Absa's weaker price bucks trend in sector
So what could be forcing investors to sell Absa shares?
The bank’s only announcement last week was a notice to inform shareholders of a telephone conference that will be held at the end of this month so that shareholder concerns about executive remuneration policy for 2018 can be addressed.
You see, in a no longer so rare corporate event in South Africa, more than 25 percent of Absa’s shareholders voted against its remuneration implementation report at the annual general meeting last month.
It’s not that the executive pay increases seemed excessive, relatively speaking. For instance, former chief executive Maria Ramos’ pay actually declined to R29.7 million from R37.9m the previous year.
But after the 2017 remuneration debacle, the bank claimed to have “refreshed” its remuneration philosophies, principles and policies, and improved the transparency and level of disclosures for its 2018 executive remuneration plan.
Clearly, it did not do this very well either.
Coal and heavy metal miner Exxaro’s share price slipped up to 4.4 percent at one stage on Friday to R164.50, over a week.
Coal mining shares on the JSE rose in June, but have slipped this month. Coal prices have fallen substantially this year, when compared with August last year, due to slowing demand from China, and increasing policy measures by major countries, including China, to reduce emissions and reduce their reliance on coal for energy.
But Exxaro has chosen to focus increasingly on coal mining, and is for instance, selling its 26 percent stake in US-based titanium dioxide producer Tronox.
However, according to unconfirmed reports, it has apparently pulled out of the bidding for South32’s South African Energy Coal business due to competition issues, as it is already a big supplier to Eskom.
If this is true, it may then need to consider seeking coal expansion opportunities offshore, which doesn’t seem to make much sense at this point. First half coal sales volumes this year are expected to be down by about 4 percent due to reduced demand from Eskom.
The share price of another diversified minerals group, African Rainbow Minerals (ARM), also declined 4.5 percent at one point to R174.23, on Friday.
ARM has interests in platinum, iron ore, coal, copper and gold. Kumba Iron Ore’s share price shed up to 7.7 percent to R469.73 on Friday afternoon.
Clearly the mineral commodities markets are spooked.
Let’s face it, there has been little indication that global growth, the top demand driver of these minerals, in developing and developed countries, is going to shoot the lights out soon.
Nevertheless there doesn’t seem to be any reason why ARM will not at least repeat its half year 13 percent rise in headline earnings per share and declare another handsomely increased dividend after its June 30 year end. The question is, will the firmer iron price hold?
Motus is another share that has struggled in the recent while, and its price has fallen 8.3 percent in the past 10 days and was last seen at R75.13 on Friday afternoon.
It is South Africa’s biggest importer of cars, particularly of premium brand vehicles.
It’s not difficult to understand why the share price is under pressure. National new car sales fell 3,2 percent in June, another month of decline in a year that has seen choppy sales figures, with sales slumping 13.3 percent in February and increasing 3.9 percent in April.
There has been some talk of green shoots in the economy, but economists are also warning of another recession.
Whichever view you take, rest assured the only thing one can be certain of is that the financial constraints facing consumers are not going to change soon.
However, with sharp increases in the sales of luxury cars seemingly unlikely at this stage, rest assured that the sales of these vehicles will certainly improve over time. And Motus’ management are experienced in dealing with tough trading conditions.
There is also likely to be a shake-out of weaker motor dealers. Value-focused investors would do well to give Motus some consideration.