Sum of the parts trading presentation
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This document summarizes Robby P's upcoming webinar on trading the South African stock market and the Stock Alert service. The webinar will feature an interview with Michael Porter, who will discuss sum of the parts trades, core holdings, and how to profit from dividend strips. Robby P will leave time at the end for questions about short-term share trading and the Stock Alert service.
Sum of the parts trading presentation
- 1. My second Stock Alert webinar From the desk of Robby P, Vunani Private Clients Tonight join me, Robby P, Private Client Trader at Vunani Private Clients, I will be talking to Michael Porter who often contributes fundamental trades to Stock Alert. You will recall his recent BVT break-up trade. We will cover • Sum of part trades • His core holdings • How and when to divi strip I will leave some time at the end to answer all of your questions related to trading the short-term share market and the Stock Alert service.
- 3. • EA is short for Enhanced Alpha, a classic hedge fund trading approach for retail CFD accounts. • The strategy is a mix of: – Long/Short trades on. We will actively be either Net long or Net short, depending what our view is on current market conditions. • This is to eliminate extreme volatility on accounts. What is my EA trading service?
- 4. Local equities, Index, ETFs & CFDs offshore equities & CFDs offshore indices & commodities (CFDs) Forex (CFDs on major currency pairs) Current holdings
- 5. Sum of the Parts Trading 5
- 6. What is SOTP? • Sum of the Parts analysis ( SOTP ), or break up analysis, is a method of valuation of a holding company. The essence of the method is to determine what divisions would be worth if the holding company is broken up and spun off or acquired by another company. • I will be covering two holding companies, and how to trade them by knowing what the SOTP value is.
- 7. PSG Group is an investment holding company consisting of underlying investments that operate across different industries. 4 of its biggest investments, is listed as separate entities on the JSE which compromises around 84% of PSG value. Thus the discount/premium to it underlying holdings can be calculated. PSG Group
- 8. Asset/Liability Shares ( m) Share price ( R ) Value ( Rm ) % of total Capitec 35.5 557.01 19773.855 44.69% Curro 207.9 36.22 7530.138 17.02% PSG Konsult 790.8 7 5535.6 12.51% Zeder 526.2 6.45 3393.99 7.67% PSG Private Equity 1393 3.15% Dipeo ( prev.Thembeka) 597 1.35% PSG Corporate (incl. PSG Capital ) 1672 3.78% Other Assets ( cash and pref investments ) 4350 9.83% Total Assets 44245.583 100.00% Perpetual pref funding 17.4 78 -1347 Other Debt -959 Total SOTP value 41939.583 Shares in issue ( net of treasury shares ) ( m ) 215 SOTP value per share ( R ) 195.07 PSG Group share price ( R ) 177.3 Discount/Premium -9.11% PSG SOTP Calculation
- 9. Local equities, Index, ETFs & CFDs offshore equities & CFDs offshore indices & commodities (CFDs) Forex (CFDs on major currency pairs) PSG discount/premium SOTP trading
- 10. • Current discount is around 9%. • A fair average discount is usually around between 9-15%. • So if this discount deviates a fair amount from the average, a trade opportunity is possible. • You can do a pairs trade on PSG/ underlying holdings. For example Long PSG/ Short CPI,COH,KST,ZED. • Or trade PSG individually. For example if the discount is 25%, you can long the stock back to fair discount. We shorted PSG at R197.50 ( Discount was 2.14% ) and bought back the share yesterday at R183.00 ( Discount was 9.14%) PSG SOTP the trade
- 11. • This is not as exciting and as frequent as the PSG trade, but does provide a opportunity non the less. • RMB Holdings (RMH ) is a holding company with its sole investment being 34% of First National Bank ( FSR ). • By doing a calculation we can determine what the discount is. • I have then taken the discount over the last year, and plotted it on a simple diagram to get an idea what the average discount is. • As soon as this discount deviates from the average, you can trade this. • For example if the discount moves to 0 ( or a slight premium ), you can short RMH and Long FSR till the discount moves back to around 6-8%. RMH/FSR pairs trade
- 12. Local equities, Index, ETFs & CFDs offshore equities & CFDs offshore indices & commodities (CFDs) Forex (CFDs on major currency pairs) Company Shares on issue Share Price Market cap FSR 5,609,488,001.00 42.55 238,683,714,442.55 81,295,673,139.13 RMH 1,411,703,218.00 52.85 74,608,515,071.30 74,608,515,071.30 (6,687,158,067.83) Discount/Premium: -8.23% RMH/FSR SOTP calculation
- 13. Local equities, Index, ETFs & CFDs offshore equities & CFDs offshore indices & commodities (CFDs) Forex (CFDs on major currency pairs) RMH/FSR discount plot
- 15. 3 Dates to remember when doing a dividend strip: • LDT: This is the last day to trade in the stock in order to qualify for the dividend. This is usually on a Friday • Ex Date: If you hold the stock on this day you qualify for the Dividend. This is usually on a Monday • Pay date: This is when you will receive the cash payment for the dividend amount. This is usually the next Monday. Lets take for example Famous Brands is paying a dividend of R2.15 next week. In order to qualify for this dividend you will need to purchase the stock before or on Friday the 1st of July 2016 ( LDT date ). Ex date will be the Monday the 4th of July, and all shareholders that came into the day with stock will qualify for the dividend. The following week on the Monday 11th July you will receive the cash payment of R2.15 per share. • As a rule of thumb traders will buy up the share on the Friday, and the market will price in the dividend amount in the share price. This is where the trading opportunity arises as the maket sometimes prices in more/less than what the dividend amount is. • Remember that if you are short on the stock ( short selling ) you will need to pay in the divi amount. • We notify clients each week on what stocks is LDT the Friday, and what stock is worth trading for the dividend. Trading a Divi strip
- 16. Profit from Stock Alert Copy trade Do it yourself Phone and email
Editor's Notes
- #9: Here I have the chart of the Top40 to give you an idea of the indicators I look at when identifying a trade. 1. buying/selling momentum indicator 2. Stochastic oscillator & RSI 3. 21 day moving average (short term) 4. 200 day moving average (longer term strength) 5. Support and resistance 6. Patterns
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