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The mixed bag of companies that make up this sector tend to have one thing in common: share price performance (and to an extent, financial performance too), which is largely dictated by what happens to the general equities market – that is, the JSE.
The JSE itself – JSE Ltd – finds itself listed in this sector.
That it should be the dominant influence isn’t surprising, with general financial services companies comprising asset managers, stockbrokers, consumer finance, speciality finance and investment services.
However, a few companies have broken that market-linked trend in the latest table, showing individual company ingenuity can rise above the effect of the market.
African Bank Investments Ltd (Abil) isn’t dependent on the equities market and is why it breaks the mould on the table.
Taking two steps back to the 2008 table, nearly all the companies – despite some recent strong share price appreciation – have lower market capitalisations.
Of more concern is that, also over this two-year period, most are showing lower pre-tax profits (though financial year-ends can make some of that information dated).
Trendsetter
But Abil is moving in the opposite direction.
Market capitalisation has grown substantially, by almost R10bn, in two years and pre-tax profit is up more than R700m.
Like Capitec, listed in the banks sector, Abil has under the hand of founder and major shareholder Leon Kirkinis become a champion of showing unsecured loans can relatively safely be advanced to the lower income market.
It’s a rich irony that while all consumers are under financial pressure, Abil and Capitec are doing reasonably well while the big banks take strain.
But not that well.
In a recent trading update for its first quarter to end-December, 2009 Abil said it was being conservative in its lending, with trading conditions muted, given the challenging consumer environment.
But it added indications are market conditions have stabilised.
That aside, Abil is by far the best performer on this year’s table.
Another company that breaks the downward market cap trend is Coronation Fund Managers.
Its latest market capitalisation number – R2.79bn at end-February – isn’t reflected in the table.
It follows a remarkable gain of more than 100% in its share price.
What’s notable about that is perhaps, more than most in this sector, the share price of an asset manager such as Coronation should be closely tied to the performance of the JSE.
The company has pulled all sorts of rabbits out the hat to generate much better performance.
Tougher times ahead
Again remembering that financial figures in the table can be dated due to year-ends, Barnard Jacobs Mellet (BJM) breaks the declining pre-tax profits trend by growing the number by more than R300m.
But it also notes a tough year ahead, with BJM indicating in a trading statement that earnings for its financial year to end-March 2010 would be down by at least 20%.
Other companies in the table that have shown strong share price performance (some gains after the table was compiled) include both Investec Ltd and Investec plc, with prices for both over the past year up by more than 70%.
It looks like CEO Stephen Koseff has finally managed to throw off the sub-prime blues that had Investec painted with the same brush as struggling investment banks overseas.
Brait SA also saw its share price advance more than 70%, continuing the strong trend it set in 2008.
Generally lower share prices, as reflected in the market cap figures, make this an interesting and potentially rewarding trawling ground for investors.
Homework will be required.
The larger companies are easier to track and research; the smaller ones will take more work.
But that’s where the best opportunities probably lie.
- Finweek
The JSE itself – JSE Ltd – finds itself listed in this sector.
That it should be the dominant influence isn’t surprising, with general financial services companies comprising asset managers, stockbrokers, consumer finance, speciality finance and investment services.
However, a few companies have broken that market-linked trend in the latest table, showing individual company ingenuity can rise above the effect of the market.
African Bank Investments Ltd (Abil) isn’t dependent on the equities market and is why it breaks the mould on the table.
Taking two steps back to the 2008 table, nearly all the companies – despite some recent strong share price appreciation – have lower market capitalisations.
Of more concern is that, also over this two-year period, most are showing lower pre-tax profits (though financial year-ends can make some of that information dated).
Trendsetter
But Abil is moving in the opposite direction.
Market capitalisation has grown substantially, by almost R10bn, in two years and pre-tax profit is up more than R700m.
Like Capitec, listed in the banks sector, Abil has under the hand of founder and major shareholder Leon Kirkinis become a champion of showing unsecured loans can relatively safely be advanced to the lower income market.
It’s a rich irony that while all consumers are under financial pressure, Abil and Capitec are doing reasonably well while the big banks take strain.
But not that well.
In a recent trading update for its first quarter to end-December, 2009 Abil said it was being conservative in its lending, with trading conditions muted, given the challenging consumer environment.
But it added indications are market conditions have stabilised.
That aside, Abil is by far the best performer on this year’s table.
Another company that breaks the downward market cap trend is Coronation Fund Managers.
Its latest market capitalisation number – R2.79bn at end-February – isn’t reflected in the table.
It follows a remarkable gain of more than 100% in its share price.
What’s notable about that is perhaps, more than most in this sector, the share price of an asset manager such as Coronation should be closely tied to the performance of the JSE.
The company has pulled all sorts of rabbits out the hat to generate much better performance.
Tougher times ahead
Again remembering that financial figures in the table can be dated due to year-ends, Barnard Jacobs Mellet (BJM) breaks the declining pre-tax profits trend by growing the number by more than R300m.
But it also notes a tough year ahead, with BJM indicating in a trading statement that earnings for its financial year to end-March 2010 would be down by at least 20%.
Other companies in the table that have shown strong share price performance (some gains after the table was compiled) include both Investec Ltd and Investec plc, with prices for both over the past year up by more than 70%.
It looks like CEO Stephen Koseff has finally managed to throw off the sub-prime blues that had Investec painted with the same brush as struggling investment banks overseas.
Brait SA also saw its share price advance more than 70%, continuing the strong trend it set in 2008.
Generally lower share prices, as reflected in the market cap figures, make this an interesting and potentially rewarding trawling ground for investors.
Homework will be required.
The larger companies are easier to track and research; the smaller ones will take more work.
But that’s where the best opportunities probably lie.
- Finweek
