Rand rallies as South Africa exits grey list

Analyst thesis

Our recommendation is based on: 

• Stronger South African cash generation: Like-for-like net property income improved on fewer rent cuts, lower vacancies, and better cost recoveries - supporting distributable income per share growth.
• Cleaner offshore footprint: Disposals and exits reduced overseas earnings volatility while keeping useful diversification.
• Improved balance sheet, funding tailwind: Leverage and interest cover are comfortable, borrowing costs are trending lower, and further rate cuts would add flexibility.
• Resilient portfolio mix: Logistics and industrial remains tight with steady renewals, while the V&A Waterfront is almost fully let with strong tenant demand; capex is focused on modern Western Cape nodes.
• Energy self-help: A large solar base and the upcoming Etana PPA will wheel power, easing tariff pressure and backup-power costs to support margins.

Analyst thesis

Our recommendation is based on: 

• Premium brand and consumer focus: Serves affluent, health-conscious clients who value rewards, wellness integration, and quality service, enabling consistently higher pricing than other insurers, while maintaining strong customer loyalty and brand strength.
• Vitality moat & diversification: The data-driven Vitality platform drives deeper engagement and cross-selling opportunities. Earnings are well spread across health, life, banking, and fee-based services, supporting stability and predictable cash flow.
• Growth runway: International Vitality partnerships, new product extensions, and Discovery Bank’s expansion provide scalable long-term upside.
• A broad product suite enables Discovery to increase value per client by cross-selling health, life, banking, and investment offerings, thereby expanding revenue without incurring heavy new-customer acquisition costs.

Analyst thesis

Our recommendation is based on: 

• Low valuations on a risk-adjusted basis, considering all three segments and the current consumer environment.
• We expect consumer foods to remain a strong performer, maintaining its margins, expanding volumes and increasing prices.
• Country Road Group (CRG) provides upside potential from a recovery in consumer spending with easing inflation and decreasing interest rates.
• We expect Fashion, Beauty and Home’s (FBH) turnaround to continue with full-priced sales being a large portion of its revenue.
• However, considering the upside, we highlight risks posed by the consumer environments in both clothing regions, namely South Africa and Australia. Consumers in these regions continue to face macro pressure as evident in CRG’s performance and FBH’s volume pressure. We anticipate the risks to be offset by the strength of the food business.