The President wants to turn South Africa into a construction site, which stocks benefit? (#596)
07/24/24 • 20 min
The South African President's recent speech emphasised making the country a hub of construction and infrastructure development. The potential for public-private partnerships and the types of infrastructure that might be developed, including roads, energy transmission, and public buildings.
Stocks That Could Benefit:- Construction Stocks: A detailed look at various construction-related companies and their potential to benefit from the President's infrastructure plans.
- PPC: Potential benefits from increased construction activity.
- Murray & Roberts: Despite historical losses, they have a division in infrastructure and renewable power that might benefit.
- Stefanutti Stocks: Focus on their claim against Eskom, which is crucial for their future.
- Wilson Bayly Holmes (WBHO): Expected growth, though a significant portion of their revenue comes from Australia.
- Raubex: Strong performance and solid management, with significant involvement in road construction through Sanral.
- Afrimat: Supplier of construction materials, benefiting from Sanral and Transnet orders.
- Reunert: Involvement in industrial cabling and commercial battery storage, critical for new power facilities.
- Mr Price* Update: Gaining market share and performing well post-elections and during a late-arriving winter.
- Sasol Production Update: Management's effective handling of controllable factors and slight improvements in Transnet's performance.
- Kumba Iron Ore: Confirmation of slight improvements in Transnet, echoing Sasol's observations.
JSE Listed Construction Stocks | 1 year return | close 23 July 2024
International Market Movements:- CrowdStrike* Incident: A significant security update issue affected numerous systems, impacting the stock but not signalling an end for the company.
- US Small Cap Stocks: Rotation into small caps like those in the Russell 2000 index, offering a cheaper alternative to large-cap tech stocks.
Simon Brown wraps up the episode by emphasizing the importance of infrastructure development for South Africa's economy and reiterates his top stock picks to benefit from potential future construction projects: Raubex, Afrimat, and Reunert. He also touches on the potential 3% GDP growth for 2025 and the broader market implications.
The South African President's recent speech emphasised making the country a hub of construction and infrastructure development. The potential for public-private partnerships and the types of infrastructure that might be developed, including roads, energy transmission, and public buildings.
Stocks That Could Benefit:- Construction Stocks: A detailed look at various construction-related companies and their potential to benefit from the President's infrastructure plans.
- PPC: Potential benefits from increased construction activity.
- Murray & Roberts: Despite historical losses, they have a division in infrastructure and renewable power that might benefit.
- Stefanutti Stocks: Focus on their claim against Eskom, which is crucial for their future.
- Wilson Bayly Holmes (WBHO): Expected growth, though a significant portion of their revenue comes from Australia.
- Raubex: Strong performance and solid management, with significant involvement in road construction through Sanral.
- Afrimat: Supplier of construction materials, benefiting from Sanral and Transnet orders.
- Reunert: Involvement in industrial cabling and commercial battery storage, critical for new power facilities.
- Mr Price* Update: Gaining market share and performing well post-elections and during a late-arriving winter.
- Sasol Production Update: Management's effective handling of controllable factors and slight improvements in Transnet's performance.
- Kumba Iron Ore: Confirmation of slight improvements in Transnet, echoing Sasol's observations.
JSE Listed Construction Stocks | 1 year return | close 23 July 2024
International Market Movements:- CrowdStrike* Incident: A significant security update issue affected numerous systems, impacting the stock but not signalling an end for the company.
- US Small Cap Stocks: Rotation into small caps like those in the Russell 2000 index, offering a cheaper alternative to large-cap tech stocks.
Simon Brown wraps up the episode by emphasizing the importance of infrastructure development for South Africa's economy and reiterates his top stock picks to benefit from potential future construction projects: Raubex, Afrimat, and Reunert. He also touches on the potential 3% GDP growth for 2025 and the broader market implications.
Previous Episode
Can South Africa do +3% GDP next year? (#595)
SA GDP Growth Prospects
- IMF's projection: 0.9% GDP for South Africa this year.
- Potential factors for growth next year:
- Reduced load shedding could add 1% to GDP.
- Two-pot system introduction, expected to inject around 40 billion rand into the economy.
- Potential rate cuts: half a percent by the end of the year, possibly 1% by mid-next year.
- Inflation targeting at 4.5%.
- Optimistic outlook with a 60-70% probability of achieving 3% GDP in 2025.
- Bell and Sasfin delisting announcements.
- Other potential delisting candidates in the small-cap space.
- Importance of constructing a portfolio that can benefit from economic growth and potential takeouts.
- Explanation of the rights issue and its implications.
- Instructions for shareholders on handling nil paid letters.
- Simon's perspective on waiting for dust to settle before considering Pick n Pay shares.
Today is the last day to trade before Pick n Pay rights issue kicks in. ° If you hold at close tonight you will receive 51.11 rights per 100 PIK shares, code will be PIKN ° You can sell then in market ° Or pay 1596c per each to get a new PIK share ° HAVE to do so by 30 July
— Simon Brown (@SimonPB) July 16, 2024
Property Stocks and Income ETFs- Analysis of South African property stocks and their recent performance.
- Attractive yields in local and international income ETFs.
- Recommendation to explore defensive income stocks and ETFs for potential investments.
- Find local ETFs here.
- MPC and FOMC meetings' impact on interest rates.
- Simon's forecast on rate cuts in South Africa and the US.
Next Episode
JSE delisting; can we spot them in advance and profit? (#597)
Jerome Powell's Statement:
- Rates left unchanged in the US.
- Possible rate cuts on the table for September.
- US MPC meeting on 19 September.
- Data needed: improving inflation and higher unemployment.
- Brent Crude:
- Under pressure, signaling weak global demand.
- Lower highs trend since June 2022.
- Support at $72.50 and resistance around $88.
- Brent Oil | 01 August 2024
- Gold:
- Trading near all-time highs.
- Strong central bank buying.
- Uncertain targets, but bullish sentiment persists.
- Criteria: Dividend yield > 0, market cap < 5 billion ZAR, NAV price > 100, P/E < 10, and profitable.
- Initial search yielded 53 stocks, refined criteria (dividend yield > 5%) narrowed it down to 25.
- Top candidates: African Media Entertainment, Argent, Combined Motor Holdings*, eMedia, Frontier Transport, Home Choice, Mustek, PrimeServe, Transpaco.
- Trading at all-time highs.
- 12% revenue increase, 6.3% like-for-like growth, 5.8% inflation.
- Successful new store formats (PetScience, Checkers Outdoor, UNIQ Clothing, Little Me).
- Disappointing trading statement.
- Comparable store sales up 6.9%, inflation at 7%, volume decline.
- Heps down 14-19%, market expectation miss.
- New Rates: Two-year at 8.75%, three-year at 9%, five-year at 10.25%.
- Rates have been declining since June.
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