Simon Shares

• Wild week for Naspers (JSE code: NPN), Prosus (JSE code: PRX) as Tencent (Hong Kong code: 700) got slapped down by the Chinese government.
• We're back at level 3, adjusted. Alcohol sales are allowed and Distell (JSE code: DGH) put out another great trading update. No doubt better if no alcohol bans, but the argument that your industry is under threat wears thin after such an update.
• President Ramaphosa also announced the return of the pandemic grant to the unemployed at R350 a month until March 2022. This pays to some 9.5million South African and means just over R3billion a month into the economy.
  • How do we pay for it? Dividend tax on these super dividends.
• Apple $21.7billion in profits, almost doubling the previous year.
• Alphabet nearly tripled its profits to $18.5billion as advertising revenue grew 69%.
• Microsoft profits hit $19.1B, up 42% from the previous year.
• The market capitalization of Amazon, Apple, Facebook, Alphabet, and Microsoft is now over 30% of the entire S&P 500 index and over 40% for the Nasdaq100.
• Tigerbrands (JSE code: TBS) are recalling 20million tins.
• Two new ETFs coming to market. Global healthcare from Sygnia and a diverse and inclusive ETF from Satrix.

Upcoming events;

• 19 August ~ JSE Power Hour: BEE shares and the JSE

Forget super cycle, hello super dividends

• Anglo Platinum (JSE code: AMS) paid an R175.00 total dividend.
• Kumba Iron Ore (JSE code: KIO) paid a 7270c.

In both cases, this amounted to a dividend yield (DY) of around 10% at the interim stage.

No share buybacks as Anglo American (JSE code: AGL) own a significant majority of the shares and likely want the dividend back at home.

The question is will other miners be as generous or will they do some share buybacks as well?

If commodity prices stay where they are, we'll see the same again in six months and into 2022?

If prices remain the same to the end of 2022 (big if?) we'll get a 40% return from just dividends?

This is what super profits look like.

Offshore

/ New closing highs for S&P500 & Nasdaq. But Russel2000 is lagging.

/ Apple delays back to the office to October

/ Twitter and Snap - good results

/ China regulator bars Tencent from exclusive rights in online music

/ Big results due this week; Apple & Amazon. So far reported results have been very strong.

Local

/ Rioting impact, retail about 8% of store space impacted. REITs bigger concern.

/ Local inflation drops

/ Anglo Americana and BHP production updates

/ City lodge sells East African assets

/ Cashbuild update

/ Distell update

Simon Shares

• We now have updates from listed retailers as to the damage caused by last weeks rioting. Chantal Marx ran the data and says we saw almost 1,700 stores looted or closed due to the rioting and this is about 8% of the retailers' local footprint and some 5% of global footprint. This is a significant number, but considering many are open for trade again, with many opening last weekend already. The impact on earnings is likely to be very modest, if at all.
• PwC expects last weeks riots to take about 0.4% off local GDP for 2021. They already had a low expectation of under 3%, but that drop of 0.4% does illustrate how listed retailers may be okay, the real pain is in the unlisted and especially the small one-off store.
• Local CPI dropped a little in June to 4.9% (5.2% in May).
• The population of South Africa was estimated to be 60.14million at mid-year 2021, an increase of about 604,281 (1.01%) since mid-year 2020.
• Stellar production updates from Anglo American (JSE code: AGL) and BHP* (JSE code: BHP). They are both firing on all cylinders, even if there have been some issues (iron ore rail line for example). But they're largely debt-free, no massive projects or M&A activity and Greg Katzenellenbogen says the worlds top miners will make almost US$120billion profit this year, double from last year. So massive dividends?
• Sygnia did not steal your dividend.

* I hold ungeared positions.

Upcoming events;

• 22 July ~ JSE Power Hour: Power of savings
• 19 August ~ JSE Power Hour: BEE shares and the JSE

Risk is good

I got an email from a listener asking about risk free investments on the JSE. Thing is, there is no risk free on the JSE - and that's a good thing.

Without risk there would be no reward.

When I am looking for investments, I always look for the good things about the business. Margins, growth, product and the like.

But I also dig into the risks, competition, input inflation and the like.

The thing is, I like to see risk, I just want risk that I think the company can manage and ultimately maybe even turn into a benefit. For example, new product is absolutely a risk. But what if they disrupt themselves and create a new product that hits sales of their existing product, but creates an entire new category.

Apple did this with the iPhone, killing off the iPod.

When researching into long-term 'til death do us part' investments

I create a short list of the three main features I like in a stock. But I also create a list of the three main risks and I keep a close eye on both lists.

Offshore

/ US inflation, again above expectations

/ Delta airline results show travel returning

/ US bank earnings as previsions put back into the income statement

/ Netflix looking into gaming

/ QoQ China's GDP increased 1.3% in Q2, 7.9% YoY

Local

/ Rioting impacts as listed companies report details

/ South African Special Risks Insurance Association (Sasria) will cover claims

/ Standard Bank taking out Liberty Holdings

/ Very strong Richemont update

/ Tongaat results

/ Steinhoff increases settlement offer

Simon Shares

• I'm recording Wednesday afternoon and the violence of the past week seems to be abating, certainly in Gauteng. It has been a horror week for our country and most importantly; look after yourself if you can somebody else as well and above all else, be kind.
• US CPI YoY 5.4%. Core YoY 4.5%. Both ahead of expectations.
• A very strong production update from Pan African (JSE code: PAN) and their 15ha blueberry farm.
• OPEC+ seems to have reached a compromise between Saudi Arabia and UAE that should see an OPEC+ deal possible.
• US earnings season has kicked off and is expected to be the best ever - and it needs to be with S&P500 and Nasdaq100 at all-time highs.
• Gold US$1,825.
• Lost in all the rioting is another two weeks of level 4 adjusted lockdown, albeit restaurants can seat customers.

Upcoming events;

• 22 July ~ JSE Power Hour: Power of savings

• We're starting to see SENS announcements about the impact of the rioting. The worst-hit so far seems to be Cashbuild (JSE code: CSB), they have 36 stores directly impacted by rioting and looting and a further 33 stores closed as a precautionary measure.
• Ethekwini Region, according to its mayor, Mxolisi Kaunda. R1billion loss of stock has been affected & R15billion rand of damage to property and equipment.
• Fuel refinery Sapref declares force majeure and shuts the plant.
• Large parts of N3 remain closed and Durban harbour has thirteen ships waiting for entry (according to VesselFinder.com). To my memory of living in KZN and counting the ships waiting whenever I could, that's about as many as I've ever seen.
• These will resolve as the rioting quietens down, and evidence is that it peaked on Monday. Longer-term the impact is hard to tell. Certainly, thousands of small businesses are gone and with them jobs. The Rand has fallen to 14.66 after hitting 14.76 early on Wednesday after it was trading at 14.20 on Friday. The JSE is actually up some 3% so far for the week.

Riot insurance

So the answer here is fairly simple, South Africa has an SOE that covers riot insurance - South African Special Risks Insurance Association (Sasria).

They repeatedly have clean audits (financials are here).

Assets under management is a little over R8billion.

But they have reinsurance.

Pretty much any property insurance you have will include a line item for Sasria and it is very cheap.

For corporates, it is a larger cost every month and the question is are corporates 10% insured or have they done some self insuring.

Offshore

/ US ten year back at 1.36% after peaking at +1.72% in March

/ Jeff Bezos has stepped down as Amazon CEO

/ OPEC+ couldn’t reach an agreement

/ Fed minutes tell us nothing new, except inflation is higher/faster than they expected

/ US extends the economic blacklist of Chinese companies

/ China wants pre-IPO review of all new listings that have large user data

Local

/ Imperial delisting offer at 6600c

/ Sibanye Stillwater bearish on palladium, bullish on platinum & rhodium

/ MultiChoice hit with R63billion tax bill in Nigeria

/ Nedbank WFH policy, 60% in office ie: 2 days WFH each week

/ Prosus shareholders approve share swap

Markets are as quiet as the street of Jozi, so this week a list of my favourite podcasts, the focus is offshore. I'll return and look at local in a few weeks.

Upcoming events;

• 13 July ~ How to use ThinkMarkets Tools
• 22 July ~ JSE Power Hour: Power of savings

Favourite podcasts;

• Planet Money
• Motley Fool Money
• Disciplined Investor
• Odd Lots
• Freakonomics Radio
• Michael Covel’s Trend Following Radio

Offshore

/ US The unemployment rate edged up to 5.9% in June

/ US home prices rose by 14.6% in April, the largest gain in 30 year

/ S&P 500 closes green 7 days in a row, record is 8 days (US markets closed Monday)

/ RobinHood proposed listing ~ $40bn valuation

/ Didi Chuxing lists on NYSE, market cap $69bn & Chinese regulator blocks new accounts

Local

/ Modest Q2 for JSE, TOP0 -1.2% (+11% YTD), Fini15 +6.8% in Q2

/ SARB turned 100 last Wednesday

/ May saw another +R50billion trade surplus tax receipts

/ Invicta results

/ AdaptIT shareholders vote for 700c Volaris delisting offer

/ Etion results. The story is they selling LAWTrust business for R245million when the market cap of the entire company is R22million. CEO says plans to return value and delist