PDSNET Market Snapshot

Everyone in South Africa knows the Spur chain of restaurants. It has been one of the strongest South African brands for decades. Over the years Spur has branched out into a variety of other well-known brands, built its own manufacturing base to supply raw materials to its restaurant chain and expanded internationally. More recently, it has been capitalising on the move towards online ordering of food with many of its restaurants now participating in what it describes as a “virtual kitchen”.

From an investment perspective, the business has the disadvantage of having a working capital element (stock and debtors) and a large staff throughout the country. These risks are substantially mitigated by the fact that most of its restaurants are owned and run by franchisees who are required to buy all their materials from Spur. An important factor is that at 31st December 2025, Spur had over R400m in the bank and almost no appreciable debt. This means that it is well-positioned to take advantage of any opportunities, while being insulated against external shocks.

Of course, the restaurant business is dependent on consumer spending. So, the company’s 753 restaurants need to be constantly patronised by people looking to eat a meal which they have bought rather than cooked themselves. A large proportion of this is sit-down meals in restaurants, but a growing percentage is take-away food ordered online and then delivered.

The restaurant business is based on the reality that everyone has to eat every day and that a good proportion of people will choose at least several times a month to get a ready-made meal even though it is more expensive. Their ability to do this is dependent on their available discretionary cash – and that depends on such things as the increase in real salary levels and the demands on their take-home pay like the cost of fuel and interest rates.

So, Spur’s business is generally aimed at higher income groups, and its success is a function of their perception of how well-off they are. When times are tight, they cut back on dining out – something which happened earlier this year when Trump decided to start a war with Iran resulting in a sharp increase in the cost of fuel and then later a 25 basis point hike in the level of interest rates.

In our view, the impact of the war in Iran is gradually subsiding. This can be seen in lower price of oil, the rands strength and the fact that the monetary policy committee (MPC) decided to keep interest rates on hold at its most recent meeting on 23rd July 2026. We believe that the oil price will continue to decline steadily over the coming months and years as the world economy adjusts to the new situation and moves more and more towards renewables. In other words, this external shock is really just a “bump in the road” for investors and hence probably represents a buying opportunity.

It their results for the six months to 31st December 2025 the company reported revenue up 8,5% and headline earnings per share (HEPS) up 13,6%. In a trading statement for the year to 30th June 2026 the company estimated that adjusted HEPS would increase by between 5% and 13%. The share trades on a dividend yield (DY) of 6,11% and a price:earnings ratio of 11,26. The DY, particularly is of interest to private investors. Any quality company on the JSE trading on a DY of 5% or more is worthy of your attention.

We first added Spur to the Winning Shares List (WSL) on 8th August 2023 at a price of 2488c. Since then, it has been in a steady upward trend paying good dividends which keep growing and maintaining its strong balance sheet. Consider the chart:

We wrote an article about Spur shortly after we added it to the WSL on 16th October 2023 in which we said that we believed that it was “an excellent addition to any private investor’s portfolio”. 

We continue to believe in its long-term investment potential, and we also believe that consumer spending in South Africa will recover as the year progresses and the benefits of our relatively low inflation rate become more apparent.

Since its inception in 1960 the JSE Overall index, including dividends, has generated an average compound growth rate of approximately 14,5% per annum in nominal terms. Of course, during that time there have been moments when the index was heavily over-priced – like in October 1987, immediately before the 1987 crash – and moments when it was heavily under-priced like March 1988 immediately after that crash.

Stock market averages or indexes, like the JSE Overall index, over time, always tend to equate to the real growth in the economy - plus the inflation rate. Sometimes investors get overly excited and bid shares up well above their real values and sometimes they become depressed and maudlin, causing shares to fall to record lows. But overall, in the long term, the JSE (and all stock markets around the world) will always go up because of the real growth in their economies and the steady erosion of the purchasing power of paper currencies that we call inflation.

The progress of share market indexes over time could be represented diagrammatically as follows:

The rising straight line represents the real growth of the economy plus the inflation rate, and the curved line shows the theoretical progress of the index through a full cycle. As you can see it fluctuates from being under-priced to being over-priced and back again.

At its lowest point (“A”), after a long downward trend, investor sentiment is balanced between the bulls and the bears (50/50). The negativity of the bears is now being balanced by the realisation that shares are very cheap, and bargain hunters are busy snapping up any loosely held scrip.

As the index begins to move up, sentiment shifts. More and more investors become bullish and there are fewer and fewer bears. Eventually, the index crosses that magical “real value” line (“B”) and the shares become over-priced – but it continues to go up. At this time, about 80% of investors are bullish and only 20% are bearish.  

Eventually, some investors, (the smart money) begin to realise that shares are now over-priced, and they start off-loading their holdings. The point is reached where the bulls and bears are again in balance (“C”) with roughly half of them bullish and the other half bearish (50/50).  

So, what is a sideways market? It is a period when investors as a group are more-or-less evenly divided between the bulls and the bears (i.e. 50/50). For a while neither can gain ascendancy and the index moves sideways. This typically happens at the top and the bottom of the cycle, but it can also happen during the upswing or downswing.

The S&P500 index, for example, right now has been moving sideways since about the end of May 2026 - a period of nearly two months. The shares of the Magnificent Seven have been moving sideways or downwards, but during that time the companies which make up the index have continued to grow and make profits – it is just that investors are worried about where they might go next.

The bears are out in force and there is the added uncertainty of where interest rates might go when the Monetary Policy Committee (MPC) meets again at the end of July. Tesla and Alphabet’s quarterly results were less than wonderful. Investors are suddenly worried about Alphabet’s expected $200bn full-year capex and Tesla’s disappointing profit. And now they are worried about Microsoft, Amazon and Meta which report next.  

Actually, if you consider that Trump has resumed the Iran war and that the Houthis have closed the critical Strait of Bab-el-Mandeb pushing the price of North Sea Brent up to as high as $100, the S&P is doing relatively well. American analysts are calling the market “frothy” or talking about investors “walking on eggshells”.

This does not mean that the upward trend is over or that we are now looking at an impending bear market. It just means that the S&P is pausing to catch its breath after the rapid rise during April and May 2026. Markets never move in a straight line – there are always rallies and corrections and periods of indecision.

In our view, Trump is now facing a terrible dilemma. The November mid-term elections are just 3 months away and his approval rating is disastrous. His traditional MAGA supporters are abandoning him in droves because they really don’t like the high price of fuel. And his bombastic attitude towards the war, which everyone knows he started, is just making the situation far worse. We believe his time is rapidly running out. But we also believe that the AI productivity boom is just beginning and that markets will continue to rise to new record highs. Our view is that the longer this sideways market persists, the stronger will be the upward move when it is finally resolved.    

Property shares do not generally make very exciting investments – but they make up for that by being very secure. Their security lies in the fact that their net asset value (NAV) is mostly comprised of very conservatively valued properties. Other companies often have insubstantial assets in their NAV like goodwill, intellectual property and other intangibles.

The property market is recovering from the impact of COVID-19 which saw many good quality property companies trading at a fraction of their NAV. The big institutional investors who make up 90% of the JSE really like secure investments. They were shaken out of property shares by COVID-19, but they are gradually regaining their appetite for them. 

One of the best examples of an institutional share that lost favour in 2020 is Hyprop which reached a low point of 1467c on 24th April 2020 – less than 20% of its NAV at the time. By anyone’s measure at that price it was a raging bargain.

Back then we were not yet producing the Winning Shares List (WSL) but we wrote an article about Hyprop which we published on 23rd November 2020 after the share completed a double bottom or island formation and it began to appreciate. Consider the chart:

The double bottom formation is a very solid and visible indication that a long downward trend is almost certainly over. At the time we recognised that Hyprop had broken up out of its island and was beginning to appreciate.

It took another two years before the institutional investors finally recognised its value and began buying it up in earnest. It began to recover and then we added it to the WSL on 15th August 2024 at 3439c. Since then, it has been appreciating steadily.

You will note that at its peak, back in August 2016, Hyprop reached a record high of 14100c – at which time it was trading almost 50% above its NAV of the time. On Friday last week it closed at 6052c – which was just below its NAV of 6443c. So, we see it as having some considerable further upside potential given the gradual improvement in the South African economy.

When thinking about this company you cannot help being impressed by the high quality of the assets which it owns. These include Canal Walk in the Western Cape, Somerset Mall, Hyde Park Corner, Rosebank Mall, and Clearwater Mall. These assets are almost always close to fully let (3,1% vacancies on average) and patronised by high-end A/B income group shoppers. At year-end on 31st December 2025 the company had a loan-to-value of just 31% - which means that it has plenty of headroom for further acquisitions.

In a pre-close operational update for the five months to 31st May 2026 the company reported a 4,5% improvement in collections and a 5,5% improvement in tenants’ turnover. The company said, “Demand for space remains exceptionally high, with a 0% vacancy rate in May 2026.”

We have no hesitation in recommending this share for your investigation, especially if you are looking for a more conservative long-term investment with a low risk profile.