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 The Sharenet Daily 
Tuesday, 19 March 2013 - 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)

Earnings Weakness

At the beginning of each month we take an in depth look at the valuations of a variety of asset classes. We mostly have standard valuation metrics that we look at – we want our process to be as consistent as possible – but, from time to time when anomalies arise, we also look at other factors (or the same factors from different angles). When there are anomalies in the output, we perform the extra research in an attempt to get a better understanding of the factors at play. Ultimately the human touch is important in an investment process – you can’t solely rely on output exported into an Excel spreadsheet when managing investments.

The results at the beginning of March proved a case in point. In February the market was down nearly 2%, but rather than being cheaper than the previous month (when using the market PE ratio as the valuation technique) it was significantly more expensive (PE of 16.6 at the end of February compared to 15.2 at the end of January).

Fortunately the PE ratio is a simple formula. If P is down and the PE ratio is up, it simply means that E (earnings) must be down. When I took a closer look, I saw that the market’s earnings were down over 10% during February, with the vast majority of the fall coming on 15 February – see Chart 1 below. It just so happened that Anglo American (AGL) reported a 55% (in USD) drop in earnings on the 15th. Essentially Anglo’s poor results had a major impact on the market’s earnings falling (and consequently an increasing PE).

Chart 1: ALSI Earnings during February

This surprised me, so I decided to take a closer look at the market’s earnings over time. I was interested to see that there have been some significant earnings drawdowns over the past 27 years. But while earnings have fallen significantly over this period – see Chart 2 below, the market has typically fallen more. The market falls/crashes have also typically occurred before the fall in earnings (lending support to the fact that the market is forward looking and anticipates poor earnings).

Chart 2: Drawdown of ALSI (P) and ALSI (E), i.e. Fall in Price vs Fall in Earnings

When looking at this is data from some other directions I saw that earnings are typically half as volatile as the price and that there’s not much correlation between the monthly returns and the monthly earnings growth. Over a rolling 12 month period the largest gain in earnings has been 49% for the 12 months ending 31 July 2001 and the worst period ended on 28 February 2010 with earnings contraction of 32%.

Interesting, February 2013 was the biggest monthly contraction in earnings over this 27 year period, the previous worst being -9.7% in August 2009. While this kind of analysis doesn’t give us all of the answers, it does at least help us understand where the change in valuation has come from.

Into March we have used the rising market to reduce our allocation to local equities across our unit trusts and range of portfolios. For more information on the Seed Flexible and Seed Absolute Return Funds, you can download the latest (February) fact sheets by clicking here.

Take care,

Mike Browne

021 914 4966

Tue, 19 Mar 2013
Top News
South Africa's benchmark share index fell for the third straight day on Tuesday, weighed down by mining companies as worries about the euro zone debt crisis dented metal prices.  Full story

Striking workers at five collieries owned by South African mining group Exxaro Resources Ltd rejected a cash offer to return to work, prolonging an illegal stoppage that could eventually hit electricity supplies.  Full story
Global stock markets fell on Tuesday, extending the previous day's decline as investors continued to fret about a bail-out plan for Cyprus and the possible effect on the euro zone should it collapse. Markets have been volatile, with U.S. stocks opening lower and then briefly rebounding as investors used strong housing data as an opportunity to pick up beaten down shares. In midday trading, however, shares returned to negative territory. European stocks, along with the euro and oil, had b  Full story
Cyprus's government proposed to spare small savers from a divisive levy on bank deposits but said it expected parliament to reject the measure, needed to secure an international rescue and avoid a default that would shake the euro zone.  Full story
Pope Francis set the tone for a new, humbler papacy at his inaugural Mass on Tuesday where he called for the Church to defend the weak and protect the environment.  Full story
European shares fell for a second day on Tuesday, with investors spooked by the possibility that Cyprus could reject a bailout, likely leading. . .  Full story
Britain's top share index fell on Tuesday, extending losses in afternoon trade as concerns that the Cypriot parliament will reject a bailout package. . .  Full story
U.S. stocks fell on Tuesday as a planned tax on bank accounts to help pay for Cyprus's bailout appeared doomed in parliament, fueling. . .  Full story
Gold reversed earlier losses on Tuesday, hitting a 2-1/2 week high above $1,610 on renewed flight-to-safety investment ahead of an imminent vote in. . .  Full story

European shares extended losses, hitting session lows in late trade on Tuesday, with traders citing growing expectation that Cyprus will reject its bailout plan,. . .  Full story
U.S. stocks erased earlier gains on Tuesday, with the S&P and Nasdaq turning negative while the Dow was flat, as investors continued to. . .  Full story
Pan-European stock indexes turned positive in afternoon trade on Tuesday, cheered by stronger-than-expected U.S. housing data and by U.S. futures pointing to a higher. . .  Full story
European shares fell in choppy trade by midday on Tuesday as investors tried to hold their nerve after Cyprus's bailout package stoked anxiety. . .  Full story
SA Business
Procter & Gamble Co., the world's biggest household products maker, is spending $450 million upgrading and building new factories in Africa,. . .  Full story
Employment in South Africa's formal, non-farm sector edged up 0.3 percent in the fourth quarter of 2012 compared with the previous. . .  Full story
South African diversified miner Exxaro said striking workers at five of its collieries had refused a one-off offer of 2,000 rand. . .  Full story
South Africa's rand is likely to trade in a narrow range on Tuesday as a cautious market awaits consumer inflation data. . .  Full story

South Africa's Treasury sold a total 2.1 billion rand of its 2036, 2041 and 2048 government bonds on Tuesday. Yields for the 2036 and 2041 paper edged lower, but that for. . .  Full story
South African power utility Eskom said on Monday that available spare supply on its electricity network had fallen to just over 1 percent of total capacity due to a sharp increase. . .  Full story
South African fixed-line operator Telkom SA said on Monday it had won a court dispute with an affiliate of China's ZTE Corp that had put on hold its planned network overhaul.. . .  Full story
Company News
Further to the cautionary announcements, the last of which was dated 5 February 2013, shareholders are advised that discussions are still. . .  Full story
Shareholders are advised that, at the general meeting of Sentula held on 19 March 2013, convened in terms of the notice. . .  Full story
Shareholders are advised that Ms Ayanda Sisulu- Dunstan has resigned as an independent non executive director of the Group, effective 19. . .  Full story
Textainer Group Holdings Ltd. (NYSE: TGH), in which Trencor has a 48.5% beneficiary interest, has filed its Form 20-F (annual report. . .  Full story

ChemSpec advised its shareholders that it has acquired the manufacturing contract for Jack's Paints' exclusive decorative paint brands- Panache, Coverkote and. . .  Full story
Datatec, (the "group", JSE and LSE: DTC), the international Information and Communications Technology ("ICT") group, is published a year-end trading statement. . .  Full story
Resgen has released a webcast with the following details: *Resource Generation, Funding update *Speaker: Mr Paul Jury, Managing Director *Live. . .  Full story
Shareholders were advised that Resgen has issued a funding update presentation. The presentation may be viewed under the ASX announcements section. . .  Full story
Company Results
Revenue increased to R5.3 billion (R4.3 billion) whilst gross profit rose to R1.2 billion (R917.4 million). Operating profit grew to R668.4. . .  Full story
Revenue for the year ended 31 December 2012 increased by 5% to R1.7 billion (2011: R1.6 billion). Operating profit was down. . .  Full story
Revenue for the year ended 31 December 2012 increased to R4.5 billion (2011: R4.2 billion). Earnings before interest, taxation, depreciation and. . .  Full story
Revenue declined to R103.4 million (R174.2 million). LBITDA was smaller at R7.5 million (loss of R39 million). The net attributable loss. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0040346.17-123.00-0.31%
JSE Top 4017:0035809.56-144.00-0.40%
JSE Gold17:001932.08-7.00-0.41%
JSE Financial17:0030720.53237.000.78%
JSE Industrial17:0049854.06-110.00-0.22%
JSE Indust 2517:0043125.72-95.00-0.22%
JSE Resource17:0049426.18-618.00-1.24%
DJ Futures19:4214310.00-80.00-0.56%
DJ Ind19:5814401.55-50.51-0.35%
SP 50019:581541.04-11.06-0.71%
FTSE 10018:356441.32-16.60-0.26%
All Ords07:435004.40-23.00-0.46%
NZSE 5006:484345.044.020.09%
NameTimeRPMove% Move
Gold $19:591612.678.190.51%
Gold R19:5814946.50253.241.72%
Gold R/kg19:5848074382421.74%
Silver $19:5928.9220.04400.15%
Platinum $19:591554.00-18.75-1.19%
Palladium $19:59729.00-32.00-4.20%
Brent Crude19:58107.56-2.55-2.32%
Rand / Dollar19:599.26430.10741.17%
Rand / Pound19:5513.96840.15311.11%
Rand / Euro19:5511.92340.04640.39%
Rand / NZD19:587.62990.06030.80%
Rand / AUD19:559.60300.06500.68%
Yen / Dollar19:5994.9140-0.3540-0.37%
Euro / Dollar19:550.77720.00570.74%
Dollar / Euro19:591.2877-0.0086-0.66%
Pound / Dollar19:550.66190.00020.03%

Click here for the Sharenet Spot Price page
The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 SILVERB  13077145.28.%2750
2 HWANGE  1552519.23.%44528
3 HOSP-B  575448.29.%168632
4 FONEWORX  210136.60.%60000
5 EASTPLATS  164106.49.%2395
6 AFGRI  556326.11.%4918281
7 ESORFRANK  13975.30.%376203
8 SUPRGRP  22641074.96.%1568056
9 HULAMIN  460204.55.%156206
10 CITYLDG  110354494.24.%78497
11 PERGRIN  1145454.09.%32051
12 ILIAD  510204.08.%476720
13 MAS  1300504.00.%316
14 MIXTEL  390154.00.%11489
15 JASCO  13553.85.%56914
16 TASTE  385133.49.%52830
17 NAMPAK  31901043.37.%1056955
18 ATLATSA  19052.70.%21760
19 JUBILEE  11832.61.%53969
20 METAIR  3669932.60.%178514

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Major Moves Down
SharenameSaleMove% MoveVolume
1 SABVEST  1300-300-18.75.%378800
2 SABVEST-N  1300-300-18.75.%1104200
3 MMG  260-30-10.34.%2500
4 TREMATON  215-20-8.51.%65000
5 BELL  2350-175-6.93.%56902
6 TRUSTCO  110-8-6.78.%230036
7 BUILDMX  215-15-6.52.%254160
8 SASFIN  3650-200-5.19.%1513
9 KUMBAIO  48605-2014-3.98.%580102
10 NIVEUS  1250-50-3.85.%35700
11 NASPERSN  58640-2080-3.43.%3310251
12 TIGBRANDS  29114-998-3.31.%487897
13 RBPLAT  5400-179-3.21.%115039
14 RICHEMONT  7485-220-2.86.%9954219
15 EHSV  1515-44-2.82.%8150
16 CIL  1770-50-2.75.%82303
17 ITLTILE  555-15-2.63.%60009
18 EXXARO  16010-415-2.53.%905732
19 METROFILE  395-10-2.47.%81410
20 ARM   19208-444-2.26.%352757

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New Highs
SharenameSaleHighMove% MoveVolume
1 SILVERB  13013077145.28.%2750
2 HOSP-B  575590448.29.%168632
3 REINET  18551999150.82.%1418016

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New Lows
SharenameSaleLowMove% MoveVolume
1 BUILDMX  215200-15-6.52.%254160
2 TELKOM  13701365-5-0.36.%1016644

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Index Summary
Index NameRPMove% Move
Top 4035,809.00-144.00-0.40%
Mid Cap55,761.0032.000.06%
Small Cap43,530.00264.000.61%
Resource 2049,426.00-618.00-1.24%
Industrial 2543,125.00-95.00-0.22%
Financial 1511,561.00109.000.96%
Financial & Ind. 3046,875.0016.000.03%
All Share40,346.00-123.00-0.31%
Oil & Gas 31,329.00.000.00%
Mining 31,020.00-434.00-1.38%
Gold Mining1,932.00-7.00-0.41%
Platinum Mining49.00.00-0.14%
GENERAL MINING8,394.00-140.00-1.65%
Oil & Gas Producers 16,845.00.000.00%
Basic Materials 26,975.00-362.00-1.33%
Chemicals 19,087.00-113.00-0.59%
Forestry & Paper 21,412.00117.000.55%
Industrial Metals 24,585.00-873.00-3.43%
Industrials 40,216.00143.000.36%
General Industrials
Consumer Goods 47,019.00-136.00-0.29%
Automobiles & Parts 8,308.00211.002.61%
Household Goods171.00-2-1.44%
Health Care 60,245.00133.000.22%
Index NameRPMove% Move
Food Producers 68,821.00-1134.00-1.62%
Personal Goods 747.00-21.00-2.79%
Consumer Services 80,797.00-876.00-1.07%
General Retailers 61,816.00350.000.57%
Travel & Leisure 5,259.0030.000.59%
Media 128.00-4.00-3.37%
Support Services 2,339.00-42.00-1.79%
Telecommunications 82,206.00690.000.85%
Financials 30,720.00237.000.78%
Banks 52,936.00705.001.35%
Non-life Insurance 49,640.00-127.00-0.26%
Life Insurance 28,829.00257.000.90%
General Financial 2,833.00-1.00-0.05%
Technology 35,954.00-76.00-0.21%
SHARIAH TOP40 3,398.00-36-1.07%
FTSE/JSE SHARIAH ALL3,526.00-31-0.90%
COAL MINING20,449.00-522-2.49%
FTSE JSE Fledgling 5,924.00-7-0.12%
FTSE/JSE Alt X 882.0091.12%
RESOURCE 27,198.00-324-1.18%
DIVIDEND PLUS215.0000.17%
FTSE/JSE RAFI 408,247.00-7-0.10%
Capped Top 4018,900.00-66-0.35%
Capped All Share20,427.00-56-0.28%
JSE TABACO 6,262.00841.37%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
20/03/2013URONEDecember 2012 (Final)
21/03/2013BIOSCIDecember 2012 (Interim)
21/03/2013LONRHODecember 2012 (Final)
21/03/2013MICROMEGADecember 2012 (Final)
21/03/2013SABLEDecember 2012 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
METAIR18/03/201305/04/201315/04/2013R 0.9500
ADVTECH18/03/201305/04/201315/04/2013R 0.1400
BELL18/03/201305/04/201315/04/2013R 0.4000
ILIAD18/03/201312/04/201322/04/2013R 0.2000
PUTPROP13/03/201312/04/201322/04/2013R 0.1800
Ex Div**
Share NameDec-DateLDTPay-DateAmount
SANTAM27/02/201314/03/201325/03/2013R 4.1000
GRINDROD PREF27/02/201314/03/201325/03/2013R 3.7900
PSGFIN PREF28/02/201314/03/201325/03/2013R 3.5124
CAPITEC-P28/02/201314/03/201325/03/2013R 3.5124
MASSMART28/02/201314/03/201325/03/2013R 2.7500

Upcoming AGMs**
CodeCompany NameDateStatus
REBRebosis Property Fund Ltd.20/03/2013Confirmed
SDHSecureData Holdings Ltd.20/03/2013Confirmed

Stock Exchange News Service
19/03/201317:49INTU PROPERTIES PLC - Notification of Transactions of Directors/Persons Discharg...
19/03/201317:36CONSOLIDATED INFRASTRUCTURE GRP LTD - TRP121: Notification of an acquisition of ...
19/03/201317:30MIRANDA MINERAL HOLDINGS LIMITED - Further cautionary announcement
19/03/201317:26Sentula Mining Limited - Results Of General Meeting
19/03/201317:25SENTULA MINING LIMITED - CANCELLATION OF S329717 Results of general meeting
19/03/201317:01REMGRO LIMITED - Unaudited Results for the Six Months Ended 31 December 2012...
19/03/201317:00RBA HOLDINGS LIMITED - Reviewed condensed provisional results for the year ended...
19/03/201316:45FIRSTRAND BANK LIMITED - Listing of Tap Issue - FRX19
19/03/201316:30AWETHU BREWERIES LIMITED - Trading statement
19/03/201316:10SANLAM LIMITED - Directors dealings in Sanlam securities
19/03/201315:55DELTA PROPERTY FUND LIMITED - Change of dates relating to the proposed rights of...
19/03/201315:50MUVONI TECHNOLOGY GROUP LTD - Changes to the Board
19/03/201315:31BSI STEEL LIMITED - Share Repurchase Programme
19/03/201315:30ISA HOLDINGS LIMITED - Trading Statement
19/03/201314:35NEDBANK LIMITED - Dividend Distribution - ASANII
19/03/201314:00CLOVER INDUSTRIES LIMITED - Clover Site Visit And Presentation At Its Uht Facili...
19/03/201313:50REMGRO LIMITED - Retirement Of Director
19/03/201313:43ABSA BANK LIMITED - ACL137 - Interest Rate Reset
19/03/201313:41ABSA BANK LIMITED - ACL020; ACL025 and ACL146 - Interest Rate Reset
19/03/201313:05HYPROP INVESTMENTS LIMITED - TRP121: Notification of an acquisition of beneficia...
19/03/201313:01TRENCOR LIMITED - Trencors Textainer: annual report for 2012
19/03/201312:30CHEMICAL SPECIALITIES LIMITED - Acquisition of a manufacturing business and excl...
19/03/201312:00CONVERGENET HOLDINGS LIMITED - Waiver of mandatory offer
19/03/201311:40INVESTEC PROPERTY FUND LIMITED - Announcement regarding the Acquisition of Letti...
19/03/201311:30INDWA INVESTMENTS LIMITED - Listing of Tap Issue - IND325
19/03/201311:28SENTULA MINING LIMITED - Results of general meeting
19/03/201311:04WESCOAL HOLDINGS LIMITED - Directors dealing in securities
19/03/201311:02SYNTHESIS FUNDING LIMITED - SYN987 Synthesis Funding Limited - New Financial In...
19/03/201310:571TIME HOLDINGS LIMITED - Renewal of Cautionary Announcement
19/03/201310:45INVICTA HOLDINGS LIMITED - Director's dealing in securities
19/03/201310:30INVESTEC BANK LIMITED - IBL42, IBL48 Senior unsecured bond issue
19/03/201310:25HOME OBLIGORS MORT ENH SEC PTY LTD - HMS1B2 and HMS1B3 - Partial Capital Redempt...
19/03/201310:15IVUZI INVESTMENTS LIMITED - Listing of Tap Issue - IVA324
19/03/201309:00DATATEC LIMITED - Pre-close year end trading statement
19/03/201308:49ARGENT INDUSTRIAL LIMITED - Dealing in securities by a director
19/03/201308:30CAPITAL PROPERTY FUND - New Financial Instrument Listing: CPL015
19/03/201308:16FOORD COMPASS LIMITED - Change to the board of directors
19/03/201308:03RESOURCE GENERATION LIMITED - Resource Generation, Funding update" BRR webcast
19/03/201308:02RESOURCE GENERATION LIMITED - Funding Update Presentation
19/03/201308:01RESOURCE GENERATION LIMITED - Funding Update
19/03/201307:50PALLINGHURST RESOURCES LIMITED - Chnages to the Board
19/03/201307:15BRITISH AMERICAN TOBACCO PLC - Transaction in own shares

Click here for more SENS news