In-form Nedbank may make top three soon
NEDBANK has traditionally been in fourth place among SA’s big four banks, but it is not far-fetched to speculate that it could overtake Barclays Africa soon if trends continue.
The share was a tad softer yesterday after reaching a record high in the previous session on the JSE when its interim results came in better than expected. Barclays disappointed the market with interims that raised plenty of questions over its parent’s rationalisation plans. It is uncertain how these will affect Barclays Africa.
Nedbank’s market capitalisation is now only about R30bn less than that of Barclays Africa, with its 15.7% headline earnings growth surpassing the latter’s 11%. Nedbank’s lower impairment credit level also shows it has made better progress in reducing bad-debt levels than Barclays, with the Ecobank transaction delivering an early dividend after the transaction for a 20% stake in the West African group was concluded last year.
Nedbank’s price-earnings ratio of 11.9 is on par with Barclays Africa’s 11.7. But both are well below that of market leader FirstRand, which is trading at 15.9. Previous market leader Standard Bank is at 14.8. The market cap gap between them just keeps growing and is now a sizeable R67bn, from just R30bn last year.
Standard has rerated to a degree following the sale of London plc and on indications that its African expansion is gathering momentum, but it has not been so impressive as to present a threat to FirstRand.
PRIVATE equity is quietly going about its business in SA despite the tsunami of negative economic headlines and political shenanigans. Waco International, owned by Ethos Private Equity and RMB Ventures among other household names in South African finance, is going from strength to strength in defiance of the lousy mining, construction and infrastructure markets.
The equipment rental and industrial services business mainly provides forming, shoring and scaffolding products and modular buildings to markets in SA and subSaharan Africa, Australia and New Zealand, the UK and Chile. It trades in sectors including oil and gas, general industry maintenance, marine, entertainment and events, education and healthcare.
When Australian mining markets took a nose dive on declining economic growth in China, that country’s broad investment focus turned to general infrastructure and building markets — to Waco’s benefit. Waco says even in SA, government spending on infrastructure such as modular classrooms and water and sanitation is substantial, so mid-tier infrastructure businesses can gain handsomely. It is good to know opportunity exists amid the gloom.
Dave Marrs edits Company Comment (marrsd@bdfm.co.za)