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We are adding these 3 shares to our JSE portfolio

July 17, 2023
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FinMeUp
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FinMeUp

Our portfolio consists of US stocks, JSE stocks and crypto.

With the launch of the brand new FinMeUp app, we are also introducing the FinMeUp Transparency Portfolio. In this project, we will systematically build and update our very own FinMeUp portfolio, consisting of SA stocks, US stocks, and cryptocurrency.

Why the Transparency Portfolio? Because it aligns with our mission, which is to clear the way to financial independence for our community. We believe the best way to illustrate our mission is to be transparent in our research, reasoning and track results.

We plan to release an in-depth analysis via the stock pick section of the app for each of the companies mentioned in this article. We will provide you with our buy positions, as well as exit positions if we believe the asset has reached its fair value or if fundamentals change.

A great company is not always a great investment - It all depends on the valuation versus the current price. So, in addition to our transparency portfolio, we will include a watchlist. This watchlist will consist of companies that we like but are trading at a price thats just a little bit too high for our taste. We will keep a close eye on these stocks and wait for better entry prices.

We believe the Transparency Portfolio will add immense value to our community. It will illustrate that we are serious about investing and we truly believe in the content we are selling. Hold on to your seats!

***Before we discuss our JSE stock picks, just a friendly reminder: This is not financial advice. Always do your own research before taking a position. Content is for informational and educational purposes only.***

 

JSE Stock Picks
Below are the first JSE companies in which we are looking to invest, along with the prices and the reasoning behind our decision. We will introduce our cryptocurrency picks soon, so keep a lookout for that! 
Santova
Renergen
Capital Appreciation

 

Santova: 
 

Business
Santova is a specialist non-asset-based provider of international supply chain solutions. Non-asset means that they deliver value in the supply chain without having any assets, much like Airbnb and Uber. They are essentially the middleman, using other transport companies assets to deliver goods from source to destination, and receiving a commission based on the value of the goods and the cost of transportation. 
 

Why Santova
Santova started its operation in South Africa, but they are now a fully fledges global player, with roughly 90% of its earnings generated overseas. 
The management and employees own about 16% of the business, which means they have a direct incentive to grow the business. 
Supply chains worldwide are in disarray currently due to the Russian-Ukraine war and lockdowns due to Covid19. This means there is a massive opportunity for gaining market share. Additionally, the supply chain is an industry that is growing by the minute as the world gets smaller via globalisation, there will always be a growing demand for efficient supply chain management.
Santovas financials are looking healthy:

 

Latest financials
P/E: 6.65 
Revenue increased by 33%
Net income increased by 7.3%
Debt to Equity decreased by 17.5% - 
Return on Equity increased by 21%
Current ratio: 1.6
EPS: Increased by 15.4%

P/Es below 10 have massive potential as growth companies. Revenue increased by 33% whilst debt decreased. The current ratio looks healthy for a short-term cover of liabilities. EPS and share price increased which instils further confidence from an investors point of view.
 

Technical Analysis
Current trend and LT support: As seen on the chart, these two support levels meet at around the 450c-500c price range. 
RSI: The RSI is currently trending downward. We can expect a turn between the 30 and 50 level. This corresponds with the support trendlines. We will look to increase our holdings at around 450c-500c range. 
 

Renergen:
 

Business
Renergen is an energy group focused on alternative and renewable energy sectors in South Africa and sub-Saharan Africa. It is listed on the JSEs Alternative Exchange (AltX) as well as the Australian Stock Exchange (ASX). Renergen is currently only producing compressed natural gas but is in emerging to become a world-leading producer of helium and liquefied natural gas (LNG). It is currently in phase 2 of developing its operation to produce helium and LNG. 

Renergens principal asset is its 100% shareholding in Tetra4, which holds the first and only onshore petroleum production right (issued by The Department of Mineral Resources and Energy (DMRE)) in South Africa, giving it a first-mover advantage in the distribution of domestic natural gas. Their Virginia Gas Project (where helium and LNG is being extracted) is located in the Free State, approximately 250 km southwest of Johannesburg.
 

Why Renergen?
Now the big question: Are they making money? Simple answer: no. Not yet. They do, however, have massive potential. The company can be branded as an exploration company, which means that you are still trying to find out if what you have in the ground has commercial value. And therefore, the current financials are not nearly as important as it would be for companies in other sectors. What matter is what you have in the ground and if you have demand for the product, the equipment to mine it, and the sales channels to sell it. 

We are bullish on Renergen for the following reasons:
Their natural gas contains one of the richest helium concentrations recorded globally. 
The natural gas is also very pure with an average of over 90% methane, and almost zero higher alkanes, which reduces the complexity of liquefication. 
Furthermore, their natural gas offers a less carbon-intensive substitute for South Africas existing transport fuel, thermal fuel, and power.
Currently, only generating revenue from natural gas, but once helium and liquefied natural gas production are up and running, it opens the door for massive new market penetration and additional income streams. 
Helium and LNG high demand commodities. Firstly, it is used in all sorts of products, such as medical equipment, rockets, semiconductors, and of course helium balloons. Secondly, there is a massive shortage globally.
Revenue lined to US$
Low-cost producer
First mover advantage

 

Risks:
Is it a risky investment? Yes. 
Supply globally catching up to demand, lowering Renergens market share 
Price of helium and LNG decreases
Being a start-up, raising capital is always a concern. Fast-growing companies like Renergen usually do not generate enough revenues on their own - They constantly need funding from investors. 
Debt high, revenue low.
Already a lot of hype surrounds the company, meaning the share price is already quite high. Its a play on the future at this stage.
 

Technical Analysis
Current trend: The share price is currently bouncing between short-term support and resistance levels, around the 4000c mark. If we break down, we will look to the previous high around 2800c.
RSI: The RSI is currently trending downward. Historically it has used the 50 RSI level as support, before bouncing upwards. This corresponds with the current support trendline. It seems like a good time to buy.

 

Capital Appreciation


Capital Appreciation is a Fintech company that seeks to serve and/or partner with established and emerging financial institutions and other clients. The Company facilitates the provision of financial services and delivers contemporary and innovative technologies and solutions.

The company went public in 2015, listing on the JSE under the computer services sector. In 2017, they acquired African Resonance, Dashpay, Synthesis and a stake in Resonance Australia. They are currently operating in 10 countries, which means they are geographically diversified.

The Company operates through two segments: Payments & Payment Infrastructure (Payments) and Software & Services (Services). African Resonance and Dashpay comprise the Payments segment, and Synthesis comprises the Services segment. 
 

Why Capital Appreciation:
Clients: Some of their clients include ABSA, Old Mutual, Investec, Capitec, standard ban, FNB, Discovery, Woolworths, Shoprite, and PNP. This is extremely bullish, as it sets the tone for deepening of relationships with these existing clients, as well as gives validity to the quality and scope of their product. 
Industry: Everything is digital. Well, maybe not yet, but we sure are moving towards such an infrastructure. Growth is expected to continue with an increase in demand for digitalization. 
The only risk here is the growing competition within the FinTech space. If they keep innovating and integrating with their clients, theyll continue to see growth.
Geographical income distribution
Strong management
Strong track record of execution
Financials looks super healthy, especially the minimal amount of Debt.
 

Latest Financials:
Revenues increased 36% to RAN439.4M (Payments 46%, Software and services 16%)
Net income increased 69% to RAN91.4M. 
Operating profit 85%
EPS 67% increase
Very low Debt
R560 million cash reserve, unusual for small-cap. enabling them to pay dividends to their shareholders 
 

Technical Analysis:
Current trend: The share price has been going parabolic since Nov 2021. We are waiting for a retest of the 160c level before entering. If we lose the trend support level, we will look to enter at the long-term support level at around 100c.
RSI: The RSI is currently trending downward. This corresponds with our view regarding the current support trendline. It has to drop just a little bit lower before we increase our holdings.


More information coming soon.


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