Natasha Senkge’s top 3 JSE stock picks

Mazi Asset Management’s head of research, Natasha Senkge, picked Reunert, Bidcorp, and WeBuyCars as her JSE stock picks.

Mazi Asset Management is a South African hedge fund company with over R46 billion in assets under management.

Senkge started her investment career as a Global Equity Analyst in 2017, covering globally listed industrial and materials companies.

Prior to investments, she spent over seven years in management consulting, focusing on business analytics, improvement, and strategy.

Her stock picks range from companies that have been on the JSE for decades to newer powerhouses on the market.

Reunert, which falls under the industrial industry, has been listed on the JSE since January 1948. In contrast, her second choice, Bidcorp, was only listed in 2016 and deals in the consumer staples industry.

The international broad-line foodservice group operates across four geographic regions: the United Kingdom, Europe, Australasia, and emerging markets.

Senkge’s final pick, WeBuyCars, was established in 2001 but only listed on the JSE this year.

The listing is a part of WeBuyCars’ unbundling process from its previous holding company, Transaction Capital. Earlier this year, the company explained that the separate listing was a result of WeBuyCars’ unique market positioning.

“We are thrilled to welcome WeBuyCars to the JSE and excited to see a new listing for the year,” Valdene Reddy, Director of Capital Markets at the JSE said.

“The company’s decision to unbundle and list on our exchange demonstrates the strength of the SA capital markets and the JSE’s role in enabling firms to progress their expansion pursuits, facilitating direct access to a well-established equity market.”

According to the JSE, the popularity of unbundling operations is a testament to its effectiveness in enhancing growth opportunities, valuation realisation, and capital allocation optimisation.

Below is a breakdown of some of her stock picks.

Reunert

First, Senkge picked Reunert, an industrial group with a portfolio of businesses in its Electrical Engineering, information and communication technology (ICT) and Applied Electronics Segments.

They supply products and services across various sectors, including power and electricity, defence, renewable energy, and the IT space. 

With a market cap of R13.54 billion, the company has both a continental and international presence.

In terms of the investment thesis, Reunert is well-positioned to capture trends in the markets they serve, Senkge said.

For example, the company’s cable business is poised to benefit from impending electricity grid infrastructure updates. 

Additionally, the opportunity within the wheeling space, which will be needed as more renewable energy is integrated into the energy generation mix, is particularly promising.

Within renewable energy, Reunert participates in the value chain through engineering, procurement, and construction (EPC) and build, own, and operate (BO) models. 

“They are well positioned to capture those projects as they come on stream,” she said.  Additionally, the company supplies large energy storage batteries.

Regarding load shedding, even as it seems to be coming to an end, it does not significantly impact Reunert’s renewable energy business. 

The savings from offsetting some of the tariff increases that Eskom will likely pass through will continue to support their market.

In the applied electronics sector, Reunert supplies radio and radar equipment primarily to the defence sector. 

This business continues to receive international support in markets such as China, India, and the Middle East. As geopolitical tensions persist, defence spending will continue to support this business.

Lastly, the ICT business is focused on digital integration and transformation. 

The company is currently integrating recent acquisitions to offer a comprehensive end-to-end service offering, which is expected to generate annuity income for the business.

Senkge explained that financially, Reunert is lowly geared, highly cash-generative, and has delivered a reliable and growing dividend.

Bidcorp

Her next stock pick was Bidcorp, a global food services distributor with a presence in both developed and emerging markets with a market cap of R147.59 billion.

Bidcorp holds a leading position in the fragmented food services market, presenting opportunities for market consolidation, which the company executes effectively through bolt-on acquisitions that are immediately accretive.

The food services market itself continues to show attractive growth prospects, driven by trends such as increased away-from-home eating and food delivery. 

Bidcorp’s decentralised operating model is particularly appealing, as it allows its various business units agility and a focused approach to driving performance. 

On the profit side, Bidcorp has margin expansion opportunities by targeting higher-margin customers and increasing their value-added and private-label products. 

Although growth rates are normalising due to the slowdown in food inflation from previous highs, the company is still expected to deliver positive volumes moving forward.

Financially, Bidcorp has a flexible balance sheet and strong cash generation, enabling continued investment in growth and high-margin revenue streams. 

The company also has the capacity to deploy funds back to shareholders.

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WeBuyCars

Senkge’s final stock pick was WeBuyCars, a leading player in the used car trading market in South Africa. 

The company is a new player on the market and has a market cap of R10.93 billion.

The growth in the used car market is well-supported by the car park, meaning the number of cars registered on the road, and the fact that cars are lasting longer, leading to multiple owners over the vehicle’s life. 

Used cars offer an affordable alternative to most new cars in the market, Senkge explained. 

WeBuyCars has developed a strong brand identity and broadened its geographical footprint, positioning the business to capture growth at scale in the fragmented pre-owned car market.

The business operates on a capital-light model and enjoys attractive stock turnover rates. 

Additionally, it offers access to finance, insurance, and warranty through third parties, providing an additional income stream, with the finance and insurance (FNI) side gaining significant traction.

WeBuyCars is OEM brand agnostic, which allows it to supply a diverse array of customers without being tied to one OEM or brand. 

A key differentiator for the business is its use of long-standing proprietary data, which, when applied to AI and data analytics, helps enhance pricing strategies and track market trends.

She said that the company is expected to continue growing as car ownership in South Africa remains aspirational, given the less reliable public transport system. 

The affordable prices in the used car market also provide scope for growth. Despite having a strong debut, WeBuyCars still has room for re-rating, especially when compared to international counterparts trading at double-digit PE multiples. 

With the potential for double-digit earnings growth, there is still some scope for upward valuation.