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Market Scorecard
Yesterday was a rather subdued day for markets. There is the overhang of increased hurdles to a trade truce, the escalating violence in Hong Kong and then sectors of the US were closed yesterday for Remembrance Day. Locally, Aspen announced that they would be selling their Japanese division for EUR 400 million. On the surface, it looks like a good price. Aspen 'only' makes EUR 24 million in profit a year from the Japanese operations, so getting 16 times earnings is a healthy price for those assets. This sale will help Aspen focus on their core business and to pay down its debt burden. The stock closed up 4% on the news.
Yesterday the JSE All-share closed down 0.78%, the S&P 500 closed down 0.20%, and the Nasdaq closed down 0.13%.
Company Corner
One thing, from Paul
Broadcast TV powerhouse Multichoice was out with results for the six month period up to the end of September yesterday. This is a stock that we recommend to clients with Rand-based accounts here on the JSE. You will recall that it was spun off from Naspers and listed in its own right in February 2019.
The core business is the DStv operation in South Africa, and a string of 50 other African countries to the north of us. Their overall subscriber base is 18.9 million households, and that grew by 1.2 million in the period. Of those, 10.7 million are in South Africa. I am always struck by how many satellite dishes you see in urban areas all around this country, including some pretty scruffy neighbourhoods.
Revenue for the period was up 4% to R25.7 billion. The price of Premium packages was held constant and that part of the customer base was stable. No loss of customers to Netflix, please note. Core headline earnings rose 24% on the prior period to R1.9 billion, despite a once off charge related to the Phuthuma Nathi empowerment scheme.
As expected, no interim dividend was declared, but Multichoice plans to pay out a dividend of R2.5 billion in the 2020 financial year.
The content offering on DStv is excellent, in my view. Live sport is the cornerstone of the various bouquets, and the breadth of their coverage of local and international events is second to none. Trust me, there is nothing like Supersport anywhere in the world, at that price.
Multichoice is probably a small holding in your local portfolio. You can certainly add to this one, at current prices.
More on the results in this excellent summary by Duncan McLeod at Techcentral:DStv rakes in subscribers, but they're spending less on average.
Our 10c Worth
Byron's Beats
As we know, Visa is a very profitable company operating in payments; a fast growing sector with lots of innovation. When you are that profitable, you are at risk of disruption. That is why Visa continues to snap up stakes in exciting payments companies.
The latest is in Africa and it is sizeable. Visa to snap up stake in African fintech unicorn Interswitch.
Visa will be buying 20% of the company for $200m. That values the Nigeria based company at $1bn.
According to Wikipedia, Interswitch was founded in 2002. Its primary function is to link different banks in Nigeria as well as supply technology for ATM withdrawals. Its debit card brand called Verve has 18 million cards in circulation in Nigeria.
The valuation is impressive. I wonder what MTN and their mobile money product in Nigeria is worth?
Michael's Musings
It feels like only a few years ago that Satya Nadella took over at Microsoft. In fact, in February he will have lead the company for six years! I remember clearly the day that Steve Ballmer stepped down. It stands out because when he announced his departure, the Microsoft share price popped and Ballmer's NAV increased by $1 billion. Do you think he was sad about the market's lack of faith in him or happy that he 'made' $1 billion in a day?
In the six years that Nadella has lead the company, the share price has gone from $35 to $145, and now has a market cap of $1.1 trillion! It shows the value of having the correct CEO in place. Under Ballmer the company seemed to be going backwards and looked to be slipping into relative obscurity like IBM.
Vestact's exposure to the tech space is firmly in Apple's 'cart' with 404 clients owning them, but we do have 19 clients who own Microsoft. As a result I own a few Microsoft shares because I like to own stocks that clients own. Here is an interview with Nadella talking about Microsoft and some of the exciting prospects on the horizon - Satya Nadella on learning, listening, and his #1 productivity hack. Having our finger on the pulse of changes in the technology sector, helps us make better long term investment choices.
Bright's Banter
Uber co-founder Travis Kalanick has a new venture called CloudKitchens. CloudKitchens is a startup that rents commercial space and turns them into shared kitchens for restauranteurs. In its most recent round of funding CloudKitches raised $400 million from Saudi Arabia's sovereign-wealth fund valuing the ghost kitchen at around $5 billion.
Someone on Twitter said that Travis is good at raising funds from the Saudi's and then burning the money; I beg to differ. Buying cheap, rundown properties and then building your own ghost kitchens, to then partner with the likes of Grubhub and DoorDash doesn't sound like a bad business model to me.
Travis Kalanick also sold $547 million of his stake in Uber after the lockup period lapsed last week. This means he could use some of that cash to have real skin in the game. What really caught my interest in this story is the fact that Travis already knows the nuts and bolts of Food Delivery and now he's playing in the sweet spot.
Linkfest, Lap it Up
November marks 30 years since the Berlin wall came down. Here are pictures of the wall being built, being taken down and what it looks like today - 30th Anniversary of the Fall of the Berlin Wall: Pictures
These graphs show how a countries history has a significant impact on economic success long into the future. In this case, the wall was only up for 29 years and has been down for 30, yet the impacts still remain.
You will find more infographics at Statista
Signing off
President Trump speaks at the Economic Club of New York today, which will probably result in some market movements. Good or bad moves? We will have to wait and see. South African earnings continue today. Telkom released a mixed bag set of interim results this morning. Interestingly, their mobile data business grew by 56%. The JSE All-share is up nicely this morning.
Sent to you by Team Vestact.