It was a busy day for those keeping an eye on the stock exchange news service (SENS) today. Having a look at the markets in the CNBC studio with Alec, was Izan de Bruin the CEO of Xenium Financial Managers. They have a look at the day’s newsmakers and movers, which have been focused on the mining sector, with Anglo American plc releasing its anticipated half year financial results. As well as Lonmin announcing that it expects to be back to 80% of its production output by September after being affected by the 5 month long platinum strike. Telkom is also on the radar after it released another cautionary announcement regarding its negotiations with MTN. Izan also discusses Richemont, as the biggest mover on the exchange, at the time of the interview it had lost 2% on its share price. Peruse this piece for all of the insights, analysis and highlights. – LF
ALEC HOGG: We’ll unpack it a little bit later. Meanwhile, the minority union NUWASA has accepted the wage deal principle. The Rand held steady against the Dollar with international observers, I suppose, taking a ‘wait and see’ attitude to see if the striking metalworkers do accept the wage offer and return.
In company results, Anglo American reported a ten percent drop in interim group underlying profit. The company also saw cash costs down two percent and higher volumes achieved across most of its portfolios. Anglo has entered into an agreement to sell half of its stake in Lefarge Tarmac to Lefarge for $1.5bn.
Staying with the mining sector, Lonmin says that it expects to return to 80 percent of normal production by the end of its financial year. This, after the company was hit hard, as were the others, by the five-month long platinum strike.
Finally, the Australian Foreign Investment Revenue Board (quite a mouthful) has given Woolworths approval for its takeover offer for the remaining shares in Country Road. It’s not surprising because it’s now managed to get Solomon Lew’s shares, the man who has been derailing the potential takeover there – or the delisting there – and at the moment, Woolworths has 99.8 percent of the equity in Country Road. Thereafter, it becomes just a formality.
Well, let’s take a quick look at how the markets are trading this morning.
Well, let’s get a more in-depth view of how the markets are trading today. Izan de Bruin, the CEO of Xenium Financial Managers. What does Xenium mean?
IZAN DE BRUIN: It actually means a present – a gift – and it’s a very specific present. I picked it up in a fancy, old Latin dictionary. It’s a present or a gift for a foreigner or a stranger, or somebody very special that you give that gift to.
ALEC HOGG: Very nice – so it’s Latin.
IZAN DE BRUIN: Yes.
ALEC HOGG: And it’s an X.
IZAN DE BRUIN: Yes, with an X.
ALEC HOGG: It’s a nice name. I often like asking people where they get their names from, because it gives you an indication of whether they read or not. Clearly, you do.
IZAN DE BRUIN: A little bit, yes.
ALEC HOGG: Do you read a lot?
IZAN DE BRUIN: I actually don’t read a lot of novels, but when it comes to market-related etcetera, of course I do.
ALEC HOGG: Have you read the SENS reports on Anglo American and Lonmim?
IZAN DE BRUIN: I glanced at them briefly this morning.
ALEC HOGG: Glanced…
IZAN DE BRUIN: Yes, when you’re trading, you’re busy. There aren’t a hell of a lot of new things. Some of it is to be expected, so we do have a quick look at it.
ALEC HOGG: Tell me about De Beers. How did they do in the half-year results?
IZAN DE BRUIN: If I remember correctly…
ALEC HOGG: You see. Had you read it properly…?
IZAN DE BRUIN: I didn’t look at it properly, but I would expect that they would be up slightly.
ALEC HOGG: Generally, though, the view of the market after those numbers…
IZAN DE BRUIN: Yes, the market is saying that’s what we expected. We know that the negativity should have been there, specifically due to Amplats and the negativities there. I think the market is saying it’s okay. I think the share price has gotten a little bit ahead of this for now, but with all the talks happening – selling off some assets and a bit of restructuring – it’s fair at this price.
ALEC HOGG: What is the Cutifani factor in this? How much premium would you say is in Anglo on anticipation of what Mark will do to the business?
IZAN DE BRUIN: I think it is pretty high because having been in the corporation for a long time with Anglo Gold and now moving into this seat; I think it makes a big difference. I think he’s closer to the whole operation and it definitely makes a big difference, I believe.
ALEC HOGG: South Africa’s best miner, by a country…well, I don’t know about a country mile, but certainly, Neal Froneman would be up there with them as well. Are there any others you could put in that league?
IZAN DE BRUIN: Those two are definitely in the top league. At this stage, I wouldn’t say the other guys are quite the same.
ALEC HOGG: Lonmin? Today’s numbers…
IZAN DE BRUIN: Yes, the numbers aren’t good – being expected… I’m a bit concerned that they’re only going to get to 80 percent by the financial year-end. I thought they’d be a little bit quicker to get to full production and now they’re only going to get to 80.
ALEC HOGG: Come on, Izan. Be honest. You know mining, goodness me. You close those stopes…you don’t just open them.
IZAN DE BRUIN: I know. It’s not only that. As we said…I think I was on Google on the day. It was okay. It’s all going again. I said the first thing they’ll go to is the medicals first, then there’s this, and then there’s that. There’s safety and security etcetera, and then to get the cog rolling properly again…it all takes a long time and so it’s to be expected. Eighty is a little bit more, but it’s okay. We understand.
ALEC HOGG: It used to be such a well-managed operation – Brad Mills….do you remember – when he ran Lonmin. He kind of turned it around and it seemed to have lost its way. As you say, if it takes so long to get back into full production, I guess management trying their best to… We can only really look at them maybe next year and the year thereafter.
IZAN DE BRUIN: Yes, we can because those kinds of problems can exist. However, from the very negative that we’ve seen, even an 80 percent is a huge improvement over the last six months. The other side of the coin is…
ALEC HOGG: It’s from zero to one…infinity, isn’t it?
IZAN DE BRUIN: Yes, that’s the point.
ALEC HOGG: Okay, well tell me about Capitec’s repurchase of some of its Pref shares. Is that to be expected of a company, which I suppose is doing quite well, and just retire some debt – not a big thing?
IZAN DE BRUIN: Yes, of course they are. In the total group, they are raising a bit of money here, a bit of money there, and they’re doing a bit of restructuring. Jannie seems to be a bit busy down in Stellenbosch currently, but specifically, the Capitec one…to repurchase it earlier; you do that when the rates are great. It therefore depends on what sort of rates you put sold them at initially, and what repurchase you got now. With interest rates currently low and expecting to go up as we’ve seen with the slight little increase there, that’s often when you start making those changes.
ALEC HOGG: Restructuring your position. The Telkom and MTN cautionary statement renewal: that’s quite interesting. I know they’ve had a little bit of business on the side, but now they’re talking about expanding their cooperation.
IZAN DE BRUIN: Yes, which you can expect on the one hand because we know that the opposition is closer to Neotel, so they have to get closer. In addition, I think there’s a lot of scope to do that. I think that MTN, working together with that on the fixed line section there…they could make new business by doing that. It could be a synergistic thing and I think that would be rather positive. I thought you were going to say something else about Telkom, something about the Telkom CEO and stuff happening there.
ALEC HOGG: The dream team…
IZAN DE BRUIN: Yes.
ALEC HOGG: Going the wrong way…the right way… Talk to me.
IZAN DE BRUIN: There was an issue about the CEO this morning, if I’m not mistaken, about things on cars or something.
ALEC HOGG: I missed that – car cloning.
IZAN DE BRUIN: It’s that one – yes.
ALEC HOGG: Yes, I missed it. He’s a good guy. There are many ways to burn this.
IZAN DE BRUIN: As long as he runs a good business, that’s a good thing.
ALEC HOGG: And I think shareholders are saying ‘please, we’ve had enough nonsense there with [inaudible 0:07:42.3] etcetera. Just let the guys get on with it’.  What is interesting is that government-related businesses…there’s so much politics and infighting. I guess you put cadres into positions and they’re cadres. They’re politicians. They want to…
IZAN DE BRUIN: It’s not the same corporate structure that we have in the corporate world where we know who’s going to be next, you know what the lines are going to be, and there’s a fixed structure out there in that. When it comes to government, there are many changes and that often causes a bit if upset because ‘who’s the new guy’ and then the structure below the new guy also has to change and it’s a new nuance. Sometimes in government departments etcetera, we make too many changes too often, and I think we should let it stabilise a bit more before we makes changes.
ALEC HOGG: Politics and power.
IZAN DE BRUIN: Yes, I suppose so.
ALEC HOGG: Its ‘he, who is powerful, dispenses largesse in that side of the world’. You can’t afford to do it in business because you’d go out of business.
IZAN DE BRUIN: Exactly.
ALEC HOGG: Where do you think Cell C is going to be sitting in amongst all of this with MTN getting closer to Telkom now, and as you mentioned earlier, Neotel and Vodacom having closer links? They’ve restructured quite a lot of debt – R1bn worth of debt today.
IZAN DE BRUIN: Yes, but the pressure must be on them more and more. Yes, they keep trying to be the leader and the cheapest etcetera, and they’re using the platform of the other operators. However, it must be a difficult situation for them.
ALEC HOGG: With Alan Knott-Craig leaving, that was the reason we (lots of us) went into it, and now, because he’s not there, you find every reason to move away again.
IZAN DE BRUIN: Yes, and it will be sad if it goes belly-up, which I don’t expect. I’d rather expect one of the operators to take over a portion of this. I wouldn’t necessarily like that because I think it’s good that we have a third competitor out there. The other two are becoming very large, especially with the synergistic things on the fixed line side. It’s going to make it more difficult for them to survive and be stronger.
ALEC HOGG: They’ve done well, though. They’ve brought a lot of competition to the marketplace. Let’s hope they’ll continue with that.
IZAN DE BRUIN: Yes, we hope that it will continue strongly.
ALEC HOGG: I’m just looking here at the biggest value traded. Richmont today – so far, anyway – are by far the biggest trader, but the share price is down two percent. Is there any particular reason?
IZAN DE BRUIN: I thought I picked up something with LMVH morning on their expected sales and sales in Japan, due to a new tax. I think that is what caused that drop.
ALEC HOGG: LMVH having a knock-on effect then on Richmont as well.
IZAN DE BRUIN: Yes, I think that’s what happened there.
ALEC HOGG: And then on the way up, the stock doing best is Anglo – up by two-and-a-half percent. Kumba’s also done quite nicely this morning. Is there any reason for that?
IZAN DE BRUIN: I was on the show a day or two ago when Kumba’s results came out. They weren’t brilliant results, but I think the idea is that the iron ore price should bounce off the bottom – if it hasn’t already – and because of that, Kumba is a good share to look at.
ALEC HOGG: Okay, so overall, we have the Country Road story for Woolworths. It’s a little bit of housekeeping I guess, more than anything else – an irritation.
IZAN DE BRUIN: Ninety-eight…that’s a bad deal. It’s just to finish it off now.
ALEC HOGG: But they had 89 percent of it for years and Solomon Lew refused to let them get to 90, where it triggers the automatic… Clearly, he’s done pretty well out of this deal that Woolworths’ latest David Jones deal in Australia.
IZAN DE BRUIN: If you have the ace card, you keep that ace until you really have to play it or when it’s very worthwhile playing it, and that’s what you do. Yes, he’s done well.
ALEC HOGG: Talking about a trump card: what about Actis selling nine percent – roughly ten percent – of Alexander Forbes on listing. Does that tell us anything about…that maybe they’ve come to the market at a price that certainly, the private equity guys think is full?
IZAN DE BRUIN: Yes, in the private equity space, you want to get in and you often have a three to five-year, and then you want to get out. You make your good money. You’re not necessarily there for the long-term because in private equity, you need to get that extra return, so they’re making good returns. Take it out, get it, and find the next opportunity to build on.
ALEC HOGG: Cashing in your chips. Izan de Bruin is from Xenium (the gift), as he explained to us in Latin – a well-read gentleman.
