Namaste Lululemon

"The share price graph is flat. Expectations were great. This happens, where there is a run up into what seems like an amazing business (which it is), the market expects more. Now may well be the right time to strike (a pose). It seems we may have gone from a time of "sleeping hero" and "pigeon" (downward dog?) to locust and cobra. Know your yoga positions people."

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To market to market to buy a fat pig A good day in Jozi for stocks, the all share index added nearly three-quarters of a percent. Financials added nearly a percent and a half, industrials as a collective added four-fifths of a percent. Kumba fell over six percent, Anglo dropped a percent. Amplats and AngloGold Ashanti roared ahead and were at the top of the leaderboards, the banks reacted positively, there was chatter that Barclays Africa would not sell at these depressed prices.

Two years out, all the major banks trade on multiples in the high single digits, with some yields pushing 8 percent (Barclays Africa). I mean, if the forecasts are right, Barclays would be selling "ABSA" at a current multiple of 8.1 times on a dividend yield of 7.2 percent (pre-tax). That hardly sounds like they (Barclays) would be getting a good deal. In fact, it sounds like a horrible idea. To be fair to the market and the present levels that Barclays Africa trades at, the multiple has been this low since 2014, the highest is around 13.5x in 2015. The stock hasn't got above a ten multiple this year, or 2016 for that matter. Mid single digit earnings growth is expected from the company this year, for a very cheap 7.5 times forward multiple. And a yield of nearly seven and a half percent.

It (Barclays Africa) is, at these levels over the last few weeks, trading at the bottom end of the "low" area. The market is still not convinced. Too much noise around .... credit ratings downgrades, political noise, general economic weakness and all in all, uncertainty. The kind of uncertainty that leads to business investment paralysis, of the kind that effectively sees people in freewheel mode. Capital has many choices, to lie and wait, to look for others pastures to survey the lay of the land, or to "get active". I am afraid that a lot of people are thinking along the first two lines. Once capital leaves, it is unlikely to return any time soon.

I saw a tweet from Wayne McCurrie (Ashburton Investments) that suggested that corporate credit markets are currently frozen. He said that MTN and Barloworld had to cancel issuances. He also suggested that Transnet was looking for 300 million Rand, and only got 20 million Rand. I am sure that when "things" settle, it will look a little more favourable for issuances. At least I hope so, if investors are shy, then things may get tougher. And added to that is the fact that we should see an 80 cents per litre increase (more or less) in the petrol price at current levels. So, it is possibly fair to say that in this type of scenario, with the consumer and business environment looking "sad", perhaps the banks are currently on exactly the correct rating. Meaning that the market is discounting the stock price based on the unknown-unknowns, to borrow a Rumsfeldian phrase. It is what it is.

Just this morning the folks from BHP Billiton have come out with a review of (the) Elliott proposal. The company views the proposals as a little short sighted. And what is interesting is the part about local (Jozi listed) shareholders:

"South African shareholders, who comprise 17 per cent of the BHP Billiton Plc register, would face particular risk as they would not obtain capital gains tax roll-over relief and might need to pay tax under Elliott's proposal."

Under that scenario, I would be totally against this! The ending is a "thanks, but no thanks" answer to Elliot. I suspect that they are going to have to do a lot more work than this, to get what they are looking for. As I said to some of the fellows in the office, for all we know, they have unwound the structure anyhow. The stock is down a little in Aussie, having fallen initially on the news, bouncing a little as we write this. Spot on Bevan, tell 'em to fob off. Unless Elliot can come back with more gunpowder and take a meaningful stake in BHP Billiton, they are just small shareholders. Sure, I buy the fact that they are owners of the business, then again so are the other 96 percent, and the current trajectory may be better for them, as owners of the business.

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Stocks in New York, New York, ended better than the session start, closing marginally away from the prior session for the Dow Jones Industrial Average. Down 0.03 percent by the close for blue chips. The broader market S&P 500 gave up 0.14 percent, whilst the nerds of NASDAQ lost nearly one-quarter of a percent on the session. Losers included some of the major tech stocks that have had good runs YTD, Facebook and Apple losing a little ground.

Much of the weakness in equity markets was attributed to the geopolitical picture and the heightened risks in recent days. Syria and North Korea are the hot spots. The recent strikes on an airbase in Syria in response to a chemical weapons attack on civilians, and the deploying of a US aircraft carrier to near North Korea being seen as a sign that "stuff" is getting real there. China have sent 150 thousand troops to their border with North Korea. Is that to show solitude or just an act? Either way, this is somewhat reminiscent of the Cold War, chess pieces being moved all over the show.

The Chinese do not want the North Koreans to get friendly with the Russians, nor do the Americans. The Chinese do not want the North Korean regime to be friendly with the US South Koreans, and I am sure the Russians do not want that either (they share a border with North Korea too). It is a case of 25 million people living under a tyrant, who could do so much better with their brothers and sisters to the South. The South, for historical reasons, has a capitalist economy and high standards of living, due to the relationship with the US post the Korean War.

The North is ..... nothing short of a disaster. It forms an important geographical buffer for both Russia and China, away from "the West". Let us just all admit that it is complicated. The nuclear bomb aspirations of the North Koreans (or a few people to be precise) makes the Japanese very nervous. And it makes the people living on the West Coast of the US very nervous too. Let us just say that is the one thing that worries Warren Buffett the most, he has made that known several times. Syria? That involves the Russians and Americans too. And many fleeing citizens that have to put up with a hostile reception in Europe and further afield. Again, this is very, very complicated.

As we have said, many times in the past, and I am sure many times in the future too, politics is a tricky old business. It changes, it can be stuck, very fluid and definitely impact on markets. The trailing PE multiple of the South Korean market is around 12.5 times, it is cheaper than many of their peers across the region, bar for China. As a result of geographical proximity to North Korea and potential conflict, investors are always putting a lid on valuations in that region. Russia may be the cheapest market in the world, in Dollar terms at this stage. Again, as in the banks and South African scenario above, sometimes cheap for a reason.

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Company corner

I have been meaning to write about this for over a week, the Lululemon Athletica results. There has been, how do we put this mildly, a lot on the go. Lululemon manufacture and sell high quality yoga and running apparel. It is not cheap, at 118 Dollars for a pair of yoga tights, 198 Dollars for a jacket, 118 Dollars for a swimming costume and even a simple visor costs 32 Dollars, this is at the top end of the apparel range. You can even buy a reversible mat, towel and water bottle for a combined 100 Dollars. Or a duffel bag for nearly 150 Dollars.

So who shops at Lululemon Athletica? Someone who wants and needs fashionable and comfortable items for athletic and general wear. You certainly have choices. I did a couple of searches, Yogasmoga for instance is more expensive. Nike, the same range tights are around 115 Dollars. Adidas sells cheaper tights. Under Armour sell cheaper and more expensive tights, depending on the quality.

At the end of the day, for a consumer that likes a luxurious product, that is durable and crosses over into fashion, they will be the core consumer of the apparel. Someone who exercises once or multiple times a day that likes to be comfortable, and the added style and comfort has a serious price tag attached to it. It is a fairly crowded space, equally, it is a space with room to grow. The brand has a loyal bunch of followers, the main gripe recently has been a lack of colour in the range. OK, time to have a look at the numbers.

Check out the Lululemon athletica inc. Announces Fourth Quarter and Full Year Fiscal 2016 Results. Revenues up 12 percent for Q4, 14 percent for the full year. The company net revenues clocked 2.1 billion Dollars. Gross profits increased 20 percent, to 1.2 billion, diluted EPS for the full year was up to 2.21 Dollars a share, an increase from 1.89 for the year prior. Mid teens growth across the board sounds like a really good outcome. Except, as is often the case, the market was expecting more from these numbers, as well as the outlook. The company expects 2.6 billion Dollars in revenues this year and diluted EPS to be 2.36 Dollars at the top end, 2.26 (which is hardly any growth) at the bottom end.

The share price fell in a heap after these numbers, down from above 66 Dollars to just above 50 Dollars, roundabout where the stock is trading now. On a low 20's forward multiple, the stock hardly seems like a steal currently. What they do have, is a growth road ahead. Although the market is relatively small and niche, the scope for multiple brands attracting a growing middle class hungry for comfortable and quality apparel is clear to see. There are multiple runways ahead for the industry.

The stock has been priced right at this level. It has been stop-start for investors since 2011, the stock is up 16 percent in 6 years. Currently at 51 Dollars a share, the high in that time is 81 and the low is in the high 30's. We are more in the bottom half. From the annual report, see below the revenue growth, which is pretty astronomical:

The share price graph is flat. Expectations were great. This happens, where there is a run up into what seems like an amazing business (which it is), the market expects more. Now may well be the right time to strike (a pose). It seems we may have gone from a time of "sleeping hero" and "pigeon" (downward dog?) to locust and cobra. Know your yoga positions people. Any further weakness in the share price, somewhere in the region of 47-48 Dollars a share seems like good value, around 8 percent lower than now. Having said all of that, who knows where share prices go, I like the story over the next three to five years. It is now correctly priced.

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Linkfest, lap it up

Here is why you should never buy/sell a stock based on what someone says on the TV or an article - Scammers Used SeekingAlpha for Bogus Stock Promotions, SEC Says. You have no idea what time frames or motives the person has for saying what they say.

We think Tesla is an amazing company and that Elon Musk is someone you don't want to bet against. Here is why people worry about the Tesla share price, note how much growing needs to happen just for the share price to stay at its current levels - The Numbers Behind the 'New Big Three'

You will find more statistics at Statista

AI is already changing our lives, even if you don't realise it. Here is how far the industry has come in a mere 5 years - Five years ago, AI was struggling to identify cats. Now it's trying to tackle 5000 species.

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Home again, home again, jiggety-jog. Stocks have started better here, that is a good thing. Pretty much across the board. French elections in two weeks, those should be fun! Or not. The spreads on the French and German treasuries have blown out. i.e. The yields and the risks have risen in France. I suspect either way, Le Pen will come second and still claim victory at some level.

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Costs down, prices down further

"What has changed a lot in the BHP iron ore business is their costs, production costs have been driven down to 17 Dollars per ton, an astonishing figure. To think that it didn't matter when the elevated iron ore price meant that cost cutting initiatives were something to happen later. Cost cutting had a massive positive impact of 3.8 billion Dollars, a negative impact of 15.2 billion Dollars as a result of much lower commodity prices. That is the biggest problem, this is possibly the finest in quality of all the mining companies, yet, like everyone else, they cannot control the prices."

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To market to market to buy a fat pig. Whoa, more dumbness. A panic close on Wall Street last evening. Stocks reversed a nearly three percent gain through the day to end over a percent down, touching the lowest closing levels for the year. It was really a sign that the jitters in equity markets never go away. I do not like to look at charts of equity markets and predict what is going to happen, that is even sillier. Drawing lines on a graph and suggesting x or y happens next is about as useful as predicting the weather in December based on today. Or (cheeky here) whether Chelsea FC are going to break into the top 10 of the BPL. Kidding, of course they are. We will get back to the markets in New York in a second, first it is time for Jozi, Jozi. Locally our markets roared yesterday, reports of the death of the global economy were greatly exaggerated. That was of course paraphrasing Mark Twain, where in fact his cousin was ill.

Expect to give up all those gains from yesterday in the early part of the trade. In the same breath as me saying I do not like charts, let me try and explain why this sell off feels so very bad, by using a uhhh ummmm, a chart. For most of this year the biggest market in the world, the S&P 500 has been stuck in a very narrow band. Very narrow in fact. I have circled in red (thanks CNNMoney for the graph) the period of great stability until just over two weeks ago.

Note the serious sell off in the last two weeks. By drawing any sort of line on that graph to the right is just as good as guessing. There is a story of Buffett being handed a graph and asked his opinion, he purportedly asked which way around he should hold the paper. I am not too sure about whether that is too true, it is however funny. Technical analysis is not for me, it is classic pattern recognition. I was on TV, Monday lunch time and was asked about the similarities between 1987 and now, there are similarities emerging said Lindsay Williams from CNBC Africa. I said to him, when I encounter people talking about two different periods in history I always answer with a facetious question, "how many iPhones did they sell back then?" The answer is obviously none.

I was rapped over the knuckles by Lindsay when he said I could not use the Benjamin Graham example of choosing your stocks like groceries and not perfume, he said to me that they sold no iPhones back then. We ran out of time when I tried to stick the boot back in I failed, we had run out of time. Darn, live TV.

I made a similar quip yesterday on live radio, using the legendary investor Peter Lynch's line: "I've always said if you spend 13 minutes a year on economics, you've wasted 10 minutes." I lost many points with Michael for bringing this up over and over again. He hates me for it. Anyhow, that statement became very evident yesterday when the local GDP number was released for the second quarter (we are nearly finished month two of the third quarter) and we were met by a contraction, in Rands too, down over a percent when measured against the first quarter of this year and then the figure is annualised. Perhaps the economy has improved a little between now and then. There was NO reaction from the equities markets, none whatsoever from the currency. Perhaps it was "priced in" or more likely equity markets and currencies are driven by the global flows.

Remember and recall each and every time there is an economic release, the stock market is not the economy and the economy is not the stock market. That is possibly what Peter Lynch meant, spend your time focusing on the companies and their prospects, their price relative to those same said prospects, rather than the economy.

Whilst the Chinese have cut rates for the fifth time since November (another cut after their market had closed yesterday, about midday locally) in order to shore up their economy, you should not worry about the health of that economy. BHP Billiton in their results yesterday had something interesting to say about the Chinese economy, the shift to consumption:

"In line with our expectations, the economy is growing more slowly, though off a higher base, as it matures over the medium term and the government's reform program promotes domestic consumption over investment. We expect near-term volatility to continue as the authorities press ahead with reform in a cautious but sustained manner as they seek to improve the efficiency of capital allocation in the economy while maintaining support for employment. However, our robust longer-term outlook for China remains intact as the economy transitions."

There is an associated graph of their expectations of the makeup of the Chinese economy, a slide that explains how the shift is unfolding over the next decade and a half. Of course this is just guessing, a very good guess, this was not just thumb sucked:

The most important "thing" to come out of the BHP Billiton results yesterday was their downgrading of peak Chinese steel production. Which is very important for their iron ore and metallurgical coal business. Of course this is very important for all iron ore producers globally. BHP reckons that, from their presentation: "we expect China's crude steel production to peak between 935-985 Mt in the mid 2020s". The previous guidance was at the high point 1100 Mt.

What has changed a lot in the BHP iron ore business is their costs, production costs have been driven down to 17 Dollars per ton, an astonishing figure. To think that it didn't matter when the elevated iron ore price meant that cost cutting initiatives were something to happen later. Cost cutting had a massive positive impact of 3.8 billion Dollars, a negative impact of 15.2 billion Dollars as a result of much lower commodity prices. That is the biggest problem, this is possibly the finest in quality of all the mining companies, yet, like everyone else, they cannot control the prices. And whilst the quality will remain, the focus will be on long term shareholder returns, the market remains oversupplied in some very key commodities. Oil and iron ore. The demand side looks lukewarm, another big infrastructural program from perhaps India needs to emerge for prices to get a serious lift.

The dividend was increased marginally, earnings were crushed as revenues fell nearly one quarter. We continue to lighten our commodity exposure across the board and have been doing so for some time now. No matter how good the management team, no matter how good the cost control, the price is controlled by the market. Which is not really fair, the price for all products is essentially set by the market. However, as we know, a longer dated bet on higher commodity consumption (which is expected as we continue to urbanise) is somewhat a bet against human innovation.

As production costs decrease as a result of innovation, the marginal miners will be flushed, it will be ugly and in the end the quality majors will prevail, BHP will still be top of the pile. The cycle may be very deep from peak to trough, and as people who were in commodity markets for thirty years will tell you, for the first twenty years basically nothing happened. I shall leave you with a 30 year graph from IndexMundi of the Iron Ore price, for you to see what I mean. Literally nothing happened for 20 years.

That is right, I recall a headline that I once posted which said something along the lines (when referring to rent resources tax globally on commodity companies being mooted by "smart" governments) "You did not make that iron ore price". Exactly, the market made the price.

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Linkfest, lap it up

Perspective matters and so does knowing what your timeframes are - The Great Divide - Traders versus Investors. The biggest point I got out of the post was that GDP is probably underestimated using current methods. We also need to focus on stock gains over the last few years in connection with the underlying strength of the global economy.

Charlie Munger is one of the best investors out there and one of the smartest people around - 10 Underrated Charlie Munger Quotes

Things do change, maybe not at the speed that people want them to though - The evolution of American energy consumption since 1776. If we get most of our energy out of renewable sources in the next 100 years, it is essentially our globe doing a total '180' in a lifetime. Which is nothing in the grand scheme of things.

Imagine the possibilities from having a selected gene pass through generations. This has the potential to wipe out diseases that are transferred from parents to children - The most selfish genes

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Home again, home again, jiggety-jog. Stocks are likely to be lower again today. Chinese shares are a little higher after a volatile session. Stay the course and buy the quality, the message from yesterday is clear, if you can get the same quality asset at a lower price, what is not to like about that? There are always long dated time frames, if however you are saving for retirement, you will want lower share prices in perpetuity, to lock in lower entry prices along the way. If you are older and reliant on the gains in the short prices to supplement your income, this is an unwelcome and nasty fall in your NAV, it leaves you reaching for the antacid. Worry not, the storm passes. The shouting voices and the chasing your tail strategy during a time like this proves to have once again been the wrong one. As in Braveheart when the horses are charging at you, you should hold ..... hold ....... hold!

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Naspers needs a name change, but nothing else

"Indians consume only 12 eight-ounce bottles of Coke per year whilst in Brazil they consume 240 on average. The average globally is 90 bottles so India is clearly coming off a very low base."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. We managed to eke out a small gain on the day, the Jozi all share added just shy of 30 points to close up shop at 33851, an improvement of just 0.09 percent. But, as I have gotten to know over the years, that is a better outcome than giving those points back. Banks were absolutely smothered, those losses largely laid at ABSA's doorstep, the stock closed the day down 8.3 percent, and the stock traded over four times its average daily volumes, there must have been some stressed out folks there yesterday who were in short term positions. I think I heard Bruce Whitfield say on his show that this was the worst price action for the stock in decades. Yip, volatility in the big caps is not something that we are used to, whereas the Americans are usually ruthless when it comes to these things. The Americans are not scared to sell big cap stocks off aggressively, but the same applies on the other side of the equation, happy to buy too if the news beats expectations.

Resources for once held it all together for us here, up half a percent on the day, the Euro noise around their pow wow still knocks around, still with mixed messages. In the US I read that some are calling an end to house prices falling, after a recent Case-Shiller release, this is good news, because in the age old(e) British saying, a (wo)mans house is his(her) castle. I think that single asset for most people is most important. Perhaps it is because I have moved often, but home is a place to live with your family. Just me. If you want to read more about this subject, housing in the US, this is an awesome middle of the road view: Real House Prices and Price-to-Rent Ratio.

I am not going to let ABSA off so lightly, I had a great interaction with a client and friend, in which the conclusion was that Barclays extraction of cash has been a little reckless to say the least. I know that Barclays have been demanding their pound of flesh. That always sounds icky, pound of flesh. This friend of mine suggested that one of the top analysts that he had chatted to said that Barclays are squarely to blame for this, as ABSA have been carrying the lowest provisions of their peer group, particularly so for the last three years. So I guess you normally get what should come to you for poor business decisions, and in this case the Barclays stake is worth over eight percent less than at the beginning of trade when we opened up yesterday.

BHP Billiton has released a presentation about their base metals business this morning, it always makes for interesting "looking" and reading -> Building momentum in Base Metals. There are always a couple of slides that catch your attention, this one in particular is a goodie, what it shows is resource usage in countries as their GDP per capita rises and they head towards developed country status. The slide is titled: Demand evolves with economic development

The point that the base metals division is trying to make is that they are more likely to be in the sweet spot later, with oil, uranium and in particular potash going to be more important as China evolves towards developed status. The example often used is close neighbour South Korea, who transitioned from developing to developed status over the last 60 years. I was interested in their copper assets part of their presentation, but it is nothing new. What I was particularly interested towards the end of the presentation was the Chile slide about costs and labour. Sounds very familiar, check out the key points on labour:

"Availability of qualified labour for both operations and projects is a key challenge
Productivity is lower in Chile compared to other mining jurisdictions"

When BHP Billiton say other jurisdictions here, they are referring to their other base metals projects. But then they say something about costs, which makes you sit up and take notice:

"Increased mining and reconstruction activity has tightened the supply of key raw materials
Our competitive position on the cost curve is important in this environment"

So what that means is that if commodity prices stay here, then at least they have the best quality assets. But that is always what Marius Kloppers says in his Nataniel type voice, about the BHP Billiton assets being Tier one. I do a decent impersonation of Marius and perhaps Nataniel as well. Comfortable? Yes, we are using the lower prices to continue to add.

Righto, Naspers have reported their full year numbers for the full year to end March 2012 this morning. This business is essentially four parts, first the pay TV part, which is DSTv across the continent with the larger home base here. Then there is the internet segment which is the fastest growing and most misunderstood part, which consists of stakes in TenCent, Mail.ru and various e-commerce businesses that are the biggest revenue generators (for that segment). The print media might be a smaller contributor than the two mentioned above and is essentially the old part of their business. The split inside of this segment consist of Media24, Abril (their Brazilian print media business) and MIH Print, which I suspect includes Jonathan Ball Publishers and Paarl Media.

And then there is a smaller part of their business, the smallest, "technology", which is a business known as irdeto, which is headquartered in Amsterdam and Beijing and as per the Naspers website "is a global software security and media technology company trusted by the world's leading content owners and distributors and device manufacturers to enable new forms of broadcast, broadband and mobile entertainment."

Most of the highlights I am going to base on the presentation, which you can download here to have a look at the same material -> Naspers Financial results presentation. Revenue for the group for the full year increased by 19 percent to 39.5 billion Rand, driven by a 15 percent increase in the pay TV segment and a 59 percent jump in the internet businesses. Print media managed to grow overall revenues by 12 percent. Core HEPS (their key metric) increased 15 percent to 18.50 ZAR per share. The dividend jumped a healthy 24 percent, but is still only at 335 cents after this jump. Whilst this business is in ramp up mode, expect the dividend flow to be modest relative to the share price. EBITDA was down a disappointing 3 percent to 7 billion Rand, the biggest drop being in the SSA segment inside of pay TV, that was down 12 percent, currency related is my best guess, will get to that later. But the main reason given for the overall number being lower in the presentation was "impact of expensing growth initiatives". Consolidated development costs clocked 2.8 billion Rand in the 2012 financial year and that is comfortably ahead of the 1.5 billion Rand for the 2011 year.

Here is a rather "nice" graphic to visualise the opening two paragraphs, this is the segment that explains the e-commerce side of their business. Here goes, all the brands and names that you might or might not know:

And then there is the explanation of why EBIDTA was lower than the prior period, they expensed much higher development projects, associated with their e-commerce businesses, which you can see are plentiful. The last two half year periods, H1 2012 and H2 2012 were the highest development spend as percentage of spend in the last five years. Koos Bekker never sits still, but we like that about him.

The valuation part is always the trickiest part when trying to determine what Naspers should, and should not trade at. For instance, what would you pay for a pay TV business that is growing profits and revenues in the middle to low teens? 10 to 13 times earnings would be a fair value to apply to these assets, the pay TV segment generated 6.331 billion Rands worth of trading profits, so roughly you could say that this business is worth 70 billion Rands, and that is a conservative valuation. I never complain about my DSTv service, they are nothing short of brilliant. Their print business has margins below ten percent, but still managed to improve trading profits significantly, a 25 percent improvement on last year to 1.09 billion Rand. So what would you pay for that business? 7 to 10 billion Rands does not sound out of order at all. Those are two parts of the business that we know pretty well, so it is fair to say that we are currently at 80 billion Rands so far.

And then the part that always seems to deliver market participants and analysts alike with a Shane Warne flipper to Daryll Cullinan (two superb cricketers, one a genius, you pick) is how to value the internet assets. I suspect it is as easy as letting the respective markets determine the value and then take the value to Naspers. Both TenCent and Mail.ru have quoted prices and as such, this should be easy. First things, probably the biggest part, and the future (for now), TenCent. The stock is listed in Hong Kong, and trades under the pretty cool ticker 0700. In Hong Kong the tickers are all numbers, confusing I know. 0700 closed at 226 Hong Kong Dollars per share, valuing the whole company at 415.8 billion Hong Kong Dollars, according to Google Finance. One Hong Kong Dollar equals 1.086 Rand. So, on that currency conversion, TenCent has a market cap of 451.56 billion Rand. And Naspers own 34.26 percent of the business, according to the TenCent annual report from 2011. The exact number of shares is 630,240,380. And that then makes it easy to work out, with the exchange rate and TenCent price available, the stake is worth 154,683,677,906 Rands. Or just 154.7 billion Rands.

On our rolling additions so far we come to 234.7 billion Rand. Let us add in Mail.ru to this list. Naspers own 29 percent of this asset (through MIH), according to the mail.ru annual report for 2011. There was a swap of an asset remember for a bigger stake in this parent company. Although much smaller than TenCent, the company still has a market capitalisation of 4.911 billion pounds as per the London Stock Exchange -> MAIL.RU GROUP LIMITED. So, in Rands, at an exchange rate of 13.15 to the GBP, that is 64.58 billion. And 29 percent of that is 18.73 billion Rands. So, add them all up to that running total and you get roughly 253.5 billion Rands. The current market cap of Naspers is around 190 billion Rands.

But the question that many people ask, does TenCent deserve to be on a 33 times earnings multiple? And that is perhaps why the Naspers discount is applied, but basically these other businesses, including the exciting e-commerce business are the cream. But the business is not without its risks, they made some serious purchases last year for blue sky (260 million Dollars in total), but if you are going to back a team, they are great. And remember that sadly they lost a core member of the team over the weekend with the passing of Antonie Roux, that was a bit of a shock for everyone.

The outlook segment basically tells me that Naspers are going to carry on doing what they do. And just be Naspers, buying nerds businesses and flattering them with the price. And to keep rolling out the DSTv business across the continent and closer to home, that business is simply amazing. It is difficult to value, but we continue to believe that the market does not appreciate the company. I am not going to use the line that it should trade higher, the level today represents the balance of buyers and sellers. And the stock price is two percent plus higher on a day that the whole market is slightly lower. We continue to accumulate the stock at current levels.

Byron's beats is too kind to me, I don't like it, I love it!

Following up on my piece yesterday, here is a perfect example of what I was talking about. Coca-Cola, one of our recommended stocks in New York announced a $5billion investment in India by 2020. Sasha, who is probably the most avid cricket fan I have ever met, made a good point. Pepsi sponsors all the big cricket events so you get the feeling that Pepsi is bigger than Coke in India. But let's be honest, everyone loves Coke. This is why the company wants to try and probably will "hook" the 1.2bn people who live in that country.

This WSJ article points out that Indians consume only 12 eight-ounce bottles of Coke per year whilst in Brazil they consume 240 on average. The average globally is 90 bottles so India is clearly coming off a very low base. The article which quotes Muhtar Kent, Coca-Cola's CEO also says that the company have only put $2bn into the country over the last 20 years. The lack of exposure to India stems from a choppy history where Coke actually had to leave the India all together in the 70's.

This is also a good vote of confidence for India who have faced a lot of scrutiny from the private world for certain policy decisions. At the same time PepsiCo have also been investing in the country. We often forget that India has 17% of the world's population and even though they are still growing between 5%-7% the potential there is phenomenal.

At this stage Indian GDP sits at $1.7 trillion which ranks alongside Canada, Spain, Russia and Australia. This puts them at 11th in the current world ranking tables. However on a per capita basis (PPP) they rank shockingly 129th with $3694 per person per year. That is well below us at $11000 and even countries like Namibia, Angola and Mongolia have higher GDP's per capita.

What I am trying to say here is that India is coming off an extremely low base, similar to Africa. That is why, when they reported 5.3% growth in the first 3 months of this year, the market was not impressed. But once the juggernaut starts rolling again like the Chinese did, we have massive growth to look forward to. The country fascinates me and I plan to visit it soon. Maybe I'll do a bit of a market research while I'm there and will certainly report back.

Currencies and commodities corner. Dr. Copper is trading lower (the price is at least) at 333 US cents per pound, the gold price is also lower at 1568 Dollars per fine ounce. The platinum price is lower at 1406 Dollars per fine ounce. The oil price is last at 79.07 Dollars per barrel. The Rand is strangely firmer to the US Dollar, 8.38 currently, 13.10 to the Pound Sterling and 10.51 to the Euro at last check. Mr. Market is in risk off mode. There are various developments in Europe that need to be watched, including the various bond auctions. But for the moment Angela Merkel has said no to Euro bonds as long as she lives, perhaps she means politically. Crouch, pause, touch and engage and all that, OK?

Sasha Naryshkine and Byron Lotter

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