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Sasha Naryshkine analyses today’s markets: Standard Bank, Sasol and Anchor Capital

Sasha Naryshkine from Vestact spoke to Alec Hogg on CNBC Africa’s Power Lunch today. Alec kicked off by asking about Standard Bank receiving $75m less than expected for 60% of its London operations being sold to Chinese associate (and its 20% shareholder) ICBC….

If you think about it, as I often say, their main shareholder hasn’t exactly have great return on their investment. What was the average price that they paid back in October 2007, I think, somewhere in the region of R120/share? The stock was at R150 today. They haven’t done particularly well out of this investment, so maybe getting a discount from one of the subsidiaries’ operation may be in their favour but you wouldn’t view that if you had your Standard Bank shareholder’s cap.

Standard Bank’s London operation seems to have been a festering sore; they’re quite happy to get rid of it and refocus on Africa?

Exactly, because ten years ago, this was the bank that was going to be a developing market giant so you bought this on the basis that they had operations in South America and Argentina.

Standard trying to be the Naspers of SA’s banking sector?

They had operations in Russia, but they’ve unwound those. Those are probably nett positives. Imagine Argentina, which is fighting the possibility of default. Russia, which has their own problems – downgraded to junk last week, I think, by Standard & Poor’s. I guess it could have been worse. You could have worse territories to operate in, than London so maybe some of the timing isn’t great from the London perspective, but perhaps offloading the others at opportune times.


You wouldn’t want money in Russia today – no surprise to see capital flight?


Exactly. Why wouldn’t you, as a rich Russian, want to be operating somewhere else in the world? Obviously, it’s been fantastic for London and the U.K. capital markets. Various other property places around the world, such as Cyprus, and more increasingly, Greece. There’s colloquial evidence to suggest that even in Cape Town money is flowing in. I guess their loss is other people’s gain. I’m just not sure what the end game is here because his approval rating inside of Russia is not as poor as it is outside of Russia.

There’s a polecat-type smell around ‘Emperor Putin’. The whole world is rallying against him…

Well, falling oil and gas prices, too. That isn’t a positive either, bearing in mind that more than two-thirds of Russia’s external export revenues are derived from oil and gas. Now you have a situation where they’re bringing in less. The economy’s probably going to shrink somewhere in the region of five to six percent this year, and it could be even worse going into next year. I think that money will ultimately be the deciding factor here because having converted to capitalism and now trying to impose all sorts of controls on the markets, the irony is that capitalism wins almost each and every single time.

Getting back to Standard Bank – $75m less than shareholders were told in the circular. No surprise to see shares down three percent today…..

Also, bearing in mind that an earnings update came out at the same time so that’s why you’re seeing some of the other banks sell off, because earnings are expected to be flat for 2014. I guess you could say that with the improving outlook (ironically, with low energy prices), maybe the market’s saying ‘okay, it’s not as bad’. Surely, on the same metrics from last year, Standard Bank’s share price is up and in fact, the banks as a collective sharply outperformed everyone last year, in anticipation of rates remaining lower for longer. This might be backward looking and you might well say ‘well, they’re going to anticipate a better year’, but if you look at banking index’s historic multiples (the majors) they’re still trading at pretty lofty valuations.

Anchor Capital listed at R2 and last week Gary Booysen said it could go to R15.00. It’s at over R11, so Gary is on the right side of this?

I guess its good news for our industry. The only positive thing I can say about it is they have many young people with a lot of energy who work there. In our industry, the assets are the people who go up and down the lift every day. Peter Armitage (the CEO) rallies people. He’s optimistic by nature, and I think he’ll attract top talent but ultimately, would want to pull in more and more assets. The tricky part will be not doing audacious deals as one has seen in the past where smaller businesses that become very sizeable overnight relative to their asset base, suddenly embark on audacious deals, which is not a fit. In our industry, it’s a fit between people and that’s the hardest fit. You can fit businesses on, and get rid of people, but in our industry, it’s all about people.

Sasol had a three percent gain, how are you reading that?

If you look at Baker Hughes, one of the big oil service people that lease out rigs in the U.S.; they had their worst week ever in terms of the drops in oilrig counts (see right). What’s that telling you? That’s a bit of a leading indicator that many suppliers are going to come out of the market – probably in the next 12 or 18 months, because a lot of those would be used for exploratory purposes. Ironically, in the week prior to that, I think it was a record U.S. crude oil production week (or rolling month) for the better part of 30 years. The data is contradictory to one another, but what it’s telling you is that exploration is slowing down, but production of what is producing is still increasing. There might well be a kind of flux here where you’re not quite sure what the leading data is going to bleed into reality 12-18 months out.

Remember, the independent producers would have hedged, so they’re probably okay for another six to 12 months. Today, ExxonMobil reports so you’re probably going to see one of the biggest drawdowns in corporate history from year-to-year that you’ve seen in a long, long time.


Baker Hughes data reflecting the sharp fall in oil and shale gas drilling rigs employed in the US.

Very good numbers on the December Trade Balance – the best since 2011 – we are now seeing the benefit of oil imports?

I would say that we fall on the same page in terms of our view on fracking.  If there’s an energy source, in order to make us energy so we can import other goods at probably cheaper prices, let’s do it. People with the expertise out there, who have decades of experience: let’s bring them to our shores and unlock these treasures that we have. It just needs to be political will, and to get over this ideological hurdle.

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