Yesterday was an unhappy day for the JSE All Share Index (ALSI), which closed 2% down after a bloodbath in morning trade. The small- and mid-cap indices didn't do too badly, but industrial companies got smashed.
Naspers led the red parade, down 7.8% for the day after news broke that the Chinese government is nowhere near finished with its social engineering project. The Chinese Communist Party (CCP) is clamping down on gaming in a big way, which at first glance isn't great news for Tencent, but on the other hand could be an opportunity.
Sometimes, a crackdown can make the existing businesses more valuable in the long term as competition is scared away or simply unable to get a foot in the door. We've seen a similar situation in coal, where a lack of available funding for new projects means that existing assets hav e climbed significantly in value.
One thing is for sure: short-term volatility in Chinese stocks (and thus Naspers / Prosus) isn't going anywhere just yet.
The winner on the JSE was Aspen, which closed 6.8% higher on the news that the company has received two unsolicited offers for its active pharmaceutical ingredient (API) business. That business contributed around R6.4bn of revenue in the year to June 2021, representing approximately 17% of group revenue.
API is clearly a material part of the group. We can expect Aspen to be a strong focus of the market for a while.
In property news, Arrowhead and Fairvest are still finding their way through a potential merger. Arrowhead has a dual-share structure which makes things a bit more complicated.
Sticking with that sector, Balwin Properties released a trading statement for the six months to August 2021. The wording in the announcement had a critical error in it, saying that earnings experienced an increase of between 24 and 25 cents per share. In fact, earnings increased TO that range. Either way, the market didn't love it, with Balwin dropping by 3.44% vs. the 2% drop on the ALSI.
Small cap hero Mustek released its results for the year to June 2021, in which HEPS grew 247.5% and the dividend matched the HEPS growth, up from 26 cents per share to 90 cents per share. The ICT company seems to be benefitting from the chip shortage that has driven price hikes and general shortages in availability of products. The share price is up over 58% this year.
Today's feature article is on Sanlam, which has had a rough time during Covid. Life insurance doesn't strike me as a fun industry in a normal year, so the past 18 months have been particularly tough.
As is the norm on a Friday i n InceConnect, the team at DealMakers wraps up the week and brings us interesting opinion pieces for you to read. Today, there are articles on human capital management reporting and restructuring of distressed companies in Kenya. We certainly can't be accused of lack of variety!
Have a wonderful weekend,
The Finance Ghost
