Vunani’s Gary Booysen is always a source of great market related information. He was today’s market commentator on CNBC Africa Power Lunch – providing insight into how traders and investors might consider playing developments at Woolworths, Nampak, Ascendis, Wesizwe and PSG Konsult. – AH
ALEC HOGG: We have Gary Booysen from Vunani Private Clients with us in the studio. Gary, lots of things are happening but I guess headline news, Solomon Lew, who is a foe of Woolworths and has been for decades – it goes back to probably 20 years ago – was attacking through a guy called Michael Kroger who was a Member of Parliament in Australia, attacking Woolworth’s Country Road, which they still own. He wasn’t successful there. He now wants to do his best to block this proposed $2bn transaction of David Jones. That was the news today. What’s your reading on it?
GARY BOOYSEN: I’ve looked at all the analysts’ comments on this thing and it doesn’t seem as if anyone really knows what his motivation is. A lot of people are speculating that he has some big end-game here and that he’s really positioning the pieces. From our point of view, if you look at his net wealth compared to what this actually would mean if he managed to buy stock – I think he managed to get most of his, it was just under a ten percent stake, at AUD3.88. With the offer price at AUD4.00, even if he managed to squeeze Woolies to up their bid or something, it’s actually not significant to his fortune. It is probably an ideological thing for him. It’s personal. It is personal. When you look at it, this isn’t going to make any material difference in his fortune. It doesn’t look as if he’s doing this for the money, despite it being a huge amount of money for us, for him…not so much. It does look like a personal vendetta.
ALEC HOGG: Well, if you go back in the years, it certainly was. I remember talking to Michael Kroger who was also Solomon Lew’s attorney, and the vitriol that came out of that man…anti-South African, anti-Susman (Simon Susman) who is of course, still the Chairman. It’s funny how egos get in the way sometimes on these big acquisitions.
GARY BOOYSEN: It’s incredible to think that the world’s capital allocation can be swayed by such personal motives. He was definitely part of the Australian Reserve Bank at one point as well, and I suppose there’s a sense of nationalism there as well, but I don’t know. It’s a difficult one to call. A lot of guys are speculating as to why he’s doing it. I think it’s sad that you have shareholders who can be this influential, and that don’t have a profit motive behind it. That’s scary, for me.
ALEC HOGG: Ask Brian Gilbertson on his departure from BHP Billiton and you’ll see the Aussie are pretty patriotic – perhaps national interests coming first, which we see in South Africa as well. It happens all over the world. Outside of that little saga, would you be buying the shares in the hope that there’s going to be more action here?
GARY BOOYSEN: I think there’s definitely going to be some action. Wherever there’s uncertainty, there’s opportunity. Looking at Woolies (see graph right) , I know a lot of the more institutional money is dumping there. They’re reducing holdings in Woolies at this level because the premium to where the deal currently is, is not significant enough to take the risk that if the deal is scuppered, you’re going to see Woolies trading all the way back down – probably sub-68 again. At the same time, I probably wouldn’t be putting new money to work here. I think it’s one to watch. A little bit of news announcement out around it, a bit of news flow that gets the stock to sell off…we still believe Woolies is a fundamentally good business and you should be buying it on dibs.
ALEC HOGG: All right, Solomon Lew is putting the fear into some shareholders of Woolies, which I guess, is what he was trying to achieve. We saw where Wesizwe…we spoke about it off air. It’s a little platinum project, which hasn’t broken any ground yet, owned by the Chinese. The share price is surging this week.
GARY BOOYSEN: Yes, I looked into that. Clients actually called us, wanting to know what happened. There’s no official news flow on it, so it’s rumours and speculation at the moment that something could be going on there, with the last movement coming off the back of a trading statement. As you say, 60 percent appreciation in a very short space of time. You’ll remember that Wesizwe used to have a huge amount of problems in trying to secure financing but now, obviously, with the Chinese backing coming I think they’ve taken a 45 percent stake in the business. Really, their financial problems are sorted out, and as a small cap platinum mine specifically, it’s one that I’ve always liked. I think we currently have so much tension around the platinum sector with production and Wesizwe, as you said, they’re only coming on stream. They’ll be up to full production in about 2023. Bakubung is a great platinum mine, and they have time to ramp it up while the rest of the platinum industry sorts out its problems.
ALEC HOGG: We hope that by 2023 there are no more labour issues.
GARY BOOYSEN: Exactly. I hope we found the solution by then. It’s one that we do like, but no official news flow on why that’s…
ALEC HOGG: So if you’re buying, you’re effectively speculating. Not so with Ascendis. There’s a good company. Its been put together by a couple of guys – Chris Dillon and Gary Shayne – in Cape Town. They are Warren Buffett followers. I won’t say they’ve cobbled together a healthcare group, but they certainly have added some very interesting parts to it. Finally, it’s gone above its listing price today at R11.30. It listed R11.00 last in November. Why would a share like this, which seems to have such good potential, just fall out of favour and then come back?
GARY BOOYSEN: It’s difficult to say. Obviously, in the healthcare space you have a lot of other very stalwart companies that portfolio managers can choose ahead of it. If you look at the likes of Medi-Clinic and Aspen, if you’re looking for Pharma medical exposure, they’re both currently such favourites in the market that perhaps these shares are overlooked a little bit. Looking at Ascendis specifically, it’s not a gain, it’s not one that we look at, and it’s not in our portfolios, so it’s one that perhaps we’ve lost over as well. I think if you’re looking for sector exposure, there’s just such quality in that sector at the moment that it’s difficult to grab investor attention.
ALEC HOGG: Yes, it’s R2.5bn market cap, so it’s not the obvious one to look at, but isn’t that where the opportunities lie, particularly for private investors? Go beyond the top 60…
GARY BOOYSEN: Definitely. That’s always the arguments: to go and look at these smaller companies. If you look at the small and mid-cap indices this year, they’ve been outperforming the top 40. They’ve done very well. Unfortunately, a lot of private investors do go there because they value the space, where we can get the ‘one-up’ on big fund managers because it’s just not practical for them to buy into that. They can’t get a meaningful weighting in their strategies. That said, when we are turned down and if this market does have a protracted sell-off, these are going to be hit the hardest. It is a more risky investment for private investors. While we do look for opportunities, especially through Anthony in the small-cap space, there’s nothing wrong with a private investor also going Blue Chip and really trying to stick with the big companies. Over the long term, I still believe that’s where you’re going to find more stability and a better performance.
ALEC HOGG: It’s interesting. I’m reading a book on strategic value investing that I picked up in Omaha, and you can do much better if you go outside of the top 40, but you have to pick right.
GARY BOOYSEN: You have to pick right. How was the conference?
ALEC HOGG: Brilliant, absolutely brilliant. We spent two days just listening to these wonderful presentations: one on QE, one on fracking shale gas – that’s a huge opportunity in South Africa. Just before we finish off, Nampak came out with an announcement just a couple of weeks ago – good solid numbers. They’re doing well in Nigeria. The share price is almost a delayed reaction – seems to be lifting.
GARY BOOYSEN: Yes, it’s interesting. On the Twitter feeds and if you really have your ear to the ground on the market, that’s one that a lot of the traders are talking about today, especially. Garth Mackenzie is looking at is as well. They’re calling a technical breakup on Nampak at the moment.
ALEC HOGG: So Garth says ‘breakup’. He has such a legion of followers.
GARY BOOYSEN: Yes, and we have a couple of different, very guru-type investors looking at this as a break-out and recommending a buy – or just purely on the technical, so we’ve seen a fairly rapid price appreciation in it. If everyone calls that a break and keeps on buying into it, it probably has a few more legs to go.
ALEC HOGG: I guess as a value investor, there’s a new CEO that usually unlocks quite a lot of energy, and if you can get the two together at the same time, you really do have a winning combination. Yesterday’s new listing – PSG Konsult…
GARY BOOYSEN: Yes, PSG Konsult is definitely an interesting listing. It seems to be doing fairly well. Obviously, you could always support PSG Konsult in the OTC market anyway. We did that for a lot of clients. We actually managed to pick up beforehand…we probably got about ten percent discount on the listing, so it’s looking good so far. We’d like it to go higher. I think it’s a brilliant business and it’s nice that we can now get exposure to those assets directly.
ALEC HOGG: I think your clients will be delighted…getting a new listing at a ten percent discount. Well done, Gary. It’s nice to see you here. Hopefully, we’ll see you again pretty soon. That was Gary Booysen from Vunani Private Clients.
