WEBINAR: SA Champions shifts gears on Ramaphosa – Joffe’s new venture joins basket

JOHANNESBURG — 2017 ended on a positive note for South Africans keen on a future built on both internal and foreign investment. With Cyril Ramaphosa winning the race to be the new President of the ANC, economic policy takes centre stage, and the positivity has been reflected in the strength on the Rand against foreign currencies, in particular the US dollar. This change has led to a fundamental shift in the investment strategy of the Biznews SA Champions portfolio hosted on the Easy Equities platform. And because of this change in focus, it also sees a new JSE-listed stock join the basket. Happy investing in 2018. – Stuart Lowman.Good afternoon in SA, it's still morning here. It's in fact, 10h30 here in London, and I'm Alec Hogg coming to you from our new headquarters. It's quite funny to say that but our new London headquarters and, of course, I'm here bringing you up to date on the SA Champions Portfolio. In Johannesburg, as ever, is our managing editor, Stuart Lowman. .___STEADY_PAYWALL___.Thanks Alec, always good to be here. We've had a good start to the year, it's our first one for 2018 so very exciting. I know you've got a few changes for us. Just before we get into it, can I just see a show of hands just to make sure that everyone can hear me – they're already coming through that's excellent. We do like to keep the presentation quite interactive, there is a little questions toolbar on the right-hand side on the control panel. I see I've got a couple already so, I suspect everyone knows where we're going with that so if you just pop them in there and I'll pass them on to Alec as he runs us through the portfolio. But over to you Alec..Brilliant, thank you Stuart and just to make sure that you know I am not kidding you. Here we are and there we go, you've got a black cab going in the background. This is in the WeWork offices where we are based, which is on the South Bank of London. So you're coming to another part of the world this morning. It does help us in our global coverage for Biznews. Today, the story is very focussed on our Champions Portfolio, and we've got a lot of ground to cover so let me go straight into the presentation..First up our mandate was to hedge against the Rand by investing in global companies driven by SA's best entrepreneurs. Now, we did deviate a little bit on that, as you would have noticed with Mediclinic for instance, and certainly with hindsight, Markus Jooste is no longer anywhere close to being one of SA's best entrepreneurs but it was our attempt. We had a relatively small universe from which to pick from. We did miss some of the big smashers, thank goodness, and we were very fortunate in getting out of Brait just one month before the whole Steinhoff debacle hit. It looked good at Brait for a period of time, and then the more we looked into New Look, the big bet that the company made in London, the less we liked it and we got out of that one. Fortunately, as it happens, before the Steinhoff problem hit and, of course, the contagion that went on that as well..But that was our previous mandate and we are changing that mandate by simply taking away the hedge against the Rand so the new mandate is to invest in SA's champion companies driven by its best entrepreneurs. That means that we will be looking at any SA company listed on the JSE (Johannesburg Stock Exchange), remember that's one of the priorities or one of the requirements for this portfolio. You need to be listed on the JSE to make it possible for SA investors to invest in Rands but now, we are no longer saying, you need to be a Rand hedge. We will be quite happy to invest in companies that are fully Rand focussed, and you'll be seeing that coming through in the next little while..Just to give you an idea of why we are making that is because there has been a structural change, in our opinion, in the Rand exchange rate. If you look at that little green circle – it shows you what happened to the Rand. Now this is the Rand versus the USD (US Dollar). We've been very negative on it for some years now. In fact, going on four or five-years because of a view that Jacob Zuma's economic policies were bad for the country's economy and indeed, that would be translated to a poor performance of the exchange rate. We've seen it come to fruition. In fact, the Rand has fallen significantly over the last five-years in particular, and Jacob Zuma's poor economic policies have seen a stagnation in economic growth and unemployment rate rising..However, all of that will now change or at least it is, in our strong opinion, and you'll remember in our last webinar we said exactly this. My view right up until the ANC elective conference, and it has been for some months and I know it was a little bit of a minority view, as far as commentators were concerned, but my view was that Cyril Ramaphosa would be elected as the new ANC president. The view was based on a feeling or an understanding that there were still sufficient numbers within the ANC to rescue the party and really, on a philosophical base, that there are more good people around than there are evil people and that the good people would have a look, within the ANC, and vote for self-preservation because the way it was going another five-years of Zuma-type policies – the economy would have been in dire straits but more than that, the ruling political party might not have survived it..That was our underlying fundamental view and it was certainly, on the 18th December, validated. At the time, you might remember last month I did say that it was in our opinion that Cyril Ramaphosa would be elected and the problem that that would do for our portfolio is that the Rand was likely to strengthen significantly, which as you can see from this graph, it duly has done. But that we weren't going to start messing around with the portfolio at that point in time, because that would be counterproductive. We thought we were well invested in most of the companies there and that we would be refraining from making some dramatic changes. As it happens, last months big issue that we discussed was, and there is Cyril Ramaphosa – the man who has changed. Why am I so confident about him making a transformation for the SA currency? Well, because he follows economic policies or is likely to adopt economic policies, which (A) attack corruption, and (B) promote investment. Investment both from the SA community or business community, and from international investors..Now, it's very important to realise that there is more than R1trn on balance sheets in cash in SA businesses. So all they need is to have the confidence that the economy is going to be going in the right direction and SA companies will open their purse-strings. They do believe, certainly when you talk to business leadership SA or have a look at the comments that come from there, and when you engage with business leaders in the country, in individual companies, they are very forcefully behind Cyril Ramaphosa and the Team-SA that he is compiling, which will be taking the country forward..By contrast, they were very anti what Jacob Zuma was doing in the country so I'm anticipating that domestically there will be an opening of the purse-strings, and on the other hand that foreign investors of course, much prefer Cyril Ramaphosa to Jacob Zuma. As you start eliminating corruption within the system, you would also get the benefit of economic growth on that side. So all round a much happier picture that is likely to be coming through, as far as the economy is concerned, and as a consequence of that, we certainly won't be advising Rand hedging as an overarching strategy. It's not a bad idea to have a Rand hedge component in your portfolio, but in this case, we're looking strongly now for entrepreneurs..Last month can't be forgotten. We did discuss this a month ago, and here is how Steinhoff hurt the portfolio. Remember, it was R100,000 that we started with. It wiped out R7,500 of what we began with, and we took the decision after two-days of investigation, and I did send out newsletters to the Biznews community over the Steinhoff matter. In the first one I said, I wasn't sure what was going on. We then investigated further and discovered that this was a real, big problem. Although Steinhoff itself, has still not said exactly or they haven't articulated exactly what the CEO did. We now know for sure that there has been accounting fraud, and as a consequence of that, we just want out. We took the Warren Buffett approach, as he indicated when he sold his Tesco shares of hearing of similar issues. We dropped out of Steinhoff and the point now was what do we replace it with?.Well, given this mandate of going for SA's great entrepreneurs there can be few entrepreneurs in SA's history, who are anywhere near in the calibre of the gentleman you see on the screen there, Brian Joffe. I've followed his career closely, over something like 30-years, and have engaged with him a great deal. He is not everybody's cup of tea. Joffe is a conglomerate builder in the old-fashioned-style that's not always in fashion. It was very much in fashion in the 60's and in the 70's, and Joffe has used the approach of a conglomerate to build Bidvest into a magnificent company. He left that business, and then recently started Long4Life..Long4Life is going to be taking the 8% of all new money that is invested in the portfolio so, if you decide today, if you've got a monthly debit order that goes into the SA Champions Portfolio, the 8% that did in the past go into Steinhoff, and once we got out of there, which was being held in cash. That will be put into Long4Life. We will be making some changes or rebalancing the portfolio in the next month or so, but I've already had it confirmed and you can go and have a look on the EasyEquities' website, any new, fresh money that goes in will go straight into Long4Life. So, it's an 8% stake in the portfolio..Why Long4Life and why now? Well, I suppose this probably shows you the reason for it. Long4Life, when it was listed, ahead of its listing it raised R2bn. Joffe put in R100m of his own money at R4 a share. So, he paid-up R4. He bought the shares himself. Then he had other investors who came in at R5 a share so they started with R2bn. They've made a few investments over a period of time. We don't really have the time today to go through the chapter and verse of it, but the important thing that you must know is that Joffe understands all about allocation of capital, and you can then see that the share price was bouncing along for most of this time, at a good premium to the cash value, which one would expect with an entrepreneur of Brian Joffe's calibre. Then round-about mid-September last year it started falling..Well, we didn't get in at the absolute bottom of around R4.20 to R4.30, but we have now seen that Long4Life is breaking back above R5 a share and I'm very happy to be investing about a year after the initial funders got in there, at just a slight premium to what they paid, at around R5.27, remember, they invested at R5 a share. So we are backing Brian Joffe. We are backing his company, Long4Life. He's completely focussed on this business. They've made a few acquisitions already, the biggest of which is Moresports, which you'll know through Sporting Warehouse, etc. We'll get into all of those details and I'll unpack them in more detail next month, as we do the rebalancing of the portfolio for the existing shares, but I'm very comfortable that we are on a strong horse here, and that Brian Joffe will not let us down. We are also, not buying it in at a significant premium to the underlying net asset value so all happy days there. Stuart, anything we want to pickup as far as the questions are concerned?.Thanks Alec. Margaret has a question just on the back of the Long4Life discussion. She asks if I missed the answer, what is the anticipated upside of Long4Life?.Wow, that's an interesting question, Margaret – what's the anticipated upside? I don't know, I just believe that you need to be buying into companies that you believe in. You believe in the managers, you believe in the entrepreneurs who are running the business, and that's what this portfolio is focussed on. It is also, in this case, along with what Warren Buffett suggests, and that is when you make your investment find a stock that if the share market was closed for five-years, you would be happy to be in it. Long4Life is one of those that I would be happy to be invested in. The upside, well, back Brian Joffe. How good is Brian Joffe? I think he is the best that SA has seen in a long time. You have to go back to Manny Simchowitz, who Joffe worked for, to find an entrepreneur of a similar calibre. Of course, Koos Bekker will be rated by some as an even greater entrepreneur, but what Bekker did was he made an incredibly inspired bet on Tencent, which has become the best private equity bet ever, but I think even Koos Bekker would say that he was very fortunate in that regard. They're doing good work at Naspers, and we'll talk about that in a moment, but it is one of those companies that could bring significant returns for us..When I look at this one, it is going to be a portfolio, where Joffe will be investing in industrial stocks and taking opportunistic bets. He has to be one of the possible beneficiaries of Steinhoff, as it starts unravelling and the banks offset or sell assets. Remember, Joffe, with his old hat on at Bidvest, was one of the direct competitors to Steinhoff so he will see if there's anything from Steinhoff that comes out that is available at a bargain price, you can be sure that Brian Joffe will be right at the front of the queue making that bet. He's still energetic, he's fit and healthy, and his mind is very sharp. I think that he's the closest thing SA has had to a Warren Buffett, as the Bidvest story tells you. So we are betting on the SA Buffett, if you like..Thanks, Alec. Margaret has got two follow-ups on that. She asks, is there any connection between Bidvest and Long4Life? And does Brian Joffe have a strong team with him, if Joffe is out for any reason?.Yes, on the first one, there is no connection whatsoever, between Bidvest and Long4Life. On the second one, he has. He's got Colin Datnow in there, who is an entrepreneur, who ran his own business for a long time. He was a non-exec on Long4Life, and has recently become an executive-director. The team that Brian has got around him, he's pulled them from various areas where they have worked with him in the past. Remember, when Joffe ran Bidvest he had a very small head office team as well. So, it isn't the kind of thing where he needs lots of people around him. What he did do here was he brought in Kevin Hedderwick from Famous Brands, and the two of them – there's different views on what happened there, and I guess we'll never really know the full story because I'm sure they wanted to part as friends, but certainly, those two buffalos didn't sit around the same fire indefinitely, and Kevin Hedderwick has left, and Brian Joffe continues to run the business, which is sometimes not a bad thing to have almost, two CEOs or joint CEOs, is not really the ideal situation. You need to have somebody making the decisions and as much as I respect Hedderwick, I certainly would believe that there are few in SA, who can stand next to Brian Joffe in that regard. .Just shifting gears. Ed and Benjamin have questions on commodities. Benjamin wants to know your views on the commodity cycle – has it begun, and is it sustainable with global growth? Ed asks about a company called Tawana Resources. I'm not sure if you have any insights on that..All right, let's start with Tawana. No, I don't so, that's easy enough to pass that one by. Sorry about that. As far as commodities are concerned. I have a very strong belief on commodities and investing in inanimate objects. You are taking, when you're investing in equities or you're investing in companies, you're actually investing in the human ingenuity. So, when you consider the guy on the screen, Brian Joffe. His experience and his understanding of how to make good business is what is appealing about Long4Life. If somebody else were putting together a R2bn portfolio, or put R2bn in cash together and said, 'back me.' You'd have to ask to begin with, well, what is your track record and why should we be giving you the money to invest or to buy companies on our behalf? .It's a similar thing when you look at commodities. Commodities are inanimate objects. You buy a commodity today on the belief that in the future the value is going to go up. There's quite a lot of working at the moment, or quite a lot of heat around platinum for instance, where some believe that the platinum price has fallen too far and that the platinum price will, in future, rise and that you should be buying platinum now. I can't understand that because when you invest in the big trends it is so difficult to get it right. Whereas, if you invest in human ingenuity you've got a track record to go back on. You've got valuations of the company, as they're standing at the moment, that you can take into account, and you've got the likely future that you can predict in your own minds if you see how the company is growing. So, commodities, I'm afraid, I don't believe from where my expertise lies, that I can call them one way or the other, and commodities have, over time, been the graveyard of many investment reputations. So, maybe it is the beginning of a new super cycle. From where I'm standing, I would rather not be the one trying to make that call. .Thanks Alec, there's no more questions at the moment..Okay so, there we go. So, Long4Life is our new stock that we've got in the portfolio and that is what is happening to the SA Champions Portfolio, as of now. We've had a very good month. Last month, with the wipe-out of Steinhoff, it pretty much put the portfolio back to where it began a year before. It got down to just under R101.000, remembering that we invested on the 23rd January, R100.000. That R101.000 has now gone up to R106.500 so, it was an excellent month for us. As you can see, we are way behind the JSE All Share Index, and that's not surprising because when you have a hopefully, once in a lifetime experience, like we had with Steinhoff, it does make a big dent relative to the market, generally. .As you can see there, the stalwarts in this portfolio, Naspers, and Discovery, have both performed unbelievably well for us. We've also had a big win on FirstRand, which was only added to the portfolio a few months ago. MTN continues to disappoint. It is bouncing around at the moment, and the shocker for us has been Mediclinic. You have to then look at Mediclinic and start making your view on whether or not Mediclinic is worth keeping in the portfolio. Remember, I said earlier that we were talking about a mandate, which says we are backing SA's best entrepreneurs. Well, it looks as though Danie Meintjes is going to be leaving Mediclinic in the course of this year, hasn't been able to qualify in that category as well. .Well, we've got a turnaround there versus entrepreneurs. It is a conundrum that we are dealing with and working on at the moment. Then the other member of this portfolio is Investec, and the great entrepreneurs there, no doubt in my mind anyway that the share price will reflect that in due course but the portfolio, as a whole, is up 6.5% on the year. At least we've got growth but it certainly isn't anything to shout about, not at this point anyway..Moving onto our individual stocks in the portfolio, and the big thing here, the big story of Naspers in the past month was the investor day that was held on the 12th December. I listened to it. It was a very strong performance and I would suggest, given that Naspers is such a big part in this portfolio, it would be an idea for you to go and Google 'Naspers' investor day,' and go and have a look at it, and you can unpack from there exactly what is going on in this company. The reason they had the investor day in New York, and it's a first time ever – that, by the way, on the left-hand side is the CEO, Bob van Dijk, and he is together with the chairman, Koos Bekker, the driving force behind Naspers. The reason they had that was because Naspers' value on the stock market was trading at a 38% discount to its underlying assets, and the most important of those underlying assets is Tencent, which is listed in China. .The inaugural day has had an impact, and when you look at this you can see towards the end of December, when you look at the bottom, this chart from the Wall Street Journal. When you look at the bottom it's the volumes of shares traded. When you pick that up you can see late December, early January, there's a spike. Suddenly, the trading there goes over five-million shares. The reason for that is, directly related I would venture to suggest, to the presentations that were made in New York. If you start bringing in global investors, into a stock like Naspers, it can make a big difference..Now, Naspers was trading at 40% discount so, really what you were doing, if you wanted to buy Tencent, which is one of the big top-10 companies now, by market value, in the world. You could get a 40% discount by buying Naspers. You got everything else thrown in pretty much for free. Naspers believes, Bob van Dijk believes, and he articulated this at the investor day that you could probably justify 20% discount because it is a holding company, and holding companies tend to have a discount on the underlying assets that they have. But, the other half of the discount, in other words the other 20% of the discount, he says it's directly related to SA. I want you just to look at this again, at this graph, very carefully and the share price graph, at the top, which went from R4.000 a share and went all the way down below R3.500 a share, and then you have the turnaround. That turnaround again, it correlates very closely with the investor day in New York..So, that was quite a big deal and remembering also, that Naspers' biggest investment is in Tencent, and Tencent is priced in HKD (Hong Kong Dollars), and the Rand has appreciated dramatically, as we saw earlier, since Cyril Ramaphosa coming in. So, if you then cut that off and you say, if you were to put the Rand or had the Rand remained flat, not appreciated with the Ramaphosa election, and you still had this appreciation in the share price of Naspers, you can then kind of understand that going up from R3.250 to around R3.750, where it is right now – this has to be directed related to this communication that has gone out into the marketplace and the new fans that have come into the Naspers orbit..This is what they are trying to sort out. Naspers, in the last year, has risen 70%. Incredible, and a fantastic return – it's the black line. But Tencent, which makes up more than 100% or more than all of the Naspers share price, is up by 128% so, in essence, had the two of them just moved together Naspers' share price would be 58% points higher today so, all it had to do was just to track what was going on with Tencent but it hasn't, and that's what we talk about with the discount with Tencent and how that has widened – the first point then, which is pretty obvious, let's try and get that discount together. Let's try and reduce that Naspers discount and just start reflecting what is going on in the Tencent share price. .Is Tencent overvalued? Well, many people believe not. It is now starting to come more and more into the portfolios of western investors, and within China itself, it is a completely different model in China with these big tech companies to what happens in the US. In the US their big tech companies are fighting with the government all the time. Silicon Valley takes pride in not being Trump supporters. Whereas, in China, there is a very different situation. The big-3 or the BAT, as they call it – Baidu, Alibaba, and Tencent. Those big-3 are very closely aligned with government and when president Xi is in the same room as Pony Ma, who's the CEO of Tencent – there's no doubting who is the senior partner in all of this. .So, if you get that and you start saying, right so, in China we have these big-3 tech companies. They are very closely related to the government. What is the government going to do? It's going to suggest to them to move in one direction but it's not going to hurt them. It's not going to smash them. Whereas in the US, you have much higher valuations on the Silicon Valley stocks than you have on Tencent, Baidu, or Alibaba. Yet, they are fighting with the government all the time so, there could be legislative issues or legislative risks there. I think this kind of unpacks the whole thing for us and why we are very happy to have 1/3rd of our portfolio, roughly, invested in Naspers..Moving onto our star performer of the portfolio, more than 50% gain since we bought it just about a year ago. Adrian Gore and his creation, Discovery Health, and in the most recent few weeks Discovery has been a runner. Now, again, have a look at those volumes down at the bottom of the charts and you'll see a very strong demand for the stock just after the appointment of Cyril Ramaphosa, as the new CEO of SA Inc, if you like, by being the new president of the ANC. There you are seeing what the international community believes Ramaphosa will be doing to the economy. The international community then looks at that, tries to find shares within the country, which will benefit from a move or a shift in the way that the country is managed – massive volumes in Discovery, and a big uptick in the share price..We invested in Discovery initially, as a Rand hedge, because of its significant operation in the UK and elsewhere, but primarily Vitality Health in the UK, which is a company that is doing very well. You won't just see the branding on the football fields, if you go anywhere in London, for instance, you will see Vitality Health branding plastered in strategic places and the market shares are growing. The life assurance business, as in SA, has been a big and very strong part of the company. Vitality is doing well. Discovery is doing well, but now that discount that the Discovery operation had because of it's SA businesses is turning into a premium, and you can see the significant improvement in the share price as a direct result of Cyril Ramaphosa's election..Investec, on the other hand, has had something else to deal with – that's Stephen Koseff, the CEO and co-founder. I took that photograph in Davos and I look forward to seeing him again. Can you believe it, Davos has come around again, it will be next week, but Stephen's company has been underperforming and it went the other way in the early part of December, as you can see, it went down from R95 to R85, directly as a result of the Steinhoff debacle. That is because Investec was perceived to be exposed to Steinhoff. As it happens, the exposure is about 3% of it's after tax profits so, it has quantified that and that is not something that we need to worry about too much, as far as an investor is concerned. Indeed, you shouldn't be marking down or losing 12% of the equity price on a 3% one off or one-year difficulty that would be coming through the income statement..But as you can see, since then, since Investec clarified its positioning as far as Steinhoff was concerned, the share price has improved and it has also benefited from that late December Ramaphosa effect, if you like, and Investec, as things are standing right now. Well, lots is going on in Investec all the time but the latest deal that they did, which gives again, an indication of the benefits of having a company that is plugged into the global market, is that they've got together with a company called Marketinvoice, which is a FinTech company in the UK, and they're going to be funding the first £50m of invoices from this FinTech company. So, they've found a FinTech company that they really like. They're partnering with them, and this is the trend internationally with banks. .Whereas, in SA, you might have seen on Biznews yesterday that Michael Jordaan is starting a new FinTech related bank, which will be an app really, where you'll be able to manage your money. What is happening internationally is that there isn't this competition that the big banks are now starting to get closer to the FinTech players, or at least they're talking to them, and Investec is the first of the major banks to do a deal here in the UK, with a FinTech operation in this field. It's to do with client-focussed banking services that Investec is now seeing can be handled better outsourced by a FinTech operation – fascinating stuff but being plugged into the London market, it does give them that advantage. .They also did a very interesting little deal where they picked up, together with a company called Shawbrook, a £150m of a book that is owned by the Lombard Finance Division of the Royal Bank of Scotland (RBS). The new laws that are coming in, in the UK and RBS had to divest itself. It didn't want to but it had to divest itself of this book so, Investec was there to pick it up so, good news for Investec. It's a fantastic business. If you are a client of this company as I am, you can just see how far ahead they are, not just in SA as far as private banking is concerned, but here, in the UK as well. This hasn't translated yet into the share price. In time though, it is one that I am very happy to stay with..Here's one that you have to be scratching your head about and wondering whether we made a terrible mistake investing in, in the first place. Well, Medicilinic was the fifth worst performer of the FTSE 100 last year and that graph, which shows you the JSE price, kind of reflects it all. It's been a slide. It got into the FTSE 100, it was aggressive in its acquisitions and for many, it was a company last year that just lost its way. What exaggerates the problem for Mediclinic is that you might remember, it was in a takeover battle for a company Al Noor. Mediclinic has really, got three major assets. It's got Switzerland, which is the biggest asset, it's got a Middle Eastern asset called Al Noor, which is losing money but is turning around, and then, of course, it's got its SA operations, which as South Africans, we know very well. In the Middle East it was in a takeover battle with a company called NMC Health for Al Noor. Mediclinic won it, they won that takeover battle but what's interesting or ironic, I suppose here, is that NMC Health was the number-one performer on the FTSE 100 last year. So, the company that lost out in buying Al Noor, against Mediclinic, was up 90% its share price, on the FTSE. Whereas, Mediclinic went the other way, and was the fifth-worst performer. .What next? Well, we're in there. We're invested there. We like it because of its international coverage. We like the Swiss story. We like the turnaround story in the Middle East, and it does seem to be starting to happen, and I guess if you were to look at NMC positively, at the very least, you could say, 'if NMC can do that,' and it comes from Abu Dhabi or the Middle Eastern area, where Mediclinic is also very strong. Then surely, it's possible for Mediclinic to do it. The other big bull point that I would say from these levels is reflected in the next graph. This one is showing you Mediclinic's share price in London. Now, there you have a continuous slide down to 500p, until late November. Then there is a definite and a distinct turnaround in the share price, and a turnaround in the perceptions amongst the UK investors, and this is where this price is being made now..As a FTSE 100 company, Mediclinic's long term future will be determined, the share price anyway, in London and not in SA. Of course, the SA graph is showing you a continued decline because this improvement, from 500p to 600p, in the share price in London, has been offset, of course, by the Ramaphosa effect, because Cyril coming in has meant that the SA Rand has gone up so, that's why you're not seeing this improvement being reflected in the SA or the JSE price. But it's an interesting turnaround, which began when Mediclinic walked away from what was being feared to have been a hostile takeover bid of Spire, which is a private hospitals company in the UK, in which it owns 29% at the moment. So, it put a bid on the table. The Spire directors said, it wasn't enough and, as a consequence of that, there was a fear that Mediclinic would get into a hostile takeover battle for Spire. It didn't – sanity prevailed. The Mediclinic CEO is going to be leaving this year, and the market is now starting to give them a little bit more credence..What you need to see from Mediclinic is an improvement in the Middle East, and possibly, some kind of a friendly tie-up with Spire. Also, what will be interesting is to see how they replace Danie Meintjes as the CEO, but the chairman is the entrepreneur behind all of this, Edwin Hertzog, and he's still very much involved in the business, and remember, it's also part of the Remgro Group. What was interesting in the Remgro statement recently was that the view that Mediclinic had actually hurt Remgro a lot in the past year, but they are expecting there to be a significant turnaround and their quotation was, 'Al Noor is now turning a corner.' That's the swing factor as far as Mediclinic is concerned, and when you think about selling out of a stock like this, you have to think very carefully that maybe you're throwing bad money or you're getting out just before you get to the finish line. On this one, I'm inclined to say, we stick with Mediclinic, certainly in the near-term..Here's one that has really sorted or has played well for us. We invested in FirstRand on the strength of its R20bn acquisition of Aldermore in the UK, but now we would have it in the portfolio anyway because of that wonderfully, entrepreneurially driven business in SA, and again, you can see the Cyril factor. My goodness, is that reflected here. If you look at the bottom of the graph, you have once more, very strong volumes between late December, (18th December), remember it was when Ramaphosa became the president in waiting, and the share price of FirstRand surged from the mid-50s, to the late-60s, and then came back to its current level in the mid-60s. That is based on the view that banks benefit when the economy benefits. If you're in an economy that is under pressure then banks cannot flourish. If, however, the economy is growing then the banks are the first to benefit because they can start lending again. .Remember, banks are actually in the business of lending money. They take in deposits and they pass those on, they lend them to people at a higher price. They pay a low price for deposits, i.e. lower interest rates, and they lend on that money at a higher price to people, who want to borrow the money. The trick for a bank is to try and have as few bad debts as possible, and that is directly related to what happens in the economy. When the economy is growing the bad debts fall. When the economy is contracting the bad debts rise. You know that, it's a law of economics and a law of life. If economies are under trouble then companies go bankrupt, and banks are the ones who pay up..FirstRand has not been exposed to Steinhoff, and that's a beneficiary there as well. You can see the difference perhaps, in the FirstRand performance with Investec. Although on the one hand, Investec of course, has got a big UK operation so that would have been hurt by the surge in the Rand, or the valuation thereof. But on the other hand, FirstRand not really being exposed to the Steinhoff debacle. The big exposures there lay in, would you believe, with Sanlam, which gave Markus Jooste R800m, on the strength of the security of Steinhoff shares and of course, Sanlam are going to take a big knock on that, and Investec and Absa. Absa, who are looking for the liquidation or the sequestration of Markus Jooste but as far as FirstRand is concerned they've now secured, they've done the deal with Aldermore so, they do have that international opportunity within SA. The improved economic outlook has a huge impact on this business..Then finally, there's Phuthuma Nhleko, one of the great entrepreneurs to come out of SA, and this is MTN, a stock that we're still expecting, in time, will be giving us good rewards. It has got a new management team. There's been a slow and steady improvement from around mid-year, as you can see there. It got down to as low as R110 a share in June. We are now comfortably above R130 so, it's been a nice improvement. That was primarily due to undervaluation. Around about mid-year what knocked the share to get to its rock bottom was Turkcell, which had lost the bid on the Iranian license to MTN. .What happened was Turkcell was given the license in Iran first, and then MTN later got it. They switched, changed their minds, whatever happened behind the scenes – Turkcell says, 'there was skulduggery.' MTN says, 'there wasn't.' There was a MTN former employer who had turned over and is working with Turkcell and Turkcell wants $4bn from MTN. They have been unsuccessful in the American courts. MTN got a judge from the UK, presumably gave the judge every bit of evidence that was there and the judge came out to say that MTN is in the right here, and their legal counsel believe they're in the right as well and that there is no skulduggery that came from their point of view. But anyway, towards the middle of last year Turkcell got permission to sue MTN in the SA courts. These things take a long time. In fact, the story has been going on since 2013. That has remained as a little bit of a depressant on the share price..Also, depressing the share price is the consequences of some fairly poor managerial decisions in years gone by. That has now all been turned around. Phuthuma Nhleko took a much more active role in the company. He is a non-executive chairman but he became a CEO for a period of time. He brought in Rob Shuter, who was running Vodafone, Europe. So, a very heavy hitter in Shuter, and he's surrounded himself with some top people as well, including the likes of Steve van Coller from Absa, who used to run Absa Capital. .I believe, and again, it's getting back to that discussion we had earlier about investing in commodities. I believe that when you invest in human potential and in human ingenuity that is where your returns are the greatest, when it comes to the stock market, or in equities, and this is a group of people where the ingenuity could hardly be higher. Phuthuma has put a really good team together and let's see how the team performs. It's still early days on this one. They've got lots to turnaround. Remember, 25% of their revenue, and that was helped by the Cyril factor, if you like. If you look towards late-December, after the ascension of Ramaphosa, there was big volumes on MTN, and the share price improving as well. So, 25% of their revenue has come from SA, still very important. More important is Nigeria, and that seems to be stabilising after its difficulties with the impact of the oil price collapse there. There's lots of work to be done but it looks like it is starting to pay off at MTN so, I'm very happy to be invested in that stock as well..Here we go, just to finish off with for the last of my slides for today, and it shows you the portfolio, as mentioned before – we are now 6.5% up so, we've gotten rid of the Steinhoff problem. We will be rebalancing the portfolio to bring Long4Life in there but if you are investing new money so, if you put R500 in today, through EasyEquities, 8% of that would go directly into Long4Life. Well, Stuart, that's the story for the day. Anymore questions? .Thanks Alec, it's a bit quiet on the Q&A dancefloor this side. I suppose 2018, the levers are still clicking into gear. Just a final one from Sameer, and this goes back to Long4Life. He asks, 'is it trading at a discount?'.No, it's not, Sameer. It's trading at a slight premium. The stock was bought at just under R5 a share so, the net asset value, if you like, or the cash value of that company is around just under R5 a share. So, it's at a slight premium but it's not that easy to calculate and the reason for that is that there have been a few acquisitions already that have been made. My sense of this is that Brian Joffe has made the acquisitions at good prices. The market wasn't too excited about the Moresport acquisition. They felt that because of the revaluation of that deal that he might have made a misstep, and that's one of the reasons why the share price did come back over that period. But Joffe will be almost certainly, you can almost certainly guarantee that he's not going to overpay for any of the acquisitions. .He built a successful conglomerate on that basis, at Bidvest, where he made deals where he bought earnings at lower multiples than his price was trading at. What he's being dong at Long4Life, in the initial stages anyway, is he's been using part of the cash but he's also been using shares and he's been issuing shares at around about the current share price, or even higher. So, you might also have noticed, if you follow these things carefully that the former CEO of Moresport has departed. He sold 10-million shares in this company, in Long4Life, and he's departed the company, which then gives Joffe the ability to put the person he wants to have in running that business, given that it's now part of his operation..I think that's it. I haven't received anything further. .Well, that's good. I think just one last, final point before we say goodbye to all our Premium Biznews subscribers, and thanks for being with us today. We have, from next month, this discussion is going to be a little different. We're going to be talking about the SA Champions Portfolio, which is with EasyEquities, but we're also going to be talking about the Biznews Exponential Portfolio, which is the one with EasyEquities where it's invested in USD. So, we've got the two bundles with Easy. This is the one, the SA one where it is restricted to JSE listed shares. The other one, which has been an incredible performer in the few months that we've had it going – the Exponential Portfolio. That is one, which is invested in US stocks. So, both of them you can buy through bundles. Both of them you can put minimal amounts of money into it. I think the one-off investments starts at about R250, and it's similar, the Biznews Exponential Portfolio with EasyEquities. It's similar to the Global Portfolio, our portfolio, which as you know, we run with Standard Bank and that's the one that's been defying gravity. It's been going for three-years now, and it has generated over 30% compound per annum. The last numbers were around 35%, in SA Rands. With the Rand improvement recently, it's probably going to knock that back to around 30%, but that's still a huge return. Thanks to our investments there, in the likes of Amazon, Google, which is now called Alphabet, Tesla has done amazingly for us, Tencent has done amazingly for us so, the difference between the two is that the EasyEquities one is just US stocks. .Whereas, the Standard Bank one is global stocks, and we have a couple of non-US stocks in that portfolio, being Tencent and Metro Bank from the UK. So, next month we'll be talking and in this webinar, we'll be talking about two portfolios, the SA Champions, and the Exponential Portfolio. Both of which you can invest in very easily through EasyEquities, and at the end of each month so, mid-month we talk about the EasyEquities portfolio, if you like. At the end of month, we'll talk about the Standard Bank portfolio, which is the Global Portfolio, the one that we started everything going in December 2014. I hope that kind of clarifies things on that, Stu. .I think you tweaked Margaret's interest with the US-based portfolio. She wants to know if it's a good time to buy into a US-based portfolio right now?.Certainly, the one we have, absolutely. I don't think it's been a better time. You'll notice, Margaret, that we haven't really been promoting it and the reason for that was in the run-up to the ANC elective conference. The view being that if Cyril Ramaphosa were to win, and we gave that a high probability, then the Rand would appreciate, and if you put cheap Rands into that US portfolio then clearly, you'd be starting on the backfoot. But now that the Rand has done its bit, it's a very good time to start investing into that portfolio. So, yes, a good call and it's available. .What I love about it is that it's just so easy. You don't have to go and start finding fractions of how much do I buy in Amazon, Alphabet, and Tesla, or what's the breakdown of the portfolio. It's all done for you. You just give your R250 and that's then allocated into, first of all, USD, and then secondly, into those stocks. So, it just makes investing easy and I suppose that's why they call themselves EasyEquities..A final question quickly from Anthony. He says, I'm an investor and not a trader. Would my losses on Steinhoff, which I've held for less than three-years, be deemed a capital loss to be offset against future capital gains?.That's outside of my area of expertise so, I'm afraid I'm going to have to come back to you on that one. My colleague, Matthew Lester, is very smart in these things. I guess what we need to do is to get hold of Matthew, ask him to write us a little piece on it, to explain it. I think there would be many people who are sitting in exactly the same position. Of course, if you're investing in the bundle then the impact of it is going to be the bundle overall, much like if you were investing in a unit trust. If you're investing, until you start selling, you won't be in a position where you have to worry about capital gains or losses so, it's a question just for those people who are trading, and if you were an investor you wouldn't really be trading. But, let's ask Matthew to give us some insights into that, I don't want to guess..Perfect, I'll pass that onto him. That's it from my side Alec. Thanks for everything, was a great one..Thanks, Stu, and isn't it nice to be able to have a look out the window here at my new office. .Yes, I've seen a few red busses pass by as well as the black cabs. .I didn't want to show you and I won't show you the extent of this office because if you can imagine, London accommodation or office accommodation – the prices are, well, we can't get our heads around it, from a SA perspective. But if you can imagine it is 2m x 2m. So, put that in the background but there are lots of people walking past here, it's a lovely vibe. WeWorks is an amazing facility. They tell me that they're looking to do something similar in SA as well, and I guess, when they do, I think they're going to be over-subscribed. There are SA businesses who are doing the same thing, like this shared office space, but having tasted it, you wonder why people would take long leases, or even bother with long leases when you have this option. You can rent month-to-month, and expand as you want the space only, as, and when you need it. It really is a new phenomenon, and something that some SA companies are starting to get into. Maybe we should be looking at that one as well, as an investment proposition. .But, generally speaking, it's been lovely coming to you here, from London. There's another red bus as we abide you, and look forward to being with all of you, the premium subscriptions, and thanks again for your support on our Premium service. We've got big news on that as well, which will be… Stu, I think it's in the next week? I know the contracts are all signed but we can't say anything because it's a big partner. I think it's in the next week or two, anyway, after Davos, we'll be able to bring you up to date with that news, as far as your Premium subscription is concerned and what I can tell you is, you're not going to be sorry. So, that's it from me. Until the next time, so long.

WEBINAR: SA Champions shifts gears on Ramaphosa – Joffe’s new venture joins basket

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