Stock Talk: Street-savvy managers credited as Capitec shares breach R500

29 March 2015 - 02:00 By Ann Crotty
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An Capitec branch on January 25, 2012 in Johannesburg, South Africa.
An Capitec branch on January 25, 2012 in Johannesburg, South Africa.
Image: Gallo Images / Sunday Sun / Sipho Maluka

The share price of Capitec, which has made a bundle by lending to South Africa's downtrodden, breached the psychological level of R500 for the first time this week.

It also makes Capitec the most expensive bank to invest in on the JSE, based on its price-to-earnings ratio of 25.7. This far exceeds Standard Bank (15.4), FirstRand (15.1), Barclays Africa (11.9) and Nedbank (11.2), but then investors believe Capitec is "priced for growth".

Nonetheless, breaching R500 is no mean feat for the country's youngest retail bank, especially considering that most of its Western Cape-based executives started their careers peddling liquor in urban townships.

It was useful training - instead of relying on fancy PowerPoint presentations from marketers, CEO Gerrie Fourie, who took over from Riaan Stassen, and his team still walk the streets of Thohoyandou in Limpopo to check in on their branches as often as they frequent those in moneyed suburbs in Johannesburg.

It is this street savvy that still gives Capitec the edge, and keeps investors interested.

Capitec continues to defy the gloomiest predictions.

In its 14-year existence it has survived numerous small bank crises in South Africa.

The first was in 2002, when Saambou collapsed a year after Capitec came into being. Then the global financial crisis rippled through the sector in 2008. Finally, last year, African Bank imploded.

Capitec was supposed to be next, but the Stellenbosch-based bank made it through and learnt to walk as it dodged contagion.

Even ratings agency Moody's had its doubts about Capitec at the time, but it pulled through.

But how?

Fourie reckons it is because management is "in touch" with what is happening. He says he spends more than 50% of his time analysing the group's credit model.

This is why, in its annual financial results to last month, Capitec revealed that its proportion of loans granted over longer than 60 months had come down from 25% to 14% in a clear sign the bank had pulled back.

This conservative stance bodes well for the group, and for investors who have already seen the stock rocket more than 220% in the past five years.

Coronation

Speaking of another company rocked by African Bank's demise, Coronation Fund Managers seems to have come out relatively unscathed.

This week Deutsche Bank upgraded Coronation to a "buy", despite the fact that shares in the financial services company have run up by 245% in the past three years.

Trading on a price-to-earnings ratio of 16.8, Coronation isn't the cheapest financial company around.

Yet, it still seems to keep producing the goods.

For the year to September last year, profit grew 38% and Coronation had R604-billion in assets under management at the beginning of this year.

Another reason is that Coronation's share price has softened recently , shedding 13.4% of its value over the past three months.

Time to buy, according to Deutsche.

Anchor Group

It must have all seemed so easy for Peter Armitage's asset management firm, Anchor Group - until this week.

The company listed on the JSE in September last year at around R3.50 a share.

The trajectory seemed only sunshine - since then, the price had soared by more than 200% to north of R12 by last week, boosted by the fact that Anchor reported a 302% jump in operating profit for last year.

And then, this week, the Ponzi scandal involving Cobus Kellermann and Belvedere exploded.

Anchor, it turned out, was managing some of the funds held by Kellermann's former company, Clarus Asset Management.

For the first time, Anchor's share price softened, falling from the high of R12 to R10.30.

This sparked a series of announcements reiterating that Anchor had "never been in business with Cobus Kellermann" other than providing asset management services.

"The Anchor board places great emphasis on reputation and the trust associated with our brand and will always maintain strict integrity ahead of potential shorter-term financial gains," it said.

Which is nice to know, and presumably the reason why its share price began to recover, climbing 2% on Friday.

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