In this briefing:
- Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
- Sony Corp: Key Takeaways from Our Recent Meeting with IR Team
- What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?
- Toyota: Hitting the Hybrid Accelerator and Towing Suzuki and Mazda in Its Wake
- Monthly Geopolitical Comment: Markets Are Still Waiting for the Result of US-China Trade Talks
1. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!
So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.
Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing.
2. Sony Corp: Key Takeaways from Our Recent Meeting with IR Team
This article is a round up of the key takeaways from our recent meeting with Sony’s IR team. Our main focus was on the PlayStation and subsequent hardware and software developments, the company’s mobile phones business unit, the pictures unit as well as the semiconductor business.
- In the gaming segment, Sony doesn’t see Stadia as a threat since Sony mainly caters to the core gaming segment. Sony does not expect cloud gaming to offer the same quality that consoles offer to core gamers anytime soon. For the time being, Stadia will most likely appeal to casual gamers.
- In the pictures segment, Sony is developing a Spider-Verse sequel. A definite release date is yet to be confirmed, however, looking at the first movie’s success, we can expect a similar result for the sequel upon release.
- The company also plans to hold onto its mobile communications segment even though it is expected to make losses in FY03/19 as well. For Sony, this segment is crucial in developing 5G technologies.
- In the semiconductors segment, Sony expects a demand hike from the number of cameras used per phone. This is in spite of the mobile phone market itself slowing down. Sony expects to increase the ASPs of these sensors going forward as well.
3. What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?
Despite some signs of stabilization in China’s factory gauges the primary trend is still weakness and it might be rash for investors to read too much into the recent data given the apparent weakness in the Eurozone and the moderation form a high level of growth in the United States. Quantitative tightening is on hold in the United States but a sharp “U-turn” to easing has not happened yet and is politically embarrassing. As inflation falls real rates are rising. Housing markets are showing signs of price weakness. Investors need to watch for signs of credit quality decay that could be an indicator of the next period of severe financial distress.
4. Toyota: Hitting the Hybrid Accelerator and Towing Suzuki and Mazda in Its Wake
The Nikkei announced this morning that Toyota Motor (7203 JP) was considering opening up its portfolio of hybrid patents for outside use, possibly for free.
We recently visited Toyota at its Toyota city headquarters and spent some time discussing this very topic. We believe this move is being made with an eye towards China in particular and to an extent the US. We would also highlight the continuing development of Toyota’s relationship with Suzuki. As the automakers move slowly towards what is likely to be an eventual union, the sharing of hybrid technology with Suzuki could have a significant impact on the medium-term prospects of both automakers.
5. Monthly Geopolitical Comment: Markets Are Still Waiting for the Result of US-China Trade Talks
The future of the US and China relationship remains the most significant geopolitical and economic issue watched by the markets. While the markets prefer to focus on the positives, the eventual outcome of the talks may yet prove disappointing. Meanwhile, a rift is emerging among EU members who have diverging attitudes to cooperation with China. Authorities in Turkey have again spooked investors with their ham-fisted approach to markets. In Ukraine, comedian Zelensky has won in the first round of the presidential poll. In India, sabre-rattling continues ahead of parliamentary elections despite the de-escalation of tensions with neighbouring Pakistan.
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