Mark Ingham's insights into JSE listed results being released 28 to 30th August 2017 -

Included in this roundup:

• 28 August - Bidvest
• 30 August - Sibanye

Bidvest - 28 August 2017     

Bidvest has already flagged an approximate 5% rise in headline EPS for the year ended June 2017, which takes EPS to 1107 cents. This would translate to earnings of R3,7 billion. The diversified industrials group reports results on Monday, 28 August.   

Trading conditions locally are poor and deteriorating. Nonetheless, Bidvest has strong market positions and proven cash generating ability in good and bad times.

Bidvest is 100% South African, or neighbouring, assets and whilst there are aspirations to grow abroad, as evidenced by the recent acquisition of Noonan, it’ll take time before Bidvest gets to the 90% of profits that Bidcorp generates outside of South Africa in foodservice.

Net debt should end the year at around R7 billion or 35% of equity with EBITDA interest cover at a comfortable 7x.

Bidvest has been listed without the Bidcorp assets since 30 May 2016, when Bidcorp was spun out from Bidvest. Post unbundling, shareholders held an equal share in both Bidvest and Bidcorp.

There has been substantial increase in shareholder value with the unbundling. The current Bidvest price is R175 and the Bidcorp share price R300, for a combined R475. If we take a pre-unbundling announcement price of R310 in January 2016 this means shareholders in Bidvest and Bidcorp on a combined basis have enjoyed a more than 50% gain.   

Whilst I have a three-year compound growth rate in EPS of a relatively modest 6%, there is little doubt that further acquisitions will assist with a stronger performance.   

The stock is on a 15,8x trailing PE ratio which compares with 25,4x for Bidcorp. However, given the diversified international nature of Bidcorp, a lower cost of capital, and good growth profile, a premium rating relative to Bidvest is warranted. Nevertheless, Bidvest offers relative attraction at these levels and has a gross dividend yield of 3%.

Sibanye - 30 August 2017

Sibanye, the gold and platinum miner, reports interim results for the six months ended 30 June 2017 on Wednesday, 30 August. The company will report a headline loss per share of about 145 cents, an adjusted loss per share of 65 cents, and a net loss per share of 320 cents. But investors should not get deflected by this loss, there are reasons for this that are not fully reflective of the underlying business fundamentals or what the future earnings outlook is.

Investors need to factor in the 1,2 billion additional shares in issue due to the $1 billion rights issue. This will be temporarily dilutive to earnings per share. Before the rights issue there was 929 million shares in issue whereas there are 2,1 billion shares in issue today, an increase of 129%.

Costs appear to have been well managed in both the gold and platinum operations with all-in-sustaining costs lower on a like-for-like basis. The newly acquired Stillwater PGM operations in Montana, United States, are included for two months with all-in-sustaining costs at $622/2Eoz, in line with 2016.

Assuming an average gold price at $1250/oz and palladium at $780/oz, I am estimating net income to shareholders on a normalised basis of R2 billion in 2017, down from R3,7 billion in 2016. With 2,1 billion shares in issue this will translate to EPS of around 100 cents per share, down from 397 cents per share in 2016. However, EBITDA is forecast to be higher at over R9 billion. Net interest on borrowings will increase from R572 million to R1,3 billion because of corporate action. 

In 2018, investors can expect earnings to rise sharply should prevailing metals pricing and currency prevail. I currently have earnings at R5,4 billion with EPS at 254 cents.

EBITDA in 2018 is forecast at R15,5 billion, which compares with R8,2 billion in 2016. PGM, including Stillwater, will be 33% of EBITDA in 2018 but estimated to rise to over 40% of total EBITDA in 2019. At this level of profitability, gearing and interest costs will fall quite nicely.    

Stillwater is more sensitive to palladium rather than platinum per se with 77% of production ounces being palladium and the balance platinum. The price has been rising this year to around $930/oz, benefiting in part from improved demand for petrol engine application following the diesel defeat device scandal and a deficit in the metal. Palladium averaged $612/oz in 2016 and could average close to $850/oz in 2017.

Stillwater is a relatively low-cost producer at $438/oz in cash costs with all-in sustaining costs at $622/oz.

I previously valued Sibanye at 2500 cents per share and maintain that. At 1950 cents, the stock has risen by approximately 30% since its low of around 1500 cents post the closing of the rights offer in June.   

Wishing you profitable investing, until next time.

Mark N Ingham     

Read more fundamentals by Mark Ingham:

• Brait
• Sibanye
• Barclays 
• Sun International
• Telkom
• Sasol
• Naspers
• Woolworths
• Attaq
• AngloGold Ashanti
• Massmart
• Bidvest
• SARB
• Glencore