South Africa

5 JSE stocks which offer great value

Prominent South African investment analysts and portfolio managers have selected five JSE-listed companies that offer good prospects – Pan African Resources, Sanlam, Spar Group, African Rainbow Capital, and BHP Group.

The investment analysts and portfolio managers included:

  • Drikus Combrinck from Capicraft.
  • Jean Pierre Verster from Protea Capital Management.
  • Wayne McCurrie from FNB Wealth and Investments.
  • Independent analyst Jimmy Moyaha.
  • Makwe Masilela from Makwe Fund Managers.

The companies that follow have been selected for their attractive share price and encouraging prospects for medium to long-term investors.

The five JSE-listed stocks you should consider, with an explanation for why these investment professionals find these companies to be a good buy, are listed below.

Pan African Resources

Pan African Resources is a precious metals producer based in the United Kingdom. It operates metal mines in South Africa and derives revenue through mining, extracting, and selling gold.

The producer is sitting with a forward price-to-earnings ratio of only 4% compared to the industry median of 10.49%, which means the share price is modestly undervalued.

The company is buying back shares with a dividend yield of 4.74% and is a good cash generator at its current level.

Combrinck believes that a weaker Rand means Pan African Resources will see an excellent increase in earnings over the next six months.

He added that the producer has a solid production profile with an operating margin of 28.7% and an ROE of 29.9% compared to the industry median of -14.37%.

Pan African Resources share price

Sanlam

Sanlam is a financial services and insurance company that sells insurance products and provides investment and wealth management services.

Verster noted that Sanlam is a solid company that has recently expanded its presence in Africa with its partnership with Allianz SE, a multinational German financial services company.

Verster believes this partnership will contribute to positive profit margins in future.

In South Africa, insurance companies were hit with claims associated with the COVID-19 pandemic and the recent Durban floods, which accounted for a drop in the industry’s share price.

Sanlam’s is currently trading at R58, which is below its five-year average. Verster believes this is an excellent entry price for investors keen to enter the insurance industry.

Sanlam is also a strong dividend payer with a current dividend yield of 5.8%.

Sanlam share price

Spar Group

Spar is a wholesaler and distributor of goods and services to the group’s main retail outlets such as SPAR stores and TOPS liquor stores across South Africa. 

McCurrie believes Spar is a good quality company with a strong management team.

The retail industry has been under pressure with increasing inflation, which resulted in a drop in the industry’s share price.

After a recent trading update, Spar’s share price is starting to see an upturn, and McCurrie believes now is a great time to buy Spar’s shares as he considers it undervalued.

The retailer is currently operating at a 20% discount relative to its competitors, with a price-to-earnings ratio of 13.58 compared to the industry’s average of 16.87.

Its dividend yield is currently 4.51%, and McCurrie believes Spar offers great value at a decent price.

Spar Group share price

African Rainbow Capital

African Rainbow Capital Investments (ARC) is an investment holding company. The company invests in Telecommunications, Real Estate, Hospitality, Energy, Financial Services, and others.

Moyaha believes that ARC’s positive prospects are weighted on its TymeBank developments.

TymeBank announced that its customer growth rate is already at 140,000 monthly, up from 110,000 last month.

ARC is also looking to broaden its telecommunications presence on the back of recent talks regarding potential partnerships surrounding Telkom and Rain.

Moyaha said ARC’s growing business structure and ventures in Malaysia and the Philippines are similar to an early Remgro regarding how ARC is structuring itself.

ARC is currently trading at R5.78, and Moyaha says that if it shows a good set of results in September, investors may not have the chance to buy shares under R10 in the future.

The current share price is an attractive entry point, and ARC presents a very good long-term hold for investors.

African Rainbow Capital share price

BHP Group

BHP is a global diversified miner, mainly supplying iron ore, copper, and metallurgical coal. The merger of BHP Limited and Billiton created the present-day BHP Group.

Despite the Chinese slump in economic growth and construction that has impacted BHP’s steel market, the group made a record profit on gains in prices of commodities from coal to nickel.

Masilela said BHP expects positive future growth as it will focus on increasing its unit volume of iron ore, copper, and nickel.

The Group will also gain from the electrification mega-trend following electric vehicles.

BHP is a big dividends payer with a dividend yield of 10.85% and boasts a price-to-earnings ratio of 4.81 compared to the industry median of 10.99.

Masilela believes the group is modestly undervalued and is a great value stock to buy for investors in the long term.

BHP Group share price

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