Market Scorecard
Yesterday was very quiet for the Vestact team because the US market was closed. Over 85% of our assets under management are now in US Dollars in portfolios in New York. That's not to say that we don't follow the local stock exchange very closely. Our livelihoods are in SA which makes the ebbs and flows of the local economy very important to us. Plus, we all still have investments here.
The JSE closed in the green, with commodity stocks leading the way. Food and branded goods producer AVI, which is one of our smaller holdings, jumped 7.8% after they announced that they were paying a decent dividend despite a tough year of trading.
US markets were closed yesterday for the Labor Day public holiday. Other global bourses moved slightly higher yesterday, which was good news after two tough days at the end of last week. Yesterday the JSE All-share closed up 0.94%.
One Thing, From Paul
South African Breweries (SAB) was once the pride of the JSE and of the corporate sector in this country, but is now an almost invisible part of global beer brewer Anheuser-Busch InBev.
I noticed this week that moves are afoot to replace AB Inbev's Brazilian-born CEO Carlos Brito, who has run the company since 2004. The CFO and chair of the board have already been despatched in the past 18 months.
The FT described Brito's achievement as follows: "He led what had been a Latin American regional brewer's expansion into the world's largest beer maker, fuelled by aggressive deal making, a bonus-led staff culture and fierce cost-cutting at the businesses it had acquired".
AB InBev continues to battle under the weight of the debt taken on to buy SABMiller (LON:SAB) for $103 billion in late 2015. Their share price is now more than 60 per cent below the level it was at back then. The group still has debts of $87.4 billion, or 4.9 times earnings.
It halved its final dividend in April, after an initial cut in 2018. It has also been selling off the family silverware to reduce debt levels, including the sale of its Australian division for $11 billion to Asahi this year.
There are no South Africans at the top table, deciding who should replace Brito. The two key blocks of shareholders are the Belgian families who used to own Interbrew and the three Brazilian founders of 3G Capital. Other major shareholders include tobacco group Altria (NYSE:MO) and Colombia's Santo Domingo family.
You can still buy AB InBev on the JSE, where it maintains a secondary listing, but I would not recommend that you do so at this time. It has halved in value since the takeover of SAB nearly five years ago.
Byron's Beats
Remember when I spoke about the much anticipated Disney release of Mulan? Because of Covid-19 they decided to dump the big cinema release and launch the movie on Disney +, their streaming service. It was first aired on the 4th of September with an extra payment of $30 needed to access the movie even if you are a paying Disney + subscriber.
According to Sensor Tower, an app download research firm, downloads of the Disney + app spiked 68% on the day of the release and the day after. In-app spending spiked 193% as consumers bought the movie. Not only does it seem like Mulan was a success but it will also lock in Disney + subscribers for life. Is this a sign of things to come? Not good news for cinemas.
They also mention another big hit movie called Tenet which was just released by Warner Bros. They went a different route, launching the flick in theatres outside the US first and then phasing it into US theatres as they opened up. It will be interesting to see which one does better.
Bright's Banter
Yum China managed to raise $2.2 billion ahead of its secondary listing in Hong Kong at a price multiple higher than Alibaba (NYSE:BABA). The operator of KFC, Taco Bell and Pizza Hut in China placed its shares at HK$412, or a 4.9% discount to its NYSE closing price on Thursday. Yum China has enjoyed tremendous success and is now one of the largest quick service restaurant operators in the People's Republic.
Yum China will start trading in Hong Kong on the 10th of September, joining the likes of JD.com and NetEase (NASDAQ:NTES) on that exchange. Jack Ma's Ant Group, e-commerce services provider Baozun and data centre operator GDS Holdings will also be listing in Hong Kong soon, moving this stock exchange higher up the global league tables by aggregate market capitalisation.
Yum China is a purveyor of fried chicken in a bucket, which doesn't seem like a high-flying tech business, but its CEO Joey Was made a big bet on a digital ecosystem with the KFC and Pizza Hut apps. In 2019, the company had roughly 10 000 restaurants with over 240 million active users on their apps which helped lift their online orders to an eye-popping 61% of total sales last year.
Signing Off
US futures, which indicate the likely trend in those markets later today, are mixed. The more traditional indices like the S&P 500 and Dow Jones are up while the tech heavy Nasdaq is flat. That suggests that some "sector rotation" is happening, although that is a favourite phrase amongst pundits, but doesn't really mean anything. The Nasdaq has comfortably outperformed all other major indices in recent years, and today's gyrations probably won't change much. The Dollar remains weaker, at R16.73.
Later today, the scale of SA's economic meltdown will become apparent when Statistics South Africa (Stats SA) releases gross domestic product (GDP) data for the second quarter of 2020. It's going to be fugly.