Happily Ever Twitter

“Another big story still doing the rounds is Twitter, we suggested that there may be someone else, and it emerges that Disney is rumoured to be looking at the 140 character news stream. More than a cursory glance. Trolls and princesses? The trolls of course are from Twitter, Disney has more happily ever afters than the All Blacks.”


 

To market to market to buy a fat pig It was tough to figure out why the markets actually fell yesterday. Was it the pending OPEC non scheduled meeting, which could, or could not reveal some production cuts? Was it central bank fatigue post the afterglow from last week? Was it the fact that earnings in the US are looming and not too much is expected? Earnings are expected to turn positive in the fourth quarter, after six successive quarters of earnings being trimmed.

Was it worries over European banks? Most especially Deutsche Bank? German Chancellor Angela Merkel is in a tough spot on this one, she has told other banks in Southern Europe that the state should impose losses on the bond holders, if governments step in to capitalise it at any stage. The bank suggested, even in the face of a US department of Justice settlement that could be in the region of 14 billion Dollars, that the bank was well capitalised, questions over their capital adequacy ratios were pure speculation. That was according to a bank spokesperson.

The Deutsche Bank stock price was the lowest ever. Like ever. The example I made was that our newest colleague (nearly a year in December) is Bright, he turned 24 this year, the bank has been listed that long. When Bright was only interested in pooping and food and not sleeping too much, his parents would have seen the Deutsche Bank share price the same as it is today. Amazing.

And if that wasn’t enough for banks, Wells Fargo, supposedly the most squeaky clean of them all has seen employees file a class action suit against the Wagon and Horse bank. The fellow sitting shotgun (the real shotgun) must be wondering if together they really do go far. The Wells payoff line “Together we’ll go far”. Too far with ghost accounts, too far with aggressive sales techniques. Just too much, the stock price has been hammered accordingly, the stock trades on a historic 11x multiple with a 3.39 percent yield as of last evening.

Banks. What a wonderful business when it works well. The public have blamed the whole financial crisis on bankers Not the lawmakers who were supposedly supposed to be in charge of the parameters, not the regulators who were supposed to be overseers, and definitely not themselves for excessive greed. It is always someone else. It is a far easier target, the excesses in the system were far bigger and more visible in bankers bonuses. And whilst all sorts of programs kept the financial system afloat and capitalised, and more importantly instilled confidence overall, the excesses of the past have to a large extent disappeared. Or so it seems. I wonder what Warren Buffett and Berkshire think of all of this, they are after all the biggest shareholders. It ain’t going to be pretty.

After all was said and done, stocks had sunk to session lows, both the Dow and the nerds of NASDAQ lost 0.91 percent, the broader market S&P sank 0.86 percent. Another big story still doing the rounds is Twitter, we suggested that there may be someone else, and it emerges that Disney is rumoured to be looking at the 140 character news stream. More than a cursory glance. Trolls and princesses? The trolls of course are from Twitter, Disney has more happily ever afters than the All Blacks. Unlikely really methinks. Salesforce for realsies? The chattering classes seem to think that either Twitter is a good fit for Salesforce, or it is a dumb idea. It is likely to be a highly dilutive transaction as Twitter still grapples with making any real money, the channels may be perfect in the future. Remember that Disney owns the biggest stake in ESPN, if users are likely to watch via Twitter (second screen), then it makes sense. Until then, I actually don’t know.

As for the high brow presidential debate, there is little to say about that. Politico has a good piece, of course for right wingers the media is always unfair: 5 takeaways from the first presidential debate. The same is true for the left wing, who accuse the media of being too friendly with business. The media cannot win, their job is to get you and I the best angle on what they see. The property buffoon owner suggested that she hasn’t had a very good track record. She really seems a whole lot more equipped for the job. If you are tired of this already, and there are two more debates, then I am afraid you will have to watch this gem: Hillary Clinton sits down with Zach Galifianakis for her most memorable interview yet. It may well be Zach Galifianakis’ best work.

Back to local, where things were not so lekker for equity markets after a successful heritage day weekend. Stocks in Jozi, Jozi sank a percent by the time the closing bell rang. It was scratchy across the market and looked like a deep red-spread. The Rand continues to firm up in general Euro, Pound and Dollar weakness, against some of the other currencies across the globe. That of course helps the Rand hedges diddly squat. There were a few stocks in the green, RMI Holdings, AB InBev and Richemont. Deep in the red were those with a European and Breeteeesh flavour, Aspen, Brait, Mediclinic losses were joined by AngloGold Ashanti, Capitec and Anglo American itself.


 

Company corner

Mediclinic has released a five month trading update this morning. The first half of the year ends on the 30th of September, that is Friday, right? The results themselves are expected to be released on the 10th of November. Is this a case of simply taking the five month revenues and presuming that the last month will be similar? It is a bit weird to have a five month trading update, I know that it is something that Richemont does too.

Anyhows, Mediclinic point out that in their first market, South Africa, they are happy with where they are, in spite of increased competition and a weak macro environment. I suppose there are certain procedures that you can and will put off if the home fires on the finances front are not burning that strong. Margins are expected to shrink a little as a result of higher pharma prices and improvement in clinical personal (meaning more people) and paying their staff better. The last thing you want as a patient is having a grumpy nurse or admin person when you are there for something that may seem routine to them, it isn’t to you.

Let us take the sales numbers and translate them back to Great British Pounds, for ease of use and looking at one currency. ZA sales are 6.054 billion Rand, or 343.88 million Pounds. Switzerland sales are 677 million Swiss Francs, or 536.87 million Pounds. Middle East sales were 1.315 billion UAE Dirhams, or 275.56 million Pounds. Total sales are then 1.15731 billion Great British Pounds for the first five months of the year, if you try and figure out the half year, you are likely to get to a number of 1.388 billion Pounds (1.8 billion Dollars). Or global sales of around 24.425 billion Rand for a half, nearly 50 billion Rand annualised.

Remember that Mediclinic also owns around 29.9 percent of Spire Healthcare, that company delivered annual revenues of 884.8 million Pounds. If you take a half year, and then multiple it by 29.9 percent, and then presume that there is an around 4 odd percent rise, you get to around 114.5 million pounds. That is for the five month period, comparable to these numbers of course. The split on a revenue basis is 42.21 percent Switzerland, 27.04 percent South Africa, 21.74 percent the UAE and 9.01 percent the UK. It looks like a business that will trend to higher sales in the UK, I am sure that they would want that in time.

The outlook, and I am sure that will be again fleshed out at the results in the first half of November, suggests stability in Switzerland with modest growth, doing OK here in Southern Africa, and in the UAE expectations are low to mid digit sales growth with EBITDA margins to be around the mid to high teens (15-18 I guess). The second half, as a result of the integration in the UAE and opening of new facilities, is expected to yield more favourable results. Thats is it, more in November, it all looks inline and reasonable to me.

The Mediclinic share price has been under the pump lately. In part the pound has been pounded. Which should mean higher revenues from their overseas business, in particular in Switzerland where the EBIDTA margins are better. Perhaps Mediclinic are also looking to take a bigger stake in Spire, they would have to raise more money in the UK, which would make the company a riskier proposition. The UK price is down 10.53 percent. In Rands it is worse, the stronger Rand has exacerbated the losses in the share price. We maintain our buy, in what is a quality business with great growth aspirations. The weak share price definitely is a big opportunity.


 

Linkfest, lap it up

Along with the likes of the art market collectable car prices have sky rocketed recently. The trend seems to be slowing though – The Collectible Car Market Is Getting the Air Kicked Out of its Tires. From a South African perspective, these prices are set in Dollars, Euro’s and Pounds. So the recent Rand strength has meant that in Rand terms collectable cars are worth less.

AI is here, the next step is to integrate it more into human life. Creativity is still firmly a human trait, AI is rather good at analysing creativity and creating a good replica of what appears to be creativity – The first pop song ever written by artificial intelligence is pretty good, actually

I don’t see this book becoming a best seller. It seems that the only people to buy it are those who want to own the world’s biggest book – The Season’s Biggest Novel Has 1.3 Million Words and Outweighs a Bowling Ball. The book is not released in electronic format so reading this in bed or on the beach is out.


 

Home again, home again, jiggety-jog. Stocks are likely to be higher here today, US futures are up and markets across Europe are also in the green. I cannot wait for earnings season, that is more exciting than any central bank meeting of any sort. Or speech from whomever. Or presidential debate.


 

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

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