As I sit writing my August column on yet another cold and wet Cape day, I look back on the past weeks — and what a month it has been.
The JSE small- and mid-cap indices are ahead 10.9% and 5.4% respectively year to date, but that does not tell the true picture.
With all the uncertainty around the election in May and the formation of the government, it was exactly June 10 when the key indices all started to move higher.
If you had picked that very day to put money into the market, the small-cap index is now ahead 10.6% and the broader liquidity of the mid-cap index 13.6% higher. The all share index in the same period was up 8.6%.
All of the above indices peaked on July 31. This is interesting as the global flash crash precipitated by a 12.4% slump in the Japanese Nikkei occurred on August 5, followed by a few days of global angst.
The Dow Jones industrial average fell 1,000 points on August 6 but all global indices have since rallied. Was it a flash in the pan, or the foretelling of ongoing global volatility? The JSE over the same period was remarkably measured. Perhaps our market looked well priced, or perhaps from a global perspective it was just a small irrelevance.
Oddly, despite equity trading volumes down 12% year to date, JSE Ltd detailed a modest 4% growth in revenue and flat earnings in its interim results to June. The stock is up 14% year to date despite listings continuing to evaporate, with Bell Equipment and Sasfin the latest to announce a departure.
Others, I have heard whispers, are waiting to delist. Yet JSE Ltd is at a 52-week high, oblivious to a shrinking market.
Astral is the Opec of chicken, producing 5.6-million birds a week, with 50-million running around at any given time
Some moves in the past weeks were also perplexing, perhaps indicating the tight liquidity in the small-cap sector bemoaned by institutions. The mid-cap index has shown the way, outperforming the small-cap sector, suggesting that the interest is there, but only in the larger, more liquid stocks. However, some small caps still surprise.
Specialist packaging counter Bowler Metcalf, long a favourite of mine, issued a sparkling year-end 2024 trading update with mid-headline earnings per share guidance ahead 58% on the year to 156c a share, placing the stock on a forward mid-p:e of 11.8. A juicy rating relative to the overall small-cap sector, some may say.
From R11.15 on July 29, Bowler soared 77% to R19.70 by August 2 on token volume. I wouldn’t take this rise seriously, despite Bowler moving to a record high. With the stock now trading at R18.40, I’d warn caveat emptor, or buyer beware. Bowler is a well-run business, but such a sharp move in low volume is lunacy.
Compare that with another columnist favourite, Argent Industrial, ahead 54% year to date in fair volume. The stock powered to a record high of R24.75 on August 7, as whispers swirled of further deals. Trading as I write at R23.05, Argent, despite the year’s move, is on a p:e of 5.3 and should unwind to 4.6 in my year-end 2025 forecast of 500c. Compared with Bowler, it looks a steal. Valuations and liquidity are strange bedfellows.
Lastly, it was announced that a fixture of the food producers sector is retiring after 16 years as CEO and 41 years in the poultry sector. Chris Schutte of Astral Foods exits in early 2025 after the AGM.
Astral was spun out of Tiger Brands in 2001 and listed as a separate entity. It has become a poultry titan. Schutte has steered the stock since listing and today, despite the volatility of the poultry sector, Astral is the Opec of chicken, producing 5.6-million birds a week, with 50-million running around at any given time.
Schutte, who I nicknamed the silver fox many years ago, bows out after leading Astral to recover from its worst-ever period in 2023, when external factors hit the poultry sector hard.
Having had many near-death experiences, from a light plane crash and a heart attack to a motorcycle accident, little could crush Schutte’s spirit and tenacity. He is a tough old bird, unlike his more succulent products.
Perhaps I am just getting old and nostalgic for the halcyon days of the JSE. Perhaps many newer CEOs are just too bland and a slave to governance. I, and many others, will miss Schutte’s results chirps, transparency and willingness to stand up to economic malfeasance. Yet another market character leaves the JSE; there are few left.
Happy retirement, Chris.
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