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 The Sharenet Daily 
Wednesday, 02 November 2011 - 20:00
Top News
SA Business
Company News
Company Results
World Markets (Spot Prices)
JSE Today
JSE Trading Statistics
Major Moves
Index Summary
Latest Consensus Changes / Results Expected
Recent Dividends / Ex Div
Upcoming AGMs
Stock Exchange News Service (SENS)

Components of Return

If one had taken a poll across a range of investors and even professional fund managers at the end of September after the local market had fallen 3,6% and global equities were down 8,6% and 16,5% over the 3 months, it is highly unlikely that even one would have predicted a return of 9,4% for local shares in one month.

It is this high monthly and even quarterly volatility that in fact frightens off many investors. But if one understands the drivers of performance, then investors with a longer term investment horizon can take advantage of shorter term mispricing.

The question then is this – just what drives the return on an investment in a financial asset – i.e. an ownership stake in an underlying business?

There are 2 main components of return, which may be further subdivided into 3 components:
• In the first instance an ownership stake in a company gives an investor access to the dividends declared;
• Secondly an investor stands to make a capital gain – i.e. the difference between the price paid for the share and the current selling price.

While most investors understand the concept of dividends – i.e. the excess profitability paid out by a company, what is less understood is what drives the capital gains component. Well, we can break down the capital gains component into 2 elements. The first is the growth in earnings per share and the second is the change in the price paid for these earnings.

As an example: Company A, generates earnings per share of R1,50 and the price is trading at R16,50 – i.e. a multiple of 11 times the most recent earnings. Over the next 3 years, should earnings per share move up to R2,20 a share, and the market is prepared to pay the same multiple for these earnings, i.e. 11 times, then one can expect the price to trade at R24,20.

One alternative is that the earnings grow to R2,20, but the investors are now prepared to pay 13 times and not 11 times for these earnings, then the price will ratchet up even further to R28,60. It is clear from this that an ideal scenario for an investor is where a company pays out strong dividends, continues to grow its earnings and over time investors are prepared to pay a higher multiple for these earnings.

While there is a higher degree of stability in company earnings and the payment of dividends over time, what does tend to fluctuate, sometimes on an almost irrational basis, is the multiple paid for these earnings (the price earnings multiple or PE ratio). At times investors become very pessimistic about the future and are only prepared to pay less than 8 times for R1 of earnings and at other times they act with exceptional enthusiasm and are prepared to pay 20 – 25 times per R1 of earnings.

Sanlam Value fund managers segmented the JSE historical returns from 1960 into bull, bear, and range bound markets and aggregated these 3 components in each phase as follows:

From this analysis it is very clear that in various market phases earnings and dividends are positive, but it’s the price paid for these earnings that is volatile and indeed has by far the biggest impact on the total return over defined bull and bear phases.

But what is very important to remember is that while PE multiples tend to be volatile over shorter and medium periods of time, they will never keep on moving in one direction (up or down) forever. Over the extended period there is a degree of normalcy with this rating change making a far lower contribution that would typically be expected. A study by JP Morgan notes that over 40 years to the end of 2010, rating change added only 2,6% per annum out of a total of 20% per annum. Over the 10 year to end of December, PE rating change had subtracted an annual 1,4% per annum.

What this tells us is that times of high earnings multiples will be followed by times of low multiples and vice versa. This is one of the major reasons why formalising an tactical asset allocation strategy is so important – i.e. a process that will down weight exposure to equities when investors are paying too high a price and conversely increase weighting when investors are too bearish.

Kind regards,

Ian de Lange
021 9144 966

Wed, 02 Nov 2011
Top News
South Africa's rand gained 2 percent on the dollar on Wednesday, recovering from a 1-1/2 week low as risky assets got a reprieve from heavy selling, which in turn gave longer government debt a lift.  Full story

South African stocks ended higher for the first time this week, with miners adding the most points to the blue-chip index on rallying commodity prices.  Full story
A firebomb attack gutted the headquarters of French satirical weekly Charlie Hebdo on Wednesday after it put an image of the Prophet Mohammad on its cover.  Full story
Prime Minister Silvio Berlusconi called an emergency cabinet meeting on Wednesday to accelerate budget reforms in an attempt to calm market turmoil that threatens to tip Italy's economy into full-blown crisis.  Full story
Greece's prime minister won the backing of his cabinet on Wednesday to hold a referendum on a 130 billion euro (111.7 billion pounds) bailout package but will find the stunned euro zone leaders who engineered the deal last week harder to convince.  Full story
U.S. and European stocks and the euro rose on Wednesday as buyers emerged after a steep sell-off on fears that Greece's referendum on. . .  Full story
Britain's top share index rose on Wednesday, regaining half the previous day's fall and bucking a three-day slide, buoyed by earnings news and. . .  Full story
U.S. stocks rebounded after two days of losses on Wednesday, aided by upbeat job market data and a slightly optimistic economic outlook from. . .  Full story
U.S. stocks held on to most of their gains in early afternoon trading on Wednesday after a statement from the U.S central bank. . .  Full story

European shares rose on Wednesday, recouping some of the sharp losses in the previous losses, as investors picked up battered bank stocks, while. . .  Full story
Gold rose 1 percent Wednesday, moving in tandem with riskier assets as the dollar fell, with investors focusing on a policy statement by. . .  Full story
U.S. stocks rose at the open on Wednesday, following two days of sharp losses, with developments in Greece and a U.S. monetary policy. . .  Full story
European stocks slipped back on Wednesday, on track for a fourth day of losses, as weak euro zone manufacturing data and a delay. . .  Full story
SA Business
. . .  Full story
Maize deliveries to South African silos rose to 9.431 million tonnes in the week to October 28, up from a revised. . .  Full story
The South African government has agreed to fund 137 billion rand of investment in modern rail infrastructure, the Business Day newspaper. . .  Full story
South Africa's total new vehicle sales were up 18.9 percent year-on-year at 52,338 units in October, the National Association of Automobile. . .  Full story

South Africa's national oil company PetroSA said its joint venture with Venezuela's PDVSA has found about 1 billion barrels of recoverable. . .  Full story
Simple reforms would eliminate much of the risk of investing in poor countries, unleashing billions of dollars of pent up cash and providing. . .  Full story
South Africa's Treasury said on Wednesday it would issue 1.1 billion rand worth of the 2020 government bond and 1.0 billion. . .  Full story
South Africa's rand firmed against the dollar, bouncing from 1-1/2 week lows against the dollar as some level of calm returned. . .  Full story

Zimbabwe has been allowed to export diamonds from its Marange fields by the industry's top certification system, ending two years of dispute that left the Kimberley Process divided, an industry group said on Tuesday.. . .  Full story
Bribing public officials when doing business abroad is a regular occurrence, according to Transparency International's 2011 Bribe Payers Index of more than 3,000 business executives from developed and developing countries.. . .  Full story
Company News
Shareholders are advised that the Annual Report for the year ended 30 June 2011 was posted on 2 November 2011. The. . .  Full story
Following the resignation of Mr K L Matseke on 31 October 2011, the board of Kagiso Media announce the following changes. . .  Full story
Mr Kgomotso Matseke has resigned as a non-executive director of MMI with effect from 31 October 2011. Mr Matseke has also. . .  Full story
Shareholders are referred to various announcements released on the Securities Exchange News Service and the circular to shareholders dated 5 October. . .  Full story

The JSE advised that the audit opinion on the above company's annual financial statements for the year ended 28 February 2011 has been disclaimed. The company's listing on the JSE TRADELECT. . .  Full story
The operating environment in South Africa remained tough during the third quarter as northern hemisphere sovereign debt difficulties reduced confidence globally. Domestic credit demand remains subdued with producers and consumers adopting. . .  Full story
The following director's dealing in securities was reported: *Alternate director: Suzanne Ackerman-Berman *Date of transaction: 26 October 2011 *Nature of transaction: On market purchase of shares *Number of securities purchased: 19 825. . .  Full story
Company Results
Net interest income increased to R177.1 million (August 2010: R78.8 million) and operating income grew to R215.7 million (August 2010: R170.4. . .  Full story
Total revenue for RedefIntl's first full year results as a listed company amounted to GBP32.3 million. Net operating income was GBP24.3. . .  Full story
Turnover for the interim period ended 31 August 2011 rose to R81.3 million (R70.8 million) and operating income improved to R17.8. . .  Full story
Revenue from continuing operations for the period to 30 June 2011 decreased to R814 077 (R3.1 million), while gross profit was. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0032196.56472.341.49%
JSE Top 4017:0028835.32462.481.63%
JSE Gold17:003128.8064.202.09%
JSE Financial17:0021578.34132.680.62%
JSE Industrial17:0034244.58359.161.06%
JSE Indust 2517:0028920.38314.871.10%
JSE Resource17:0053032.471206.152.33%
DJ Futures19:5011700.0019.000.16%
DJ Ind19:4111788.47130.511.12%
SP 50019:561232.4914.211.17%
FTSE 10018:355484.1062.531.15%
All Ords07:384251.30-45.90-1.07%
NZSE 5006:463308.89-23.88-0.72%
NameTimeRPMove% Move
Gold/R kg19:5644443723740.54%
Brent Crude19:56109.192.722.55%
Rand / Dollar19:597.9833-0.1100-1.36%
Rand / Pound19:5512.7006-0.1842-1.43%
Rand / Euro19:5510.9746-0.1206-1.09%
Rand / NZD19:586.2957-0.1388-2.16%
Rand / AUD19:558.2388-0.1305-1.56%
Yen / Dollar19:5978.0700-0.2560-0.33%
Euro / Dollar19:550.7272-0.0026-0.36%
Dollar / Euro19:591.37450.00450.33%
Pound / Dollar19:500.6265-0.0003-0.05%

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The JSE Today
Trading Statistics

Major Moves Up
SharenameSaleMove% MoveVolume
1 CALGRO  1892918.13.%51093
2 WINHOLD  150117.91.%17100
3 HARMONY  109957197.00.%1758242
4 MVELASERV  1056565.60.%706255
5 GBGOLD  1150605.50.%2600
6 GRANPRADE  295155.36.%33670
7 IMPLATS  183508494.85.%822546
8 SPANJRD  440204.76.%6500
9 COMAIR  20094.71.%250
10 VILLAGE  16374.49.%2417226
11 ASSORE  213998994.39.%36663
12 EOH  2388934.05.%137609
13 SASOL  3610014004.03.%2163836
14 MIXTEL  15664.00.%330
15 RMBH  2515943.88.%3101386
16 IMPERIAL  120004233.65.%1781807
17 PBT  14253.65.%20500
18 ESORFRANK  14553.57.%102840
19 PAN-AF  17663.53.%1347739
20 GROUP-5  2405803.44.%62147

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Major Moves Down
SharenameSaleMove% MoveVolume
1 LONAFRIC  175-25-12.50.%1379
2 PLATMIN  210-19-8.30.%18008
3 TREMATON  154-11-6.67.%1000
4 KEATON   261-14-5.09.%10254
5 PHUMELELA  1050-50-4.55.%44511
6 OCTODEC  1525-65-4.09.%119580
7 HOLDSPORT  3280-119-3.50.%24894
8 CADIZ  250-9-3.47.%40700
9 AQUARIUS  2194-76-3.35.%360576
10 STEFSTOCK  1111-34-2.97.%13069
11 HOSP-A  1295-35-2.63.%59273
12 VUKILE  1485-40-2.62.%131113
13 ALTRON  2388-62-2.53.%7914
14 EHSV  3600-87-2.36.%3927
15 METROFILE  225-5-2.17.%33038
16 SABVEST-N  880-19-2.11.%160
17 CAT  1465-30-2.01.%400
18 PARACON  183-3-1.61.%3000
19 CAPCO  2190-34-1.53.%27772
20 WESIZWE  142-2-1.39.%528078

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New Highs
SharenameSaleHighMove% MoveVolume
1 HARMONY  10995109957197.00.%1758242
2 SPANJRD  440440204.76.%6500
3 EOH  23882400934.05.%137609
4 PAN-AF  17617863.53.%1347739
5 LIFEHC  19642000241.24.%4148572
6 A-V-I  36203700100.28.%1200529

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New Lows
SharenameSaleLowMove% MoveVolume
1 AQUARIUS  21942170-76-3.35.%360576
2 WESIZWE  142141-2-1.39.%528078
3 TELKOM  30502964501.67.%4382177
4 ALTECH  534551601753.38.%72232

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Index Summary
Index NameRPMove% Move
Top 4028,835.32462.481.63%
Mid Cap42,837.06340.510.80%
Small Cap32,044.31149.980.47%
Resource 2053,032.471206.152.33%
Industrial 2528,920.38314.871.10%
Financial 158,053.7859.230.74%
Financial & Ind. 3031,665.86302.760.97%
All Share32,196.56472.341.49%
Oil & Gas 27,319.491059.534.03%
Mining 34,762.38746.602.19%
Gold Mining3,128.8064.202.09%
Platinum Mining66.082.263.54%
GENERAL MINING8,366.41163.431.99%
Oil & Gas Producers 14,689.19569.694.03%
Basic Materials 29,251.50607.832.12%
Chemicals 12,807.6441.630.33%
Forestry & Paper 11,786.1518.850.16%
Industrial Metals 28,513.69625.082.24%
Industrials 28,134.66309.031.11%
General Industrials 78,949.01598.850.76%
Consumer Goods 29,726.36132.440.45%
Automobiles & Parts 3,933.3686.042.24%
Household Goods149.41-0-0.25%
Health Care 35,339.22249.860.71%
Beverages 97.16-.13-0.13%
Index NameRPMove% Move
Food Producers 52,190.2259.550.11%
Personal Goods 440.456.791.57%
Consumer Services 57,370.79846.721.50%
General Retailers 47,604.60130.480.27%
Travel & Leisure 3,578.6439.901.13%
Media 84.842.202.66%
Support Services 2,244.7547.872.18%
Telecommunications 67,704.391189.521.79%
Financials 21,578.34132.680.62%
Banks 39,829.75234.760.59%
Non-life Insurance 34,676.20.000.00%
Life Insurance 16,106.62106.330.66%
General Financial 2,200.9338.031.76%
Technology 24,129.53257.921.08%
SHARIAH TOP40 3,122.80652.13%
FTSE/JSE SHARIAH ALL3,182.17632.01%
COAL MINING24,201.513511.47%
FTSE JSE Fledgling 4,558.02120.27%
FTSE/JSE Alt X 1,157.14-31-2.65%
CAPPED PROPERTY 320.80-0.02%
RESOURCE 29,357.377002.44%
DIVIDEND PLUS173.4621.17%
FTSE/JSE RAFI 406,623.14941.43%
Capped Top 4015,161.692411.61%
Capped All Share16,262.212381.48%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
03 Nov 2011AFRIMATAugust 2011 (Interim)
03 Nov 2011MONEYWBSeptember 2011 (Interim)
03 Nov 2011PERGRINSeptember 2011 (Interim)
03 Nov 2011REDEFINEAugust 2011 (Final)
03 Nov 2011SEKJALOAAugust 2011 (Final)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
REDEFINTL11-11-0111-11-1811-11-28R 0.0209
BLACKSTAR11-10-2811-11-0411-12-02R 0.0650
SPANJAARD11-10-2711-11-1111-11-21R 0.1000
BARWORLD611-10-2711-11-1111-11-21R 0.0600
NUWORLD11-10-2711-12-0211-12-12R 0.2950
Ex Div**
Share NameDec-DateLDTPay-DateAmount
SBR00311-08-0511-10-2811-11-07R 1.5200
PSG11-10-1411-10-2811-11-07R 0.2600
EXCELL11-09-2811-10-2811-11-07R 0.0400
LONFIN11-10-1411-10-2811-11-25R 0.0030

Upcoming AGMs**
CodeCompany NameDateStatus
AEGAveng Ltd03/11/2011Confirmed
FFBFortress Income Fund Ltd03/11/2011Confirmed
FFAFortress Income Fund Ltd03/11/2011Confirmed
VPFVunani Property Investment Fund Ltd03/11/2011Confirmed
HPAHospitality Property Fund Ltd04/11/2011Confirmed

Stock Exchange News Service
02/11/201117:49 Pan African Resources plc - Dealings by an associate of an non-executive
02/11/201117:34 Awethu Breweries Limited - Provisional reviewed results for the year ended
02/11/201117:33 Discovery Holdings Limited - Dealings in securities by a director
02/11/201117:23 Jasco - Resignation of company secretary
02/11/201117:03ZA030 - BNP Paribas Arbitrage Issuance B.V - New Financial Instrument Listing
02/11/201116:56ABL/ABLP - African Bank Investments Limited - Trading Statement
02/11/201116:55 O-line Holdings Limited - Notice of Annual General Meeting
02/11/201116:40 William Tell Holdings Limited - Appointment of Financial Director
02/11/201116:30OML - Old Mutual Plc - Form 8.3
02/11/201116:24 Aspen Pharmacare Holdings Limited - No change statement and notice of
02/11/201116:23 Beige Holdings Limited - Further cautionary announcement regarding a
02/11/201116:15MND/MNP - Mondi Limited/Mondi plc - Transactions in Mondi Plc ordinary shares of
02/11/201116:03 Awethu Breweries Limited - Revised Trading Statement
02/11/201116:00 Anooraq Resources Corporation - Further cautionary announcement
02/11/201115:55 Premium Properties Limited - Disclosure of disposal of securities
02/11/201115:30 1time Holdings Limited - Results of General Meeting
02/11/201115:24NEDB - Nedbank Limited - Expiry of share instalments
02/11/201115:18BIIVU - Ivuzi Investments Limited - Listing of New Financial Instrument and Tap
02/11/201115:08 RBA Holdings Limited - Designated adviser dealing in securities
02/11/201115:00 Kagiso Media Limited - Change in Directorate
02/11/201115:00 MMI Holdings Limited - Change in directorate
02/11/201114:55 Chrometco Limited - Further cautionary announcement
02/11/201114:51FRS61 - FirstRand Bank Limited - Listing of new financial instrument
02/11/201114:27 Metorex Limited - Update on conditions relating to the scheme
02/11/201114:20IVA144 - iVuzi Investments Limited - Full Capital Redemption
02/11/201113:47 Purple Capital Limited - Trading statement
02/11/201113:35INL/INP - Investec - FORM 8 (DD)
02/11/201113:35CCO - Capital & Counties Properties PLC - Transactions of Director / PDMR and
02/11/201113:33INL/INP - Investec - FORM 8 (DD)
02/11/201113:25 Distribution and Warehousing Network Limited - Director`s dealing
02/11/201113:16 Kumba Iron Ore Limited - Results of general meeting
02/11/201113:00 SABMiller - MillerCoors reports challenging third quarter
02/11/201112:55IND206 - iNdwa Investments Limited - Listing of Tap Issue
02/11/201112:48GEN - General - TBX- Disclaimed audit opinion
02/11/201112:46 Famous Brands Limited - Appointment of alternate non-executive
02/11/201111:21 SilverBridge Holdings Limited - Dealings in securities by a
02/11/201111:06 Rolfes Technology Holdings Limited - Transfer to the main board
02/11/201111:00 ZCI Limited - New amendment to Thakadu Mining Licence
02/11/201110:55 Rolfes Technology Holdings Limited - Dealing in securities by a director
02/11/201110:53 Transpaco Limited - No change statement and notice of Annual
02/11/201110:50 Exxaro Resources Limited - Disclosure concerning certain share
02/11/201110:50INL/INP - Investec Limited/Investec plc - Disclosure in accordance with Rule
02/11/201110:12 Sappi Limited - Press Release
02/11/201110:07BIJHB - City of Johannesburg Metropolitan Municipality - Media release
02/11/201109:00 African Eagle Resources Plc - JV Partner announces more drill results at
02/11/201109:00 Old Mutual plc - Nedbank Group Limited - Third quarter 2011
02/11/201108:45 Village Main Reef Limited - Update regarding disposal of 47 065 916
02/11/201108:00 Nedbank Group Limited - Third quarter 2011 Trading update
02/11/201107:32 Pick n Pay Holdings Limited - Dealing in securities by directors
02/11/201107:15 Bowler Metcalf Limited - Update on previously announced Directors`dealings
02/11/201107:10 British American Tobacco p.l.c.- Transaction in own shares
02/11/201107:06CCO - Capital & Counties Properties PLC - Transactions of Director / PDMR and
02/11/201107:06CPI/CPIP - Capitec Bank Holdings Limited - Results of placing of 4,644,952 new
02/11/201107:05 Santova Logistics Limited - Group interim results for the six months ended

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