Truworths top 40 exit new blow for investors
Retailer Truworths’s unceremonious dumping from the JSE s top 40 index is yet another blow for a company that has shed 16% of its value so far in 2019.
The unbundling of MultiChoice from Naspers on Thursday resulted in the subscription TV service listing with a market capitalisation of R46.5bn, easily eclipsing Truworths’s R33bn and seeing the clothing retailer ousted. In the short term, this will result in a rebalancing by tracker funds, which will automatically sell stock in Truworths as they will be required to dispose of shares that are not in the top 40 index. It will also not benefit from automatic buying from passive investment vehicles.
Although this is not ideal for the retailer, over the longer term it is likely to adjust as active investors looking for underlying value will still pour in. SA retailers are under severe strain as tepid economic growth and government tax hikes drain consumer spending.
Truworths’s share price loss in 2019 is bigger than that of the JSE’s general retailer index, which recorded a 9.29% drop. Nevertheless, the company is only the third-worst performing share on that index, trailing both Woolworths and Massmart.
Truworths remains a solid business, pleasing the market with its results for the half year to end-December. Despite pressure in the UK market, where it is facing stiff competition from online retailers, Truworths continues to expand and has launched an e-commerce platform. All in all, it looks set to continue delivering solid results.
ADVANCED HEALTH
The market was clearly hoping for a stronger dose of good news from dayhospitals group Advanced Health on Thursday.
Advanced’s share price more than doubled from about 44c in early November to settle at about 95c for most of 2019. But in the past few weeks the share has trended weaker and lost almost 7% on Thursday after the release of interim results to endDecember that showed the bottom line still bleeding.
Advanced remains excited about private health care in SA, and — on paper — the group is in the sweet spot when it comes to offering more affordable daysurgery procedures.
But this enthusiasm is not translating into profit … yet. Local operations did show markedly reduced losses, but it seems there is still a fair wait for meaningful profits and cash flows.
THE GROUP IS IN THE SWEET SPOT OF MORE AFFORDABLE DAYSURGERY. BUT THIS IS NOT TRANSLATING INTO PROFIT … YET
Encouragingly, Advanced did say it was seeing traction in medical schemes directing surgical procedures towards its day-hospitals as a more costeffective option. Notably, Discovery has recently introduced the Discovery Day Surgery Network, which hopefully means more patients for Advanced.
While expansion is not at a break-neck pace, Advanced is pushing hard to start operations at the Harbour Bay Medical Centre in Simonstown. This looks like a smart move in an area without many private hospitals.
But Advanced — as always — is quick to confirm that it takes up to 18 months to establish a new day-hospital, which then requires settling-in of at least 36 months before profit accrues.