WHEELINGS AND DEALINGS
Recent headlines have been around Vedanta Resources from India putting almost $800m into building a zinc mine in the Northern Cape, but where does it plan to get electricity? One of the biggest issues with the Eskominduced lack of electricity is a lack of development of powerhungry projects, as security of supply is not possible. But the reports state that Eskom has reached a supply agreement with Vedanta for 40MW of power starting early next year. To put this into perspective, recent load-shedding had to reduce usage by around 1 300MW, so 40MW is relatively little. But one does wonder what promises Eskom has made and what this may mean for the rest of the country. HEPS growth should be higher than a stock ’s P/ E (making for a P/ E to growth ratio below 1 and offering value – the lower the PEG ratio, the more the stock may be undervalued given its earnings performance), and we’re a long way from that. Even if share prices go nowhere for the next year, the market is pricing in earnings growth of around 20% in f inancial year ending 2016 and I am far from sure we’ll see that. So while I continue to hold my retail stocks, I am not chasing them at these levels – I think we’ll be able to pick them up for much cheaper in 2015.