Booming Local Retail Sales and RIP Tito Mboweni (#607)
10/17/24 • 18 min
- Retail sales show a positive trend, rising 3.2% in August, exceeding expectations of 2.1%.
- The Two-Pot System has already released R20 billion in six weeks, with the money used mainly for paying down debt, saving, and spending.
- Retail sales recovery, though from a low base, is a strong indicator of improved consumer health due to factors like slightly lower interest rates and inflation.
South African retail sales | YonY
Tribute to Tito Mboweni:- Simon reflects on the passing of Tito Mboweni, former Finance Minister and Reserve Bank Governor.
- Mboweni’s contributions include institutionalising the Reserve Bank’s MPC meetings and implementing key labor reforms during his tenure as Labor Minister.
- His lasting impact on the country’s economy and financial sectors was highlighted, along with his personality as a Twitter chef and self-styled "Duke of Magoebaskloof."
- Simon shares his reasons for holding Johnson & Johnson: consistent dividend growth (around 3% yield) and a steady 8% annual share price growth in US dollars.
- Despite some issues, the company offers reliable long-term returns in a competitive health and consumer space.
Johnson & Johnson quarterly dividend payments
Bytes Technology Group and Investment Opportunity:- Bytes operates in the UK, offering hardware, software, and services. The stock showed mixed market reactions but has strong support around certain levels.
- With a forward P/E of 20 and a dividend yield of 3.6%, Simon sees it as an interesting opportunity for long-term investors in the tech space.
- Quilter’s strong Q3 results follow a good first half of the year, with significant inflows supporting future earnings.
- A solid financial services player with a dividend yield near 4% and a forward P/E of 15, Quilter is performing well and trading at all-time highs since its 2018 listing.
- Simon discusses Sasol’s ongoing struggles, with a weak chart suggesting possible further declines.
- Investors should wait for technical indicators before making any moves.
- Brent crude oil hit highs recently but is now retreating to $70 per barrel, with potential for further declines due to global oversupply.
- The rand, affected by dollar strength, is volatile but could see a return to 16.80 against the dollar in the coming months.
00:00 Retail Sales Recovery and Economic Outlook 04:29 Tribute to Tito Mboweni 08:32 Johnson & Johnson: A Steady Investment 09:52 Bytes Technology Group: Market Reactions 12:32 Quilter's Strong Performance 14:29 Cecil's Ongoing Struggles 15:56 Brent Oil Prices and Global Economy 17:48 Volatility of the Rand and Market Predictions
- Retail sales show a positive trend, rising 3.2% in August, exceeding expectations of 2.1%.
- The Two-Pot System has already released R20 billion in six weeks, with the money used mainly for paying down debt, saving, and spending.
- Retail sales recovery, though from a low base, is a strong indicator of improved consumer health due to factors like slightly lower interest rates and inflation.
South African retail sales | YonY
Tribute to Tito Mboweni:- Simon reflects on the passing of Tito Mboweni, former Finance Minister and Reserve Bank Governor.
- Mboweni’s contributions include institutionalising the Reserve Bank’s MPC meetings and implementing key labor reforms during his tenure as Labor Minister.
- His lasting impact on the country’s economy and financial sectors was highlighted, along with his personality as a Twitter chef and self-styled "Duke of Magoebaskloof."
- Simon shares his reasons for holding Johnson & Johnson: consistent dividend growth (around 3% yield) and a steady 8% annual share price growth in US dollars.
- Despite some issues, the company offers reliable long-term returns in a competitive health and consumer space.
Johnson & Johnson quarterly dividend payments
Bytes Technology Group and Investment Opportunity:- Bytes operates in the UK, offering hardware, software, and services. The stock showed mixed market reactions but has strong support around certain levels.
- With a forward P/E of 20 and a dividend yield of 3.6%, Simon sees it as an interesting opportunity for long-term investors in the tech space.
- Quilter’s strong Q3 results follow a good first half of the year, with significant inflows supporting future earnings.
- A solid financial services player with a dividend yield near 4% and a forward P/E of 15, Quilter is performing well and trading at all-time highs since its 2018 listing.
- Simon discusses Sasol’s ongoing struggles, with a weak chart suggesting possible further declines.
- Investors should wait for technical indicators before making any moves.
- Brent crude oil hit highs recently but is now retreating to $70 per barrel, with potential for further declines due to global oversupply.
- The rand, affected by dollar strength, is volatile but could see a return to 16.80 against the dollar in the coming months.
00:00 Retail Sales Recovery and Economic Outlook 04:29 Tribute to Tito Mboweni 08:32 Johnson & Johnson: A Steady Investment 09:52 Bytes Technology Group: Market Reactions 12:32 Quilter's Strong Performance 14:29 Cecil's Ongoing Struggles 15:56 Brent Oil Prices and Global Economy 17:48 Volatility of the Rand and Market Predictions
Previous Episode
Capitec, a Core Portfolio Holding? Balwin vs. Calgro M3. (#606)
Overview:
In this episode of JSE Direct, Simon Brown breaks down the latest market updates, key stock analyses, and insights into the South African investment landscape. Episode highlights include discussions on property developers Calgro M3 and Balwin, Capitec’s strong performance, Purple Group’s rise, Afrimat’s challenging update, and Wilson Bailey’s long-term chart breakout. The show also covers upcoming events and Brown's views on Nvidia’s stock movement.
Property Developers: Calgro M3* vs. Balwin- Calgro M3: Delivered a strong trading update, attributed to its flexibility in targeting lower-income segments. Calgro’s ability to adapt and scale down offerings positions it well, with potential for significant price appreciation. Trading at a low PE of 3.5, Brown argues that in a normal market, it should command a 10x PE, suggesting a fair value of around R9.
- Balwin: Struggling with higher entry price points in its developments. Despite weaker performance, there may still be value. If results improve in the future, Balwin could present a solid opportunity. Brown speculates that a delisting could be on the cards if the stock remains undervalued.
Calgro M3 weekly chart | Close 09 October 2024
Capitec: Expensive, but Resilient- Capitec continues to outperform with robust growth, though it trades at a high PE of 27 and a price-to-book of 7.8. Despite concerns about its premium valuation, the company’s diverse ventures, from mobile services to expanding insurance offerings, make it a long-term core portfolio holding. Historical growth shows Capitec’s resilience and market leadership in the South African banking sector.
- After months of a consistent seller at 80 cents, Purple Group’s stock broke higher, reaching 98 cents before pulling back. Brown remains optimistic, particularly as trading volumes in the JSE pick up, benefiting Purple’s core business. Although trading at a high PE of 45, Brown is bullish about its prospects in a rising market.
- Afrimat’s trading update indicated a sharp drop in earnings (down 75-85%), partly due to the acquisition of Lafarge, which is still loss-making. While the near-term outlook is challenging, Brown remains optimistic about Afrimat’s long-term potential, especially if South Africa enters a construction boom. He sees the stock as attractively priced for long-term investors.
- Brown discusses WBHO’s impressive 17-year chart, finally breaking out after a long consolidation period. He suggests the stock could benefit from renewed local construction activity, while Afrimat remains his preferred pick in the sector due to its diversification into industrial metals.
A breakout after a 17-year consolidation is very bullish in TA. Add the fundamental underpin. I think this still has lots of room to run. pic.twitter.com/fBk5BCKtvk
— Richard Thomason (@richytee) October 9, 2024
Nvidia: Breaking New Highs- Nvidia, another stock Brown holds, is testing all-time highs after a series of consolidations. With Nvidia's historical pattern of doubling after breaking key resistance levels, Brown remains confident in the stock's potential for further growth despite its high valuation.
Nvidia weekly chart | Close 09 October 2024
All charts by KoyFin | Get 10% off your order
Chapters 00:00 Market Overview and Calgro M3 vs Balwin 07:11 Capitec's Performance and Future Outlook 12:43 Exploring Other Stocks: Purple Group and Afrimat 18:15 Long-term Trends: Wilson Bailey and Nvidia
Next Episode
Using AI to analyse Famous Brands results and Awesome Local CPI (#608)
Local Inflation Update
- Inflation at 3.8% - lowest since March 2021 (3.5 years ago)
- Well below SARB's target range midpoint of 4.5%
- Q3 year-on-year inflation at 4.3% (vs SARB's expected 4.4%)
- Rate cut expected, but size uncertain
- Possibility of 25bps vs 50bps cut
- Factors affecting decision:
- Rand weakness
- Rising oil prices
- Global economic conditions
Important titbit about today's SA headline CPI print. It meant that CPI rose by 4.3% y/y in Q3 2024. In Sept, SARB expected 4.4% for Q3, implying Sept print largely in line with their expectations. Therefore, today's number will not change SARB's thinking. Folks should calm down.
— Hugo Pienaar (@hugopien) October 23, 2024
Currency Markets- US Dollar showing significant strength
- DXY moved from 100.42 to 104.33 (≈4% increase in one month)
- Strong capital flows into US
- Rand trading at R17.73
- Potential to move above R18
- Long-term targets of R16.80 and R15.50 looking less likely short-term
- Potential implications of different outcomes
- Trump's proposed policies could be inflationary:
- Planned tariffs
- Immigration restrictions
- Impact on labor markets and prices
- Demonstration of AI analysis using Google Notebook LM
- Key findings:
- Leading Brands: Operating margin >50%
- Signature Brands: Operating margin -6.7%
- Manufacturing: Improved margins due to diesel savings
- Geographic performance varies:
- South Africa: 1.8% margin
- UK operations showing significant decline
- Cash generation at R498 million (7% decrease)
- Plans for 89 new stores
Chapters
00:00 Local Inflation and Economic Outlook 06:01 Using AI for Investment Analysis 12:06 Famous Brands Results Analysis 18:05 Comparative Analysis with SPUR
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