Gary Booysen: Quick gains after buying into Steinhoff, Aspen dips

Market timing is more art than a science. Most of the time, buying and holding pays off best. But occasionally Mr Market loses his head and one witnesses irrational pull-backs in the share prices of top quality companies. Those are the opportunities that Gary Booysen waits for – and profited from keeping his nerve when the share prices of two of this week's reporting companies, Steinhoff and Aspen, fell on the flimsiest of reasons. Booysen explained his thinking on CNBC Africa Power Lunch today, and picked up on some another investment idea: he likes Spur after its tie-up with Grand Parade. – AH 

ALEC HOGG: Gary Booysen from Vunani Private Clients is with us in the studio. The morning, Gary…the morning session affected by the Oscar Pistorius trial or judgement rather, no doubt.

GARY BOOYSEN: No, I don't know if the market is affected but definitely all TV screens are dealing with it across the country have been switched to 'Oscar Trial' instead of probably the traditional channels. We looked at the morning session. It should have been up, quite positively. We saw the Tencent re-rating overseas a little bit, which should dragged our ALSI higher. Yes, we're up slightly perhaps we think, maybe a little bit more to go trading around, on the ALSI, at least around 46 000.

ALEC HOGG: Interesting to see Steinhoff has now gone back above its rights-issue price, so if we had bought at R50, which last time we were talking about. It seems quite a good signal if big investors were prepared to put R18bn at R52. If it was trading at R50, why not buy?

GARY BOOYSEN: Yes, definitely, you obviously saw that get it all the way down there was some smart trade just below R47 as well, so we were looking at that as definitely a 'buying opportunity'. We think Steinhoff the size of the retailer it is, with the Frankfurt listing coming up, we think it's an opportunity for investors to get into a good company that's going to perform long term. Even if there is a little bit of, perhaps, uncertainty in the short-term.

ALEC HOGG: Yes, of course the Rand weakening does help a stock like that.

GARY BOOYSEN: No, and we're seeing the Rand weakness feed into a lot of the Rand 'hedge-players' at the moment, so you are seeing the likes as you've already mentioned, Aspen in the headlines there, obviously great results but also companies like that also getting a boost from the weaker Rand.

ALEC HOGG: Aspen, Bidvest, Steinhoff… those three great capital allocators and we've had the results coming in the last week, which of the three jumped out of you?

GARY BOOYSEN: I have to disclose, I own all three of them, so…

ALEC HOGG: You're on the right horses…

GARY BOOYSEN: Yes, we've backed them for a long time and I think Aspen's results were outstanding. After that conference call that got everyone very nervy, we used that as an opportunity again to collect stock. It's paid off nicely because, as you can see (especially in those results) looking at how they actually did in South Africa, with the Government business obviously coming off with the delays in the ARV payments. The private sector actually doing exceptionally well, I think Steven SARB pointed that out as well.

ALEC HOGG: The 'Government business', you've got to ask how can the ARV's drop by 30 percent. Somebody is not getting their muti.

GARY BOOYSEN: Definitely and that was covered quite in depth, in the conference call and I think that's a little bit what spooked investors. What investors need to focus on as you mentioned, Aspen is now, primarily offshore. Two-thirds of its businesses is offshore and I think what really jumped out as well, there was just the sort of across the wires flashed up, one headline which just said, "Aspen is back on the acquisition trail as well." To know that Aspen is now going to be out there doing more deals, the deals that they have done have been bedded down well. Again, the management just letting us know that you sort of expect some of your deals to go wrong but the acquisitions they've made in the last two-years have all paid off for them, so every single deal has worked.

ALEC HOGG: So stay with (Stephen) Saad?

GARY BOOYSEN: Stay with Saad, yes I think so.

ALEC HOGG: What about the results that came out this morning from RMI? You've got to start wondering whether that whole conglomerate, RMH and RMI, is now getting to a bit of a toppy level because relative to the peers, in the investments that they've made. Their stocks are really out-performing.

GARY BOOYSEN: Yes, hugely. Many of our underlying businesses have reported over the last two weeks anyway, and we've seen stellar results out of their underlying. MMI came out yesterday. Okay, in some of their divisions, a little bit softer but their EB pulling it all right, which is the Employee Benefits business. We saw discovery last week as well, really shooting the lights out. These insurers are just doing fantastically well in a rising market and in an environment that's fairly difficult for them to operate. They shouldn't be struggling to get new business, but seem to bet getting it right anyway. Looking at their underlying investments, RMI are poised to do very well. Their policy is obviously to feed through those dividends to the investors as well. Whether they restructure I think, is going to be a question for Herman B0sman when he gets his feet properly under the desk.

ALEC HOGG: It was interesting talking through the results of the FirstRand Group, which is part of the whole RMI as well, and a suggestion was made that maybe Wesbank is being set up for a spinoff. Could that be the fifth leg for the whole RMI?

GARY BOOYSEN: Potentially. I think it would be very interesting to see Wesbank. We could value it as a standalone business – see it and value it on its own merits – but again, a question I think you should definitely be asking Herman.

ALEC HOGG: Indeed. Well, he'll be here in just a little while. Gary…Petmin: is it a company you follow?

GARY BOOYSEN: Yes, we follow Petmin off and on. Obviously, it's been hit a slide in the prices of its products: anthracite, the coal price, and the iron ore price – both coming off quite sharply and they're putting a lot of pressure on the stock in the results and the aggregate. The slide in prices is around 27 percent, so they're operating in a difficult environment. That said, they have actually, managed to do very well in this set of results. There are a couple of funnies there, that they took impairments with one of their pig iron projects. They took impairments elsewhere as well, so you have these normalised headline earnings up, but their actual headline earnings per share down. When I left, the stock was up 13 percent. It is a small cap. It does suffer from a little bit of liquidity issues, but overall, it looks like a decent set of results.

ALEC HOGG: It's had a good day today, but it's come down 12 percent at the moment. It's come down recently. Brad Doig will be on Business Tonight at 7:00pm this evening. The other set of numbers from Spur – any surprises there?

GARY BOOYSEN: No, I don't think any surprises there. We like Spur as a business. We think that in the sector, it's one of the better value business. Again, it's business as usual but they're managing to grow a few new stores. They're looking especially into expanding into our neighbouring countries now as well with more stores planned. I think they revamped about 63 stores as well, so they're doing well. They mentioned that obviously, the consumer environment, especially in the lower LSM's is hitting them. It especially hits them in their Dorado's business, which caters for that demographic, but overall it's a very solid set of numbers and a group that I think can go from strength to strength.

ALEC HOGG: Well, they also have a business partnership now with Grand Parade Investments. Hassan Adams seems to have a very good eye for spotting winners.

GARY BOOYSEN: I hope they bring their expertise into the rollout of Burger King for Grand Parade as well. I think that little partnership is going to work out very well.