1. R20 Million Fine Tasting Bittersweet at Tongaat Hulett
Following a very scandalous exposure of what is for some reason not being called accounting fraud, plain and simple, the Financial Sector Conduct Authority (FSCA) has slapped Tongaat Hulett with a R20 million fine. This comes after it was found that things were so bad, the company had to restate their 2017, and 2018 financial statements (A Restatement is like saying “Alright, I lied. Here’s the financial state of the company. Sorry man”). Interestingly, this fine was originally R118 million but apparently, cooperation earned Hulett an 83% discount on a fine.
Now who wouldn’t want to be a good boy? Be that as it may, the JSE itself had slapped the company with a R7.5 million fine for the same reason in July. Following the scandal, the company has been advised to take on legal action against its former directors and CEO, Peter Staude. Unfortunately, SA companies don’t have the best track record in following through with such legal actions, but hopefully Tongaat Hulett does.
2. PSG Looking Shaky with 80% Drop
PSG Group Limited, the investment holding company, traded at under R40 on Wednesday, which equates to an 80% share price drop. But worry not, this was as expected, much like what happened with RMB Holdings. PSG Group made a decision to let go of a large portion of their shares in Capitec, their biggest asset. So as a reflection of the removal of a high value asset, the market responds by selling off PSG Group shares, which brings their share price down to a level that the market believes is fair.
PSG sold off about 28%, and are now left with 2.79% of Capitec shares. Its shareholders will receive 14 Capitec shares for every 100 PSG shares they hold. This all means that share price recovery will take a while, but only as expected. PSG still remains a strong bunch with PSG Alpha and Curro (the private schools)
3. Mining Stocks Going Under
The South African index for mining stocks saw a drop of about 0.6% in the face of a weaker global iron ore market. Well, a lot of markets are weaker as of late, so that’s not too surprising. Anglo American shares dropped by 0.7%, Exxaro dropped by 1.7%, and Richemont was the jockey leading the pack with a 0.9% drop in their share price.
As an interesting side note, as of the 26th of August, foreign investors had become net buyers of SA shares for the first time in 11 days with R523 million worth of shares purchased. This is significant for many reasons, but the most important one is that we can (very loosely) say that foreign investors have some substantial degree of good sentiment towards SA.
4. Heavy Iron Insight Pick: The Big Bank War
As some banks come to their full year-end, and others to their half year-end, attention has shifted greatly to their performance. Now more than ever. The performance of the banking sector is very important. Want to know how your people are doing as a country? Just look at the guys who handle their money. And what we all want to see is, “How has Covid-19 affected bank performance?” Without much being said, I don’t believe we will see much of the real impact. Only part of it. A minimal amount. However, remember those guarantees for businesses and payment holidays on loans that the President asked banks to give to consumers? It will be interesting to see how it looks on financial statements.
The biggest bank in Africa remains on top, measured by both assets, and revenue generated. Standard Bank has outdone its peers once again, but the question of the impact of Covid-19 is still to be answered, likely in their full-year results in December. We have seen major impairment losses and revaluation losses across industries, and so to what extent will banking suffer? And the heavy job losses we have seen raise questions about loan performance, and bad debts that will have to be written off.
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Author: Nkanyiso Nyawose