Arthur Buchner: JSE Report

MONEYWEB, BY BRUCE WHITFIELD, 3 AUGUST 2001

Johannesburg — MONEYWEB: Over now to Arthur Buchner at BoE Securities. Arthur, the top forty shares on the JSE up 7% this week. Is it a fair reflection of the market, or has it really been driven by just a couple of shares?

ARTHUR BUCHNER: Bruce, we saw a lot of buying in the resources which looked to actually be short covering by futures close. In fact yesterday, looking at the volume, we reckon 25% of the actual daily volume on the JSE was as a result of futurues arbitrages buying the market.

MONEYWEB: What about Richemont, because Richemont has seen some fairly heavy volumes this week as well?

ARTHUR BUCHNER: Richemont makes up between 29 and 30% of the industrial index, and every rand move in Richemont equates to about 12 point moves on the actual underlying index. And we’ve seen it rally ten points. So that’s 120 points, which is quite a large portion of that whole movement. The rest of the market actually some of the stocks lagged and were actually down on the week.

MONEYWEB; So really, that 7% gain might be just a little bit deceptive?

ARTHUR BUCHNER: 100%. Very deceptive, and even today, the market was down, whereas Richemont was up, showing that the broader market was down quite considerably.

MONEYWEB: Banking shares under huge pressure today. Perhaps not a big surprise that we saw Nedcor down 4% after those results yesterday?

ARTHUR BUCHNER: I think two analysts have down graded Nedcor, they haven’t down graded it to say sell it, but our analysts came out today and said they are down grading it from a buy to an accumulate. It sounds funny to say, if it’s not a buy, it’s not an accumulate, but an ad says buy into weakness, you don’t have to go out and take out all the offers. And we do know of another broker who also came out with a similar prediction.

MONEYWEB: The Nedcor share price at the moment at about R144 a share if I’ve got it right. Where is weakness? At what point should people be looking to buy into Nedcor?

ARTHUR BUCHNER: We don’t have an exact price. It was just a buy into weakness. They were down R6 today. So I would say from now you could start to accumulate and don’t throw all your money at it, but look at different levels, similar to stuff like M-Cell, which came down R2 in the beginning of the week and actually rallied the full R2. If you weren’t buying into weakness, you wouldn’t have got any benefit out of the stock. It’s hard to pick a bottom, but we definitely see value in the share, we just don’t see huge upside momentum.

MONEYWEB: So certainly small shareholders should watch the market very, very closely before buying into those companies. Most of the banking shares down today. Is it a case of the market looking at Nedor, worrying perhaps that the other banks may not be able to sustain those 25% earnings that we’ve become used to?

ARTHUR BUCHNER: Yes, I would think so, but we must also remember that with the arbitragers buying on Wednesday and Thursday, those banks make up quite a fair portion of the all-share and they did get moved up on the back of that arbitrage buying, and I think just some profit taking from the movements yesterday and Wednesday.

MONEYWEB: And Absa breaking through R40 this week. It’s succeeded in staying above that level. Do you think we are going to see it staying above there for much longer.

ARTHUR BUCHNER: I actually like Absa, we’ve seen it test R37 on a number of occasions, hasn’t been able to break through it and we also saw a technical break on the upside, and I don’t see too much downside at the moment on it.

MONEYWEB: New highs for Sanlam and First Rand as well which goes against the other financial services companies. What are they doing that nobody else seems to be getting right?

ARTHUR BUCHNER: I wouldn’t be able to tell you.

MONEYWEB: Profurn results. They were up today. Gavin Walker will talk to us just now. What did your guys make of those numbers?

ARTHUR BUCHNER: Sidney Venello is quite highly rated in the sector, and he came out and said that he believed that Profurn were at fair value at current. But he would recommend a sell anywhere above 73, 74c, with a buy at round about 55c. The interesting thing with Profurn today is that it traded a low of 65 and a high of 71, that’s almost a 10% movement. So if you were a jobber in the market, someone who was actively speculating, you could have literally made quite a lot of money buying on the lows and selling on the highs. He also came out and said that he believed that they could trade themselves out of the current problems that they are faced with if they looked at selected assets and sold them off. One of them is the Australian operation which they had a turnover of over a hundred milllion, yet they are losing a million rand a month.

MONEYWEB: That’s an interesting perspective on that, because I think Profurn’s NAV at the moment, around R1.73 and Sidney Venello saying that realistic value right now, around 67c?

ARTHUR BUCHNER: He also came out and he said that Profurn have recognised that the true value of the Zimbabwe investment is not what it is perceived to be. On the good side, they did bring down their stock quite a bit, but he thinks there’s a two year consolidation period whereby management aren’t going to continue with what they wanted to do, which was to go for high growth and they’ve just got to consolidated. And he says that when they are consolidating, it’s not going to run away.

MONEYWEB: Didata, the news today that it’s falling out of the FTSE 100. The share all the way down to R13.70 today, but seems to be stabilising around R14, R15?

ARTHUR BUCHNER: I think we saw some opportunistic traders this morning actually trying to knock it down, and you must also remember that index trackers are very dynamic. As the share price falls, we have to sell out a number of our stock, due to the fact that it has a smaller percentage in the index. So as Didata has been falling, these index trackers have had to sell. Their holdings in Didata cannot be as much as what they had at R60. Their holdings must be minimal, I don’t even think they are going to have that much of an affect on the share price.

MONEYWEB: That is something that we will be talking to Donald Rogan to later on. That was Arthur Buchner at BoE Securities, and some interesting perspectives on Profurn.

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