Stock Watch - Anheuser-Busch InBev and Afrimat Limited
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Ricus Reeders from PSG Wealth chose Anheuser-Busch InBev as his stock pick of the day and Deryck Janse van Rensburg from Anchor Securities chose Afrimat Limited
Reeders said: "It has been about 4-5 years since the SAB merger and that is working out on the system. The concern about it has been debt and they have addressed that to a certain extent by changing the terms of that so at the moment with a strong Rand which I don't think is going to persist, rand/hedges like Anheuser is probably under pressure so I would cautiously take a look it specifically because you are getting a good yield of around 5%-6% at the moment and it's a safer play in a market that is pretty heated at the moment"
Janse van Rensburg said: "My stockpick is a risky one, it is Afrimat. I have looked at the top forty space and thought, okay, we need to move beyond that and look for something else with a bit of value so, I think there is a management team that I certainly back. They have certainly delivered over the last five years plus in terms of shareholder value that they have created. Recently they made quite a significant investment in the iron-ore space actually adjacent to Kumba Iron-Ore and they took on quite a bit of debt to pay for that acquisition. Obviously what has happened with the iron-ore price on the back of the Vale disaster in Brazil and some of the disasters that are taking place in Australia at the moment, this iron-ore price could potentially sustain these levels and if that is the case then I certainly think that this iron-ore investment that Afrimat made is going to be a big contributor to earnings if we just look forward from here on and out. I think that there is a lot of optionality cash that they generate and that debt will be paid down very quickly"
Reeders said: "It has been about 4-5 years since the SAB merger and that is working out on the system. The concern about it has been debt and they have addressed that to a certain extent by changing the terms of that so at the moment with a strong Rand which I don't think is going to persist, rand/hedges like Anheuser is probably under pressure so I would cautiously take a look it specifically because you are getting a good yield of around 5%-6% at the moment and it's a safer play in a market that is pretty heated at the moment"
Janse van Rensburg said: "My stockpick is a risky one, it is Afrimat. I have looked at the top forty space and thought, okay, we need to move beyond that and look for something else with a bit of value so, I think there is a management team that I certainly back. They have certainly delivered over the last five years plus in terms of shareholder value that they have created. Recently they made quite a significant investment in the iron-ore space actually adjacent to Kumba Iron-Ore and they took on quite a bit of debt to pay for that acquisition. Obviously what has happened with the iron-ore price on the back of the Vale disaster in Brazil and some of the disasters that are taking place in Australia at the moment, this iron-ore price could potentially sustain these levels and if that is the case then I certainly think that this iron-ore investment that Afrimat made is going to be a big contributor to earnings if we just look forward from here on and out. I think that there is a lot of optionality cash that they generate and that debt will be paid down very quickly"