Ton­gaat Hulett, Kumba Iron Ore

Finweek English Edition - - Contents -

In Si­mon Says of the 16 June 2016 edi­tion, I made a case for buy­ing Ton­gaat Hulett. It mostly in­volved re­turn­ing rains that would boost sugar pro­duc­tion. I ex­pected starch to be largely flat and prop­erty to be lumpy as nor­mal but pre­dicted that sugar would boost prof­its.

More re­cently I have writ­ten how the the­ory was not play­ing out as ex­pected, and with div­i­dends re­ceived, my po­si­tion from July last year is cur­rently pretty much flat (The case of Ton­gaat Hulett: When sweet dreams turn sour, 19 Oc­to­ber is­sue).

But now we have a trad­ing up­date from the com­pany, and it is very dis­ap­point­ing. Prop­erty has done very well, while starch has per­formed worse than ex­pected; sugar pro­duc­tion is im­prov­ing but sugar prices are tak­ing the shine off the ex­tra pro­duc­tion. At the end of the day, Ton­gaat ex­pects head­line earn­ings per share to be up only 4.8%, and I got this call to­tally wrong.

We could stick around in the share for an­other year wait­ing to see if the plan starts to come to­gether. But I made a call, bought the share, and it hasn’t worked. So I’d rather move on and de­ploy the cap­i­tal some­where else that may work. I am sell­ing my Ton­gaat po­si­tion down to zero. ■

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