Tiger mulls and mills Nigeria

 

“The stock ended the session up five and a half percent after they announced they have “decided not to provide further financial support with respect to its investment in Tiger Branded Consumer Goods plc of Nigeria. Tiger Brands is currently exploring various alternatives with respect to its shareholding in Tiger Branded Consumer Goods plc.” In other words, the investment in Nigeria was a disaster, they have basically written it off, and now they are not funding it any more. More tomorrow I guess, the results are then.”


 

To market to market to buy a fat pig. It was a sombre day to begin with, the terrorist attacks in Paris from Friday evening dominating the discussion. The G20 meeting in Turkey focused squarely on the events over the last few weeks, the Russian passenger jetliner being brought down by what is widely considered a bomb, the attack in Beirut and then of course Paris. As many folks point out, the activities of this radical group are not isolated to these events.

I often wonder what gives rise to such radicalism? Are people marginalised that much, that they need to finish themselves and others around them? I can’t and won’t understand it, it is best left for people with far better skill sets than myself, let me stick to my world. Which consists of companies, their prospects, their numbers, deal making activities ongoing, pending or potential. Companies doing different things, creating new products and new services, that is what we emerge ourselves in each and every day. We are lucky in that no two days are ever the same in our job, we don’t have to churn out 20 widgets a day. Great job. Do what you love and you will never work a day in your life.

Yesterday was a wild crazy busy day, results from all quarters as well as some pretty interesting announcements. All stocks rallied during the course of the day, all major indices “doing better” after a bit of a tough time lately. After the dust had settled, stocks as a collective had risen just over two-thirds here in Jozi. Resource stocks added over a percent, Glencore on the wrong end of the scoreboard again, at the top was Tiger Brands.

Why? The stock ended the session up five and a half percent after they announced they have “decided not to provide further financial support with respect to its investment in Tiger Branded Consumer Goods plc of Nigeria. Tiger Brands is currently exploring various alternatives with respect to its shareholding in Tiger Branded Consumer Goods plc.” In other words, the investment in Nigeria was a disaster, they have basically written it off, and now they are not funding it any more. More tomorrow I guess, the results are then.

There were results from Telkom, Mr. Market seemed to like it, revenues were flat, they are still losing headway in their old businesses, fixed lines and minutes spoken fallen. They are to a certain extent controlling costs, another 3100 odd folks let go during the period, salaries still up around 10 percent. ADSL makeup slowing, they have more than 1 million connections, apparently the excitement was around Telkom Mobile, our Telkom LTE router gets all of zero bars at the office.

And it gets about as much attention from Telkom, their technician was here for all of 20 odd minutes. My gripes are a separate issue, I recently have had more favourable dealings with Telkom. The fundamentals don’t look that bad, I just see more competition and the company continually having to evolve. Plus there have been more once offs than most other listed businesses here locally, Benjamin Graham always said beware of the company with recurring once offs. As they are no longer once offs. We have been wrong on the share price, we will continue to avoid.

Barloworld had results too, again a tough environment for them. Siberian sales crushed in Dollar terms, Iberia is showing signs of life for the first time since 2008. Their second hand and rental car business was the only real bright spot, indicating that Joe Consumer must be looking long and hard at the more sensible option. Buying and financing a new car is one of the least smart things that you could ever do, talking investments. And I have read that the feel good factor disappears after a number of months. Whereas a life experience lingers for a year and a half, this is just what I have read. So, rather buy the shares. The stock may look cheap, it may struggle in a tough economy and as such we will still avoid it.

Tongaat and Astral both warned of the dire impact of the worst drought in Mzansi for a LONG time, obviously the feeds business of Astral will be impacted, as well as regulations around brining. You know, salt water injected into your birds, and then it is frozen. I met Chris Schutte, the Astral CEO, in passing at the CNBC studios at lunchtime yesterday. I had mentioned that by holding the company you were going to have to roll with volatility over a long period, he is a pretty big guy and shook my hand furiously and said, what volatility? Nice man, I have met him a few times, with a farmers suit he might actually look like the legendary Farmer Brown. Remember, they taste so good, ‘cos they eat so good? That guy.

Tongaat Hulett warned of a lower sugar crop here in South Africa, I don’t necessarily buy the long term story, once all the land is sold, you are owning a sugar company. With the WHO warning of the impact of sugar, surely that is not an industry that you want to be in long term. I have read loads of literature on sugar and it seems that although we are still early stages, the longer term impact will start to be felt with richer consumers. We will also continue to avoid.

Reuters is reporting that the regulators in Nigeria, the Nigerian Communications Commission (NCC) said that the 5.2 billion Dollar fine would stand, the appeals just impact on the payment deadline. We will wait for more news from the company, a client sent me a statement, it went like this: “…. telecommunication will serve as the new cashcow for the country and I’m going to pursue this…..” – Adebayo Shittu, Newly appointed Nigerian communications minister. That sounds, well, not so clever. We will continue to monitor this and advise accordingly.

Lastly, Famous Brands have announced this morning that they have secured a 10 year licence to operate French bakeries brand PAUL. Heard of them before? Not our Paul, who sits next to me, rather a 120 year old family business, with tons of outlets. A lot more than you might imagine. It is nice to see that not all emerging markets are finished, the president of PAUL is quoted in the release as saying: “South Africa is one of the most sophisticated, diverse and promising emerging markets globally. In addition, Famous Brands, specifically, appealed to us as a partner because the Group is Africa’s leading branded foodservice franchisor with an enviable track record and extensive experience of the industry and market.” Great space, all the local listed quick service restaurant groups are doing just fine in this tough economy, Taste and Spur included. Seeing as I have stopped eating pastries, cookies and the like, I shall have to get Michael to taste their food when it arrives.

Over the seas and far away in New York, New York, stocks took off, all the broader indices rallied hard. The broader market S&P 500 ended nearly one and a half percent higher, the Dow Jones industrials added 1.38 percent and the nerds of NASDAQ lagged a little, up 1.15 percent. Marriott announced that they were buying Starwood for a whopping 12.2 billion Dollars, their presence (out of 1722 places to stay) here in South Africa is restricted to Ten Bompas (yes!), the Westin in Cape Town and the Sheraton in Pretoria. I once stayed at the Westin for a friends wedding, it was marvellous. That was a long, long time ago when I used to attend the wedding circuit. Mind you, Michael got married this year and Byron is getting married next year, it is all rather exciting!! Babies are still a way off, I am afraid, in case you ask.


 

Linkfest, lap it up

This is great news for the local economy, both in terms of jobs and the spill over effects from increased demand down the supply chain – BMW to spend R6bn on factory

I have heard rumours of robo advising coming to South Africa soon. Robo advising is where you replace your financial advisor with a computer, you tell it your risk tolerance, time frame and some other generic information. The robo advisor then spits out a portfolio for you, which maths says is the best suited to you over time. Sounds like a good way to keep costs down and emotions out of investing, I’m not convinced that humans have no future in the industry though. Here is the year to date performance – Checking In On The Robo Advisors

Yesterday a client told me they have a high risk tolerance and want to invest mainly in our ‘out there’ ideas. I think they were confusing high risk tolerance with profit incentive, which are two very different things. High risk would mean that your portfolio has the ability to drop 20 – 30 % in a very short space of time and that is not what the client has in mind. Remember everything in investing comes with some form of trade off and normally to do well you have to avoid the land mines instead of consistently hitting the home runs – Regret Minimization

Energy drinks are not great for your health and even worse when consumed in conjunction with alcohol – What slamming an energy drink really does to your body. I was not aware that they have such a big impact in elevating stress hormone levels.


 

Home again, home again, jiggety-jog. Stocks across Asia are really strong, Hong Kong is up over two percent, Shanghai just a little over a percent and Japanese stocks are up one and two-thirds. We continue with local results. Mitch Johnson will no longer strike fear into the hearts of batsmen on the international front, he is throwing the towel in at the age of 34. I am sure that Ryan McLaren is happy to hear this news.


 

Sent to you by Sasha and Michael on behalf of team Vestact.

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