Presidential Vision for Infrastructure Development:

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.

Market Insights:

• 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.

Simon Brown

* I hold ungeared positions.

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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.

South Africa GDP

Delistings and Market Movements

• 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.

Bell weekly chart

Pick n Pay Rights Issue

• 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.

Interest Rate Outlook

• MPC and FOMC meetings' impact on interest rates.
• Simon's forecast on rate cuts in South Africa and the US.

Simon Brown

* I hold ungeared positions.

Load Shedding Update

• Milestone: 100 days of no load shedding by Friday.
• Factors: New capacity online, Kusile unit 5 (800 MW), upcoming additions from Medupi and Koeberg.

Impact:

• Reduced GDP loss (previously 1.8% of GDP due to load shedding).
• Positive effect on inflation and economic stability.

Winners:

• Retailers: Shoprite*, Pick n Pay, Spar (less expenditure on diesel).
• Manufacturers: Invicta, Hudaco (benefit from increased customer stability).
• Real Estate: REITs with shopping centers, reduced generator use.

Interest Rates

• Jerome Powell's Speech: Potential for a single rate cut in November.
• Impact on Markets: Minimal immediate impact, with expectations already priced in.
• Local MPC Meetings: Predictions for rate changes on 19 September and 21 November.

Market Insights

• Mr Price*: Ex-dividend yet the stock price increased, indicating strong sector performance.

Tesla Analysis

• Market Share: Decline in second-quarter sales but maintains a significant market share (~50%).

Challenges:

• Increased competition from other EV manufacturers.
• Need for cheaper models.
• Significant share dilution over the years.
• Stock Performance: Historical highs and current rebound to 231.
• Future Prospects: Continued relevance in the EV market despite competition.

[caption id="attachment_42560" align="aligncenter" width="849"] Tesla weekly chart | 02 July 2024[/caption]

SARS Tax-Free Changes

• Impact: Minor changes affecting pro rata contributions for part-year taxpayers.

RSA Retail Savings Bonds

• Rate Change: Significant drop in 5-year bond rate from 11.5% to 10.5%.
• Action Required: Reset by the 20th for current holders. The form is here.

Simon Brown

* I hold ungeared positions.

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