"Mediclinic announced yesterday a transaction that has been known to the market for over three weeks, that they had reached an agreement to buy an existing facility in Switzerland, 98 percent of the operating business of Swissana Clinic in Meggen. For those of you who are familiar with the Swiss countryside (lucky you) Meggen is smack bang in the middle of the country, and looks as beautiful as a postcard. Or should I say jigsaw puzzle."
To market, to market to buy a fat pig. Another record day for the Jozi all share index, driven in large part by Chinese PMI numbers and the afterglow the day after, but more specifically an additional boost in the afternoon part of the session as a result of the US ADP employment report. If you needed a reminder, this report is released once a month, normally two days before the US Labor department releases the highly anticipated non-farm payrolls report, or as it is known to The Bureau of Labor Statistics (BLS), the unemployment situation.
ADP, Automatic Data Processing is their long name, have a payroll processing division in their business (it is listed, trades under ticker ADP on the NASDAQ, what a twist) and are able to make a pretty accurate forecast of the non-farm payrolls BLS number, which is usually on the first Friday of the month. Tomorrow is however Independence Day in the US, the day in which the first thirteen colonies declared their independence from the British Empire. 1776 was a long, long time ago! It is basically the 238th birthday of the USA. The traditional birthday of Japan is 660 BC, which makes them 2674 years old this year. Well done Japan. China? That is said to be 221 BC, which means the people of that country celebrate 2235 years this year.
Perhaps we can explore in detail what the US managed to build in 238 years and how their economic prowess trumps all of the other nations in the world, in absolute numbers, yet all the other nations had centuries head start over them. Makes you think what is possible in a relatively short period of time, in human history terms of course. The oldest known manmade structure is the Cairn of Barnenez in Brittany, France, dated to around 4800 BC, which makes it nearly 7000 years old. Yowsers, the Europeans certainly got a head start!!
Back to the ADP data, which buoyed the markets significantly at the open of the US session, less so here because we had been on a tear already. Resources were up over a percent sending the broader market up around three quarters of a percent to a new closing record of 51884. Yowsers. As we pointed out yesterday however, the Resources index has loads of heavy lifting to do before it gets anywhere close to being back at the levels prior to the economic meltdown of 2008/2009. ADP estimates were around 205 thousand, the actual number ended up being 281 thousand.
As the ADP employment portion website says: The ADP National Employment Report provides a monthly snapshot of U.S. non-farm private sector employment based on actual transactional payroll data. So this is not necessarily all of the US, it is rather a very good estimate because ADP has all these customers that they can see on their payroll run monthly. Whereas not too many people question the BLS data, that is prone to many revisions and you would think is a whole lot less efficient and noisy. But yet this continues to be the litmus test for the state of the US economy, because it is the freshest information out there. The BLS data, the employment report is released today around 14:30 this afternoon, the expectations are for 212 thousand new jobs, I have no idea what revisions expectations there are, or even if that number exists.
The unemployment rate expectations are for around 6.3 percent, the average hourly week worked in the US is expected to be 34.5 hours, or around an extra lunchtime hour, if you live south of the Danube river. That is terrible, implying that the wine drinkers work less than the average work week in the US, but for all those people that work very hard in the US, there must be loads of part time employees.
There is a reason why investment bankers and analysts earn so much money, the companies that they work for squeeze 90 to 100 hours a week, that is as much as Elon Musk works. That equates to 14 hours and 16 minutes each and every day, including Sunday. If you take Sunday off, it is closer to 16 hours and 40 minutes a day, but do not stress, you get Sunday off!!! As far as I am concerned, you can pay those people what you want, working those hours and having no life outside of work they have nothing else. Your colleagues really are your family.
Mediclinic announced yesterday a transaction that has been known to the market for over three weeks, that they had reached an agreement to buy an existing facility in Switzerland, 98 percent of the operating business of Swissana Clinic in Meggen. For those of you who are familiar with the Swiss countryside (lucky you) Meggen is smack bang in the middle of the country, and looks as beautiful as a postcard. Or should I say jigsaw puzzle. Almost everyone there speaks Swiss German, of course if German was your first language you would be able to tell the difference. According to the Wikipedia page on the town, a notable resident was the late Mark Rich. The town itself is around 550 years old, if we continue the historic theme!
Switzerland has a state system of cantons, which were individual sovereign states until the year 1848 when the country established a federal state. So for naming purposes, Meggen still sits inside the canton of Lucerne, which has a population of around 386 thousand rich folks. To refresh your memory, Switzerland has the largest out of pocket healthcare per capita spend in the world. Which is one of the very good reasons why Mediclinic find themselves doing business here in this part of the world.
And the facility that Mediclinic are buying, what does the Swissana Clinic do? The website is all in German and my understanding of that language is limited to the basics, counting, greetings and few food stuffs and of course cursing words. A quick look through the doctors by their area of expertise is a clear indication that this is a servicing richer and older people. Orthopedics, Cosmetic Surgery, Dermatology and Laser Medicine, Aesthetic Dermatology and Dermatologic Surgery. A huge list of doctors for a hospital that is relatively small, 11 inpatient rooms with a capacity of 22 beds, 11 day surgery beds and 3 operating theatres as per the release. And the price? 11 million Swiss Francs, 133 million Rand. Not a lot.
A much bigger and more sizeable acquisition from the same group was Clinique La Colline, announced last week. This is in Geneva based hospital, far larger. In the SENS release from the 25th of last month, the hospital was described as having a significant market share in orthopaedic treatments performed in Geneva. Other treatments offered at La Colline include internal medicine, visceral surgery, neurology, ophthalmology, general surgery, urology, plastic surgery, and gynaecology. Again, expensive therapies for rich people. The price tag? 130 million Swiss Francs, or 1.574 billion Rand. Add the two together and you are somewhere over 1.7 billion Rand, which is roughly two and a half percent of the current market capitalisation of Mediclinic.
Remembering that Mediclinic announced that they would be issuing roughly five percent more shares, 41 million shares were available to elected parties in a book build earlier in June. They raised 3.177 billion Rand at a price of 77.5 Rand. Perhaps more to shore up their local balance sheet in the face of the weakening Rand. As per the last annual results:
"Interest-bearing borrowings increased from R26 362m at 31 March 2013 to R30 370m at 31 March 2014, mainly as a result of the change in the closing ZAR/CHF and ZAR/AED exchange rates. The closing ZAR/CHF exchange rate moved from R9.69 at 31 March 2013 to R11.96 at 31 March 2014 and the closing ZAR/AED exchange rate moved from R2.51 at 31 March 2013 to R2.88 at 31 March 2014. It is important to note that the foreign debt of the Group's Swiss and Middle Eastern operations, amounting to R24 528m, is matched with foreign assets in the same currencies. The foreign debt has no recourse to the Southern African operations' assets."
Most of the debt, even though here it is translated back to Rand terms for the purposes of reporting are backed by foreign assets. Which must be worth more. Hirslanden, the Mediclinic business in Switzerland is now 16 hospitals strong and growing. As you will well know, we have recently instituted a buy recommendation on Mediclinic, we welcome this news.
Michael's musings are cooler than Monet
Good old Watson IBM's supper computer know as Watson has come up with a new BBQ sauce. Seems like a strange way to use a billion dollar computer even more so considering that the sauce recipe can be found for free on the IBM blog.
Watson is part of a new breed of computers that can do cognitive learning or deep learning, which is where the computers can "think" and learn for themselves. Watson can read and understand natural language, compared to normal computers where words are little more than "1" and "0".
Watson rose to fame in the quiz show Jeopardy, where it beat its human counter parts. Now if your first reaction is the same as mine, then you would think that it is not a big deal. On further reflection it is a huge accomplishment. To beat a human, the computer first needs to comprehend what the question is asking and then needs to comprehend all the data it shifts through to find the answer.
Since then Watson has been used by doctors, where the doctors first teach Watson and then use Watson to help diagnose patients. This is a great way of diagnosing patients because the computer can process more data than humans and the computer is not skewed by emotions when looking at the symptoms.
To create the BBQ sauce, Watson was given a large number of other recipes which it then analysed for different good combinations, and from there it produced the sauce. From the few blogs I have read, food critics approved of the sauce, great news for the AI industry.
Google also was a division working on deep learning, were they are including robotics in the mix. This is a very exciting prospect, where robots can understand what we say and learn from their experiences.
I think the biggest impact on society will come from the implications that a cognitive computer will have on searching for information. Given the internet, it is fairly easy to find most information, but still tricky when you are looking for a less popular topic, or have a complex question. Imagine asking a question to a computer who understands your question and then has the internet as its source of information. How many professions suddenly become obsolete?
A very exciting space and one of the many reasons why we are a Google shareholder. Here is a link to the BBQ sauce if you want to try it at home.
Home again, home again, jiggety-jog. Markets are higher here. Making new gains one day at a time I guess. No massive moves northwards, if I told you we were up 12.4 percent for the year on the Jozi all share index and the S&P 500 is up 6.83 percent, would you believe me? That is the case. But yet the S&P 500 has made its 24th high yesterday. So roughly each and every new high, since the beginning of the year has been around one quarter of a percent, a little more. When you put that there, this makes for not so scary reading!
Sasha Naryshkine, Byron Lotter and Michael Treherne
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