Four stocks to keep an eye on in 2017
It’s true: Income is scarce and global growth is sluggish. Tomorrow’s returns may not match yesterday’s. In light of all the crises of the past two years (think Eskom, NeneGate, NkandlaGate and #CabinetReshuffle) – throw in the recent downgrade from ratings agencies like S&P and Finch – investor’s confidence has hit an all-time low in South Africa. Despite the gloomy forecasts, we’ve been keeping a close eye on a few companies currently trading on the Johannesburg Stock Exchange (JSE), and four of them, we believe, will offer investors great value in 2017.
Company #01: Remgro. Through Stellenbosch-based investment group, Remgro, investors are exposed to listed assets such as Mediclinic and the First Rand Group, but also to a number of quality, unlisted shares comprising around 22 percent of the net asset value (NAV) of the group. While Mediclinic share price dropped significantly, due to one-off events, such as the Al Noor Hospital Group transaction amounting to R788 million, buying Remgro shares will provide investors with exposure to Mediclinic at a marked reduced price, a quality unlisted portfolio and a premium bank, First Rand – at an attractive discount. Dividend Yield: 2.29%
Company #03: Hudaco Industries. Hudaco Industries remains a well-managed company despite tough business conditions, resulting from a slump in industrial production and mining industries. But Hudaco has managed to diversify its product range and its share performance is likely to beat market expectations. While it’s an unloved share in terms of its rating, it will create opportunities for patient investors. Dividend Yield: 3.82%
Company #04: Shoprite. 2016 was a very tough year for South African retailers. The economy ground to a halt and along with the drought, retailers’ profit margin declined. However, Shoprite managed to grow revenue at double-digit rates. It’s also said that the largest shareholders of both Shoprite and Steinhoff have initiated and facilitated discussions to combine their respective African retail businesses with the aim to create a retail business with significant scale and an international footprint. Dividend Yield: 2.45%
Company #02: Metair Investments. Although down-rated significantly over the past few year, mainly as a result of its struggling European operations (on the back of deteriorating political relations between Turkey and Russia). With the tension behind us, business as usual conditions will restore confidence in Metair and improve margins. Alwyn van der Merwe, director of investments at Sanlam Private Investments, told BusinessTech.co.za that he expects Metair’s earnings per share to jump from R1.50 in 2016 to R2.44 in 2017 – an immense 62% growth. “This puts the share on an 8 times forward earnings multiple, which is very cheap. If Metair’s operational results do turn around as expected, this share will certainly reward investors,” he says.Dividend Yield: 2.86%