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Counterpoint Value Fund manager Piet Viljoen joins BizNews founder Alec Hogg with a wide variety of talking points on the agenda. BizNews portfolio constituent Wilson Bayly Holmes released an upbeat earnings guidance to the market with Viljoen confirming that the outlook for the construction counters looks more positive than it has of recent years. That’s including Aveng, who Viljoen has been bullish on since the share was a mere 2 cents. Apart from unpacking Standard Bank’s results and outlining the importance of the health of the financial sector to the general economy, Viljoen walks us through what an average day in the life of a fund manager is during earnings season. – Justin Rowe-Roberts
Piet Viljoen on the average day of a fund manager during earnings season:
So the analysts on any specific stock will give the results a glance. I don’t think one needs to react to the results immediately. Remember, these results are speaking about what happened, especially when we refer to Standard Bank – what happened from December or January to June. It’s rear-view mirror stuff. It doesn’t tell you what’s going to happen in the future. I think when you buy a share, you are buying the present value of future cash flows, not the cash flows that have already happened. So when results come out – the price might react – but I don’t think it changes the fundamental valuation of the business. So it’s not something I try to react to – at all, ever. I’ll get around to reading the results properly in two or three or four weeks time. It’s because I’m reading history. I’m not reading about the future.
On WBHO’s earnings guidance:
It seems like they starting to get the Australian business back on track. I think for me, the big thing about Wilson Bayly, it was always the engineering construction firm with the strongest culture in terms of how they went about bidding for contracts, evaluating contracts and managing the risks associated with contracts. So they always used to do that very well, whereas a lot of the other construction firms used to probably overbid and under manage the risk. Wilson Bayly never did that. They also had a very good reputation in terms of the quality that they built. So they had a strong culture. I think when they diversified into Australian and the UK, they lost a little bit of that. And I think we can see what happened in Australia. That road contract in Melbourne, they lost a lot of money on that. So they still busy working through that. So I think they’ve lost a little bit of that edge. What we’re looking from them is to start regaining that cultural edge again, which I think is possible. And right now, if you look at the share price, it’s not expensive at all, but one could only really justify higher valuation multiples on it if it regains its cultural edge, if I can put it that way.
On Standard Bank’s results and the importance of the financial sector:
I think the health of any country’s financial sector is indicative of the health of the country’s economy – of the wider economy. When one looks at any country it’s always a good thing to look at how the financial shares are doing, specifically the bank shares – Standard Bank is one. They are recovering from all the provisions they had to make during Covid. So the earnings look very good right now. But I think the fundamental thing with Standard Bank and basically with any bank shares in South Africa is the lifeblood of banks is credit extension – lending money to businesses and people. And that’s not happening at the moment. I think the private sector credit extension itself is growing anywhere between three and five percent, if I’m not mistaken. And as long as that is muted, the outlook for earnings from Standard Bank specifically and banks generally will still be muted and current valuations probably won’t change very much. So although they look like good value, one would need to see credit extension grow much more rapidly for one to become more bullish on the sector generally.
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