David Shapiro: JSE Report


BROADCAST TRANSCRIPT: Well, we got lucky yesterday David, by selling our short position in BHP Billiton. It bounced back today.

DAVID SHAPIRO: I thought they would have given more respect to Brian Gilbertson, and at least mark the share down for two days. But it recovered very, very sharply. In fact, Alec, if you look at the dollar chart of Billiton and Anglos, very, very positive. Even if you translate the same into the gold shares, look at it from a dollar point of view, those charts look very strong, the up trend is still intact. So if you want to measure those markets, the pace is still being set by foreigners, and all the gold market, platinum markets, and the diversified miners are very strong in dollar terms.

MONEYWEB: We got that right. What I got wrong last night, to my extreme embarrassment, was our discussion with City Lodge. I had a look through the annual report afterwards and discovered that I had forgotten how to read a balance sheet. There are two parts to balance sheets. Usually at the top part it says what the depreciation is, accumulated depreciation. That was R27m, and not the R247m which is the assets that are on the balance sheet. Good to put that right, because there might have been a few people rushing out and buying City Lodge shares today, thinking they had hidden assets in their balance sheet, which aren’t there.

DAVID SHAPIRO: An NAV play. But City Lodge was also performing today, continues to rise.

MONEYWEB: David, today’s birthday is a gent called Piet Beyers. He’s a director of VenFin, Remgro and Distell. So he’s one of the Stellenbosch mafia.

DAVID SHAPIRO: They are very quiet, it’s very difficult to get information out of VenFin. So, apart from Johann Rupert, who is normally the spokesman for that whole group, we don’t really know the personalities behind that group. Very, very secretive.

MONEYWEB: Piet turned 53 today. He is on leave, and he doesn’t talk to anybody when he’s on leave, as we found out today. How did Nampak do? That went ex-dividend.

DAVID SHAPIRO: There were three shares that went ex-dividend yesterday ?Tiger Brands, Nampak and PP Cement. All of them are big dividend payers and it was I think in most cases a final dividend. And what normally happens is the share price adjusts for the dividend, because you are paying it out of reserves. So technically you find a short-term adjustment until the profits build up again. And that does have an impact on the index, because the index looks at the absolute price. So we found that it did put a bit of pressure on the index as well. And Nampak as well came off by its value, 40c.

MONEYWEB: What happens with our single-stock future there? Does it mean the price that we settle at is 40c lower?

DAVID SHAPIRO: I meant to ask Arthur Buchner about that last night as well. But I think you would get the dividend, I think it would be adjusted, because it is a future. Unless, for a future settlement, you are passing the price. I’ve got to find that out. It confuses me a little, because normally we deal in indices, where there are no dividends. We are dealing in something intangible, but where you deal in single-stock futures, I’m not sure what the position is.

MONEYWEB: I will tell you a stock that’s looking very attractive to me right now – Nedcor. And I will tell you why. I looked at the market capitalisation of the company, in other words what is the company worth today, as compared to what it was worth a while ago. After the BoE acquisition, after the issuing of a whole lot of shares, Nedcor today is worth the same as it was before it did that whole deal. Now that must be understating its value, because if you add up the value that’s been added by BoE, R900m a year I think they said they would take out in savings, there’s got to be some upside.

DAVID SHAPIRO: To digress, the whole banking sector was very strong, and we mentioned last night the volumes in Nedcor and Standard Bank. Again, today, dominated volumes. Absa was the lead there. But banks are very strong and quite a bit of money is flowing into banks at the moment. But I think the downside there is a bit of concern about its exposure offshore, and the translation of what were profits last time could be losses with the rand having improved. And I think that’s weighed down on Nedcor for the meantime. I like to look at Nedcor around about these levels, R110. It always seems to bounce up. So I would share your sentiments that that sector is looking very cheap and I would go along.

MONEYWEB: What’s your pick of that sector, then? Kokkie Kooyman has picked Abil.

DAVID SHAPIRO: I still like, as a bank, I am very conservative in that sector and I still think Standard is the one that I like. But I think the running and the one that we saw going today was Absa, and Absa looks very interesting because it could be testing that R36 level and going into new area. It seems to be the one with the most gearing – in other words, where if things do improve, this is the one that could run faster than the others. And I think it’s setback, the Unifer deal, has passed and I think it’s starting to build up a good name in the market. So that seems to be the one that the aggressive players will go for.

Posted in Market commentary

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