Afrimat Revisited

23 March 2021 By PDSNET

On 25th May 2020, ten months ago, we published an article on Afrimat in which we said we liked what the company was doing and considered it to be undervalued. At the time Afrimat shares were trading in the market for R29. In the past ten months they have risen to R46 – a gain of 58,6%. Consider the chart:

You can see here the steady rise in Afrimat shares as the institutional investors gradually appreciated its excellent prospects over the past ten months and drove the share up.

The construction industry has been in a parlous state for the past decade with most of the big construction companies (such as Murray & Roberts or Aveng) vanishing or becoming penny stocks. Why was Afrimat different?

What attracted us to this construction materials company was the quality of its management. High quality management can see difficulties in their industry and move proactively to change direction to optimize their position.

This is exactly what Afrimat did in 2016 when they decided to invest R400m to buy a failing iron ore mine (Demaneng) adjacent to Kumba’s Sishen mine. At the time the price of iron ore was around $50 per ton and the mine needed a further investment of R450m to bring it back into production.

By anyone’ standards, this was a big risk. Afrimat’s balance sheet at the time was strong enough to make the acquisition and the board decided to take a calculated gamble. A major factor in their success has got to be the rise in the price of iron ore which has reached $164 making Demaneng highly profitable.

Afrimat’s other businesses have continued to operate effectively through the pandemic, but its bulk commodities business has been the star of the show.

The quality of its management can also be seen in the strength of the company’s balance sheet. This company had R333m at the end of August 2020 with no significant debt. This strong position is ideal given the uncertainties of the current economic situation. It will enable the company to take advantage of any opportunities and manage any significant threats which may arise.

Of course, we could say that Afrimat has been lucky with the rise in the iron ore price. Management cannot take credit for that. At the time that they bought Demaneng the future of the metal looked relatively bleak with over-supply on world markets a very real concern. But, like Sibanye’s Niel Froneman, Afrimat decided to be “greedy when others were fearful” (Warren Buffett) and is now reaping the rewards.

One of our clients acted on the advice which we gave regarding Afrimat last year in May and bought in. He is now up about 50% on that investment and contacted us to ask whether he should continue holding the share. We don’t give advice of this type, but we did tell him that we are still holding onto our Afrimat shares and intend to do so for the foreseeable future – because our investment is not in iron ore, but in quality management, a very rare and valuable commodity.


All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:


The Confidential Report - May 2021

The US economy grew at an annualized rate of 6,4% in the first quarter of 2021 – which was much faster than expected. Gross Domestic Product (GDP) was $19,1 trillion – which can be compared to the $19,3 trillion of the December quarter of 2019 - before the pandemic took hold. This shows that the economy is now virtually back to pre-COVID-19 levels. The

Top of the Market Signs

In last week’s article, 12-Year Bull Trend, we pointed out that the bull trend was rising exponentially and ultimately that could only end with an exponential collapse. We said that the exact timing of that collapse was very difficult to assess.

You may also recall our article of 23rd January

12 Year Bull Trend

On 6th March 2009, just over 12 years ago, the S&P500 index made an intra-day cycle low at 666.79. It was the end of a 17-month bear trend which had seen the S&P fall by 57,4%. The world was in the teeth of the sub-prime crisis and negativity abounded. Investors were terrified.  The response to the crisis was massive and world-wide.

The Confidential Report - April 2021

The S&P500 index closed above 4000 for the first time on Thursday 1st April 2021 at 4019.


You can see the impact of the COVID-19 V-bottom, which we regard as an extraneous non-economic factor, and the subsequent acceleration of the S&P. Obviously, the


Hammerson has been listed on the London Stock Exchange since 1945. It is a real estate investment trust (REIT) and owns “flagship destinations and premium outlets in key cities across the UK and Europe”. Most of the company’s properties are shopping malls like Brent Cross in London, The Bullring in Birmingham and Dundrum Town Center in Dublin. Obviously,


The relationship between technical analysis and fundamental analysis is the relationship between the reality and the perception of that reality in a company. The fundamentalist searches for the share’s real value by studying the company’s financials. The technician studies the impact of investors’ perceptions as they are reflected in the

OBV and Mpact

Joseph Granville, talking about the share market, famously said, “volume leads price”. By this he meant that the volume traded in a share tends to begin increasing before the price rises. He encapsulated this idea in his “On Balance Volume” technique (OBV). If you are not clear on OBV go back and re-read On

The Confidential Report - March 2021

The major change that has come about in America since the advent of the Biden administration has been a broad shift towards “risk-on”. The uncertainties associated with Trump are fading. American investors have welcomed the economic logic and sanity of the new administration with a desire to generate returns which are well above those offered by US Treasury


Naspers is the largest share on the JSE with a market capitalisation of R1,67 trillion. Naspers was founded in 1915, as a printer and publisher of newspapers and magazines. It has since evolved into an international social media, entertainment and gaming company.

This share has the problem that it is undervalued in relation