The JSE’s 2017 top performers
TAKE HARD LOOK AT HIGH-FLYING KUMBA There are increasing questions around Naspers’ valuation, but it may still be underpriced.
Kumba Iron Ore edges out Naspers with massive 98.18% increase in its share price.
This month, the FTSE/JSE All Share Index closed above 60 000 for the first time.
Overall, the market is up close to 20% this year, all since mid-June and largely due to Naspers. The media giant’s share price is up over 85% this year. Naspers isn’t, however, the top-performing share in SA largeand mid-caps. Kumba Iron Ore is up almost 100%. Kumba
The improvement in sentiment towards Kumba follows severe underperformance, where its share price collapsed from R600 in January 2013 to R25 three years later. It began to stabilise in 2016.
“The strong recovery in commodity prices enabled strong free cashflow generation … and the resumption of strong dividends …” says 27Four’s Nadir Thokan.
However, Investec Asset Management’s Hannes van den Berg suggests it may be time to treat Kumba with some caution.
“At the moment, the market is very concerned about the iron ore price expectations for 2018, but note that the market also underestimated the average iron ore price in 2017.” Naspers
Naspers’ 33.3% stake in Chinese e-commerce business Tencent drives its performance.
“Tencent … this month became the fifth-largest tech company in the world with a market capitalisation in excess of $500 billion,” notes Thokan. “The strongest driver of returns from Tencent remained the stellar earnings delivery throughout the year …”
There are increasing questions around Naspers’ valuation. However, Van den Berg believes, if anything, the share is still underpriced. Clicks
Clicks’ share price has proved resilient.
However, on a price-to-earnings multiple of over 31 times, it now looks expensive versus other local retailers.
Woolworths’ price to earnings is 14 and Shoprite’s 2.1.
“Clicks is probably the stock that most got wrong this year because of the valuation,” says Van den Berg. Richemont
The luxury goods retailer has benefited as concerns around China’s economy fade. Chinese demand for items like watches hasn’t collapsed as some feared and Richemont’s earnings have continued to improve.
“With the company maintaining its bulletproof balance sheet… stabilising volume growth precipitated a sharp recovery in the share price,” Thokan explains.