TOURISM & LEISURE
The scoreboard will show that the JSE’s travel and leisure sector had a huge rebound after being laid low by Covid lockdowns in 2020. Punters who bet early on a recovery scored big, with the index more than doubling from about 1,400 points to about 2,900.
But these statistics don’t tell the full, harrowing tale of what transpired in 2021 — especially when the initial response to the Omicron variant briefly threw off the recovery trajectory. Stocks were also helped by a “mature” response from the government, which resisted tightening restrictions into the festive season.
The share prices of City Lodge and Tsogo Sun Hotels were both up more than 120%, while gaming groups Tsogo Sun Gaming and Sun International advanced by similar percentages.
While the recovery has been quite startling — especially in the case of the hotel groups, where occupancies are still well off traditional levels — the share prices are still far from levels seen in
TRANSPORT & INFRASTRUCTURE
Transport and infrastructure is a relatively underappreciated segment of the market. It’s understandable, considering the sector has languished in a bear market ever since the boom that preceded the 2010 Soccer World Cup.
Factor in horror stories about the “construction mafia” — thugs typically arrive on site demanding everything from jobs-for-pals to payments for nonexistent services rendered — and you can see why so many companies in the sector are increasingly looking outside SA for work. Then there’s the fact that landing big contracts often exposes companies in the sector to possible corruption scandals and allegations of collusion, putting them under the regulatory scrutiny. In short, this is no sector for sissies.
That said, there’s a common favourite among the asset managers the FM canvassed: Raubex, a multidisciplinary construction play whose mainstay is roads and earthworks. With an order book of R16.6bn as at end-August, the company early 2018. City Lodge was trading at about R33 then (it’s now about R5.60), and Sun International at about R66 (now roughly R28.40).
Gaming counters should continue to garner positive sentiment if cash flows remain reasonably has a healthy pipeline of work ahead of it. If the government can get its act together and revive SA’s infrastructure, that could translate into longer-term tailwinds for the share price.
Because Raubex’s order book is so flush, it strong and debt can be comfortably serviced. Alternative gaming assets — limitedpayout machines, electronic bingo and sports betting — have also shown a good deal of resilience. should be able to tender at higher margins for new contracts, as it doesn’t actually need the additional work at present, says Sanlam Investment Management’s Vanessa van Vuuren.
That’s a good place to be.