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sectors and shares

Watch: our Chief Investment Officer, David Lerche, provides an overview of global markets during the third quarter of 2025, here.

Mondi: earnings miss confirms caution

Mondi’s share price fell more than 16% on 6 October following the release of a quarterly update that missed expectations. Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in over 25% below market forecasts, prompting more than 20% downgrades to consensus earnings for 2025 and 2026. Notably, consensus estimates for 2027 earnings per share are now below where 2025 expectations stood at the start of the year.

The company saw a combination of lower pricing and weaker volumes across key divisions, which dragged revenue lower. In addition, maintenance shutdowns further weighed on profitability.

Expectations had been building for both improved volume and pricing in packaging markets in 2025, but this has yet to materialise. While Mondi now trades at around 12 times expected earnings over the next 12 months – attractive for bottom-of-the-cycle earnings – we believe a re-rating of the stock will require clear signs of a product price recovery.

We exited our position in June at a share price 42% above current levels. While we certainly didn’t anticipate the extent of the earnings pressure, our concerns regarding the European packaging cycle have proven well founded.

Capitec: still a high-quality business

Capitec’s half-year results for the period ending August 2025 show a 26% increase in headline earnings to R8 billion. The lending business remains a key driver, growing 27% on the back of higher loan volumes and disciplined risk management. The capital-light segment – which includes value-added services, fintech and insurance – rose 19% to R13.4 billion, with fintech revenue up around 40%, underscoring Capitec’s scale and innovation advantage.

Return on equity improved to 31% from 29%, reflecting the bank’s ability to monetise a large customer base and diversify income beyond traditional lending. Despite a weak macroeconomic backdrop in South Africa, Capitec continues to outperform peers and sustain its premium valuation through consistent execution and a digital-led strategy. This remains a high-quality business – and one we will look to own at the right price.

Aon: positioned for long-term growth

Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. With operations in over 120 countries, the firm combines global resources and technical expertise with strong local delivery.

The business is anchored in four key areas: commercial insurance, reinsurance, health (human capital) and wealth solutions. These segments operate in markets that are not only growing in size but also increasing in complexity – a dynamic that creates a structural opportunity for Aon to deliver mid-single digit revenue growth over the long term.

We’re drawn to Aon’s strategic positioning, particularly its focus on higher recurring revenue streams. The company is well placed to maintain strong returns on capital, supported by long-term growth opportunities, increased operating leverage, and the benefits of recent investments aimed at expanding its mid-market presence – in particular, through NFP.

Aon currently trades at a five-year relative low compared to the broader US equity market. In our view, this discount is unwarranted, given the company’s quality, growth outlook and consistent track record of free cash flow generation. The CFO recently reaffirmed guidance for free cash flow to compound at over 10% annually over the next five years – underscoring both resilience and upside potential.

The underperformance and improved valuation provided a compelling opportunity for us to initiate a position at a meaningful discount to our assessment of intrinsic value.

Electronic Arts: trading above fair value

On 29 September, it was announced that Electronic Arts (EA) would be taken private in a landmark US$55 billion deal – set to become the largest private equity-funded buyout on record. The share price rose 20% following the news.

We originally invested in EA in November 2020, and over the holding period it delivered a compound annualised US dollar return of 12%. EA develops, publishes and distributes video games across consoles, PC and mobile platforms. Its major franchises include Battlefield, EA Sports FC (formerly FIFA), Madden NFL, Apex Legends and The Sims.

Around 75% of EA’s revenue is generated from in-game spending, with the remainder from initial game sales. While performance at the individual game level can be unpredictable, engagement continues to be driven by established franchises.

We note that once adjusted for the cash impact of stock-based compensation, EA’s forward free cash flow yield remains low – our estimate is just 3.3% in 2027, rising to 4.4% by 2030. With the share price moving 20% above our assessment of intrinsic value, we decided to exit the position.

Samsung: scale, resilience, recovery

The investment case for Samsung has historically been premised on scale, technological leadership in memory, a conservative balance sheet, and a diversified portfolio of cash-generative electronics businesses – a combination that enables resilience through semiconductor market cycles.

Samsung’s early leadership in advancing memory technology has allowed it to command premium pricing and scale production ahead of peers, helping to consolidate the memory industry into an oligopoly. Today, Samsung remains the largest player in memory and continues to benefit from that scale.

While the broader memory market has been in a cyclical downturn, high bandwidth memory (HBM) – a critical component for AI-focused server graphics processing units (GPUs) – has been a bright spot. Samsung’s ability to sustain capital investment through downturns, supported by its broader business base, stands in contrast to memory-only peers that have been forced to cut spending.

In our portfolio, both Samsung and Applied Materials have benefited from the semiconductor memory segment’s recovery following the severe 2022-24 downturn. Samsung is one of the portfolio’s strongest performers year to date, delivering a return of over 90% in US dollar terms.

Copart: a strong financial model

Copart is the largest online salvage vehicle auction operator in the US. Since fiscal 2011, the company has expanded its top line more than fivefold through significant land acquisition and consistent service quality. Most inventory is sourced through contracts with major auto insurers and sold on consignment at high margins to dismantlers or retailers in emerging markets.

The company places strong emphasis on maintaining insurer relationships, which depend on its ability to provide ample storage capacity. This requires not only significant land holdings but also the staffing to manage sudden spikes in volume. Since 2015, Copart has nearly tripled its total acreage, with a focus on expanding in disaster-prone regions.

Today, the company operates over 250 yards across 11 countries, facilitating more than 3 million vehicle sales annually, with over 250 000 vehicles available for bidding at any time. Structural growth drivers include increasing miles driven, rising accident rates and inflation in average selling prices – all contributing to low economic sensitivity. The industry is also highly concentrated, with Copart and IAA jointly holding around 90% market share.

Copart’s financial model is particularly strong, with clean earnings, a net cash balance sheet and excellent returns on a large tangible asset base. Because its vehicle volume is sourced mainly from insurance providers, the business is designed to make the salvage process seamless for insurers – managing transportation, title processing, storage and sales. This service offering has built strong brand equity.

We reallocated the cash released from the sale of our Electronic Arts position into Copart – a company with a defensible moat and strong balance sheet after a severe derating, which provided us with a margin of safety to intrinsic value.

SA off grey list: investor sentiment lifts

South Africa has officially been removed from the Financial Action Task Force (FATF) grey list – a significant development for investors. The country was placed under increased monitoring in February 2023 due to shortcomings in its framework for combating money laundering, terrorist financing and proliferation financing.

Grey-list status had tangible costs: it raised concerns about financial crime controls, increased due diligence requirements, and complicated cross-border transactions – effectively imposing a ‘risk premium tax’ on the system. With the label now removed, South Africa’s financial integrity credentials are strengthened, supporting improved investor confidence.

For capital markets, the implications are meaningful. The delisting should help lower perceived country risk, reduce funding costs for corporates and banks, and ease trade finance and cross-border activity.

That said, this is progress – but not the finish line. Ongoing regulatory reform, deeper enforcement and continued institutional credibility remain essential. Policymakers have rightly positioned this milestone as part of a longer reform journey. Still, for investors assessing South African exposure, this is a clear positive – it’s one fewer structural headwind.

SAICA recognition for Kgomotso

We’re pleased to share that one of our equity analysts, Kgomotso Mokabane, has been named as one of SAICA’s Top 35 Under 35. This recognition follows Kgomotso’s work on the Boxer initial public offering, in which we participated – the stock has delivered a 44% return to date.

The prestigious South African Institute of Chartered Accountants (SAICA) Top 35 Under 35 Awards identify and celebrate 35 exceptional young chartered accountants and associates under the age of 35 who have made significant contributions to their profession and society.

Kgomotso joined Sanlam Private Wealth in December 2023 as an equity analyst, focusing on the South African retail sector. He graduated from the University of the Free State with a BAcc (cum laude) and BAcc Honours in 2020.