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Simon’s weekly wrap-up: Navigating capital raises and the budget

Also, a look at positive news for Afrimat and Stor-Age, wine as an alternative investment, and more.
Image: Supplied

Capital raises are flooding the JSE rights now and I spoke with Jean Pierre Verster, CEO at Protea Capital Management, about this issue. He pointed out that getting in early could be an advantage, as investors aren’t a never-ending source of money and as such those coming to market late may find less interest in capital raises. He also cautioned investors not to blindly follow a capital raise, especially if this may be the first of many on the JSE. Exiting a position may be a better course of action.

One of the global responses to the pandemic is government plans for infrastructure spending. It supports employment and spending and helps economies upgrade often ageing infrastructure. I spoke to Vunani Corporate Finance’s CEO Sam Mokorosi on listed options on the JSE, with Afrimat the standout stock to potentially benefit from local infrastructure spend.

With property stocks on the JSE having a very tough time, Stor-Age’s* annual results this week showed a resilient business model that manages to do well even during tough times. An increased dividend was unexpected, and the company remains confident in its business model. Some under-pressure customers may be lost, but the work-from-home trend will likely also see new potential customers, as people need to re-jig their home (and now also work) environment.

Read: Stor-Age pays out full-year dividends

Whether for a household or a state, budgeting is tough and this week’s Supplementary Budget from Minister Tito Mboweni was no exception. The minister proposed a zero-based budget so ahead of the budget speech, I chatted to Citadel chief economist Maarten Ackerman on what this means practically. In short, start from scratch with every expense. This makes perfect sense during a pandemic and is something we can even apply to one’s personal household budget, as the pandemic impacts our spending patterns and potentially our income as well.

Also this week:

Mia Kruger of Kruger International on US unemployment and Berkshire Hathaway being too large for market-beating returns. Absa’s Justin Schmidt on its Q2 manufacturing survey and food producers struggling under lockdown. Wine Cellar’s Roland Peens on wine as an alternative investment.

The writer holds shares in Stor-Age.

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