Avior Capital Markets - SA Investment Strategy | Contrarian Value: Screening for stocks trading similar to 2009 levels: Tactical upgrade in SA Banks

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Avior Capital Markets

Ayan Ghosh

SA Investment Strategy | Contrarian Value: Screening for stocks trading similar to 2009 levels: Tactical upgrade in SA Banks

Historically, in a slowdown phase of the US yield curve, with soft economic data and monetary loosening, SA sectors including Telecoms (MTN), Platinum (Sibanye), Healthcare (Netcare), Life Insurance (Old Mutual), Food Retail (Shoprite) have been the best outperformers, while they currently appear oversold. We see a tactical opportunity to upgrade SA Banks (SBK, NED, ABG) to Overweight with current valuations similar to 2009 levels. Should earnings growth fall by 15% for SA Banks in the next 12 months (which appears unlikely to us), SA Banks' 12m forward PE multiples should re-rate in-line with LT average valuation levels. Sasol currently trades at a 12m fwd PE of 6.2x, levels seen during Oct'08, and appear oversold. Bearish brent crude forecasts of between USD40-50/bbl would imply core-HEPS of between R20 to R34/share

19/08/2019 13 EN

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Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

Ayan Ghosh

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SA Investment Strategy | Contrarian Value: Screening for stocks trading similar to 2009 levels: Tactical upgrade in SA Banks

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

SA Banks | Low credit risk in commercial property | Time to buy SA banks

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