ALEC HOGG:  Well, let’s get a more in-depth view on how the market is trading today and for comment on what’s just gone down at that general meeting at Adcock Ingram, Craig Martin from Sharetips.co.za is in our studio in Cape Town. Craig, I hope you heard all of that.
CRAIG MARTIN: Yes, I managed to hear the last part. It’s quite interesting that many fingers are being pointed at the PIC in this matter, but they’ve indicated ‘if there’s cash on the table we’re viewing this as shareholders, so bid for like-bid and we can make a decision’. It’s very difficult to see which way it will go, but certainly, from Adcock’s point of view one gets the feeling that there’s a will to want to work with CFR in growing into new markets, going forward.
GUGULETHU MFUPHI: Craig, what about your thoughts on Bidvest? We just heard from Nastassia that they weren’t too happy about the proceedings taking place today and no doubt, the offer is still on the table. How do you see this unfolding?
CRAIG MARTIN: I think that if the indications are that Bidvest are not happy with the outcome of the postponement, then I think they’d like to start seeing this matter resolved. I don’t expect that they’re going to increase their offer – they’ve already done so. They’ll probably let things play out. There are certainly mixed camps in terms of which way it should go and I think Bidvest can be very patient in this matter.
ALEC HOGG:  It’s unlikely to have much impact on the share price, but it’s very sad news that Graham Mackay of SABMiller, long-time Chief Executive and Chairman there, has passed away this morning.
CRAIG MARTIN: Yes, he was certainly a great asset. If you think of Meyer Kahn and Graham Mackay – those are the leaders that will certainly be remembered of SAB’s direction, but he was very much a global player. There’s Alan Clark and others that will fill his shoes quite successfully.
ALEC HOGG:  Craig, we’ve heard a lot, particularly from Cannon Asset Management on how the big-cap stocks have had a fantastic run on the Johannesburg Stock Exchange in the past year or so. Indeed, they were saying that half of the All Share Index’s growth was down to just three stocks. You would suggest then that perhaps 2014 might belong to another sector of the market – to smaller companies. Are you looking there?
CRAIG MARTIN: Absolutely. It’s quite interesting. You’ve had the predominant players as you know, and there’s a China story behind that as well – we’re talking about a slow-down in Chinese growth. I think multiples that we see Ten Cent on would reflect that a correction could occur, although there’s a nice growth story there. What will that do to the JSE in 2014? SAB has gotten fantastic growth out of China, so I think that’s a focus area. Small players and sectors that have not done well, are certainly something to look out for in 2014 on the JSE. Construction shares have had a torrid time. Some of your resource players – Exxaro comes to mind, which is on really good multiples – and with the weakening rand, the improvement in exports… Some of the mid-cap companies offer some good opportunities. I don’t think we have the buoyant small-cap market that we may have had before, and some of those small-caps have started to develop into mid-caps or like your EOH’s etcetera, but there are still some opportunities around.
ALEC HOGG:  Craig, I had a lovely piece that I published on my site yesterday from Warren Deck, a regular contributor here on CNBC Africa. He likes Adcorp and as you are well aware, there’s been quite a lot of action in Adcorp lately. What’s your view on that stock?
CRAIG MARTIN: I have a Power Portfolio newsletter that I send out and that used to be a holding in it. It was sold recently, but we got some good growth out of it and I do like the theme around it. Of course, the labour element has been a bit of a question mark around how legislation will affect that, but I think Adcorp are doing a lot right on the educational side of things and the growth there, so it’s a nice story.
ALEC HOGG:  You have given us broad themes: construction and resources. What about some individual stock that we can go and do homework on?
CRAIG MARTIN: All right, so I mentioned Exxaro in that. I like Vodacom as a dividend underpin. I know that’s in the big side of things, but I think it’s quite interesting with Verizon having been sold out. We’ve heard the news now about the extra capitalisation that’s going to be spent – it’s a nice one for the year ahead. I also think gold is one of those we didn’t mention and I like Sibanye as a gold pick, which is a smaller-cap. They’re doing some things right. They just refinanced their balance sheet. There’s the acquisition of Wits Gold, there’s a good cash flow, and I think cash flow is part of the theme, because, if you’re going to have a soft market you want that underpin of cash flow, cash stream, and perhaps a dividend underpin, which Sibanye offers. Some of your gold counters knocked by 80 percent this year, so there are probably opportunities in that sector. Sun International’s maybe not such a small player. There are certainly some growth prospects there on the international side in terms of where management is focusing. Those are a few that come to mind at the moment. Aveng – in the construction sector – I think there are fantastic ratings there and they’re now global players, so they’re not just looking at the South African market space.
GUGULETHU MFUPHI: Craig, are there any sectors or perhaps stocks that you’re a little bit wary of?
CRAIG MARTIN: Yes, I think one needs to be very careful of retail. Let’s see what happens when the figures come out. Some of them are on really high multiples, and if you look at a company like Woolworths, which has been a fantastic story for the last three years or so…they’re now expanding their growth, and expanding their food footprint. They’re going to move into markets where Truworths and Foschini were, and benefitting from the government grants. Now Woolworths are almost playing catch-up. A lot of their growth came from purchasing franchises, which is now all in the balance sheet, so I think some of the shares that were the darling…a lot of that growth is there. You have to ask where are they going to get future growth from, so retail I’m very cautious of and don’t hold any at the moment.Â
