Curro's earnings get the red pen

Wednesday 04 August 2021

Good morning Voornaam,

The markets can be weird. Just ask Royal Bafokeng Platinum.
Despite releasing fantastic results and declaring a juicy dividend, the share price dropped 8.5%. Now, regular readers of my work will know that I constantly beat the valuation drum. Overpaying for a great company can be just as painful as buying a poor quality company.
This doesn't apply to Royal Bafokeng, hence why I'm scratching my head (and so is everybody else). The company is only trading on an annualised P/E of under 3x. Perhaps the market is carrying its scars from years of underperformance in the sector.
There's a lot of focus at the moment on the "real economy" - sectors like mining and construction. Murray & Roberts announced two new construction projects in North America and was also rewarded with a share price decrease on the day, although nothing like the drop at Royal Bafokeng. I've written in more detail on both company announcements today.
One thing about smaller mining houses is that they are filled with passionate people. Renergen has been chastised by the JSE for releasing too many SENS announcements that are high on excitement and low on detail. Whilst Orion Minerals cannot be accused of being low on detail, I did laugh at the release of another long announcement on Okiep in the same week that the exercise of the option was announced. To be fair though, it's a genuinely exciting project.
However, the lead story today goes to Curro, which has reported a nasty drop in earnings per share. It's a great lesson in the effect of rights offers on per-share performance. When companies issue tons of shares in order to pay down debt rather than to invest in operations and earn an attractive return on investment, earnings per share will suffer.
ESG also features strongly in InceConnect today. Cuma Dube has given an interesting perspective on ESG in the property sector and Lauren Bauer has written the first in a two-part series on her interview with Juana Purchase Hatfield, an ESG industry expert.
Finally, for fans of Big Tech, The Creative Accountant (a talented young contributor to thefinanceghost.com) has written on the "Metaverse" - a term that Mark Zuckerberg brought into the headlines last week. Microsoft CEO Satya Nadella also jumped on that bandwagon, so it's a concept that is worth understanding. You can read more about it here.
Have a productive Wednesday!
The Finance Ghost

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