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David Shapiro joined Alec Hogg and Gugulethu Cele on CNBC Africa’s Power Lunch to talk all things markets. Focusing the spotlight on Sasol’s share price plummet following a change in dividend policy, as well as Naspers’ [JSE:NPN] Tencent interests, and Blue Label’s position in the market.
Good to have you here with us, David.
There’s a story you missed, and that is why the markets come down. It’s just, literally come out a few minutes ago. Sasol [JSE:SOL] are reviewing their dividend policy and that knocked Sasol shares, when I left to come here, by almost 5%. I think that has had quite an impact on the market’s performance up to now. As you know, we were over 53 000 and I think it’s just rattled the commodity markets. It’s a big player. It’s a big mover in the market and it was bound to happen. They were on this policy of a never increasing dividend, with the oil price now where it is. They’ve had to review that and also conserve cash.
They are down 4.3%, down R40.00 a share today, at the moment and it is interested contrasting with BP, which has lots of cash, and BP are going to try and defend their dividend. I guess the assumption would have been made that Sasol too.
Well, they were on a policy and we knew that they were going to relook at it. In fact, there was a UBS report that came out overnight saying, ‘they can’t have both’. ‘They can’t have this policy of increasing dividends and their expansion plans, particularly in Louisiana’. They’ve got to choose one or the other because the one is going to sap a lot of cash and I think they haven’t given detail, but they have mentioned that they are going to review the policy and I think that unsettled the markets because one of the reasons it was holding up so well. Was because of its very reasonable dividend yield.
Look, it depends where oil settles as well. It will also have an influence on Sasol’s price. I think the current market is probably reflecting discounting a slightly higher oil price in its trading in. It is probably closer to R70.00 to R75.00 than to R60.00. It remains one of the market’s weaknesses or soft underbelly on the JSE, at the moment.
You could have bought them or some people bought them this morning, between 09:00 and 10:00, at R475.00 a share. Now it is R455.00. That’s a bit sore Dave.
It is sore and it was fast. They came out with this statement and I think the market is responding or reacting to that. We’ll get more details later.
But isn’t it still at a significant discount, compared to where it was, the R600.00 levels a few months ago?
Oh yes, but that was when oil was R115.00. It’s changed a lot of the market.
Let’s pick your brain on Naspers. That listing of Nouveau.
I would imagine we are going to get more of these, Alec because Naspers today is Tencent and it means that you are virtually buying the rest of the businesses, which are some very solid operating businesses, underneath Tencent. No one values. They just don’t play any part in the valuation of Naspers, so it will probably find better businesses being listed, which will, of course increase the value of the underlying business.
They’ve got a good online business in News24, which might get listed. I see my old company is 25 cents. Moneyweb today, down 20%. What are they doing to my old business? It’s got 25c in cash; it is trading at 25c.
What’s that telling you about management?
Don’t ask me to comment.
It’s sad, but I do think News24 is the giant in the online space, so maybe we’ll see that. Maybe we’ll see the newspaper as being listed. Maybe Multi-Choice, so this could be the start.
I think that maybe they need to do that. I would imagine that’s not a bad policy. Tencent is doing wonderfully. It’s starting to attract a lot of foreign investment. Alec, there’s not a day that goes by where Naspers is not the top trader on the JSE, and you go check your stats, every day Google it and you’ll see. Naspers, MTN [JSE:MTN] and Sasol seem to be the big three traders, but Naspers…why foreigners are using it as a proxy to get into Tencent.
Instead of having to go to Hong Kong and buy Tencent, you go to Naspers and you get Tencent. We’re still seeing a lot of traffic in there.
Tencent is on a role. This week Ford said, they are going to be putting in WeChat into all of their new cars in China to start with and then elsewhere in the world, so they are doing the right thing.
What about Mark and Brett Levy [Blue Label Telecoms]? We saw in October. It was a cautionary. They had an unsolicited offer to buy the company. The speculation was that Microsoft wanted them and then, in December, very quietly the cautionary disappeared. Was it Microsoft, do you know?
I don’t know. Maybe one needs to relook at the company. I reckon for the first time they may have prospects. When I look at the number of people in Soweto, who are not paying electricity bills. I think there is going to be a shift towards metered electricity, and metered water (metered everything).
User/pay principle as in e-tolls?
Well I don’t know how we’re going to get around that but there may be something that they have. They’ve built up an expertise in phones, in selling airtime and that. While that is going down, they might be able to do it. It is interesting to see. I don’t know. I know them very well. Where they see this happening or whether they’ve got the ability to actually, come together with a project that can work.
When that story was in the market, the share price went from around R8.00 to ten Rand, so there was a 20 percent jump. Then when the story started dissipating, so did the share price fall down to where it is now. You remember when they listed it.
Yes, they still haven’t got that price. I can’t remember the exact date.
It was R7.50 and then R8.00. I think was R7.50, but that is some years ago.
It is a long time and it has been a tough industry. We’ve seen it in Vodacom. We’ve seen it in MTN, voice is falling but data is improving.
Again, the big story there is Cell C. It is now on the market. The Saudis have appointed Goldman Sachs. They’ve been at it for 15 years and they can’t turn a profit. They’ve lost hundreds of millions in this market and when you appoint Goldman Sachs, what are you asking them to do? ‘Get us the hell out of here quickly’.
To sell, yes. Alec, you know what, there are only three operators in the whole of the United States, AT & T, Verizon, and T-Mobile in the whole of the U.S. We’ve got three already…
Four, we’ve 8-ta as well.
I forgot about Telkom. I don’t really count them but if we look at the huge amount of capital that’s required to give you data. It requires a huge capital investment. I don’t think the other two have got it. I don’t think neither Telkom nor Cell C can keep up with MTN and Vodacom.
Surely, that will hurt Blue Label, because they took a big bet on Cell C.
Not only that. I think the move is towards data…
Well, the banks are making it easier now. You can just use your USSD card and then get some kind of data or airtime upgrade from that service.
Yes, I don’t know it. I’ve got a contract. I don’t know that market that well, but I look at the results and I think it is interesting to know where the ‘push’ of this company is. These are nice result but where is the push? They haven’t done well in Mexico. They’re just starting to reduce losses in India but it will be very interesting to understand where they are.
Well, they’re going to have a few more minutes with us because we’ve just heard that our favourite miner, Neal Froneman, in fact South Africa’s favourite miner, Neal Froneman will not be coming in today because the results have now been postponed until tomorrow. Let’s hope there isn’t something untoward in all of that.
Well, in fact their results were down. They gave us a warning.
They gave us the trading update but the actual numbers were supposed to be out today and he was due to come and see us.
So he can’t talk about them.
No, he’ll come tomorrow.
He’s done a good job though.
Neal, sure he has.
Would you still invest in the company, even though it is really quite hard, from a share price perspective?
No, I don’t invest in gold mines. It’s hard work.
And Village…excuse me. Remember, we spoke about Village. Do you know what’s happened to Village? When I told the world (including you) to buy… They’ve been bought out and you would have made 60 percent in just over a year.
The Chinese investors.
Thank you. Heaven-Sent.
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