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Market Scorecard
Well done to Kevin Anderson on getting to the Wimbledon final, and then what a cracker of a World Cup final; normally finals only see one or two goals. Have you seen the image doing the rounds on social media that compares the cost of DSTV and Netflix? What the graphic forgets to mention is DSTV's sport option, which Netflix does not offer. The reason that we are drawn to sport is because of its unscripted nature, we didn't know who was going to win the world cup or how long the Anderson Isner match was going to last.
If you read through Naspers most recent financials, their Video entertainment division had revenues of $3.7 billion and net profit of $370 million, and EBITDA margins of 16%. Not quite the 40% profit margins that Apple makes on their iPhone. Although the way that South African's gripe about Multichoice, you would think DSTV margins were even higher than that of Apple.
Sports rights cost Multichoice a fortune. For the UK football Premier league, it cost somewhere between R6 billion and R7 billion, that is for the right to broadcast the 2016-19 seasons. Now add the costs of broadcasting rights for other football leagues, cricket, rugby, hockey, boxing, F1, Olympics, golf, and the list can go on. As Multichoice have said before, if you only bought a sport subscription, it would cost you more than the current premium subscription. The revenue from the smaller channels, subsidises the sport channels to bring the cost of the premium package down.
With Netflix having more Emmy nominations than HBO, can we say that the age of internet streaming has officially arrived? I'm very interested to see how Super Sport changes things up to cater for the new generation of entertainment consumers.
On Friday the JSE All-share closed down 0.85%, the S&P 500 closed up 0.11%, and the Nasdaq closed up 0.03%.
Our 10c Worth
One thing, from Paul
The problem with Trump's trade war, is that it's not really clear what he's trying to achieve? He has not articulated any desired outcome, just a generalised theme in rambling interviews about putting "America First".
By imposing new tariffs on imports to the US, he has undermined generations of work to build the anti-tariff World Trade Organisation (WTO). Traditional US allies are disgusted.
Trump's latest instruction to his administration to draw up new 10 percent tariffs on another $200 billion of Chinese imports will impose hefty new taxes on US consumers and producers. Remember folks, tariffs are taxes. I read somewhere that Apple is responsible for almost 24% of the U.S. trade deficit with China, due mostly to parts for iPhones.
The Chinese have a long history of withstanding Western pressure that goes back the Opium Wars against the British, so they will retaliate, and the economic damage will be compounded.
Supply chains and investment plans of global multi-nationals will be thrown into disarray. These are the companies that you and ourselves are directly invested in, so there is cause for concern. We will be keeping a close watch on all this, on your behalf.
Byron's Beats
Wilderness Safaris is not a stock we talk about often. But some recent news from the company resonates with an investment theme I strongly stand by. Good things happen to good companies. And by "good company" I mean a company that strives to improve our planet or enhance human progress.
Wilderness Safaris is the epitome of this theme. They are a safari company with high end lodges in prime wilderness areas around Africa which include the Okavango Delta, Kafue, Hwange and The Skeleton Coast. One of their main goals is to protect the land where they operate. This makes sense because that enhances the experience for guests paying thousands of dollars to stay there. Their holistic approach is to involve the communities who live around those areas. If the surrounding communities benefit, the land and animals will also be protected.
On Thursday it was announced that a consortium of high net worth investors called the Rise Fund have bought a 34% stake in the company. The Rise Fund has some big name investors which include Richard Branson, Bono, Mo Ibrahim, Laurene Jobs and Reid Hoffman.
The nice thing about having wealthy, influential people like that as shareholders is that they are patient and more interested in the long term sustainability of the business and it's ethos. Wilderness have never put profits at the forefront of their objectives. Having said that, they have done incredibly well over the last few years. The share price has tripled in 5 years.
I also believe that a private business like Wilderness will be more effective than a non-for profit because they are driven to create shareholder value and to maintain their own survival. This investment sounds like a good fit.
Although Wilderness is too small for our radar I do like the long term thinking model while at the same time doing good.
Michael's Musings
Every time I see what the US spends on their military, it blows my mind. Thanks to my economics background, I feel that there are much better places their government could put the cash to get better returns. The scary part is that Trump is increasing military spend and pressuring NATO to increase their spend too.
When it comes to military spending, many people point to how much economic stimulus is created by building tanks and bombs. This is called the broken window fallacy, where people assume that the spending attributed to destruction, is a good thing. What do you think would benefit the US economy more, spending $685 billion on bombs that once they explode are gone, or spending $685 billion on improving their ageing infrastructure? Both would stimulate the economy, just the roads will still be around for decades to come.
You will find more infographics at Statista
Bright's Banter
Byron wrote about the Emmys and their importance in the film industry in his recent Beats. Statista made a very cool infographic showing all the Emmy Nominations for 2018.
What stood out for me is that Donald Glover aka Childish Gambino's Fox production "Atlanta" got 16 Emmy nominations. Atlanta is a really fun series he created and serves as a writer and director in. I've been a Glover fan since he was writing for 30 Rock, under Tina Fey ,and won a couple of Emmys at the tender age of 24.
He then went to be a co-star in the series "Community", released some dope rap EPs and albums where he describes his experience as being "too soft for Roc-a-fella records but too hard for Pitchfork." Today he's signed with RCA. Fast-forward a few years and we have hit records like Not Going Back, Freaks and Geeks, Heartbeat, 3005, Redbone, and most recently a hit single called "This is America".
This guy is a powerhouse and he's not done!
You will find more infographics at Statista
Linkfest, Lap it Up
Thanks to recycling your trash now has value. Probably the most valuable waste is e-waste because of the minerals used to make these products - E-Waste Offers an Economic Opportunity as Well as Toxicity
- "According to researchers at U.N.U., the raw materials contained in e-waste were worth roughly $61 billion in 2016, more than the gross domestic product of even middle-income countries like Croatia or Costa Rica."
One of the unintended consequences of economic growth is light pollution. I love getting out to the bush and looking at the stars; in JHB we can only see a handful on clear nights - We're losing the night due to artificial light. But it's not too late to get it back
The pulling power of some sport stars is amazing. Now you can understand why Juventus were willing to pay EUR 100 million
Signing off
MTN announced this morning that they have sold their Cyprus business for R4.1 billion, roughly 2% of MTN's market cap. With Cyprus being a developed economy it was always the odd one out in MTN's portfolio, it had ARPU's of around $20; Swaziland is the second highest with $8. It looks like management is focusing their portfolio on key markets, and cashing in on non-core assets. Global central banks will be in focus this week. There are global CPI reads coming out this week, ours included, where the expectation is for higher inflation unfortunately. Then on Thursday, we will find out if our home loans are going to get more expensive.
Sent to you by Team Vestact.