To market, to market to buy a fat pig. Sony released their latest PS, the first in seven years last evening. The PS4 will only be available at the end of the year, pretty weak if you think about it. This is of course an attempt to revive a struggling company. Consoles are being eaten alive by "new" experiences, you can buy FIFA 13 on the app store for around five Dollars. Sure, it might not have all the graphics and details that the real users crave (notice how I have to be really selective about the words I use) but it does the job. Over the last five years Sony is down some 72 percent plus in Tokyo. They sold the walkman, the coolest invention of its time. The original PS was released in 1994. That is right, nearly 20 years old. Since the dotcom artificial highs the stock is down 95 percent. Sony were the legends. Sony were the best. I guess they forgot to pay attention and listen to their users and to see what the consumers wanted. Canon is a perfect example. Once the king of the world, not too dissimilar to what happened to General Motors. Add Sharp and Panasonic to that mix, and you have a perfect example of why you should always be paying attention to consumer trends. Sigh. As the Business Insider pointed out last evening, 70 percent of Samsung's profits come from their smartphones.
This does not happen too often, but perhaps it is just timing. The Bank of England governor, Mervyn King was basically outvoted, the minutes reveal yesterday. Some are saying embarrassing, I guess it is when the rest of the committee do not agree on current direction. Check it out: Bank of England chief joins minority wanting more asset buying. The pound got crushed. Mark Carney, the current governor of the Bank of Canada takes over in the middle of the year. He is highly regarded. Perhaps this shift from the committee members is them anticipating a change in policy when Carney marches into their HQ on Threadneedle Street in London, on the first of July this year. Lucky one July is a Monday, a full work week. There is actually a South African connection here, Carney, whilst he was working at Goldman Sachs, as per the Wiki entry: "He worked on South Africa's post-apartheid venture into international bond markets..." Nice. Good luck in what is a tough beat, expectations are for a rating downgrade of the United Kingdom in the coming months. The pound sank, folks worried about the split monetary policy committee and a lack of consensus.
Equally, over the sea in the US policy makers were a little split on what to do next. The Fed of course will stay in their current mode of asset buying until unemployment shows a meaningful drop, and the inflationary fears were unfounded, or perhaps have not emerged as of yet. Coupled with this Fed "uncertainty" is the plunging gold price. Stuck in a "death cross" is what the technical analysts are saying. Ha-ha, what the hell is that? According to Investopedia: "A crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level." Hmm.... when I hear about support levels and graphs and all that, I switch off. The fact that you expect a price (because you couldn't give a hoot about the underlying business) to move in a certain direction as a result of historic price moves, what is that all about? Show me the 10 thousand day moving average.
I think that the platinum executives speaking to the folks in parliament yesterday was a great outcome for all of us. What it meant is that parliamentarians (who get bucketloads of freebies at your and my expense) can hear it from the masquerading as beef horses mouth. Like I said last week, and I was talking about Hugo Chavez and Venezuela, they are going to be stuck with a whole lot of useless oil when the combustion engine ends. Equally, platinum bosses told the committee the bad news, and the truth. This Miningmx story lays it out: Amplats' Griffith "not confident" of saving jobs. See that simple line: "I'm not confident that we will come up with any clever ideas so that Amplats can become profitable again. Discussions have turned very aggressive, but that won't change the fundamentals."
I suspect that the combative to business politicians need to think a little harder when making statements that these mines make billion. No. As Griffiths said, 80 percent of their (Amplats) operations were unprofitable last year, obviously the already bleak landscape was exacerbated by strike action. As Griffiths suggested though however, 30 to 40 percent of Amplats operations would have been unprofitable if the illegal strikes had not happened. I think that he made it completely clear. Private business is not backstopped by government, in the case of SOE's, when their shareholder say enough, it is quite frankly enough.
It is not just the platinum producers under pressure on this score, AngloGold Ashanti had weak results yesterday, not too well received either. And these were the last that Mark Cutifani presented. There is a very nice interview on CNBC Africa, where Samantha Loring interviews him: AngloGold Ashanti Annual Results with CEO Mark Cutifani. Some very interesting points there, including having watched the Gold Fields split. But the frightening part comes when Cutifani starts talking about what is left in it for shareholders, from about 5 and a half minutes in the video clip. Very little as it turns out over the last five years, next to nothing, what a disgrace really. Cutifani tells the ugly truth.
He says that only 7 percent of revenues have been returned to shareholders, the other 93 percent goes to suppliers of goods and services, peoples wages, local community development programs and government in the form of taxes. And we are open for business? Give me a break here. As he says, when "people" and I am sure that he is referring to loose comments from government officials and the chattering types that taxes have to increase, that would amount to more than 100 percent, no viable of course. And he is worried that this type of talk is scaring people in an industry that has shrunk in value relative to the rest of the market.
Yes, we know what he, Cutifani, is talking about. Cutifani has a great way of explaining things, he says that anybody who thinks that mining in South Africa has a big pot of gold at the end of the rainbow "doesn't understand the numbers". But the good news is that Cutifani reckons that the Finance Minister understand which is why he is cautioning against folks expecting more. Quite frankly, there is no more. Higher taxes, as he says means less employment and less money for community development programs, simply because you do not have the money. He also talks about electricity prices being up 278 percent in five years, and the current Eskom proposals would take it up to a 578 percent increase. And that, he said, would force AngloGold Ashanti to continue to cut costs, and sadly the only that they can control is labour. So in other words, more taxes equals fewer jobs.
This is no golden goose that unfortunately people think it is. I used the analogy that a goose can't pull a wagon over a bumpy (and perhaps potholed) road. It just can't. Unsustainable. The goose is no War Worse. Cook it and it is finished. I hope the message is starting to sink in.
- Byron beats the streets. Yet another trading update came at us this morning from a recommended stock, this time from Aspen. They too have been very busy for the 6 months leading up to 31 December 2012. This means that there is a significant difference between earnings per share and headline earnings per share which only includes continuing operations. There was also a dilution because 17.6 million shares were converted to ordinary shares.
If you exclude all these factors and just focus on continuing operations Aspen grew earnings by between 21% and 25%. However, you need to factor in the dilution because in essence those preference shares becoming ordinary shares is a form of compensation from the shareholders. It is a form of cost, just like salaries. That headline number will come in between 15% and 19% growth. If you include everything earnings per share will increase 5% to 9%.
Looking at the headline numbers we should expect R3.60 compared to R3.08 in this period last year. Forecasts for the full year are for around R7.80. Trading at R163 which is north of 20 times earnings the stock is definitely not cheap. But with those growth rates, huge margins and a business model which does not look like it will slow down either here in SA or around the world you can see why the stock attracts a high rating.
We will evaluate the business in more detail when the full numbers come out but we remain firm buyers of this stock.
Crow's nest. Thursdays is always a day that you get insight into the health of the US labour market. Resource and commodity stocks have taken some pain as the gold price in particular has attracted some short interest. Johnny and his band Come Lately have initiated a short. And another inflation number in the US. Perhaps Rick Santelli four years on from his Boston Tea Party rant will provide us with some more entertaining TV.
Sasha Naryshkine and Byron Lotter
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