JSE Stock Picks

16 November 2010

We short trade HAR ( harmony gold ) at 8300. Target 7800 stop loss 8500. HAR produced poor results and are having to dig deeper to get product, costs are rising and we don't see it getting any better. Techs also show a short opportunity at these levels.

JSE Stock Picks

The markets have been very choppy & almost impossible to call lately but there are still a few good trades around. In the short term we short trade BAW at current levels with a target of 4500. stop loss 5300. For a longer term trade we look to buy long ART at 900 with a target of 1200 and stop loss at 800. ART have increased their earnings 1900% & produced good results in general for 2010. A small dividend of 4c is to be paid. We expect ART to move upwards and past 1200 in the next year.

JSE STOCK PICKS

This week we short Naspers.

With all of the news flow around the performance of Tencent in driving the share price of Naspers, there is a tendency to forget

about the role played by other parts of the Naspers business. Indeed, in recent times, it appears as if these have been more

significant drivers of share price performance than Tencent.

To recap:

• Naspers’ share price has risen from R258 to R335 since we presented in early-July (+30% or so).

• Over the same time period, Tencent’s share price has risen from HK$130/share to HK$168 (+30%), but when converted

into ZAR it is only up 17%.

• Based on the above, if one strips out Naspers’ 35% holding in Tencent at full value from both measurement periods, the

remaining Naspers market cap has risen by 34% over the same time period, or an increase of ~R11bn. Tencent

accounts for around 70% of Naspers market cap before applying any holding company discount (we think a 15%

discount is appropriate).

Recently there have been some news reports that DST (the Russian Internet company) is looking to re brand as Mail.Ru Group

and list on the LSE this year with media reports citing a listing value range of $5bn-6bn. As a reminder, earlier this year Naspers

swapped its 39.3% stake in Mail.Ru plus a cash injection of $338m for a 28.7% stake in the enlarged DST (to be renamed Mail.Ru

Group) business – this is the entity it is looking to list. In F2010, Naspers’ 39.3% stake in Mail.Ru accounted for R70m of associate

earnings – so even if we put a 50x PE on this number, most analysts probably wouldn’t have come up with a value of more than

$850m for Naspers’ 28.7% share of DST ( equal to $338m + [50x R70m / 6.85]). The talk around this listing is that this same asset

will now be worth as much as $1.7bn (ie 28.7% of $6bn)!

The point of all of this is that the hype around this listing could well have accounted for $850-1000m worth of “value” uplift for

Naspers over this period, or R5.5bn-R6bn. This would explain around 50% of the re-rating of the “non-Tencent” market cap over

this period.

Therefore the approach we have taken to valuing Naspers now is to give Naspers the benefit of the doubt and assume that

Mail.Ru Group will list at $6bn (100% of the group) and then apply a 15% holding company discount for Tencent’s 28.7% – much

as we have done for its holding in Tencent. Bear in mind of course that a value of $6bn will probably amount to a forward PE of 50-

60x.

Naspers valuation:

Rm Per share

35% of Tencent @ 15% discount: 79,678 R 208 (HK$168/share before discount)

28.7% of Mail.Ru Group @ 15% discount: 10,079 R 26 ($6bn listing value)

Remaining businesses at 15x P/E to March 2011: 52,710 R 137

Value of Naspers Group 142,467 R 371

Number of shares in issue (million) 383.8 % upside

Per share value of Naspers R 371 R 371 11%

On this basis we still don’t see huge upside in the stock, with a fair value of around R370

We will short NPN any were below 365 keeping a stop loss at 380 looking at a target price of 290.

We will also be looking at short trades for ALSI , SLM, SHP,TRU,IPL,CFR & ABL this week so don't forget to look at them as possibilities.

Have a good trading week.

JSE STOCK PICKS

All those who did not short sell SHP & IPL previously they are still great opportunities to short at these levels. IPL anything above 106 & if you can get in above 107 all the better. SHP has already started to fall from the 98 levels but could have a support at 95, if it breaks through this it could go below 90. Note my previous posts. The markets are not steady at the moment & the slightest news is moving them up & down but although the bulls are trying to get control the overall fundamentals are still very bearish and as was seen this week the slightest bad news will send the markets down at speed. We are still very bearish on the markets and expect more downside in the short term. A short on the EUR/JPY can be considered above 113 with a target of 106. Have a good week trading.

JSE STOCK PICKS

This week we look to short sell SHP ( shoprite ). Fundamentally SHP will be ex dividend & should start to track back. Technically SHP is way oversold & looking very expensive with a PE over 20 & all the indicators in an oversold position.
Best entry: R95.00
Stop Loss: R100.00
1st Target: R88.00

2nd Target R80.00

JSE Stock Picks

We short sell IPL at 10600. All technical indicators are pointing to IPL being overbought. IPL has hit resistance at 10600 and we expect a retractment to 9300. Note September is renowned for being bearish and a pull back can be expected sooner rather than later. Fundamentally the car manufacturers are on strike again and that could also affect IPL.
Best Entry:  10600
Stop Loss:  11000
Target:        9300

3 September 2010
Short Sell Tiger brands ( TBS ) resistence hit at 18100 expect downside back to 17200.
Best entry: R18100
Stop Loss: R19100
Target:       R17200

JSE STOCK PICKS

This week the JSE has all the signs of turning even though the markets are bearish. If one looks at the alsi chart a clear support can be seen at 23750 but there is a second support at 23000. Watch the momentum for the turn before trading this week.
We look to trade TBS & SBK long this week.

TBS:                              SBK:
Best Entry: 16900          Best entry: 10300
Stop loss: 16500            Stop loss: 9800

Target: 18000                Target: 11800

JSE STOCK PICKS

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Well what do we do this week? Is it a double dip or not? Big questions being asked by all, but somehow I don't think so. There is nowhere for everybody to place their cash , 0% interest rates all over the world does not help. SA on the other hand does offer a return so what better place to put your dosh in the event of a possible disaster than SA and other emerging markets, so I don't see the JSE taking as much strain as other markets around the world but it would take a knock none the less. This said I don't see a double dip just a blip in the slow recovery and lots of buying opportunities coming up. This week we buy ASA , AMS and AGL long. SBK is also a good buying opportunity at the moment as it pulled back on Friday. ASA has had reasonable results and is paying a good dividend next week , technically it is slightly oversold and although it could still go further due to the fundamentals it should turn up this week. AMS is heavily oversold on the techs and has started to turn back up. AMS is at the bottom of its trading range at this time as is AGL. Although SBK did not produce the expected results I see the pull back as a knee jerk reaction, this is still the best bank on the block and it will recover the pull back in share price very quickly.

ASA                                    AGL                                      AMS
Best entry: 12600                 Best Entry: 27400                  Best Entry: 67000
Stop Loss: 12000                 Stop Loss: 26500                 Stop Loss: 65000
Target: 13500                       Target: 31000                       Target: 75000

SBK:
Best Entry: 10400
Stop Loss: 9800
Target: 11600

JSE Stock Picks

This week we short trade PIK ( pick & pay ) as well as JDG ( JD Group ) both these shares are heavily overbought as is the entire retail market & as these 2 are the weaker of the picks we expect them to retreat back to more reasonable levels.

PIK:
Entry: 4600
Target: 4100
Stop loss: 4800

JDG:
Entry:4500
Target:4000
Stop loss:4700

We are watching PPC as a long trade at 3125 with a possible target of 3400 stop loss at 2900. Market sentiment will be critical to all these trades this week. Have a good week

JSE STOCK PICKS

NOTE: Price has broken through the 200dma so trade can only be entered on a reversal. Wait for reversal before trading. We are watching OML & BTI for a short trade as well. Long trades can be considered for AGL, EXX & SOL while the momentum is bullish.

Last week we experienced a nice bounce on the market but don't think all the problems around the world have gone away leaving you to just go long in the market. There is one or 2 long trades to take eg: AGL, BIL, ABL,EXX and SOL . This week we look at a short trade on ASA (ABSA). technically all the indicators are overbought and the price is about to hit the 89 day moving average. If it does not cross through the 89 day moving average and starts to pull back we will short. Fundamentally as we mentioned nothing has changed in the world to create a long term positive sentiment and the market is expected to continue hitting head winds and pulling back. The euro zone is doing bank stress tests and we have no idea what to expect from that.

BEST ENTRY: 132.00
TARGET: 122.00
STOP LOSS: 137.00

JSE STOCK PICKS

Well after the long weekend markets are looking rather bullish but dont let this fool you into just buying anything , the markets will suck you in & spit you out. This is a time to be very cautious , markets are very top heavy & the slightest bit of bad news will ensure a decent pull back. That being said I am looking to purchase 2 shares this week the 1st being SHP ( shoprite ) & the 2nd being SHF ( steinhoff ). SHP has had a nice pull back with all the other retailers but is still the strongest choice amongst the food retailers producing great results.

SHP:
Entry: 74.00
Target: 80.00 
Stop loss: 71.50
 Please note you should create your own targets &; stop loss strategy as only you will be able to feel when it is time to sell depending on your investment plan.

SHF is technically moving through its cycle & at the moment it is at the bottom of its cycle sitting on a low pe of 8.02. It is a fundamentally a good company & always a good purchase.

SHF:
Entry: 19.50
Target: 22.00
Stop loss: 18.50

JSE STOCK PICKS

It would seem the Dow was very happy with the non farm payroll figures by the way the markets finished on thursday & we will possibly follow depending on monday. Resource stocks are looking extremely strong but also very overbought & one gets the feeling that a buy in this area could be a mistake at such a late stage. Retailers have pulled back and will most probably come into buying territory soon. Some of the banks are heavily overbought for a while now & could be good shorting opertunities , but one must be specific on their picks.

My stock pick tommorow.

JSE STOCK PICKS

Please note, stock picks for the 1st week in April will be added on monday 5 April due to the long weekend.

JSE STOCK PICKS

My next pick for March towards April is HAR (Harmony gold). Gold is oversold at the moment & is finding support at $1090. I expect the gold price will move up again in its cycle & the ZAR should lose a little of its value in the short term. This is bullish for the mines & HAR should benefit from this. Technically HAR is oversold but the indicators are pointing to a positive move up.

ENTRY: R70.00
TARGET: R75.00
STOP LOSS: R67.50

JSE STOCK PICKS

My pick of the week March 26 2010 has to be NHM ( Northam Platinum ). Technically NHM is trading on her support & all the oscillators are grouping at the bottom. The STS & RSI showing strong buy signals. Fundamentally platinum is in demand , vehicle sales are picking up & generally there is a good feeling around commodities. NHM has been a favorite for a long time & I don't see that changing anytime soon.
Entry: R45.50
Target: R50.00
Stop Loss R44.00

My next idea for the week: Short ABL ( African Bank )
This share has run hard basically following all the other banks & not really on its own strengh even though it has reasonable financials no dividend was paid.The problems in Europe are not going away and talks of possible default still remain in the air. Technically ABL is heavily overbought & I dont see much more upside.

Entry: R36.00
Target R30.00
Stop loss R38.00