Stock Watch - Stock Picks — African Rainbow and Echo Polska Properties
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Mark du Toit from Courtney Capital Private Wealth chose African Rainbow Minerals as his stock pick of the day and Drikus Combrink from Capicraft chose Echo Polska Properties
du Toit said: "I chose African Rainbow Minerals as the metal prices are running and there is not a lot of supply of new mines coming online and certainly the the current company is going to throw of quite a lot of cash now and African Rainbow Minerals haven't re-rated to the extent that some of the other mining stocks have and they have exposure to platinum and a little bit of gold trough their holding in Harmony. I think that you could get a market re-rating and go from a PE of 7 to 9 or 11 and that will be a nice catalyst plus it is going to throw off a good cash flow so I think in the short to medium term it is going to be good.
Combrink said: "Echo Polska Properties, locally listed but it's a Polish company. They're sitting at about a 9%-10% yield in Euro terms but essentially as a Polish company. Now our bond ten-year bond yields are sitting at 8% but our high-quality REITs are trading at about a 9%. The Polish ten-year sitting about 2.7% while you're getting this at 9.5% yield that is a massive discount and I think partially because you know they haven't got a listed counter in Poland or the UK. Part of the valuation disparity that you are seeing could be because their counter in Poland and UK is not listed and most of their stock is trader here in South Africa. Secondly they had a large loan to value of about 1.53 loan to value. They've also just announced that they sold 70 percent of one of the office Holdings and they're holding 30% of what is left of the sold off company which they will continue to manage for a fee and part of that will also be used to down lever the balance sheet and also to continue building retail space in Poland."
du Toit said: "I chose African Rainbow Minerals as the metal prices are running and there is not a lot of supply of new mines coming online and certainly the the current company is going to throw of quite a lot of cash now and African Rainbow Minerals haven't re-rated to the extent that some of the other mining stocks have and they have exposure to platinum and a little bit of gold trough their holding in Harmony. I think that you could get a market re-rating and go from a PE of 7 to 9 or 11 and that will be a nice catalyst plus it is going to throw off a good cash flow so I think in the short to medium term it is going to be good.
Combrink said: "Echo Polska Properties, locally listed but it's a Polish company. They're sitting at about a 9%-10% yield in Euro terms but essentially as a Polish company. Now our bond ten-year bond yields are sitting at 8% but our high-quality REITs are trading at about a 9%. The Polish ten-year sitting about 2.7% while you're getting this at 9.5% yield that is a massive discount and I think partially because you know they haven't got a listed counter in Poland or the UK. Part of the valuation disparity that you are seeing could be because their counter in Poland and UK is not listed and most of their stock is trader here in South Africa. Secondly they had a large loan to value of about 1.53 loan to value. They've also just announced that they sold 70 percent of one of the office Holdings and they're holding 30% of what is left of the sold off company which they will continue to manage for a fee and part of that will also be used to down lever the balance sheet and also to continue building retail space in Poland."