Rowan Williams of Nitrogen Fund Managers on what the smart money is doing
07 March 2024 - 05:00
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Rowan Williams, portfolio manager: Nitrogen Fund Managers
Buy: Coronation Fund Managers Ltd
Coronation Fund Managers Ltd is a global asset manager offering a complete range of investment products to institutional and individual investors, with total assets under management of R629bn as at December 31 2023. The company was recently subject to a substantial adverse tax ruling related to its international operations that has weighed on sentiment and the share price, causing the company to pass last year’s interim dividend. Earnings should benefit from the buoyancy of global capital markets, notwithstanding the lacklustre performance of the JSE all share index (Alsi), given the high fixed-cost nature of the business and portion of assets that are exposed to international markets. The share is also on a forward annual dividend yield of more than 10%, which provides a significant underpin to the share price. We also expect the Alsi to perform better in the second half of the year following the national elections, and this should further boost the medium-term prospects of the business.
Sell: Spar Group Ltd
The Spar Group Ltd is a wholesale distributor of goods and services to independently owned Spar, Tops and Build it stores and has operations in South Africa, Ireland, the UK, Switzerland and Poland. The company has faced an extremely challenging period locally, with a number of operational missteps worsening the impact of a difficult trading environment. The group’s SAP implementation in KwaZulu-Natal has resulted in significant disruptions to the supply chain, resulting in a loss in market share. The recent trading update highlighted tough South African trading and a slowdown in the performance of the international operations, most notably in Switzerland. The Poland operations, which are up for sale, continue to be loss-making, placing a further drag on the group. All of these challenges have led to the group being in breach of its debt covenants and there is a possibility that it will require a rights issue to recapitalise the balance sheet.
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BROKERS’ NOTES: Buy Coronation, sell Spar
Rowan Williams of Nitrogen Fund Managers on what the smart money is doing
Rowan Williams, portfolio manager: Nitrogen Fund Managers
Buy: Coronation Fund Managers Ltd
Coronation Fund Managers Ltd is a global asset manager offering a complete range of investment products to institutional and individual investors, with total assets under management of R629bn as at December 31 2023. The company was recently subject to a substantial adverse tax ruling related to its international operations that has weighed on sentiment and the share price, causing the company to pass last year’s interim dividend. Earnings should benefit from the buoyancy of global capital markets, notwithstanding the lacklustre performance of the JSE all share index (Alsi), given the high fixed-cost nature of the business and portion of assets that are exposed to international markets. The share is also on a forward annual dividend yield of more than 10%, which provides a significant underpin to the share price. We also expect the Alsi to perform better in the second half of the year following the national elections, and this should further boost the medium-term prospects of the business.
Sell: Spar Group Ltd
The Spar Group Ltd is a wholesale distributor of goods and services to independently owned Spar, Tops and Build it stores and has operations in South Africa, Ireland, the UK, Switzerland and Poland. The company has faced an extremely challenging period locally, with a number of operational missteps worsening the impact of a difficult trading environment. The group’s SAP implementation in KwaZulu-Natal has resulted in significant disruptions to the supply chain, resulting in a loss in market share. The recent trading update highlighted tough South African trading and a slowdown in the performance of the international operations, most notably in Switzerland. The Poland operations, which are up for sale, continue to be loss-making, placing a further drag on the group. All of these challenges have led to the group being in breach of its debt covenants and there is a possibility that it will require a rights issue to recapitalise the balance sheet.
Also read:
Shareholders place flight from SA assets in the spotlight at Coronation AGM
Coronation goes to Constitutional Court over R716m tax penalty
Spar to lend money to ailing shops
Botched rollout of SAP system still haunts Spar
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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.