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    Home»Sections»Investment»Old Mutual says local shares oversold, including MTN and Vodacom

    Old Mutual says local shares oversold, including MTN and Vodacom

    Investment By Agency Staff4 November 2020
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    South Africa’s weak economy and poor growth prospects have hidden the “phenomenal” potential for the shares in some locally focused companies to deliver returns for investors, according to Old Mutual Investment Group.

    So-called South Africa Inc stocks have largely missed out on the 40% rebound in Johannesburg’s benchmark index from its March lows, an under-performance that is “not sustainable”, Meryl Pick, who helps oversee OMIG’s R10-billion Investors Fund, said during a webinar on Wednesday.

    “There are resilient and adaptive companies that can still outperform in a weak macro,” Pick said, citing stock-specific areas of the local market that the money manager sees as attractive.

    Pick pointed to South African bank valuations as an example, with lenders trading at the same price-to-book multiples they had in the 1980s, even though their businesses are much stronger with more robust balance sheets.

    Here are more of Pick’s views on “South Africa Inc” stocks:

    • MTN Group and Vodacom Group have benefited from work-from-home measures and have cut their costs in response to a low-growth environment.
    • Aspen Pharmacare’s deal with Johnson & Johnson to manufacture the US company’s Covid-19 vaccine will allow the healthcare firm to generate volumes at its manufacturing facilities.
    • Construction companies Raubex Group and Stefanutti Stocks Holdings are also favored, given their strong balance sheets and cost-cutting measures, and are poised to benefit from government infrastructure spending.
    • Italtile is poised to benefit from relatively low penetration in South African market.
    • Hospital operators are priced as if the current low occupancies and slow rate of elective surgery will continue indefinitely, but volumes will return. “We have seen that in the US; we will see that in South Africa.”
    • Among retailers, Massmart remains “exciting”, given its rationalisation and reorganisation.
    • Foschini Group’s acquisition of Jet has given the fashion retailer additional local manufacturing capacity and a new platform.
    • Shoprite’s online shopping business and restructuring of its portfolio has positioned it to emerge from the pandemic stronger than it entered it.
    • Retailers should also benefit from favourable lease terms with landlords in the wake of the virus.  — Reported by Adelaide Changole, (c) 2020 Bloomberg LP
    Meryl Pick MTN Old Mutual top Vodacom
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    Previous ArticleCxO Insights: Meet Pick n Pay CTSO Richard van Rensburg
    Next Article Renewable energy shift threatens 120 000 SA jobs: researchers

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