BUY: Bidvest
Bidvest is a high-quality, defensive business that has derated notably over the past year. On a forward earnings multiple basis, the stock is now trading at almost two standard deviations below its long-term mean. The stock seems notably undervalued on a forward multiple of 10.4, particularly considering that the earnings growth profile still looks solid.
For the year ended June 30 2025, revenue growth was affected by a stronger rand, price-sensitive demand, lower grain exports, lower renewable energy product sales and a negative price mix in some businesses. However, trading profit gained some support from solid growth in the higher-margin businesses, well-managed expenses and contributions made by acquisitions. Additionally, cash generation remained solid and return on invested capital remained well ahead of the group’s weighted cost of debt. In its outlook statement, management noted that momentum was positive in the second half of 2025 and this was expected to continue into financial 2026. New investments are expected to position the group strongly for continued growth.
The stock recently rebounded to above its 200-day simple average, offering notable support. It has also been testing its 200-week moving average and sustained success here will boost our confidence in a more notable momentum reversal.
TAKE PROFIT: Resilient
South African government bonds have continued to move sharply higher, with yields moving to levels well below what we have become accustomed to over the past few years. There are several good reasons for this, however, and we don’t necessarily foresee a sharp deterioration in the near term. At the same time, we don’t foresee notable near-term strength. South African property stocks have benefited from lower bond yields and have experienced a notable improvement in local property fundamentals. This has resulted in the sector more broadly delivering excellent returns so far this year.
Resilient has been one of the best-performing stocks in the sector and has outperformed the index by over 10% year to date. The stock is now trading at a premium to its last reported NAV. We still advocate for having South African property exposure, but we think it could be a good time to switch out of more expensive names into real estate investment trusts that offer better yields and are still trading at discounts to their respective book values.
From a technical perspective, the stock looks overbought. We would anticipate at least a shallow pullback if any of the notable support factors fade, to the R69.10 mark or closer to the 200-day moving average of about R63.
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