Cape Town - Stocks analyst Kirk Swart from Overberg Asset Management looks at shares to keep an eye on in the new year, betting that Sasol may be one of the better performers in 2017.
2016 was a very tough year for South African retailers. The economy ground to a halt and along with the drought, retailers' profit margins declined. However, Shoprite still managed to grow revenue at double digit rates.
The big corporate action regarding Shoprite is that the largest shareholders of both Steinhoff and Shoprite have initiated and facilitated discussions to combine their respective African retail businesses. This is done with the aim to create a retail business with significant scale and an international footprint.
Investors will ask what the merit is of the combination and if any synergies can be obtained? If such synergies can flow from it, expect investors to do well out of Shoprite in the medium to long run.
Old Mutual [JSE:OML]
Old Mutual has listed its asset management division at the end of last year in the US. This is part of the Old Mutual strategy to break itself up into four separate parts. This is being done as the current structure is very inefficient and costly. The four parts; Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank and Old Mutual Asset Management. The separations will be complete by the end of 2018.
Recently Old Mutual Emerging Markets also appointed a new interim CEO, Ian Williamson. He takes over from Ralph Mupita, who left the company to join MTN. Old Mutual will list the emerging market division in 2018.
Trading at a price earnings ratio of only 13, the new leaner Old Mutual will be good for existing shareholders.
Invicta holdings is an investment holding and managing company that manages assets of R15bn. They operate across three different divisions namely Engineering Consumables, Capital Equipment and Building Supplies. Invicta's most notable investments are in Bearing Man Group (BMG), Man-Dirk Group, Tiletoria and Doosan SA.
Invicta shareholders will be happy that Arnold Goldstone, who was the CEO from April 2000 to April 2015 will be back at the helm from 1 February 2017. He is taking over from Charles Walters who has joined mining company Assore. 2016 was a good year for the Invicta share price. It reached a low of R37 in January 2016 and is currently trading at R64. With Goldstone back and the global economy showing signs of a recovery, Invicta is a share that will be on the radar for many investors in 2017.
Zeder is an investor in the broad agricultural sector in southern Africa. The last couple of years Zeder has faced various headwinds due to the declining macro conditions and the widespread drought. Zeder's most notable investments are Pioneer Foods, Kaap-Agri and Quantum Foods.
Zeder's shareholders will be happy that PSG will no longer be charging any management fees. This means more earnings will go the shareholders. Added to that it seems that the drought is coming to an end. This can be the catalyst for Zeder shareholders going into 2017.
Of late Sasol has crept above R400 on the back of a strong increase in the oil price. The question for 2017 is whether the increase in oil prices will continue? The opinion among analysts is mixed. Some analysts see the Opec oil output cut as a positive for prices. The International Energy Agency (IEA) has estimated that as long as the Opec producers keep to their promised cuts, oil will soon move into a deficit. On the other side of the spectrum, some analysts believe that oil is stuck in a secular bear market. The bears believe that the US shale producers will make a comeback which will flood the market with oil again.
The odds are that shale can't be switched on as easily as it takes time, manpower and money to start operations again. If so, Sasol might be one of the better performers in 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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