Elton Oliver has selected three companies as his stock picks in the JSE’s online stock analysis series – MTN Group, Netcare, and Mr Price Group.
Oliver has over 24 years of experience in the investment world, with expertise in financial analysis, equity research and investments, financial modelling, company valuations, and capital structure optimisation.
He has worked with asset management firms such as Momentum, Mundane (London), Standard Bank, and Rand Merchant Bank.
Oliver currently serves as an investment analyst and co-portfolio manager at Aluwani Capital Partners.
Commenting on current market conditions at the JSE stock pick seminar, Oliver said industries such as telecommunications, healthcare, and lower price point retailers would provide good prospects given the recent COVID-19 pandemic and recessionary economic forecasts.
With these industries in mind, he picked stocks which offer value and are likely to produce long-term returns to investors.
Elton Oliver’s stock picks, with an explanation of why he finds these companies attractive, are listed below.
MTN is a South African multinational mobile telecommunications company that operates in many African countries and holds a 37% market share in South Africa.
Over the last few years, MTN has strengthened its balance sheet by selling off non-core assets, paying down debts, and reinvesting in the quality of its networks.
In March 2022, MTN was awarded additional spectrum, which gives them the capacity to load more users on its networks without compromising network efficiency.
The company expects to gain significant revenue from mobile money opportunities – the ability to conduct financial transactions on a mobile device – in Nigeria, as it holds a 37.9% share in the Nigerian telecommunications market.
In Africa, MTN has seen a Compound Annual Growth Rate (CAGR) of about 11% over the past 11 years, while in Ghana, it has seen growth rates of around 40% in the last five years.
Oliver believes MTN’s growth in Africa shows no signs of stopping, making it a solid stock pick that will generate significant returns in the long term.
Netcare is the largest private hospital network in South Africa and operates 53 hospitals, 82 emergency bases, 68 primary healthcare facilities, and 56 training centres countrywide.
Netcare’s share price took a hit as COVID-19 had a notable impact on elective surgery and non-essential hospitalisation – a crucial revenue driver.
However, Oliver believes the worst of the pandemic is behind the hospital group as Covid-19 admissions have fallen substantially and will therefore start to move towards more profitable elective procedures.
As of March 2022, Netcare’s occupancy rates had already increased to over 60%.
Netcare also has an opportunity in the mental health space as individuals have become more aware of their mental health during the lockdowns.
The hospital group currently holds a 40% market share in the South African mental health sector – which is a R9 billion market.
Netcare reported that profit is still below pre-covid levels by at least 30% — meaning the stock could potentially be undervalued.
Oliver says that Netcare is an excellent stock as the hospital group’s core profit margin shows an upturn.
Mr Price Group
Mr Price is one of the biggest public trading retail companies in South Africa, with a portfolio that includes Mr Price, Mr Price Sport, Mr Price Home, Sheet Street and Yuppiechef.
History has shown that during challenging economic times, customers tend to trade down to retailers who offer lower price points, such as Mr Price.
The retailer is also a low-cost operator, and its operating costs against its percentage of sales are much lower than that of its competitors – which stands the retailer in good stead in an uncertain consumer environment.
Mr Price is a high cash generative company and has virtually no debt on the balance sheet.
Since 2021, the retailer has raised its Return on Equity (ROE) by 160 basis points and increased its revenue by 25.9%.
Oliver believes Mr Price will gain favourable market share soon due to the current economic pressures.