BROKERS’ NOTES: Buy Super Group, sell Impala Platinum

Willem Oldewage, senior analyst: Nitrogen Fund Managers

Buy: Super Group (SPG)

Super Group exhibits deep value at its current market price, supported by strong performance in the coal trucking sector. This performance continues to benefit from Transnet Freight Rail’s delivery shortcomings, alongside a substantial derating in the rump valuation, driven by the robust performance of its Australian SG Fleet business. SPG’s geographical diversification further enhances the company’s investment appeal, increasing earnings resilience and expanding growth opportunities. SPG also compares favourably against its historical multiples and the broader sector, boasting a p:e of six and a 3% dividend yield. Despite challenges in the broader South African economy, SPG has demonstrated admirable performance, achieving 28% annual earnings growth since the 2021 financial year, while delivering returns to investors through dividends and buybacks.

Sell: Impala Platinum (IMP)

Implats presents a compelling sell case amid its loss-making nature at spot platinum group metal (PGM) prices. Despite recent operational records in production and sales, the business faces significant challenges, including inventory revaluations affecting cash flows, an incredibly volatile PGM market and potential overinvestment in Royal Bafokeng Platinum. The sharp 34.5% increase in the share price from March 5 to spot appears unjustified. With spot PGM prices implying an estimated headline loss per share for 2024 of about R9-R10 and a free cash flow loss of R8bn-R10bn, Implats’s financial outlook remains bleak. Guided production cuts across various projects further underscore the company’s struggles. Its mines operate at all-in costs of $900-$1,450, which implies that PGM basket prices would need to reach the upper end of that range before the company can operate at full capacity.