Cape Town - Kirk Swart, share analyst at Overberg Asset Management, looks at a mixed bag of share movers on the JSE, with special attention to Sasol which is trading flat despite the oil price creeping above $60 per barrel and the rand moving out to R14.09/$.
Richemont is a world leader in the sale of luxury goods. Known Richemont brands include Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC Schaffhausen, Panerai and Montblanc.
Richemont rewarded shareholders this year with a return of 44%. In a recent trading statement released on the 17 October, Richemont indicated that sales for the six months ending September 2017 increased 10% on a reporting currency basis and 12% on a consistent currency basis. Operating profit for the six months ending September 2017 is likely to increase by 45% and profits increasing by 80%.
This jump is likely to be a once off as the previous year's figures show exceptional inventory buy backs.
Transpaco is a manufacturer, recycler and distributor of paper and plastic packaging products in South Africa. Transpaco had a great 2016 but it seems that the weak economic conditions are starting to catch up with the company. Group turnover reduced by 4.5% while operating profits declined by 22.5%.
The company cites selling price deflation, reduced customer spend and a softening demand for recycled material as the biggest contributors to the decline. Transpaco's share price has fallen all from R34.40 in January to around R21 today. The final divided also declined to 72 cents per share.
The oil price has finally crept above $60 per barrel and the rand has moved out to R14.09/$. Yet we see that Sasol is trading flat for the year. Investors seem to believe that the Lake Charles Chemical Project will drag Sasol's performance down. The project is 74% complete and expenditure thus far is in the region of $7.5bn.
Total expenditure forecast is approved at $11bn. In rand terms, it is R155bn. To give it perspective, it can cover the South African government shortfall 3 times. With return estimates being lowered to 7% - 8% investors remain sceptical.
However, continued rand weakness and oil price increases will be good for Sasol.
PSG has given investors another great year. Trading at R265 today, the share was trading below R200 in November last year. In a trading statement released on 6 October 2017, the company reported that for the six months ending August 2017, recurring headline earnings per share will be between 0.4% and 0.5% higher than the corresponding previous period.
Headline earnings per share will be lower between 22.4% and 23.5%. The drop is due to the weak performance of Zeder, PSG's agriculture and food business. Zeder has a stake of 27% in Pioneer Foods, and Pioneer foods has had a terrible year.
However, droughts do not last forever and the time to be considering these shares are when sentiment is rock bottom.
Rhodes Food Group [JSE:RFG]
Rhodes Food Group released a trading update on Monday for the year ending 1 October 2017. Canned fruit volumes recovered in the second half while industrial sales of pulp and puree products slowed. The slowdown is due to a global pricing decline and a decline in demand.
Management expects headline earnings for the year to be lower between 17% and 22%. Management will give a better indication as to the reasons for the decline when the company release the full financial results on 21 November 2017. The share price has fallen by 33% since January 2017.
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*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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