SIMON BROWN: I’m chatting now with Wayne McCurrie, senior portfolio manager at FNB Wealth and Investment. Wayne, I appreciate your time this morning. The FSCA, the Financial Sector Conduct Authority, yesterday fined Viceroy on their, what was it, January 2018 Capitec report. I wasn’t sure about the theory, but the regulator makes it quite clear that the statements were false, deceptive; and when it was pointed out [to Viceroy] it wasn’t corrected. I suppose if you’re knowingly putting out false and deceptive information and reports, that is a different story.
WAYNE McCURRIE: Correct. Anyone can have an opinion about the shares, even if you’re talking about your own book. If you long a share or short a share, you like a positive or negative, that happens every single day in the investment market. But if you intentionally put out misleading or false information without correcting it when the company points out to you that it’s actually factually wrong, that’s what they fine you for. This is a very, very good thing. Of course, if they didn’t come out with the Steinhoff report that turned out to be right, no one would even have noticed this report. It wouldn’t even be noticed.
SIMON BROWN: It would have completely and absolutely disappeared. Does Viceroy pay? Is this a reputational hit if they just sort of ignore it? They said they’re going to appeal it, but does it resolve itself eventually, or is it one of those things that eventually does get left hanging?
WAYNE McCURRIE: I’m not too sure. They are going to appeal and that, of course, will take forever; but they are liable for the fine and the FSCA has put out an R50 million fine against them. That’s massive.
SIMON BROWN: Yes, and we’ll see how that goes. [Annual] results yesterday from Momentum Metropolitan. Obviously, their death claims have doubled from their average. That’s no surprise. But some of these items, some of these insurers are perhaps looking attractive.
WAYNE McCURRIE: I think so. If you ignore the death-claim provisions that they’ve had to make – this is the third time they’ve had to increase their provision – the actual underlying results were very good. They saw very good new business growth in the investment business, and that’s why the share price was up in what was quite a big down-day yesterday; it was one of the only shares that was up about 2% or 3%. So they are doing very well, and I think they do show absolute value.
SIMON BROWN: A new management team returning there in a sense as well, doing what they promised.
WAYNE McCURRIE: Yes. Unfortunately, there was a lot of tidying up to do at Momentum, but the new management team there has done extremely well. But it’s sometimes easier to pick the low-hanging fruit quickly, the obvious things. It’s more difficult because this is a highly competitive market and, as we all know, in very difficult circumstances, because insurance is sold, not bought. You’ve got to have your sales force out there doing their work, and you can’t do it under the current restrictions.
SIMON BROWN: It is hugely competitive and a lot of it is actually just stealing market share from others.
A last one, Sibanye Stillwater closed yesterday at the low for the year. I suspect you’re not surprised by that. You’ve been saying that the commodity run looks over.
WAYNE McCURRIE: Yes. That’s correct. I think the commodity run is in a down-cycle, and that there’s limited downside on this.
Put gold aside, there’s limited downside in the other more commercial commodities.
So, surprisingly enough, I think we might be buying commodity shares by the end of this year, the beginning of next year. But I still think there is some downside. As you said, the Australian market is down again heavily this morning and our mining shares will be down again today.
SIMON BROWN: I take your point there. This is cyclical, and particularly in the PGMs (platinum group metals), the industrial metals, and so on. The demand will come back, the prices will come back. It’s just been a bad 2021 for them.
WAYNE McCURRIE: Well, it had such a massive run, and they’ve got up to previous record highs, both in dollar terms or any terms by which we want to measure it. So some downside was actually waiting to happen. But because there’s no big surge in supply the downside is not like in 2008 or 2015 or 2002. The downside is far more limited than that.
SIMON BROWN: I take your point on that. It’s going to be fundamentally different. We haven’t had that massive sort of build-up in supply, which we certainly saw previously.
Wayne McCurrie, senior portfolio manager at FNB Wealth and Investment, I appreciate the early morning time.
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