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Mondi out with ‘a superb result’ and the market loved it: David Shapiro – Sasfin

Bloomberg reports a gold mine just outside Sydney is for sale for a mere A$600 000.

SIKI MGABADELI: We are back up on the markets, David. I can’t keep up.

DAVID SHAPIRO: One day up, one day down. In fact today I think there were a lot more losers than gainers. But, given a couple of shares that really supported the market I think that’s the reason that we ended in positive territory.
    The No 1 big mover with its heavyweight influence on the indices was Naspers, up 3.5%. And strangely Tencent didn’t do much in Hong Kong this morning, but Siki I think it made up almost 20% of the market’s value traded today – almost 4bn shares traded. So I’m not sure where the demand is coming from, but certainly very strong. Whether it is foreigners using this as a proxy to get into Tencent – that’s been the trend and it just continued. So I think a lot had to do with that.
    Then Breweries up. We were up here just about 0.5% but a lot better in London, and one of the reasons was the rand was quite strong – and that’s more because the euro was up on GDP numbers, with the dollar under pressure on their retail sales numbers. I think that, there, observers believe that any rate increases will now be stretched further into the future.

SIKI MGABADELI:  And what did you make of Breweries’ numbers out today?

DAVID SHAPIRO:  They were OK. They are very, very good. If you look at their organic growth, they are still plodding along. We kind of turn our noses up at 6%, but when you do it in those kind of volumes it is penetration. Of course, they suffer from currency translation, so when you bring it back into dollars or pounds of course the performance was hurt by that. But organically it’s doing well. Africa was one of the disappointing regions, but I still think they are doing quite well.

SIKI MGABADELI:  We are going to be chatting to their acting CFO, Domenic De Lorenzo, in a moment.
    More rumours again about Anheuser Busch.

DAVID SHAPIRO:  In fact, Alan Clark actually hinted at that. He said that the level of deals was high. They are pursuing Heineken, AB InBev is pursuing them. I don’t know whether the talks are taking place, but I’m sure that there are a lot of emails that are going back and forth. I like it because it just keeps the share price going up and up, and the higher that goes the more it keeps our all-share index up.

SIKI MGABADELI:  Nice numbers out of Mondi. They are quite happy with their input costs in their main European markets, the increase in their selling prices in Russia.

DAVID SHAPIRO:  It was a quarterly report, but well ahead of where analysts thought that they would be. South Africa again a little bit of a disappointment but, according to their statement, offset by most forestry gains and various other valuations. But overall a superb result and the market loved it – up 7%. It is picking up momentum; 2013 was a great year, 2014 a flat year, and 2015 looks like it’s going to be another very good year. And with Europe improving maybe they’ve got more pricing power and demand will pick up.

SIKI MGABADELI: Obviously we are all waiting to see what’s going to happen with the negotiations in the gold and coal sector. But just taking a quick look at resources, the shares have been literally three days up, three days down, three days up, two days down. I just wonder what the trend is.

DAVID SHAPIRO: In fact I read a report today that came out from Macquarie, who are well known and well respected in resources. They’ve actually downgraded the outlook for commodity prices, believing that first of all there is no shortage of supply, No 1, talking mainly about the bulks – iron ore, the coals. You’ve got this excess supply, also not seeing too much increase in demand or downgraded demand. So I think against that there are not many – I think Billiton comes out as the only overweight; the rest are all neutral to negative. Their view is that perhaps this rebound has run its course for the meantime. Just be cautions. So I think that’s a sign.
    But I love this gold story because there was something this morning on Bloomberg – there is a certain website where all the excess mining equipment is being sold in Australia, and you can buy a gold mine outside Sydney for the same price as you can buy a small apartment there – there is a gold mine going for A$600 000, and if you go to Sydney I don’t think you can buy a cupboard for that price. So it gives you an idea of the kind of pressure that miners are facing. But here we don’t seem to read that kind of news and they are pressing for wage increases that I don’t think the mines can handle.

SIKI MGABADELI:  Interesting, because obviously we had AngloGold Ashanti reporting a loss, and they were saying when they walk into those negotiations they are going to have to tell everybody that they need to be a little bit more realistic.

DAVID SHAPIRO:  We’ve discussed it here. What they might do is finally say, listen, you can have the South African mines, we are closing them, we are going to focus on anything outside the country. Gold Fields to an extent have done that. But no one seems to be listening and basically we are bringing a close to an industry because they might give the wages but they are going to lose people in the process as well.

SIKI MGABADELI:  When was the last time we were No 1 in gold?

DAVID SHAPIRO:  We are going down and down and down.

SIKI MGABADELI:  We are No 8 now or something.

DAVID SHAPIRO:  It’s not important. It’s I think our third-biggest export after platinum and coal on the mineral side. But it’s still a big employer.

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