Cape Town - Overberg Asset Management analyst Kirk Swart looks at notable South African companies in this week's five shares to watch.
Rolfes is a specialised chemical company that plays in the space of food security, clean water and manufacturing demand. Shareholders in this little gem will be pleased at the performance of Rolfes in 2016. It started the year trading below R3 per share and it is currently trading at around R5.30 per share.
Rolfes released a trading statement in which it states that headline earnings per share for the six months ending 31 December 2016 will be between 31% and 36% higher than the previous year. This is exceptional considering the tough trading conditions in South Africa.
As with most South African retailers, Massmart is also feeling the effects of a weak South African economy.
Massmart, which trades under names such as Game, Dion Wired, Makro and Builders Warehouse, has recently released a sales update for the 52 weeks that ended 25 December 2016. Massmart was able to grow sales by 7.7% of which only 5.4% was comparable store sales.
Product inflation came in at 6.2%, which places real sales growth in negative territory.
South African retailers will be hoping that the economy shows signs of life. On a positive note, it seems as if the South African Reserve Bank has halted interest rate increases for the time being as inflation is lowering towards the 3% to 6% target range.
Reunert is a company that not many retail investors know. It manages a portfolio of businesses in the electrical engineering, information communication technologies (ICT) and applied electronics space.
The biggest contributor is the electrical engineering division which contributes around 46% to revenue. This division designs and manufactures a whole range of electrical energy cables, telephonic cables and low voltage electrical equipment.
The ICT division, contributing around 37% to revenue, manages brands such as Nashua and ECN. The applied electronics division which manufactures radar tracking systems, remote control platforms, circuit boards etc., contribute around 17% to revenue.
It is worth noting that Reunert's directors have bought shares in the company worth almost R14m recently.
Anchor Capital [JSE:ACG]
Anchor Capital is an asset manager that provides a whole spectrum of investment products. Following Anchor's listing in 2014, the share went from R3 all the way up to R17. Subsequently, the share has come off its highs and is trading at around R9.50 as market expectations have cooled. The company grew assets under management (AUM) by 36% in the first half of 2016 to about R46bn.
Much of the asset management industry is geared towards the markets and it will be very impressive if Anchor can continue to grow their AUM as aggressively as they have done in the past.
Transaction Capital [JSE:TCP]
Transaction Capital provides specialised and allied financial services in selected higher risk and under serviced segments of the South African economy. The company is a non-deposit taking asset backed lender. In 2014 it disposed of Paycorp and Bayport and distributed parts of the proceeds to shareholders.
The company now only consists of two divisions namely, SA Taxi and Transaction Capital Risk Services. SA Taxi is Transaction Capital's biggest revenue earner.
SA Taxi provides, sells, finances, insures and refurbishes minibus taxis to many SMEs throughout the country. It recently added Zebra Cabs to its portfolio.
Currently SA Taxi contributes around 54% to Transaction Capital's headline earnings. The second division, Transaction Capital Risk Services, offers credit solutions to clients in the consumer credit life cycle. This division contributes around 37% to headline earnings.
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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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