ARTICLES

The Rebosis Saucer

Rebosis (REB), the first substantially black-owned real estate investment trust (REIT) on the JSE, over-extended itself and ended up with a loan to value ratio (LTV) of over 64%. Any REIT with an LTV above 40% is considered too highly geared, especially in an economy like South Africa’s that is in difficulties. It has had to retreat from its R1,2bn investment in New Frontier in the UK for a miserable R700m – and blamed the debacle on Brexit. Now there is a row over the exact value of its remaining properties. The company values them at R15,9bn while the appointed valuer, Quadrant Properties, says they are only worth R12,8bn. However, even if we accept the lower figure, the company is still trading on the JSE at less than a quarter of this value. Surely this represents at least an opportunity for one of the larger property groups to negotiate a take-over?

Of course property shares generally in South Africa are still recovering from the Resilient Group collapse and the bad economic situation – but this valuation seems unduly low. Consider the chart:

You can see here that Rebosis was trading at over R13 per share in February 2017. It broke down through a 150-day moving average in April 2017 at R12 and has been falling steadily ever since. Since July last year it has been moving through what technicians call a “saucer bottom” – a gradual petering out of the down trend followed by the equally gradual emergence of a new upward trend. This has now been confirmed by a “buy signal" on the 150-day moving average. Of course, this does not necessarily mean that it will go up from here – but the balance of probabilities is certainly pointing in that direction. It seems unlikely that its worst-case asset value of R12,8bn will be ignored by the market for too long.  

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PDSNET ARTICLES - FEBRUARY 2020

Corona Correction Part II

Since our article “The Corona Correction” at the end of January 2020, the disease has progressed significantly, spreading to Europe and particularly to Italy where 10 cities have been quarantined and there are now 1146 confirmed cases.
As a private investor, you need to consider just how serious this pandemic is likely to become and exactly how much impact

Silver Ready to Go

An article by one of our customers, Koot Jordaan:
At the moment, the JSE is not a good place to be, despite all the bargains. Nobody is bargain hunting in ANC country lately. The only sectors that are booming are gold and PGM’s, due to the extraordinary performance of palladium. These are out of the starting blocks already, but silver, another precious metal, is just getting ready

Grit

Private investors in 2020 are faced with a domestic economy that is performing badly. South Africa is missing out on the world-wide boom in commodities because of our penchant for “shooting ourselves in the foot” economically.
In this environment it is quite natural for investors to seek solid safe investments that offer a decent return – preferably in a hard currency.
One

The Future of Inflation

Throughout the world, especially the first world, inflation is subdued. In the G7 countries, inflation remains stubbornly under 2% despite the efforts of central bankers. At the same time, in most first world economies, unemployment rates have fallen below the level that most economists consider to be “full employment”. Central banks world-wide are all focused on getting inflation back above 2%

A Story About Focus

The sale of CNA by Edcon, as part of its rationalisation and re-focus, is long overdue. There has really never been a good reason for Edcon to own CNA because there are no synergies between the two businesses. Edcon is in the clothing and fashion business – what has that got to do with what CNA does?
CNA itself seems to us to be completely defocused. What business is it in? Do they sell stationary? Because, if they

The Rebosis Saucer

Rebosis (REB), the first substantially black-owned real estate investment trust (REIT) on the JSE, over-extended itself and ended up with a loan to value ratio (LTV) of over 64%. Any REIT with an LTV above 40% is considered too highly geared, especially in an economy like South Africa’s that is in difficulties. It has had to retreat from its R1,2bn investment in New Frontier in the UK for a miserable R700m – and blamed