Big Action in the OTC Market this week: record prices, soaring volumes

The OTC Market was the place to be this week, with share prices hitting record highs, and trading volumes peaking. Etienne Nel, from Equity Express, the OTC trading platform speaks to us about the stocks making waves, the BEE Share Market, and where we could see profit-making opportunities in the market. It certainly seems that although over-the-counter, the OTC Market is growing its trade traffic, and picking up interest from investors hastily. If you’re looking for a good place to get a growing base of exposure to sound, well priced stocks, especially on the BEE Share front, the OTC Market could be for you – LF

 

ETIENNE NEL:  Yes, notwithstanding the public holidays and the voting day in the middle of the week, we saw very active trading in some of the larger counters.  Specific reference can be made to Phuthuma Nathi, which yesterday alone traded R27m worth of shares in very active trade.  That particular share, Phuthuma Nathi 1, hitting a new all-time high of R115.00 and Phuthuma Nathi 2 similarly trading at R120.00 – a new all time-high for them, too.  Not being left behind, YeboYethu, the Vodacom BEE structure…also a very active trade with 107 deals going through the market, totalling R2m and some eager investors paying up to R75.00 for a share, In the end though, that particular stock closed at R57.68.  It rebounded a bit again today and is currently trading at R59.00 per share, so overall quite busy markets.  African Bank obviously coming out with a trading update, disappointing investors even further and their two BEE structures have obviously felt the brunt of that, so Hlumisa is down six-and-a-half percent today.  That’s trading at R4.21, but from a fairly scrappy volume on that one.  In a nutshell, those are the highlights of the week.

LUCIENNE FERREIRA:  Thanks, Etienne.  Talk to me about Phuthuma Nathi.  Do you think anything in particular led that spike?

ETIENNE NEL:  Lucy, that’s a good question.  I’m not too sure why investors have suddenly started pushing the price.  Bear in mind that Naspers, which is the holding company for MultiChoice…so Phuthuma Nathi own 20 percent of MultiChoice South Africa, which is a wholly owned subsidiary within the greater Naspers Group…  Their year-end is the 31st of March, so I suspect that in terms of JSE listing requirements that their results should come out sometime at the end of June or probably early in July.  Maybe investors are punting the share in anticipation of the results in about two months’ time.

LUCIENNE FERREIRA:  If you were investing, what would you be watching?  Do you have you eye on anything, which you would expect is a good value stock?

ETIENNE NEL:  We’ve had a number of companies, such as Thembeka and Assuppol report some fairly robust numbers, so I think a lot it is good news already and the price is there…  It’s a bit risky for me to do forecasts.  We don’t really make investment recommendations.

LUCIENNE FERREIRA:  Of course.

ETIENNE NEL:  One, which hasn’t had such a run-up, is the Ukhamba structure from Imperial.  That’s trading at R22.00-odd, which is very much in line with the level at which they came on the market at the end of last year.  Sasol similarly, had a very, very strong week trading at R155.00 per share as well as some fairly slight activity in that one.

LUCIENNE FERREIRA:  Good stuff happening on the OTC market.  I think what’s happening is that investors are picking up on what’s going on, getting excited about it, and becoming more active.  I’ve also noticed those spikes and it seems like there’s a trend beginning, which is great news for you guys.

ETIENNE NEL:  Yes, it is.  We’re obviously delighted.  We strive to give our clients (being the issuers) a very transparent and arms-length solution to creating controlled liquidity in their shares.  Obviously, on the BEE side, we give the BEE series – once empowered, always empowered, – which, following the election is obviously going to become an issue with the BEE codes literally a year away.  In May 2015 (next year), the new BEE codes will be legislated and companies are going to have to comply with the new revised BEE codes, so it’s going to be interesting to see what corporate SA does about that.

LUCIENNE FERREIRA:  Yes, I’m sure that we can expect lots of activity.  Do you find that with the BEE shares, there is more volume and activity?

ETIENNE NEL:  Depending on the underlying…  Obviously investors, even though it’s OTC trading are still quite sophisticated, so they still ask the right questions in terms of all of the value propositions of the underlying companies.

LUCIENNE FERREIRA:  Certainly.

ETIENNE NEL:  As you can see in African Bank’s BEE structures, the underlying asset there is African Bank’s shares, which are listed on the Johannesburg Stock Exchange and recently came off.  Similarly, the BEE structures obviously took pain as well, and so it’s not one-way traffic, if I could put it that way.  You still need to do your homework and be comfortable with the fundamentals of the underlying asset prior to making that investment call.  We definitely are seeing some clever buyers coming into the market, who are cherry picking

 

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