Solid results despite the coronavirus turmoil
CAPE TOWN - Markets are in turmoil from investors spooked about the rapid global spread of Covid-19 outside China and the JSE has been no exception.
The JSE All Share index opened 3.42percent in the red on Friday, and the JSE Top 40 was down 3.45percent.
This followed an equally disastrous opening on Asia markets. The Nikkei index fell more than 4percent and Shanghai was down by more than 3percent.
This in turn had preceded a plunge of almost 1200 points in the US’s Dow Jones industrial average a day before, bringing the index to its worst four days since the 2008 financial crisis.
The Dow closed 4.42percent lower, while the S&P500 index fell 4.42percent on the same day.
Oil prices have plunged about 10percent in a week, with Brent Crude trading near $50 a barrel on Friday.
Treasury services firm TreasuryOne said the rand had lost more than 7.3percent in a month by Friday and could get weaker. “For now, the corona virus and the global impact its having is going to dominate market moves,” the group said.
Foreign investors reportedly dumped government bonds at the fastest pace on record - it began tracking the data in 1996 - with non-residents selling R9.1billion of the securities.
People were infected in 55 countries outside of China by Friday morning.
The markets are at a pivotal point. Moody’s said a global pandemic would trigger global and US recessions in the first half of this year.
Even if South Africa miraculously escapes the virus, and the global economy and US manage to avoid recession, a weaker global growth outlook may still wipe out the little growth that South Africa might have had this year.
This in spite of last week’s mildly stimulatory national Budget.
For JSE investors, the bad news effectively went global last week - foreign equity share portfolio’s now also face precarious returns.
Many JSE-listed companies reported financial results last week. Companies such as Shoprite and Anheuser-Busch InBev have warned of potentially big impacts on their finances from Covid-19, even as the issue remains clouded with uncertainty.
Standing out in my mind is Spur Corporation. Good interim earnings growth, costs being contained, measures in place to fix lower Australia and New Zealand sales, 80percent of its restaurants have generators to deal with load shedding, still opening new stores, on track with Africa expansion, well-loved, sustainable brands.
And its middle-income consumers will benefit marginally from the Budget. Its share price was steady at R24.25 on Friday morning, a good thing considering how the rest of the market was falling. Its PE ration was 13.97, a fair price, relative to the broader market.
Also reporting solid annual results was Liberty Group, but the share price has slid this year. The results were boosted by strong equity returns from its asset management unit, which may be tough to replicate this year.
The slow, 2percent rise in new insurance business inflows, attested to its traditional middle to upper-income clients facing tougher times and choosing to spend incomes on other things than insurance premiums.
Its share price was 1.99percent lower at R96.45 on Friday, bringing the decline over a week to 7.5percent.
Also reporting good results was British American Tobacco, which met earnings targets in an increasingly tough regulatory environment, for its traditional cigarette markets and vaping products, and it is moving well towards streamlining operations.
Its share price was down 2.65percent to R617.51 on Friday morning, undoubtedly, to my mind, a misaligned victim of the global equity sell-off, and the price was 5.7percent down over a week.
Another share standing out for me this week was Aveng, which is progressing well with its transition from South African construction group to an international, resources mining and engineering group.
Losses and debt were reduced in the interim period, and noncore asset sales appear on track, and those sold have received anticipated fair values.
The two primary subsidiaries in the transforming company, the infrastructure and engineering subsidiary operating in Australia, New Zealand and South-east Asia, is profitable, while contract mining firm Moolmans in South Africa returned to profitability.
The share price remained at 2cents on Friday.
Adapt IT reported a 35percent decline in interim headline earnings per share to 15.93c and passed the dividend. However, strong cash and annuity type inflows, together with some seemingly well thought-out strategies to resume earnings growth, such as re-entering the public service market and growing in Africa, also make this a share to watch.
And it seems I wasn’t the only one with this view - the share price had increased a whopping 14.3percent to R1.60 on Friday.