Vestact Moves to Rosebank

 

Market Scorecard


As expected, the SARB left interest rates on hold yesterday. What was not expected, not by me (Michael) at least, was how close they came to lowering rates. Of the MPC members, three voted to keep things on hold and two voted to drop rates. I thought they made a mistake by raising interest rates last year, but agree with their approach of taking caution in lowering it again. The hike was purely because the SARB was worried about what other central banks might do this year. Chopping and changing rates is not good for an economy.

Assuming that oil doesn’t shoot higher or the Rand fall out of bed, we have a good chance of an interest rate drop in coming months. Here is the current forecast on inflation: “Headline inflation is expected to average 4.5% in 2019 (down from 4.8%), increasing to 5.1% in 2020 (down from 5.3%) and moderating to 4.6% in 2021 (down from 4.7%).”

The SARB has made it clear, their target for inflation is between 3% and 6%, which effectively means that their inflation goal is 4.5%. The above forecast is perfectly aligned with this goal, so they had good reason not to drop rates. As we have said before though, if the Rand strengthens substantially then inflation will drop further.

Yesterday the JSE All-share closed down 1.74%, the S&P 500 closed up 1.19%, and the Nasdaq closed up 1.58%.

Company Corner


 

Bright’s Banter

Mediclinic reported its full-year numbers yesterday where it said earnings per share fell 10%, in line with “market expectations”. Thanks to a big change in regulation in Switzerland that affected the Hirslanden business which led to write-downs of GBP241 million. Total write-downs for the year were GBP405 million.

Part of the GBP241 write-down included a non-cash impairment charge on property, plant, equipment and vehicles of GBP168 million and intellectual property of GBP55 million. The other non-cash write-down of GBP164 million came from the Spire business in the UK.

The healthcare group reported revenues of GBP2.9 billion, an increase of 2% year-on-year. However, earnings before all the accounting non-cash items fell to GBP493 million from GBP 515 million year-on-year, in line with market expectations. The Swiss business still contributes 47% of group revenues.

The Swiss regulatory pains include what the company calls “tariff reductions on outpatients and a less favourable insurance mix”. These regulations have compromised Mediclinic’s margins, slipping from 18.3% to 16% in the current reporting period.

In the past two years, Mediclinic has written down a total of GBP1.2 billion due to a combination of badly timed acquisition in the UK and a shocking regulatory environment in Switzerland. Regulation is a two-edged sword that creates a barrier to entry but also punishes existing players in some cases as we’ve seen above.

Mediclinic is down 69.6% in three years but is showing signs of a recovery. A single trip to the doctor will not be enough to heal this company, so start booking some big operations at your nearest Mediclinic!

Our 10c Worth


 

One thing, from Paul

Vestact has moved into its new office on the 6th floor in the Rosebank Firestation. This is a new sectional title office building which was developed on top of the old heritage municipal fire station, which still operates. Our address is Suite 608, 16 Baker Street, at the corner with Bath Avenue. Our windows look out to the east. Our telephone number is unchanged, 078-533-1063.

Here are some photos of us, hard at work, taken by photographer Neal Markham. As you can see, there is a vertical garden (living plant wall) at the back. The plants map out seven year share charts, of companies including Amazon and Tesla. This is the kind of fit out that you do when you own the place! We plan to be here for many, many years.


 

Byron’s Beats

In our message we often celebrate technology and innovation. A large part of our focus is on the listed space in the US, so we tend to miss a lot of local up and comers. Every now and then I will be using Beats to showcase some local entrepreneurial talent.

The first company I will showcase is called Aerobotics. This company uses drone and satellite technology to pinpoint issues on farms quicker than ever before. The sooner you pick up a problem, the sooner you can fix it. The technology has the ability to pick up a sick tree or orchard before it is too late to treat. Not only does this make farming so much more efficient, but the insurers are also very excited to see farmers using preventative technologies. Just like with healthcare, preventing is better than curing. When the insurers are happy, premiums come down.

Last week the company won the President Macron Africa Award at VivaTech in Paris and is making strides around the globe. Especially in the US which has a huge farming industry hungry for these types of innovations. Once this company builds up a large database of how orchards and forestries behave and react to certain treatments, their IP will become even more valuable.

This 2018 Year in review will tell you a lot about where they have come from and where they are going. I wish these guys all the best!


 

Michael’s Musings

This Bloomberg piece was doing the rounds of Twitter yesterday – The Wealth Detective Who Finds the Hidden Money of the Super Rich. There are some interesting estimates around global wealth.

Gabriel Zucman, the economist spoken about in the article, is one of the leading thinkers around wealth inequality. One of the core messages behind his work is that inequality will lead to bad things. His warning is that if the wealth gap persists, at some point the more marginalised in society will rise up and overthrow the current system. Either by voting for extreme left or right, or through actual revolt. If that happens, everyone loses out.

I don’t agree with all of the assumptions in the piece, but it did make for interesting reading. The article finished off with the below sentence, based on the assumption that Howard Schultz (founder of Starbucks) doesn’t work as hard as Beyonce.

“Let’s have Howard Schultz explain to us why he should be worth more than Beyonce.”

 

Linkfest, Lap it up


This seems like a world first. The truck is limited to a single route and can only go 5km/h but every step helps in creating the reality of driverless vehicles – Driverless electric truck starts deliveries on Swedish public road

Not having a global recession in over a decade has assisted in unemployment rates globally. Look at what political instability has done to Brazil.

Infographic: Unemployment Down Across the World's Largest Economies | Statista You will find more infographics at Statista

Vestact Out and About


This week on Blunders: Trade War Game of Phones; Theresa May to exit; Mexico City “burner” phones; and Modi’s submarine is leaking – Blunders: Episode 142.

Signing off


Theresa May is expected to give a timeline for her departure today; her days are numbered. Boris Johnson is the favourite to replace her, but who knows what will happen when it comes to politics. If Boris does become PM, then the likelihood of a hard Brexit increases, and you can probably expect the Pound to weaken further from here. This evening the S&P is expected to give their latest review of South African debt. The All-share is higher this morning.

Sent to you by Team Vestact.

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