Johannesburg - Fund management firm Sanlam Investment Management (SIM) says it is now looking at non-traditional resources like paper and chemicals for pockets of value for investors.
"We are struggling to find value in the "resources" sector," says Shoaib Vayej, who heads up the resources fund. "We're now looking at paper and chemicals counters, but are also looking at the gold sector."
Base metals and oil have sustained the JSE over the last few months, while indices that are not driven by resources have suffered.
In the paper sector Vayej says SIM's preferred counter is Mondi. "Mondi is a quality business with a good growth outlook and exposure to emerging markets. Mondi also currently has projects on the go in Poland and Russia,which the market appears to be discounting".
Vayej says that a big reason for the Mondi's share price being under pressure (down 30% since March) is that both Mondi and fellow paper company Sappi have large numbers of overseas shareholders who are selling down paper stocks.
On the chemicals side, Vayej likes AECI. He believes that the market is underrating the performance of subsidiary Chemserve and the value of the property assets managed by Heartland.
Heartland is responsible for some 2 200 hectares of land located primarily at Modderfontein in Gauteng and Somerset West in the Western Cape.
The leasing division has a gross lettable area of 275 000 m² under management and has recently appointed Anthony Diepenbroek as the new CEO.
Gold pick
The South African gold index has been equally out of favour with investors. Down 19% since peaking in mid-March, the gold index has been an underperformer in comparison to the rest of the resource sector.
Vayej's pick here is Anglogold: "Anglogold is the best cost performer amongst the three locals [Gold Fields and Harmony being the other two]". He attributes the share price underperformance to the continued overhang of the Anglo American shareholding.
These sentiments were echoed by Imara SP Reid analyst Percy Takunda Chiweshe. In a note assessing the recent Anglogold rights issue and prospects going forward he says the group's financial performance "can only get better... and the reduction of the hedge could also result in a re-rating of the stock".
Chiweshe says the financial impact of the rights issue will probably be evident by the third quarter of financial 2008; "if bullion remains at current levels there could be a significant change of fortune for this miner".
In the first quarter of 2008, funds were net buyers of Mondi (Both PLC and Ltd), AECI and Anglogold.
- Fin24.com
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