPN] also sold 2% of its stake in Tencent and will use the proceeds to fund future growth. Naspers announced that its has no immediate plans to sell any more Tencent shares.
In a statement, Tencent chairperson Pony Ma mentioned: "Naspers has been a steadfast strategic partner over a great many years. Tencent respects and understands Naspers' decision and looks forward to continuing to work closely together in building a mutually supportive and prosperous future for both companies."
Investors might use opportunities like these to buy into the dips.
Do you agree with Kirk's stock suggestion? 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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