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Media and electronics stocks in 2012

Gareth Vorster

 ·24 Dec 2012

While results from lead companies in the media counter of the JSE were robust in 2012, those companies representing the electronics sector had mixed results.

“The media sector has been quite robust,” opined investment analyst and partner at First Avenue Investment Management, Nadim Mohamed.

In September, Kagiso Media reported that total revenue increased by 21.3% to R956.9 million for the year ended June 2012, “this growth being driven primarily by the broadcasting, content, information and other segments”.

Operating profit rose marginally to R258.6 million, from R252 million in 2011.

“Kagiso Media is showing very strong cash generation ability from tier 1 radio assets.  They are cautiously looking to invest in digital assets in order to prepare for a longer term migration in adspend towards digital medium,” said Mohamed.

Kagiso Media said its MSN division had to recalibrate itself after the loss of the online gambling advertising spend, but was well positioned to grow in 2013.

Kagiso’s MSN business was established in a partnership with Microsoft (MSN) in 2010 to manage and localise the www.howzit.msn.com portal in South Africa.

In November, media giant Naspers heralded a 22% rise in revenue for the six months ended September 2012, to R22.6 billion. This came on the back of organic growth in existing businesses, supplemented by a few acquisitions.

The group, with internet companies including Russia’s Mail.Ru Group, kalahari.com and China’s Tencent in its portfolio, reported an operating profit of R2.5 billion, from R1.95 billion in 2011.

Internet revenue improved 70% to R14.1 billion rand.

“Naspers is showing impressive growth in its internet business and the market has rewarded it with exceptional share price growth.  Going forward, there will be more spend on development relative to acquisitions which may result in slower earnings growth in the near term,” Mohamed said.

The analyst noted that whilst the group looks expensive at its P/E multiples (38 times), “if you believe in Koos Bekker and his team, this is probably the best way to gain exposure to emerging market internet sector.  Their focus going forward will be e-commerce which is not an easy journey.  The GoTV offering in Africa for Multichoice is also looking very interesting,” Mohamed said.

Media

Stock return 1 Jan to 12 Dec, 2012

Electronics

In September Allied Technologies (Altech) reported a R420 million loss in results from operating activities for the six month period ending August 2012, from a R283 million profit in 2011.

The group lamented that its results reflect the volatility and challenges presented by the global and local economic environment, which continues to affect many businesses worldwide.

Altech’s revenue increased by 6.8% to R5.2 billion, and its operating profit before capital items was 13.5% lower than that of the prior period; this, mainly due to losses incurred in Altech’s operations in East and West Africa.

“On the electronics side, Altech had a poor year with the poor performance of its east and west African businesses.  We think that it will not be easy to turn these around and expect flat growth for 2013,” Mohamed said.

Also in September, Jasco Electronics reported a rise in diluted headline earnings per share to 16.8 cents for the year ended June 2012 from 14.0 cents a year ago.

Revenue was 28.1% higher at R990 million‚ while operating profit before interest and tax grew 8.4% to R31.2 million‚ mainly due to the growth in turnover.

In November, Reunert announced a 10% rise in operating profit to R1.525 billion for the year ended September 2012.

Looking ahead, the group said that the local and global economic environment remained uncertain with 2013 also expected to be a challenging year.

“We remain committed to our strategy of diversifying our revenue streams and promoting efficiencies within our businesses.

“We will continue to act with prudence and foresight and shall, of course, plan for and pursue earnings growth,” it said.

“With Reunert, we saw a slower H2 closely following SA economic growth.  We think most of the subsidiaries are in mature industries and are unlikely to achieve above-average growth rates,” Mohamed said.

Electronics

Stock return 1 Jan to 12 Dec, 2012

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