If population increases relative to the labor force due to increased life expectancy, then the LFPR would decrease."
Jozi, Jozi. 26o 12' 16" S, 28o 2' 44" E. We slipped a number of gears after the nonfarm payrolls number came in lower than anticipated. Session end the Jozi all share index had slipped 0.72 percent, or 248 points to 34127 points. Banks made some modest gains and were comfortably better than the rest of the markets. Resource stocks as a whole were trounced, down 2.2 percent after the dust had settled. Industrials were slightly lower, but benefitted I guess from a weaker currency.
MTN produced subscriber numbers on Friday, and finally there was good news for only I guess the second time this year for the stock, or so it seems anyhow. These are numbers for the first quarter to end March. And the number is, (drum roll), 170 573 000. That is right, 170 and a half million people, which is now more than the population of Nigeria. Only just, because the Wiki listed population of Nigeria is 170,123,740 folks, which is the worlds seventh most populous country. Nigeria in fact, in these numbers, is 25.1 percent of the overall MTN subscriber base. So, without thinking too hard, one in four Nigerians are on the MTN network, 42.899 million folks. The next biggest market for them is Iran (where MTN has a 49 percent stake in Irancell), which has 36.831 million subscribers. Next is South Africa, 22.735 million subscribers. Together, these three markets make up 60 percent of the overall MTN subscriber base. The only other country with more than 10 million subscribers is Ghana with 10.394 million subscribers.
Only three of their territories saw their respective subscriber bases contract were Guinea-Conakry, Congo - Brazzaville and Syria. MTN describes the Syrian business as follows: "Its performance continued to be hampered by civil unrest in the country, which resulted in a reduction of subscriber numbers of 23 000 subscribers and a decline in local currency ARPU of 8,5%." Hampered? The place is as close to a disaster as you get, it is quite surprising that it is still OK, relatively speaking. Notwithstanding that, MTN still expect to add 450 thousand subscribers in Syria for the year. In fact, in total MTN are expecting to add 21.3 million subscribers.
All ARPU's (Average Revenue per users) across the board fell, blended ARPU's in South Africa are 123.5 Rands per month. Or roughly 15.83 Dollars per subscriber, blended of course. In the pre paid market in South Africa, the ARPU is 93.2 Rands, or 11.94 Dollars per user, which is still a lot more than our African counterparts. Here goes, Nigeria is the highest at 9.4 Dollars per user per month, Iran 7.5 USD, Ghana 6.6 USD, Syria at 10.4 USD whilst some of the lower ARPU's in MTN's operations not unsurprisingly come from Afghanistan (4.5 USD), Zambia (4.4 USD) and Rwanda (3.8 USD). I think that notwithstanding that economic progress has been made in all of the countries that MTN do business in. OK, perhaps Swaziland and Syria for the time being are exceptions, Swaziland has a long road to travel.
Cyprus with a subscriber base of only 283 thousand folks (population estimate 834 thousand people on the Cyprus part) has ARPU's of 27 USD per user, a fall of 16.4 percent in Rands and 11.2 percent in local currency. Uganda saw a significant jump in ARPU, but again, it is just less than 4 USD. The MTN subscriber base is by in large in relatively poor countries that are growing their economies quickly, but that does not detract from the fact that ARPU's are still shrinking. As more marginal users are added to the network, ARPU's will continue to decline. And greater competition will continue to see lower ARPU's.
MTN data revenue (which includes SMS) is 14.4 percent of total revenue, mostly South Africa though. MTN Mobile Money at the end of the period had 6.2 million subscribers and is now active in 13 of their territories. Mobile payment systems are going to become increasingly important as societies trend towards less cash based payment systems. The stock rallied in the face of a weakening market after these numbers, quite clearly Mr. Market enjoyed this release. MTN closed at its best level in over a month, at 136.68, up 1.62 percent.
Oops. I was wrong. I thought that Mr. Sarkozy would have piped François Hollande and retained the French presidency. Oops. Sarkozy has conceded defeat. And with that, Hollande now needs to make new friends. I am pretty sure that more than a cursory telephone call has taken place between himself and Angela Merkel already. But this is, how should we say, not the best news, political instability. It will matter immediately what Hollande does to calm markets, to say that he will stick to the plan. All we have to do is wait and see, but now you know, the socialists are back in charge in France, at least of the presidency. If you have a look at the Senate and National assembly, it is still the Union for a Popular movement that holds the edge. But guess who is leader of that party? Nicolas Sarkozy. Well, excuse me for thinking out loud here, but probably not for much longer. Time to go and change diapers I am guessing. Eish, not good, but I guess the French have spoken, and the right of centre in France has a lot of soul searching to do now. And the socialists, well, they will be dancing. Ugghh.
Byron's beats has a look at companies who are doing better!
- Today we are going to cover two trading updates from two companies who have had very different fortunes of late. One falls in the retail fast food category while the other is in construction. I'm sure you can guess which one has done well and which one hasn't. Esorfranki and Famous Brands both had updates this morning, let's look at the construction company first.
"Esorfranki is currently finalising its financial results for the year ended 29 February 2012 and shareholders are advised that the company expects a basic earnings per share of between 4,5 and 5,4 cents and a headline earnings per share of between 5,5 and 6,5 cents for that period, these numbers represents an increase in earnings per share of between 132% and 138% (2011: loss per share) and headline earnings per share of 143% and 151% (2011: headline loss per share)."
This is very good news as we finally see a turn in fortune for a company that is an important indicator for the sector as a whole. This is because they do the earthworks and pipeline construction for sites before the actual building takes place. They are one of the first to be contracted and paid when a building goes up and will therefore be one of the first companies to indicate a turn in the sector. As you can see from the update this is a massive turnaround from a big loss in 2011 to a decent profit. Good to see.
Famous Brands, another one of those over achievers, released a trading update which indicated headline earnings per share growth of 14%-16%. On a diluted basis this will come in between 270c-275c per share. The company is not cheap but in recent memory, it never has been. Trading at R52.90 the stock trades at 19.3 times earnings. But the fundamentals look very strong for this extremely well managed business to carry on growing.
They have great brands in a nation that has a growing middleclass with aspirations to consume their products. Fast food around the globe is being lapped up by the developing world. Yum Brands and McDonalds are doing fantastically and it makes perfect sense. It's convenient, affordable and people absolutely love to eat. As the demographics of South Africa changes, Famous Brands are perfectly poised to benefit. They just need to maintain their brilliant brand portfolio. The full results are coming out on the 21st of May where we will have a closer look.
New York, New York. 40o 43' 0" N, 74o 0' 0" W. Jobs. Nobody wanted to be taking any chances late in the session Friday, the worst week of the year unfolded with the worst day that we have seen in a while. The broader market S&P 500 fell 1.61 percent, the Dow sold off just over a percent and a quarter whilst the nerds of NASDAQ bore the brunt of the selling, down two and a quarter of a percent. Yech. You know how I feel about the "jobs number", and it was great that I stumbled across this article titled Wise Up to the Proper Flaws of Monthly NFP Data, by Barry Ritholtz. For him, and his publication, the "stuff" that is useful is hours worked, temp help and wages paid. Well, for the record as far as Barry is concerned, you can find out everything about the jobs numbers Friday here: Employment Situation Summary.
There you go, only 115 thousand jobs added for the month of April, less than the anticipated 175 odd thousand. What I found quite interesting was revisions upwards for the month of February and March were 53 thousand MORE collectively. So, simple math, add this number to the headline number, and hey presto, don't we have consensus? Not sure, the number is unpredictable, and we tend to side with earnings, that ultimately gives markets direction.
OK, but back to the Barry big picture measure. Hours worked? Unchanged. Temp jobs? Temp help? That increased 21 thousand. Average hourly earnings? Up a single cent to 23.38 USD. Hey, that is twice as much as a South African (on the MTN network) uses in mobile charges per month. Let me get that right, what the average South African uses for a whole month in airtime on their mobile phone, that is equal to half an hour of the average hourly wage in the USA. Getting distracted, so by Barry's measure "things" are looking average. My thoughts exactly, this was a decidedly average employment report, with only the unemployment rate at 8.1 percent moving in the right direction.
What is particularly disturbing (or strange) is that the civilian labour participation rate was at its lowest level since December 1981. Most are struggling to explain, many are pointing fingers at the ageing US labour force. And those who were expecting employment before they thought that they would retire, well, that is not happening, many close to the cusp are being "forced" to retire earlier. Which is why strangely the unemployment rate is falling, fewer folks making themselves employable. So who knows, ironically in the recovery, perhaps the unemployment rate will rise again. As Paul said on Friday, what is the Romney crowd saying as we continue to see jobs added and the unemployment rate fall? Perhaps by the time the election takes place the number will be closer to seven and a half percent.
I did see that one of my favourite bloggers, Prof. Mark Perry explains all of this, and as usual makes the most sense, at least to me. Read it, it is a summary. And after having finished the piece, I almost feel like buying more healthcare stocks! Prof Perry's theory is simple, and listen in everyone:
"An increase in population would exactly confirm and support the trend I am highlighting:
LFPR = Labor Force / Population
If population increases relative to the labor force due to increased life expectancy, then the LFPR would decrease."
Read the whole piece here: Decline in Labor Force Participation Reflects Demographics, May Not Be as Bad as Reported.
Currencies and commodities corner. Dr. Copper is last at 377 US cents per pound, perhaps not as weak as you might think. The oil price has taken a beating. Yes. Beating is the word. 97.06 Dollars per barrel for NYMEX WTI. The Gold price is last at 1639 Dollars per fine ounce, slightly lower, the platinum price is lower at 1518 Dollars per fine ounce, the gap has opened up sharply. The Rand is weaker at 7.86 to the US Dollar, 12.69 to the Pound Sterling and 10.27 to the Euro. Asian markets have started off weaker, we have started weaker here too!
Sasha Naryshkine and Byron Lotter
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