FILE PHOTO: Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London
FILE PHOTO: Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London

Safe haven appeal drives gold shares rise

By Edward West Time of article published Jun 24, 2019

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JOHANNESBURG - Gold mining company share prices received a hefty boost from the rising gold price last week, after the yellow metal/dollar spot price hit a six year high on Thursday, due to expectations of interest rates cuts in the US, weakening global growth, and rising trade tensions.

These factors helped drive the safe haven appeal of the metal. But the gold price, which steadied at around $1388.60 (R19851) per ounce on Friday, has been ticking up for some time and gold bugs who invested wisely will have benefited handsomely.

Gold mining companies would have also gained from the weaker rand on Friday, following President Cyril Ramaphosa’s State of the Nation address on Thursday night.

Just to focus on one gold share: consider that AngloGold Ashanti traded at R246.83 early on Friday morning, which was more than 47percent higher than the price over a month.

Other gold miners also rose, with, for instance, Harmony up 29.2percent over a month, and Sibanye up more than 35percent. Will the gold price continue to rise?

The top moving share by value on the market on Friday was the biggest in market capitalisation, Naspers, which traded at R3464.11, and which released its financial results late in the afternoon that showed earnings increasing by up to a third. Its share price had risen 7.8percent over a month.

Dis-Chem Pharmacies opened slightly lower on the JSE at R27.12 on Friday morning, but it doesn’t take away the fact it had risen a healthy 9.9percent over a week.

It has 129 stores across South Africa, much less than the other listed pharmaceuticals and healthcare products retailer Clicks, which has more than 670 stores.

Analysts have rated Clicks highly for its defensive characteristics in the tough and worsening retail environment - it benefits from cash-strapped consumers buying down of smaller luxury items, or the so-called Lipstick Effect - and it seems investors on the JSE similarly latched on to Dis-Chem last week to close the valuation gap between the two shares.

Dis-Chem’s headline earnings per share were up 7.4percent in the year to end-February 2019, even though it had suffered financially from a prolonged strike from November to April this year.

Dis-Chems’ price:earnings was 31.83percent on Friday morning, just below the 34.13percent of Clicks.

Another share to trade marginally lower on Friday was pay-TV company MultiChoice, which fell 0.3percent to R131.94. However, the price is more than 3percent up on the week. The rise follows the release of maiden annual results last week, which included a respectable 6percent increase in revenue to R50.1billion, while the subscriber base was up 12.1percent.

The number of subscribers from the rest of Africa surpassed local users for the first time. MultiChoice certainly has its work cut out for it, what with increasing competition from all manner of services, such as Netflix, and the free satellite TV Openview, which offers some 20 channels free and is already in 1.6million homes. MultiChoice has 7.4million South African subscribers.

Another share that did reasonably well last week was Stor-Age, the JSE’s only listed property company that does self-storage. The share was trading at R14.20 on Friday, almost 3percent up on the week, and more than 14percent year-to-date. It stands out among the other retail, industrial and office focussed property groups, because it is still delivering inflation beating returns, which analysts attribute to the relative defensiveness against the downturn, of the self-storage market niche.

Earlier this month it declared a total dividend for the year to end-March 31, 2019 that was raised by more than 9 percent, and management seem confident of more growth in the year ahead.


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