BROKERS’ NOTES: Buy Absa, sell Amplats
Mark du Toit of OysterCatcher Investments on what the smart money is doing
Mark du Toit: OysterCatcher Investments
I would buy Absa. The South African banks are still looking cheap on a relative basis, and Absa has underperformed because of fears of a writedown on Kenyan government bonds (following what happened in Ghana), which is probably unlikely to happen. We think that fear is overdone and that their CIB global markets business will actually have a good year on elevated trading levels. I think that earnings will still be strong despite elevated credit loss levels too.
Sell: Anglo American Platinum
Platinum group metal (PGM) prices have continued to be weak and we are seeing very little trade in the spot market in rhodium, coupled with our rand which has now strengthened over the past few weeks, so the PGM basket price as of this week was R26,000, and Amplats’s share price is just not pricing in these lower PGM levels. It means that either PGM prices need to recover, or Amplats’s share price needs to correct lower. I think that the time it’s taken for them to decide on the Mogalakwena extension is also telling you that they don’t have confidence in the PGM market.
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