SPEC­TAC­U­LAR RE­SULTS, BUT I’M NOT BUY­ING

Finweek English Edition - - SIMON SAYS -

The Coro­na­tion trad­ing up­date spooked the mar­ket, but it shouldn’t have. As I have high­lighted be­fore, man­age­ment has con­tin­u­ally been warn­ing of the un­sus­tain­abil­ity of its prof­its – most re­cently it said in its Septem­ber 2014 re­sults: “Earn­ings are highly geared to mar­ket re­turns and share­hold­ers should not ex­pect earn­ings to grow ev­ery year off the cur­rent high base.” The past few re­sults have been spec­tac­u­lar and even with a 5%-15% decline in di­luted HEPS, Coro­na­tion is mak­ing se­ri­ous money and pay­ing a se­ri­ous div­i­dend. Fur­ther, as­sets un­der man­age­ment grew from R588bn at the end of De­cem­ber last year to R636bn at the end of March. That all said, the stock is not even that ex­pen­sive, at a price of around R90 and, as­sum­ing a 10% decline in HEPS the P/ E is around 18 times, av­er­age for the mar­ket. But with the po­ten­tial for tough times ahead, I wouldn’t be look­ing to buy any.

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