It’s Raining Content


Market Scorecard

Apple announced yesterday that due to coronavirus disruptions, they will miss their quarterly guidance forecasts. The disruption is felt through slower production and lower sales. This warning from Apple seems to have spooked global markets, as Asian markets are lower this morning coupled with lower US futures. Locally, trading statements from Bidcorp and Discovery disappointed traders, pushing both their share prices lower. The companies report later this week, so we will give you an in-depth look into their numbers in the coming days.

Yesterday the JSE All-share closed up 0.56% and US markets were closed.

Our 10c Worth


One thing, from Paul

Most Vestact clients with South African accounts own Multichoice. This is because almost everyone had Naspers shares, and the former was unbundled from the latter.

Yesterday MultiChoice wrote to its DStv customers in South Africa, letting them know that it plans to increase bouquet prices on 1 April 2020. The increases have been kept well below inflation as the broadcaster struggles with weak consumer spending and some competition from other streaming media services.

The price of DStv Premium, MultiChoice’s top-end bouquet, will rise from R809 to R819 per month, an increase of just 1.2%. I have said this many times before, but I’ll say it again. This product is a bargain, especially for sports lovers. Here’s a picture bonus for Liverpool fans.

The price of the mass-market DStv Compact bouquet remains unchanged at R399, while Compact Plus rises by 1.9% to R529 per month.

DStv is more than just a satellite, decoder and TV-set service. I’ve become a frequent user of DStv Now on my other devices. I also access Showmax and Box Office from time to time. I’m a Netflix subscriber too of course. I haven’t signed up for Disney Plus yet, because I’m not under 12 (sorry Star Wars fans).

We advise clients in South Africa to hold on to their MultiChoice shares. The stock has softened to around R105 per share in 2020, but the company still has a market capitalisation of R46 billion. If the local economy picks up a bit it will do even better. It also has a growing business in Africa outside of South Africa, where its competition is minimal. It is well run and is set to become a solid dividend payer in the years ahead.


Byron’s Beats

The current market does not seem to like investment holding companies. Stocks like Remgro, PSG, Naspers and Long 4 Life trade at big discounts to their NAV. This is not just a local issue. Softbank, Berkshire Hathaway and Prosus are also unloved, judging by their share prices to NAV.

As an investor, is this an opportunity to unlock value or is it something to avoid? On the local front I think a big part of the discount is the depressed feeling towards the JSE. From a global perspective, I think the discounts come from access to finance.

Historically investment holding companies offered their subsidiary companies cheap access to funds. That was one of their main advantages. These days, with low interest rates, access to cheap finance is a lot easier to access.

However, companies like Amazon, Apple, Alphabet, Visa, Tencent and Facebook are slowly becoming investment holding companies themselves. They have so much cash that they cannot help themselves but to buy stakes in already established businesses. Even though the model is unloved, many successful companies are going that route.

This is not a lecture or advice. Just an observation. Personally, I see these discounts as good buying opportunities for when the market changes its mood or when the value is unlocked by management.


Michael’s Musings

This headline caught my eye yesterday – There Were 646 152 Things to Watch on TV Last Year. The research was done by Nielsen and included things like sport, news, movies and series. I wonder how many hours it would take you to watch all of the content available?

The amount on offer shows why it is important to have some smart technology at play to assist you in selecting what to watch. Even though there is all the choice out there, if it is not easy to find something you like, you won’t part with cash to pay for a streaming service.

One of the reasons that Netflix has been so successful is because they have some of the best AI technology around. Their AI is working hard in the background finding unique shows for you. If you have watched content on Showmax before, you will know the struggle of finding the shows that appeal to you. Admittedly, their user experience has improved.

In years to come, I think there will be content aggregators, with some potent AI technology in the background helping to find the shows for you. Even at the moment, swapping between Netflix, Amazon Prime and Showmax is a mission. I would much rather have everything in one place. Maybe Apple can play a more prominent role in this space?


Bright’s Banter

I’ve always wondered how the two e-commerce giants Alibaba and Amazon would look on a side-by-side comparison. Alibaba released results last week Thursday which gives us a fresh set of numbers to compare to those of Amazon’s. Alibaba’s revenues were up 38% to $23.19 billion, and net profit surged 62% to $7.2 billion.

Alibaba’s cloud revenues grew by a staggering 62% to $1.5 billion for the quarter, a first for the company. The full year cloud revenues top $6 billion, making it the fourth-biggest cloud infrastructure company in the world.

Quarterly, AWS is a $10 billion business, Google Cloud is at $2.5 billion, and Microsoft said software and cloud came in at $12.5 billion. The infographic below compares Amazon and Alibaba different divisions and how they fare against each other.

Infographic: China's Amazon Is Not Quite Amazon Yet | Statista You will find more infographics at Statista

Linkfest, Lap it up

Here is another reason to not use cash. Long Visa! – China is literally cleaning its money to stop the spread of coronavirus.

New life is returning to the areas in Australia burnt by the fires – Photos show how life is returning to Australian forests that were devastated by wildfires.

Signing off

Asian markets are red this morning, including Tencent. The JSE All-share is starting the day lower. There is limited economic data out today. The Rand is also weaker as Moody’s lowered their forecast of South African GDP growth, it is currently trading at $/R15.02.

Sent to you by Team Vestact.

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