Capitec's growth engines

As you already know, I collaborate with Capitec (JSE: CPI) on a podcast series for their business banking clients.

The group has taken it a step further in their support of my work, with a decision to place their latest results on the platform.

The official press release on the Ghost Mail website will give you the corporate narrative (and the earnings presentation recording), with the word “diversified” featuring strongly. In Ghost Bites further down, I’ve highlighted areas that jumped out for me.

I’ve also covered the latest from Araxi (JSE: AXX) and Netcare (JSE: NTC) in the Bites today, along with a brief note on Sibanye-Stillwater (JSE: SSW).

Enjoy!

Keen to do more research on local stocks? Unlock the Stock is a wonderful way to do it. In the past few weeks, we’ve hosted CA Sales Holdings (JSE: CAA) and Redefine Properties (JSE: RDF) in separate sessions. This is a fantastic way to hear directly from management, with the subsequent Q&A session facilitated by yours truly and Mark Tobin of Coffee Microcaps. Get the latest videos here.

Looking for something you’ve read recently? This link has all the previous editions of Ghost Mail (and Ghost Mail Weekender). Share it with your friends and bring them into the community!

Capitec (JSE: CPI) was clearly the biggest story on the JSE yesterday. The banking group’s share price has been doing very well over the past couple of years:

On a Price/Earnings multiple of roughly 30x in a country where consumer stocks have been falling apart at the seams, Capitec’s earnings need to remain strong to support such a lofty valuation. They keep managing to do it despite the tough conditions, with the six months to August 2026 reflecting growth of 19% in both HEPS and the interim dividend per share.

The group now has 26.6 million clients, of which 25.7 million are personal clients. But the real insight is to dig into some of the underlying growth engines, like “high earner” clients (more than R50k per month) being up 22%. The number of businesses and entrepreneurs more than doubled to 686k, so Capitec’s efforts there are really paying off.

I’ve obviously had a front row seat to the Capitec Business push via the podcast campaign that I collaborate with the group on. Honestly, the clients I’ve interviewed are very happy. That’s the behind-the-scenes narrative that has come through for me on pretty much every show. Business Banking just grew headline earnings by 52%, so happy clients on the ground are translating into strong group earnings.

Within the 26.6 million customers, there are 10.4 million fully banked customers. That’s very important, as this is where Capitec can really maximise their share of wallet.

The days of Capitec just being a bank for lower-income earners are well behind us now. In this slide, perhaps one of the most important ones from a strategic perspective, Capitec highlights their strength in international travel (!) and the incredible number of clients in the youth segment:

The earnings deck is full of really interesting statistics, like a note that the number of clients subscribing to Anthropic and OpenAI services has jumped by 422% year-on-year. There are 94,000 clients paying for these AI models!

And if you’re wondering why the apparel retailers are getting killed out there, here’s a slide showing how the Youth and Lower Income Earners segments have pulled back on entertainment and clothing spend in the latest period. Note the impact of transport inflation here:

Fascinating, isn’t it?

Against this tough consumer backdrop, it’s perhaps not a surprise that the credit loss ratio has increased from 7.9% to 8.4%. The group’s income growth has been strong enough to drive a solid HEPS performance despite these issues, but the consumer stress is there.

One of the reasons why Capitec keeps bucking the trend in South Africa is that they have impressive cost control. Growth in operating expenses was just 5%. Capitec’s reputation as an efficient group remains intact.

Special mention must also go to the fintech business, comprising VAS and Capitec Connect. This is now contributing 29% of group earnings, more than the insurance business at 27%.

Capitec Connect’s net income jumped by 72%, with 27,000 devices sold in the past 6 months. This is such a good example of how competition in the local market has broadened well beyond traditional sector classifications, as we are in a situation where Capitec is out there competing with clothing retailers to sell cellphones!

It’s easy to assume that Capitec’s growth rate must moderate from here. I think a deeper look at the drivers of that growth supports a more bullish lens, but of course the market already knows how good this business is – and the valuation has always been a tough hurdle for investors to get over. Those who have taken the leap have usually been rewarded though, especially over a longer time horizon.

Moving on, Araxi Limited (JSE: AXX) released a business update covering the six months to June 2026. The payments division is the one that really counts, with the bad news being that performance has been “well below expectations”.

There are a number of factors at play here, including enterprise customers trying to reduce the lifetime costs of the payment terminals they use. There’s also a lot of debate around which route to go for many merchants, as terminals have evolved well beyond being devices that simply accept card payments.

Although Araxi can offer all of these solutions, the combination of technology uncertainty and macroeconomic pain for consumers means that terminal orders and deployments have been postponed. Management believes that the medium- and long-term outlook remains positive, but this period has been weak for growth in terminals.

Things at least sound more positive for Halo Dot and Pay@, with the latter included in this interim period for four months.

The software division, which has been the ugly duckling in recent years, seems intent on becoming a swan. Or at least a reasonably cute duck. There’s a long way to go, but a significant reduction in expenses has improved profitability in that business.

Finally, the performance of the investments held by Araxi in LayUp and AssetPool has been in line with expectations.

Interim results will be released in early December. The share price was down 19% year-to-date before this announcement was released after market close on Wednesday. Keep an eye out for fireworks today as the market responds to the disappointing news.

Netcare (JSE: NTC) also gave the market a trading update to consider, with theirs covering the year ended September 2026. Although Netcare’s share price is up nearly 20% in the past year, there’s been quite a correction off the 52-week high of R19.43:

At the halfway mark, the group had guided an FY26 performance that would include growth in total patient days of between 1.1% and 1.6%, driving group revenue growth of between 4% and 4.8%.

The latest update confirms that they achieved growth in total patient days of 1.6%, so they’ve come in right at the top of guidance. The acute business grew by 0.8%, while the mental health operation achieved 8.2% growth in paid patient days. If you exclude the recently commissioned Netcare Akeso Polokwane facility, growth in the mental health business was 3.6%.

But revenue is expected to be up by 4%, so they’ve only reached the bottom of the guided range on this key metric. The drag this year was the non-renewal of a large occupational healthcare contract, driving Primary Care revenue down by 6.9%. Hospital and Emergency Services revenue was up by 4.2%.

Thankfully, the group EBITDA margin is expected to increase year-on-year from the strong base of 18.6% in FY25.

The HEPS story will be boosted by share buybacks. The weighted average number of shares outstanding for that calculation has been reduced by 4.3% in the past year.

Finally, Sibanye-Stillwater (JSE: SSW) has locked in a wage agreement at the East Boulder mine in the US, with the increase over the next three years ranging from 3.0% to 4.5% (or CPI if higher in the latter years). The backstory here is that the company is modernising its mining process in the US, so this naturally creates a difficult situation with unions. Notably, strike action at the Stillwater East mine and the Columbus metallurgical facility continues.

Do your own research and speak to your financial advisor. Nothing you read or listen to in Ghost Mail should be interpreted as financial advice. This is not a complete review of SENS and does not replace the need for you to refer to company announcements and reports yourself. Every effort is made to avoid errors in Ghost Bites and related podcasts, but I am only human.

A stronger than expected ADP payroll print, softer PCE inflation and an upward revision to US second quarter GDP gave investors plenty to digest yesterday, with expectations of an October Fed rate hike now dimmed to below 40% according to Fed fund futures.

On Wall Street, the Nasdaq closed higher while the S&P 500 and Dow closed lower, as AI related stocks continue to provide the short term outperformance. Micron added to that theme after forecasting quarterly revenue above estimates and saying customers had increased commitments under its long term supply agreements to $32 billion, signalling continued demand for AI memory chips.

US futures are pointing to a positive open and Asian equity markets are mostly firmer this morning, with semiconductor stocks leading the way.

The yield on US 10 year Treasury notes hit 5.3%, its highest level since June 2007, before easing slightly. The dollar index continues to firm on the back of rising yields, although gold has managed to rebound this morning despite the stronger greenback. Oil prices are flat after yesterday's gains.

The rand is flat this morning but remains near its weakest levels against the dollar since early August. We expect a cautiously firmer open for the JSE All Share index following yesterday's selloff.

This afternoon, PMI and weekly US jobs data will be in focus.

This update is provided by Shaun Murison, Senior Market Analyst at randswiss.com. Connect with him on LinkedIn here and follow him on X here.

Key Indicators: 

USD/ZAR R16.43/$ | US 10yr 5.27% | Gold $4,187/oz | Platinum $1,740/oz | Brent Crude $96.94