More stock picks for 2017

By Janice Roberts
Sizwe Mkhwanazi

Sizwe Mkhwanazi

As a tumultuous year winds down, Sanlam Private Wealth analysts look to the year ahead and choose the stocks they expect will offer the most value to investors.

In this article, we look at Portfolio Manager Sizwe Mkhwanazi’s stock picks for the year ahead.

Anheuser-Busch InBev (AB InBev) – When AB Inbev bought SABMiller it ended the 119-year relationship of one of South Africa’s most loved companies with the JSE. Part of this US$109 billion mega-deal was listing AB InBev on the JSE. Management is well known for cutting costs, with CEO Carlos Brito leading by example. The company plans to reduce employee numbers by around 5 500, which will lead to savings of around US$1.4 billion.

Earnings are expected to grow between 7% and 9%, and operating margins should improve from 31.9% to 33% over the next few years. This share offers rand hedge qualities and at the current level of about R1 450.00 offers good value over the long term.

Standard Bank – Standard Bank plans to invest US$100 million in ICBC Standard Bank, which will put the bank in a good position as the cycle begins to turn. The African presence should provide superior earnings over the next five to 10 years, although over the next two years, earnings may be under pressure due to lower oil prices and a challenging environment. The bank has also invested heavily in IT infrastructure to convert its core banking system. Earnings would have been 20% higher had the IT spend been in line with that of South African peers. Standard Bank is currently trading on 1.6 times price to book and 4.65% historic dividend yield and is an excellent dividend payer.

Impala Platinum – Precious group metals companies, including Impala Platinum, have concluded successful wage negotiations with the Association of Mineworkers and Construction Union (AMCU), reflecting a positive relationship between employers and employees. Although the World Platinum Investment Council’s latest report has indicated a decrease in autocatalyst demand, it remains the main driver of platinum use and Impala Platinum should benefit from this.

The platinum price has declined since the November US presidential elections, resulting in a negative effect on platinum shares. The share price of Impala Platinum has recovered from the low of R23.00 in January 2016, and the current levels provide a great buying opportunity as the long-term fundamentals remain intact. We have a target price of R66 over the next 12 months.

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