BROKERS’ NOTES: Buy Oracle, sell Hyprop

David Shapiro, chief global equity strategist: Sasfin Wealth

Buy: Oracle

Software cloud company Oracle has been overshadowed by the “magnificent seven”, but it came out with really forceful results last week that the market wasn’t expecting. Oracle is making a lot of headway in the cloud and cloud services and at a time when a lot of companies in that area are doing well. It’s suddenly doing deals; it’s just announced it’s going to be talking to Nvidia. That highlights that it’s expanding its offering. This is a company we all know — a lot of businesses in South Africa use the software — but this whole transition onto the cloud, to offering AI, is changing the shape of software businesses, and Oracle is well placed to benefit from this. The reason the market is responding is that the guidance forecast in the years ahead is well above where the market has been positioning this company.

Sell: Hyprop

I’m using Hyprop as a proxy for retail property owners. Last week it came out with its numbers, and it’s not paying a dividend. The reason is problems in Nigeria — the huge devaluation of the naira — where it’s got some big operations. The other thing is uncertainty. Pick n Pay, to stabilise the company, is closing a lot of outlets. This is a very worrying element for retail properties because Pick n Pay is an anchor tenant. When your anchor tenants close, shrink space or renegotiate their rentals, it affects the whole industry. We haven’t fully discounted this yet, but it’s something we’ve got to be very careful of — to watch out for. A lot of smaller businesses will rewrite their leases because a company like Pick in Pay brings foot traffic. There are other issues too: retail stores are suffering because of huge costs of electricity, solar and water. But Pick n Pay is worrying.