5 great JSE-listed stocks

Five prominent South African investment analysts and portfolio managers have selected five local companies that offer great prospects and future value – Super Group, Pepkor, MTN, Adcock Ingram, and Motus.

The investment analysts and portfolio managers are:

• Roy Mutooni from Absa Asset Management Protea Capital Management
• Rowan Williams from Nitrogen Fund Managers
• Rob Towell from Sasfin Securities
• Makwe Masilela from Makwe Fund Managers
• Wayne McCurrie from FNB Wealth and Investments

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

The five local stocks you should consider, explaining why these investment professionals find these companies to be a good buy, are listed below.

Super Group

Super Group Limited provides logistics and supply chain management services throughout South Africa.

The Group provides truck rental, third-party distribution services, cross-border transport, freight management, and trading operations. Super Group also supplies auto-electrical parts, operates automobile dealerships, and offers various insurance products.

Despite the turmoil the Group has experienced in its core markets, it grew earnings by 33.2% over the past year.

Super Group also announced that it would issue dividends and buy back shares. Just over 25 million shares were repurchased between May and June and again after the closed period ended on 30 August, with an average purchase price of R29.63 per share.

The company is good value based on its price-to-earnings ratio of 7.7 compared to the industry average of 8.3.

Revenue is forecasted to grow 6.61% per year, and Mutooni believes the market has ignored this stock but continues to deliver, and he said there is no reason why it won’t continue.

Pepkor

Pepkor is a South African investment and holding company that manages a portfolio of retail chains focused on the value market, predominantly selling clothing, footwear and textiles.

Williams likes the value-based retailer because it’s currently operating very well. Its share price is only down 1.13% year-to-date compared to the JSE all-share index’s drop of 7.69%.

Pepkor has also announced that Pieter Erasmus, the chief executive officer who expanded Pepkor from a relatively small company in 2001 until it was sold in late 2014, is back as CEO.

Erasmus’ return boosted the company’s shares by 1.4%, even as the benchmark index fell by 1.1%.

The company’s price-to-earnings ratio is 13.4, slightly below the industry average, and Williams believes that this and Pepkor’s prospects make it an attractive buy.

MTN

MTN is a South African multinational mobile telecommunications company that operates in many African countries and holds a 37% market share in South Africa.

The Group’s revenue has grown by 152.2% over the past year, with a net profit margin of 9.9% – higher than last year’s 4.2%.

MTN’s earnings have grown significantly by 22.5% per year over the past five years, while its debt-to-equity ratio has reduced from 81.8% to 73.5% over the same period.

At its current trading price of R124.25, Towell believes MTN is a steal as it’s trading well below its fair value estimate of R184.96.

Adcock Ingram

Adcock Ingram is a drug manufacturing company. The company manufactures, markets, and distributes a wide range of healthcare products.

The company generates roughly two-thirds of its sales from the private sector, with the remaining from the public sector. 

Adcock operates in four broad areas:

• Renal disease
• Medicine delivery
• Transfusion therapies
• Bioscience and specialized pharmaceuticals

Masilela noted an increase in demand for over-the-counter medications and healthcare products, and Adcock is set to gain substantially from this going forward.

The company has solid earnings with an annual increase of 6.1% over the past five years.

Adcock is good value at the moment as its price-to-earnings ratio is at 10.96 compared to the industry average of 21.33.

The manufacturer’s return-on-equity is 15.32, far above the industry average of 3.62 – indicating Adcock is effective at generating profit from its existing assets.

Masilela believes the share price to be undervalued, as its trading at R49.49 – far below its fair value estimate of R137.36.

Motus

Motus Holdings is a non-manufacturing service provider in the automotive sector.

It has four business segments, which are:

• Import and Distribution
• Retail and Rental
• Financial Services
• Aftermarket Parts

Despite chip shortages and other constraints on the motor industry’s global supply chains, Motus is operating very well.

Revenue was up 5% to R92 billion and is forecasted to grow by 5.83% per year, while earnings per share (EPS) jumped 65% to R19.02.

The company increased its total dividend by 71% to R7.10, of which R2.75 was already paid as an interim dividend, and R4.35 will be paid as a final dividend.

Its price-to-earnings ratio is 7.8, below the industry average of 8.1.

McCurrie believes that Motus is a deep-value-buy as its current trading price of R116 is considered cheap, and investors get a half-decent dividend of 4.57%.