The Hoff goes Shopping

 

To market to market to buy a fat pig. Another record close for The Dow and our All Share, up 0.23% and 0.47% respectively. The S&P 500 and Nasdaq are one or two strong days away from their all time highs too. The big news for Friday was the US jobs data, which was well ahead of expectations. Economists had forecast 180 000 jobs created for the month of July, the number came in at 209 000 and then the June number was revised higher by 9 000 jobs (remember that the published number is revised 3 times over the following months as more data rolls in).

Another noteworthily number in the release is the unemployment figure which improved to 4.3% from 4.4%, at these levels there will be jobs in the economy that businesses struggle to fill. Meaning that if you are unhappy with your current job it is much easier to find another. More importantly though, when businesses need to restructure (to stay strong and relevant) and retrench some of their labour force those workers have a much easier time being reabsorbed into the economy. The labour force participation rate also climbed to 62.9%, with a significant increase from the key working age category 25 – 54 increasing to 78.7%, a post-recession high. Remember that you can’t be considered unemployed if you haven’t recently looked for a job. The number that is starting to matter the most in these jobs numbers is the wage growth number, wages grew 2.5% compared to last year, higher than the 2.4% forecast.

Minutes before the market closed on Friday Steinhoff released two SENS announcements, updating us on the listing of their African assets and telling us that they are in the process of getting enough votes to control Shoprite. The new entity is called STAR (Steinhoff Africa Retail) and should be listed by the end of September. Have a look at the comprehensive list of brands currently owned by Steinhoff, always nice to get a refresher:

    “The African retail brands included in the Listing will comprise Pep in South Africa and the rest of Africa, Ackermans, Speciality division (comprising Dunns, John Craig, Refinery and Shoe City), JD Group (comprising Russells, Bradlows, Rochester, Sleepmasters, Incredible Connection and Hi-Fi Corporation), Steinbuild (comprising Buco, Timbercity, Hardware Warehouse and The Tile House), Poco South Africa and Tekkie Town (the “African Assets”)”

 

The big news though was that Steinhoff have set up a call option structure between themselves, Dr Christo Wiese (autocorrect keeps changing his surname to ‘wise’) and the PIC where STAR (and in turn Steinhoff) will end up with an economic interest of 22.7% and voting rights of over 50% of Shoprite. How does owning 22.7% of Shoprite end up with more than 50% of the voting rights? Due to legacy control structures Dr Wiese has an extra 292 million Deferred Shares, which have no value but have voting rights. How many voting rights? Around 33.7% of the vote, plus his extra 15.9 % of ordinary shares (which thanks to the deferred shares 15.9% translates into only 10.5%of the vote). In total Dr Wiese has just over 44% when it comes to a vote in Shoprite.

Given that Dr Wiese and the PIC in total own 27.04% (15.9% and 11.05% respectively) it would seem that the PIC have only committed part of their shareholding to the structure. The logic from the PIC seems to be that STAR is going to be a big player on the JSE (Steinhoff management forecast, given it’s size that Star will be in the Top 40), so it makes sense to sell some of Shoperite to get a chunky stake in the parent. When the dust settles I estimate that the PIC will have around 4% of Shoprite and 10% of Star. Shoprite is down 2% this morning on the news and Steinhoff are up just under 1%, not major moves.

Assuming that management can stay on top of all the moving parts, I think these companies joining forces is a good thing for shareholders in the long run. After two failed attempts to delist Shoprite are these the first steps in a third attempt?


 

Linkfest, lap it up

One thing, from Paul

The UK has some crazy TV programmes, Bitcoin is like “digital gold” in your sock drawer, the Dutch swapped Manhattan for some sh***y islands in Indonesia, and problems for a gold miner in Tanzania – Blunders – Episode 67


 

Michael’s Musings

Great to see MTN being part of this initiative to bring power to more rural parts of Africa – US solar start-up, MTN target off-grid Africans. This partnership points to MTN’s new focus area of ‘digital’, where it looks like MTN want to be a big player in the fin-tech space on the African continent.

As we have come to understand more and more about our genome scientists have been able to identify faults that lead to diseases. Work has begun to try edit those errors so that in the future we will have less inherited diseases – A highly successful attempt at genetic editing of human embryos has opened the door to eradicating inherited diseases. Exciting times but at some point this will open the door to creating ‘super’ children.

Apple’s cash reserves are so big that we are now comparing it to countries instead of other companies – Apple owns $52.6 billion in US Treasurys – more than many major countries


 

Bright’s Banter

Adidas have found that models and bloggers, not athletes, are the key to selling sportswear to women. This explains why the Adidas brand was up 33% in North America in the second quarter, and the groups revenues were also up 30% for the second quarter year-on-year – Adidas Finds The Magic Formula


 

Home again, home again, jiggety-jog. Our market is flying again this morning, up 0.7%. Big gains from Naspers, up 2.6%, being driven by a 2.9% increase in the Tencent share price. Amazing to see that Tencent is up 70% this year! Naspers only up 45% though. Apart from holding a public holiday the week ahead also has numbers out from two very exciting companies Priceline and Nvidia. Good to see the price of platinum on the up, a couple weeks ago we were in the $800’s now the price just crested $960, much needed for our miners that have very marginal production in the $800’s.


 

Sent to you by Team Vestact.

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