So, that’s how many market shake-outs that I’ve lived through? I just missed Black Monday in 1987 — with such an epoch-making event hardly registering in my circle of acquaintances as we were in panicked preparation for year-end exams in Grahamstown. That would mean I have experienced six significant market corrections, counting this week’s Manic Monday and excluding some of the more “regional” and less impactful flash crashes over the past 40 years.
What have I learnt from these ructions? Probably that it’s always worth buying a constellation of high-quality, cash-generating assets such as Remgro (Rembrandt, back in the day) at a knock-down price — even though this week my preferred “dip flip” was Sasol, which skulked under R55 in early trading on Monday. In truth, anyone who bought into any number of large- and mid-cap stocks early on Monday morning would have been grinning broadly at market close.
At one stage in the morning, not a single large-cap stock (not even dear old British American Tobacco) on the JSE had registered a gain. By mid-afternoon this list was well populated again. On a longer-term view, I also snaffled a few shares in Brait (easing my fomo on a Virgin Active pump), JSE Ltd and Sygnia’s Japan ETF.
A few of the large commodity shares still look intriguing, despite the mini-bounceback — particularly, for me, Glencore, BHP and South32. Hosken Consolidated Investments at R120? Tempting. Frankly, I could do with a few more Trumpian ripples in the major markets to throw up a few more bargains — and I get the distinct feeling I’m not going to be disappointed.
Speaking of bargains, I received a press release that called for the National African Federated Chamber of Commerce & Industry (Nafcoc) to consider acquiring restructured retail giant Pick n Pay. This was the view of former statistician-general Pali Lehohla at Nafcoc’s 60th anniversary celebrations last week.
The press release stated that Lehohla feels it is incomprehensible that black South African households, who collectively possess an estimated annual spending power of R3.6-trillion, remain mere consumers and without ownership stakes in major retail players. I concur wholeheartedly.
But if Nafcoc is to harness funds collectively to make strategic acquisitions to “own the economy”, I would respectfully submit that Pick n Pay, which has a serious battle on its hands to restore its operating margins, would be possibly the worst place to start. I doubt whether I’m going to crack the nod to participate in Nafcoc’s anniversary function, but I certainly have a few ideas I think would be better entry points to capture local consumer spending power.
At one stage of the morning not a single large-cap stock (not even dear old British American Tobacco) on the JSE had registered a gain
Here’s, literally, some food for thought: I would suggest making a play for a meaningful slab of enduring empowerment investment company Brimstone. It offers major and heavily discounted stakes in fishing group Oceana (the owner of the best-selling Lucky Star canned pilchards brand) and Sea Harvest (famous for its frozen hake portions).
Then there is Rainbow Chicken, as well as the superbly run AVI (owner of Bakers biscuits, Willards chips and Five Roses tea), not to mention Premier Group (Blue Ribbon bread). Then — thinking out of the box here — there is assurer Clientèle, private university business Stadio, Blue Label Telecoms or Nampak. Hell, if it has to be a retailer, rather punch for Pick n Pay’s fleet-footed offshoot, Boxer, or undisputed heavyweight retail champion Shoprite ... or even the nicely priced Cashbuild or Combined Motor Holdings.
I managed only recently to take the time to scan the latest annual report from small investment counter Astoria. Quite a riveting read it was.
For one thing, the group has increased the value of its 40.2% stake in niche retailing outfit Outdoor Investment Holdings (OIH) from R389m to R418m. This means OIH, which is largely centred on the Safari Outdoor stores, now represents a chunky 57.4% of intrinsic NAV. OIH, which includes a wholesale arm as well as a pet store offering, managed a 5.4% rise in earnings before interest and tax (ebit) to R203m. For Astoria’s valuation, the enterprise value of OIH was calculated on a fairly reasonable six times the rolling 12-month ebit to December 2024. Oh, and there were dividends of almost R11m too.
For me the big question remains: what does Astoria ultimately do with OIH? Is it a business that one of the major retailers might covet? Other than perhaps the rurally focused KAL Group, I’m not so sure. Can OIH markedly expand its footprint? Again, I’m not sure how much scope there is, unless there are ambitions to grow outside South Africa (which would bring its own particular risks).
More startling, however, was Astoria’s entry on its marine diamond operations, which run alongside its original investment in land-based diamond business Trans Hex. The value of the marine diamond operation has been slashed from R144m to just R19m (roughly $1m) — a mind-boggling writedown.
It operates large exploration and mining vessels off the west coast of Africa — the kind of business that, older readers will fondly recall, captured the imagination of retail investors in the 1990s (remember Ocean Diamond Mining Holdings, Benco and Namco?) Astoria noted quite candidly: “In 2024, the second full year under new management and strategy, there was no escape from the relentless decline in diamond prices, specifically smaller stones produced by Trans Hex Marine, which led to reduced revenue for the business.”
I seem to remember that Astoria, not too long ago, bemoaned not having the capital to pursue a larger shareholding in the joint Trans Hex diamond venture when there was a rights issue. This regret might turn to another opportunity at a better price, though there might be a long way to go before this investment gets its shine back.
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