The Hoff is Back

” Revenues of 13 billion Euros represent growth of 33 percent, operating profit clocked 1.474 billion Euros, up 32 percent when compared to the same period last year. Operating margins were a little softer, down to 11.3 percent.”


 

To market to market to buy a fat pig Wow, that was another whopping session over the seas and far away. Far away from here. Stocks in New York, New York rose to another all time high, at least for the broader market and blue chips. The Dow Industrial Average tacked on nearly 300 points, just over a percent and a half to 19549 points. The broader market S&P 500 closed one and one-third of a percent better on the day, 2241 is the new high. The nerds of NASDAQ closed just below the all time high, up 1.14 percent to 5393. What is driving the market to new highs? It was pretty much an entire broad based rally, from financials to banks, industrials to cyclical and non-cyclical consumer goods. Regulatory rollbacks and stimulus are the reasons been given for Mr. Market rallying to these new all time highs.

The only sector losing out was Healthcare and more specifically, the drug manufacturers. JNJ, Novartis, Pfizer, Merck and Amgen all sank. Why? President elect Donald Trump, at the same time as being voted Time’s number 1 of the year, was quoted as saying he was going to bring down drug prices. Whilst the President elect is fond of words like loser, stupid and weak (Donald Trump’s 20 Most Frequently Used Words), he also likes smart, tough and dangerous. Amazing and huge are also in there. As is tremendous and terrific. So, take your pick as to what this means for the sector, remember that the tweet of Hillary also shook things up. Talking of tweets of Hillary, she last tweeted on the 26th of November on Thanksgiving. Since then, things have been …… quiet. Not so much for the tweeting Trump.

Back home where local was finally lekker, stocks ramped over a percent on the day, again it was a pretty broad based rally. Apart from the small cap stocks. A few stocks were dragged back by the stronger local currency, the price conversion from Pounds back to Rands was not favourable for the share prices of Investec, BATS or even Hammerson. In the #winning column was Steinhoff, up nine and a half percent on the day. Still, notwithstanding the heroics of yesterday, the stock is down 12 percent over the last 12 months and more importantly (for the closer watchers) down nearly 18 percent in the last 3 months. We will cover these results below.


 

Company corner

The Hoff is back in town, sans red budgie smuggler and lifesaving plastic device thingie. No automated car either that speaks into a wearable device (come to think of it, Knight Rider was way ahead of it’s time). Talking watches (Siri and her users) and self driving cars, those exist today. Turbo boost = ludicrous mode. I told you, that Hoff is a legend. Actually, Glen A. Larson, who also created Buck Rogers and Magnum P.I. is the legend.

Moving swiftly along to my favourite Hoff – you guessed it, Steinhoff. The company reported numbers with a changed year end to June yesterday. The dividend, the interim dividend actually filtered through at the beginning of the week, it is unusual for that to happen, it just coincides with the change in reporting periods.

OK, so what are the highlights here? I listened into the conference call for a while, the internet wobbled and bobbled and buffering ensued. I managed to get the first bit, the most important bits which had an associated Powerpoint presentation for the results to 12 months. Revenues of 13 billion Euros represent growth of 33 percent, operating profit clocked 1.474 billion Euros, up 32 percent when compared to the same period last year. Operating margins were a little softer, down to 11.3 percent.

A couple of useful slides, first the segmental revenues and profits. General merchandise is clothing and footwear, as well as household goods and personal accessories. It is also cellular products and financial services. The much bigger household goods segment is furniture, appliances, consumer electronics, DIY and building materials, as well as some household goods and home accessories. Lastly, automotive is so small, it is really a rounding error when it comes to the overall group profits. Vehicles, parts and rentals.

And then of course, the main reason why the company sought a European listing, the geographical breakdown of revenues and profits.

Of course, recently there are loads of moving parts and recent transactions include that of Mattress Firm – Steinhoff moving into the USA and Poundland in the UK. Tekkie Town here in South Africa and Fantastic Furniture in Australia – Steinhoff buying Fantastic Furniture in Australia. And the company plans to extend their store presence in Eastern Europe in a big way, planning to open another 1000 odd stores, doubling the base over the next half a decade. That would take them from a standing start at the turn of the century to 2 thousand stores in Eastern Europe in 2 decades, no mean feat.

Eastern Europe is the focus, the chief Markus Jooste suggested that they would not be looking at South America. I should hope so, with that type of growth, you would need to be on point to execute that type of strategy. I back them. I back them as a result of South Africa’s finest retail specialist, Christo Wiese who has thrown his lot in with Markus Jooste. Just recently – Billionaire Wiese Invests $1.8 Billion More in Steinhoff.

We continue to recommend what is a very hard charging management team, implementing a global titan of tomorrow. At these levels we continue to accumulate the stock for those who are underweight and continue to recommend the company as a buy.


 

Linkfest, lap it up

I did this calculation for myself at the beginning of the year, owning a car worked out to be the same cost as taking an Uber to and from work each day. Depending on what car you drive, it works out cheaper to take Uber like these calculations show – Better to own a car or to simply Uber?.

When looking at inflation numbers from different sectors education is one of the prices increasing the fastest, this is due to the need for knowledge based workers. Due to the high cost of gaining this knowledge, graduates are expecting a high paying job on the other side of the program. Reality is somewhat different – Want a Job in Silicon Valley? Keep Away From Coding Schools. Another example is paying $30 000 for a culinary diploma, to then get an entry level job in a kitchen earning $12 an hour.

Great to see private individuals using their own money and time to make a pronounced impact on people’s lives- These 7 People Just Won $1.1 Million For Being Kind.


 

Home again, home again, jiggety-jog. Stocks across Asia are up a lot. Some are, some are not actually. Shanghai is down. I saw an article suggest that Hong Kong Chinese H shares (the Hong Kong listed ADRs of companies listed primarily in Shanghai) that said it was the cheapest in the world. H shares that is. It looks like many local stocks are the same, relative to their historic multiples. We expect a better start to the day.


 

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

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