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Looking at Amplats, Tiger Brands and Liberty Two Degrees

Nesan Nair from Sasfin Securities considers the good and bad news out from the three South African companies.

SIMON BROWN: I’m chatting now with Nesan Nair, portfolio manager at Sasfin Securities. Nesan, I appreciate the early morning time. Anglo American Platinum – it’s like a flashback to 2007/2008 – [with its] special dividends, except this dividend, was giant. A R70 dividend, a special dividend of R105. That’s a 10% dividend yield just at the interim stage. This is what you expect your miners to do when the commodity prices are booming. But wow, the market liked it. It’s great to be a shareholder. 

Read: Anglo Platinum hits that sweet spot at halfway stage
Listen: Amplats declares record dividend as earnings rocket (interview with CEO Natascha Viljoen)

NESAN NAIR: Yes, absolutely. Good morning, Simon. What a wonderful set of results from Amplats. It’s been coming for quite some time now. I just looked at the headline numbers as well to get some context – R43 billion interim earnings. It’s phenomenal. 

I can’t imagine another South African-based company generating that sort of money at the interim stage.

I just thought to myself it’s obviously rand basket (price per PGM ounce sold ), as you mentioned. A dollar basket would be $2 900. So one’s got to put that into context. It just goes to show you what these mining companies are capable of. If we enable them even further, the foreign exchange it could bring into the country – not just for the benefit of shareholders, obviously, but also for the benefit of the country! 

SIMON BROWN: Someone on my Twitter account @martintagg was asking, “Is this perhaps the biggest dividend ever?” I think it is because they paid out all R43 billion. And of course, Treasury’s licking its lips as well [over the] dividend tax income, all the other taxes coming with it. 

The other big story yesterday was Tiger Brands recalling some tins. As my sound engineer says, you’ve probably got more chance of winning the lottery than getting a bad tin from Tiger Brands. But on the heels of listeriosis, is this something that indicates a trend, or are we being a little overly nasty? They’ve got recall insurance, which I didn’t know existed, so it’s probably not going to hurt them financially, [just their] reputation.

NESAN NAIR: Yes. I scratched my head when I saw that. That announcement came out quite early in the morning on Monday, [and I thought] not another scandal with Tiger Brands, surely? When I read through it – leaking tins, I’ve never come across something like that, faulty welding in Kansas – I just thought they did go through a great deal of trouble providing a proper explanation of exactly what happened. Still, Simon, you don’t expect that. There must be some sort of quality control within Tiger Brands. If you buy packaging material from a third-party provider, surely there’s a process that’s followed in order to determine whether these (goods) are going to be safe for food packaging. That was absent in the explanation. We don’t know to what extent the culpability exists with the supplier of the packaging or with Tiger Brands. 

In any event, they have taken the drastic step of recalling these 20 million cans and making sure that they are safe for production. The first thing that caught my eye was it’s just not a scandal with Tiger Brands, it’s not going to be a sign of things to come.

SIMON BROWN: At least, as you point out, they handled this one better. That Sens had a lot of detail. The Listeriosis one seemed a bit head-in-the-sand.

A quick last question. Just chatting on Liberty Two Degrees, I’ve got to say I was not expecting such a good (result). It’s not brilliant, but for super regionals, I thought there would be a little more pressure. That result looked better to me than certainly, I was expecting.

NESAN NAIR: Yes, 15 cents-odd at the interim stage. The share’s at R4.90. They listed at R10. I’m also inclined to believe that the property companies have been punished substantially more than the earnings are going to tell us. They are probably on a recovery stage.

But one thing’s for sure – not everyone is going to survive this pandemic, certainly as far as listed property is concerned.

I suppose Liberty Two Degrees is in that super-regional space, that high-end Sandton City, Eastgate, Melrose Arch, the market’s expecting there to be a cyclical change in rentals there and probably pressure on rentals to come down. I think the jury is still very much out on these big property companies at the moment. I think that’s what you are seeing in the share price, notwithstanding the improvement in earnings that we’ve seen now.

Read: L2D achieves improved retail occupancies despite Covid-19 lockdowns

SIMON BROWN: I take your point. This is a pick-and-choose, not a sort of take-them-all. 

Nesan Nair, portfolio manager at Sasfin Securities, I appreciate the early morning.

Listen to Tuesday’s full MoneywebNOW podcast here.

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