Just Go to Gym

“One of our biggest holdings in the US, Nike had their 4Q and full year results out last night after the close of the market. They blew past analyst’s already lofty estimates with EPS of $0.98 vs estimates of $0.83 and they grew revenue by 5% (13% excluding currency changes) to $7.79 billion for the 4Q vs estimates of $7.69 billion. Gross margins also grew by 60 basis points and their future orders are up by 13% to $13.5 billion. Given the earnings beat the stock was up 3% after hours, we will have to wait till 15:30 our time to see if the stock holds onto the over night gains when the US market opens.”


To market to market to buy a fat pig. Still no deal in Greece. Moving swiftly along and more to the East, Iran. Negotiations will begin tomorrow in Vienna to set limits on Iran’s nuclear program and result in sanctions being lifted. The target date for the agreement is the end of this month which could be postponed by another week. I don’t profess to be a political expert but from an economic point of view it is always better for everyone involved to be part of an open economy and trading with the rest of the world. As per this article businesses are already lining up to get a piece of the pie – Iran is about to become the biggest free for all since the Soviet collapse. For us locally MTN has operations in Iran and has a whole bunch of cash sitting there that they would like to take out. If the deal to raise sanctions gives a clear commitment for the future, I see many businesses piling into the country which should lead to the Iranian Rial strengthening (see how the currency has weakened over the last year), which will be good for MTN when they take cash out.


taken from http://www.xe.com

The lifting of sanctions will allow more countries to buy oil from Iran, increasing local activity (good for MTN) and helping to push oil prices further down. For MTN, Iran is their 2rd biggest country in terms of customers and accounts for 20% of MTN total subscriber base. In terms of profitability Iranian Average Revenue per User (ARPU) sits at $ 4.01 compared to South Africa’s $7.45 and a developed country like Cyprus of $19.35, there is huge room for growth in Iran and South Africa! As we have said before, a lower oil price is better for most people but will probably result in the slower adoption of green technology.


Company Corner

Advtech released a Cautionary Announcement at around lunch time yesterday. Here are the important parts, “The board of ADvTECH has received an unsolicited proposal from a third party which it is obliged to consider.” The tone that I get from the SENS is that they are not too impressed with the offer and it will probably be rejected. We are not sure who the offer has come from. The two leading theories at the moment are Curro, who also happen to be under cautionary as of 2 weeks ago and the other is maybe the former CEO, Leslie Maasdorp. Given that Curro have recently done a rights issue and they would have to do another huge one if it was them making the bid (Curro market cap is R12 billion and Advtech is R5.2 billion); I doubt it is Curro who are making the bid.

One of our biggest holdings in the US, Nike had their 4Q and full year results out last night after the close of the market. They blew past analyst’s already lofty estimates with EPS of $0.98 vs estimates of $0.83 and they grew revenue by 5% (13% excluding currency changes) to $7.79 billion for the 4Q vs estimates of $7.69 billion. Gross margins also grew by 60 basis points and their future orders are up by 13% to $13.5 billion. Given the earnings beat the stock was up 3% after hours, we will have to wait till 15:30 our time to see if the stock holds onto the over night gains when the US market opens.


Linkfest, lap it up

Looking at the growth in gym numbers and the growth in customers, it shines a good light on the Virgin acquisition by Brait. – Planet Fitness’s IPO shows the incredible rise of budget fitness. This is not the Planet Fitness that we know in South Africa, this one is a different company and all their gym equipment is yellow and purple (hurts my eyes looking at them). The numbers confirm though the shift towards being more healthy which is good news for companies like Nike (as seen in their results) and for companies like Discovery who pay out less due to a healthier client base.

Linkin Park was and is one of my favourite bands. Given the rise of streaming services (which seems to result in less revenue for artists) the focus has shifted to leveraging off the brand of the artist to get revenue from other sources – What Happened When Linkin Park Asked Harvard for Help with Its Business Model. This is not a new concept, artists like Jay Z and Dr. Dre (who recently sold Beats to Apple) have been using their brands for years to make extra money.

One of my favourite bloggers shares his thoughts on Four Questions that he has been thinking about. He talks about what he thinks of interest rates, inflation and what he thinks the financial services sector will look like going forward. Here is a stat that he mentions which stood out to me (do with it what you will) – “There are 10,000 baby boomers retiring every day for the next 20 years”


Home again, home again, jiggety-jog. The healthcare stocks in the US were up last night after the US supreme court ruled in favour of Obamacare. The shares of HCA Holdings and Community Health Systems were up 8.8% and 13%! Having more people who are able to pay for healthcare, increasing the customer base for these companies is going to be very good for business. Markets in the US closed in the red, Asian markets followed suite and we are also in the red as I write. The volatility in the Chinese mainland market seems to be persisting, the Shanghai was down a mind boggling 7.4%! I’ve seen many reports of the average man on the street moving from speculating/investing in gold and moving into stocks. Add a bit of leverage to the mix and you can understand why there is such volatility. The image sums it up quite nicely.

I found this image in a newspaper a couple years ago, not sure which one though and who the artist is. Definitely not me!


Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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