ARTICLES

Sun International

Gambling is at least as addictive as smoking, alcohol, or drugs. As such, like other forms of human addiction, it has always been an excellent money-spinner. People love the ambience, excitement and risk associated with casinos and the gambling world. Unlike working for a living, gambling offers the magical opportunity to make a substantial quick return with almost no effort. The problem is that the potential return involves taking more than a commensurate risk.

The underlying principle of a casino is that its customers essentially bet against each other while the house is continuously skimming off a small percentage in exchange for offering an appropriate forum. In this, it is very similar to the financial markets, especially those involved in trading the various derivatives.

Stock markets are different because they offer the opportunity to make investments rather than to trade and, unlike the casino, investment makes it possible for participants to significantly improve their probabilities being successful by doing basic investment analysis.

Sun International (SUI) is a listed share whose primary business it is to exploit the human gambling addiction and the public’s fascination with casinos and games of chance. This business has the disadvantage that it usually requires a substantial capital investment, but once established and paid for, the cash flows from gambling in all its forms are compelling.

SUI suffered when its monopoly was unceremoniously removed when South Africa abandoned apartheid and the ANC took over. Suddenly it was no longer necessary to travel to Sun City to have the casino experience. Casinos were allowed all over Gauteng.

SUI was recovering well from the spread of casinos and increased competition when the COVID-19 pandemic delivered a major blow to casinos generally because it precluded gatherings of large groups of people in close proximity to one other. The casinos did their best to continue operations by putting up dividers and limiting attendance, but there can be little doubt that COVID-19 resulted in a massive and unexpected reduction in casino profits.

Now that the pandemic is more-or-less behind us these the gambling industry is recovering. Consider the chart of Sun International since early 2006:

You can see here that SUI made a record high at around R160 per share immediately before the sub-prime crisis of 2007/8. It was hammered down by the outbreak of COVID-19 in 2020 reaching a low of just 833c on 29^th May 2020. Since then, it has been recovering steadily.

It closed on Friday at 3468c following the release of a trading statement in which it estimated that adjusted headline earnings per share (HEPS) would be between 415c and 461c per share in the year to 31^st December 2022. This is almost a ten-fold increase on the previous year’s HEPS of just 44c and will move the company’s P:E ratio to around 7,9 – which looks cheap to us.

It seems unlikely that SUI will suffer from any further “black swan” events like COVID-19 in the immediate future – so we should expect its P:E to gradually recover towards a P:E of somewhere around or even above 15 – which effectively means that the share has the potential to double from its current level.   

DISCLAIMER

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.

PDSNET ARTICLES

Sibanye takes off

We have been writing about Neal Froneman and Sibanye for years now. Beginning in 2013, Froneman assembled the Sibanye group over a period of 7 years, buying up mining operations both in South Africa and America at bargain prices. Initially he bought precious metals producers, but more recently he has been diversifying into base metals like zinc and lithium which

The 16 Year Bull Trend

Since the Second World War, the stock markets of the world, including the JSE, have always tended to follow the New York Stock Exchange (NYSE) - and the NYSE is best measured by the S&P500 index (S&P) of its 500 largest companies.

For this reason, we believe it is important for private investors to constantly

CA Sales Revisited

Retailing in Africa is difficult with many of our leading retailers having attempted to open stores in countries to the North of us without notable success. These countries are often unstable and volatile politically. Getting adequate stock to branches has proved problematic and expensive.

It is not surprising therefore that a company has been

Bluetel

Bluetel (BLU) is a company involved in pinless top-ups, prepaid electricity, ticketing and universal vouchers. As such it is a company with substantial repeat business from existing customers. This type of business model is attractive to investors because it implies minimal working capital and strong cash flows.

Bluetel’s purchase

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately

WeBuyCars - Results

The financial results of companies show how profitable they are and give a good indication of their share’s risk and potential return. WeBuyCars (WBC) is a recent listing which came to the JSE on the 11^th of April 2024. Unlike other listed motor vehicle companies, it is a company which specialises in the purchase and sale

Choosing Winners

We are often asked how we go about selecting the shares to put on to the Winning Shares List (WSL). Right now, there are 102 shares on the list with 5 having gone down since they were added, 94 are up and 3 are unchanged. On an annualised basis, 24 of them are performing at above 100% per annum.   

As a private investor,

Kore Revisited

Kore (KP2) remains at once the most exciting and most risky investment on our Winning Shares List (WSL) at the moment. We originally added it to the list just over a year ago on 16^th May 2024 at a price of 20c. It subsequently rose to a high of 83c on 3^rd October 2024 and we published an article

Rand Strength 2025

The strength of the rand is both a critical and a complex issue for private investors on the JSE. Our currency is influenced by two primary forces:

1. Our local economy’s prospects
2. The rand’s role as a leading emerging market currency

These, in turn, are

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem