PDSnet Articles


Nepi (NRP) was part of the infamous Resilient Group of property companies which was the main reason for the collapse of the real estate investment trust (REIT) sector in January and February of 2018. Nepi itself fell from R217.50 to as low as R115.37. Today it trades for around R127.

The REIT is a R74,4bn operation which operates more than 50 shopping malls in 9 central and eastern European countries, mostly in Poland (26%) and Romania (39%). Its close association with the Resilient group of REITs resulted from the merger with Rockcastle, but has now decided to distance itself by removing key directors (Spiro Noussels and Nick Matulovich).

In its results for the year to 31st December 2018, the company reported distributable earnings up 9,5% with net rental and related income up 29,6% which puts it amongst the best REITs listed on the JSE. Vacancies were just 2,8% with a collection rate of almost 100%. The total portfolio is worth 5,9bn euros – which is 20% up on the previous year. In the 3 months to 31st March 2019, the company reported total assets of 6,6bn euros with a loan-to-value ratio of 32% and a collection rate of 99,9%. The occupancy rate was 96,3%. Read More


Commodity shares are generally more risky than industrial or financial shares because they mostly do not have any control over the selling price of their products. The commodities which they sell are mostly priced in international commodity exchanges and subject to wild fluctuations. Sasol is really no exception. It is in the oil business and the chemicals business. In both cases the pricing of its products is largely outside its control. Despite this, Sasol offers investors an interesting option. It is an extremely well-run company with a very strong balance sheet and it is busy diversifying away from oil.

Like most South African commodity companies, its profits are impacted by the strength of the rand. When the rand appreciates, Sasol becomes less profitable and vice versa.

It has its roots in the oil-from-coal technology developed during the apartheid era in South Africa, but today about 50% of the company’s profits are directly linked to the oil price. It has two main growth areas – its $12,9bn ethane cracker plant in Louisiana, America, known as “Lake Charles Chemical Project” (LCCP), and its development of gas resources in Mozambique.

Sasol was recently awarded two new licences in Mozambique to explore for gas in an onshore development of approximately 3000 square kilometres. This could significantly add to its existing gas projects in the Rovuma province. Read More

The Confidential Report – June 2019

US Economy

The opinions of the investors of the world are averaged and expressed in the various indexes of major world markets, especially the S&P500. They have recently (just a month ago) pushed the S&P500 index to a new record high (2945 on 30-4-19). And the data coming out of the American economy is confirming their optimism. The US economy grew by 3,1% in the first quarter of 2019 – easily beating the average forecast of 2%. A good chunk of that growth came from private consumption expenditure (PCE) – which shows that consumers are spending. This is not surprising given the better-than-expected results from the S&P500 companies and the extremely low unemployment in America. At the same time, the US economy added 263 000 new jobs in April month – easily beating analysts’ forecasts of 190 000. This brought the unemployment rate down to 3,6% – its lowest level in 50 years. Hourly earnings growth was up 3,1% year-on-year at an average of $27,77.

So with all this good economic news flying around why is the S&P falling? The answer is quite simply Donald Trump. His aggressive attitude towards America’s traditional trading partners and particularly China is beginning to unnerve investors. More and more analysts are starting to talk about some kind of recession. The Trump tariffs are starting to bite.

A trade war makes no economic sense from any perspective – any economist will tell you. Everyone ends up losing. Aside from the tariffs on $200bn worth of Chinese goods, Trump last week announced a 5% tariff on imports from Mexico, effective 10th June 2019 and which would grow to 25% unless the Mexicans stopped illegal cross-border immigration into America. At the same time Trump has threatened around $200bn worth of additional taxes on Americans and put the United States-Mexico-Canada agreement (USMCA) into jeopardy. These factors are causing some investors to decide to sell out and await developments. In our view, Trump is feeling more and more pressure from the Democrats and the rising possibility of an impeachment. He is cornered and potentially dangerous. But can he really derail the economic boom in America? We don’t think so. In our view, the escalation of the trade war is probably temporary and in a few months’ time it will be history. It is far more likely that Trump is trying to use his executive powers to gain political points – or at least he is trying to distract Americans from his mounting personal problems. Read More

Horizontal Count on Afrimat

Afrimat was originally a construction company which specialised in the supply of what are known as “aggregates” to the road-building industry. With the collapse of the construction industry following the 2010 Soccer World Cup, Afrimat set about re-inventing itself to become a mining company.

The decision to rely less on the road-building industry has paid handsome dividends. It began with the acquisition of the Demaneng iron ore mine in the Northern Cape. More recently (on 8th April 2019) it announced that it had put in a firm offer to buy Universal Coal Plc., a company listed in Australia but which has operations in South Africa. Afrimat has offered R2,1bn for the business which mainly supplies coal to Eskom through contracts valid until 2023. Read More

The Foschini Group

The Foschini Group (TFG) has done things that other clothing retailers have apparently been unable to do. The retail trade in South Africa has been beset by low consumer spending and fierce competition from overseas brands like Cotton On. Large iconic brands like Edgars are teetering on the edge of bankruptcy and yet TFG seems to be able to continue growing its sales and profitability.

The retail clothing business is extremely difficult to manage because of constantly shifting fashions and the need to keep stock levels under control. Rapid, accurate responses are needed to the ever-changing fashion world so that stores can display those styles of clothes which their clients are reading about online.

TFG said that it experienced difficult trading conditions in all three countries where it operates – South Africa, the UK and Australia and yet its results were outstanding.  In South Africa, turnover in the year ended 31st March 2018 was up by 8,9%, in the UK up by 31,3% and 58,3% in  Australia.

Working capital management is critical in this business. This means minimising the amount of capital tied up in stock and debtors. On the debtors side, 72% of TFG’s business is done in cash so the company is not dominated by its debtors’ book. Read More