HILTON TARRANT: David Shapiro of Sasfin is with us. David, the market today slipping ever so slightly.
DAVID SHAPIRO: Hilton, a little disappointing because, if you look at Wall Street, Wall Street’s making another fresh high. The gains on Wall Street have lifted all the other markets – Europe was up at a five-year high, UK markets up at five-year highs, Asian markets very strong this morning and probably getting stronger on this employment report that’s come out. It’s a preliminary report but just shows that the US economy continues to create jobs.
And yet we were down. And it’s all mining shares that have brought us down, particularly platinum and gold counters, suggesting that maybe this ongoing shift out of the safe-haven assets continues. And that drags down our miners.
HILTON TARRANT: We spoke about gold shares last night – 52-week lows for Harmony, Gold Fields as well as AngloGold. A question from Simon on the SMS line asks in short why Gold Fields has plummeted since that unbundling of Sibanye. Sibanye has held up over all but as you see Gold Fields is at a 52-week low, Harmony 52-week low, AngloGold Ashanti 52-week low.
DAVID SHAPIRO: It’s the fundamentals. It’s the underlying fundamentals that are dragging it down. It’s got nothing to do with Sibanye. Sibanye is a new mine and I’m surprised that it’s holding up because I would have expected foreigners to actually start dumping this, wondering why they’ve got this share. I can’t really comment on that other than the big ones, which just keep getting weaker and weaker. And we haven’t seen the cavalry come in to support them as well.
Even platinum shares are looking very, very stodgy. Those shares are a worry. If anything, they are looking like they could go weaker. It’s affecting the rest of the mining boards. It seems to be brushing off onto the others. Billiton had a good day today, but somehow I think that it’s hurting the general mining industry.
HILTON TARRANT: We were told by Sibanye chief executive Neal Froneman as well as Gold Fields chief executive Nick Holland that it would take three months at least for Sibanye to find its price and for Gold Fields to find its price.
DAVID SHAPIRO: Ja. I think we are going through that at the moment. But overall it’s providing a drag. Take the miners away and on balance financials and industrials were a lot stronger today. In other words, there were a lot more gainers on both of those boards than there were losers.
HILTON TARRANT: Except for FirstRand, which was up 4% yesterday; down 3% today, which is practically exactly where it started.
DAVID SHAPIRO: I’ve no idea why. No idea what triggered the sell-off today – I thought they were pretty good results. Maybe there was a knee-jerk reaction. Analysts I think were surprised on the upside yesterday after the result. What may be happening – and I’m guessing – is that if you analyse the bank results they are pointing towards more consumption, more funding consumption rather than people coming into banks and funding fixed investment and maybe a story; and there might be concerns about whether this is sustainable or not. But other than that financials – Standard Bank also came down a bit today, also tends to be sold off. But the rest of the insurers were pretty steady.
HILTON TARRANT: Strange announcement from Transnet today. It’s restructuring its tariffs in favour of manufactured goods. Manufactured goods tariffs down by 47%, so basically halving. Tariffs on dry bulk up by almost 70%.
DAVID SHAPIRO: I thought it would have been the other way around. You want to get the bulk off the road.
HILTON TARRANT: They are trying to align their tariff structure to the National Development Plan.
DAVID SHAPIRO: I missed that. But if they can encourage rail traffic I think it’s going to save our roads and there are going to be huge savings from that point of view.
HILTON TARRANT: As far as the Top 40 is concerned, with those index changes that happen once a quarter, Discovery is being added to the Top 40 as of the end of this month. Mr Price is out, and Mr Price has just joined in place of Harmony. It joined about six months ago.
DAVID SHAPIRO: And out it goes. There’ll be a one-off adjustment. I think Discovery has attracted a huge amount of popularity after its results, and every day we see more and more money flowing into it. It had a little bit of a drag yesterday but it recovered today. So expect more money to flow in there.
HILTON TARRANT: Well, let’s bring in Moneyweb’s Sasha Planting who has been covering the Meltz business rescue story today. Sasha, we know now that Meltz has applied for business rescue – 43 stores across the country, 260 employees. Has the business rescue practitioner given you any further details?
SASHA PLANTING: Hi Hilton. He just said that he believes there is a buyer in the wings, and that there is some negotiation under way to secure a deal. And if that happens, obviously it will be very positive for the business. It will ensure that at least a fair number of the stores will carry on as going concerns. But it does seems that some of the stores are going to be sold independently of the chain, and I guess that doesn’t necessarily bode that well.
HILTON TARRANT: Right now, though, the business is funding its capital and operating requirements from cash flows from selling its stock that it’s already got on the floors.
SASHA PLANTING: Yes, it is, Hilton. But that’s obviously not sustainable because it doesn’t mean that they are investing in new stock. They are using current inventory. So a deal needs to be done very fast or recapitalisation needs to take place quite fast. It can’t carry on in the current situation.
HILTON TARRANT: Sasha Planting, thank you. David, that’s out of the blue.
DAVID SHAPIRO: I’ve known Meltz, I’ve known Jackie [Meltz] for 40, 50 years. I’ve always regarded it as a very successful company and am very surprised. What the reason is – whether it was poor merchandising, or pressure from other manufacturers [I don’t know].
HILTON TARRANT: They have grown very, very quickly, very quickly.
DAVID SHAPIRO: Maybe they outgrew themselves, because they always had a good line, very good value for money. I thought in Africa they were particularly well placed.
HILTON TARRANT: You don’t shop there, David!
DAVID SHAPIRO: I’ve still got a twin-set from about 1966!
HILTON TARRANT: David, a very quick question in on the SMS line – if the offer on Cipla Medpro is for R10 by Cipla India, why is the share trading below that – R9.40, R9.50?
DAVID SHAPIRO: No-one believes that this is going to take place. There is no confirmation. I don’t think the documentation is out and this was preliminary. So there’s been a lot of talk about them pulling out and no-one’s quite sure whether it will take place. Remember, even if you accept it I think the money will be far down the line. So that’s the discount you are paying.
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