BROKER$' NOTE$: Buy Bidvest, sell SA asset managers
Chantal Marx, head of investment research and content at FNB Wealth & Investments, on what the smart money is doing
Bidvest CEO Mpumi Madisa
Image: Supplied
Buy: Bidvest
Bidvest, the services, trading and distribution group, is down 20% over the past year while the broader JSE has gained strongly over the period. The company's stock has derated and is now trading on a forward earnings multiple of below 10, versus a long-run average rating of about 12.5 despite the medium-term revenue and earnings growth expectations remaining solid.
The recent weakness came after a disappointing financial 2025 print. Divisionally, profitability in Freight and Commercial Products remained under pressure in the second half. However, exceptionally strong profit growth in Services SA, Services International and Branded Products helped offset the impact. Automotive improved profitability in the second half, as did Adcock Ingram. Importantly, sequential trading momentum was positive in the second half for most divisions and is expected to continue into the new financial year.
Also encouraging was cash generation that remained strong despite revenue pressure. Additionally, return on invested capital remains well ahead of the group's weighted cost of capital.
SELL: SA asset managers (ex-AlexForbes)
South African asset managers have quietly experienced a strong run over the past year. Coronation has gained 29% on a total return basis, Ninety One is up 26%, and Sygnia has amassed a 73% return. AlexForbes has had a pullback recently and now lags the broader sector.
Technically, Coronation, Ninety One and Sygnia look overextended to the upside, and we could experience a sector-wide correction near term, particularly if markets pull back.
Fundamentally, the strong returns have been justified by a solid improvement in net flows as well as markets that have underpinned decent increases in assets under management. However, the stocks now look fairly valued, and we see better longer-term potential in cheaper areas of the market.