Market Scorecard
US markets were closed yesterday, so it was a rather quiet day in the Vestact office. Locally, the JSE closed in the red as mining stocks dragged the index a little lower.
Shares of former JSE-heavyweight Steinhoff (JO:SNHJ) tanked by 21.6% yesterday, as they released three separate SENS announcements relating to their ongoing litigation challenges. Outcomes of these court processes will determine whether there is any value left for the long-suffering ordinary equity shareholders.
In company news, BMW (MI:BMW) unveiled an electric motorcycle and a high-speed electric bicycle with a range of 300km. Elsewhere, Tesla (NASDAQ:TSLA) is aiming to release a $25 000 electric car in 2023, which might not even have a steering wheel.
Yesterday the JSE All-share closed down 0.18%.
One Thing, From Paul
Ray-Ban and Oakley eyewear maker EssilorLuxottica (PA:ESLX) is a stock that I like. It's not widely owned in our customer base, but it could be.
In 2017, leading French lens maker Essilor merged with Italian frame producer Luxottica. The share code of the New York-listed ADR is ESLOY and the group has a market cap of $87 billion.
In May 2021, the two businesses were finally unified, ending a difficult co-leadership agreement. The Luxottica camp won, with Francesco Milleri taking the CEO title, and Luxottica founder Leonardo Del Vecchio appointed chairman. The market seems to like this outcome because the stock has rallied up to $100 a share, an increase of 50% over the last 12 months.
EssilorLuxottica also has the licence to make frames for Armani, Bulgari, Chanel, and Prada, and owns retailer Sunglass Hut. They employ over 180 000 people.
In late June, they decided to proceed with another transaction, an $8.7 billion merger with GrandVision that gives EssilorLuxottica a network of 7 000 retail stores that offer eye-care services, sunglasses, and prescription eyeglasses.
The optical prescription operation (previously Essilor) accounts for two-thirds of revenue, and is reliable repeat business. Sunglass sales are more of an impulse purchase, heavily impacted by the weather.
According to the management team, merger cost savings could amount to as much as $700 million by the end of 2023. Online sales are still only 10% of revenue, but growing fast. China contributes just 6% of revenue, but that's expected to climb as the middle classes there expand. As mentioned yesterday, they also have an active collaboration with Facebook (NASDAQ:FB) to make augmented reality glasses.
There's a lot to like with this one. It's partly a healthcare company, and partly a luxury-goods maker. Nice combination!
Michael's Musings
A few months ago I wrote about Lamborghini planning to release their first fully electric car. I lamented that supercars are supposed to have big engines making too much noise. The Italian government seems to agree with me because they are lobbying the EU to exclude supercars from the 2035 combustion engine ban.
Roughly speaking, Ferrari (NYSE:RACE) sells 10 000 cars a year, and Lamborghini sells 8 000 cars a year. These are cars that people buy and hardly drive because of their high running costs and rapid rate of depreciation. In the grand scheme of things, a few thousand supercars adorning garage floors are not really going to move the needle on emissions.
I have similar feelings about some countries pushing to ban gas stoves. Isn't the time spent by regulators better applied elsewhere? I don't think humanity will ever reach a point of zero greenhouse gas emissions, and that's okay. Some industries should be left alone, since they have small emission impacts. Steaks cooked on gas fires and noisy petrol supercars are two good examples.
Bright's Banter
Zoom (NASDAQ:ZM) made its way to the top by being the go-to video conferencing app during the pandemic. There was a lot of speculation about whether the company would survive after lockdowns ended. By the looks of things, it seems that Zoom is not going anywhere, and it will be part of corporate life until the next best thing comes along.
Zoom's quarterly revenues surpassed $1 billion for the first time. Video apps like Zoom and Microsoft (NASDAQ:MSFT) Teams give employees the flexibility and freedom to work from anywhere. We've seen a lot of businesses adopting hybrid models, such as working remotely for two days and then spending the rest of the week in the office.
The infographic below shows Zoom's quarterly growth in revenues since the 2019 fiscal year.
Infographic courtesy of: Statista
Signing Off
Most Asian markets are up this morning with Japan, Hong Kong, and mainland China leading gains. The MSCI World index is back at record highs, brushing off inflation worries and concerns around the Delta variant hindering economic recovery.
El Salvador's Bitcoin law takes effect, making the cryptocurrency legal tender from today.
US futures edged higher in early trade as trading resumes today. The Rand is at R14.24 to the US Dollar. The trees are green and the first summer rains are falling in Johannesburg, oh joy!