Profits are more than 6x higher at AngloGold Ashanti (JSE: ANG)
Production has increased at the right time
Mining companies cannot control the price of commodities. All they can control is their production, with shareholders hoping for production increases at a time when prices are nice and juicy. At AngloGold, this has been the case in the first quarter of 2025.
Driven by acquisitions and output improvements, gold production increased by 28% at a time when the average gold price per ounce was 39% higher (in dollars). The cherry on top was a drop of 2% in cash costs per ounce as well as all-in sustaining costs per ounce at owned operations.
Although there were some challenges in the joint venture operations, these were swept away by the strong performance in owned operations. A group level increase in cash costs per ounce of 4% wasn’t enough to spoil the party, with AngloGold achieving a 158% increase in adjusted EBITDA. More importantly, HEPS jumped from $0.14 to $0.88 – or 6.3x higher year-on-year!
Capex increased 27% year-on-year, so they are still investing for the future as one would expect. That seems like a modest increase in the context of current profits, which is why the balance sheet is looking so strong right now. Adjusted net debt to adjusted EBITDA is just 0.15x, down from 0.86x a year ago.
AngloGold is now paying an annual base dividend of $0.50 per share, which means there’s a quarterly dividend of $0.125 per share. This is tiny in the context of HEPS for this quarter. In Q4 each year, there will be a further payment to take the dividend up to 50% of free cash flow. In other words, they are now just playing the dividend aristocrat game that is tried and tested on the US market, with consistent but artificially low quarterly dividends.
The share price is up 78% over 12 months and has more than tripled over 3 years.
The Barloworld deal hasn’t reached sufficient acceptances (JSE: BAW)
The deadline has been extended to try and save the deal
After the scheme of announcement for the take-private of Barloworld failed, the standby offer kicked in. Technically, the offeror has the ability to walk away if they don’t reach a 90% acceptance rate. The technical reason is that 90% is the level at which you can force a squeeze-out, which then acts like a scheme anyway and ends up with a 100% holding.
But if they didn’t get the scheme right (a 75% approval threshold), then it was never going to happen that they would get to 90%. I don’t believe that the 90% threshold is relevant for any reason other than to give the offeror maximum flexibility. My suspicion is that they would go ahead with the offer at a far more modest acceptance rate, but it does need to be above the current level of 46.93%.
To try and improve the current rate, they are extending the deadline for acceptances to 30 June 2025.
The share price is currently at R105 and the offer price is R120, so the market is pricing in a failed deal at the moment.
Collins Property Group is recycling capital from SA to the Netherlands (JSE: CPP)
They are selling properties worth almost R650 million
Collins Property Group holds three properties that are leased to Trident Steel, located in Durban, Roodekop and Port Elizabeth. The tenant has been in the properties for over 20 years and will be buying the properties from Collins for a total price of just under R650 million.
Property nerds will enjoy how nuanced the deal is for the Roodekop property, as Trident doesn’t want to acquire the two other properties at the site that are subject to a notarial tie. This leads to a bare dominium and usufruct structure, with a plan by Collins to break the notarial tie and establish an industrial estate.
Another interesting point is that Collins will pay R32.8 million for the cost of repairs to the property on the transfer date, with that amount coming out of the R650 million purchase price based on my understanding.
The value of the net assets is estimated to be R617 million, so that’s perfectly in line with the selling price less the repair costs. The interim net operating income was R43.6 million. If we just annualise that, the yield on the amount net of repair costs is around 14%.
That’s a high yield, but these are single tenant sites in industrial areas. I’m not surprised that Trident is quite happy to buy these properties, as that’s a decent return on capital for them and it secures the sites forever. As for Collins, their plan is to recycle this capital into properties in the Netherlands. We haven’t seen much in the way of offshoring of capital in the property sector recently!
Mantengu Mining has pressed the big red button on share price manipulation (JSE: MTU)
Either they are right, or the market will never touchthis management team again
At some point, Mantengu Mining either had to stop writing wild SENS announcements about share price manipulation, or actually take the big step. After the recent announcement that was even weirder than the preceding ones, they’ve finally gone with the latter.
And boy, have they come out swinging. The nuclear button has been pressed.
Mantengu Mining has filed a criminal complaint with the Hawks against JSE executives and others. They claim that this comes after 18 months of investigative work into alleged share price manipulation. To claim that the JSE is in bed with some kind of syndicate is truly extraordinary stuff.
Of course, they can’t help but add daft comments like this into the announcement: “MTU’s trading statement, released on SENS on 6 May 2025, indicated that it expects to report earnings that are significantly more than its market capitalisation at the time of the trading update. The Company believes that this disconnect stems largely from alleged share price manipulation.” – I will remind you that this is a company that guided a headline loss per share. The earnings per share number is less important.
There are literally only two outcomes here. Either they are right, in which case this will be quite the scandal and the market will forgive the company for some of the additional arguments made in these announcements that show poor understanding of markets. Or, they are completely wrong, in which case the “you’ll never work in this town again” joke isn’t a joke in this case.
Time will tell. Either way, I suspect there are more peri-peri flavoured SENS announcements to come.
Montauk Renewables reported a loss (JSE: MKR)
As usual, they’ve put the bare minimum effort into investor relations
I’m becoming increasingly convinced that Montauk Renewables doesn’t actually want more shareholders on the JSE. Their SENS announcement simply directs you to the Form 10-Q on the SEC website (as they are listed in the US) for their quarterly announcements. Now, I have no problem with that, but a Form 10-Q is a completely daunting thing for non-professional investors to understand.
If you hunt around on the website, you’ll find a presentation. Sadly, the slides mainly consist of screenshots of financial tables, so that doesn’t exactly help either.
So, the 10-Q will have to do, which means you need to work through the financial tables until you finally reach the management commentary. The TL;DR for Montauk is that they operate Renewable Natural Gas (RNG) projects that either supply the transportation industry or use the RNG to produce Renewable Electricity.
In terms of the financials, the latest quarter saw a 9.8% increase in revenue. A 15.8% increase in operating expenses quickly ruined that party, taking quarterly operating income down from $2.37 million to just $410k. Once you take into account interest expenses, there’s a net loss of $464k vs. net profit of $1.85 million in the comparable period.
The share price is down 49% over 12 months. If they are going to report losses and aren’t going to put any effort into properly explaining their strategy to the market in a way that is easy to understand, that I don’t see that trajectory improving anytime soon.
Newpark REIT is slightly ahead of guidance (JSE: NRL)
Lower than expected operating costshave been helpful
Newpark REIT has released a trading statement dealing with the year ended February 2025. The good news is that they ahead of the full-year guidance that was given at the time of the interim results, which suggested funds from operations per share of between 67 and 78 cents per share.
Thanks to lower operating costs than they expected, they are coming in at 78.37 cents per share. The total dividend for the year is expected to be the same (which means a final dividend of 48.37 cents), representing an 11.4% year-on-year increase in the total dividend.
Old Mutual picks an ex-Sanlam exec as the new CEO
Given the relative outperformance of that group, that’s a good idea
Old Mutual has announced that Jurie Strydom will be replacing Iain Williamson (who is retiring) as CEO of the group from 1 June 2025. Strydom is very highly qualified (including an MBA from MIT) and has served as CEO of Sanlam Life and Savings, among other companies. He also has a particular grasp of fintech.
Old Mutual has been the perennial underperformer in the sector and isn’t exactly renowned for innovation as a whole, so the board appears to be taking steps to rectify this.
The market certainly agreed, sending the share price 10% higher on the news.
A rough day for Raubex shareholders (JSE: RBX)
Whistleblower allegations will delay the release of financials
Raubex closed 7% lower on the day after announcing that financials for the year ended February 2025 will be delayed based on the receipt of an anonymous whistleblower report on 22 April. It alleges unlawful or improper conduct regarding the group.
Although these allegations are unproven at this stage, the board is taking them seriously. An investigation is being launched and no guidance has been given for when results will be announced. At this stage, the guided earnings range in the trading statement is unchanged.
Depending on how long this takes of course, Raubex could end up being temporarily suspended from trading if the results are sufficiently delayed. At this stage, there’s no guarantee that this will be the outcome. In fact, there are no guarantees of anything really!
Sibanye’s profits have jumped year-on-year (JSE: SSW)
And yet the share price is flat over 12 months
I think that the market has been so battered and bruised by Sibanye-Stillwater that investors find it hard to extrapolate any kind of good news. Despite the latest quarter reflecting adjusted EBITDA that has nearly doubled year-on-year, the share price is flat over 12 months. This shows you how much uncertainty there is. It’s going to take a few strong quarters to improve sentiment here.
Sibanye can’t do much about the share price, but they can do a lot about their earnings. There have been a number of restructuring activities at the group, contributing to a 74% increase in adjusted EBITDA in the South African PGM operations. The gold price has obviously done wonders for their gold business, increasing adjusted EBITDA by 178%. Sadly, the US PGM underground business suffered a loss this quarter, so it’s not all good news.
With Sibanye, it’s very important to understand the relative sizes of the underlying operations. The South African PGM operations are the most important, contributing R2.53 billion in adjusted EBITDA in this quarter. Next up is South African gold, with R1.8 billion in adjusted EBITDA. Thanks to a strong improvement, the Australian Century zinc retreatment business is next, with adjusted EBITDA of R178 million. Normally, the US business would be much more important than the Australian business, but the US could only manage positive adjusted EBITDA of R20 million as Reldan and the recycling business slightly more than offset the loss in the underground operations. Finally, the nickel business in Europe suffered negative EBITDA of R181 million, which is pretty similar to the number in the comparable quarter.
Despite the narrative around the circular economy and the other exposures in Sibanye, this remains a PGM and gold group at its core. The gold business is being flattered right now by the gold price. The market knows that PGMs are key, which is why there is much caution in the share price – there are many burnt fingers in that space in the local market. Although the share price is flat over 12 months and this doesn’t necessarily make sense in the context of latest earnings, it’s worth pointing out that the share price is up 43% year-to-date.
Nibbles:
Director dealings:
Stephen Saad has bought another huge chunk of Aspen (JSE: APN) shares, capping off a week of a strong message sent to the market about the long-term viability of the group. The latest purchase is for R83 million.
The recently retired CFO of ADvTECH (JSE: ADH) sold shares worth R10.3 million. Whilst I understand the need to diversify into retirement, I never enjoy the messaging behind execs selling shares as soon as they retire. It doesn’t imply a long-term mindset among execs.
The financial director of KAL Group (JSE: KAL) bought shares worth R99k.
The CEO of Ascendis (JSE: ASC) and a major shareholder each bought shares worth nearly R31k.
A number of Anglo American (JSE: AGL) directors reinvested their dividends in shares in the company. Ditto for several British American Tobacco (JSE: BTI) directors. Although I don’t usually bother with these reinvestments (in my view, they aren’t nearly as strong a signal as a purchase using other cash), I thought I would make you aware that this happens in the market.
London Finance & Investment Group (JSE: LNF) shareholders will receive their distribution of R17.39188 per share on 19 May. The last day to trade is 12 May and the listing will be terminated from 20 May.
A wave of TikToks from Chinese factory owners is reshaping how we think about where the things we buy come from. By casually revealing that many brandnamed products are made in Chinese factories, these videos are forcing a reckoning with a deeper bias: our enduring discomfort with the words “Made in China”.
There’s a curious influx of videos making the rounds on TikTok. In them, Chinese factory owners hold up luxury handbags, shoes, or athleisure wear and casually mention the brand they’re made for. Lululemon. First Ascent. Under Armour. Sometimes the logos haven’t even been added yet. Other times, the products are fully finished, just awaiting a flight to Paris, Milan, or Los Angeles.
Even when it comes to brands that you would reasonably expect to be made in China, like Nike, videos like these still rack up engagement:
For a certain corner of the internet, these videos have hit like a slap. They expose something we’ve all sort of known but deliberately ignored: that “Made in China” and big-name brands are not mutually exclusive. In fact, they often overlap.
Which brings us to the question: why do we have such a negative association with goods that are manufactured in China, even in the cases where the quality of the products are on par with those that are produced locally or elsewhere? We can make arguments about everything from the need to protect local manufacturing to the environmental impacts of globalisation – and all of those arguments are valid. But to have a truly well-rounded conversation, we need to acknowledge that there may be an element of anti-Chinese bias at play.
A uniquely Chinese headache
Monosodium glutamate (MSG) has had a rough PR run. On paper, it sounds pretty tame – it’s just the sodium salt of glutamic acid, which is a naturally occurring amino acid found in foods like tomatoes, mushrooms, and parmesan cheese. Toss it into a pot of stew or a meat broth and suddenly everything tastes a little deeper, a little richer, a little more oomph. In the flavour world, that oomph has a name: umami.
Back in 1908, Japanese chemist Kikunae Ikeda decided that the flavour of kombu (a type of seaweed used in dashi broth) was simply too delicious to leave unexplained. So he went to work to extract the magic molecule behind the savoury sensation, and called it monosodium glutamate. He even patented the process. By 1909, the Suzuki brothers were selling it commercially through a jointly-owned patent deal under the now-famous name Ajinomoto, which roughly translates to “the essence of taste”.
In the early days, MSG was marketed with a sleek sense of sophistication. The fine white powder was sold in slim glass bottles aimed squarely at the science-loving, hygiene-obsessed bourgeois housewife. In China, it was a hit with Buddhists, many of whom were vegetarian but still wanted their food to taste like something. MSG offered a way to dial up flavour without adding meat to the dish. In no time at all, MSG became a staple of Chinese cooking.
By the 1950s, MSG had quietly slipped into Western food supply. You could find it in everything from snacks and canned soups to frozen dinners and even baby food. It was everywhere and no one seemed to mind. Until they did.
In 1968, a doctor wrote a letter to the New England Journal of Medicine after a trip to a Chinese restaurant left him with arm tingles, fatigue, and a fluttery heart. He wasn’t sure what caused it – maybe the MSG, maybe the salt, maybe the cooking wine. But the seed of suspicion was planted. Readers flooded the journal with similar tales of post-dumpling malaise, and “Chinese Restaurant Syndrome” was born.
Researchers jumped on the trend and started churning out studies linking MSG to everything from headaches to brain fog. Newspapers fanned the flames: “Chinese Food Make You Crazy? MSG is No. 1 Suspect”, screamed the Chicago Tribune. Pop-science books with ominous titles like Excitotoxins: The Taste That Kills didn’t help. Suddenly, a molecule that had been quietly enhancing umami since the early 20th century was cast as a culinary villain.
The problem was that those early studies wereriddled with flaws. Most notably, participants knew when they were consuming MSG, which (scientifically speaking) breaks the whole point of a blind trial. Later, more rigorous research found that when people weren’t told they were eating MSG, most didn’t react at all. Even self-proclaimed MSG-sensitive folks were fine unless they thought they were eating it.
So why did the panic persist? Well, part of it has to do with the deeply racialised framing of Asian food in the West. MSG became shorthand for “unnatural,” “dirty,” or “foreign”. To expose the xenophobic roots of this fear, you only have to consider that there is no “Pringles Syndrome” or “Hot Dog Syndrome”, despite the fact that both of these things contain as much MSG as the local Chinese restaurant’s Lo Mein.
From the late ’60s through the early ’80s, “Chinese Restaurant Syndrome” was treated as legitimate medical concern. It was the gluten intolerance of its day, except backed less by science and more by racial biases. Yes, a very small group of people may legitimately react to glutamate, but those cases are rare and not exclusive to Chinese food. Meanwhile, the FDA has kept MSG on its “generally recognised as safe” list this entire time.
And yet, public perception hasn’t kept up. Why? Because our brains love a neat narrative. If you once felt woozy after Chinese takeout and someone told you MSG was to blame, that’s the explanation that sticks. It’s what psychologists call the availability heuristic: we grab onto the most obvious answer instead of digging deeper. Once that belief is locked in, new info just kind of bounces off.
This is how we ended up with a world where Doritos are fine, but dumplings are suspect. I think the late superstar chef Anthony Bourdain said it best in a 2016 interview: “You know what causes Chinese Restaurant Syndrome? Racism.”
Luxe-for-less
If MSG was the canary, then the mine is the West’s ongoing discomfort with the idea that China could be both a producer of quality and a source of cultural legitimacy. This isn’t just about food; it’s about a broader, deeply ingrained narrative: things made in China are cheap, fake, or suspicious – unless, of course, a Western logo has been stitched on top.
Here’s where things get awkward.
For years, “Made in China” was Western shorthand for cheap and low-quality goods, but that reputation has often lagged behind reality. Today, China’s manufacturing sector is one of the most advanced globally, with factories operating at a scale and precision that many Western producers struggle to match. In 2023, China’s manufacturing industry generated$4.8 trillionin value added, making up 27% of the country’s total economic output. By contrast, the US, which was once the undisputed global manufacturing powerhouse, saw manufacturing contribute just over 10% to its economy in the same year.
From aerospace components to iPhones to high-end fashion, Chinese OEMs (original equipment manufacturers) are not only technically capable but often indispensable to the global supply chain (as a handful of American politicians are about to find out).
This capacity for excellence is not lost on luxury and aspirational brands. Companies like Prada, Nike, and even Hermès have tapped Chinese factories (sometimes quietly, sometimes overtly) to produce or source parts of their collections. Hermès, for example, launched the Shang Xiabrand as a way to fuse Chinese artisanal traditions with luxury positioning, signaling a strategic move to embrace Chinese design without diluting its French heritage.
Despite this, Western suspicion toward Chinese-made goods continues to smuggle in old colonial assumptions: that Asian products are inherently suspect, or that anything made outside of Europe is counterfeit until proven otherwise. The panic over MSG in Chinese food is mirrored in the continued handwringing over the authenticity of luxury goods emerging from Chinese supply chains, even when those chains are contracted by Western brands themselves.
A story with many sides
And yet, this is not a simple story of Western ignorance. Some of the discomfort is not unfounded. China’s manufacturing prowess has often been built on the backs of poorly paid labour, long hours, and minimal regulatory oversight. In certain sectors, worker exploitation, unsafe factory conditions, and egregious environmental degradation remain ongoing issues. These are not problems unique to China, but their scale there (and the opacity of many factory operations) makes them harder to ignore.
So, we are left in a bind. China appears to be both the villain and the hero in the global manufacturing narrative. It’s a place where extraordinary craftsmanship coexists with troubling labour practices and where cutting-edge innovation operates alongside environmental shortcuts. To say that Western distrust of Chinese manufacturing is entirely racist or misplaced is too simple. But to pretend it is purely about ethics, and not also tinged with historical bias, is equally dishonest.
The truth is uncomfortably layered, much like those supply chains we’ve spent decades pretending are simple. As Chinese cars fill South African roads and cause chaos for legacy European brands, perhaps this bias is finally starting to disappear.
About the author: Dominique Olivier
Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.
She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.She now also writes a regular column for Daily Maverick.
At AB InBev, consumers are sending a clear message about alcohol (JSE: ANH)
The growth is coming from no-alcohol products
There is a strong recent trend around alcohol that shows just how much things have changed. With a focus on wellness and a deeper understanding of what alcohol does to the body (specifically, too much of it), consumers are increasingly choosing to either drink less or drink none at all.
Will it eventually go the way of smoking? I’m not sure. It’s not impossible, I’ll tell you that much.
In the latest quarterly results, AB InBev achieved revenue growth of just 1.5% on a constant currency basis. The no-alcohol beer portfolio grew revenue by an impressive 34%, so you can clearly see the trend here. Beer volumes fell by 2.5%, which means there’s even pressure on beer as a whole.
The standout is Corona Cero, which grew volume by triple digits – in other words, volume more than doubled! COVID really was the ultimate brand awareness tool for the word “Corona” and AB InBev has been taking advantage ever since.
It’s also important to recognise that there are different regional trends. Although volumes as a whole might be down, South American markets actually achieved growth in volumes and markets like Colombia had record high volumes. Here in South Africa, volumes were down low-single digits, but there was strong growth in Corona and Stella Artois – the more premium options.
Thanks to cost management, normalised EBITDA was up 7.9% and margin expanded by 218 basis points to 35.6%. Underlying earnings per share increased by 7.1% as reported in USD, or 20.2% on a constant currency basis. That’s a solid outcome off such modest revenue growth.
enX: one of the casualties of the mysterious disappearance of loadshedding (JSE: ENX)
Continuing operations have taken a knock
enX has released a trading statement dealing with the six months ended February 2025. There have been significant disposals by the group, so looking at total earnings isn’t the most helpful approach. Instead, it makes sense to look at continuing operations.
On that basis, HEPS is expected to fall by between 23% and 35%. This unpleasant reality has been driven by the lack of loadshedding, as enX is one of the companies that saw a way to address the market opportunity created by Eskom’s incompetence. The miraculous improvement at Eskom has left some companies in serious trouble, as they built businesses around a desperate consumer need that suddenly disappeared. A drop in revenue in the Power segment of 10% doesn’t seem too bad in the broader context of what has happened, but it was enough to put major pressure on continuing earnings.
These numbers suggest that the “easy” disposals at enX may already have been banked, leaving the group with a trickier situation going forwards.
Better quality emeralds on the horizon for Gemfields (JSE: GML)
Open-pit mining will recommence at Kagem
In December, Gemfields suspended mining at Kagem so that they could focus on processing the ore stockpile that they had. This processing has been in line with expectations, but has resulted in lower quality emeralds. This must be a contributing factor to the recent auction results, although trying to figure out the trend in price per carat remains an impossible task due to quality differences.
What we do know is that management is clearly feeling more confident about the emerald market, as they’ve made the call to recommence open-pit mining in the pursuit of premium emeralds.
And growth at Agrimark was too slow to offset this effect
KAL Group released results for the six months ended March 2025. With fuel prices down by an average of 12.4% year-on-year and with the group having invested heavily in the forecourts business, it was never going to be the most lucrative period in the group’s history.
To add to the pricing pressure, fuel volume performance was down 2.6%. Interestingly, petrol outperformed diesel, which must at least be partially due to reduced loadshedding and associated demand for generators. Although it was a difficult period for PEG Retail Operations (the group’s fuel business), they did win market share.
With gross profit up by only 0.9% (gross profit itself, not margin), even the solid performance of expense growth of just 1.9% was too much for the income statement to handle. EBITDA fell by 2.1% and profit before tax was down 3.9%. Recurring headline earnings per share fell by 3.7%.
Interestingly, KAL has both positive and negative exposure to interest rates. They earn interest on credit sales and they pay interest on bank debt. Both interest metrics decreased due to lower average interest rates and balances. The group’s interim net debt to EBITDA was constant at 3.3x and they expect to see a slowdown in the reduction of debt in the second half due to the planned capex spend.
The Agrimark business grew revenue by 2.8% and profit before tax by 2.4%. I think it’s impressive that margins were only slightly down despite the slow top-line growth. Something I found quite interesting is that the group disposed of 9 fuel sites from PEG to Agrimark. They need to be careful in mixing their drinks here, as investors probably won’t appreciate a situation in which there isn’t clear delineation between the two income lines.
Despite the obvious pressure in the business, the interim dividend increased by 3.7% to 56 cents. This is a sign of management’s confidence in their assertions that the second half of the year will be better than the first half. It’s a difficult business to try and predict, with exposure to everything from the impact of Trump’s tariffs on the agriculture industry through to local fuel price trends.
The shape of Lesaka’s business has changed (JSE: LSK)
Net revenue is a more important metric than revenue
Income statements can be tricky things to interpret. Even revenue isn’t always simple, particularly if there are commissions or agency fees payable on amounts coming into the business. Net revenue, which is what’s left after such fees, is what pays for operating costs and eventually dividends. This is therefore the more important metric to use.
At Lesaka, the difference is incredibly important in the latest quarter, which is the third quarter of the financial year. Net revenue as a percentage of revenue increased from 36% in the comparable quarter to 54% in this quarter. On a year-to-date basis, the increase is from 36% to 49%. This is why net revenue increased by 43%, despite a slight drop in revenue.
Operating income in this quarter was impacted by $2.3 million in transaction costs. In the comparable period, transaction costs were $0.9 million. A drop in operating income of $200k therefore doesn’t look bad when you consider that the change in transaction costs was $1.4 million. Split out those costs and there was a $1.2 million increase in operating income.
Group adjusted EBITDA increased by 29% measured in ZAR, which is in line with the guidance that the company provided. Whether you agree with this metric or not, it’s the one that growth investors tend to focus on. As long as they keep hitting guidance on that metric, they will have supporters in the market.
If we look deeper, the Merchant Division grew net revenue by 58% and adjusted EBITDA by 7%. The Consumer Division was good for a net revenue increase of 32% and adjusted EBITDA growth of a meaty 65%. The Consumer Division is the smaller of the two in terms of adjusted EBITDA, but not for much longer at this rate.
The metric that gets glossed over somewhat is the huge interest expense. The year-to-date expense of nearly $17 million is vastly higher than operating income (before interest and fair value changes) of $1.3 million. They are sitting with over $194 million in long-term borrowings. There are very large senior facilities in the mix here, so my view is that the major risk facing investors at the moment is related to the balance sheet. Lesaka has to grow quickly enough to build sufficient equity value that shareholders will be left with something meaningful once the banks have eaten at the table. As useful as adjusted EBITDA is for growth stocks, that’s usually because such stocks aren’t sitting with large piles of debt.
The growth is there at least, with expected growth in net revenue of 23% based on guidance for FY26 vs. FY25. Adjusted EBITDA is expected to grow by 42% over that period. The medium-term target for net debt to EBITDA is 2x vs. the current level of 2.8x.
Mondi’s production carried them through a quarter of weaker selling prices (JSE: MNP)
This certainly looks much better than Sappi’s update (see further down)
By late afternoon trade, Mondi was up 2% on the day and Sappi was down an ugly 14%, both in response to quarterly updates by these competing groups. It’s not hard to guess who the winner was.
It will become clear further down in the Sappi update why the share price took such a beating. This section of Ghost Bites is focused on Mondi, which put in a flat quarter-on-quarter EBITDA performance once you adjust for the forestry fair value gains and losses that introduce such additional volatility into the numbers.
Q1’25 underlying EBITDA was €290 million including the fair value gain and €288 million excluding it. Q4’24 underlying EBITDA was €261 million including a fair value loss and €288 million without it. I wasn’t joking when I called the performance flat excluding those fair value moves!
Right now, flat is good. Average selling prices were under pressure this quarter, so Mondi had to dig deep and put together a solid production performance. Planned maintenance timing is also relevant here, making it difficult to always directly compare the companies on a quarterly basis. This was a quarter in which Mondi had fewer planned maintenance shuts than before, which obviously helped.
Encouragingly, there are signs of better pricing to come, as order books are strong heading into the new quarter. It’s a decent start to the year for Mondi in a difficult operating environment.
Ahead of a capital markets day, Fabricio Bloisi has written to Prosus and Naspers shareholders (JSE: PRX | JSE: NPN)
I’m a shareholder and I like the vibes of this letter
There is basically a zero percent chance that the previous management team at Prosus / Naspers would ever have written an official communication that starts like this:
Confident, casual and inspiring. This is the difference when a founder is running a business, rather than a corporate caretaker. I love it.
Of course, confidence means nothing without results. The letter confirms that the target of adjusted EBIT of $400 million for FY25 has been exceeded, as they expect to report more than $435 million for the year. There’s a lovely statement in the letter that is included shortly after that good news: “This is important because we should be measuring our results not by the millions, but by many, many billions and we will get there. I will speak more about projections after our results.”
If the projections look anything like the recent growth rates, then all is well. OLX grew adjusted EBIT by over 50% and iFood (Bloisi’s bread and butter, literally) more than doubled its adjusted EBIT.
Bloisi is clearly positioning Prosus as a way to give investors exposure to growth assets outside of the US. Given the current state of political affairs in the US, the timing couldn’t be better. I’m long Prosus and starting to wonder if I’m long enough.
A poor quarter for Sappi (JSE: SAP)
EBITDA has nosedived and ruined the interim result
I’m not invested in the paper sector, mainly because I prefer not to treat each earnings release as a lottery. It’s borderline impossible to forecast how these companies will perform, as evidenced by the latest quarterly numbers at Sappi.
Revenue was flat year-on-year, but adjusted EBITDA fell by 41%. Net debt increased by 22%, so by now you should be feeling worried about the bottom-line performance. Those worries would be correct, as they slipped into a headline loss per share of -3 US cents vs. HEPS of 5 US cents in the comparable period.
If we look at the interim results, we find a completely different swing. They were loss-making in the comparable interim period (-17 US cents) and made 8 US cents in earnings in this interim period. As I said, it’s a lottery.
Aside from obvious risks, like productions issues beyond just scheduled maintenance, Sappi also needs to navigate the global trade concerns that are impacting demand and thus selling prices. And in case you’re wondering, the increase in net debt is actually due to a drop in cash, mainly due to the level of capital expenditure. Even with all the uncertainty, they need to keep investing in their operations.
7% of the group’s sales volumes include cross-border trade with the US, so the tariff risks are irritating but not immense. The company also notes that they might even present an opportunity, as they have a strong presence within the US.
With net debt expected to peak in the third quarter based on the capex plan, they could really do with some good luck here. For now, adjusted EBITDA is expected to be at similar levels in Q3 vs. Q2. That’s not really what the market wants to see.
Nibbles:
Director dealings:
Stephen Saad certainly isn’t holding back on buying the dip of Aspen (JSE: APN), the company he co-founded and still runs today. With a purchase of R102 million in shares, he’s sending quite a message here about the company’s resilience at a difficult time.
Des de Beer bought another R4.2 million worth of shares in Lighthouse Properties (JSE: LTE).
At this stage, it really is time that Mantengu Mining (JSE: MTU) handed the SENS release button to an adult in the room. They continue to try and drive this narrative of share price manipulation, which we can all agree is a very serious thing if true. The bit they seem to be missing is they are still making headline losses, so poor share price performance is hardly surprising and not necessarily because of manipulation. In the latest SENS, which reads like an explanation that my children would give me about the owie they got at school, Mantengu goes into great detail about potential shorts on its shares before acknowledging that such trades may in fact be legal. But then, they call it “extremely peculiar” on the basis that “legitimate shorting is generally targeted at blue-chip, high-volume stocks in competing markets” – I have no idea what a “competing market” is, but I can tell you that this is 100% wrong. You won’t really see shorts on highly illiquid stocks, but there are plenty of people (and hedge funds) who will go short on mid-caps with reasonable liquidity. I genuinely can’t understand how Mantengu doesn’t see that this approach is making it very difficult to attribute any credibility to them. Either prove manipulation (and I mean really prove it) or keep quiet and focus on execution in the business, but don’t do this stuff on SENS.
Goldrush Holdings (JSE: GRSP) released a cautionary announcement regarding a potential expansion of the group’s business. As always with these things, there’s no guarantee of a deal going ahead.
In the unlikely event that you are a Deutsche Konsum (JSE: DKR) shareholder, be aware that the company is considering a restructuring proposal that would see property disposals with proceeds of EUR 350 to EUR 450 million by the end of 2027.
Challenges to the Tongaat Hulett (JSE: TON) business rescue plan are still going through the courts. There’s currently an application to try and stop the plan that the applicants are hoping to move to the newly established Insolvency Motion Court in Gauteng. The business rescue practitioners will obviously be opposing this application.
It is no wonder that activity in the South African mergers and acquisitions (M&A) space has been subdued; there has been so much noise, both locally and internationally, that investors have opted to take a cautious approach – for now, anyway.
DealMakers recorded a total of 87 deals for the quarter, valued at R176,4bn. Sector analysis for the quarter shows real estate transactions taking the major share in activity reported, followed by deals in energy, financial services and the industrial and manufacturing sectors. Companies in Africa were the partners of choice for cross border activities by SA-domiciled exchange-listed companies – with nine deals announced of the 23 recorded for the quarter. These deals were across a broad spectrum of sectors, with no trend evident.
The number of private equity deals recorded (both by exchange listed and unlisted companies) continued to decline to 15 (2024: 26 deals). At six, the number of BEE deals for the quarter remained constant, with Exxaro’s extension of its BEE ownership scheme (valued at R16,7bn) making the top 10 deals by value for the quarter.
Source : DealMakers Online
Behind the scenes, in what DealMakers classifies as general corporate finance, activity was also subdued. Only repurchases showed an uptick as companies took advantage of the turmoil in global markets to repurchase shares at discounted values. R107bn worth of shares were repurchased – against R64,6bn during the same period in the previous year.
Sourece: DealMakers Online
Sectors on the investment radar for 2025 include: renewable energy – South Africa has attracted significant international funding to support its push towards sustainable energy solutions; digital infrastructure, as acquisitions and strategic partnerships are sought to enhance connectivity, particularly in underserved areas; and mining, with the likes of Anglo American pursuing strategies involving restructuring, and broader consolidation efforts ongoing in the mining sector.
Trump’s ‘Liberation Day’ tariffs, although now on a 90-day pause, showed the current US administration’s ability to potentially alter the global economic landscape – with South Africa facing the prospect, with some exceptions, of a 30% blanket tariff on exports to the US.
Challenges often provide an opportunity for self-reflection, and for South Africa, there is a unique opportunity to reposition itself as a leader in African trade by strengthening regional trade networks within AfCFTA and beyond, and to leverage public-private partnerships and public sector investment.
DealMakers Q1 2025 League Table – M&A activity by the top South African advisory firms (in relation to exchange-listed companies).
DealMakers Q1 2025 League Table – General Corporate Finance activity by the top South African advisory firms (in relation to exchange-listed companies).
DealMakers is SA’s M&A publication.
The latest magazine can be accessed as a free-to-read publication on the DealMakers’ website
Production at Anglo American’s Moranbah North coal mine, a key asset in the announced November 2024 deal with Peabody Energy, was suspended after an underground fire broke out at the mine in March this year. The incident has created huge uncertainty on the timeframe of the deal. The transaction comprised an upfront cash portion of $2,05 billion and deferred payment of $725 million. The balance of the consideration comprises a $550 million price-linked earnout and a contingent cash consideration of $450 million which is linked to the reopening of Grosvenor coal mine. In response to concerns raised, Anglo American said it did not believe production stoppage at the mine constituted a Material Adverse Change to its agreement with Peabody.
Gold Fields through its wholly owned subsidiary Gruyere, has entered into a scheme of agreement to acquire 100% of the issued shares of Gold Road Resources, with shareholders receiving a cash consideration equivalent to the value of A$3.40 per Gold Road share – higher than its original offer. The consideration per share comprises a fixed cash portion of $2.52 and a variable cash portion equal to the full value of each shareholders’ portion of Gold Road’s shareholding in Northern Star Resources of c.$0.88 per Gold Road share. In addition, if the deal becomes effective, shareholders will receive a special dividend from Gold Road of c.$0.35 per share (A$379 million). The scheme consideration values Gold Road’s equity at c.A$3,7 billion (R43,66 billion) with an implied total enterprise value of c.A$2,6 billion. For Gold Fields the acquisition represents a strategically low-risk opportunity to enhance its portfolio through consolidation of the Gruyere Joint Venture in which it is the operator.
In addition, AngloGold Ashanti (AGA) and Gold Fields have agreed to pause a two-year long discussion around a proposed joint venture to combine their Iduapriem and Tarkwa gold mines in Ghana. During this time, AGA has identified changes in its standalone mine plan for Iduapriem which have the potential to unlock significant additional value. The companies will, for now, focus on improving the current standalone performances of their respective sites while allowing AGA to consolidate the improvements to its long-term mining plan.
AngloGold Ashanti (AGA) will sell its interests in two gold projects in Côte d’Ivoire to Australian Resolute Mining in a move which will allow the miner to focus on its operating assets and development projects in the US. It will sell Centamin West Africa which owns the Doropo Project and the Archean-Birimian Contact – both acquired when it bought Centamin plc in November 2024. The value of the consideration for the sale of the Doropo Project is US$175 million, comprising a cash payment of $150 million plus either (i) the acquisition of the Mansala Project which, as a brownfield project, will provide an additional ore source to AGA’s Siguiri operations or (ii) an additional amount of $25 million if the acquisition cannot be completed within 18 months. A milestone payment of $10 million in cash will be paid for the Archean-Birimian Contact on declaration of a mineral reserve.
Unlisted Companies
Menar, a South African diversified industrial group, has acquired Springlake Colliery from Mylotex. Considered a strategic asset for Menar, Springlake is an underground mine situated within the Klipriver Coalfield near Hattinspruit in KZN. It has the capacity to produce an c.60,000 tonnes of run-of-mine anthracite per month, suitable for export markets in parts of Asia, Europe and South America. Financial details were undisclosed.
In mid-April the JSE has advised Wesizwe Platinum shareholders that the company had failed to submit its financial statements within the three-month period stipulated in the JSE’s Listing Requirements. The company had until the 2 May 2025 to do so, which it failed to do. The company has been warned that if it still fails to submit its annual report on or before 31 May, its listing may be suspended.
aReit Prop was warned in February by the JSE that its REIT status would be removed if it failed to submit a REIT Compliance Declaration as per the JSE Listing Requirements. Although the company objected to the JSE’s decision, the REIT status of the company was removed with effect from 6 May 2025.
The JSE will welcome Shuka Minerals plc to the Alternative Exchange – General Mining sector on 21 May 2025. The mining and development company which has its primary listing on AIM, will take an inward secondary listing on the JSE under the fast-track listing process. The miner’s focus lies in the acquisition and development of valuable mineral opportunities which aim to contribute to the sustainable growth and development of local communities.
This week the following companies announced the repurchase of shares:
Thungela Resources has completed the share buyback announced in March 2025, repurchasing a total of 3,254,559 shares for a total consideration R328 million. The shares will not be cancelled. The group now holds a total of 10,18 million shares in treasury.
Sabvest Capital has purchased 720,000 shares through the market at an average price per share of R94.13 for a total consideration of R67,8 million.
On March 6, 2025, Ninety One plc announced that it would undertake a repurchase programme of up to £30 million. The shares will be purchased on the open market and cancelled to reduce the Company’s ordinary share capital. This week the company repurchased a further 917,581 ordinary shares at an average price of 151 pence for an aggregate £1,38 million.
On 19 February 2025, Glencore plc announced the commencement of a new US$1 billion share buyback programme, with the intended completion by the time of the Group’s interim results announcement in August 2025. This week the company repurchased 18,500,000 shares at an average price per share of £2.47 for an aggregate £45,73 million.
Hammerson plc continued with its programme to purchase its ordinary shares up to a maximum consideration of £140 million. The sole purpose of the buyback programme is to reduce the company’s share capital. This week the company repurchased 344,310 shares at an average price per share of 255 pence for an aggregate £878,872.
In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 629,347 shares at an average price of £32.63 per share for an aggregate £20,54 million.
During the period 28 April to 2 May 2025, Prosus repurchased a further 3,983,979 Prosus shares for an aggregate €164,85 million and Naspers, a further 177,844 Naspers shares for a total consideration of R875,4 million.
Three companies issued profit warnings this week: Astral Foods, Mantengu Mining and enX.
During the week eight companies issued cautionary notices: Tongaat Hulett, Gold Fields, Kore Potash, PSV, Metrofile, TeleMasters and Goldrush.
iSUPPLY, an Egyptian B2B med-tech, has announced a US$3 million Sharia-compliant revenue-based revolving finance agreement with Bokra. i‘SUPPLY looks to digitise the pharmaceutical business by providing a one-stop-shop solution to quickly predict and overcome supply chain disruptions. Leveraging artificial intelligence and predictive analytics, the platform streamlines procurement and optimises inventory, helping resolve long-standing inefficiencies in the healthcare supply chain.
Metals exploration company KoBold Metals has agreed a framework agreement to buy AVZ Minerals’ interests in the Manono lithium deposit in the Democratic Republic of Congo. The agreement will enable KoBold, which is backed by billionaires Bill Gates and Jeff Bezos, to invest more than $1 billion to bring lithium from Manono to Western markets.
Nigerian heath-tech Platos Health, has raised US$1,4 million in pre-seed funding to grow its AI powered health platform, Platos Monitor. The round was led by Google for Startups and also included Invest International and several angel investors.
ASX-listed Resolute Mining has signed an agreement with AngloGold Ashanti to acquire the Doropo and ABC Projects in Côte d’Ivoire for US$150 million. The consideration will be paid through an upfront payment of $25 million and a deferred cash consideration of $125 million payable in two instalments. The consideration also includes a royalty (2%) and milestone payment over the ABC Project and the transfer of Resolute’s Guinean exploration permits, to AngloGold.
Egypt’s Elsewedy Electric S.A.E has acquired a 60% stake in Thomassen Service. The acquisition consists of its MEA business unit (TSME), its filters manufacturing and its African-business affiliate. Financial terms were not disclosed. Elswedy operates in five key business sectors: Wire, Cable & Accessories, Electrical Products, Engineering & Construction, Digital Solutions, and Infrastructure Investments and the acquisition will expand its global footprint and diversify its capabilities in the energy sector.
Renewable energy firm, Biolite, headquartered in New York and Nairobi, and Norwegian Investment Fund, Norfund, have acquired a majority stake in Baobab+ from the Baobab Group. Baobab+ is a provider of off-grid renewable energy solutions, operating in Senegal, Côte d’Ivoire, Nigeria and Madagascar. Financial terms of the deal were not disclosed.
Egyptian fintech, MoneyFellows has raised US$13 million in pre-Series C funding. The round was led by Al Mada Ventures and DPI’s Nclude Fund and included Partech Africa, CommerzVentures and other investors. MoneyFellows has digitised one of the world’s oldest financial systems: the rotating savings and credit association (ROSCA). ROSCAs are informal savings groups where a fixed number of participants contribute regularly to a shared pool, which pays out to one member per cycle. Rather than act as a lender, MoneyFellows matches savers and borrowers using behavioural data, credit scores, and income tiers.
They’ve carried on from where they left off in the interims
In the six months to August 2024, Datatec had a grand old time during which HEPS jumped by 67% (measured in US dollars). This performance was driven by a significant improvement in gross margin, along with efficiencies in expenses that drove EBITDA higher. This is old news of course, but important context.
The new news is that a trading statement for the year ended February 2025 shows us that the second half was even better, as the full-year guidance is for HEPS growth of between 76.1% and 83.1% (measured in USD).
The shape of the income statement is changing, as evidenced by Logicalis Latin America improving its overall performance for the year despite lower gross profits. Ultimately, net profit is what matters for shareholders, although it’s important to keep an eye on trends throughout the income statement.
Look out for detailed numbers on 27 May. With the share price up 55% over 12 months, they should get plenty of attention.
DRDGOLD had a disappointing quarter (JSE: DRD)
The company is vulnerable to any impacts on throughput and yield
DRDGOLD processes reclamation material (like mine dumps) to extract gold. This is clearly a much lower margin process than the operation of an established, deep mine. It is therefore more sensitive to not just gold price moves, but also anything that can impact surface-level production.
It was therefore bad luck that the quarter ended March 2025 was impacted by rainfall, as the company couldn’t take advantage of a 10% quarter-on-quarter increase in the gold price. Yes, it was up 10% vs. the quarter ended December 2024, not just the equivalent quarter last year. But this only served to mitigate the pain in the end, as gold sales were down 13% quarter-on-quarter.
The blame lies at the door of a 12% knock to production, which was a combination of a 5% deterioration in the amount of ore milled and a 7% decrease in yield. They attribute both these drops to the weather. This is easy to understand in terms of total ore milled. For yield, they explain that this is because of limited access to material, hence they couldn’t process the desired blend. Fair enough, although I must add that yield has been a challenge at DRDGOLD before.
With all said and done, adjusted EBITDA was down 2% quarter-on-quarter. This is frustrating, but they certainly still made money, as evidenced by cash increasing by R289.3 million to R950.5 million despite the payment of the interim cash dividend of R258.7 million.
As this was the third quarter of the financial year, there isn’t much time left to make up for the disappointment. This is why the company has warned that it may fall marginally short of full-year production guidance.
Despite this, the share price is up 71% year-to-date. The market firmly believes that gold prices will remain strong.
MTN Uganda: another African winner this quarter (JSE: MTN)
The good news just keeps flowing for MTN
MTN Uganda has been the most stable of MTN’s African subsidiaries. The inflation rate is low by any standard, leading to a sensible macroeconomic environment in which to operate. It’s therefore not surprising that at a time when even the crazy uncles (like Nigeria and Ghana) are behaving at the dinner table, the class captain (Uganda) is still doing well.
How well, you ask? With inflation at just 3.6%, they grew revenue by a delightful 13.0%. EBITDA was up 13.7%, so EBITDA margin expanded slightly – up 40 basis points to 52.4%, which is a lucrative level. Profit after tax grew by 20.6%, coming in at a margin of 21.3%. This is a fantastic business by any metric.
And in case you’re wondering about where the cash is going, capex (ex-leases) actually decreased by 2.8%. Capex intensity is in line with their medium-term guidance.
This really is the icing on the cake for the recent updates coming from the MTN Group. The MTN share price is up 30% year-to-date, making it one of the best places that you could’ve had your money on the local market.
I must of course note that the longer term performance isn’t nearly as exciting, as MTN has been through some immense volatility. This is the same company that had to extend its B-BBEE deal at the end of last year because the group share price was under so much pressure!
Things change quickly in Africa.
Nibbles:
Director dealings:
Here’s yet more selling by a Standard Bank (JSE: SBK) executive, this time the COO. She’s sold shares worth R4.9 million. It really is quite remarkable how many Standard Bank execs have sold shares recently, with the share price up 2% year-to-date.
The marketing and communications executive at Capitec (JSE: CPI) – a prescribed officer – bought shares worth R2.4 million.
There’s some clever wording in the Nedbank (JSE: NED) director dealings announcement. A few directors / executives sold shares to cover purely the tax on share awards, but the COO sold shares that were only partly for the tax. The total sale by that director was R8.5 million but we don’t know how much was for tax and how much was on top of that.
Europa Metals (JSE: EUZ) announced that certain directors will be receiving shares in lieu of fees to the value of £48.2k. This works out to a substantial 4.6% of the current issued share capital! To be fair, this includes the acting CEO, so these aren’t just non-executive director fees.
Absa (JSE: ABG) announced that Sello Moloko will step down as chairman and independent non-executive director of the group. He will be focusing on other business interests and community projects. René van Wyk will replace him as chairman, subject to regulatory approval. He was interim CEO of Absa in 2019 and rejoined the board in 2020 as a non-executive. He also has tons of other banking experience, including at the SARB.
Oasis Crescent (JSE: OAS) shareholders should be aware that the circular dealing with the reinvestment of the dividend has been sent out to shareholders. The trick here is that if no election is made, the default is that the distribution is reinvested. The second trick is that the reinvestment is made at the NAV of the units, which is R28.07 per unit, when the current share price is R20.50. Hence, read carefully.
Universal Partners (JSE: UPL) has very little liquidity, so I’ll just give the results a passing mention down here. The net asset value (NAV) per share is down 9.1% year-on-year. Forex moves are certainly relevant here, as they directly impact the fair value of foreign assets once translated to rand. If you read through the updates on the various portfolio companies, it’s the usual selection of hit-and-miss. It doesn’t feel like there are any standout businesses in this portfolio, which is probably why the market doesn’t pay much attention.
Gold Fields had a strong start to the year (JSE: GFI)
And Ghana JV discussions with AngloGold (JSE: ANG) have been paused
Let’s start with the joint venture opportunity in Ghana. AngloGold and Gold Fields have been talking since 2023 about combining the neighbouring Iduapriem and Tarkwa gold mines and have been in discussions with government regarding the required approvals. But during that period, AngloGold had a change of heart – they have a different strategy for Iduapriem and will focus on running that mine in isolation.
Gold Fields refers to the opportunity as still being “compelling” – this leaves the door open for discussions to resume at some point in time. In the meantime, Gold Fields will look to apply to extend the Tarkwa leases which are due for renewal in 2027. They had some headaches getting the mining lease across the line at the Damang mine (also in Ghana), so hopefully that won’t be the case once more.
Onwards to the Gold Fields operational update for the first quarter of 2025, which reflects partially sustained momentum from the second half of 2024. Group attributable production was 19% higher year-on-year, but 14% lower quarter-on-quarter vs. a particularly high base (Q4’24). Naturally, if you dig into the underlying mines (pun shamelessly intended), the production results become more volatile. This is why the market prefers larger mining groups with multiple sites.
Better production leads to a lower cost per ounce, so it isn’t surprising to see that all-in sustaining cost (AISC) was 7% lower year-on-year. It also isn’t a surprise to see that it was 15% higher quarter-on-quarter, given the aforementioned production statistics.
Net debt reduced over the past three months from $2,086 million to $1,981 million. Net debt to adjusted EBITDA is at a perfectly acceptable 0.59x.
A solid quarter was important here, as this week also saw Gold Fields announced that they’ve convinced the Gold Road board to support the proposed A$3.7 billion acquisition of that group. They plan to fund it using new bridge financing. The hope here is obviously that gold prices remain strong, allowing them to reduce that debt.
2025 guidance is unchanged. This means that they still expect to spend roughly $1.5 billion on capex (give or take a few million) and over a third of that is expected to be on expansion capex rather than sustaining capex. These are good times in the gold sector.
Mantengu releases one of the strangest trading statements you’ll ever see (JSE: MTU)
It looks like EPS and HEPS had a fight and never want to talk to each other again
Mantengu Mining released a trading statement dealing with the year ended February 2025. Earnings per share (EPS) is up by 14,700% (from 1 cent to 148 cents), while headline earnings per share (HEPS) was actually a loss, down at -23 cents vs. 1 cents in the prior year. Talk about a fork in the road!
I had to have a chuckle at the SENS announcement referencing that Mantengu’s earnings are well in excess of the market cap and hence the significant discount to net asset value that the company is trading at isn’t justifiable. I hate to break it to the good people of Mantengu, but nobody cares about EPS. HEPS is what counts and considering they just made a loss, I would suggest making less noise about linking earnings to the share price.
It very rarely ends well for management teams who get frustrated at the market. Just focus on execution, particularly with the share price down 41% over 12 months.
Speaking of execution, production ramped up in 2024 and had a really strong end to the calendar year. Alas, January and February were quite sharply down year-on-year due to flooding. As luck would have it, this coincided with a 30% drop in chrome concentrate prices. Prices rebounded in March, so hopefully they can take advantage of that. The March and April production numbers certainly look good.
Remember the announcement of the acquisition of Sublime Technologies? The deal made absolutely no sense to me, as Sublime had a net asset value of R205 million and yet they bought it for $100k. The trading statement notes that the previous owners had started the process of winding the business down before Mantengu bought it, so that net asset value seems even stranger to me. I have a strong suspicion that the huge jump in EPS is because of a bargain purchase gain that will be recognised on this acquisition, as they bought the net assets at a deep discount.
Of course, whether or not they really got a discount will come out in the wash. Cash generation is what counts, not balance sheet values. This is why HEPS (which is at least a closer proxy for cash than EPS) is what the market looks at.
A potential deal for Metrofile draws closer (JSE: MFL)
A party is conducting due diligence
Metrofile released a cautionary announcement on 26 March that alerted the market to discussions with a potential acquirer of the company. Goodness knows this isn’t the first time that Metrofile has been thrown around as a takeover target.
Will it be different this time? The potential deal is at least still alive and well, with the mystery acquirer now moving into the high level limited due diligence phase. There is still absolutely no guarantee of an offer being made.
Since 25 March, just before the cautionary came out, the share price has increased by 60%. I obviously have no idea what premium has been discussed behind closed doors for this potential deal, but it seems like the market may be very guilty of counting its chickens before they hatch here. Even if there is an offer coming, how much higher could it possibly be than the current traded price?
MTN Rwanda also grew ahead of inflation – although there are pressures (JSE: MTN)
This can be added to the list of African subsidiaries that are in the green
MTN seems to be having a much better time of things at the moment. We’ve seen strong numbers in MTN Ghana and MTN Nigeria. We can now add MTN Rwanda to the list, albeit to a lesser extent.
The first thing I do is compare revenue growth to inflation, as some of these African countries have massive inflation rates. Rwanda isn’t one of them, with inflation of 5.3% in Q1. Service revenue up by 12.3% is thus a tick in the box, particularly as this was achieved despite a decrease in active data subscribers (a risk of an increasingly competitive market that shouldn’t be ignored).
The next thing to look at is EBITDA margin, which decreased by 120 basis points to 38.9%. That’s not great obviously, but EBITDA was still 9.3% higher and that represents real growth i.e. growth above inflation.
Capex fell by 22.5%, although this seems to be mainly due to the timing of capex spend in the prior year. We will need to see how this plays out over a full year. For now at least, adjusted free cash flow was up 70.1% and nobody is going to be upset about that!
Nibbles:
Director dealings:
The CFO of Growthpoint (JSE: GRT) sold shares worth R2 million.
Renergen (JSE: REN) has achieved another milestone in the general de-risking of its investment story. The High Court in Gauteng has ruled that the Gas Act of 2001 does not apply to any liquefaction facilities outside the Piped Gas industry. Specifically, this means that Renergen’s activities fall under the Mineral and Petroleum Resources Development Act (MPRDA) and thus outside of the regulatory reach of the National Energy Regulator of South Africa (NERSA). Essentially, as long as Renergen stays away from supplying the regulated piped gas industry, there is no longer any ambiguity around the relevant regulatory regime.
Shareholders of African Rainbow Capital Investments (JSE: ARC) voted strongly in favour of the delisting of the company. The focus is now on the offer itself, which is open for acceptance until 23 May. At this stage, having written so many times about the offer price and the management fees to get to this point, I’m just happy to see it go.
Assura (JSE: AHR) is under offer from Sana Bidco, which is a special purpose vehicle created by KKR and Stonepeak Partners for this deal. The proposed structure is a scheme of arrangement, which means that a circular needs to be sent out to shareholders. The challenge is that there’s been a delay to getting the circular approved by the JSE, so Assura had to approach the takeover authorities for an extension of the deadline for posting the scheme circular. It has been pushed out to 21 May.
Telemasters (JSE: TLM) has renewed the cautionary announcement related to a potential acquisition. They are in the process of identifying funding partners, so it sounds like they are getting close to making a detailed announcement. But as always, there’s no guarantee at all of a deal happening.
Ever wondered how the nuts and bolts of ETFs work? What goes into index tracking and making sure that it is achieved at the lowest possible cost? And are all indices created equal from a complexity perspective?
In answering these questions (and many more), Lauren Jacobs at Satrix* shows you what a day in the life of a portfolio manager looks like. As you’ll learn in this podcast, a great deal of work goes on behind the scenes to make Satrix ETFs as efficient as possible for investors.
*Satrix is a division of Sanlam Investment Management
Satrix Investments Pty Limited and Satrix Managers RF Pty Limited are authorised financial services providers. Nothing you have heard in this podcast should be construed as advice. Please do your own research and visit the Satrix website for more information on all their ETF products.
Full transcript:
The Finance Ghost: Welcome to this episode of the Ghost Stories podcast. It’s another one with the team from Satrix, who won a lot of awards, by the way, at the recent industry awards. I actually put something on Ghost Mail just this week about that, so go and check it out and see all the wonderful accolades that the Satrix team is receiving for all the excellent work that they do. And we’ve met so many of the team members over the course of this podcast series. But today we have someone new, which is really exciting.
So, Lauren Jacobs, you’re a senior portfolio manager at Satrix and I see that they finally managed to persuade you to come out and do a podcast with me. Welcome! I believe today is your first podcast, isn’t it?
Lauren Jacobs: Thanks for having me, Ghost. Yes, it is my first podcast. I’m quite excited, but also a little bit nervous. So let’s see how it goes.
The Finance Ghost: No, it’s going to be great, I promise. It’s much less scary than the markets, that I can absolutely assure you.
Lauren Jacobs: That is true! Yes.
The Finance Ghost: Yeah, exactly. So what we’re going to do today, the whole idea behind this podcast, is just a day in the life of a portfolio manager. But obviously I’m not going to miss the opportunity to ask you some interesting questions. Lauren, we were talking a bit off-air about how long you’ve been at Satrix and at Sanlam before that. I think you said you started at Sanlam basically in the global financial crisis, essentially 2008. So probably, I’m guessing, just before everything blew up, was it, or was it in the middle of all the pain?
Lauren Jacobs:Yeah, so I joined Sanlam in around November 2008. I’ve been at Sanlam in the group since 2008, so almost 16 years now. 17 years, almost. I’ve been at Satrix now for 11 years, since 2014. Obviously I came in, I wasn’t a portfolio manager before, so I came in as an analyst and worked my way up from there to do all the hard work. And here I am now as a senior portfolio manager.
The Finance Ghost: Yeah, very very nice. Look, I think you’ve gotten to see the incredible growth in ETFs in South Africa. And Satrix has always been at the forefront of that. A Satrix Top 40 ETF was the first ever listed thing that I bought. I can’t remember how many years ago that was now, but certainly very early in my career, that that was the first thing that I bought. I think a lot of people have a similar story, as that Satrix Top 40 ETF has been around for a very long time.
And of course these days, there’s a very broad product suite at Satrix. People think that ETFs – well, actually, I don’t think people think this anymore and I hope they don’t if they’ve been listening to the show, because I’m not sure how they would still believe that ETFs are a bit boring and a bit vanilla because they actually let you do a lot. They really let you do a lot.
Speaking of things that are not boring, I think the term “portfolio manager” is one of those jobs that really comes up a lot when you ask – look, if you ask a toddler, they’re going to tell you fireman or policewoman, take your pick, or I want to be a dinosaur when I’m big, that one too. But once you ask someone who’s a bit older and maybe someone who’s studying finance, maybe someone who’s early in their career, “portfolio manager” is one of those glamour jobs that tends to come up. It’s right up there with investment banker. You know the drill.
So was it always that way for you? Was that always where you were heading or did your road actually take some twists and turns along the way?
Lauren Jacobs: Yeah, very interesting. I actually started off in asset consulting in an analyst kind of role. And it gives you a very broad view of portfolios in general and what there is in terms of access for clients in all investment vehicles. And from there when I moved into Sanlam – and from there I went into private wealth, which was also quite interesting, again focused around clients – but when I came into Sanlam specifically, I was more on the back-end, support services, so performance and looking at portfolios from the bottom-up. Understanding how all the portfolios work, not only at that point index tracking, but also generally in the whole of Sanlam Investment Management. I think that gave me a very good background and understanding specifically for index management, or index tracking specifically, because it’s a very niche role.
People think: what is indexation? You’re just buying the index, you just can buy all the stocks and then you can go on holiday. But actually, you can’t! An active manager can, definitely. They can buy and hold for 6, 12, 18 months and say, oh, they’re riding the wave. But as an index tracker, you are held to your tracking performance. If you are behind the index by 1% or ahead of the index by 1%, you are not tracking. You have to be very close to that index return.
And it’s harder work trying to be close to that index return than actually just choosing stocks and letting them ride the wave. On a daily basis, we have to ensure that your portfolio looks like your benchmark. And any changes to the benchmark – the index changes seamlessly, If there’s a corporate action, if there’s a dividend, there’s nothing that has to be done on the benchmark to change the benchmark. But your portfolio, because it has to then mimic the benchmark, you have to implement that with a trade.
So there’s a lot of thought behind how do I trade this fund to get to that index change, at what point do I trade it? Because all the prices have to be the same as that of the index and how do I take into account the cost of these trades? It seems like indexation is passive, it’s so easy, but it takes a lot of hard work and it also takes a lot of – you have to have a lot of attention to detail, which it’s very important in terms of index tracking.
I started out as an analyst in Satrix and then moved on and learned how we track indices. When I started at Satrix, I think we had about 50 funds or portfolios that we looked after. We obviously had ETFs, we had some segregated mandates and now we’re sitting at 160+ portfolios. And the interesting part is that even though we are now at 160, we’re still only four portfolio managers. It’s important for us, we rely very heavily on technology and we are constantly evolving in the way in which we manage our portfolios using different technologies within the business. Yeah, so that’s just a little bit of what we do on our side.
The Finance Ghost: No, that was super interesting. I have always wondered about the nuts and bolts behind some of these ETFs, and obviously some of them are easier than others, right? It depends on the liquidity of the underlying instruments. We can get into some of that. There’s stuff that’s offshore, there’s stuff that’s local. So that is a pretty interesting area.
As I kind of expected, it’s a completely different job to what a portfolio manager would do in an active asset management environment where they are actually picking stocks, they are expressing a macroeconomic view, etc. And the reason why people are attracted to ETFs is (1) because of the low cost, so that’s a core part of what you’re doing obviously is keeping those costs down, and (2) because the ETFs just take all the emotion out of it, right? It’s not that you are investing in a specific asset manager and their worldview, which can change depending on what happens. The ETF’s job is to track, as you say, so I guess that’s what you’re measured by, right? Your tracking error and your costs to actually get the ETF right. And I’m sure, am I right, that some of them are easier than others? Some of them must give you serious headaches.
Lauren Jacobs: So in terms of indexation and tracking, specifically at Satrix we use physical tracking. So that means we hold the underlying stocks in the index, right? But you can do it one of two ways with physical stock. You can either do full replication, which means that in Satrix 40, there are 40 stocks in the portfolio. They’re the top 40 stocks, so they’re quite liquid. You can buy every single one of them in the same constituent weights as that of the index. But then you get an index like your MSCI World, which is 1300+ stocks. And you can’t necessarily buy all of those stocks – you can definitely buy them, but it’s going to be a bit costly and you know might not get everything you want depending on the size of your portfolio.
So what we do there, is we use optimisation. What it says is we take a subset of stocks in that index and we track the risk and return characteristics of the index using a subset of the 1,300 stocks. So maybe we use 900, maybe we use a thousand. We use a specific optimisation model that then looks at all the risk characteristics of the underlying stocks – where it is in terms of geography, what is the GICS sector and what are the other factors that may affect whether or not this subset can track the index. So, those are the two ways in which we actually track the indices.
Obviously where you have a Satrix 40, where there are 40 stocks and you can get them quite easily in the market if you have to trade for a corporate action or an index change, it’s quite easy to trade that portfolio. You would then do a full replication. But the implication there is that you have to ensure that any change to the index, any corporate action is implemented exactly as per the index or else you’re going to mistrack. So for example, when it comes to index rebalance, we prepare ahead of time. There are definitely some portfolios where it’s only the shares in issuance that change or it’s only the weighting factors that change.
But on top of that, you also have to remember that there are different index providers. So you have your FTSE/JSE, you have your S&P, you have your MSCI, there are a number of other index providers. And some of those index providers treat securities differently depending on is it a global view, is it a local only view, is it a country view from a global index provider, there are all these nuances that you have to take into account.
And maybe you trade in corporate action on one security, but across different indices it’s treated differently. So there’s a lot of preparation around how am I going to trade this fund, this fund and this fund if it’s a different index but the security is the same in all these funds, what is the plan? What time am I going to trade it? When am I going to trade? There are all these different nuances you have to take into account.
Over and above which index provider you are using, you also have to take into account the vehicle – is it a unit trust? Are there CIS rules? Is it an ETF, what are the rules there? Is it a segregated mandate? If you’re tracking offshore, is it a UCITS? There are just these layers of how am I going to trade this fund so that I don’t mistrack, given all of these rules that I have to take into account?
The Finance Ghost: Sho, that’s interesting. That’s genuinely interesting. It’s such a technical role, right? This is definitely not a case of read the market news and then express a view, not in the slightest. This is about taking the rules and making sure you apply them as best you can in the market. And how often are these indices typically rebalanced? Because it’s not every day, right? You’re not sitting and tracking something every day. It’s how often the index is rebalanced. And I’m sure that’s different per index, but what is it? What is the typical timeline?
Lauren Jacobs: So your market cap weighted indices, they generally rebalance once a quarter. FTSE/JSE is the third working Friday of each quarter, so March, June, September and December. And generally that falls close to a public holiday, which is not great for us, but you know, we work…
The Finance Ghost: …I saw the pain in your face there. There was – people can’t see it because this is not a video, but I saw the pain.
Lauren Jacobs: Yeah, generally it’s always around a public holiday, but yeah. So FTSE/JSE, usually those are the rebalance dates. Your MSCI, they rebalance in Feb, May, August and November, so there are different rebalance periods. Those are usually quarterly. For example, your bonds and your ILBs, those rebalance on a monthly basis and they have reweighting and reconstitution.
It just depends what the index is. You have your momentum or your factor indices, those might rebalance more frequently. We have some mandates that track, not Satrix Momentum, but other momentum indices where they actually rebalance monthly as well. It just depends how the index is constructed and what the index is trying to achieve that would dictate what the rebalance periods are. And then of course, when there’s a corporate action, your index also effectively rebalances depending what the construction methodology is. That can be anytime. Whenever a company does something weird and wonderful, we have to then implement it on the portfolio based on what the change is in the index.
The Finance Ghost: And they love doing weird and wonderful, right? This happens a lot. I loved what you raised earlier about the full replication versus the optimisation – obviously, that’s such a cool thing, right? So it’s all about cost/benefit. Technically, could you go own all 1,300 stocks in, I think you said the MSCI? You probably could, but I can imagine that’s very expensive and you’re owning a long tail of stocks that actually contribute a very tiny percentage of how the index moves. And I guess the argument is, well, the cost outweighs the benefit of having that long tail of stocks. And then you use some other clever ways to replicate. Right?
Lauren Jacobs: Yeah. So it’s quite interesting because we obviously manage a local fund where we buy the underlying stocks in the MSCI World which is our Satrix MSCI World Unit Trust. But we also manage Irish-based funds or Irish-domiciled funds for Sanlam Asset Management Ireland and those are UCITS vehicles. We also track MSCI World there. So what we’ve had to do across the two different vehicles, given the different regulations for each vehicle, locally because of your BN90 rules in your unit trusts we’ve actually had to go and hold all the stocks in the MSCI World. So that effectively is a once-off trade because your smaller stocks when it comes to the index reviews there might not specifically be any changes there. So you can then, once you now hold everything, do an optimisation where you every time you trade you’re maybe not buying 1,300 stocks. You only buy a subset when you have to reinvest cash or for corporate action.
Whereas on the UCITS side, we hold whatever, a thousand stocks, and I mean obviously there is an effect on, on what return you get because when you’re holding all the stocks maybe some of the smaller stocks can contribute quite a bit if that is 1.5% and all the small caps are doing well, then you know you do miss out on that if you’re not holding it in your optimised model.
But yeah, I think it’s just interesting how also indices have changed over time. So when I started, I think there were 1,500 or 1,600 stocks in MSCI World and now there’s only 1,300. So it is easier to get all of those stocks and also because most of the time you’re doing a once-off trade and then maybe when you have to sell it to go in for an index deletion.
And then when you look at the FTSE/JSE, similarly when I started working at Satrix there were about 160 stocks in the index. We also did an optimisation on the local All-Share trackers – capped SWIX, capped All-Share, All-Share and your SWIX indices. At that point we also did an optimisation because the liquidity in that tail was not great.
We’re now it’s sitting at what, 126 stocks. So we actually are holding almost all of those. But there are obviously liquidity issues in some of the stocks in the index. And because we are quite a large player, if we need to trade, we can’t go and trade a stock that takes five, six, seven days to trade. So we do look at liquidity there. So, yeah, that’s just how indices have changed over time and how they’re constantly changing and the way in which companies are coming in or going out of the indices. It’s very interesting also, just how it’s changed over time. And having been here as long as I’ve been, I’ve seen a lot of these changes coming through.
The Finance Ghost: Yeah, you raised there something I wanted to actually ask you anyway, which is how you’ve basically been – well, Satrix has been a victim of its own success in some regards because some of these ETFs are quite big and so it’s more money that you need to move through potentially illiquid stocks. And people in the market are not stupid – if they know that something’s going to fall out of an index, then you’ve got traders, you’ve got hedge funds, you’ve got people with derivatives who know that there’s going to be selling pressure. If you know something is falling out the bottom of the Top 40 at the end of a particular quarter, you know that the ETFs need to dump that stock. You don’t have a choice – you have to track the index. And if you are a clever trader, you can play all kinds of interesting games around that. And that of course, is part of what you’re up against because you want to try and get out of it at the best possible price. That’s a market, that’s how a market works, right? You’ve got people on different sides of a trade. Everyone’s trying to either make money or manage according to a mandate. And that’s what, what keeps this big machine ticking that we both know and love so well.
Lauren Jacobs: Yeah, so we have to trade responsibly as well. We understand the impact of, as you said, they know we’re coming, they know three weeks before the time we’re coming and we’re going to be selling and we’re going to be buying and at what levels we need to buy and what percentage in the indices. So, when we come to market at index rebalances, we do a lot of liquidity testing beforehand. Once we know what’s going to happen in the index rebalance, we look at what’s coming in, what’s falling out, where we might have issues around selling or buying some stocks in the index.
And we also have to trade responsibly, so we make sure that say we are bringing in a new stock into the index, but if we see that it’s going to take longer to trade into the stock, we might also trade it longer so that we’re not pushing the price on that index rebalance day. We’re very conscious of our size. We’re conscious that yes, we want the closing price, but if we going to push the closing price way down, then we don’t want to affect the market in that way. So we do take steps to ensure that if we are going to be a big player in a stock that we manage that trade, whether it’s over a day or over two days to ensure that we don’t move the market too much in that regard.
But there are also surprises. So over time, sometimes you’ll be surprised on an index rebalance day because not only is everybody coming into the market so the volumes are high on that day, but also it’s usually around – well locally, specifically with FTSE/JSE, it’s usually futures close-out. There’s a lot of volume in the market. So sometimes, we might overthink it and maybe be very cautious. But there’s also a lot more volume at index rebalance because everybody is in the market so there just tends to be more availability of stock.
The more difficult part is actually when there’s corporate actions, right? Because if a stock is falling out and you’re getting cash and you have to reinvest it and it’s quite a large portfolio that’s like a random day in the week, it’s not an index rebalance day when there’s a lot of volume. So that is actually trickier than the index rebalance to prepare ahead of the time and say, okay, this is where we’re coming in.
So we work closely sometimes with the index providers as well and say, look, we understand this is coming up, but this is the impact for us. Is there another way to look at this? Can we bring in a cash line for a few days? So we, as a big provider of index tracking products, we also have to always look to the market and say: this is where we are and this is what’s going to impact us. Can we talk about it? Can we see what we can do?
We are very conscious of our impact, so we work very hard to ensure that we don’t create any changes in the market that could affect all investors.
The Finance Ghost: Yeah, brilliant. And that’s what an award-winning team does, right? It’s really, really good to learn some of that stuff. And you do see some really big changes. Hot off the press at the time of recording at least is what’s going on with Aspen. I’m not sure where Aspen is in the Top 40, but if they’re anywhere near the bottom, I don’t know if they’re going to be there on the next rebalancing because that share price was down like 30% when I looked, we’ll see where that shakes out. But this stuff happens and that’s what ends up, or that’s what drives things like index deletions. Or you have another stock that comes roaring up through the ranks and then gets into the index and obviously kicks something out the bottom.
It’s like football, right? Someone gets relegated out of the Top 40. That’s just how this game works. While we’ve still got some time, and because you’re obviously so passionate about everything you do, maybe just a high level question or two more around – I hate calling it passive investing, mainly because Nico shouts at me because he always says that allocating to an ETF is an active decision and of course he’s completely right. But you’ve been in both, it sounds like, and I mean just your experience working in ETFs for this long etc. – you obviously are passionate about the space. You obviously firmly believe in it, as do I. Do you advocate for, even just in your own money because obviously you’re not giving generic advice here, but just with your own money and how you do it, are ETFs a big part of your own wealth creation strategy?
Do you leave a little bit of space to do some active investing and do some stock picking as well or are you busy enough with index rebalancing?
Lauren Jacobs: So I’ve always kind of taken the stance that I’m not an analyst. I don’t know companies back and forth. But I do know that an index gives me this diversification. If you look at your Top 40, you’ve got such a diverse number of companies there and it’s also sometimes the companies you know – it’s an Absa, it’s a Woolies – and you’ve got this wide variety, but it’s in an index that is saying in terms of the market caps, here’s a Satrix 40, it’s giving you a diverse exposure to specific equities, but it’s not – yes, the active decision is choosing Satrix 40, but in terms of the underlying, I don’t have to make that decision. The index makes that decision.
I’ve always thought that using an index strategy not only allows this diversification in terms of the stocks, but also it doesn’t eat away at your performance because the costs are low. So that is where I advocate for index tracking, because the cost of active management and the cost of “not index managers” is what is eating away at your performance over time. So even if you look at your retirement, because there you can also invest in Satrix Balanced, you can use that fund and the underlying is all index tracking but the cost is low. So, if you look over time, the amount of money you effectively “lose” in inverted commas to that performance fee of an active manager, you gain that by staying in the market with your index tracker and also getting it at the lower fee. So in my personal portfolios and so on, I do obviously gravitate towards your index tracking because that’s my passion. And also, it gives you a much broader environment to choose from. So if it’s local, if it’s offshore, it can be bonds, it can be ILBs, it gives you such a wide variety at such a low cost that you can pick and choose. Do you want to go global bonds? Do you want to go local property? It gives you so many options. And also at Satrix, we have a plethora of products to offer you.
So yeah, it’s also around just giving people options. When I talk to my kids about investing and about looking at an index and what it means, it’s really just showing them that there’s this wide variety of diversified set of stocks in this index that gives you such an opportunity to be able to invest in it to see how your money grows or changes over time and what the impact is of news in the market on those indices.
So, yeah, I’m a huge advocate for index tracking in your portfolio. And I will always be.
The Finance Ghost: Yeah, I mean it is great. Look, single stock picking is really tough and is a very, very – I don’t want to say dangerous, it’s not dangerous, but it’s something that you need to commit yourself to. It’s not something you can just do on the fly. I think a lot of people learned that the hard way in recent years and I always have mad respect for those who said: I got burnt or I don’t know what I’m doing here – it’s that Dunning-Kruger curve, they go into that like valley of hopelessness or whatever it is, I can’t remember exactly what it’s called – and then a percentage of them say, okay, I’m actually going to commit to learning about this. And they come out the other end with this wonderful skill set and you’ve just learned so much about business and everything else. I always think when I’m writing Ghost Mail, those are my people, the ones who really want to actually get up the curve because, yeah, I mean everyone loves being a concentrated portfolio hero until Aspen goes and smacks you in the face.
I’m looking at the chart now, again, relevant to time of recording only, obviously, but Aspen now over five years has returned a total of 2% after this latest fall in the share price – over five years, not per annum, total. It has absolutely been caned by this latest news flow. So you can go and have 20% of your portfolio in this high conviction position in Aspen and you would have looked like a hero right up until August 2024 roughly. And then you would have stopped looking like a hero very, very quickly.
It’s a tough game and that’s why ETFs I think are so important, even for someone like me who really enjoys stock picking and has a reasonable amount of knowledge I suppose around it, ETFs are just a very important building block for any portfolio. You absolutely have to have them in my opinion. They are the way you can add market returns to your portfolio, general equity exposure with the lowest possible cost.
And also, tax-free savings accounts, that’s the other thing I always talk about, is how important it is to max out the TFSA every year. I max mine every year. It’s my first port of call. Because you can then go and buy ETFs and again, it’s not quote unquote “boring” because you can go and rotate your exposure – basically your TFSA just builds this amazing walled garden over time where you can then rotate your exposure across ETFs without incurring any taxes. Again, that’s the active investor in me using passive instruments. Making Nico proud now!
But it just shows, ETFs are a tool in the market, they can be used for just a monthly debit order and long-term investing: perfect! There are also hedge funds who use ETFs to express a view on a whole sector if they can go short on the thing. It’s a really fascinating area of finance. And I think what’s been so great with this podcast is just learning the nuts and bolts that actually sit behind this thing because it is complicated to run these funds. And that’s your day-to-day.
Lauren Jacobs: Yeah, I mean in terms of ETFs, I’ve been at Satrix for a long time and obviously our product set has really evolved over time. What I’ve learned and what I’ve seen has expanded exponentially since I started here. You know, just the fact that we brought in the feeder portfolios, we’ve done multi asset funds, we’re now doing direct tracking in our Satrix Nasdaq, we’re doing direct tracking on MSCI World, I mean, how many people are actually doing that?
So, every day we’re learning something new. Every day we’re learning what the impact is of things that we do on the portfolio. So it’s always heartwarming for me to see when we get it right. We get a SALTA for tracking performance, for how tight our tracking is. That’s really important to us because we can’t sell a product and say we’re 1% behind the benchmark, that is not index tracking. We have to be super tight. Excluding costs and on a daily basis, if you are anywhere from between 1 and 2 basis points away from the index, it’s trouble because you know a client’s going to see that. And even like you say, your hedge fund managers that are using the ETFs for their portfolios, they also want to know that we’re going to be consistent, that we’re going to be consistent in our tracking. And consistency is very key in tracking.
I think there’s so much room for us to also grow in terms of innovation and technology. The fact that on an index rebalance day we are sending thousands of lines of trades through our trading desk, through all of our systems and how that has evolved over time. We have internal systems that we have enhanced with accessing the JSE data through their FTP site, whereas a lot of places are using emails or using Excel. We’ve got all of this technology at the tip of our fingers to just enhance our process and to ensure that that tracking is tight on a daily basis and for the client also to know that Satrix is consistent. You’re going to get what you asked for, what’s on the box is what is inside. And you can trust us, you can trust that the end of the day we have all our clients’ best interests at heart. We want to make sure that you’re getting your consistent tracking and we also want to learn how we can do it better if there’s a corporate action where we can maybe do a little bit better by taking the stock instead of cash. Can we do that? Can we give you a little bit more performance over and above your costs?
I think it’s important that when people are looking to invest their money, they look at someone that’s going to be consistent, that has been around in the industry for 20+ years and what we offer you is just – there are so many options and you’re going to get your money’s worth if you put it in.
And then in terms of tax-free savings, that’s always been very close to my heart because I think that it’s so difficult these days for anyone to save money. Everything’s getting expensive on a daily basis. You’re paying more and more for petrol, for food, for all of those things. But if you are able to put away as little as R100 a month in a tax-free savings, yes, you may not be able to max it out, but at least you’ve put something away. And that was something that I also learned early on. When you work in a corporate, obviously you can save towards retirement. And it was something that I learned very early on was that if you max your retirement percentage right from the beginning, before you get all your nice increases and your new job titles, when you start getting those increases, you don’t even feel sort of the cost of putting away that high percentage. You just carry on. This is what you get, this is what you get. But at the end of the day, you’re gaining, you are paying your future self by putting away more money every month.
And another thing around tax free savings is if you put away that R100 a month, but next year you get an increase at work and you just increase that R100 by that percentage, whether it’s 6%, whether it’s 3%, you start putting away a little bit more every year. And the way that money grows over time, if you watch it grow, it’s, it’s so amazing that if you just put it in there and you leave it there over time, you’ve got yourself a little nest egg. For the young ones that are coming out of varsity to start working, you’ve got your deposit for your car, you’ve got something to start and to buy a new home. It’s a beautiful thing, tax-free savings, so that you don’t have to pay that tax on it when you pay it out. And if you have kids, it’s really important to start early with them as well, start as early as possible so that they also understand that over time there’s just this compound growth that you can’t get it anywhere else, you can’t get it from buying a toy or whatever else, but just putting that money in over time, that growth is, is very good.
The Finance Ghost: Absolutely. So I think just to bring it to a close, just given your interesting career and how long you’ve been doing this for – if someone’s listening to this and they are either studying finance or perhaps they are in the financial space and they’re considering a career change – I think whenever you do one of these sort of “day in the life” shows, not that I do that much, or you just speak to someone who’s clearly successful and has done some really cool stuff, it’s always good to ask: what do you wish someone had told you? What is that one piece of advice you wish you had received?
I know it’s such a cliche question, but it is that for a reason, because it’s just that ability to impart just that one piece of wisdom now to everyone who’s listening, which is a wonderful opportunity.
Lauren Jacobs: So maybe I have two things…
The Finance Ghost: …two pieces of wisdom! There we go.
Lauren Jacobs: The first one is that you really have to be curious. And when I say be curious, I mean Google is your friend. If you’re unsure, Google it and ask the questions. No question is a dumb question. In my opinion, no question is a dumb question. You ask that question, Google, you find out what is going on and then go back and formulate an idea of what it is you want and also sometimes what it is you don’t want. But be curious. Always be curious.
And then the second part of it, a little bit of advice, is that nobody’s going to do it for you. So nobody’s going to put your hand up. Nobody’s going to say, oh, I think it should be Ghost, it should be Lauren. Only if you’re there and you put yourself first in front of that opportunity is it going to come to you, because you can’t sit back and think people are seeing your work or seeing your hard work if you are not stepping up and saying: I would like to do this, I would like to do that. That’s been essential in my career specifically, is that I put up my hand for things. Even if I didn’t know how to do it, I was curious. I found out how to do it and I put my hand up and I said, I want to do this. If it means you’re working after-hours to be able to upskill yourself or whatever it is, just put your hand up and put yourself there front and centre because nobody else is going to do it for you.
The Finance Ghost: Yeah, brilliant advice on both. Can’t fault that. I think the fact that people are either listening to this podcast or reading this transcript already takes the curiosity. I think the second piece of advice around, just give yourself a chance, put your hand up – it’s absolutely right. You’re going to get exactly the life that you design and the one that you want if you do that kind of stuff.
So, Lauren, thank you. I think this has been a very impressive podcast debut, I’ve got to tell you, I do hope to have you back because I’ve learnt some cool stuff from you today. I thought that this was really great. Thank you so much for your time.
If anyone wants to connect with you. Are you on the cringe festival that is LinkedIn? Just kidding. You know I’m more of an X/Twitter kind of guy, but are you on beloved LinkedIn if people want to connect?
Lauren Jacobs: I am on LinkedIn. You can connect with me there anytime, definitely. But thanks so much for having me. Ghost, this is actually – as much as it’s probably been great for you, it’s also been great for me just to tell my story and just my passion for index investing and it’s been amazing to chat to you and chat about it.
The Finance Ghost: Podcasts are fun! That’s why we do them. Lauren, thank you so much. And to the listeners, thanks for being here. We will be back soon with another Satrix team member. I don’t know – are there any more that you can dust off out of the cupboard, Lauren? Or are we getting – we’ll have to see. I’m always excited to see who I get.
Lauren Jacobs: We’ll have to see. We’ll have to see.
The Finance Ghost: Yeah, exactly. Exactly. Thanks for your time, Lauren. We’ll do another one of these.
Lauren Jacobs: Thanks.
The Finance Ghost: Ciao.
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*Satrix is a division of Sanlam Investment Management.
Satrix Investments (Pty) Ltd is an approved financial service provider in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”). The information above does not constitute financial advice in terms of FAIS. Consult your financial adviser before making an investment decision. While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSP, its shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.
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