PHANTOM SHARES: The Finance Ghost: Capitec’s share price cracks

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The year is 2022. The UK is behaving more like an emerging market every day and Capitec is the worst performing major bank on the JSE. These are interesting times.

To be honest, though, it’s been a long time coming for Capitec. There’s nothing wrong with the underlying bank. The problem is entirely the valuation.

You would only pay a premium to book value if the bank is either growing quickly or generating above-average returns from that equity. A “high” price/book value would be as much as 2x, which would make me nervous. Despite losing more than 20% this year, Capitec’s multiple is still 5.2x.A key principle in corporate governance is succession planning.

In a pre-close update on its performance, Netcare has indicated that the case mix is normalising. This means higher patient growth and lower revenue per patient.

 

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