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Money Matters: Trick or Treat?

Money Matters: Trick or Treat?. Tuesday, 30 October 2012. Agenda. Technical Market Overview Top Down Approach Top Technical Trade Ideas Technical analysis Top Investment opportunities Fundamental analysis Summary Conclusion. International Markets. Resistance. Resistance. Support.

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Money Matters: Trick or Treat?

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  1. Money Matters: Trick or Treat? Tuesday, 30 October 2012

  2. Agenda • Technical Market Overview • Top Down Approach • Top Technical Trade Ideas • Technical analysis • Top Investment opportunities • Fundamental analysis • Summary • Conclusion

  3. International Markets Resistance Resistance Support Bullish

  4. Brent Oil & Gold $ Resistance Resistance Support Support Bearish Resistance Resistance Support Bullish

  5. Exchange Rates Support Channel Resistance Resistance US$ Strength Triangle Support Resistance ZAR Weakness

  6. Local Markets Bearish Divergence Rising Wedge? Resistance Support Support Bullish

  7. JSE Resources 20 Resistance Resistance Support Support Bullish

  8. JSE Fin30 Channel Resistance Support Bullish

  9. Trade Ideas

  10. The Stockbroker

  11. Open trade Ideas

  12. Open trade Ideas

  13. Trade Spotlight • Stanbank(SBK) • Sasol (SOL) ** • Barloworld (BAW) • Tiger Brands Ltd (TBS) • Vodacom (VOD) • SABMiller (SAB)**

  14. Stanbank (SBK) 25.09.2012 Long / Buy – Break above 10650c

  15. Stanbank (SBK) 26.10.2012

  16. Sasol (SOL) 25.09.2012 Long / Buy – 36500c Long / Buy – 36500c Dividend in Oct (8/10/2012) for 1180c

  17. Sasol (SOL) 26.10.2012 Instrument: CFD / SSF Direction: Buy / Long Entry: 365.00 Take Profit: 385.00 Stop loss: 355.00

  18. Barloworld (BAW) 25.09.2012

  19. Barloworld (BAW) 26.10.2012

  20. Tiger Brands (TBS) 25.09.2012 Long / Buy

  21. Tiger Brands (TBS) 26.10.2012

  22. Vodacom (VOD) 09.10.2012 Instrument: CFD / SSF Direction: Buy / Long Entry: 100.00 Take Profit: 108.00 Stop loss: 97.50

  23. Vodacom (VOD) 26.10.2012

  24. SABMiller (SAB) 18.10.2012 Instrument: CFD / SSF Direction: Buy / Long Entry: 364.00 Take Profit: 390.00 Stop loss: 349.50

  25. SABMiller (SAB) 26.10.2012

  26. Fundamentals & Share picks PSG Online

  27. Fundamentals & Share picks

  28. Grindrod (GND)

  29. Operational Overview • Shipping • Contributed 12% to revenue • Trading • Contributed 83% to revenue • Freight Services • Contributed 10% to revenue

  30. Comment on Results • Market Capitalisation = R8 993-million (29/10/2012) • Good results for the 6-months ended 30 June 2012. • Transforming - integrated freight & logistics service provider - retaining its position in shipping. • Revenue - 9% higher at R19-billion • Increased volumes in marine fuels trading and terminals. • Adjusted operating profit before depreciation grew 8% • R547-million • Margins improved • Marine fuels trading • Improved dry bulk terminal volumes. • Adjusted operating profit grew by only 2% • R350-million. • Operating margin of 1.9% (2011: 2%).

  31. Comment on Results • A significant increase in profit from minorities. • EBT was 45% higher. • Net finance expense fell 52% • Reduction in the group's gearing. • Headline earnings jumped 61% • R410-million. • Number of shares in issue jumped 29% • Diluted HEPS grew by only 25% • 55.5 cents to 69.4 cents. • Basic EPS jumped 70% to 103 cents • Non-trading items of R239-million • Profit on sale of the Maputo coal terminal • Offset by the impairment of ship values.

  32. Comment on Results • Cash generation was strong • Net working capital inflow of R439-million • Disposal 50% interest in Cockett Marine Oil. • Interim dividend of 17.5cps declared. • After Dividend Withholding Tax (DWT) = 14.875cps.

  33. Recommendation • Operations are very cyclical • Operating profits and margins currently depressed. • Growth opportunities • Freight services & trading businesses • Negated by subdued shipping earnings / Oversupply of ships. • Sensitive • Rand/US Dollar exchange rate • Shipping rates • Capital raised & the strategic partnerships • Remgro and Vitol • Maputo Coal Terminal • Trading at an 8% discount to its tangible NAV • Offers value. • Recommendation = Speculative Buy.

  34. Grindrod (GND)

  35. Sasol (SOL)

  36. Overview of operations • Sasol Mining • Contributed 4% to group revenue and 6% to group operating profit • Sasol Gas • Contributed 3% to group revenue and 8% to group operating profit • Sasol Synfuels • Contributed 20% to group revenue and 60% to group operating profit • Sasol Oil • Contributed 27% to group revenue and 4% to group operating profit) • Sasol Synfuels International (SSI) • Contributed 2% to group revenue and 5% to group operating profit • Sasol Petroleum International • Contributed 1% to revenue and -5% to operating profit • Sasol Polymers • Contributed 8% to group revenue and 2% to group operating profit • Sasol Solvents • Contributed 8% to group revenue and 4% to group operating profit • Sasol Olefins & Surfactants • Contributed 15% to group revenue and 9% to group operating profit • Other chemical businesses • Contributed 7% to group revenue and 3% to group operating profit • Other businesses • Contributed 4% to group revenue and 4% to group operating profit

  37. Comment on Results • Market Capitalisation = R243 947-million (29/10/2012) • Strong set of results year ended 30 June 2012 • Continuing global economic uncertainty • Certain production challenges. • Revenue: 19% higher at R169-billion. • Gross profit margins: 34.5% (2011: 36.5%) • Adjusted operating profit before depreciation and excluding once off items increased by 21% to R49-billion • 17% improvement in the average crude oil prices • 11% weaker average Rand/US Dollar exchange rate

  38. Comment on Results • Depreciation expense jumped 30% • Adjusted operating profit to R39-billion. • Operating margin: 23.3% (2011: 23.2%). • Operating profit: Second half lower than first due to: • Partial impairment & higher depreciation charges of the Canadian shale gas assets; • Year-end closing exchange rate adjustments- Canadian foreign exchange contracts; • Impact of year-end stock movements; • Higher provisions for rehabilitation and other remeasurement items.

  39. Comment on Results • EBIT grew 27% to R38.6-billion. • Net finance expense: +49%. • Headline earnings: R25.5-billion (+25%) • 64% increase from income from associates. • Offset by a 58% increase in income attributable to minority interests. • HEPS: +19% - From 3385 cents to 4228 cents • First half contributed 56% or 2350 cents. • Cash generation remained strong. • A final dividend of 1180cps was declared - 19% higher • After Dividend Withholding Tax (DWT) = 1004.3cps. • Total dividend = 1750cps (2011: 1300cps).

  40. Recommendation • High quality company - Exceptional track record. • Improved demand for commodities - Supply shocks - Political unrest • Sound investment with its long term drivers intact • Diverse portfolio of operations • Potential inherent - GTL & CTL ventures. • Vulnerable - external factors - beyond management's control • Oil price & exchange rate movements. • Contain costs - Successfully deleveraged its balance sheet • Ample room for future growth. • Low level of gearing - maintained in the short-term. • Gearing - targeted range of 20% to 40% in the medium term • Large capital intensive growth program • Gas acquisition strategy gains momentum. • Trading at 1.8 times its NAV • Offers value • Attractive dividend yield of 4.7%. • Recommendation: BUY

  41. Sasol (SOL)

  42. Old Mutual (OML)

  43. Embedded Value (EV) • Conservative valuation method • Excludes certain aspects of goodwill. • Goodwill includes intangible assets that increase the value of a company beyond its assets minus liabilities • Strong management • Good location • Happy workforce. • EV calculation does not include any increase in future business. Source: Investopedia.com

  44. Embedded Value (EV) • Embedded Value - Adds the adjusted net asset value PLUS the present value of future profits. • Present value of future profits – Looks at the potential profits that shareholders will receive in the future • Adjusted net asset value - Looks at the funds belonging to shareholders that have been accumulated in the past. Source: Investopedia.com

  45. Divisional Overview • Long Term Savings: • Emerging Markets: The segment contributed 45% towards total life insurance sales (APE) • Wealth Management: The division contributed 55% towards total life insurance sale (APE). • Nedbank: Contributed 33% to group MCEV • Mutual & Federal: Contributed 3% to group MCEV • US Asset Management: Contributed 11% to group MCEV • Debt: Group's debt decreased by 21% to £1341-million and contributed -13% to group MCEV.

  46. Comment on Results • Market Capitalisation = R116 128-million (29/10/2012) • Subdued set of results - 6-months end 30 June 2012 • Challenging • Macro-economic environment in Europe • Adverse currency movements. • Substantial exposure to emerging markets • Not as badly affected. • Financial position remains strong • Debt levels have been reduced. • Adjusted operating profit (AOP) from core operations on a post-tax basis declined by 7% to £416-million • AOP in constant currency managed to grow 11% • Strong performance from Nedbank.

  47. Comment on Results • Market Consistent Embedded Value (MCEV) per share reduced by 18 pence - payment of the Special Dividend. • Interim dividend: + 17% to 1.75 pps. • Total funds under management declined by 2% to £260.7-billion.

  48. Recommendation • Underperformance of investment markets - primary driver in EV • World economic conditions – Europe • Emerging market growth - Compensate for muted growth. • Lower consumer confidence - product preferences • Lower margin risk investment products. • Movements in asset prices • Lead to changes in funds under management • Fees earned from those funds. • Restructuring initiatives - produced significant value. • Further efficiencies in its operations. • Trading at a 25% discount to its EV. • 68% of the group's EV is directly related to investment markets. • Offers value • Recommendation - Longer term investors to buy the share.

  49. Old Mutual (OML)

  50. Sunint (SUI)

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