Finweek English Edition - October 24, 2019

Simon’s

stock tips

Founder and director of investment

website JustOneLap.com, Simon

Brown, is finweek’s resident exper t

on the stock markets. In this column

he provides insight into recent

market developments.

marketplace Simon says

By Simon Brown

36 finweek 24 October 2019 http://www.fin24.com/finweek

What’s the plan

with Spur?

LONG4LIFE

Long4Life* has increased its stake in Spur

to 14.3% of voting shares. The question is

whether CEO Brian Joffe is just taking a stake

at what he considers a decent valuation, or

whether he has bigger plans. Certainly, during

his time at Bidvest, he would take decent-size

stakes in companies and be happy to simply

harvest the dividends. I do suspect that is

also what he’s doing here. That said, Spur has

a market cap of under R3bn and with a lot

of cash at Long4Life, there could be an offer.

But I wouldn’t bet on that happening.

The pinch of

import duties

TISO BLACKSTAR

Global trade wars have now directly impacted

a locally listed investment, as Tiso Blackstar*

placed Robor Proprietary into voluntary

liquidation. Robor is involved in steel. I never knew

that Tiso owned such an asset, but one of the

reasons provided for the liquidation is “imposition

of import duties by the United States of America

on imported steel”. Selling into the US had been a

lucrative business for them, and it is no longer.

AFRICA MEDIA

ENTERTAINMENT

Internet killed

the radio star

Africa Media Entertainment announced that

Classic FM, which it owns, has been placed into

business rescue. The station will remain on air

and will likely be restructured and survive. But it

does indicate, in part, how tough the economy

is. Radio is, in theory, a great business: if you

can increase listenership you can charge more

for advertising while your cost base shouldn’t

change at all. Therefore, it would result in better

margins and profits – the ultimate operational

leverage. But the problems are three-fold.

Increasing listenership is hard in the age of the

internet; I can literally listen to any radio station

in the world and stream tens of millions of

songs. Secondly, increasing sales is not a linear

process. An increase of 10% in listeners does not

automatically mean you’ll get 10% more income,

as there is severe competition for ad spend. The

last issue is the cost base. I am always amazed

at how fancy radio offices are when, truthfully,

you can run radio from any building. Yet, radio

stations often seem to operate out of fancy areas

with high rentals, resulting in a high cost base.

Spur has a market cap of under

R3bn

and with a lot of cash at Long4Life, there could be

an offer. But I wouldn’t bet on that happening.

BROKER FEES

Heading for

zero?

US brokers are going all-in on price wars,
with investment management company
Charles Schwab dropping brokerage to zero.
They’ve already been followed by eTrade, TD
Ameritrade and Interactive Brokers, while Robin
Hood has been offering zero brokerage fees
since launching in 2013. For Charles Schwab,
brokerage revenue is small, at under 10%, while
for the others it’s a larger chunk – around a
quarter of existing revenue. US brokers earn
fees from multiple sources and not just from
transacting. This is as transacting has become
a commodity in that there is nothing special
about enabling a trade. The question is whether
we’ll see zero brokerage in South Africa any time
soon. I think the answer is no. Locally, our brokers
make a significant portion of revenue from
brokerage fees and, as such, need to protect that
income. While we have seen some new entrants
being aggressive in pricing, the rest of the broker
market has kept prices flat over the last number
of years, with some increasing admin and
Photos: Shutterstock | Gallo/Getty Images minimum fees.

SPUR

Now a little

bit sweeter

Spur has announced approval for the

cancellation of the 16% of its own shares which

it bought back (including 10% from Grand

Parade Investments). This means that each

share becomes a little more valuable, because

the company remains the same – but with

fewer shares in issue. That means more profit

(and dividends) will accrue to each share.