INDUSTRIALS
● The industrials sector is home to some of SA’s stalwart stocks, such as Bidvest, Barloworld, Imperial and Super Group. The sector outperformed in 2021 despite a bleak economic landscape, rising unemployment and the July unrest, in which warehouses were torched and transport disrupted. Even PPC, which not too long ago was battling a debt-fuelled existential crisis, performed admirably, despite a lingering hangover from years of boardroom shenanigans.
If SA can kick-start its economy in 2022, the sector may be able to build on this solid performance in the year ahead.
Within this space, Christo Wiesechaired Invicta Holdings is a stock to watch. It suffered dramatically in 2020: already mired in debt and facing a
R200m tax bill (the final tranche of a R750m account), the last thing the company needed was a pandemic to decimate the economy it serves through the provision of industrial parts and equipment.
The onset of Covid and subsequent
INVESTMENT COMPANIES
Investment holding companies are hardly flavour of the month, thanks to the steep discounts at which they trade relative to their underlying assets. After all, why buy into a holding company, which adds another layer of management and cost, when you could simply buy the underlying assets themselves?
It’s a valid point, and one that’s made PSG unbundle its stake in Capitec to appease shareholders demanding a value unlock. Meanwhile, Long4Life, the company founded by Brian Joffe that owns beauty chain Sorbet and retailers Sportsmans Warehouse and Outdoor Warehouse, will be delisting after selling its assets due to unhappiness over the discount between its share price and the value of its assets.
Still, Andrew Kingston of Sanlam Investment Management (SIM) says these structures offer value investors a cheaper entry into solid underlying businesses. Take Johann Rupert’s Reinet: its two main investments are in the JSE-listed British lockdowns saw Invicta’s share price plunge to just over R4 in May 2020, while the company teetered on the verge of bankruptcy. But such has been the turnaround under new CEO Steven Joffe that the share has rallied 64%
American Tobacco, which accounts for about a third of its NAV, and unlisted UK firm Pension Insurance Corp, an insurer of defined benefit pension funds. Reinet has used healthy cash flows from its tobacco asset to reinvest in its over the past year.
It ’s led small-caps analyst Anthony Clark to call for a medium-term share price target of R35 and R60 over a three-year horizon. other businesses. SIM likes Reinet for its conservative management and strong underlying assets. That’s augmented by Reinet’s discounted valuation, offering investors “a big safety net”, says Kingston.