Simon's Stock Tips

Founder and director of investment website JustOneLap.com, Simon Brown, is finweek’s resident expert on the stock markets. In this column he provides insight into recent market developments.

- Simon Brown

Bad debts rise

Capitec’s* financial results for the six months through 31 August showed the impact of the hard lockdown and the resultant job losses as bad debts spiked to record levels. That said, Capitec’s systems managed the hit as the bank pulled back on lending and rolled over loans. Those rolled loans (and payment holidays by the large banks) worry me as it may just be kicking the bad debt can down the road. But assuming the worst is behind – even as we have an awfully long road back to a pre-Covid-19 economy – the banks will survive the next couple of tough years. That all said, valuations on the big four remain very cheap (Capitec is never cheap) but I see no reason to rush in to buy as I expect them to be cheap for easily another year or more.

BARLOWORLD

A takeover target?

Zahid Tractor & Heavy Machinery (a Saudi Arabian company) has been slowly building its stake in Barloworld, which is now at 15%. Zahid Tractor & Heavy Machinery is owned by the Zahid Group, which operates a Caterpillar delearship, car rentals in Saudi Arabia and green energy interests in Germany, as well as operations in Kenya, among other businesses. So, why does it want 15% of Barloworld? Zahid Group is an unlisted company, so information about it is hard to find. But the group certainly doesn’t seem to take minority stakes and has been expanding globally over the last decade or so. A 15% stake is not much use to anybody who is not an investor, which Zahid Group is not. So, is Barloworld a potential takeover target?

BARLOWORLD

A takeover target?