Stay abreast of COVID-19 information and developments here
Provided by the South African National Department of Health
Poor appetite for new listings:
a contrarian view
Four new potential listings have come to the JSE in the last month or so – usually a warning sign that the top of a bull market is close. However, two of these listings were abandoned, one was placed at the bottom of its price range and one was comfortably oversubscribed. What are we to make of this? On the surface, it points to unfavourable conditions in capital markets and may even be interpreted by some as being indicative of an approaching bear market. We believe this is a very one-dimensional view.
Historically, large numbers of new listings taking place at high valuations is an indicator of top-of-the-market activity, with capital easily available. However, the unbridled optimism traditionally associated with bull market peaks has been conspicuous by its absence from these new listings – in fact, the evident sense of caution among South African asset managers suggests they remain quite rational. We find this encouraging as it seems to indicate that the market is not yet topping out.
The overriding theme in global investing right now is ‘dancing near the door’ – asset managers remain invested in equities, but there’s a sense of concern that equity markets could be overvalued. Accordingly, the mood both in South Africa and globally is one of caution. Again, such caution is not typically associated with the top of the market. We’d be far more concerned if there was widespread euphoria and many new listings were being done at high prices.
The failed R50 billion Sagarmatha listing was an attempt to agglomerate a variety of B-grade South African media assets, many in the ‘old media’ space, and sell the concept as a ‘multisided platform’ that was all about technology and e-commerce. The market saw through this and chose not to participate, a clear sign that the South African market remains both rational and sceptical.
Consol Glass was the next to look for capital. This is a quality business with more than 75% of the South African glass bottle manufacturing industry. Despite a history of steady revenue growth and stable margins, the market wasn’t convinced about the timing of the exit of the private equity investors, given substantial capital investment requirements over the next two years. Had this been a euphoric point in the cycle, we suspect the listing would have proceeded at a high valuation.
Libstar is a food manufacturer with many individual businesses. It focuses on private-label ready meals for Woolworths and Checkers, but also has a number of food brands, including Lancewood cheese and Rialto pasta. The group has an enviable growth record from a combination of organic and acquisitive growth. Its relatively small market capitalisation of R7.5 billion kept investors cautious despite private-label food growing well ahead of the branded goods offered by Tiger Brands. The shares were placed at the bottom of the listing price range, a further sign of caution among South African asset managers.
Vivo Energy’s listing was more successful, likely aided by the fact that it will be listed on both the London Stock Exchange and the JSE, as well as its greater size. Vivo owns petrol stations across Africa, but not in South Africa, and is well placed to take advantage of the growth in sub-Saharan African economies.
We’re aware of two more companies that had originally planned to list in the first half of 2018, but which abandoned the idea due to the low appetite for new listings.
Contrarian logic suggests that if the general mood is one of fear, caution and rationality, now may be the time to be a little more optimistic. At Sanlam Private Wealth, we are therefore searching more actively for value among the JSE’s smaller and less-loved businesses. As Warren Buffett famously said, ‘Be fearful when others are greedy, and greedy when others are fearful.’
Sanlam Private Wealth manages a comprehensive range of multi-asset (balanced) and equity portfolios across different risk categories.
Our team of world-class professionals can design a personalised offshore investment strategy to help diversify your portfolio.
Our customised Shariah portfolios combine our investment expertise with the wisdom of an independent Shariah board comprising senior Ulama.
We collaborate with third-party providers to offer collective investments, private equity, hedge funds and structured products.
We constantly challenge the norm. Our investment process is a thorough and diligent one.
Michael York has spent 18 years in Investment Management.
Have a question for Michael?
Going global:
navigating the complexities
Sanlam Trustees International
Classic cars:
are they a good investment?
Portfolio Manager
The great lockdown:
one year on
Head of Equities
IHG: focus on
quality pays off
Sanlam Active UK Fund
BUDGET 2021: THE RIGHT INTENT,
BUT RISKS ABOUND
Investment Economist at Sanlam Investments
INVESTING IN 2021:
WHAT TO EXPECT
Sanlam Private Wealth
MINING: IS THE
CYCLE TURNING?
Investment Analyst
BITCOIN: CUTTING
THROUGH THE HYPE
Head of Equities
South Africa
South Africa Home Sanlam Investments Sanlam Private Wealth Glacier by Sanlam Sanlam BlueStarRest of Africa
Sanlam Namibia Sanlam Mozambique Sanlam Tanzania Sanlam Uganda Sanlam Swaziland Sanlam Kenya Sanlam Zambia Sanlam Private Wealth MauritiusGlobal
Global Investment SolutionsCopyright 2019 | All Rights Reserved by Sanlam Private Wealth | Terms of Use | Privacy Policy | Financial Advisory and Intermediary Services Act (FAIS) | Principles and Practices of Financial Management (PPFM). | Promotion of Access to Information Act (PAIA) | Conflicts of Interest Policy | Privacy Statement
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
MANDATORY DISCLOSURE
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
INVESTMENT PORTFOLIOS
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.