Chantal Marx, head of investment research and content at FNB Wealth & Investments, on what the smart money is doing
24 October 2024 - 05:00
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Chantal Marx, head of investment research and content at FNB Wealth & Investments
Buy: Bidcorp
Bidcorp is up just 4.2% year to date, significantly underperforming the broader market. Part of this has been due to the comparative enthusiasm towards South Africa Inc shares since the election, and concerns about the global growth outlook and what that could mean, more broadly, for services businesses such as Bidcorp.
In its financial year ended June 30, Bidcorp’s top line expanded by double digits, with almost every business showing an improvement against their previous record achievements of financial 2023. Management reiterated that long-term prospects remain attractive in the global food service industry. Bidcorp is a high-quality company with a strong management team and an excellent track record of delivering organic growth and successfully bedding down bolt-on acquisitions in a highly fragmented market.
The stock is trading on a 12-month forward multiple of 16.3, which is more than one standard deviation below its through-the-cycle average, but with solid and steady growth to come over the next three years. Our short-term upside target is R519, or 18% above current levels. We recommend a stop loss at R402.
Sell (Switch): Harmony Gold
We continue to see support for the gold price in the near term amid geopolitical concerns, rampant central bank bullion buying and solid demand for gold jewellery. Additionally, several traditional drivers of gold are now starting to fire up. As an example, physically backed exchange traded funds are finally starting to see positive inflows which could be supportive of another leg-up. In May we recommended switching out of Harmony Gold into some of the other gold miners. While Harmony Gold has since returned about 20%, this matched AngloGold and was well below the return on Pan African Resources (+48%) — our preferences at the time. Harmony Gold still looks expensive relative to the other gold miners and has outperformed significantly in the latest gold bull run (sparked by Russia’s invasion of Ukraine).
For reference, Harmony is up 236%; Pan African Resources is up 93%; AngloGold’s and Gold Fields’s share prices have given 50%. The rand gold price is up 60% over this time. We reiterate our preference for AngloGold and add Gold Fields as a possible candidate in which to deploy proceeds from a Harmony sale.
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 Bidcorp, sell (or switch) Harmony Gold
Chantal Marx, head of investment research and content at FNB Wealth & Investments, on what the smart money is doing
Chantal Marx, head of investment research and content at FNB Wealth & Investments
Buy: Bidcorp
Bidcorp is up just 4.2% year to date, significantly underperforming the broader market. Part of this has been due to the comparative enthusiasm towards South Africa Inc shares since the election, and concerns about the global growth outlook and what that could mean, more broadly, for services businesses such as Bidcorp.
In its financial year ended June 30, Bidcorp’s top line expanded by double digits, with almost every business showing an improvement against their previous record achievements of financial 2023. Management reiterated that long-term prospects remain attractive in the global food service industry. Bidcorp is a high-quality company with a strong management team and an excellent track record of delivering organic growth and successfully bedding down bolt-on acquisitions in a highly fragmented market.
The stock is trading on a 12-month forward multiple of 16.3, which is more than one standard deviation below its through-the-cycle average, but with solid and steady growth to come over the next three years. Our short-term upside target is R519, or 18% above current levels. We recommend a stop loss at R402.
Sell (Switch): Harmony Gold
We continue to see support for the gold price in the near term amid geopolitical concerns, rampant central bank bullion buying and solid demand for gold jewellery. Additionally, several traditional drivers of gold are now starting to fire up. As an example, physically backed exchange traded funds are finally starting to see positive inflows which could be supportive of another leg-up. In May we recommended switching out of Harmony Gold into some of the other gold miners. While Harmony Gold has since returned about 20%, this matched AngloGold and was well below the return on Pan African Resources (+48%) — our preferences at the time. Harmony Gold still looks expensive relative to the other gold miners and has outperformed significantly in the latest gold bull run (sparked by Russia’s invasion of Ukraine).
For reference, Harmony is up 236%; Pan African Resources is up 93%; AngloGold’s and Gold Fields’s share prices have given 50%. The rand gold price is up 60% over this time. We reiterate our preference for AngloGold and add Gold Fields as a possible candidate in which to deploy proceeds from a Harmony sale.
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