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.

All charts by KoyFin | Get 10% off your order

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.

All charts by KoyFin | Get 10% off your order

Key Takeaways

• MultiChoice Trading Opportunity: Potential for profit if the Canal+ deal goes through, despite current low stock prices.
• Futures Trading: Importance of understanding margin, liquidity, and strategy when trading ALSI and ALMI futures.
• Market Conditions: Current cheap valuation of SA Inc stocks presents opportunities, pending political stability and cabinet announcements.

MultiChoice Mis-pricing:

• Discussion on the 125 Rand mandatory offer from Canal+ for MultiChoice.
• Current stock trading at 102 Rand due to poor financial results.
• Analysis of Canal+'s offer document, potential deal completion, and possible trading opportunities.

Index Futures - ALSI and ALMI:

• Detailed overview of trading ALSI (All Share Index) and ALMI (All Share Index Mini) futures.
• Explanation of points trading, margin requirements, and contract specifics.
• Tips on trading strategies, including liquidity considerations and handling overnight gaps.
• Trading as a side hustle, watch the video.

Market and Stock Updates:

• Cabinet Announcement Awaited: Market reactions and fluctuations in the Rand.
• Individual Stocks: Analysis of Mr. Price*, Foschini Group*, Nedbank, Spur, and CMH*.
• Banking Sector: Observations on price to book ratios and the overall market valuation of SA Inc stocks.

Simon Brown

All charts by KoyFin | Get 10% off your order

* I hold ungeared positions.

dd

Face-Ripping Rally on the JSE:

• Surge attributed to the formation of a coalition government involving ANC, DA, and IFP.
• Top 40 index rose 3.5%, a significant increase not seen since February 2018.
• The rally, likened to the start of a marathon, suggests potential long-term growth, despite possible volatility.

RAND and Resource Stocks:

• RAND trading under 18, affecting resources positively.
• Potential for RAND to strengthen further, possibly reaching 17.

Coalition Government and Market Impacts:

• The coalition’s stability is uncertain but critical for long-term market confidence.
• JP Morgan upgraded South Africa from underweight to overweight, signaling positive outlooks.

SA Inc Stocks and ETFs:

• Retailers like Shoprite*, Mr. Price*, Foschini Group*, and Truworths hitting 52-week highs.
• ETFs for local investors, focusing on SA Inc..
• Recommendations include avoiding heavy Rand Hedge dual-listed miners in a strong RAND environment.

RSA Retail Savings Bonds:

• Interest rates for RSA Retail Savings Bonds to drop in July.
• Current rates: 11.5% for a 5-year bond, expected to decrease to 10.75%.
• Opportunity to reset bonds before the rate change on the 20th of the month.

Inflation and Interest Rates:

• Local CPI stable at 5.2%, within the target band but aiming for 4.5%.
• US FOMC holds rates steady, hinting at a possible future rate cut.
• Prospects for lower local interest rates and their impact on retail stocks and disposable income.

Market Opportunities:

• Interest in retailers and brokers like Purple Group* and PSG Konsult, considering the potential increase in disposable income and trading volumes.
• Positive long-term outlook, but caution against immediate full investment.

Simon Brown

* I hold ungeared positions.

US Inflation:

• Core Inflation: Came in at 3.4%, lower than the expected 3.5% and previous 3.6%.
• Impact: Positive market reaction, with US Treasuries under pressure, Rand strengthening, and Dollar weakening.
• FOMC Outlook: Potential rate cuts anticipated towards the end of the year, possibly in November and December.

Company Results:

SPAR:

• Performance: Results were as expected, market responded positively.
• Issues: Challenges in Switzerland, discontinued operations in Poland, and ongoing SAP implementation issues.

Foschini Group:

• Performance: Strong results, market reacted favorably.
• Highlights: Good performance in their online platform Bash and general improvement across brands.
• Foschini Group and Clothing Retailers: Potential growth areas and resistance levels in stock prices.

Interesting Stock:

• Contemporary Amperex Technology Company Limited (CATL):
• Sector: Battery technology for EVs and corporate solutions.
• Market Performance: Positive analyst ratings, promising future prospects.

Renergen*:

• Helium Production: Helium is flowing, but further testing is required.
• Challenges: Significant delays and ongoing testing phases, but progress is being made.

Santova:

• Stock Movement: Changes in buyer and seller dynamics impacting stock price.
• Insights: Importance of identifying market movers in stock trading.

Political Developments:

• Coalition Talks: Ongoing with potential for an ANC, DA, IFP coalition.
• Rand Performance: Strengthening in response to political stability and positive US inflation data.

[caption id="attachment_42378" align="aligncenter" width="849"] USDZAR | 12 June 2024[/caption]

Simon Brown

All charts by KoyFin | Get 10% off your order

* I hold ungeared positions.

New Two-Pot Pension System:

• Details on the implementation and implications for retirement savings.
• Kicks in 1 September 2024
• Can take up to R30k immediately, but this will be taxed.
• Thereafter 30% of contribution go into a savings pot your can take out, it will be taxed.
• Only use for an emergency, not holidays.

Rainbow's Return to JSE:

• Analysis of Rainbow's re-listing after 17 years.
• RCL Foods will be unbundling later in June
• One Rainbow share for every RCL Foods share
• But is Rainbow the best chicken stock on the JSE?

OPEC+ Impact on Oil Prices:

• Members agreed to cut voluntary production cuts
• Oil crashed
• As did Sasol

[caption id="attachment_42315" align="aligncenter" width="849"] Brent oil | weekly | Koyfin

Q1 GDP Results:

• Negative Q1
• Q2 should be slightly better thanks to reduced load shedding
• But election will have worried investors.

Santova Stock Analysis:

• Buyer at 750c
• Seller at 760c

[caption id="attachment_42316" align="aligncenter" width="849"] Santova daily | 06 May 2024 | Koyfin

Coalition Talks:

• ANC is talking with everybody
• They seem keen on a governmnt of national unity
• Rand volatile

Recent uploads onto Just One Lap

• Three new Global ETFs from FNB with low TERs
• The Power of Commodities with 1nvest: Navigating Trends and Unlocking Portfolio Diversity

Simon Brown

All charts by KoyFin | Get 10% off your order

Election Results Impact on Markets

• Slow ballot counting with three ballots, 18.7% counted.
• CSIR prediction at 5%: ANC 42%, DA 22%, EFF 9%, MK 14%, Patrick Alliance 2%.
• Market concerns about ANC forming a coalition.
• Rand fluctuations: From 18.34 on Tuesday to 18.61 currently.

[caption id="attachment_42259" align="aligncenter" width="849"] Rand | 1pm 30 May 2024[/caption]

Pepkor Results:

• 9.5% revenue growth.
• 24.5% growth in fintech, now 12% of the business.
• Pepkor sells 7 out of 10 smartphones in South Africa.

Woolies (Woolworths) Update:

• Earnings down 20% for the year ending June.
• Challenges in the clothing segment, further deterioration in footfall and discretionary spend.
• Food segment performing better, but overall market reaction negative.

Zeda Results:

• Revenue growth of 19%, HEPs up 12.5%, return on equity at 28.5%.
• Surprise 50 cents dividend despite previous year-end dividend expectations.

BHP Billiton and Anglo American Merger

• BHP walked away from the Anglo-American takeover proposal.
• Speculation about potential offers from Rio Tinto or Glencore.
• Anglo-American's disinvestment plans for De Beers and Anglo Platinum.

Market Insights

• Discussion on Metrofile's challenges with dividend yield falling and pressure on share price.
• SAB Cap Investments' exit from Metrofile.
• South African Reserve Bank MPC rate announcement: No rate changes expected.
• Upcoming central bank meetings: ECB, FOMC, Bank of England, Swiss National Bank.
• Potential for future rate cuts in South Africa if inflation targets are met.

Commodity webcast with Johann Erasmus available on Just One Lap.

• Insights into gold, PGMs, and copper.
• Mention of the cheaper gold ETF from 1nvest compared to Absa GLD.

Changes in 10X ETFs: Local Dividend Aristocrat and Smart Beta merging into a Top 50 ETF.

* I hold ungeared positions.