Beer, bling and China: the curious case of S.African stocks

Men's Cartier Watches
cartier watches for men replica
Replica Cartier Watches | Replica Cartier Watch Shop | swiss replica cartier watches Beer, bling and China: the curious case of S.African stocks Content preferences Done David Dolan September 26, 2013 10:07 AM . View gallery A man chats on his mobile phone in front of an electronic board displaying movements in major indices … cartier By David Dolan cartier watches women JOHANNESBURG (Reuters) - What do Peroni beer, Cartier watches and Chinese online games have in common? Very little, except that all three are behind the South African stock market's gravity-defying run in recent years. cartier watches replica Since recovering from the 2008 financial crisis, stocks in Africa's biggest economy have blithely weathered all kinds of bad news - strikes, sputtering growth, credit downgrades and waning consumer demand - to notch up a string of record highs. swiss replica cartier watches Johannesburg's benchmark Top-40 index has risen nearly 40 percent since the start of last year, outperforming many major developed and emerging markets, including India (28 percent), Mexico (11 percent), the United States (35 percent), although some of those returns have been eroded by the weakening rand currency. cartier watches replica But here's the curious part. According to some recent research from South Africa's Cannon Asset Managers, 25 percent of the performance comes from just three stocks: brewer SABMiller, luxury firm Richemont, and media group Naspers. replica watches Since January 2012 Johannesburg-listed shares of SABMiller, known for Castle Lager and Peroni, have risen 80 percent. Richemont, the Swiss maker of Cartier watches and Mont Blanc pens founded and still run by South Africa's Rupert family, has seen its South African shares surge 137 percent Naspers, a sprawling media group with holdings in e-commerce companies in emerging markets, including a stake in Chinese Internet giant Tencent Holdings, has clocked a stunning 166 percent. Yet investors who owned all the other shares in Johannesburg, but not those three, would have seen an increase of less than 15 percent, Cannon CEO Geoff Blount said, a performance more in line with South Africa's fundamentals. Blount's observations are intriguing for several reasons, particularly from a valuation perspective: "There is no doubt that the stocks that did well over this period are extremely high-quality firms, but - and here's the issue - many are very expensive, high-quality firms," he said. At least in Naspers' case, "very expensive" may be an understatement. The stock, which this month eclipsed telecom MTN Group as South Africa's largest firm by market value and is now worth $40 billion, is trading at a heady 29 times forward earnings, according to Thomson Reuters data. Its share price is 36 percent above its intrinsic value, according to Thomson Reuters StarMine, which takes into account a company's future growth prospects. SO MUCH FOR AFRICA And despite all the hype about "rising Africa" and South African equities as a gateway to sub-Saharan growth, none of the three stocks are pure Africa plays. Although it has significant pay TV and print operations, Naspers is seen as a "proxy for Tencent" as Jefferies analyst David Reynolds remarked in a research report last month. Tencent, a $98 billion company known for its wildly popular social messaging application WeChat and its lucrative online games, contributed about 40 percent of Naspers' revenue in the last financial year. Richemont, which has its primary listing in Switzerland after being spun off from the predecessor of South Africa's Remgro Ltd in 1988, is also increasingly reliant on Asia, given the heavy demand for luxury items from China's wealthy. For SABMiller, Africa outside South Africa is an increasingly important market, although it is still a smaller revenue contributor than Latin America, Europe and North America. The three companies have something else in common: they show how much investors will continue to pay - or, arguably, overpay - for high-quality businesses with good growth prospects. The challenge for South African investors is now to find the next set of companies that can deliver such stunning returns. Finance Investment & Company Information South Africa Men's Cartier Watches cartier watches for men replica