The world is changing fast and to keep up you need local knowledge with global context.
Click here to view this Anchor Capital review as a PDF
South African markets closed higher on Friday. Sasol climbed 3.8%, after indicating that it expects its 1H15 EPS to be higher from the corresponding previous year. Banking sector stocks, Barclays Africa Group, Standard Bank and Nedbank Group advanced 3.4%, 0.7% and 0.3%, respectively. Net 1 Ueps technologies increased marginally, after reporting that its revenue for 2Q15 increased 12.4% from the same period in the preceding year. Among retailers, Pick n Pay Stores gained 1.1%, but Shoprite Holdings fell 1.3%. Sibanye Gold plummeted 1.8%, after a conflict between mineworkers and union resulted into suspension of operations in one of its mines. Harmony Gold Mining declined 2.6%. The JSE All Share Index rose 0.6% to close at 51,998.32.
|UK Market Review|
UK markets finished lower on Friday, amid a slump in mining sector stocks. Fresnillo and BHP Billiton declined 4.1% and 2.2%, respectively, amid a drop in metal prices. Tesco fell 1.6%, after news indicated that the company would face an enquiry into its relationship with suppliers. Shire slid 0.9%, after a leading committee of British lawmakers announced that an accountancy firm, PwC, had assisted the firm participate in tax avoidance practices. On the brighter side, banking stocks, Barclays and Royal Bank of Scotland Group rose 2.7% and 1.7%, respectively. GlaxoSmithKline advanced 1.1%, after declaring encouraging late-stage results of two of its skin cancer treatments. The FTSE 100 Index declined 0.2% to close at 6,853.44.
|US Market Review|
US markets ended in the red on Friday. Meanwhile, data indicated a higher-than-expected increase in US non-farm payrolls in January and a strong wage growth. Expedia plunged 11.5%, as its 4Q14 results trailed market expectations. Intuit slid 4.2%, after the company announced that it had to halt e-filing of state tax returns due to fraud concerns. A drop in copper prices led Freeport-McMoRan to fall 3.8%.On the other hand, FLIR Systems and Moody’s surged 6.8% and 5.1%, respectively, as the companies reported 4Q14 results above markets estimates. Aon gained 2.9%, buoyed by better-than-expected 4Q14 earnings. The S&P 500 Index fell 0.3% to settle at 2,055.47, while the DJIA Index plummeted 0.3% to close at 17,824.29. The NASDAQ Index dropped 0.4% to finish at 4,744.40.
|Asia Market Review|
Asian markets are trading mostly lower this morning, as dismal trade data from China pointed to sluggish economy and mirroring Friday’s losses on Wall Street. In Japan, Nippon Telegraph & Telephone Corporation jumped 4.6%, after it posted better-than-expected 3Q15 earnings. Dai-ichi Life Insurance advanced 2.7%, amid news that the company is seeking closer ties with Resona Holdings Inc. in an attempt to spur sales. In Hong Kong, Industrial and Commercial Bank of China, Bank of China and Agricultural Bank of China slipped 1.4%, 0.5% and 0.3%, respectively. In South Korea, Hyundai Motor and Kia Motors declined 3.7% and 3.2%, respectively. The Nikkei 225 Index is trading 0.2% higher at 17,682.71, while the Kospi Index is trading 0.4% lower at 1,947.99. The Hang Seng Index is trading 0.4% in negative territory at 24,574.38.
At 06:00 SAST today, Brent crude oil fell 0.2% to trade at $57.38/bl. Meanwhile, data showed that China’s imports and exports came in worse than anticipated in January, while the trade surplus widened. On Friday, Brent crude oil rose 2.6% to settle at $57.52/bl, lifted by ongoing strikes in US refineries and conflicts in Libya. Oil prices also rose following better-than-expected US jobs data.
On Friday, the Illinois North Central No.2 Yellow corn spot prices rose 0.3% to $3.61/bushel.
At 06:00 SAST today, gold prices advanced 0.3% to trade at $1,237.85/oz. On Friday, gold declined 2.4% to close at $1,234.04/oz, as the US dollar strengthened following a strong jobs report in the US.
On Friday, the South African rand weakened against the US dollar, after US non-farm payrolls data indicated that US employers added more than expected jobs in January. The upbeat labour report buoyed the US dollar as it increased expectations that the US Federal Reserve might raise interest rates sooner than expected. Meanwhile, data indicated that South African net gold and forex reserves for January dropped more than market expectations.
The yield on benchmark government bonds rose on Friday. The yield on 2015 bond rose to 6.10% while that for the longer-dated 2026 issue advanced to 7.44%.
At 06:00 SAST, the US dollar is trading 0.1% lower against the South African rand at R11.5063, while the euro is trading 0.1% higher at R13.0465.
On Friday, the euro declined against most of the major currencies and advanced against the South African rand. Meanwhile, the seasonally adjusted industrial production in Germany climbed 0.1%, but less than market expectations. Additionally, the trade deficit in the UK widened more than expected. Going forward, investors will keep a tab on German trade data scheduled today.
At 06:00 SAST, the euro advanced 0.2% against the US dollar to trade at $1.1338, while it is marginally higher against the British pound to trade at GBP0.7431.
South Africa’s net gold & forex reserves recorded a drop to $42.15bn in January, compared with market expectations of a drop to $42.61bn. Net gold & forex reserves had registered a reading of $42.73bn in the prior month.
The South Africa Reserve Bank has reported that, in January, gross gold & forex reserve in South Africa recorded a drop to $47.61bn, compared with a reading of $49.10bn in the prior month. Market anticipations were for gross gold & forex reserve to fall to a level of $48.89bn.
According to the office for national statistics, the total trade deficit in the UK rose to GBP2.89bn in December, from a revised total trade deficit of GBP1.84bn in the prior month. Markets were anticipating the nation’s total trade deficit to fall to GBP1.70bn.
On an annual basis, real retail sales advanced 2.2% in December, in Switzerland. Real retail sales had recorded a revised drop of 0.6% in the prior month.
The national institute of statistics has reported that the calendar adjusted industrial output in Spain unexpectedly eased 0.9% in December on an annual basis. Market anticipations were for the calendar adjusted industrial output to rise 0.3%.
In December, on a seasonally adjusted monthly basis, industrial production in Germany climbed 0.1%, less than market expectations for an advance of 0.4%. Industrial production had registered a revised similar rise in the prior month.
In the US, non-farm payrolls rose by 257.00k in January, compared with a revised gain of 329.00k in the prior month. Markets were anticipating non-farm payrolls to advance 230.00k.
The US Department of Labour has indicated that, in the US, the unemployment rate climbed unexpectedly to a level of 5.7% in January. Markets were anticipating unemployment rate to remain unchanged.
The (BOP basis) trade deficit in Japan dropped to JPY395.60bn in December. Japan had posted a (BOP basis) revised trade deficit of JPY636.80bn in the prior month.
The trade surplus in China widened to $60.03bn in January, more than market expectations of a trade surplus of $48.20bn. China had posted a trade surplus of $49.61bn in the previous month.
Curro Holdings: The consumer services company, in its trading statement for FY14, projected that its headline EPS would increase between 33.0% and 43.0% from the prior year. It expects its basic EPS to increase between 30.0% and 40.0% from FY13.
Net 1 Ueps Technologies: The technology company, in its 2Q15 results, stated that revenue increased 12.4% to $154.13mn from the same period in the preceding year. Its GAAP EPS stood at $0.48, compared with $0.28 posted in 2Q14. For FY15, the company expects fundamental EPS of at least $2.28. The company further reported that it has filed affidavits on 20 January 2015 and written submissions on 27 January 2015 with the South African Constitutional Court, setting out the its reasons and arguments for a court order setting aside the request for proposal and / or directing SASSA to issue a corrected RFP.
Adcorp Holdings: The company, in its trading statement for FY15, indicated that it expects both headline EPS and EPS to improve by at least 20.0%, compared with the previous year.
African Rainbow Minerals: The company revealed that Mr Daniel Vusimusi Simelane has resigned as the Chief Executive of ARM Copper and an Executive Director of the company with effect from 6 February 2015 and Mr Thando Mkatshana, who currently is the Chief Executive of ARM Coal, has been appointed as the Chief Executive of ARM Copper and an Executive Director of the company with effect from 7 February 2015.
Sibanye Gold: The gold mining company revealed that a conflict between members of the association of mineworkers and construction union and the National union of mineworkers at its Beatrix Operation resulted in injuries to 9 employees. Furthermore, the company stated that management has decided to suspend operations at Beatrix north and south shafts while it attempts to restore calm and peacefully re-integrate the rival groups.
Trencor Limited: The company’s Textainer Group Holdings, announced the closing of an amendment to extend the term and lower the interest rate on a $300.00mn revolving credit facility used to finance seasoned income producing intermodal shipping containers.
MTN enterprise unit denies job cut plans: MTN SA Enterprise Business unit head Alpheus Mangale has allayed fears that the subsidiary plans to lay off all its 600.00 employees, insisting that the changes may lead to more job creation.
Vodacom takes insurance market bull by the horns: Vodacom’s insurance unit aims to grow at 30.0%-40.0%, adding another revenue stream as the growth rate in voice revenue slows down.
UK and US
Marsh & McLennan Companies: The company, in its FY14 results, stated that revenue increased 5.6% to $12.95bn, compared with the previous year. Its diluted EPS from continuing operations stood at $2.61, compared with $2.42 posted in the preceding year.
Aon Plc.: The risk management company, in its FY14 results, revealed that total revenue increased 1.9% to $12.02bn, compared with the preceding year. Its diluted net EPS was $4.66, compared with $3.53 reported in prior year.
Moody’s Corporation: The company, in its FY14 results, indicated that total revenue was $3.33bn, compared with $2.97bn posted in the previous year. Its diluted EPS increased to $4.61 from $3.60 recorded in FY13. For FY15, the company projected diluted EPS to be between $4.55 and $4.65.
Harris Corporation: The company, in its 2Q15 results, stated that revenue from product sales and services was $1.21bn, compared with $1.22bn reported the corresponding period previous year. Furthermore, its net diluted EPS increased to $1.32 from $1.26 recorded in the same period a year ago. The company raised its FY15 guidance for EPS from continuing operations to a range of $4.95 to $5.05from a range of $4.75 to $5.00estimated earlier. FY15 revenue guidance remains unchanged and is expected to decline 1.0% to 3.0%, compared with the prior year. Furthermore, the company stated that it has agreed to acquire Exelis for $4.70bn in cash and stock.
Madison Square Garden: The company, in its 2Q15 results, indicated that revenue has increased 6.5% to $0.54bn from the same period reported a year ago. Its diluted EPS marginally increased to $0.78 from $0.77 in the corresponding period last year. The company further announced the appointment of Gregg Seibert as the Vice Chairman.
CBOE Holdings: The company, in its FY14 results, revealed that total operating revenue was $617.23mn, compared with $572.05mnposted in FY13. Its diluted EPS increased to $2.21 from $1.99 recorded in the previous year. It further stated that capital expenditure for FY15 is projected to be in the range of $37.00mn to $40.00mn, reflecting the company’s ongoing investments in systems hardware and software to support and enhance its trading technology.
Sirona Dental Systems: The company, in its 1Q15 results, revealed that revenue was down 1.9% to $293.00mn, compared with the previous period a year ago. The company reported that its diluted EPS stood at $0.82, compared with $0.79 recorded in the corresponding period in FY14. The management has reiterated guidance of FY15 local currency revenue growth of 6.0% to 8.0% and non-GAAP adjusted EPS in the range of $3.95 to $4.05.
FLIR Systems: The designing and manufacturing company, in its FY14 results, stated that revenue grew 2.3% to $1.53bn from the previous year. Its diluted EPS was $1.39, compared with $1.22 posted in FY13. The company expects revenue in FY15 to be in the range of $1.55bn to $1.60bn and net EPS to be in the range of $1.60 to $1.70.
Anthem Inc.: The health insurer has warned US customers about an email scam targeting former and current members whose personal information is suspected to have been breached in a massive cyber attack. It indicated that it is not calling members regarding the breach and not asking for credit card information or social security numbers over the phone.
Tate & Lyle Plc: The company, in its trading statement for 3Q15, indicated that speciality food ingredients performed in line with its expectations. Its bulk ingredients segment performed lower than the preceding year due to capacity constraints, weakening EU sugar prices and a sharp deterioration in ethanol margins. The company’s net debt was GBP466.00mn, compared with GBP383.00mn in the previous quarter. It expects group profits for FY15 to be modestly below the range of GBP230.00mn to GBP245.00mn.
Shaftesbury Plc: The real estate investment trust, in its trading statement for the period 1 October 2014 to 5 February 2015, stated that visitor numbers have been good, bringing buoyant trading across its shops, restaurants, cafés, bars and pubs over the important trading season leading up to Christmas and through to the New Year. Total pro-forma debt at 31 December 2014 was GBP631.60mn, compared with GBP616.40mn in the previous quarter. The company remains confident in the long-term prospects of its business with the benefit of local knowledge and innovative approach to managing its assets.
GlaxoSmithKline Plc: The company announced that overall survival or OS results from COMBI-d showed a statistically significant reduction in the risk of death for the combination of dabrafenib and trametinib compared with dabrafenib monotherapy in patients with BRAF V600E/K mutation-positive metastatic melanoma. It further indicated that the safety profile was consistent with the profile observed to date for the combination; no new safety concerns were observed.
Capita Plc: The company revealed that it has been approved by NHS England to join the new lead provider framework for commissioning support services. It has been approved for the core Lot 1 of the framework, covering end-to-end commissioning support services, and for Lot 2A, which covers specialist decision support services.
Poundland Group: The general merchandise retailing company announced that it has signed a conditional sale and purchase agreement to acquire 99p Stores Limited for an enterprise value of GBP55.00mn, comprising a cash consideration of GBP47.50mn and the issue of new company shares with a value of GBP7.50mn at closing.
Guy Hands in EUR1.00bn Terra Firma reboot: Terra Firma, the British private equity group founded by Guy Hands, is to radically change its approach to investment and put EUR1.00bn of its own capital into future deals as it seeks to restore a reputation marred by the debt-laden takeover of EMI in FY07.
Biotech company hits crowdfunding record for life sciences: A Welsh biotech company founded by a Nobel laureate has claimed a UK record for crowdfunding in the life sciences sector after raising almost GBP700.00k in a scheme that could provide a new model for financing medical research.
US scrutiny of Barclays and UBS widens forex trading probe: The US Department of Justice is scrutinising currency-linked investments marketed by Barclays and UBS in an indication that the sprawling global probe into the foreign exchange market may become more troubling for banks.
Hedge funds short property companies as London housing wobbles: Hedge funds have begun to take out bets against property businesses that are exposed to the downturn in London’s housing market, in the first sign that investors are tentatively seeking to profit from the slowdown.
RBS Chief calls on regulator to act against ‘free trial’ groups: The Chief Executive of Royal Bank of Scotland is urging regulators to take action against companies that extract money from customer accounts without clear warning and said lenders should stop financing them.
Pemex to cut capital spending: Pemex, Mexico’s state oil company, expects to cut capital spending this year and says it will be “very difficult” for already falling production not to be affected further as it is forced to cut $4.00bn from its budget due to the oil price shock.
Mining companies suffer reversal of fortune in Africa: Mining companies’ excitement over Africa is being cooled by fresh five-year lows in commodity prices — resulting in cuts to investment in even the most resource-rich countries.
Sienna Capital backs activism with Primestone investment: Sienna Capital, an affiliate of Albert Frère’s Groupe Bruxelles Lambert, has invested EUR150.00mn in Primestone, a hedge fund that aims to buy stakes in listed companies and work alongside management for long periods to increase value.
Credit Suisse investors braced for dividend cut: Investors are braced this week for a possible cut to Credit Suisse’s dividend, as the Swiss bank prepares to announce its full-year results on Thursday.
Biotech company hits crowdfunding record for life sciences: A Welsh biotech company founded by a Nobel laureate has claimed a UK record for crowdfunding in the life sciences sector after raising almost GBP700,000 in a scheme that could provide a new model for financing medical research.
Poundland: Jumped 15.4% to 413.00p after setting out plans to buy 99p Stores, its closest peer.
Orbitz: For sale, will travel: Now a juicy offering is reportedly up for sale — Orbitz, the fourth-largest US-listed online travel company by sales, with an enterprise value of $1.20bn. Would Amazon buy it? Should Google? They certainly might take a look. The online travel sector had bookings of $460.00bn last year and will grow 14.0% this year, IDC estimates. Google has already dipped its toe into travel, by acquiring ITA, the flight information company, in FY10. Orbitz is growing more slowly in part because it is mostly a US business, and faster growth is overseas. Yet a more fundamental reason is that online travel is about economies of scale — just like online advertising, or online merchandise sales. Being a small player makes it hard to get the best deals and reach the most customers. Amazon and Google understand this well. So the more likely buyer would be a big internet company looking to get a travel foothold. Buying Orbitz could be cheaper than building something, given its branding, loyalty program and list of corporate deals. Whether the shareholders of companies like Amazon and Google would appreciate such a gambit is another matter. But those who should really worry would be Expedia and Priceline. With bigger resources at its disposal, Orbitz could become a force with which to be reckoned.
RadioShack: time of death: Could RadioShack have changed itself into something else? Sure. Nokia was once a paper mill. RadioShack could have started selling fruit baskets or turned its stores into Zumba studios. The interesting question is when the business became hopeless except as a pile of assets to plunder and redeploy. Turn back the clock three years, to early FY12. RadioShack’s shares were at $10.00; the business was valued at over $1.00bn. Net profits had halved in the year just ended, to $1.00 a share, as the shift towards mobile phones and tablets led to lower margins. Not good, but the company was moving to where the sales were — mobility. And there were reasons to hope for stabilisation. Revenues were not falling. There was almost no net debt. Free cash flow was a robust $1.30 a share, almost twice as much as the year before and plenty to support the 5.0% dividend yield. The company had bought back $110.00mn of its own shares in 2011. It did not appear to be too late.
US corporate tax reform: bluff called: The US corporate tax regime is considered “global” — US-domiciled companies owe a 35.0% federal tax on income, wherever that income occurs. Many companies find this unjust. They complain that 35.0% is a steep rate compared to most countries. They also point out that, unlike the US, most countries employ a “territorial” regime under which taxes are owed based on the rates where income is earned, not the rate where the company is incorporated. Mr Obama wants that $2.00tn pile to face a one-time 14.0% tax. After that is paid, the earnings could be brought back to the US with no further tax due. In future, the President wants foreign income to face a minimum 19.0% tax (with no deferrals) while the US statutory corporate rate would be reduced to 28.0%. But they have benefited from the current rules, and may receive little sympathy if they try to block reform. In 1960, 42.0% of US corporate profit was paid to Uncle Sam. By FY13 that proportion had halved. Similarly, the ratio of personal income tax to corporate tax has grown from 2:1 to 5:1. Ordinary Americans may lament political gridlock. Corporate America celebrates it.
*Published with special permission by Anchor Capital (ACG)
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.