E-Malt.com News article: South Africa: Surge in share price takes SABMiller past R1-trillion market capitalisation mark for the first time

A 5.58% surge in SABMiller’s share price in South Africa took it past the R1-trillion market capitalisation mark for the first time on June 10, Business Day reported.

The only other JSE company with a market cap over R1-trillion is another "sin stock", British American Tobacco (BAT).

SABMiller also led the London Stock Exchange higher on June 10. Reuters reported traders were citing fresh talks about the merger of the brewer with a major European beer company.

"Companies have got a lot of money and are looking at places to spend. SABMiller is just as likely a candidate as anyone else. I think it’s more chatter than substance at this moment," CMC Markets chief market analyst Michael Hewson told Reuters.

On the JSE, the brewing giant jumped 5.58% to R615.34, helping the R9.94-trillion all share index to another record close above the 50,000-point mark, as industrial stocks continued to tighten their grip on the local bourse.

BAT occupies the top spot on the JSE with market capitalisation of R1.28-trillion, followed by SABMiller and Glencore.

"The recent SABMiller results were fractionally above consensus with faster than expected internal cost savings coming through. The internally focused programme highlights how costs and margins will be the earnings drivers going forward, rather than volume growth," Absa Wealth and Investment Management’s Craig Pheiffer said.

Mining stocks have traditionally dictated direction on the JSE until 2008 when the global economic downturn took its toll on some of the resources, giving rise to more defensive industrial stocks such as luxury goods group Richemont.

The JSE industrial 25 index is now worth R5.3-trillion, according to INet BFA data, compared with R1.92-trillion in the resources 10 index.

The global mining industry realigned expectations last year in one of the most difficult operating environments for years, according to a PwC report last week.

Analysis of the largest 40 miners showed no one was immune from the recent turmoil.

Commodity prices, led by gold’s greatest annual fall in over 30 years, decreased significantly and mining values fell 23% last year. This, along with record impairments, means profitability in the industry was at its lowest in a decade.

SABMiller, the world’s second biggest brewer after Anheuser-Busch InBev, plans to save about R5.2 bln a year by 2018 through its programme to create a group-wide business services unit and a centralisation of various back office functions.

"We have recently reduced SABMiller from an overweight position to an underweight position relative to the JSE all share index in our private client portfolios," Mr Pheiffer said.

BP Bernstein Stockbrokers portfolio manager Menelaos Hatziandreou said SABMiller still "has legs" in the short term, but in the medium term "we can see … some form of correction".

The Financial Times reported on June 10 that rumours have been heard in recent weeks of bankers putting together a syndicate to raise about $60 bln of debt, to fund the cash component of a European takeover.

Among the stocks to benefit from the speculation was SABMiller, rumoured for more than a decade to be a possible target for Anheuser-Busch InBev.


11 June, 2014