You're listening to Strictly Business Podcast with Lindsay Williams.
The JSC has closed its doors for another day and as it's a Wednesday, I speak to
Skulk Lowe, Portfolio Manager at PSG Wealth,
Old Oak in Cape Town.
A few results coming out of the JSC.
Let's start with the JSC for a change, Skulk, and South Africa.
We've got the Reserve Bank coming up with their decision very soon.
Tomorrow that is, isn't it?
Yes, on interest rates, probably going to cut by 25 basis points.
And we've had a few JSC-listed companies with results.
What have you made of them so far?
Hi, Lindsay, and good evening to all the listeners.
Thank you.
I thought, you know, we had a conversation today,
and you're asking me on specific companies to report them,
and not a lot of companies really report them, and I think the main one is Tiger
Brands.
Tiger Brands today, yeah, but going back a couple of days as well, people like
pick and pay now john but let's start with talking friends if you if you can i i can
but but i wanna i'm gonna just quickly just
sort of a general theme general trend that i saw in the results um over the past
let's go two weeks three weeks
and it's a theme called cost
cutting um and yeah and there's a lot of companies that come out and say um they've
been you know
quite successful because they they've managed to to contain the the the cost,
the expenses,
or they've managed to cut it.
And, you know,
that's great when you listen to management because the earnings has been coming
through quite positively.
I thought looking at the general trend for South African companies reporting this
season was
mostly wins.
And for that good reason, I mean, the JSE country trading more than 13% higher year
to date.
but that's it That's a massive question mark that I got there because we know cost
cutting can only take you that far.
I mean, eventually you need income to grow.
But let's not focus on the income.
I'm worried because I'm sitting here and I say, well, all these companies are saying,
well,
we are really focused on keeping our expenses low.
And the expense is trying to get it even lower.
We're going to try and cut some of these expenses.
What that means is usually either we're going to.
We're going to not employ new people.
Sometimes layoffs.
We've heard that.
We've seen quite a few of these companies saying that we've closed either shops or
non-performing shops in the case of pick and pay or plants.
We've heard quite a few car makers now in South Africa.
They're closing down some of their plants.
And that tells me that's the economy struggling.
And it's not going to continue.
You know, stop struggling because most of these companies are not going to employ
people because they focus on,
you know, keeping their expenses under control.
They're not going to expand.
They're not going to grow the businesses, open up a lot of new shops.
And that's worrying.
And that brings me to tomorrow.
I mean, when you're sitting with an environment where you're sitting with high
unemployment, right, and you're sitting with,
you know, you're sitting with.
on a high unemployment rate you're seeing with the economy that's not even growing
by one percent you need to be
proactive and now we've seen some of these companies be proactive but now we need
government or let's call it the sr reserve
bank to be proactive as well we're sitting here first cuts started in in august last
year we've only seen two cuts of a
quarter percent each half a percent up to now um and and and inflation is sitting at
the lowest level is
in in in many, many, many years.
2.8%.
Don't forget, that's a number that has gone by.
And I know that the Reserve Bank, having spoken to a few governors in my time,
they're not looking at what's just happened.
They're looking at up to 18 months ahead.
Maybe that's a bit of an exaggeration, but they can see what's coming through the
system, Scout.
And I think you'll agree that Licecia Cagnargo and the team have done quite well
by managing expectations,
first of all, and also the inflation rate and the RAND.
Definitely.
I mean, that I would definitely give us.
But I do think that we've missed, I mean, you made a valid point there.
I mean, I think we missed one or two opportunities where we could have seen
another quarter of a percent, maybe two.
And now we're sitting in and yeah,
most of the economists are forecasting that we're going to see a quarter of a
percentage.
Now some analysts and economists are also forecasting that we'll see another quarter
of a percent.
at the next meeting.
Yet, I mean, the big question mark is will the SR Reserve Bank, you know,
sort of be a leader and not a follower?
I mean, because I had the feeling that Gaghania would say,
let's wait and see what the Fed does.
And if the Fed cuts, it makes our decision easier.
Well, the Fed didn't cut.
They kept it unchanged.
And now let's see if they're going to be proactive.
I don't think they should look at the interest rate differential between the
United States and South Africa.
I think they should start their meeting by looking at South Africa in isolation and
then say, OK,
if there were no external influences, what would we do?
And they all vote.
And then I'd say, right, that's obviously fantasy land.
Let's have a look at the international situation and see if it changes your
decision.
That's the way I would do it, but then I'm an idiot.
So, you know, what can you say?
But it does have some merit, I think, Skulk.
And just on the point of cutting costs, bottom line and top line and everything,
yeah,
top line growth is what people really want to see, isn't it?
They want to see sales.
They want to see income.
And they don't really get that excited about, oh, we closed this shop or our
expenses came down by 3%
in this particular division.
And I was talking to David Shapiro last week, I think it was.
And I said, nice results from this company and look at its share price up 5%,
whatever it was.
And then I read the final paragraph and it said, we've achieved this because, A,
tumty tum.
And I said, cost cutting.
And the second one was cost cutting.
And the third one was cost cutting.
Just dressed up.
In a different phrase.
So yes, cost-cutting, very, very good.
And if times turn up, in other words, growth starts to occur in the South
African economy,
you'll be well-placed because you cut your costs.
But if it doesn't, at least you've done the prudent thing.
It's not great to get going because of cutting costs, I don't think.
No, no, no, exactly.
I mean, I agree with you 100%.
I think.
Companies in South Africa are well managed, as what I was alluding to.
I mean, they're extremely well managed.
That is evident in the recent set of results.
Most companies, I'm talking about broad-based.
But, I mean, now we need an environment where they can grow the top line.
I mean, unfortunately, that's the pool you're in.
I mean, let's get to Tiger Brands because I think that's where we want to end.
what I'm going to get to.
And it's very similar storyline.
Revenue up 2%. Yeah, that's 2.
1, 2%.
So not a lot, but Hebb's really solid growth.
You know, Hebb's growing 18%.
Very nice growth in the interim dividends.
We're looking at a 90% growth in interim dividend.
There's going to be a special dividend.
So I'll go through all these results and it really looks good.
I mean, it shows.
a management that's been able to contain the rough seas quite well.
Then you get to the strategic outlook.
And here we go again.
They're going to be focused on clear categories with strong competitive
advantage.
Here's the second point.
Continued execution of cost savings and efficiency initiatives.
I mean, that's telling me, okay, efficiency initiatives will say, well,
where can we use...
computers and AIs and all those that type of thing.
So that's the one.
And then the third one was said non-corporations to remain operational
while...
But bottom line is it's looking good, but
I think they keep on telling us that the environment we're in is a very, very
difficult environment.
And that's sort of the general trend that we've been hearing from...
It seems like some South African companies have employed their own version of Elon
Musk.
They've got their own departments of corporate efficiency, dose.
Dose.
Exactly.
Okay, so we've had that.
We've had pick and pay, which I thought were really, really ordinary numbers.
And as he said, what's his name?
Gosh, what's his name?
Summers.
Sean Summers.
He said, it's 2028 before we break even.
That's a long time.
It's a grocery store, for goodness sake.
It's been going since the 1950s.
Three years to break even.
That's not very exciting, is it?
Yeah, it's a tough one.
And I think just straight after that,
a company like Standard Bank came out and immediately downgraded pick and pay.
And we saw the artifacts in the share price.
After that report came out, I think it dropped 4% or 5% yesterday.
I see there's a bit of a retracement again today.
But in general, Lindsay, it's a tough environment.
I mean, and pick and pay has got...
a whole new set of troubles that they've got.
They need to claw back what they've lost.
They lost a massive amount of market share.
And yeah, you don't close a shop within a day or two.
So it's a process.
So yeah, but 2028, I mean, I don't know.
We live in a era.
What did I read?
Somebody shared it yesterday, and I think it was Honor Lawrence.
a fund manager that that shared um i think maybe a quote of warren buffett where he
said
Nobody wants to get rich quickly.
Nobody wants to take time to get rich or something like that.
I think that's where we live and the era we live.
We live in the era where we're looking for instant gratification.
If a company is going to say, well, it's going to take us three years to break
even,
they're going to find some other investment to make.
I think that's going to be a difficult environment for pick and pay.
Exactly.
just on the corporate front as well.
Valterra Platinum, the world's biggest miner of the metal by value.
You've never heard of it, have you?
No, of course you haven't, because it made its trading debut on the JSC today as a
standalone unit on Wednesday, today of course,
completing a spin-off from parent Anglo-Americans.
That's a new one for us to watch out for.
Valterra, how did it do, Scott?
Down a bit, I think, or haven't you got the code yet?
It's with a V.
A V, okay.
Thanks very much, Scalculo, as a portfolio manager.
No, okay, it's just an incidental.
I didn't know it was listing today, though.
Anyway, very good luck to you.
I think the PGMs are poised for greatness myself.
I don't know why.
I just think that we've seen the worst.
And if you listen to the United States, I read this blog from this woman who's a
very, very angry woman.
She lives in New Jersey, and her name's Jo, and she's quite keen on swearing.
The profanities fly in her blogs, so they're not for everybody.
But even she, who hates Trump more than I've ever known anyone hate Trump, and she
said,
even I now am just fed up with it.
There's a time where you can read no more Trump nonsense, and that time has come for
me.
And, you know, when he says 50%, he wakes up one morning and says, no, 50% on
European imports, and then brings it down.
and extends the date from starting on June the 1st to potentially July the 9th.
Come on now, you're playing with people's lives.
And the US stock market after a day off went up, shooting up yesterday because of
it.
It's unfair, Skulk, and I'm not, you know, I'm not whinging here and, you know, oh,
woe is me or woe is the investment community, but it does seem a little bit
childish, don't you think?
No, I do think so.
I definitely...
Definitely do.
But I mean, with all due respect, when
Trump won the election to become the new president of the USA,
we always knew that it's going to be the case.
So I don't think this is a surprise.
I think it's just, I mean, we need to know that we're going to deal with this for the
next four years.
Yeah, you're 100% right.
I mean, none of the...
july now becomes a very very big date in in our investment calendar for
2025.
most probably the biggest date um because i think the whole um tariff announcement
1.0 caught everyone sort of aware unaware or it's my surprise and and we saw the
after effect of the market all those losses has now been been been been wiped
out we're back into positive
territory But 9th of July, I mean,
now we're going to have all these tariffs that's going to come through.
We're going to know exactly where we stand.
And I think it's going to be really interesting.
I hope so.
We've got three days left of May, don't forget.
So sell in May and go away is still valid, Skunk.
You've got three days.
It doesn't say sell on the 1st of May.
It just says sell in May.
So maybe it's good that the market has recovered so much.
So you're selling at a much more advantageous price should you wish to do
so on the markets today.
Dollar-Rand is 1795.
British Pound against the Rand 2417.
Euro-Rand 2029.
And Euro-Dollar is 11305.
And that is a Euro that is 0.3% weaker against the greenback.
British Pound 13470.
Okay, on to our beloved commodities.
And the gold price, 1.3% weaker, $43 down at $3,300 on the nose.
Platinum, $10.84, which is barely changed.
And palladium is down $18 an ounce.
$9.75, the other white metal that we follow.
As for others, where's my CRB index?
Oh, there it is, yeah.
I noticed that OPEC are meeting in Vienna at the moment.
They're talking about raising their production.
but uh That has, in fact, meant that the price has risen, which is slightly
perverse.
$64.88, up nearly a percent for Brent crude.
West Texas crude, $61.87, which is up 1.3 percent.
Natural gas prices down 4 percent all over the place, as usual.
And the CRB just taking a little bit of a dip.
This is yesterday's price.
It'll be up again tomorrow because of the crude oil influence.
S&P 500 futures.
We've still got the June contract up, another couple of weeks before that goes
off the board.
Down very slightly, down a quarter of a percent to 59.20.
US 10-year, 4.49.90 actually,
but we'll call it 4.50.
The South African 10-year has been doing very well, 10.33 now.
And that's obviously linked to the strength of the RAND and the very
responsible budget, I thought it was.
And finally, Bitcoin.
I noticed that Trump is trying to raise $2 billion through his social media outlet,
Truth Social, or the holding company.
And he says he's going to put $2 billion, or they say he's going to put $2 billion
into Bitcoin.
Well, that's probably why it went up to $112,000 the other day.
Currently, $107,300, the Bitcoin price, down 2.6%.
That's it, Skull.
What have you got on your board, ups and downs?
Not a lot of movements.
I thought yesterday's announcement from Harmony Gold was an interesting one.
I mean, I don't think we can go through a strictly business program, you know,
not talking about, you know, some sort of gold.
Well, certainly not with you anyway.
I'm not a Harmony Gold investor, but I mean, I thought yesterday's,
but we know yesterday's announcement was a massive surprise.
price you know i mean 18
18 billion uh rand deal you know buying mac mac copper um
australian copper mine yes i mean that is really interesting do they have an
experience in mining copper
in the past that's no and
and it's it's we we've seen what sabania uh still water you know let's call it over
the past
few years and i know i mean people will tell me remember it's been a
difficult period for pgms in general um i might be a bit harsh but i mean sebani
was a solid you know strong you know gold counter and then they ventured into these
these and yeah it's a
it's a bit of a struggle and will they get through it well most probably will how
many now going to to copper and just put this in perspective i mean they've got a
market cap of around about you know
160 billion Rand.
So this 18 billion...
uh rent transaction into to mac copper is quite a quite a significant buy for this
um uh
so i'm i'm a little bit worried and mr marker told us yesterday and that they a
bit worried as well because we saw
uh harmony dropped
about five percent yesterday and only recovered 0.3 percent today so market not
really overly
overly optimistic yet the mac copper investors there
ball of the time i mean i think it was something like 21 up in dollar terms
yesterday uh they listed on the new york stock exchange so
um that caught the market totally totally i know i hope the gold mines don't do what
they've done so many
times in the past over the decades scalpers start saying look
at our margins look at all this money let's let's go shopping because i hope and
i hope i'm not
suggesting that harmony's done that because copper long term i think is a
fantastic investment.
whether they've paid the right price whether it's the right company or lots of
questions we don't know enough about it you and i uh but they mustn't go on a
spree the gold miners consolidate is my word for gold miners that's that's exactly
what i'm what i'm what i'm
getting to i know it's a tough environment i mean when the gold price is trading
where it's trading i mean i i know the gold mines in
general is going to be trading at massive massive premiums um these mines are
extremely cash flow positive so
be careful Most mines would like to diversify themselves somewhat and not be
so dependent on, let's call it,
one type of commodity.
But I mean, when you're a gold miner and your experience is in gold mining, and
also the third point,
and that's the thing that maybe worries me the most, is we know that Harmony bought
most, pretty much all of
Agner Gold's South African gold mines a few years ago.
And most of those mines are pretty mature mines.
late cycle late life cycle and the the little bit that i've that i've read on on
on mac copper um
it gives me the ideas also again a very mature mature copper mine very deep very
mature type of copper mine so
yeah i don't know i i don't know i'm i'm not i
don't i'm not not jumping jumping up and down for when i heard that there are many
transactions so but but be
there as it may um you You ask...
some of the winners and losers yeah the one's a catcher i mean i'm looking at my
screen and it's it's not rats and mice but it's certainly not anything that really
jumps out
at you No, it was a quiet day.
MTN, I think, was probably the one that stood out because there was no corporate
action or no sense announcement,
and yet the share price up 3.9% for today.
And for the listeners out there just wondering, I saw there was a report that
came out from Standard Bank where they upgraded
MTN's target price to R148, and actually that had a massive or very,
very positive effect on the share price today.
Okay, yeah, I've got Tiger Brands, we've spoken about them, at 3.75%.
Downside, Redefined down 3.7%.
Aspen, a 2.3% loser.
Bidcorp down 2.1%.
And Coronation Fund Managers down 2%.
Quiet day, Skulk.
Nearly the end of the month,
the beginning of the final month of the first half of 2025.
So there'll be some action over the next few weeks.
And yes, you've still got three days to sell in May and go away.
But you will only be going away for a week.
Scalculo is a portfolio manager at PSG Wealth Old Oak in Cape Town.
And that was the five o'clock shadow.
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