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Sibanye-Stillwater results shine; Woolworths falls short

Numbers from ‘the dividend leader in the resource sector in SA,’ and the retailer which still misses the mark in its fashion and beauty offerings.
Image: Bloomberg

SIMON BROWN: I’m chatting now with Mia Kruger, a director at Kruger International. Mia, I appreciate the early morning. The Sibanye-Stillwater (interim) results [are out] – a stock you and I both like, justified by really strong results and a proper chunky dividend. That dividend annualised is a 10% yield.

MIA KRUGER: Yes. Good morning, Simon. It’s definitely a very interesting scenario. As we see here, it’s a company that came out and is now the dividend leader in the resource sector in South Africa. But we haven’t seen that price adjust to the valuation of what we’ve seen on the earnings side. This is a company that has net cash on the balance sheet, and has reduced its debt position extremely well over the past years. After the results I looked at the results presentation, where they mentioned that they’d already reduced it by a further R5 billion since the results were measured until the end of June.

These numbers were exceptional. They’re also buying back shares.

We are seeing the earnings per share that they came out with, compared to what analysts were expecting when I looked at FactSet for six months, being over what the mean expectation is for the year. That is a staggering number.

So the cashflow is very strong. I’ve spoken about this in the past, but the acquisitions Sibanye has done until now really are only equal to four months’ cashflow for them – all the acquisitions they’ve done. That includes Lonmin Mines, which we know about.

So yes, I think the company is on a really good trajectory. I listened to a conversation with Neal Froneman last night. He spoke about all the opportunities and what they are looking to achieve. They are really focused on growing areas in the mining industry going forward – all the exciting things that we know and we talk about often outside of mining, which are battery technology, renewable energy, EVs, all of those. Those are the areas that Sibanye focuses on.

Many people still think about them as a gold miner icon, and even believe that they were that once. It feels so long ago. That still seems to be a bit of a drag on their share price. So it would be interesting, as Neal Froneman said.

They will have to come to the market consistently in the next couple of quarters or the next couple of results and show that they are in a position to deliver these returns consistently before the market will probably re-rate that share price.

SIMON BROWN: The stock is looking cheap at every level. I’m with you; we forget that it started life as Sibanye Gold, coming out of Gold Fields with, frankly, a bunch of B-grade gold assets. And here they are a platinum powerhouse.

Woolies [52-week] results came out, the food doing great. Fashion is still trying to turn it around, and Australia – that’s just Australia for you – plugging along, I suppose, is the kindest thing we can say.

MIA KRUGER: Yes. I mean, this is a completely different case from what we just spoke about in Sibanye, where I wouldn’t say it’s such a great business case at this stage. But the share price has really done well over the last while. They’ve caught up with all the other retailers. But the thing here is they missed so many key areas of the market where they could definitely have been the leaders.

I specifically think of a Woolies Dash, and this is the strong part of their business, the food business. It’s pretty much the only part of the business that grew. It grew even compared to 2019, and is up over 18% since 2019, which I think is a staggering number. It’s a really strong number. But on the home, beauty and fashion side they’ve just missed all the balls.

I’m thinking of myself as a Woolies buyer, and I’ve been very disappointed over the last couple of years. It would be my one-stop shop where I’d buy everything I wear from office wear to pyjamas, and I’ve actually been very disappointed in the quality and, as they also say, the miss of the trends. They’ve been far too edgy in the trends that they’ve tried to achieve in South Africa, and they’ve really just missed the market.

They’ve disappointed their loyal customers. That’s very clear to see when you look at those numbers; the numbers are down across the board there.

They’ve also tried to take away that whole playing field in the beauty side where Edgars used to be, where they offer all the different brands. It’s a tough area to do well in. People are very cognisant of the money they spend these days. I think that these sort of very high-margin niche areas where they try to achieve a lot of growth hasn’t worked for them.

Unfortunately this is a very good business-case story to look at in an emerging market like South Africa, as to what works and what does not. And sort of being the middle of the ‘fancy’ road hasn’t really worked for Woolworths. You either need to be really niche, or you need to be really run-of-the-mill, and they’ve been neither on the clothing, beauty and home side.

They are still trying to increase that business, it seems. They’re going to reduce the floor space, but they’re going to try and focus on basically only the Woolworths brand. It sounds like they’re ditching most of the other Woolies brands in the W Collection and so forth. We’re not quite sure about the RE: denim range. But I think it would be a good move for them, just to consolidate what they do, focus on what they can offer the market, and hopefully bring us a better quality product going forward.

SIMON BROWN: And get their clothing working like their food. Then they’ll be rocking.

Mia Kruger, director at Kruger International, I appreciate the early morning.

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When will Sebanye start buying back shares?
When the price drops to R40?

End of comments.

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