Major International Business Headlines Brief::: 04 November 2019

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Major International Business Headlines Brief::: 04 November 2019

 


 

 


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*  Absa PMI rises to 48.1 in October

*  Kenya's Safaricom says first half core earnings up 12.7%

*  African Development Bank board eyes 125% capital increase - Ivorian
president

*  Moody's leaves South Africa teetering on brink of 'junk'

*  Kenya's Safaricom plans joint bid with Vodacom for Ethiopia licence

*  South Africa's Taste Holdings to exit food business, sells Starbucks
stores

*  Sudan agrees reforms with World Bank, IMF - finance minister

*  Africa's MTN cancels $300 million stake sale in Mascom Wireless Botswana

*  Kenya's economy to grow at a faster pace next year -World Bank

*  Positive China data lifts South African rand ahead of Moody's review

*  McDonald's: CEO Steve Easterbrook fired after dating employee

*  US jobs growth beats forecasts despite GM strike impact

*  Saudi Aramco IPO: World's most profitable company to go public

*  Fitbit snapped up by Google in $2.1bn deal

 


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Absa PMI rises to 48.1 in October

JOHANNESBURG (Reuters) - South Africa’s seasonally adjusted Absa Purchasing
Managers’ Index (PMI) continued to contract in October, despite improvements
in business activity and new sales orders, the survey showed on Friday.

 

The index, which gauges manufacturing activity in Africa’s most
industrialised economy, rose to 48.1 points in October from a revised 45.1
in the previous month, remaining below the 50-point mark that separates
expansion from contraction.

 

“The business activity index increased after two consecutive declines, while
new sales orders also improved somewhat from a sharp drop in September,”
Absa said in a statement.

 

“However, both indices remained below the 50-point mark pointing to a
decline in demand and output.”

 

 

 

 

 

 

 

 

 


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Kenya's Safaricom says first half core earnings up 12.7%

NAIROBI (Reuters) - Kenya’s largest telecoms operator Safaricom said on
Friday its earnings before interest and taxes rose 12.7% to 49.8 billion
shillings ($482.79 million) in the first half to end-September.

 

The firm, which is partly owned by South Africa’s Vodacom and Britain’s
Vodafone, attributed the growth to increased revenue from its mobile
financial service, M-Pesa, and its internet access provision.

 

($1 = 103.1500 Kenyan shillings)

 

 

 

African Development Bank board eyes 125% capital increase - Ivorian
president

ABIDJAN (Reuters) - The African Development Bank’s board of governors may
approve a 125% capital increase to $225 billion on Thursday, Ivory Coast
President Alassane Ouattara said.

 

The board is holding an extraordinary meeting to decide whether to approve a
seventh boost to the bank’s capital base. The last increase was agreed in
2010, giving the Abidjan-based lender far greater scope to meet the
continent’s funding needs.

 

Addressing the board before the meeting, Ouattara said: “We are convinced
the governors will take the right decision to increase the general capital
up to 125%.”

 

The AfDB’s shareholders are Africa’s 54 nations and 26 non-African donor
countries. Part of its lending to poorer countries is at concessionary
rates, largely financed by Western donors.

 

Each member country appoints a governor to the board whose voting power is
proportionate to the amount of capital contributed by the country.

 

 

Moody's leaves South Africa teetering on brink of 'junk'

JOHANNESBURG/LONDON (Reuters) - Moody’s left South Africa on the brink of
“junk” status on Friday after it revised the outlook on the country’s last
investment-grade credit rating to “negative,” piling pressure on President
Cyril Ramaphosa to quicken the pace of reform.

 

Moody’s said the outlook revision on its ‘Baa3’ rating, the lowest rung of
investment grade, was motivated by a deterioration in the economic growth
outlook and rising debt.

 

Analysts had expected the move after a bleak mid-term budget statement this
week that slashed this year’s growth forecast to 0.5% and showed government
debt racing to more than 70% of gross domestic product by 2023.

 

The rand tumbled more than 2.5% over the past week against the dollar, its
sharpest weekly drop since early August. Yields on local 10-year government
bond issues traded on Monday at just over 8% but climbed as high as 8.6%
following the dire budget predictions.

 

The negative outlook means there is a window of 12-18 months in which a
downgrade could be delivered, but it could come sooner if Moody’s isn’t
impressed by the fiscal picture presented at the next budget statement in
February.

 

“The development of a credible fiscal strategy to contain the rise in debt,
including in the 2020 budget process and statement, will be crucial to
sustain the rating at its current level,” Moody’s said in a statement after
South African financial markets had closed.

 

It added that its new outlook reflected rising concern that the government
would not find “the political capital to implement the range of measures it
intends, and that its plans will be largely ineffective in lifting growth”.

 

The finance ministry responded by saying the country had “a narrow window to
demonstrate faster and concrete implementation of reforms”.

 

Ramaphosa has struggled to revive Africa’s most advanced economy since
taking over from scandal-plagued Jacob Zuma in February 2018.

 

The wave of optimism among foreign and local investors that accompanied his
rise to power has fizzled out as the economic challenges have grown more
acute, with unemployment reaching an 11-year high above 29% and state power
company Eskom struggling to keep the lights on.

 

One of the greatest worries is rising government debt, which shows no signs
of stabilising soon amid repeated bailouts for state-owned companies.

 

‘CONSISTENT UNCERTAINTY’

Fund managers said they were not expecting a steep sell-off in government
bonds and the rand when financial markets re-open on Monday, because the
outlook revision was expected by so many and South African assets had fallen
sharply over the past week.

 

The spread of South African dollar debt over U.S. Treasuries is already
wider than on some junk-rated sovereigns, reflecting longstanding concerns
over the country’s fiscal health.

 

“Valuations are already reflecting this outcome. So on any sell-offs, we
would see it as a buying opportunity,” said Jean-Charles Sambor, deputy head
of emerging market fixed income at BNP Paribas Asset Management.

 

S&P Global and Fitch already moved South Africa’s debt to sub-investment
level in 2017, when the country was embroiled in corruption scandals under
Zuma.

 

A move to “junk status” from all three agencies typically increases a
government’s cost of borrowing by raising the premium that investors demand
to hold its debt. It could also see South Africa evicted from the benchmark
World Government Bond Index of local-currency debt, which could trigger
billions of dollars of passive outflows.

 

Phoenix Kalen, director of emerging markets strategy at Societe Generale,
said South Africa was now in the “last-chance saloon” and that it had to
stabilise its debt.

 

“This will be a Herculean task,” Kalen said, citing financial pressures at
state companies among causes for concern.

 

Ramaphosa’s government has promised Eskom R230 billion($15.3 billion) of
bailouts over the next decade, on top of a R59 billion “special
appropriation” over the next two fiscal years. But analysts say it will need
more state money than that.

 

Kevin Lings, chief economist at asset manager Stanlib, said a downgrade in
2020 was now his “base case” and that some investors would be reluctant to
buy South African debt until the downgrade had happened.

 

“Next year is going to be marked by consistent uncertainty around the
currency and bond markets, it’s going to put South Africa under a lot of
strain,” he said.

 

($1 = 15.0268 rand)

 

 

 

Kenya's Safaricom plans joint bid with Vodacom for Ethiopia licence

NAIROBI (Reuters) - Kenya’s largest telecoms operator Safaricom plans a
joint bid with South Africa’s Vodacom for one of two Ethiopian telecoms
licences that will be offered next year, its acting chief executive said on
Friday.

 

Michael Joseph said the company, partly owned by Vodacom and Britain’s
Vodafone, had not made up its mind about another option of entering the
lucrative Ethiopian market through partial privatisation of state monopoly
Ethio Telecom.

 

Firms which want to secure the licences have to come with deep pockets,
Joseph said, citing the expected cost of acquiring the spectrum.

 

“You have to bid for the spectrum. There is talk about it and it is in the
billion dollar range, just for the licence,” he told Reuters after the firm
released its first half results.

 

 

 

South Africa's Taste Holdings to exit food business, sells Starbucks stores

JOHANNESBURG (Reuters) - Taste Holdings, owner of Starbucks and Domino’s
Pizza franchises in South Africa, said on Friday it was abandoning the food
business, and had already sold its 13 stores of the coffee chain to a
consortium for 7 million rand ($464,000).

 

The company said it was also in discussions on the sale of Domino’s and its
two other food businesses, restaurant chain Maxi’s and The Fish & Chips Co,
as part of a new strategy to become a solely luxury retail group.

 

It had been trying to turn its food business around after putting Starbucks
and Domino’s expansions on hold a year ago amid losses - making Taste one of
a string of retail firms hurt by a troubled South African economy.

 

In a statement, it said that after months of canvassing potential partners
and capital providers, it had become evident that the money required to fund
its plan could not be secured with the current business structure and market
conditions.

 

“Taste’s board of directors has therefore revisited the previous strategy
and has decided that it is in the best interests of the Company and all
stakeholders to exit the food business,” the statement said.

 

Starbucks said in a statement the sale would provide the necessary capital
to achieve its ambition of having up to 200 stores in South Africa. A
spokeswoman noted that Starbucks stores had been profitable with Taste.

 

Consumer-focused firms from banks to retailers have been struggling in South
Africa, where a stagnant or contracting economy, unemployment of near 30%
and rising living costs have left many with little extra cash.

 

Taste said following the sale of the food assets, including the Starbucks
stores and 48 Domino’s outlets, it would focus on its remaining luxury
retail portfolio, including jewellers Arthur Kaplan and World’s Finest
Watches. That, however, is also loss-making.

 

Its statement said the Starbucks outlets had been sold to a company called
K2019548958 (South Africa) Proprietary Limited, a consortium whose members
were not identified in full.

 

($1 = 15.0898 rand)

 

 

 

Sudan agrees reforms with World Bank, IMF - finance minister

KHARTOUM (Reuters) - Sudan has agreed a roadmap to “rehabilitate” the
country with the World Bank, International Monetary Fund and African
Development Bank, its finance minister said on Thursday.

 

Finance Minister Ibrahim Elbadawi said the plan involved structural reforms
but did not go into further details. He said as part of the deal Sudan would
not have to pay its lenders debt arrears. There could also be non-financial
support.

 

Sudan’s inclusion on a list of countries deemed sponsors of terrorism by the
United States makes it ineligible for debt relief and financing from lenders
like the International Monetary Fund and World Bank, cutting off a crucial
source of finance.

 

Elbadawi was speaking to reporters at Khartoum airport after he flew back
from Washington, D.C., where he was attending the annual World Bank and IMF
meetings.

 

He said negotiations with other creditors would begin in March.

 

“Based on that, Sudan’s debt relief programme will start by the end of
2020,” he said, without giving further details.

 

Elbadawi said that “friends of Sudan” will fund its 2020 budget, and said
the ministry has submitted financing requests for 20 projects to donors,
without identifying who those donors were.

 

A “friends of Sudan” meeting will be held in Khartoum in early December, he
said. Another meeting for donors will be held in April.

 

Saudi Arabia and the United Arab Emirates have given Sudan $3 billion in
aid, agreed soon after former president Omar al-Bashir was ousted in April,
throwing a lifeline to Sudan’s new military leaders at the time.

 

Sudan’s new transitional government, formed as part of a three-year deal
agreed by military and civilian leaders in August, has been working to
remove Sudan from the U.S. sponsors of terrorism list, to potentially open
the door for foreign investment.

 

Prime Minister Abdalla Hamdok is expected to visit the United States soon,
Elbadawi said, without saying when.

 

 

 

Africa's MTN cancels $300 million stake sale in Mascom Wireless Botswana

JOHANNESBURG (Reuters) - South African telecoms major MTN Group Ltd has
ditched a plan to sell its 53% stake in Mascom Wireless Botswana, which was
supposed to net the company $300 million.

 

Africa’s largest mobile operator by subscribers said in a quarterly update
on Thursday that certain conditions related to the transaction had not been
met, which led to the company’s decision.

 

Chief Financial Officer Ralph Mupita said on a call with reporters that the
bid for MTN’s stake in the business had been unsolicited, and it was for now
no longer being held for sale.

 

“In the longer term, if somebody came with a very attractive offer for the
business, we’ll apply our minds then,” he said.

 

A 15 billion rand ($1.00 billion) divestment plan is making “steady
process”, Mupita said, adding that the company was in advanced discussions
around the disposal of 49% holdings in ATC Ghana and ATC Uganda, which it
values at between 7 billion rand and 8 billion rand.

 

MTN is reviewing a raft of investments under a three-year plan that includes
shedding loss-making e-commerce assets and exiting countries where it has no
prospect of reaching the top-two spots in terms of market share.

 

It is aimed at slimming the company down and honing its focus on high-growth
markets on the continent and in the Middle East after clashes with
regulators in Nigeria, Uganda and elsewhere crimped growth.

 

It said on Thursday its service revenue for the nine-months to Sept. 30 rose
by 9.6% year-on-year, buoyed by strong performances from its Nigeria and
Ghana operations.

 

However, in its home market South Africa, where a sluggish economy, high
unemployment and rising living costs have hurt consumer finances, service
revenue over the period was flat.

 

($1 = 14.9979 rand)

 

 

 

Kenya's economy to grow at a faster pace next year -World Bank

NAIROBI (Reuters) - Kenya’s economy is likely to expand by 6.0% next year,
rising from projected growth of 5.8% this year, due to a favourable weather
outlook, the World Bank said on Thursday.

 

East Africa’s biggest economy has grown by an average of more than 5% in the
last five years but investors have been concerned by growing public debt,
which nominally rose to 62.3% of GDP last year, from 59.1% previously, the
World Bank said.

 

The government usually provides its debt figures in net present value terms,
meaning its figure is a bit lower.

 

“The (2020) growth outlook is predicated on normal weather conditions,” the
bank said in its biannual report on Kenya’s economy, adding that planned
fiscal deficit cuts by the government will also help.

 

The Treasury has already indicated it is reviewing its budget for the
current financial year to cut the government’s expenditure and set more
realistic revenue collection targets.

 

The central bank will embark on a monetary easing stance if the fiscal cuts
are sustained to attain a balance, Patrick Njoroge, the bank’s governor,
said last month.

 

The World Bank warned its latest growth forecasts faced risks. “Downside
risks to the outlook are significant,” it said.

 

They include potential droughts, failure by the government to cut its fiscal
deficit and a slowdown in global growth.

 

The World Bank welcomed the prospect of the removal of a cap on commercial
lending rates, saying it could boost the economy.

 

In 2016, the government capped commercial interest rates at four percentage
points above the central bank’s benchmark rate, accusing lenders of failing
to offer affordable credit.

 

President Kenyatta refused to sign this year’s budget this month, demanding
lawmakers remove the cap.. Lawmakers are due to decide on the cap next week.

 

Kenyans have questioned the quality of the current robust annual economic
growth rates, citing widespread unemployment.

 

“It’s true that you have numbers, you have GDP numbers and... you can’t eat
GDP,” Njoroge, the central banker, told a forum on the economy on Monday. “I
mean jobs, that person who is trading, actually does go and make a profit
and all those other things.”

 

 

 

Positive China data lifts South African rand ahead of Moody's review

JOHANNESBURG - South Africa’s rand firmed on Friday as an unexpected bounce
in Chinese factory activity helped offset concerns over prospects of a
U.S.-China trade pact and skittishness ahead of a long-awaited decision on
South Africa’s credit rating.

 

The rand traded at 15.0600 versus the greenback by 0505 GMT, 0.31% stronger
compared with the previous day’s close.

 

The currency had been losing ground following a bleak budget speech on
Wednesday, where Finance Minister Tito Mboweni slashed growth forecasts and
predicted ballooning debt.

 

That raised fears that South Africa could lose its last investment-grade
credit rating on Friday, when Moody’s is set to announce its ratings
decision following a review, also knocking confidence in the rand.

 

However, investor sentiment was given a boost on Friday after a survey
showed that manufacturing activity in China expanded at its fastest pace in
more than two years in October, lifting Asian shares.

 

Throughout the day, though, the rand is likely to be driven by Moody’s
decision. Peregrine Treasury Solutions said in a note there was no telling
the impact a negative adjustment in its rating could have: “For now, it’s
just sit back and hold tight, with a new support level of R15.00 having been
set.”

 

Government bonds inched lower, with the yield on benchmark 2026 instrument
rising 1 basis point to 8.505%.

 

 

McDonald's: CEO Steve Easterbrook fired after dating employee

McDonald's has fired its chief executive Steve Easterbrook after he had a
relationship with an employee.

 

The US fast food giant said it had been consensual, but Mr Easterbrook had
violated company policy and shown poor judgement.

 

In an email to staff, the British businessman acknowledged the relationship
and said it was a mistake.

 

"Given the values of the company, I agree with the board that it is time for
me to move on," he said.

 

Mr Easterbrook, 52, who is divorced, first worked for McDonald's in 1993 as
a manager in London before working his way up the company.

 

Easterbrook's new McJob

Intel chief resigns over relationship

He left in 2011 to become boss of Pizza Express and then Asian food chain
Wagamama, before returning to McDonald's in 2013, eventually become its head
in the UK and northern Europe.

 

He was appointed chief executive of McDonald's Corporation in 2015.

 

The fast food giant's board voted on Watford-born Mr Easterbrook's departure
on Friday after a review.

 

It will release details of his severance package on Monday, details of which
will be closely watched.

 

The company has been criticised over the amount it pays shop staff, and Mr
Easterbrook faced scrutiny for his $15.9m pay packet in 2018. It was 2,124
times the median employee salary of $7,473.

 

He will be replaced by Chris Kempczinski, most recently president of
McDonald's USA, with immediate effect.

 

In a statement, Mr Kempczinski thanked Mr Easterbrook for his contributions,
adding: "Steve brought me into McDonald's and he was a patient and helpful
mentor."

 

Last year Intel boss Brian Krzanich stepped down for having a consensual
relationship with an Intel employee, which was against company rules.

 

He had been in the post since May 2013.--BBC

 

 

 

US jobs growth beats forecasts despite GM strike impact

US employment was more resilient than expected in October despite the impact
of strike action at General Motors.

 

Companies added 128,000 new jobs, ahead of a forecast 85,000 rise, during a
month when thousands of workers walked out at the carmaker.

 

The unemployment rate edged up slightly to 3.6% from 3.5% in September,
which had been the lowest rate since 1969.

 

Analysts said the data supported the Federal Reserve's comments earlier this
week that the economy is in good shape.

 

President Trump immediately praised "blowout" jobs data, stating that
adjusted employment figures showed growth of 303,000 roles. However, this
includes upgrades to figures from previous months and other adjustments.

 

The jobs data for August and September was revised upwards. In August,
51,000 more roles than originally thought were added to the US economy and
44,000 more jobs were created in September.

 

The data from the Labor Department showed that the manufacturing sector shed
36,000 positions last month, the biggest fall for a decade.

 

However, within manufacturing, employment in the motor vehicles and parts
sector declined by 42,000 because of the strike at GM. Striking employees
are treated as unemployed in the US statistics.

 

The White House said that 60,000 jobs were affected by the GM strikes.

 

And public sector payrolls fell in October because 20,000 temporary workers
who had been preparing for the 2020 Census completed their work.

 

Neil Birrell, chief investment officer at Premier Asset Management, said
employment data "appears to back up the Fed's comments on Wednesday night
about the economy being in decent shape and its shift in policy stance".

 

On Wednesday, the US Federal Reserve cut the country's key interest rate,
but signalled that there would not be further reductions in the near term.

 

Does the US "rock", as President Trump says?

 

The labour market does seem pretty resilient, and the new figures do support
that view.

 

By international standards, the country's unemployment rate is very low. Not
the lowest among the developed economies, but well towards the right end of
the range. But in terms of the percentage of the adult population who do
have jobs, the US is near the middle.

 

So why the apparent discrepancy between what the employment and unemployment
figures tell us?

 

It is because people who don't work are only counted as unemployed if they
have actively tried to find work. Some people don't for family reasons. Some
are full-time students. Some are retired. But some are discouraged by the
lack of opportunity, which may be a factor in some areas in the US.

 

And some don't seek work because of health problems. In the US, opioid drug
misuse is sometimes cited as a factor that inhibits some people from seeking
work.

 

There is no question that since the financial crisis the US has created a
lot of jobs. But there are some troublesome features of the country's labour
market.

 

Slowing growth

The world's largest economy grew at an annual rate of 1.9% in the third
quarter, which was the slowest rate this year but was above some analysts'
expectations for expansion of 1.6%.

 

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that the
number of new roles added over the last three months average at around
170,000.

 

"That said, forward-looking surveys continue to point to the trend in
payroll growth slowing to only 50,000 or so by the turn of next year," he
said.

 

"They might be wrong - shifts in sentiment don't always translate into
shifts in action - but we aren't willing to assume that job gains will
continue to trend at anything like 170,000."--BBC

 

 

 

Saudi Aramco IPO: World's most profitable company to go public

Saudi Aramco has confirmed it is planning to list on the Riyadh stock
exchange, in what could be the world's biggest initial public offering
(IPO).

 

The state-owned oil giant will determine the IPO launch price after
registering interest from investors.

 

Business sources say the Saudis are expected to make shares available for 1%
or 2% of the firm, and the offer will be for existing company shares.

 

Saudi Aramco is thought to be worth about $1.2tn (£927bn).

 

'Historic'

The firm said it has no current plans for a foreign share listing, saying
long-discussed plans for a two-stage IPO including an offering on a foreign
exchange had been put aside for now.

 

"For the (international) listing part, we will let you know in due course.
So far it's only on Tadawul," Aramco chair Yasir al-Rumayyan told a media
conference, referring to the Saudi stock exchange.

 

Saudi Aramco flotation 'coming soon'

 

Saudi Arabia denies calling off Aramco float

 

Saudi Arabia to open up to foreign tourists

 

Chris Beauchamp, chief market analyst at derivatives traders IG Group, said:
"Investing in Aramco carries risks, of course, and not only that oil prices
will struggle to move higher.

 

"Political and strategic risks are high for any firm operating in the
region, not least one which is an arm of the Saudi state. Aramco also has
limited control in output policy, a key part of Saudi Arabia's Opec
management."

 

Those potential risks were highlighted in September when drone attacks hit
the Abqaiq oil facility and the Khurais oil field in Saudi Arabia, both
owned by Aramco.

 

But Aramco boss Amin Nasser, who called the plans "historic", told a media
conference after the IPO statement was published that the firm was still the
most reliable oil company globally.

 

In its launch announcement Aramco said: "The company does not expect the
impact of these attacks to have a material impact on its business, financial
condition or results of operations."

 

What is Saudi Aramco?

Saudi Aramco traces its roots to 1933 when a deal was struck between Saudi
Arabia and the Standard Oil Company of California, which later became
Chevron, to survey and drill for oil, creating a new firm to do so.

 

Between 1973 and 1980, Saudi Arabia bought the whole company.

 

Saudi Arabia has the second-biggest oil reserves after Venezuela, according
to the Energy Information Administration. It is also second in production,
after the US. But it gets its prominence because it has the monopoly on all
that oil in the country, and because of how cheap it is to extract.

 

It's essentially the world's largest unquoted company; it's a massive global
oil producer," said David Hunter, director of market studies at Schneider
Electric.

 

"This is the absolute mother of all oil and gas companies."

 

Why is it worth so much money?

Saudi Aramco is worth $1.2tn, according to analysis from financial news
service Bloomberg, although Riyadh would prefer a valuation of $2tn, which
is one reason the company's share sale has been delayed a number of times.

 

Mr Beauchamp from IG Group says: "Aramco is a world away from the tech IPOs
that have been all the rage lately, but the valuation problem still haunts
them like it does the firms of Silicon Valley."

 

He adds: "$2 trillion probably overstates the worth of the firm in a world
of high oil supply and uncertain demand, but $1.2 trillion is too low for a
vital part of the Saudi state".

 

Once shrouded in mystery, Aramco has been transformed in the last few years
as it geared up for this moment

 

It has begun publishing financial results, holding question and answer
sessions about the company and even bringing journalists to its sites
following recent drone attacks.

 

And it has hired female Westerners to some of its top jobs. The language in
today's document speaks to international concerns. It describes "long-term
value creation through crude oil price cycles" and improving sustainability
"by leveraging technology and innovation to lower our climate impact".

 

Local people - even "Saudi female divorcees" - will be eligible to buy
shares, and will receive a bonus share for every 10 they hold.

 

Either way, it is phenomenally profitable. For the first half of 2019, it
posted a net profit of $46.9bn, almost all of which was paid out in
dividends to the Saudi state.

 

Any company that profitable will attract a high price. By comparison, for
the same time period, Apple, the world's largest company by value currently,
posted a net profit of $21.6bn, and Exxon Mobil, the largest listed oil
company, made $5.5bn.

 

 

Another aspect is the cost of production. Whereas extracting North Sea oil
is expensive due to its location under hundreds of feet of water, oil in
Saudi Arabia is relatively close to the surface.

 

Saudi has many of the cheapest oil fields for extraction, with some
per-barrel costs below $10, says Mr Hunter. With Brent crude at more than
$60, much of the difference can be profit.

 

Why does Saudi want to sell shares in it?

Saudi Arabia is keen to sell shares in its state oil firm because it is
trying to reduce its reliance on oil.

 

 

Crown Prince Mohammad bin Salman wishes to diversify his country's economy
in the next decade under a programme dubbed Vision 2030.

 

The plan includes more solar power, making use of the country's vast desert,
says Mr Hunter.

 

The first Saudi CEO of the company, Ali al-Naimi, had a vision that Aramco
could become a global integrated energy company. Over his years as CEO, he
expanded Aramco's assets to include downstream (refining) and other assets
in the US, South Korea, China, Indonesia, Japan and Europe.

 

He and his successors also expanded Aramco's footprint in Saudi Arabia with
joint ventures in refining and petrochemicals. Saudi Arabia is the largest
oil exporter today and is the only oil producer that maintains at least 2
million barrels per day of spare capacity that can be brought onto the
market very quickly.

 

The fact that it is a national oil company means it has exclusive access to
the best and least-expensive-to-produce oil resources in the world. This
makes it hugely valuable. But there are downsides. Saudi Arabia's upstream
assets aren't diversified like other major international oil companies
upstream assets are. It also means that the Saudi government plays a role in
the company. Historically, Saudi Arabia allowed Aramco to operate
independently and did not make decisions about spending for strategy for the
company. There are troubling signs that this is changing now and the
government is taking a more active, and detrimental, role.

 

How much Aramco is really worth will be determined by the market. Banks have
put forth their valuations, but the market will show how much it is really
worth. Different sources have quoted valuations ranging from $1.2 tn to $2
tn.

 

The most common number floated right now seems to be about $1.5 tn, perhaps
$1.7 tn, though public sentiment probably indicates that this is too high a
number. In 30 years, who knows how much Aramco will be worth. We don't know
what other energy technologies will develop, or not, in that time, nor what
Aramco's strategic vision will produce.

 

In September, the kingdom said it will open its doors to international
tourists for the first time, launching a visa regime for 49 countries and
relax strict dress codes for female visitors.

 

Tourism Minister Ahmad al-Khateeb described it as a "historic moment" for
the country. It wants tourism to rise from 3% to 10% of gross domestic
product by 2030.

 

The push comes as the kingdom faces a tarnished international image amid
criticism of its human rights record following last year's murder of
journalist Jamal Khashoggi, and a recent crackdown on women's rights
activists.

 

Why the sale is controversial?

Politically, matters are rather complicated for Saudi Aramco right now, in
light of the recent Kashoggi scandal, said Mr Hunter.

 

"And the fact of Saudi Arabia's human rights record. Anything to do with
Saudi Arabia is always seen through that prism."

 

 

Another wrinkle in the crown prince's plan is the surge in anti-fossil fuel
sentiment around the world, plus the comparatively low oil price compared to
late last year, where prices were above $80.

 

"The listing could be controversial because it's a massive fossil fuel
listing in a time investors are becoming increasingly ethical," said Mr
Hunter.

 

"There are a lot of new and existing funds looking to divest from fossil
fuel assets."

 

In May, fellow oil producer Norway's $1tn sovereign wealth fund said it
expected to sell some of its oil and gas holdings, albeit to make it less
reliant on price swings in the commodity.--BBC

 

 

 

Fitbit snapped up by Google in $2.1bn deal

Fitness device marker Fitbit is being bought by Google for $2.1bn (£1.6bn).

 

The move allows Google to expand into the market for fitness trackers and
smart watches. It comes at a time when loss-making Fitbit has been looking
to expand into other areas.

 

"Google is an ideal partner to advance our mission," said James Park,
co-founder and chief executive of Fitbit.

 

The bid values Fitbit at $7.35 a share, a premium of about 19% to the
stock's closing price on Thursday.

 

"With Google's resources and global platform, Fitbit will be able to
accelerate innovation in the wearables category, scale faster and make
health even more accessible to everyone," said Mr Park, who founded Fitbit
12 years ago.

 

The company, one of the first sellers of tech-enabled fitness trackers, was
valued at more than $4bn at the time of its flotation in 2015.

 

It has sold more than 100 million devices, but has struggled with waning
demand for its products as other companies enter the market. It put itself
up for sale last month.

 

Its shares have jumped 40% since Monday, when Reuters reported the interest
from Google.

 

The transaction is expected to be completed in 2020, pending approval by the
board and regulators.

 

Regulators in the US and abroad have been taking a closer look at
acquisitions by the tech giants, amid growing concerns about monopoly power.

 

Fitbit said its "health and wellness" data would not be used for Google
adverts and pledged to maintain strong privacy protections.

 

But analysts said the health data was key the deal.

 

"The deep health and fitness data, coupled with the 28 million active users
on the Fitbit platform, offer a tremendous value," Craig Hallum analysts
wrote in a note cited by Reuters.

 

Will Fitbit users be happy?

 

Here's a deal that makes perfect sense for Google. While $2.1bn is a pretty
hefty premium given Fitbit's market value was around the $1.4bn-mark last
week, it's small change when considered against the bigger picture of
gaining a huge amount of health data.

 

For Fitbit, it's a noble exit after putting up a decent fight in the years
since the launch of Apple's smartwatch. A Fitbit-Google product could mean
Wear OS - Google's wearable operating system - will get a much-needed boost.

 

I do wonder, though, how Fitbit's 28 million users will feel about this.

 

Anecdotally, I know several people who have told me that Fitbit's relative
autonomy from the tech giants was an incentive to buy their products (though
Fitbit has used Google's cloud to support its service since 2018).

 

By next year, the health data Fitbit has on its users today will become
Google's data - a valuable acquisition for Google, undoubtedly, but one that
I predict could make consumers uncomfortable.--BBC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 


 

INVESTORS DIARY 2019

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
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any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

 


 

 


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