Rowan Williams, director of Nitrogen Fund Managers
Buy: Standard Bank
Standard Bank Group continues to solidify its position as Africa’s leading banking and financial services group, making it attractive to investors seeking both stability and growth. Under Sim Tshabalala’s strong leadership, backed by a highly experienced management team, the group delivered on its 2021 strategy through “disciplined execution”, leading to improved returns on capital and record-breaking results. The FY2025 results demonstrated continued strong growth. The group achieved a return on equity (ROE) of 19.3% while tightly controlling costs and managing bad debts. With its Africa regions franchise contributing over 40% of total earnings, Standard Bank remains well shielded from localised volatility and is positioned to capture high-growth opportunities across the continent in several regions. At a recent capital markets day, the group committed to its next phase of growth, building on its previous success across Africa. This phase involves expanding its service offerings and client franchise to deliver market-leading medium-term targets: ROE between 18% and 22%, headline earnings growth between 8% and 12%, tight control of costs and bad debts and a strong dividend payout ratio with growing distributions. The group also reaffirmed its commitment to investing in technology, payments and AI, ensuring it remains digitally enabled and future-relevant in a fast-changing financial services landscape. Standard Bank is a best-in-class high-growth emerging markets banking group trading at an attractive valuation of close to 10 times earnings and a 5% dividend yield. Its ability to generate record earnings while maintaining a fortress-like balance sheet makes it a solid pick for long-term portfolios.
Sell: Harmony Gold
Harmony Gold has benefited significantly from the rally in gold prices, but the share price has declined recently after disappointing half-year results, impacted by operational issues and higher costs. Despite reporting a 39% increase in ebitda for the first half of 2026, the stock has declined nearly 30% in the past month. This volatility is increasingly driven by operational headwinds, specifically a persistent rise in all-in sustaining costs to R1.18m/kg and production disruptions caused by regional cyanide shortages. With the stock trading well below its 52-week high of R428, the positive share price momentum has turned negative, while the execution risks of its pivot into copper remain a long-term variable. Adding to the headwinds, Harmony is an energy-intensive miner with total energy costs comprising about 20% of its cash operating costs. Fuel costs alone are up to 8% of total operating costs and these will increase significantly as the oil price remains elevated. Harmony’s reliance on ageing, ultra-deep South African mines presents a structural margin risk that high gold prices can only partially offset. Labour cost inflation and deteriorating public infrastructure continue to squeeze the bottom line, as evidenced by a relatively modest 4% growth in adjusted free cash flow despite a 20% jump in revenue. While the company’s expansion into copper via the Eva and CSA projects provides some diversification, these assets are not yet contributing enough to offset the capital-intensive nature of extending the life of its South African gold operations. Given the recent selling pressure and the mounting cost pressures, we prefer lower-cost gold producers with superior free cash flow conversion.
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