More solid earnings growth at ADvTECH (JSE: ADH)
Student enrolment sounds positive as well
ADvTECH continues to just get on with it really, with a trading statement for the year ended December 2025 reflecting expected growth in HEPS of between 14% and 19%. That’s roughly 5x inflation!
This works out to around 235 cents at the midpoint of guidance, suggesting a trailing Price/Earnings (P/E) multiple of 17.6x. South Africa is still a market where you can buy high-quality companies on a PEG ratio of roughly 1.
How do you calculate that? You compare the P/E multiple to the growth rate. For example, buying a company trading on 10x, with a 10% earnings growth rate, is a PEG of 1. If the growth rate was higher, the PEG would be lower than 1.
This is just one of many valuation metrics out there, but anything at or below a PEG of 1 is worth a further look. Check out Peter Lynch’s writing on this topic if you want to learn more. I enjoy the way it bridges concepts that you’ll find in growth and value investing.
It’s also worth noting a comment by management that enrolments are in line with their expectations. That’s good news.
FirstRand’s ROE has moved even higher (JSE: FSR)
This is why the group attracts a premium valuation
FirstRand has released results for the six months to December 2025. The group is known for having a rock-solid business that generates excellent Return on Equity (ROE). Aside from some hiccups in the UK market, that reputation remains intact.
In a period in which HEPS increased by 11%, the financial services group managed to also increase ROE from 20.8% to 21.1%. This is miles ahead of the laggards in the local banking sector. To make it even more impressive, the Common Equity Tier 1 (CET 1) ratio, which essentially measures the amount of equity on the balance sheet, increased from 13.6% to 14.4%. Not only is the group in the territory of having a fortress balance sheet, but they’ve also improved their return on that balance sheet.
Earnings growth was driven by an 8% increase in net interest income (NII) and a 12% increase in non-interest revenue (NIR). In a superhuman effort in the treasury strategy, the net interest margin (NIM) somehow increased by 8 basis points despite the reduction in interest rates in the market. That is truly exceptional.
The credit loss ratio increased slightly, with the blame being laid at the door of the economy in Botswana. As people have been warning for a while now, the obliteration of profits in the diamond industry is going to have an effect there.
Including R333 million in legal costs related to the UK motor commission matter, operating expenses were up 9%. This means the cost-to-income ratio improved from 48.9% to 48.7% – another strong metric for the group.
And in case you’ve been wondering whether people have been vibe coding their corporate transactions, RMB saw growth of 16% in knowledge-based fee income.
So that’s a no, then.
I’ll leave you with one other interesting point: Wesbank is doing really well, powered by the growth in new car purchases in South Africa. Core advances at Wesbank grew by 13%, while FNB advances were up just 5%! Thanks to the lack of safe public transport in South Africa, we are a nation of car buyers – and on credit.
Greencoat Renewables is reducing debt and introducing share buybacks (JSE: GCT)
It’s all about capital management
Greencoat Renewables, as the name suggests, has a renewable energy portfolio. They have 36 assets spread across five European countries. It makes for a feel-good story, but that doesn’t mean that it also makes money.
Relying on the wind to blow is tricky. The sun is a lot more dependable, although not necessarily in Europe. And when you add in the macroeconomic shifts in the world and the effect of the yield curve, that pretty wind farm can dish up returns that are more volatile than the South-Easter in Cape Town.
In the year ended December 2025, Greencoat Renewables generated cash of €114.6 million, well down from €140.8 million in the prior period. The net asset value per share has decreased from 110.5 cents to 99.0 cents.
There’s been a modest reduction in debt from €1.26 billion to €1.21 billion. This works out to 52% of gross asset value, so these projects carry more leverage than a property fund.
The target dividend for 2026 is 6.81 cents per share, unchanged from 2025.
How do you create value in this situation?
One of the ways is to sell assets at good prices to reduce debt (they are targeting €350 million in asset disposals over the next 18 months). They hope to reduce the gearing to 45% in 2027, a far more palatable level.
Another way is through share buybacks, with a programme of €100 million kicking off and expected to run for 12 months. This represents 13% of current issued share capital. The first tranche of the programme is €25 million, running between March 2026 and September 2026. This leaves them with a long way to go towards the end of the programme, with the risk being that the share price rises into that significant buyback. I guess a rising share price is a problem they would love to have!
It would also help them tremendously if the wind blew a bit more in Europe.
A further positive update is that the company has established a new green digital infrastructure platform and its first investment. The underlying opportunity here? Data centres. Big, power-hungry data centres that need to run on renewable energy to avoid a social outcry.
The platform is a 50:50 joint venture with Schroders Greencoat. The first asset in the platform, the Drogheda Energy Park, is a brownfield project north of Dublin.
With Ireland as familiar territory for the hyperscalers, this actually sounds like a great opportunity.
Impala Platinum can thank the PGM prices for its recent performance (JSE: IMP)
That’s because other key metrics weren’t great
In the classic environment of a rising tide that lifts all boats, it’s still important to check which boats might be rusty. In mining, the best way to do this is to look at production and unit cost metrics (the “controllables”), as the price of the commodity sits outside of management’s control.
In the six months to December 2025, Impala Platinum’s Group 6E production only increased by 1%, while refined and saleable production was slightly down (even though the group uses the word “stable” to make it sound better). Unit costs increased by 11%, so they are very lucky that rand revenue per 6E ounce increased by 40%.
Capital expenditure decreased by 23%, so that gave a useful boost to free cash flow. The group achieved headline earnings of R9.3 billion and free cash flow of R7 billion.
This is a five-fold increase in earnings vs. the prior year, but we all know how well things went in this sector during periods when the mines relied on PGM price increases to cover inflationary cost pressures. It’s obviously difficult to get more of the stuff out of the ground (otherwise prices wouldn’t go up anyway due to supply deficits), but this is exactly why many have lost their shirts in this sector.
And also their shoes. Possibly their pants as well, depending who you ask.
Sanlam’s earnings have been heavily impacted by corporate activity (JSE: SLM)
The market never enjoys a period where “normalised” earnings are needed
When it comes to the financial services giants, Sanlam can never be accused of being boring. The company is always busy with some kind of corporate transaction – and usually more than one at a time.
This means that the earnings can be skewed by the specifics of the deals, especially as accounting rules are complex. Fin Acc IV lecturers get excited when they see this stuff, but everyone else starts to feel their eyes glazing over.
We therefore need to deal with the important context to these numbers that explains why the year-on-year moves are so sharp.
In the comparable period, the cessation of the Capitec partnership led to a once-off reinsurance recapture fee in the base period. There’s also the partial disposal of Shriram Finance in 2024, as well as the Namibian integration into the SanlamAllianz joint venture. And in 2025, the stake in that joint venture was reduced from 59.59% to 51%.
Now for the metrics that actually drive the numbers. For the year ended 31 December 2025, new business volumes for the group increased by 18% as reported and 22% on a normalised basis. This is a record performance for the group. Net client cash flows more than doubled, which is excellent.
Value of New Business (VNB) unfortunately went the other way, dropping by 21% as reported or 11% on a normalised basis. This was driven by product mix in South Africa, along with the various distortions detailed below.
The Net Result From Financial Services (NRFFS) moved by between -5% and 5% as reported, or increased by 15% to 25% on a normalised basis.
To add to the complexity, they are replacing NRFFS with a metric that the market is more familiar with: net operational earnings and adjusted headline earnings.
Using net operational earnings, the move was -15% to -5% as reported, or 0% to 10% normalised.
And finally, we have HEPS, which fell by between -25% and -15%. Much of this is due to the distortions, but there was also a difficult investment variance in 2025 vs. 2024 that hurt the numbers.
The market didn’t like it. And probably didn’t really understand it, either. The share price fell 5% on the day vs. a decline in the JSE All-Share of less than 1%.
STADIO manages even higher growth than its arch-rival ADvTECH (JSE: SDO)
The midpoint of core HEPS growth is north of 20%
In case you thought the abovementioned growth at ADvTECH was just a fluke in the sector, I now bring you STADIO – and the story here is even better.
For the year ended December 2025, STADIO’s trading statement reflects growth in core HEPS of between 17.1% and 27.3%. HEPS will be between 17.5% and 27.7% higher. Either way, that’s a midpoint of over 22%.
With core HEPS of between 36.9 cents and 40.1 cents, the midpoint is around 38.5 cents and hence the P/E multiple is just over 30x.
Using the PEG ratio example that I introduced you to earlier, STADIO is on a PEG of nearly 1.4x. This is a quick way to see that the market is putting a significant premium on STADIO vs. ADvTECH.
In today’s poll, I’m keen to find out which one you prefer:
Nibbles:
- Director dealings:
- The Wiese family has reshuffled some chairs at the dining room table, with father and son doing some trades across their various entities. Titan Premier Investment has sold shares in Invicta (JSE: IVT) to Thibault Square Financial Services. The value? A casual R482 million. There’s some feel-good context for the next time you’re having a family budget conversation in the living room. Sigh.
- Tharisa (JSE: THA) announced that the CFO sold R7.3 million worth of shares. The company secretary also got involved here, selling R980k worth of shares.
- An executive director of KAL Group (JSE: KAL) bought shares worth R990k.
- ArcelorMittal (JSE: ACL) has renewed the cautionary announcement related to negotiations with the IDC regarding a sustainable solution to the company’s problems. It’s clearly a very difficult situation, with the IDC needing to determine the extent to which taxpayer-subsidised funding will be dressed up as a commercial agreement. There’s a spectrum here from pure commercial terms through to a government bailout. I’m sure some kind of solution will be found, but I can’t wait to see exactly where they land on that spectrum.
- In case you’re keeping score for Schroder European Real Estate Investment Trust (JSE: SCD), the company announced some updates in terms of leases. There’s a new lease for a property in Germany that contributes 5% of portfolio income. The 10-year lease has been signed at an 18% increase to the previous passing rent (that’s good news). A further 5% of portfolio income is at heads of terms stage on a 7-year lease (no information is given on the pricing). But before you get too excited, a property in the Netherlands (also 5% of portfolio income!) has a tenant in financial difficulties, which means Schroder is now suing for the rent. This fund has been very disappointing, with the share price down more than 20% over 3 years. Including dividends, the total return over 3 years is essentially nil.
- enX (JSE: ENX) has released the circular for the disposal of the remaining 75% in West African International to Trichem South Africa. This actually relates to a previously negotiated deal, as Trichem is simply exercising their option here. The independent expert has determined that the minimum price under the option is towards the low end of the fair value range, but that still means that the transaction is fair. enX shareholders will need to approve this via a special resolution, as the shares represent the greater part of enX’s assets or undertaking (a Companies Act definition for a s112 resolution).
- ASP Isotopes (JSE: ISO) is still keeping SENS busy. The latest announcement from subsidiary Quantum Leap Energy is that they’ve appointed Nate Selpeter as Chief Technology Officer. Like many of the people who work there, he’s a PH.D. and a leader in his particular field. The average IQ at ASP Isotopes is a metric that they should consider adding to their reporting!
- Mantengu (JSE: MTU) has refinanced around R130 million in short-term debt that was payable at the end of February 2026. At Langpan and Sublime, working capital facilities have been converted into 4-year and 3-year loans respectively. That’s important breathing room for the balance sheet, with the share price closing nearly 13% higher in appreciation.
