Having trouble reading this email? View in your web browser
 The Sharenet Daily 
Tuesday, 07 October 2014 - 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)

Sharenet Securities - smarter investing | online

* Lightening quick order entry and cancelation
* Sophisticated portfolio and share selection tools
* Lowest rates in South Africa: only 0.3% commission

Seed Weekly - Compounding at higher rates of return

Why do some companies seem to consistently move up in price, even though at face value they appear to be expensive when measured on typical measures such as price to earnings ratios, while others businesses constantly appear cheap but the price struggles to move up.

One answer is that these superior business are those that generate a high return on invested capital (ROIC) above that of the cost of capital and they also have the ability to reinvest a large portion of their profits at higher rates of return. By consistently doing this, these businesses generate above average compounding of their intrinsic value.

An investor that allocates capital to such a business will over time typically participate in the compounding effect of the higher rate of return on the company’s intrinsic value. The compounding is the product of two main factors; firstly return on capital and secondly the reinvestment rate. If a business can achieve a return of 20% on its invested capital and it reinvests 2/3 of its earnings, then the intrinsic value of the business will compound by 13,3% per annum, (20% x 66,6%). The excess not reinvested, can be paid back to investors as a dividend or by way of a share buyback.

Compare this to a business that only generates a return of 8% on its invested capital but has to reinvest 100% of its profits back into the business each year. It will only see the intrinsic value of the business compound at the 8% per annum.

An article by Deloitte found that ROIC is an understated but powerful metric, for the following reasons:

Persistence – Studies have shown that ROIC tends to persist over time in a given industry. One is likely to find that companies in sectors like utilities and construction have a relatively low ROIC while companies in, say, the pharmaceutical or beverage sectors have a relatively higher ROIC.

Robustness – the metric is extremely robust as it assesses the underlying performance of operating assets before being complicated by a company’s financial structure or non-operating assets. ROIC measures the investing decision, which is independent from the financing decision.

Comparability – It can readily be compared across industries, companies, early/late stage growth businesses or against an entity’s weighted average cost of capital (WACC).

In the long run it has been demonstrated that share price movements are determined primarily by growth in earnings. This is well illustrated in the following chart, which compares the ALSI’s price with this index’s earnings. Although the market fluctuates widely around the earnings line, it is clearly heavily influenced by long-term growth in listed company earnings.

Therefore companies that can compound their earnings at a higher rate because of a high return on capital and a higher reinvestment, should over time have a share price that moves up commensurately.

Earnings and equity performance

Therefore for an investor seeking a superior investment return, it is more than buying companies at low prices to current or one year forward earnings. More importantly it is about allocating capital to a business that has an ability to compound its earnings over time at a higher rate than others. Naturally if one can at the same time also buy such a business at a lower than market price, then this is a huge positive.
Kind regards

Ian de Lange

021 914 4966

Tue, 07 Oct 2014
Top News
South African stocks fell on Tuesday as iron ore prices continued their downward march, hitting companies such as ArcelorMittal, but platinum producers shined due to a slightly softer dollar.  Full story

Standard Chartered plans to hire at least 1,000 more staff in Africa in the next couple of years, an increase of more than 10 percent, even as its expansion elsewhere has slowed.  Full story
Turkey's president said the Syrian Kurdish town of Kobani was "about to fall" as Islamic State fighters pressed home a three-week assault that has cost a reported 400 lives and forced thousands to flee their homes.  Full story
A Spanish nurse has become the first person to contract Ebola outside of Africa, casting doubt over measures taken in Spain to control the potential spread of the deadly disease.  Full story
An American and two Japanese scientists won the 2014 Nobel Prize for Physics on Tuesday for inventing a new energy-efficient and environment-friendly light source, leading to the creation of modern LED light bulbs.  Full story
Global equities prices fell on Tuesday and oil slipped to near 27-month lows after a second day of weak data out of Germany,. . .  Full story
Gold steadied above $1,200 an ounce on Tuesday as global shares retreated and the dollar eased from a four-year high, but optimism over. . .  Full story
Hong Kong shares finished higher for a third day in a row on Tuesday, with investor confidence recovering as pro-democracy demonstrations eased in the. . .  Full story
Japanese stocks slipped on Tuesday as the yen rebounded from lows and real estate and financial shares gave up gains after the Bank. . .  Full story

Australian shares ended a volatile session 0.2 percent lower on Tuesday, clawing back gains in late afternoon trade as the materials sector underpinned. . .  Full story
Hong Kong shares rose for a third straight day on Tuesday, with investor confidence recovering as the city's pro-democracy demonstrations calmed down and behind-the-scenes. . .  Full story
Global equity markets extended a rally on Monday that drew strength from a U.S. jobs report last week that bolstered confidence in the. . .  Full story
Gold rose 1.4 percent on Monday, its biggest one-day gain in two months, as the dollar's sharp retreat sparked fresh physical demand and. . .  Full story
SA Business
South Africa's business confidence index nudged up 0.2 points to 89.2 in September, cheered by a surprise jump in new car sales in the month, a survey by the South African. . .  Full story
The rand slipped against the dollar on Tuesday as central bank data showed South Africa's foreign reserves dipped in September and the U.S. currency rebounded after investors cashed in profits in. . .  Full story
South Africa's net gold and foreign exchange reserves dipped to $43.329 billion in September from $44.24 billion in August, data from the Reserve Bank showed on Tuesday.. . .  Full story

Sub-Saharan Africa's economic growth remains strong and should accelerate to 5.8 percent in 2015 but if the Ebola outbreak in its western corner is protracted or spreads it will have "dramatic consequences" for that zone, the IMF said on Tuesday.. . .  Full story
South Africa's Treasury sold 2.35 billion rand ($210 million) of its 2037, 2041 and 2044 government bonds on Tuesday.. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0048712.45-453.75-0.92%
JSE Top 4017:0043500.25-432.72-0.98%
JSE Gold17:001198.83-5.67-0.47%
JSE Financial17:0036649.46-472.29-1.27%
JSE Industrial17:0066054.09-716.18-1.07%
JSE Indust 2517:0058302.50-645.78-1.10%
JSE Resource17:0050619.94-165.50-0.33%
DJ Futures19:1216765.00-117.00-0.69%
DJ Ind19:5816857.62-134.29-0.79%
SP 50019:581951.91-12.91-0.66%
FTSE 10017:356495.58-68.07-1.04%
All Ords07:395284.80-7.80-0.15%
NZSE 5006:305235.71-5.60-0.11%
NameTimeRPMove% Move
Gold $19:591211.624.680.39%
Gold R19:5813561.8039.350.29%
Gold R/kg19:5843600552661.22%
Silver $19:5917.2000-.1210-0.70%
Platinum $19:591260.4020.901.69%
Palladium $19:59785.0020.502.68%
Brent Crude19:5892.16-.15-0.16%
Rand / Dollar19:5911.1922-0.0119-0.11%
Rand / Pound19:5517.9594-0.0317-0.18%
Rand / Euro19:5514.1449-0.0380-0.27%
Rand / NZD19:588.7616-0.0177-0.20%
Rand / AUD19:559.85920.03620.37%
Yen / Dollar19:59108.2730-0.4530-0.42%
Euro / Dollar19:550.79080.00080.10%
Dollar / Euro19:591.2642-0.0011-0.08%
Pound / Dollar19:550.62170.00020.03%

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 REXTRU-N  1250710131.48.%41
2 CENRAND  24011084.62.%3480
3 RESGEN  1503025.00.%3610
4 BUILDMX  1101010.00.%2324
5 ANGLOPLAT  3740018825.30.%419515
6 PHUMELELA  1800905.26.%115388
7 FAIRVEST  14775.00.%160020
8 DRDGOLD  346154.53.%383000
9 ARGENT  580254.50.%68500
10 REX-TRUE  1200504.35.%592
11 IMPLATS  88463684.34.%2372028
12 QUANTUMF  365154.29.%180123
13 CBH  490194.03.%5507
14 VALUE  450153.45.%37205
15 ANCHOR  584193.36.%68732
16 NORTHAM  36601143.21.%839476
17 PALLINGHT  483132.77.%349627
18 MASSMART  125513342.73.%210836
19 ZEDER  568152.71.%783947
20 PAN-AF  23362.64.%126801

Click here for more Major Moves...
Major Moves Down
SharenameSaleMove% MoveVolume
1 CULLINAN  222-23-9.39.%348
2 NIVEUS  3000-200-6.25.%83816
3 DIAMONDCP  140-8-5.41.%9298
4 ADAPTIT  620-35-5.34.%449991
5 CLIENTELE  1610-89-5.24.%13727
6 HOLDSPORT  4100-200-4.65.%126809
7 DAWN  700-30-4.11.%24015
8 MASTDRILL  1360-58-4.09.%3000
9 YORK  289-11-3.67.%24146
10 ADCORP  3150-111-3.40.%145135
11 THARISA  2080-70-3.26.%3153
12 WESCOAL  153-5-3.16.%241040
13 ADVTECH  780-25-3.11.%230487
14 TRNSHEX  330-10-2.94.%2606
15 SYNERGY-B  660-20-2.94.%25000
16 BRAIT  7079-208-2.85.%361557
17 BEE-SASOL  45500-1300-2.78.%100
18 REINET  2460-70-2.77.%1442212
19 GLENCORE  5953-166-2.71.%2526568
20 PNR-FOODS  11198-300-2.61.%150447

Click here for more Major Moves...

New Highs
SharenameSaleHighMove% MoveVolume
1 REXTRU-N  12501250710131.48.%41
2 REX-TRUE  12001200504.35.%592
3 ASTRAL  16001161702801.78.%127224
4 ASPEN  35100352294501.30.%997758
5 A-V-I  70197109-12-0.17.%1320577
6 CAPEVINH  883920-7-0.79.%1299719

Click here for more Major Moves...
New Lows
SharenameSaleLowMove% MoveVolume
1 AFROX  17751703-36-1.99.%188501
2 GRINDROD  22182205-22-0.98.%674931

Click here for more Major Moves...

Index Summary
Index NameRPMove% Move
Top 4043,500.25-432.72-0.98%
Mid Cap64,359.66-458.89-0.71%
Small Cap54,984.25-66.46-0.12%
Resource 2050,619.94-165.50-0.33%
Industrial 2558,302.50-645.78-1.10%
Financial 1513,973.95-221.35-1.56%
Financial & Ind. 3061,673.71-755.28-1.21%
All Share48,712.45-453.75-0.92%
Oil & Gas 44,042.59-1059.45-2.35%
Mining 29,256.3286.570.30%
Gold Mining1,198.83-5.67-0.47%
Platinum Mining37.731.433.94%
GENERAL MINING8,661.755.260.06%
Oil & Gas Producers 23,680.89-569.64-2.35%
Basic Materials 26,167.5513.320.05%
Chemicals 24,040.76-79.40-0.33%
Forestry & Paper 31,417.84-640.18-2.00%
Industrial Metals 16,340.85-422.87-2.52%
Industrials 45,193.21-708.60-1.54%
General Industrials 148.90-2.41-1.59%
Consumer Goods 58,919.16-715.25-1.20%
Automobiles & Parts 7,042.47-90.57-1.27%
Household Goods370.59-2-0.61%
Health Care 94,797.93-63.50-0.07%
Beverages 204.41-3.08-1.48%
Index NameRPMove% Move
Food Producers 82,003.88-287.50-0.35%
Personal Goods 909.67-13.39-1.45%
Consumer Services 12,220.89-57.31-0.47%
General Retailers 64,944.57124.790.19%
Travel & Leisure 5,846.66-38.70-0.66%
Media 284.26-1.24-0.43%
Support Services 2,811.32-63.53-2.21%
Telecommunications 11,494.34-188.63-1.61%
Financials 36,649.46-472.29-1.27%
Banks 62,652.79-706.59-1.12%
Non-life Insurance 52,703.36-433.88-0.82%
Life Insurance 34,376.63-778.46-2.21%
General Financial 3,615.21-47.38-1.29%
Technology 45,927.07-65.76-0.14%
SHARIAH TOP40 3,953.15-28-0.71%
FTSE/JSE SHARIAH ALL4,123.33-29-0.70%
COAL MINING16,420.38-239-1.43%
FTSE JSE Fledgling 6,670.38200.30%
FTSE/JSE Alt X 1,297.26-0-0.00%
CAPPED PROPERTY 467.89-0.34%
RESOURCE 27,537.54-74-0.27%
DIVIDEND PLUS216.16-2-1.12%
FTSE/JSE RAFI 409,473.56-99-1.03%
Capped Top 4023,109.89-230-0.99%
Capped All Share24,687.60-230-0.92%
JSE TABACO 7,969.15-51-0.64%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
08/10/2014ALTRONAugust 2014 (Interim)
08/10/2014ALTRON PPAugust 2014 (Interim)
08/10/2014CAPEVINHJune 2014 (Final)
08/10/2014EASTPLATSJune 2014 (Interim)
08/10/2014PSG KSTAugust 2014 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
HOLDSPORT03/10/1405/12/1415/12/14ZAR 0.8500
PHUMELELA03/10/1424/10/1403/11/14ZAR 0.6000
NTC PREF01/10/1424/10/1403/11/14ZAR 3.7651
ILRPREF130/09/1417/10/1427/10/14ZAR 12.9895
ASTRAPAKP30/09/1417/10/1427/10/14ZAR 3.8959
Ex Div**
Share NameDec-DateLDTPay-DateAmount
SASOL08/09/1403/10/1413/10/14ZAR 13.5000
BEE-SASOL08/09/1403/10/1413/10/14ZAR 13.5000
BIDVEST01/09/1403/10/1413/10/14ZAR 4.3200
ASPEN10/09/1403/10/1413/10/14ZAR 1.8800
RMBH10/09/1403/10/1413/10/14ZAR 1.2750

Upcoming AGMs**
CodeCompany NameDateStatus
PGRPeregrine Holdings Ltd.07/10/2014Confirmed
PGPPeregrine Holdings Ltd.07/10/2014Confirmed
BK1PBK One Ltd.09/10/2014Confirmed
BK1OBK One Ltd.09/10/2014Confirmed
VISVisual International Holdings Ltd.13/10/2014Confirmed

Stock Exchange News Service
07/10/201417:30BRITISH AMERICAN TOBACCO PLC - Notification of transactions of directors, person...
07/10/201417:05TRANS HEX GROUP LIMITED - Update regarding the acquisition of Namaqualand Mines
07/10/201417:05MONEYWEB HOLDINGS LIMITED - Appointment of Managing Director
07/10/201417:00SHERBOURNE CAPITAL LIMITED - Update to shareholders
07/10/201416:45MONDI LIMITED - Employee share plans
07/10/201416:30SATRIX COLLECTIVE INVESTMENT SCHEME - Partial Delisting of Satrix 40 Securities ...
07/10/201416:25GLENCORE PLC - GLN - Response to press speculation - Rio Tinto plc
07/10/201416:16REAL PEOPLE INV HOLDINGS LTD - GCR Downgrades Real People's Ratings
07/10/201416:11DOLOMITE CAPITAL LIMITED - Notice to Holders of amendment in respect of 2014 ISD...
07/10/201416:10DOLOMITE CAPITAL LIMITED - Notice to Holders of amendment in respect of 2014 ISD...
07/10/201416:10DOLOMITE CAPITAL LIMITED - Notice to Holders of amendment in respect of 2014 ISD...
07/10/201416:10DOLOMITE CAPITAL LIMITED - Notice to Holders of amendment in respect of 2014 ISD...
07/10/201416:10DOLOMITE CAPITAL LIMITED - Notice to Holders of amendment in respect of 2014 ISD...
07/10/201416:07MACQUARIE SEC SOUTH AFRICA LTD - Macquarie Securities South Africa Limited- New ...
07/10/201416:00PEREGRINE HOLDINGS LIMITED - Results of annual general meeting
07/10/201415:41COMMISSIONER STREET NO 4 LIMITED - Interest Rate Resets - MEFSA3-MEFSA6
07/10/201415:30BUFFALO COAL CORP - Dundee operations back in production
07/10/201415:15OLD MUTUAL PLC - Public Opening Position Disclosure/Dealing Disclosure by a Pers...
07/10/201415:11HOSPITALITY PROPERTY FUND LIMITED - Resignation of Independent Non-Executive Dir...
07/10/201415:09Commissioner Street No. 5 Limited - Interest Rate Resets - TPDA01-TPDA03
07/10/201414:30ILLOVO SUGAR LIMITED - Change of Directorate
07/10/201414:30ZEDER INVESTMENTS LIMITED - Condensed unaudited interim results for the six mont...
07/10/201414:07FORTRESS INCOME FUND LIMITED - FIFC13-New Instrument Listing
07/10/201413:12UBUBELE HOLDINGS LIMITED - Resignation Of Director
07/10/201412:46QUANTUM FOODS HOLDINGS LIMITED - Resignation of Director
07/10/201412:16ELB GROUP LIMITED - Dealing in securities by directors
07/10/201412:00ADVTECH LIMITED - Director's dealings
07/10/201412:00CLOVER INDUSTRIES LIMITED - Further cautionary announcement
07/10/201411:38MICROMEGA HOLDINGS LIMITED - Acquisition Of Action Training Academy
07/10/201410:57IVUZI INVESTMENTS LIMITED - IVA441-Full Capital Redemption
07/10/201410:55ABSA BANK LIMITED - New Financial Instrument Listing - ASN033
07/10/201410:03FERRUM CRESCENT LIMITED - Ferrum announces a halt in trade
07/10/201410:00AFRICA ETF ISSUER LTD (RF) - Listing of additional AfricaPalladium Debentures -...
07/10/201410:00TRUWORTHS INTERNATIONAL LIMITED - Proposed acquisition of Earthchild by the comp...
07/10/201410:00ESOR LIMITED - Appointment of Chief Financial Officer, Independent Non-Executive...
07/10/201410:00THE STANDARD BANK OF SA LTD - New Financial Instrument Listing Announcement CLN3...
07/10/201409:05PHUMELELA GAMING & LEISURE LIMITED - Dealings in Securities
07/10/201408:33ECSPONENT LIMITED - Dividend Finalisation Announcement
07/10/201408:32ECSPONENT LIMITED - Issue and listing of Class A, Class B and Class C Preference...
07/10/201408:00TIMES MEDIA GROUP LIMITED - Change To The Board Of Directors
07/10/201408:00GLENCORE PLC - Transaction in own shares
07/10/201408:00REDEFINE INTERNATIONAL PLC - Part disposal of Delta portfolio
07/10/201407:05DATACENTRIX HOLDINGS LIMITED - Unaudited Condensed Consolidated Interim Results ...

Click here for more SENS news