David Shapiro: Loving Property – cheering Stafford’s innovation, Ketso’s stance at PPC

David Shapiro saw nothing in today's financial results from Harmony and Kumba to change his pessimistic view on the mining sector. But as he shared on CNBC Africa's Power Lunch today, he's enthused by the Property sector, and strongly supportive of Ketso Gordhan's approach at PPC where corporate governance is getting a practical application with the upcoming Special General Meeting. – AH  

ALEC HOGG: Let's get a more in-depth view now on how the market is trading. David Shapiro from Sasfin is with us in the studio. On a day when your own share is price is down nearly six percent at Sasfin – very low trade today. I just double-checked. No need to make a detour on your way back to the office?

DAVID SHAPIRO: Nothing that I know and I can't really speak as an insider, but nothing's happening there. If something were wrong, you'd feel it in the passages.

ALEC HOGG: Well, it's a small trade and quite often, it happens that you get volatility in a tightly held share like that. Lots of volatility also in America with the Republicans taking the Senate. Is that likely to have an impact on investors?

DAVID SHAPIRO: I've looked at the futures, they're rising. Generally, I think that the Republicans are pro-business so I think there's been a lot of 'anti-Obama' feelings and sentiment evolving, and it's manifested itself now where he'll become a 'lame duck President'. He has two years to run. He doesn't control the Senate. He doesn't control the House anymore. In fact, I think Republicans increased the majority in the House as well, so it doesn't bode well for any of his reform programs. However, from a business point of view, I reckon business will just brush it aside. Alec, yesterday we saw that the US Budget Deficit is now down to 2.8%. Remember when it was 10% in 2009? So the American economy is really rolling along. In fact, against that, I'm surprised Obama actually lost the vote. I think that the economy has come a long way there.

ALEC HOGG:  At least voters in America take their democracy very seriously, but sometimes they don't vote the way that we would have anticipated, particularly with the economy being better.

DAVID SHAPIRO: That's why I'm not sure what their driving forces are. But when you look at the votes, they're very close. This is not a '60/40'. This is more a 51/49' so they just come in. I think the nation is still evenly balanced.

ALEC HOGG: They now talk about the toxic Obama. How things change. Looking at the numbers locally that came out today, we have… Kumba headline earnings are going to be down at least 20 percent. That's no surprise, given the iron ore price, but what is a little strange is that Harmony's share price is up on its results. If you have a look, as I mentioned at the intro to the show, the gold price in Rand per kilogram – they got R443, 000 in the past quarter. It's now R410, 000

DAVID SHAPIRO: I can't explain. I'm not quite sure whether…why Harmony's price would have increased. I'm still very concerned about our gold miners. The gold price has now fallen another chunk to $ 1 150. Platinum's coming down. All of those put pressure on the miners. Even though the Rand is giving us a little hope (R11.10 to the Dollar which gives a little comfort) but Alec, it's becoming more and more difficult to make those margins. We have no electricity here. I think our wage bill is still high so generally, inflation here is up. It's a difficult place to be so best to stay away. Then you have iron ore prices, which also don't look like they're going to turn around fast. They may be bottoming. We might see it scrape along the bottom, but I think it's still going to be a tough time for miners in the next couple of years.

ALEC HOGG: Let someone else go and play with the Kumba's and the Harmony's for now? What about PPC, we had Ketso Gordhan in the studio yesterday. It looks like he's got good support from shareholders, certainly enough support to requisition a Special General Meeting, which you only do if you've got the votes.

DAVID SHAPIRO: It's up to the shareholders now. They're the ones who can change the board and they only need a 15 percent majority.

ALEC HOGG: But you're not going to requisition a meeting if you are the warring party, unless you've already got the votes.

DAVID SHAPIRO: No, so at the meeting they must be sure that they've got the votes. That they can actually change the composition of the board, hopefully we find out what Ketso's views are, what he wants to do, what's been holding him up? Why they didn't support him? I think that is also going to be very important but it is always nice to see a battle like this, taking place.

ALEC HOGG: Unless you're one of the people directly involved or in the middle.

DAVID SHAPIRO: For sure. From a corporate governance point of view, from a shareholder point of view, as soon as you hear noise like this you do want to find out what the story is. Ketso was a popular leader and I think the fact that he took over from some very good leaders there, I think that it is something we have to hear. I like PPC. I think it has always been a good company, it's always delivered, the markets against it. Infrastructural development is not taking place at the pace we want it to do but, nevertheless it's a very solid business.

ALEC HOGG: It's the second one of these because we had HCI as well. What was your take on the whole Marcel Golding and Johnny Copelyn divorce?

DAVID SHAPIRO: You know it's a frightening aspect and we have to get to the bottom of that as well. Were those phone calls made? Were they trying to influence ETV?

ALEC HOGG: Well, Marcel swore in an Affidavit that they were made, so that's pretty clear.

DAVID SHAPIRO: Well, there you are. I think we discussed it last week, going back to The Citizen and the Eschel Rhoodie era. You don't want Government interfering, you don't want them influencing the press.

One thing that we really celebrate here in SA is freedom of press and freedom of thought.

Once they start coming in, particularly with the present Government that we have now, it's a frightening prospect. I know Johnny Copelyn. They came from a Trade Union background, you would have expected them just to dismiss it, and that is where I have to…the fact that Marcel, Barbara Hogan (she's a very honourable person). She's the partner of Kathrada. She has been for many years. These are stalwarts, so once she resigns you must know that something is not 100-percent there.

ALEC HOGG: David, just to close off with, Rebosis did you have a look at those numbers? We're going to talk to Sisa in a moment.

DAVID SHAPIRO: No, I haven't.

ALEC HOGG: What do you think of the property sector though?

DAVID SHAPIRO: An incredible performer, I've got to say I've been one who's supported it. I've always supported it because they've been well run businesses. It's at the top end of the market. There's very good management. You are getting good yields and it's an increasing yield (it goes up every year), and we haven't been let down.   I know there were a lot of negative views on the sector, as long interest rates started to go up, everybody told you to bail out of the sector. I held on and, thank goodness, my faith has been rewarded but it is a sector I hold in very, high esteem.

ALEC HOGG: Would you continue to hold them?

DAVID SHAPIRO: Yes absolutely.

ALEC HOGG: Even though there's been enormous development in an economy that's not really helping, at the moment.

DAVID SHAPIRO: You've got to choose the right companies. If you're going into retail, make sure you've got the right tenant mix there (in the right areas) but, overall we haven't been let down with them. I think there's, on the office side, there's a little bit of excess, rentals coming through or excess vacancies but, generally, if you've monitored the sector it's been a way, superb performer.

ALEC HOGG: We're going to talk to the man, who created Tekkie Town, (13 years ago), Braam van Huyssteen. A nice deal that, they haven't said how much he's selling, but it's a minority stake and it is $65m, so he's created quite something in 13 years. Stafford Masie, who you know well – a technology entrepreneur – I spoke with him this morning. He's in Australia, in Melbourne and what he's done with a Pebble, here in South Africa; he's just done with ANZ Bank in Australia. It is lovely to see South African innovation.

DAVID SHAPIRO: He's an entrepreneur and he knows the industry very well. It's an area we can't participate here, on the Stock Market. It's the one area I think we haven't developed here, and we've got so many clever youngsters here and so many clever young people. I'm just sorry that it is not a priority to develop a hub, here as part of the National Development Plan or part of a plan.

ALEC HOGG: There's been some attempts. If Mark Shuttleworth had kept all his money in the country and built a Silicon Valley, imagine where we might have been today?

DAVID SHAPIRO: It's important because it embraces every part of our life.

ALEC HOGG: He did say, at the time, (if you recall) and then your guys went and changed his mind.

DAVID SHAPIRO: My guys?

ALEC HOGG: Your guys – from the Financial Services Sector. They said take your money offshore, Mark. He's done well financially but if he had invested Stafford Masie would not have been an exception as he is right now. But well done to Stafford. That's an incredible achievement by a South African technology entrepreneur.