Rubies are red

Gemfields (JSE: GML) has been one of the more interesting stories on the JSE in recent years. It’s obviously not at the top of anyone’s list of great stocks, but it does give us a cautionary tale about what can happen when a company gets ahead of itself on capex.

I focused on the rubies and emeralds this morning, with notes on Mustek (JSE: MST) and Primary Health Properties (JSE: PHP) as well. There’s also something very embarrassing about AngloGold Ashanti (JSE: ANG) that went out on SENS early this morning…

As you’re probably aware, South African consumer stocks are in huge trouble at the moment. And over in the US, there’s plenty of talk about the rates cycle and inflation, with those factors directly impacting the interest rates that we pay as well.

Doesn’t it sometimes feel like the macro data is far removed from the mood on the ground?

In the latest episode of Magic Markets, I explore this with my co-host Mohammed Nalla. You can get it on YouTube, Apple Podcasts and Spotify.

Capitec’s (JSE: CPI) strong results this week are available for you to read on the Ghost Mail website. The official narrative is always worth checking out, with Capitec focusing on how diversified the business has become. My thanks to Capitec for their support of my work in Ghost Mail.

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Gemfields (JSE: GML) released results for the six months to June 2026. The company has been through a horrible time in recent years, so this was an important release for investors. Just take a look at the share price over the past 5 years:

The highlight is that the company has posted positive HEPS. But the nuance is that a delayed auction was part of the reason, as a ruby auction that was meant to happen at the end of 2025 only took place in 2026.

This has given the numbers an unusual boost vs. the prior period, with revenue jumping from $64.2 million to $106 million. This increase converted beautifully to the EBITDA line, which increased from a loss of $4.9 million to profit of $40.7 million.

Before anyone pops the champagne, it’s important to note that there’s a non-cash impairment charge of $125.2 million. This is why the company has reported an attributable loss.

Impairments are reversed out for the purpose of calculating headline earnings, hence the shift to positive HEPS vs. the prior year when they couldn’t even manage a profit at EBITDA level.

The real question is: why is there such a large impairment?

The answer is that the rubies business is still in a very tough space, with a shortage of premium rubies at Montepuez Ruby Mining (MRM) in Mozambique.

Gemstones like rubies are unpredictable, which is exactly what makes them valuable in the jewellery trade in the first place. It makes for great adverts about special stones for a special person in your life, but it also makes it really tough for management (and investors) to forecast financial performance with any degree of certainty.

This can transform from a challenge to a complete nightmare in periods of heightened capex. A large investment programme in its operations literally nearly killed off Gemfields, with the company having to raise equity capital from investors in prior years under painful circumstances.

One of the projects was the second processing plant at MRM. If grades improve, then perhaps that will turn out to have been a good decision. Such a large impairment at MRM is a strong signal that the grades haven’t been nearly as good as management expected when they moved ahead with the project.

Another challenge has been higher diesel costs, so watch out for that in the full-year numbers. Fuel costs are a major component of the mining process.

Overall, credit must go to management for making it clear to investors that this return to positive HEPS was mainly due to the timing of an auction rather than a sustained improvement to the business. There are some encouraging signs, but the pressure is clearly still on.

Mustek (JSE: MST) released results this week that have some unusual percentage movements. Also, you may recall that there’s still a lot of noise in the background regarding the offer by Novus (JSE: NVS) to acquire all the shares in Mustek that weren’t already held. Novus had a 50.4% stake in Mustek as at the end of the financial year.

Revenue only increased by 1% and gross profit deteriorated by 60 basis points to 12.7%, so you wouldn’t expect to see happy news at the bottom of the income statement.

Here’s the surprise though: HEPS jumped by 181.3%! The cash largely followed suit, with the dividend per share up by 172.7%.

There are a few factors at play here, including operating costs decreasing year-on-year by around R20 million. The other big movement is a decrease in finance costs of more than R50 million. When you consider that profit before tax in the comparable period was under R47 million, these are material movements.

Mustek is one of those companies where you won’t learn much from digging into the segmental reporting. The Distribution segment generated a profit before tax of R139 million, while the other two segments could only generate R4.4 million in total. Segmental reports become far less useful when a group is so dominated by a single segment.

But something I do appreciate about Mustek’s numbers is that attributable profit is very close to headline earnings. There was only a small forex reserve-related movement that needed to be added back in the reconciliation.

Primary Health Properties (JSE: PHP) gave an update on Q3 rental growth, with the UK-based healthcare portfolio achieving growth slightly ahead of guidance. Rent reviews have generated an annualised 6.1% uplift over the previous rent. This is just their way of talking about positive reversions in the way that South African funds usually do.

The portfolio is being expanded, with the company currently working on five new build development projects across the UK and Ireland. They are also implementing a joint venture that would free up capital to reduce debt.

After putting the balance sheet under some pressure for the major M&A transaction with Assura, they are looking to bring the loan-to-value below 50%. In the current environment, the sooner that happens, the better.

That’s because Primary Health’s share price is down nearly 10% year-to-date despite this revenue growth. We find ourselves in a fairly hostile environment for a developed market property fund sitting on a lot of debt. Aside from the cost of debt concerns as rates go up, there’s the impact of rising bond yields on the valuations of the underlying properties.

And finally, AngloGold Ashanti (JSE: ANG) earned itself a public censure by the JSE. This goes back to the release of results in August 2025, where they were disseminated on a number of news services before actually going out on SENS. The company is dual-listed on the New York Stock Exchange and on the JSE, with the attempted defence being that they couldn’t achieve simultaneous disclosure on both exchanges.

As this sequence of events shows, they somehow managed to put the results on their website a full 24 minutes before they went out on SENS, hence the embarrassing censure:

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.

US stocks closed marginally higher on Thursday after recovering from early losses. Equities sank to session lows as long dated yields climbed, before clawing back their declines as yields retreated from their highest levels in more than two decades.

US jobless claims, construction spending and ISM manufacturing data all came in stronger than expected yesterday. Attention today turns to September's non farm payrolls report, which is set to be a major catalyst for market direction.

The dollar index is off yesterday's highs, although it remains elevated. Gold is tracking modestly firmer this morning from its overnight close.

Oil prices rose sharply after a report that the US is sending a third aircraft carrier strike group to the Middle East, although prices have tempered modestly this morning.

US futures are firmer, while Asian equity markets are mixed to mostly softer. The rand is slightly firmer after yesterday's sharp losses against the greenback, and we expect a flat to modestly firmer open for the JSE All Share Index.

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 R16.66/$ | US 10yr 5.24% | Gold $4,188/oz | Platinum $1,751/oz | Brent Crude $101.81