Arthur Buchner: BoE Securities


BROADCAST TRANSCRIPT: And joining us now, Arthur Buchner from BoE Securities. Arthur, the Iscor story, it’s the end of an era, I suppose you could call it, but as Stewart says, who cares – if you’d invested in Iscor at R12.75 at the beginning of this year and it’s R32.50 today? You would have made yourself a whole big pile of cash!

ARTHUR BUCHNER: Well, I remember when Iscor first listed, and I think pretty much every South African had an Iscor share and they saw no growth out of it. I think 90% of those guys actually sold out and the insider punters actually made all the cash.

MONEYWEB: Do you remember what Iscor listed at?

ARTHUR BUCHNER: It was R1, if I’m not mistaken.

MONEYWEB: So people have made, anybody who stuck with Iscor …

ARTHUR BUCHNER: There was a ten for one spilt.

MONEYWEB: Yes, ok. Fair enough. But still, you’ve done pretty well out of it if you haven’t been in there for too long?

ARTHUR BUCHNER: If you’d held them right from listing, you’ve made money, but I think you could have invested better somewhere else.

MONEYWEB: Ok, but then the unbundling on Monday, we see that the business split into two, the steel and mining businesses. The Iscor – the steel – business is likely to disappoint?

ARTHUR BUCHNER: There is such a supply of steel at the moment in world markets, so when there’s an oversupply why go into it and actually purchase it? And I really do think Kumba is the jewel. I don’t think JP Morgan have valued it correctly. I think they’ve overvalued it. I don’t think it’s worth that amount of money, but judging by the amount of people that have been purchasing Iscor over the last three days and the demand for call warrants on Iscor – punters seem happy and they still think there’s upside.

MONEYWEB: Would you stick your neck on a block and say where you would see Iscor and Kumba on Monday?

ARTHUR BUCHNER: Well, it’s very difficult and the warrant issuers themselves don’t even know where they’re going to open, so they’re doing an actual basket between Kumba and Iscor. They’re saying, we’ll add the two together and we’ll get an eventual price. And that’s what it’s going to do. At the end of the day Iscor closed at R32-odd. The two together will open around R32.

MONEYWEB: Stewart was saying that the Miningweb guys are hedging their bets quite significantly – between R5 and R10. It’s far more likely to be in that range than at JP Morgan’s R20, which they said at the beginning of this year.

ARTHUR BUCHNER: Yes, correct. And I would hate to trade on a R5, R10 spread!

MONEYWEB: Having a look at the market overall today, we did see the banking shares do very well indeed. Nedcor and Absa in particular shone. Nedcor 5.5% up to R130. It has been sold extensively over recent weeks. Was there any particular news in the market today that saw Nedcor strengthen like that?

ARTHUR BUCHNER: Not at all, in fact Didata … Nedcor has almost become a Didata stock. If Didata goes down, Nedcor goes down. If Didata goes up, Nedcor goes up. They actually went opposite directions today. So it was surprising. I think someone may have decided to get involved in the financial sector. Nedcor was at this price three days ago. So it did get knocked down R8 or R9 over the last two days and rebounded up to these levels.

MONEYWEB: And then Absa at 3.5% – the results out earlier this week. They were good results, and yet the share price each day has been gaining ever so slightly.

ARTHUR BUCHNER: A lot of guys, before the results, sold out and I think they’re getting back in again. Nowadays with the results, the results have tended to disappoint, so everyone expected maybe there was going to be a disappointment and got out. Now they’re saying, hold on, there’s no disappointment and their growth strategy forward is looking quite good, so let’s get back in.

MONEYWEB: So far the market seems to like Investec. They liked it a lot more yesterday. The share price there rose R11. Today it was up just half a percent and closed at R176. What’s your view on the Investec offshore listing which was granted yesterday?

ARTHUR BUCHNER: Well, I don’t believe that an offshore listing is going to enhance earnings at all. So the fact that people are buying it is on the hype that Didata when it listed offshore had a big run, but that was because it was actually entered into the FTSE. I don’t think Investec is going to be in the top 100 in the FTSE, so there won’t be any index trackers purchasing it. And I think it’s purely a sentiment play on the fact that Didata which listed went up, Anglos which listed went up, South African Breweries on their listing in London went up. So we’ll buy Investec because it should also go up, but it’s different because it’s so much smaller than those shares. I think a lot of punters will be a little bit disappointed on the listing and you won’t find those index trackers pushing it any higher.

MONEYWEB: But surely for Investec to grow, it does need to be in an international arena? They’ve pretty much saturated the South African market. It makes sense for them to go and make a couple of juicy acquisitions overseas. Others have tried and failed, as we know. Old Mutual for example has spent a lot of money on growing internationally, but maybe the Investec guys have learnt from that?

ARTHUR BUCHNER: Well, I think they could have done that from South Africa, and they always use that argument that it’s cheaper capital to get overseas. But cheaper capital also comes at a price … and if you’re earning a lot of money in South Africa and you’re lending money overseas, you’re paying with your earnings out of South Africa, so it is costing you a lot of cash. I think that they’ve done great marketing in Europe – they bought cleverly unlike some other South African institutions – and I don’t think that the listing is going to enhance any more acquisitions or make them any more marketable than they already are. They’re a household name in England, and you can see that at the test on Saturday, they sponsor all the tests, all the rugby, everyone in London knows who Investec is.

MONEYWEB: If you held Investec shares at the moment, in your personal capacity, would you be holding on to them or would you be selling them?

ARTHUR BUCHNER: I would liquidate some. I think there’s hype around it. It came from R150 up to R185 yesterday. It’s too big a move on no earnings justification yet – they still have got to come out with results. But I would lighten a little bit.

MONEYWEB: Arthur Buchner from BoE Securities is sticking with us through the programme. We’ll continue to pick his brains from time to time.

Posted in Market commentary

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