Nick Kunze, portfolio manager at Sanlam Private Wealth, on what the smart money is doing
28 July 2022 - 05:00
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Nick Kunze, portfolio manager: Sanlam Private Wealth
BUY: KAP Industrial Holdings
The business was severely affected by Covid but it has planned quite high capex over the next three years and debt doesn’t seem to be a problem. For those who want small-cap SA exposure, we really like the business. It operates in the industrials, chemicals and logistics sectors and if you look at chemicals especially, prices are really strong and it’s making high margins. The stock trades at a 6.5 forward p:e and we see this being at least a 10 times p:e business, so for that reason alone the valuation is compelling.
SELL: Telkom
It’s a bit out of left field but we’ve never liked Telkom and given the possible deal with MTN, we think the money has been made there. MTN is obviously going to take the juicier bits of the business such as the fibre division, and the only thing that might be interesting as a spin-off is its property portfolio — it could be worth a bit. But Telkom has been disappointing for shareholders, so MTN is a bit of a get out of jail free card: take the profits now and run.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
BROKERS’ NOTES: Buy KAP Industrial, sell Telkom
Nick Kunze, portfolio manager at Sanlam Private Wealth, on what the smart money is doing
Nick Kunze, portfolio manager: Sanlam Private Wealth
BUY: KAP Industrial Holdings
The business was severely affected by Covid but it has planned quite high capex over the next three years and debt doesn’t seem to be a problem. For those who want small-cap SA exposure, we really like the business. It operates in the industrials, chemicals and logistics sectors and if you look at chemicals especially, prices are really strong and it’s making high margins. The stock trades at a 6.5 forward p:e and we see this being at least a 10 times p:e business, so for that reason alone the valuation is compelling.
SELL: Telkom
It’s a bit out of left field but we’ve never liked Telkom and given the possible deal with MTN, we think the money has been made there. MTN is obviously going to take the juicier bits of the business such as the fibre division, and the only thing that might be interesting as a spin-off is its property portfolio — it could be worth a bit. But Telkom has been disappointing for shareholders, so MTN is a bit of a get out of jail free card: take the profits now and run.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.