Tuesday, 22 March 2011 - 20:00
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Soe thoughts on gold
Whenever we run presentations and have a time for questions, invariably there is one on the outlook for gold. While gold ownership in SA has typically not been an attractive investment, there remains a strong emotional attachment to this asset class.
But lets examine the case for this metal.
Gold has been in a steady upward price pattern for the last 12 years. After falling to a low of around $250/oz in mid 1999, the price of this yellow metal has been steadily increasing.
Over the past 11 years, in US dollar terms, the price has compounded up at 15,3% per annum. Because gold pays no interest or dividends, this is the total return for an investor holding this asset. This return has actually been very good compared to say global equities, which gave investors a dollar return of 4,8% for the last 10 years.
Investors into local shares achieved a dollar return of approximately 18% over the last 10 years – so this puts some perspective on gold’s 11 year run.
US investment bank, Goldman Sachs has a current forecast for gold bullion at $1480/oz. in 3 months, a 6 month forecast of $1565 and 12 months out at $1690/oz.
One main reason for them remaining upbeat on the price is the fact that the Federal Reserve continues to keep the interest rate below the rate of inflation – i.e. running negative rates of interest. This tends to be dollar negative and asset price positive.
Gold producer, AngloGold reported to Reuters that they are looking for a price of $1600/oz. towards the end of 2012.
Investors that are bullish on the price have the option of buying either the metal itself, or investing into a mining producer. Over the years, except for certain spikes, mining companies have generally not been fantastic investments. In general their costs have continued to rise and given the fact that they mine a wasting asset, a large component of their costs is on exploration and new acquisition. This in order to replenish a wasting asset.
Today Goldfields announced a voluntary purchase offer in Lima, Peru to buy shares that it does not already own. If the offer is taken up in full the cost will be $420 million.
AngloGold reported that their all in cost of producing an ounce of gold is already higher than $1000/oz. and this is likely to increase by more than $100/oz. year in year.
At these and higher gold prices, gold producers can be profitable and should the price continue to rise and companies start to demonstrate a willingness to pay out higher dividends, then these businesses can be attractive investments. At current price multiples, investors are already pricing in high expectations.
Our view is that while the dollar price of bullion will remain volatile, we have not yet seen the top. We continue to hold a small portion within the Seed Flexible Fund, but not as yet any gold producer.
Ian de Lange
021 9144 966
Tue, 22 Mar 2011
Revenue grew to R1.2 billion (R1 billion) and gross profit rose to R278.6 million (R247.2 million). However, earnings before interest, taxation, depreciation and amortisation (EBITDA) fell marginally to R36 million (R36.4 million), while operating profit also fell to R28.8 million (R29.6 million). Net profit attributable to ordinary equity holders jumped to R15.3 million (R11.4 million). Furthermore, headline earnings per share increased slightly to 6.7cps (6.4cps).
No div. . .
|JSE Top 40||17:00||27790.80||177.89||0.64%|
|JSE Indust 25||17:00||25646.78||419.67||1.66%|
|Rand / Dollar||19:58||6.8650||-0.0775||-1.12%|
|Rand / Pound||19:55||11.2512||-0.0447||-0.40%|
|Rand / Euro||19:55||9.7919||-0.0884||-0.89%|
|Rand / NZD||19:58||5.0893||-0.0166||-0.33%|
|Rand / AUD||19:55||6.9730||-0.0240||-0.34%|
|Yen / Dollar||19:56||80.9500||-0.2000||-0.25%|
|Euro / Dollar||19:58||0.7034||0.7034||0.00%|
|Dollar / Euro||19:58||1.4216||-0.0001||-0.01%|
|Pound / Dollar||19:55||0.6103||-0.0029||-0.47%|
Click here for the Sharenet Spot Price page
The JSE Today
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||28,866.33||435.67||1.53%|
|Oil & Gas ||28,177.76||454.16||1.64%|
|Oil & Gas Producers ||15,150.66||244.19||1.64%|
|Basic Materials ||30,223.37||-131.20||-0.43%|
|Forestry & Paper ||13,925.76||155.77||1.13%|
|Industrial Metals ||28,007.12||367.23||1.33%|
|General Industrials ||72,444.63||1068.05||1.50%|
|Consumer Goods ||25,222.50||458.04||1.85%|
|Automobiles & Parts ||3,032.11||20.38||0.68%|
|Health Care ||30,561.94||-131.03||-0.43%|
|Food Producers ||45,494.09||21.90||0.05%|
|Index Name||RP||Move||% Move|
|Personal Goods ||394.81||16.78||4.44%|
|Consumer Services ||50,572.42||1097.83||2.22%|
|General Retailers ||38,070.64||128.58||0.34%|
|Travel & Leisure ||3,582.17||12.56||0.35%|
|Support Services ||2,407.65||8.82||0.37%|
|Non-life Insurance ||29,731.81||-264.32||-0.88%|
|Life Insurance ||15,643.33||155.92||1.01%|
|General Financial ||2,177.11||8.89||0.41%|
|SHARIAH TOP40 ||3,139.97||-1||-0.04%|
|FTSE/JSE SHARIAH ALL||3,190.74||-0||-0.00%|
|FTSE JSE Fledgling ||4,510.72||4||0.09%|
|FTSE/JSE Alt X ||1,043.89||7||0.67%|
|SA LISTED PROPERTY ||356.12||1.11%|
|CAPPED PROPERTY ||297.37||0.89%|
|FTSE/JSE RAFI 40||6,479.60||49||0.77%|
|Capped Top 40||14,463.02||128||0.89%|
|Capped All Share||15,530.30||116||0.75%|
Click here for the Sharenet Index Summary page
Latest Consensus Changes**
|TBS||TIGER BRANDS LTD||BUY||16 Mar|
|SUI||SUN INTERNATIONAL LTD||BUY||16 Mar|
|RMH||RMB HOLDINGS LIMITED||BUY||16 Mar|
|NED||NEDBANK GROUP LTD||HOLD||15 Mar|
|PAP||PANGBOURNE PROPERTIES LIM...||HOLD||15 Mar||
|Expected||Company Name||Fin. Date|
|23 Mar 2011||ADVTECH||December 2010 (Final)|
|23 Mar 2011||GB LD||December 2010 (Final)|
|23 Mar 2011||GB LD OPT||December 2010 (Final)|
|23 Mar 2011||GIJIMA||December 2010 (Interim)|
|23 Mar 2011||JASCO||December 2010 (Interim)|
|PSGFIN PREF||11-03-01||11-03-17||11-03-28||R 3.4377|
|HDC||Hudaco Industries Ltd||24/03/2011||Confirmed|
|AMSP||Anglo Platinum Ltd||28/03/2011||Confirmed|
|AMS||Anglo Platinum Ltd||28/03/2011||Confirmed|
|ORE||Orion Real Estate Ltd||29/03/2011||Confirmed||
Stock Exchange News Service
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