WATCH: Market Report - 01 June 2026 | Business Lunch

追加: 2026-06-02

[00:00:06]Well, joining me now with greater perspective on these news is Vic Sharma from differential capital. Hi Vic, good to chat you once again. Looking at what's going on, I mean general markets at the moment, where are we? I know the AI stocks are driving things up, but thank goodness for them because let's be honest about it. If you were counting on peace in the peace in the Middle East, we'd be waiting for a very long time.

[00:00:33]>> Yeah, I mean thanks for the opportunity.

[00:00:35]Ray, thank you. And yeah, the whole idea here is clearly whatever is happening in the Middle East somehow for the global stock markets it's you know just an event on the sidelines. I mean you're looking at all-time highs on the US market. The AI you know trade boom that you're talking about is in full swing.

[00:00:56]So yes, peace would probably I would say you know unleash the animal spirits if you want to call it in these markets. I mean Nasdaq is already up 25%.

[00:01:06]I don't think they're waiting for an announcement of that whether there is a peace in you know Middle East or not. But nevertheless, you know countries emerging market countries like ours we are bearing the brunt of all the negativity that comes with it. You know you're seeing that interest rate hike of 25 pips. Your food inflation's now going to go up.

[00:01:27]Yes, gold prices are up year over year, but remember they're still off now their highs. So your fiscal balance is better, right? But I mean that is only going to be in the base eventually. One good news from a South African perspective is that Moody's upgrade that we've had. So which kind of shows you know pretty much the positive momentum on reforms that has been happening here.

[00:01:49]But there is a little bit of a political premium because of the fact that whether we have the executive stability or not. And I'm talking about Mr. Ramaphosa's case, you know, which you know, potentially have people worried a little bit. So, nevertheless, I think global markets are just treating this as any other event and for them it's a non-issue. I mean, oil is not not an issue at all.

[00:02:11]>> Yeah, you're quite right. You're quite right. But look, let's be honest about it. We are not alone. It's the rest of the world who are feeling this as well.

[00:02:19]One company that's not feeling it is Tiger Brands. Good results today, strong results. I see they're also offloading some assets.

[00:02:27]>> So, Tiger Brands, I mean, I think the new management team deserves all the kudos, right? They're cleaning up the base. They're, you know, selling what you call as the non-core businesses or low, you know, return businesses. The returns have improved. The earnings are coming through.

[00:02:42]And what has happened in the meantime is all the cash that has been raised have been given back to the shareholders as repurchase of shares or much higher special levies.

[00:02:51]I think the bigger mountain to climb for Tiger Brands is now. Right? Now they have to actually invest the capex to kind of get to a mega bakery or a mega, you know, production facility to challenge some of their closest competitors. So, phenomenal work done. I think there is still some uncertainty in terms of how this money will bring the return. Nevertheless, I think all kudos to that management team for doing all the right things.

[00:03:18]>> No, absolutely. I'll be chatting to the CFO shortly about this. Sirius Real Estate, I find them fascinating. They are targeting those military complexes.

[00:03:28]They are using that as their real estate in Germany, also the UK. Great also interim results from them as well, but I suppose that was expected.

[00:03:38]>> Yeah, and I mean, I think they've been kind of a bit of a darling, if you want to call it, you know, internationally in that space which is in vogue. As you say, those military, you know, land targeting etc. Phenomenal result everywhere. And I mean, I think if you see the drag on the earnings is basically an unrealized forex loss. So, your rental revisions are positive. You know, you're doing the right things. Uh, it's offshore. It's kind of gives you the diversification away from SA as well. Um, I think they're just in good space and executing quite nicely.

[00:04:08]>> Yeah, quite right. Okay, so Momentum also performance updates as well.

[00:04:12]Momentum are solid. I mean, every once in a while we do a stock pick and Momentum come up. I mean, they they're also very solid.

[00:04:20]>> For sure. I mean, I think apart from all the growth that they talk about, uh, one of the things that hasn't received as much airtime is that the expenses were only up 1%. So, beautifully controlled expenses, which is kind of leading to that 20% or 15% growth in bottom line earnings.

[00:04:35]Uh, you know, yes, new business is under pressure, but the stock still trades below its EV, uh, and they've bought back a lot of shares already, uh, below its, uh, EV, which is about 44 rand. Uh, still a good dividend yield there. And, uh, like you say, I mean, I think it's a solid contender. So, no qualms against it. I think they're doing a phenomenal job.

[00:04:54]>> Yeah, yeah.

[00:04:55]All right, I'm looking at AI stocks, and I started our conversation with AI because they're propping up the market.

[00:05:02]Vic, what are you seeing? It's the most common question I have on Stock Watch and elsewhere's what's happening with AI stocks? What are you looking at?

[00:05:11]>> From our perspective, I mean, I think there is like a lot of momentum baked in, right? Uh, not that it's stopping anytime soon. Uh, I mean, the chip stocks are just through the roof. I mean, we saw what Dell did, and I mean, I think that was without any kind of, uh, I mean, if you would have seen the stock price of Dell, you would have thought somebody has made an offer for it.

[00:05:29]Uh, so, essentially, uh, I think there is a lot of positivity and momentum around these things, which I don't know when it'll end. Uh, a lot of people would obviously love to make a lot of money around it. Uh, we are kind of getting a little more circumspect on the rally, right? Not that, uh, you know, we are negative. We are just more like things have actually gone up a little too much too quickly. Maybe we need to you know, take a step back and a bit of a breather and that might be around the corner. That might not be.

[00:05:57]I don't know, but we are a little bit circumspect around the rally. I mean it has done just a little too much for us in a very short span of time.

[00:06:05]>> Right, your stock pick for today. What are you looking at?

[00:06:08]>> I think I'm I'm more of a broken record.

[00:06:10]If you remember last time as well, I also picked Naspers. My thinking of it is you know, there is Tencent which is trading at 12 and a half times PE, right? If you exclude the investments of Tencent, that's like less than 12 times PE. You're talking about a company that has hold on Chinese consumer like no one else. Right? The biggest risk that I see for a Tencent is basically if anything, you know, government coming in and clipping the margin. They are a phenomenal company in itself with great returns on equity as well. There is a little bit of concern that they're spending a little too much money on AI right now, but I would say sitting in our own market kind of getting access to something which is kind of global {slash} you know, geared to Chinese economy in a way at 11.8 times multiple, I mean that is phenomenal. And I'm not even talking about any other businesses of Naspers as yet. They trade at a 40% discount to their Tencent valuation, let alone all the other businesses. So to me, I mean I think it has kind of underperformed quite a bit and possibly a good opportunity for over a 12 to 18 months to accumulate and get the returns there.

[00:07:14]>> There's a saying if it's not broken, don't fix it. So there we go. Victor, thank you so much. That was Vic Sharma from Differential Capital.