JSE-listed equities have had a tough time since rolling into the second half of 2019 and if you weren’t in gold or platinum stocks then your local portfolios have failed to inspire.

The following shares are currently on our radar and worth keeping an eye on:

Imperial Logistics:

With more than 50% of it’s earnings coming from offshore operations, this is one of those businesses which will benefit from a weaker Rand. In a previous post, we identified that Imperial – much like many of the transport and logistics stocks – was looking cheap on an historical earnings basis but it also enjoys the benefits of having a larger capitalization than some of it’s smaller peers – something which could potentially boost its pool of potential institutional investors.

Imperial has traditionally been a good dividend payer, something which could under-pin its demand despite trading at 52-week lows.

Gemfields:

There is a significant amount of cynicism around this stock, having regularly failed to fire despite being driven by resources sector guru Brian Gilbertson. Now positioned as a significant player in the rubies, gems and faberge egg market – the company is offering investors the opportunity to buy into a couple of niche players in the resource sector. In the long-term, this could offer investors an alternative interesting play but for a short-term play but there are a couple of factors which could be worth looking at:

• The company has undertaken a significant buy-back at the current level and insiders have entered the market at similar prices in recent months
• The counter trades at a significant discount to NAV (R1.62 vs R5+)
• Another international player has just entered the market near it’s Mozambique ruby mining operation, something which could spur some form of corporate action and lift market infrastructure in the region
• There has been a noticeable increase in marketing to potential institutional investors ahead of a proposed London listing – something which may improve volumes / liquidity

Santova:

The logistics company has hit a new 52-week low as concerns around its operations in the UK and South Africa continue to weigh on the share price.

The business on the whole remains robust but trades on a price to earnings multiple of around 3 times earnings – a price which seems unreasonable for a listed when it and sectoral peers are buying unlisted assets at around times earnings.

The key risk for Santova investors is that the share may end up being taken off the market if the share is consistently punished through a lack of local appetite of small and mid-cap shares.

Reunert:

Another mid-capitalisation share which is trading at a near 52-week low on the bourse and being shunned by investors.

Reunert offers investors an industrial stock which gives access to a number of businesses which should ultimately benefit from an improvement in demand for industrial and energy infrastructure.

Investors get a business which is trading on an historical PE of 7 times earnings and an historic dividend yield of around 7% (Giving your cash in the bank a real run for its money)

Discovery Holdings

For many years, Discovery was considered near bullet-proof with a charismatic CEO and innovative management team, Discovery was offering investors the opportunity to participate in the healthcare insurance sector.

The share has fallen sharply in recent weeks and is now at a 52-week low with many market commentators pointing to the proposed “National Health Insurance” bill and the potential impact of ratings agencies on financial services businesses in South Africa.

While these are both very real issues for Discovery, one can’t ignore that Discovery has diversified its operations to include joint ventures / partnerships in the US, UK and China and that the practical implementation of the NHI bill will require private sector participation for it to be viable.

African Media Entertainment:

Media businesses are a strange animal – particularly in South Africa where the sector is dominated by a handful of key players. Coupled with the global trend where traditional media clients (advertisers) are now investing heavily in their own content and effectively becoming competitors, the idea of investing in a radio sector player is not everyone’s kettle of fish.

But there comes a point where assets are simply too cheap to ignore and potentially AME is at that point. The shares are trading on a forward price to earnings multiple of 4.6 times earnings and an historic dividend yield of 7.5%.

They are the owners of key media platforms including Algoa FM, OFM and ClassicFM, AME as well as digital media group Moneyweb and AME offers a number of niche media platforms in less contested markets.

Lack of liquidity is major issue for AME shareholders but retail investors might find that the 39% sell-off in 2019 is worth nibbling at.

Blue Label Telecoms:

The share has had a volatile past 30 days with concerns around the sustainability of Cell C driving the share down below R4/share a few weeks back. The counter has rallied back to around R4.50/share and with changes in the spectrum licensing expected to help open up the telecoms sector further, Blue Label could benefit.

Consolidated Infrastructure:

It’s been a volatile few weeks for Consolidated Infrastructure with the share regularly making double digit increases and drops (on Thursday the share was down 19% on 125 000 shares).

Once the darling of the small and mid-cap market, Consolidated Infrastructure dropped 95% in 5 years as debt and delayed projects in the power sector impact profitability.

The company announced on 31 July 2019 that it had secured a debt reorganization with major lenders and was confident it could trade its way back to profitability.

The energy sector offers a variety of opportunities in both South Africa and the rest of Africa and this could provide a very real catalyst for growth for Consolidated Infrastructure.

Intu Properties:

Said [partially] tongue-in-cheek: It is worth noting when the CFOs wife is buying shares after a massive slump in the share price. Intu has fallen dramatically in recent weeks as debt, Brexit and the changing face of retail has seen the share fall.

Intu shares are down 64% in the year to date but after the most recent sell-off, insiders (including the CFO’s spouse) have been buyers of the shares.

While debt is a major consideration for investors, Intu now trades at R7/share with a reported Net Asset Value (NAV) of around R40/share and a forward price to earnings multiple of under 3 times earnings.

 

One should never try and catch a falling knife but price action is worth following.