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The Rand's rally stalls as investors eye 2nd quarter GDP figures - TWO to buy

by , 21 September 2017
The Rand's rally stalls as investors eye 2nd quarter GDP figures - TWO to buy
The major news is today's GDP growth figure for the 2nd quarter. The print should come out at 2.6% and signal a short-lived recession.

The Rand's strength was given a boost after poor jobs numbers out from the US on Friday, but has started consolidating around R12.95. We believe clients should use the current strength to allocate an appropriate portion of assets to offshore markets. - Contact Prodigy if you would like assistance investing offshore.

August was a good month for the market, rising 2.6%, while resource stocks started slowly, the index jumped 6.5% from the middle of the month. The All-share Index is up 8.3% year to date and we expect the market to steadily make new highs into year end.

In the week ahead:
 
  • Tuesday: GDP 2nd Quarter Growth, Standard Bank PMI for August
  • Wednesday: SACCI Business Confidence Index for August
  • Thursday: Mining and Manufacturing Production for July
  • Friday: No Data Releases Expected
  • Results expected: EPP, WBO, DRD (05/09); MMI (06/09); AVV, ARI, SUR, FVT (07/09), FSR, AFX, SLM, PPR (08/09); RMI, AVI, MSP, RMH, ALH (11/09)
  • Offshore Results Expected: Gazprom, Hewlett Packard Enterprise, National Beverage, Dell.
  • LDT (05/09): ADH, BGA, BIL, CCO, EMI, FFA, GFI, GLN, ITE, MPT, NED, REI, SHP, SOL, ABSP, SBKP, and SBPP

Last week’s movers and shakers…
 
Best Performers: MUR 22.8%, TOR15.9%, TSX 15%, ANG 10.8%, PAN 8.7%.
 
Worst Performers: BAT -7%, PSG -6.2%, MMI -5.2%, SAP -4.7%, ZED -3.8
 
After Murry & Roberts fell 9.6% the previous week, it staged a strong recovery last week to end the week up 22.8%. PanAf, AngloGold and Torre also kicked up higher last week after being down over 6% in the previous week.
 
Other Economic data releases of interest…
 
  • Tuesday: Interest Rate Announcement (AUS); Services PMI (UK)
  • Wednesday: GDP q/q (AUS); Trade Balance and Interest Rate Announcement (CAN); Non-Manufacturing PMI (USA)
  • Thursday: Retail Sales, Trade Balance (AUS); ECB Press Conference (EU); Unemployment Claims and Crude Oil Inventories (USA)
  • Friday: Trade Balance (CHN); Manufacturing Production (UK), Unemployment Rate (CAN)

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Two to Buy
 
EOH – A Positive Trading Statement should ease concerns
 
EOH released a brief trading statement that signaled revenue will be up 21% for the results to 31 July. And earnings will be up between 10% and 20%. This will put EOH on a PE of around 13, while in prior years it’s PE was around 29 in 2015 and 20 in 2016.
 
This is positive given the negative press received over the past 12 months. We believe shares offer good value at these levels for long term investors. Results due 19 September. Buy below R107.50
 
Tharisa – Attractive Platinum producer, with improving production and profits
 
Tharisa is SA’s only PGM and Chrome co-producer, after listing in 2014, plans have been hampered by weak commodity prices, however production is improving and better prices will flow to shareholders.  
 
Its March interim results provided positive insight into its growth prospects. It has a strong balance sheet with net debt at 31 March standing at US$ 7m and debt to equity of 13%.
 
Earnings per share have grown from R0.24 in 2015 and R0.72c in 2016 to R2.17 for the half year to March 2017. This earnings per share growth will allow Tharisa to pay a dividend or return of capital that can grow significantly over the next few years. Buy below R18.00
 
None to Sell
 
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Shorter Term Ideas
 
  • Pioneer Foods: Short position in profit territory. Reduce stop loss to R124 to lock in gains.
  • Sasol: profitable short, reduce stop loss to R395 to lock in a 3.66% profit. Target R382.50.
  • Vodacom: Support level resilient, but weakness is gaining momentum. Target R165, maintain stop loss at R190.00
  • Sibanye Gold: 40% open profit. Adjust stop loss to R19.50 to lock in a 30% gain, keep the target price at R24.50.
 
Long Term Ideas
 
  • Steinhoff: Nicely up from last week. Buy on pullbacks below R61.
  • Jubilee: Responding slowly to higher platinum prices, buy below R0.68
  • African Rainbow: 10% gain on position, In the money, Results out next week. Hold.
  • Old Mutual:  Nicely in a profit. Buy dips below R33.
  • AECI: Price consolidation at support. Buy below R105.00
  • MTN: Good rally and dividend. Hold
  • Coronation: Moving up. Keep stop loss at R66.
  • Glencore: Rally intact, up 29% in two months. LDT tomorrow. Hold
  • Wescoal: Long term buy. Add below R2.15
  • Famous Brands: Finding a bottom above R112.50, accumulate.
  • Naspers: Consolidating around R2,890. More upside to come. Hold
  • MediClinic: Slightly below the 200-day moving average, a move to R139 is on the cards. Hold.
  • Richemont: Battling to break above R117.50. Maintain stop loss at R112 to lock in gains.
 
(This article is an extract from Prodigy’s weekly Investor Digest. For more information, contact Gavin McCarter at gavin@prodigyam.co.za.)
 


The Rand's rally stalls as investors eye 2nd quarter GDP figures - TWO to buy
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