To market, to market to buy a fat pig. Whilst the important (self or not) politicians met last evening for a working dinner in Saint Petersburg. I have no idea what was on the menu last evening, cabbage soups and meat broths. Lots of soups. And cabbage. More cabbage. Although my mother used to make many bliny (Russian pancakes) with a special small pancake pan (really small), those ones were very tasty. But I can't imagine that the climate is too kind at all times of the year for grain production and livestock rearing. Oh, and did I mention cabbage. No wonder there is a lot of gas there.
And speaking of gas and the pressing issue of Syria, Vladimir Putin's spokesperson (Dmitry Peskov) suggested in a press conference to Russian journalists that Britain is "a small island no one listens to" and suggested that the UK is politically irrelevant. That ought to irk the Brits. Check it out -> Russia mocks Britain, the little island.
That is just not cricket to suggest that rich Russians are buying up large parts of the good parts of London. Perhaps the reason why they are investing in property in the UK and Cyprus is because there is rule of law and not, as one American described Russian politicians as kleptocrats at the beginning of the week. People in glass houses should buy curtains. I mean, they should not throw stones.
I have no idea of knowing what the outcome of robust debate will be in Russia between politicians around the one burning (literally) issue, Syria. But this picture at the top of the article tells you what you need to know: G-20 Wrangles Over Stimulus Exit as Syria Roils Markets. Sigh. We watch while ordinary people are suffering.
Yesterday there was also an ECB press conference, Mario Draghi is amazing, his confidence and humour is definitely worth the interruption of normal programming. It was Draghi's birthday at the beginning of the week, he turned 66. He looks really great for that age. That is what happens when you work indoors all day. He continues to remain cautious about the economy of the central bank that he presides over and there was even talk (and bias towards) a rate cut in the eurozone. Check out this FT article -> ECB's Mario Draghi cautious about eurozone recovery.
As Paul said here in the office, Draghi used the wrong metaphor suggesting that the early signs of the recovery and the "shoots" are still very, very green. Perhaps his horticulture knowledge is not as good as Paul's, who suggested he should have said that the green shoots were still very tender. I guess from the ECB's side, they would prefer to be positively surprised by an improvement rather than ankle tapped again. And downgrading growth is consistent with that view. My more optimistic view (from very, very far away) has been dented before.
Back to markets and performance, the rally on Wall Street petered out and all the attention was turned to the non-farm payrolls number, which is due today. Expectations are for in the region of 180 thousand new jobs added for the last month, the unemployment rate to tick to as low (relative) of 7 percent with the average week worked to tick a little higher. Certainly some good US Q2 productivity numbers yesterday, from the BLS -> Second Quarter 2013, Revised: "Nonfarm business sector labor productivity increased at a 2.3 percent annual rate during the second quarter of 2013, the U.S. Bureau of Labor Statistics reported today. The increase in productivity reflects increases of 3.7 percent in output and 1.4 percent in hours worked." Sounds good to me! As usual, the excitement builds for the non-farm payrolls number, turn to your screens at 14:30 local time!
Eight hundred and eighty eight eighty. 88880. That is where the share price of Naspers closed last evening, at an all time high. The intraday price was closer to 890 ZAR, within a whisker there. Why? How is that possible? The stock always looks stretched to many market commentators. Perhaps because for whatever reason we don't seem to think that the Chinese in Hong Kong have it right with their valuations of Naspers' biggest holding, Tencent. Tencent is trading at an all time high of nearly 390 Hong Kong Dollars a share, 388 to be exact. Let us do the math quickly, and borrow the "what is stake worth" in ZAR from this piece: Naspers/Tencent all growing fast!.
As of this morning, the Tencent market cap (721.46 billion HK Dollars) in Rand (at 1.3177 to the HKD) is 950.66 billion. 34.9 percent of that (the Naspers stake) is 331.78 billion ZAR. Last evening the market cap of Naspers was 369.582 billion ZAR. Roughly 37.8 billion ZAR in that not reflected by way of the Tencent holding. That is what you get the rest of the business for! But there is another holding, not as significant as the Tencent holding, but important enough when determining the valuation for Naspers. Mail.ru, which is listed in Dollars on the London Exchange -> MAIL RU GROUP GDR, the share price is 33.52 Dollars.
That is not the entire market cap that you see there, I got a better one over from an analyst report, it is around 7.4 billion US dollars. 30 percent of that is 2.22 billion Dollars. At the current USD/ZAR rate of 10.22 that translates through to 22.68 billion ZAR. Or only 6.1 percent of the Naspers entire market cap, not insignificant at all. Subtract that from the 37.8 billion Dollars left over (after the Tencent stake) and you get to 15.1 billion Dollars. Mr. Market, and the collective values all of the other Naspers businesses only affords a value of 15 billion. The bulk of the profits of course as we know well come from DStv, 30.2 billion ZAR in turnover and 7.559 billion ZAR in trading profits. So you practically get the rest for free. And as the story below points out, you get more than just the direct stake, there is an indirect stake through Tencent's holding in Mail.ru. All linked together.
Yesterday there was news that Mail.ru had sold the rest of their Facebook stake, using the massive upswing in the social media company's share price to sell out. See here -> Usmanov's Mail.ru Sells Rest of Facebook Stake. I guess it is a bit of a disappointment as Naspers shareholders to know that the stake does not exist, and that there is no indirect holding. Another special dividend is anticipated, BUT this is on top of a business, Mail.ru that continues to grow. And be fairly attractive for a subset of investors interested with emerging market internet assets.
I guess that there will continue to be anxieties over the price that Naspers trades at, not too dissimilar to the Apple lofty prices, remember those. But on reflection, whilst Naspers seems a lot more full than before, from a valuations point of view, there are certainly many attractions that remain. It does matter what ends up with Tencent, and how that profitable company continues to make headway in a market that many of us struggle to understand, China. Stay long!
Michael's musings.
Yesterday I wrote about the strikes in the Gold mining sector, this morning I read an article talking about one union's members attacking another group’s members. It appears that NUM members attacked AMCU members in the showers after the AMCU members finished their shift. The reason for the attack was because AMCU is not on strike as they are still negotiating with management.
If labour worked together they would have a stronger position when it comes to bargaining and you wouldn't have the violence that we have seen of late. Labour working together is unlikely to happen though because AMCU are new on the block and they have to offer something better than NUM so that they can attract new members. For everyone involved let’s hope that the strike is resolved soon before tensions and frustrations manifest in more violence.
On a lighter note, if you work for SAP, you work for the number one Top employer in Africa for 2014 according to the Top employers Institute. Other companies to make the list of Top employer, are Microsoft, EY, Unilever and Old Mutual (great to see a South African company on the list).
Adding to the lighter note, NUM announced this morning that some miners had returned to work on Thursday night, with a vote scheduled tonight on the revised offer from the chamber of mines, and AMCU will be holding their vote tomorrow morning. So let's hope that on Monday morning I get to write about the strike being over and the Boks walloping of the Wallabies. And of course Bafana bashing Botswana.
Home again, home again, jiggety-jog. Jobs time, which is going to be wildly exciting. As quickly as the jobs number looms, the impact after it is gone is no different to devouring a large meal at lunch. The afternoon blues and guilt of having overindulged. Be careful not to take these numbers all too seriously. They are important, but certainly not everything.
Sasha Naryshkine and Michael Treherne
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