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China | Moneyweb results :( | Imperial |
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20 Mar 2014. I'm not a macro guy, as I'm not smart enough to predict where macro variables (like the Rand) are going to go. However, I do sometimes start getting a feeling that there's a macro bubble building up. Check out this article by Worth Wray on a possible credit bubble in China. Of course there's been some guys who have been calling a Chinese collapse since 2010, and you know how it goes - if you keep banging on the recession drum for long enough, eventually you'll get to one! (and experience that wonderful feeling of self-justification). Here's some stats:
The ratio of property prices to their rental stream is 39 in 8 key Chinese cities (in the US it was 23 just before their housing crisis).
If non-cashflow producing assets are recognised as non-performing, then bad loans will equal 98% of bank equity.
China's debt:GDP ratio grew from 150% to 210% by end 2012, rising further in 2013. Corporate debt rose from 92% in 2008 to 150% "today". Chinese corporates are the most leveraged in the world, and twice as levered as US corporates...just as corporate defaults are happening for the first time in China in more than 60 years.
The interest burden on China's total debt, at 9.2%, is higher than in US in 1929 & close to the peak interest burden in 2008.
China's leadership are really smart, and they are already trying to prick the credit bubble & allow defaults. They've got the levers too, as they're in charge of more of the economy than any other economically significant country.
"Although many economists believe that China’s abundant reserves, near 50% of GDP, will be enough to stem the tide in the event of capital flight, I don’t believe they are looking at the right data...M2 is a far better proxy for the capital that can rush out of an economy without warning … and Chinese M2 is now nearly twice the size of GDP. Since outstanding reserves cover less than 35% of M2, capital outflows place more pressure on the currency than most people realize. I wholeheartedly believe the renminbi will fall further over time, albeit with some serious volatility."
"We really have no way of knowing whether the country will suffer a modest slowdown or a hard landing."
"To be clear, China doesn’t have to experience a deep recession in order to disrupt global growth. A slowdown to 2-3% real GDP growth and a corresponding decline in China’s import demand could fire demand shocks across emerging Asian economies like India and Indonesia, commodity producers like Australia and South Africa, and even deteriorating economies in the Eurozone like France and Italy." Worth Wray.
It's worth wondering what the implications are of deleveraging in China, Chinese property prices cooling & mounting commodity stockpiles which they're wondering what to do with! On the other hand it's entirely possible that US & European growth picks up at the same time as Chinese growth slows down (this is why I don't like doing macro predictions).
I've got a soft spot for Moneyweb - I love their website and am often clicking through their interesting articles. It seems I haven't been doing enough clicking though, as they ran a comprehensive loss in the 6 months to 31 Dec 2013 of R1.4m or 1.3c per share. The loss is attributed to "lower than expected revenue generation across all platforms". They're facing increasing competition from the likes of Fin24 and, dare I say it, Biznews (Alec Hogg's new online platform).
They don't put a number on it, but one has to wonder how much smaller the loss would be if they weren't incurring legal costs in their battle against Media24. Moneyweb is due to file its replying affidavit shortly, after which the matter will proceed to court, for judicial determination. Given the relatively meagre profit Moneyweb ekes out, the length of the court case and the final result could have a significant impact on the company.
It was interesting to see that their mineweb.com website attracts 133,000 unique visitors a month - it's gained a fair bit of traction. And this is really where the big opportunity lies, in carving into international niche markets.
Moneyweb's got a NAV per share of 25c. The price of 50c last trade is a bit misleading, as the highest bid is only 35c (the lowest offer is 50c).
Looks like it may have been a blessing in disguise for Alec Hogg to move on, and sell out at prices from 68c to 80c a share.
Timeline:
Oct/Nov 2013 : director sales at prices from R201 to R223.
4 Dec 2013 : MJ Leeming buys at R199
20 Feb 2014 : Announced MJ Lamberti will be CEO from 1 Mar 2014
26 Feb 2014 interim results
27 Feb 2014 RJA Sparks' wife purchased at R162.
Mar 2014 : MJ Lamberti purchases shares from R169 to R170
It feels a bit like Lamberti's share purchases are to get himself some skin in the game now that he's CEO...but Imperial does look a little bit of interesting.
This put a smile on my dial when I read it in a financial magazine last week : "A falling-wedge, which
is a bullish continuation pattern, is in the
making and upside above 12 400c/share
would confirm a positive breakout".
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