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These companies will be the hardest hit when the looting stops

by , 15 July 2021
These companies will be the hardest hit when the looting stops
I hope you are safe today. Amidst the unprecedented looting in KZN and Gauteng there are glimmers of hope as communities come together to fight the violence.

But once the fires stop, and the rubble is cleared, which businesses will be hardest hit - and which ones will need the longest time to recover fully?

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Watch out – these companies’ share prices might not yet reveal the damage they’ve taken…
 
Looting victim #1 – Massmart
 
Massmart has been hard hit. The company’s 60,000sqm distribution hub which holds stock for Game and Makro has been hit and looted.
 
The company also says that around 30 of its stores in total have either been looted or burnt down.
 
This comes as US owner Walmart continues to provide financial support to the ailing company, including a rolling R4bn loan and a new interest-free loan it announced in June.
 
Massmart is already restructuring operations, and even if it can reclaim damages from insurance, the scale of lost income and lost opportunity is huge.
 
One also needs to wonder at what stage the US owner, Walmart, throws in the towel and simply says enough is enough.
 
The company will be hard hit with supply chain issues in coming months, and imported goods specifically might be in shortage.
 
Looting victim #2 – Capitec Bank
 
Capitec Bank specifically is harder hit by the looting than other banks because the company focusses specifically on rural and township areas that have been hardest hit by looting and vandalism.
 
The company has already shut more than 300 branches, and the number of damaged branches and ATMs are still unknown – but definitely numerous. These are branches and ATMs that will all need to be replaced, taking time, taking management’s focus off crucial growth projects.
 
And at a PE ratio of 40 – the company can’t afford to take its eye off growth projects.
 
Looting victim #3 – Tongaat Hulett
 
Tongaat just released results and the company is well under way on a turnaround strategy.
 
But it’s just been announced that ALL KZN sugar mills have been shut down due to violence in the areas.
 
As things stand more than 300,000 tonnes of sugar cane fields have been burnt – and the risk is that sugar mills might sit without enough sugar cane. At the very least we’ll see some supply chain disruptions in coming weeks.
 
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Here’s what to expect in the coming month
  
KZN specifically will face food shortages.
 
The country will likely face fuel shortages as fuel refineries have also shut down.
 
Agri businesses dependant on exports are losing products due to exports not happening at present.
 
And supply chains will be messed up – similar to what we experienced following the level 5 hard lockdown last year.
 
Shops that are still standing, are empty and need to restock. Distribution hubs are empty, so will have to restock first. And that means importing in many cases – which will also see delays.
 
Mines like coal mines exporting through the Richards Bay coal terminal will experience delays, and most certainly have operations affected by this. But fortunately record high commodity prices will limit the damage they experience.
 
Simply put – this has set the economic recovery following last year’s hard lockdown back by another year.
 
I’d look towards businesses earning offshore income. The rand has further weakened following this ordeal, and I doubt we’ll see R13 to the dollar levels again soon.
 
Here’s to unleashing real value
 
Francois Joubert
Editor, Red Hot Penny Shares


These companies will be the hardest hit when the looting stops
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