Book Your Next Trip to Profit Town


Market Scorecard

Thanks to a slightly lower inflation read in the US yesterday, markets are less worried about the chance of the Fed increasing the speed of interest rate hikes. That meant higher stock prices and a weaker USD. Apple closed above $190 a share for the first time last night, taking its market cap to around $960 billion. The exact number of shares in issue is changing due to company buy-backs, so we are not sure of the exact share price required. Roughly speaking though we need another 5% move until Apple breaks the $1 trillion milestone.

Yesterday the JSE All-share closed up 0.16%, the Dow closed up 0.80%, the S&P 500 closed up 0.94%, and the Nasdaq closed up 0.89%.

Company Corner


One thing, from Paul

Vestact has held Richemont in local portfolios since 2008, when the Rupert-family controlled companies were re-organised to allow direct access to the luxury goods part of the empire, and to exclude exposure to the British American Tobacco interests.

Richemont initially did very well for us, rising from around R20 per share to around R100 in 2014. Since then it has not done as well, going sideways most of the time. It’s currently trading at R120 per share.

Remember, its principal assets are the Cartier and Van Cleef and Arpels jewellery brands, and wristwatch brands like IWC Schaffhausen, Jaeger-LeCoultre, Officine Panerai and Piaget.

Its the sixth largest corporation by market capitalisation in the Swiss Market Index and the second-largest luxury goods company in the world after LVMH.

In recent years, the watch business has suffered a bit, due to the emergence of smartwatches such as the Apple Watch. The jewellery operations have done really well, especially in Asia.

In an interesting recent move, Richemont has taken full control of online luxury retailer Yoox Net-a-Porter. In January they offered up to 2.8 billion euros ($3.32 billion) to buy out the minority shareholders. It will now be delisted from the Italian bourse.

The Yoox part of the business was founded by Federico Marchetti, in Bologna in 2000. Their concept is to buy up overstocked or unsold items from previous seasons from renowned fashion houses like Dolce & Gabbana, Diesel, Gucci and Armani. The Net-a-Porter part was founded by Natalie Massenet, in London at the same time. They also run end-to-end e-commerce platforms for independent fashion and accessory brands.

Under Richemont’s control, we expect the platform to be expanded to undertake all sorts of luxury goods retail products, promotion and distribution. Including, of course, their jewellery and watch brands. Seems like a smart move!


Byron’s Beats

Booking Holdings breached quarterly travel bookings of $25 billion for the first time in its history, an increase of 21% from this time a year ago. This amounted to revenues of $2.9 billion for the 1st quarter of 2018 and gross profits of $2.3 billion, an increase of 25% from the prior year. Equating to $12.34 a share, smashing expectations of $10.

Unfortunately, guidance for next quarter was less than expected and the share fell 7% after hours. Don’t feel too bad, even after the drop the company is still up 17% this year.

The business is going through a bit of a transition. They are focusing their marketing (their biggest expense) on smaller niche hotels. The big hotel groups have their own mass booking systems, and although they still list on Booking’s platforms, they incentivise clients to go directly through their own systems. This is why Booking prefers to operate in Europe where the market is dominated by niche hotels.

The only problem here is that the smaller hotels require higher advertising spend per room. Booking is also spending big on advertising their own platform brands, mostly The good thing about being an online business like this is that you can track peoples spending habits and build a huge amount of key data. Booking is steering their business towards these trends.

Our view on the general trend is that travel demand will increase fast and Booking is perfectly positioned to benefit from this. Most of the push in demand will come from online savvy, younger people who are curious about the world. I am sure most of that curiosity is fuelled by the internet itself, people seeing weird and wonderful places on Instagram and Facebook. Then once they are there, you can show off your amazing life on these exact platforms, making more people want to travel. You get my point.

The company is expected to make $88 a share for 2018. Trading at $2 030 a share, that puts the company on a multiple of 23 times. With net cash of $5bn and growth of 20% we think this is a compelling investment in a very exciting theme.

Our 10c Worth


Michael’s Musings

I always enjoy blog posts from Bill Gates. He is able to give a unique perspective given his background in business, now running a non-profit, coupled with his access to interesting people. His latest post looks at the web page Dollar Street, where families are depicted on a virtual street based on their monthly income.

Going through the webpage, you get a feel for the priorities of people globally; what priorities are shared and what aren’t. If you have the time enjoy browsing the site.

Here are the seven insights that Gate’s picked up from visiting the site – Dollar Street.


Bright’s Banter

Mobile Money or MoMo is without a doubt the next frontier for our local telecom companies. This service allows large unbanked populations to participate in the economy in a meaningful way by enabling them to perform transactions such as sending cash to one another, paying for goods and services, converting different currencies, receiving/paying salaries, saving etc.

In the article below, Nick Hedley goes deep into the topic of Mobile Money and how MTN and Vodacom are playing a role in increasing economic participation across Africa.

We are proud shareholders of both MTN and Vodacom in our client portfolios.

The Mobile Money Story

Linkfest, Lap it up

One point that I make when talking about moving to environmentally friendly energy production, is that you have to be wealthy first – California just became the first state to require solar panels on new homes. California estimates that each house will have to pay around $10 000 more upfront; this will hurt in the short-term but will be great for homeowners long-term. As more people use these technologies, their costs will come down and ‘green’ technology will become the norm.

Here is a humorous blog piece about how we all suffer from cognitive biases, and if we just accept that people can be stupid (ourselves included), than we will probably live happier lives – Koping With Stupiderity.

Vestact in the Media

This week Blunders turns 100. Tune in to watch Paul chatting about: Fleeing car thieves drive into Pollsmoor prison; Trump quits Iran deal; Zimbabwe optimistic but running out of beer; and bank CEO arrested for stealing money to buy scratch-and-win tickets.Blunders: Episode 100

Signing off

Tencent is higher again this morning, so expect another good day for Naspers. Yesterday I read a note from Goldman Sachs about Naspers, based on their values for Naspers underlying assets, the stock currently trades at a 43% discount to NAV. Crazy, just crazy! As the US market earning season slows, the South African one gets going next week. Stay tuned for all the local action.

Sent to you by Team Vestact.

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