Major International Business Headlines Brief::: 26 November 2019

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Major International Business Headlines Brief::: 26 November 2019

 


 

 


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*  South Africa's big supermarkets told to drop exclusivity clauses in mall leases

*  South Africa blocks arms sales to Saudi and UAE in inspection row

*  Nigeria's SecureID taps into Africa's move from cash to plastic

*  Ethiopia vows to remove barriers to investment in mining

*  Egypt's central bank governor appointed for second term -state media

*  Kenya's central bank cuts benchmark lending rate to 8.50%

*  Kenyan shilling weakens against the dollar amid end-month demand

*  Charles Schwab just broke one of Warren Buffett’s biggest rules about acquisitions

*  89% of Chinese Blockchain Firms Have Tried to Issue Crypto: Report

*  Viagogo buys rival ticketing website StubHub in $4bn deal

*  Uber loses licence to operate in London

*  Louis Vuitton buys jeweller Tiffany for $16bn

*  TSB to close 82 branches next year to save costs

 

 


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South Africa's big supermarkets told to drop exclusivity clauses in mall leases

PRETORIA (Reuters) - South Africa’s biggest supermarket chains could be forced to drop exclusivity clauses in shopping mall leases if they fail to do so voluntarily, the country’s competition watchdog said in findings from a sector inquiry published on Monday.

 

The grocery retail market inquiry was initiated in November 2015 to deepen understanding of a sector dominated by Shoprite Holdings and its upmarket chain Checkers, Pick n Pay Stores, Spar Group and Woolworths Holdings.

 

The inquiry found “features in the South African grocery retail sector that may prevent, distort or restrict competition”, inquiry chairman Halton Cheadle said as the final 600-page report was unveiled on Monday.

 

Among those features are exclusive leases and tenant mix clauses negotiated by the major chains in shopping malls across the country to deny opportunities for specialist, emerging chains and small, medium and micro-enterprises (SMME) in areas where the majority of consumers do their weekly and monthly shopping.

 

“Of even greater concern, these agreements also systematically deny the opportunity for specialist stores and independent entrepreneurs to locate in the mall if they compete with any of the national chains’ product lines,” Cheadle said, quoting the report.

 

One such retailer was Walmart-owned Massmart, which in 2014 lodged a complaint about exclusive lease arrangements that it said were hampering its expansion into the fresh groceries sector.

 

The inquiry found that more than 70% of shopping malls, which account for about half of all grocery sales nationally, are subject to exclusive lease agreements.

 

It recommended that national grocery retailers immediately cease enforcing exclusivity clauses against specialist and SMME stores in shopping malls and all grocery retailers in non-urban areas where there are fewer alternative malls.

 

Cheadle said the measures will be achieved through voluntary compliance within six months from Nov. 25 or the regulator would instigate “legislation in the form of regulations or a code of practice”.

 

“The inquiry strongly believes that a less concentrated grocery retail sector, with a large ecosystem of small independent traders alongside national retail chains, is in the best interest of the economy and consumers,” Cheadle said.

 

 

 

 

 

 

 

 

 

 

 

 


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South Africa blocks arms sales to Saudi and UAE in inspection row

JOHANNESBURG (Reuters) - South Africa is blocking arms sales to countries including Saudi Arabia and the UAE in an inspections dispute, endangering billions of dollars of business and thousands of jobs in its struggling defence sector, according to industry officials.

 

The dispute centres on a clause in export documents that requires foreign customers to pledge not to transfer weapons to third parties and to allow South African officials to inspect their facilities to verify compliance, according to the four officials as well as letters obtained by Reuters.

 

Officials at major South African defence groups Denel and Rheinmetall Denel Munition (RDM) said the dispute was holding up their exports, as did a third big defence company which asked not to be named. RDM said some of its exports to the Middle East had not been approved since March.

 

Saudi Arabia and the United Arab Emirates, which account for at least a third of South Africa’s arms exports and are engaged in a war in Yemen, have rejected the inspections which they consider a violation of their sovereignty, the sources said.

 

Oman and Algeria have also refused inspections and seen their imports from South Africa blocked, the industry officials added.

 

Government officials in Saudi Arabia, the UAE, Oman and Algeria did not respond to emails and phone calls from Reuters seeking comment, nor did their embassies in South Africa.

 

Asked about the inspection clause issue, Ezra Jele, South Africa’s director for conventional arms control in the defence ministry, said that authorities considered criteria including human rights, regional conflict, risk of diversion, U.N. Security Council resolutions and national interest when evaluating applications for export permits.

 

He did not comment on specific cases.

 

The Aerospace, Maritime and Defence Industries Association of South Africa (AMD) says the dispute could threaten the sector’s survival.

 

“We’ve got one clause that’s disabling us from exporting 25 billion rand ($1.7 billion) worth of value today, right now,” Simphiwe Hamilton, the head of the AMD, told Reuters.

 

The industry body estimates the export blocks put an additional 50 to 60 billion rand in future business at risk and could cause the loss of up to 9,000 jobs at defence firms and supporting industries.

 

YEMENI CONFLICT

Since democratic rule was established in 1994, South Africa has sought to reform its defence industry – once a pillar of the racist apartheid regime – by making export approvals subject to human rights considerations.

 

Saudi Arabia is leading an alliance of Arab states, including the UAE, to try to restore the government of Yemeni President Abd-Rabbu Mansour Hadi, who was ousted from the capital Sanaa by the Iran-aligned Houthis in 2015.

 

In February, Amnesty International accused the UAE of diverting arms supplied by Western and other states to militias accused of war crimes in Yemen. In the same month, a CNN investigation said Saudi Arabia and the UAE had transferred American weapons to Yemeni fighters, breaking the terms of their arms sales with the United States.

 

The UAE did not respond to the Amnesty allegations. The Saudi military coalition did not respond to CNN’s allegations, but a senior UAE official denied it violated end-user agreements.

 

The South African defence industry has become increasingly reliant on exports, which have grown more than 12-fold since 1990 as domestic defence spending has declined.

 

Exports now make up the bulk of revenues for major defence companies including Denel, Paramount Group, Hensoldt South Africa and RDM, which is a joint venture between Denel and German industrial giant Rheinmetall.

 

Saudi Arabia and the UAE alone represented a third of South Africa’s 4.7 billion rand of authorised arms exports in 2018, according to data compiled by the National Conventional Arms Control Committee (NCACC), a group of ministers and deputy ministers that approves the exports.

 

‘ENCROACHING ON SOVEREIGNTY’

Requiring buyers not to transfer weapons to third parties is common practice in the international arms trade, stipulated in export documents known as end-user certificates. Requiring inspections, though uncommon, is not unheard of. Germany, for instance, requires them for small arms sales to certain countries.

 

The industry officials told Reuters that South Africa had long included a clause in its end-user certificates requiring on-site visits, though it was rarely acted upon.

 

Clients regularly amended or deleted the clause, which was included in an annex, and the NCACC still granted export permits, they said. But in 2017, arms control officials moved the clause to the front page of the certificates, and some countries refused to sign them, according to the officials.

 

The clause requires customers to grant “access and permission to South African Government Authority’s representative(s)” to verify they are in compliance with South Africa’s defence export regulations.

 

“This is what’s making some of these countries uncomfortable,” Hamilton said. “You are encroaching on their sovereignty, and they cannot allow that.”

 

An NCACC official, who was not authorised to speak publicly, would not comment on the reason for the new format, and industry officials said they had not been told.

 

Matters did not come to a head until this year because arms contracts are often signed years before the anticipated delivery date, the company officials said.

 

JOB LOSSES ON ‘MASSIVE SCALE’

Some companies have already indicated that they will need to cut more than 500 employees if they can’t export their products soon, trade union Solidarity said.

 

On July 3, Solidarity and other unions wrote to Public Enterprises Minister Pravin Gordhan stating that failure to resolve the impasse would lead to “job losses on a massive and irreversible scale”.

 

“Customers in the UAE have already begun firing trials with China, India as well as Serbia with the intention to replace RDM as a preferred supplier of ammunition,” said the letter seen by Reuters.

 

Three weeks later, Norbert Schulze, RDM’s CEO at the time, wrote to the NCACC urging it to take action.

 

In his Aug. 5 response, also seen by Reuters, NCACC chairman Jackson Mthembu said the body would not grant an exception.

 

“The NCACC is aware of the possible loss of jobs occasioned by the inability to export in the time being. However, as your organisation would appreciate, compliance with regulations sometimes produces negative impact,” he wrote.

 

The government is encouraging defence companies to avoid an over-reliance on the Gulf, the NCACC official told Reuters.

 

But building up business in new markets would take time.

 

“It’s not like selling Coca-Cola. It can take 5-7 years to go into new markets,” one defence company official said. “I don’t think the politicians are aware how serious this is.”

 

($1 = 14.7662 rand)

 

 

 

Nigeria's SecureID taps into Africa's move from cash to plastic

LAGOS (Reuters) - Sub-Saharan Africa lags other regions such as Asia in moving away from cash to plastic money. One Nigerian company is aiming to close that gap by tapping into a growing appetite for smartcards across the continent.

 

SecureID makes bank cards, mobile phone SIMs and voting cards for businesses in 21 African countries, to address an acute need for secure electronic cards carrying sensitive data, particularly in the banking sector.

 

In sub-Saharan Africa, only 43% of people aged above 15 have a bank account, according to the World Bank’s Global Findex Database. That figure has grown from 34% since 2014, highlighting the potential for growth.

 

Nigeria’s central bank has implemented policies aimed at encouraging a move away from cash, as have Ghana, Kenya and Rwanda, in large part motivated by efforts to tackle fraud, theft and money laundering.

 

Kofo Akinkugbe, who 14 years ago founded SecureID which produces 200 million cards each year, said more African companies should use manufacturing to harness business opportunities arising from technological advances.

 

“That is what I think the entire continent should focus on,” she said, noting the continent is effectively a technology consumer, rather than producer.

 

“The potentials are enormous for it,” said Akinkugbe, who previously worked in banking, at the company’s site in a nondescript building in Nigeria’s commercial capital Lagos. She, however, would not be drawn into giving an estimate of the potential size of Africa’s smartcard market.

 

The company declined to disclose details of its sales figures or provide a forecast for demand.

 

SecureID started by importing bank cards before certification from Visa, Mastercard and Verve to make cards around two years after the company was set up. She said it previously took months for imported cards to arrive from Asia and Europe and now takes 12-24 hours to deliver specific orders.

 

Akinkugbe said she believed there was a gap in other African markets for the manufacturing of smartcards.

 

“We feel that the same gap that we saw 12 years ago in Nigeria is the same gap that seems to exist in other African countries,” she said. “The people can be trained and have the potential to do much more.”

 

But manufacturing accounts for just under 8% of Nigeria’s GDP, according to the World Bank, dwarfed by services at 52% and agriculture at 21%. High-tech exports from Nigeria, which relies on oil for 90% of foreign exchange, account for less than 2% of the total.

 

And, as in many African countries, poor infrastructure makes it difficult for manufacturers to operate in Nigeria.

 

Congested ports, pot-holed roads and slow border processing have hamstrung many industries and leave Nigeria heavily dependent on imports, from textiles to tomatoes. 

 

 

 

Ethiopia vows to remove barriers to investment in mining

ADDIS ABABA (Reuters) - Ethiopia vowed on Monday to remove barriers to investment in its mining sector, focusing efforts on minerals used in agriculture and construction which will help drive its industrialisation.

 

Ethiopia, which has a mostly artisanal mining industry, wants to woo foreign mining companies to kick-start development of its vast mineral resources, a key part of its efforts to plug a large trade deficit and generate foreign exchange.

 

Prime Minister Abiy Ahmed is shaking up several sectors in a liberalisation drive aimed at transforming Ethiopia into a middle-income country.

 

“Our ministry will keep reforming to remove uncertainties that held back the development of the mining industry,” minerals minister Samuel Urkato said in a keynote speech to a mining conference in Addis Ababa on Monday.

 

The government will give incentives to investors who develop minerals used in agriculture such as potash, a key ingredient in fertilizer, as well as construction minerals, a draft policy document seen by Reuters ahead of the speech showed.

 

The ministry is still working out the details on tax and incentive policies, Samuel told Reuters, and the revised mining law would be announced by August next year.

 

IDEAL NEW MINING DESTINATION?

Ethiopia set out its stall as “Africa’s ideal new mining destination” at the conference in the Sheraton Hotel.

 

Changes to its mining policies have been expected since February this year. Ethiopia aims to increase the mining sector’s contribution to GDP to 10% by 2030 from the current 3%.

 

The government cut the corporate income tax rate for miners to 25% more than two years ago from 35%, and has lowered the precious metals royalty rate to 7% from 8%.

 

Despite such reforms, Ethiopia faces stiff competition on the continent in vying for much-needed foreign investment.

 

Democratic Republic of Congo’s new mining code introduced last year increased the royalty rate for precious metals from 2.5% to 3.5% - half the Ethiopian rate.

 

On the other hand, Ethiopia’s current law guarantees the government just a 5% minimum equity stake in projects - less than in many African countries.

 

Guinea’s mining code, for example, grants the government a free 15% stake in mining projects.

 

Access to hard currency remains a big stumbling block for international miners wanting to operate in Ethiopia, where foreign exchange reserves are low.

 

“It’s foreign exchange that is the key barrier to investing and growing investment within Ethiopia,” said Christopher Suckling, sub-Saharan Africa country risk analyst at IHS Markit.

 

Government guarantees of access to foreign exchange would help attract more miners to Ethiopia, he added, which in turn could help bring in more hard currency to bank coffers.

 

Norwegian fertilizer company Yara is among those planning to develop potash, found in the remote Danakil depression in the northern Afar region of the country, through its Yara Dallol project.

 

Kefi Minerals’ Tulu Kapi site in the west of the country is expected to produce its first gold in 2021, executive chairman Harry Anagnostaras-Adams said.

 

U.S. gold miner Newmont GoldCorp is exploring in Ethiopia’s Tigray region.

 

While Ethiopia’s conference pitch focused on industrial mining, analysts say it cannot achieve its goal solely by attracting large-scale miners, given the lengthy timeline for developing major projects.

 

The government is therefore enlisting the help of organisations such as the Canadian International Resources and Governance Institute (CIRDI) to develop the artisanal mining sector and increase government proceeds from these activities.

 

Of the high-value minerals Ethiopia produces, 60%-80% are mined artisanally, while that figure rises to 80%-95% for construction minerals such as basalt, pumice and limestone, according to Rahel Getachew, senior programme officer at CIRDI’s project supporting the ministry of mines.

 

 

 

Egypt's central bank governor appointed for second term -state media

CAIRO (Reuters) - Egypt’s central bank governor Tarek Amer has been appointed to a second four-year term, state media reported on Monday.

 

State-run newspaper Al Ahram cited an unnamed deputy central bank governor as confirming Amer’s reappointment. Akhbar Elyom, another state-run paper, also confirmed the news, citing unnamed banking sources.

 

Amer, whose term ends this week, was appointed in 2015 when Egypt was in a currency crisis. He helped oversee a three-year, IMF-backed reform programme which included a sharp devaluation of the pound currency, the introduction of a value-added tax and the elimination of subsidies on most fuel prices.

 

 

 

Kenya's central bank cuts benchmark lending rate to 8.50%

NAIROBI (Reuters) - Kenya’s central bank cut its benchmark lending rate to 8.50% on Monday from 9.0% previously, saying the economy was operating below its potential.

 

The bank’s Monetary Policy Committee was meeting for the first time since the East African nation lifted a cap on commercial interest rates that it said had stifled credit growth and held back the economy.

 

 

 

Kenyan shilling weakens against the dollar amid end-month demand

NAIROBI (Reuters) - The Kenyan shilling weakened against the dollar on Monday due to end month dollar demand from merchandise importers and the energy sector, traders said.

 

At 0930 GMT, commercial banks quoted the shilling at 101.70/90 per dollar, compared with 101.55/75 at Friday’s close.

 

 

 

Charles Schwab just broke one of Warren Buffett’s biggest rules about acquisitions

Most investors know that Buffett, chairman and CEO of Berkshire Hathaway, is full of advice for individual investors. But the Oracle of Omaha’s market musings — doled out year after year across decades of annual letters to Berkshire shareholders and interviews — are also reflected in the actions of major corporations and the ways in which they leverage their balance sheets.

 

The two big corporate acquisitions show divergent paths when it comes to one of Buffett’s strongly stated beliefs about making deals: Don’t use your own stock. Use cash. Buffett’s rules of the road for acquisitions have been expressed in years of shareholder letters.

 

His advice to CFOs, implicitly, shows up in these letters, according to the editor of “The Essays of Warren Buffett” and George Washington University professor Lawrence Cunningham. Read enough of them and the 89-year-old chief executive of Berkshire Hathaway gets around to giving his distinctively value-tinged, commonsense approaches to accounting, mergers, stock buybacks, dividends and other tricks of the trade to build value.

 

“Everyone sort of nods when they’re reading, but then they don’t listen,” said Cunningham, a corporate-governance expert at George Washington University Law School. The fifth edition of the book-length distillation of Buffett’s decades of shareholder letters just came out. “Then they go make the mistakes themselves.”

 

Berkshire famously never has paid a cash dividend, for example, and has moved more slowly on stock buybacks than most companies of its size (its market capitalization is $535 billion).

 

Especially, Buffett sounds repeated warnings on the subject of acquisitions, though Berkshire itself has been a serial acquirer — either of whole companies like Geico and the Burlington Northern Railroad or of big stakes in public companies like Apple, IBM and American Express.

 

Buffett’s preference for cash over stock in M&A can be summed up this way:

 

If a company is in a position to buy a rival, it’s probably in better shape than the target is, and that means its stock is worth more of a premium, Buffett wrote in 1997. Paying cash helps the acquirer avoid giving away the appreciation of its existing business to holders of the company getting bought out, which, if you’re doing it right, is larger than the gain likely to come from the acquisition, he wrote.

 

“For a baseball team, acquiring a player who can expected to bat .350 is almost always a wonderful event -- except when the team must trade a player hitting .380 to make the deal,” Buffett wrote.

 

In one instance of Buffett going public with this belief about giving away shares in a deal he chastised then Kraft CEO Irene Rosenfeld in 2010 for using Kraft shares in a takeover of Cadbury. He did break his own all-cash rule once, notably, using a combination of cash and shares to buy Burlington Northern, at the time Berkshire’s biggest acquisition ever.

 

News of the Schwab and LVMH deals hit just as a new edition of the Buffett book is hitting the stands. And the headlines underscore how timely Buffett’s advice remains for corporate titans. The 89-year old has long been known in his personal life for being a bit of a miser, eating McDonald’s for breakfast and living in the same modest home in Omaha for decades. When it comes to spending a company’s cash or stock, in acquisitions or otherwise, his grip on his wallet is no more loose.

 

Why Schwab analysts say the stock deal is OK

Analysts who cover the brokerage industry say Buffett’s words are wise, but the specifics of the Schwab-TD Ameritrade deal make the decision to finance it with stock a reasonable one.

 

“Buffett has over $100 billion in cash. Schwab had about $20 billion at Sept. 30, so could not have financed this entire transaction with cash,” wrote Argus Research analyst Stephen Biggar in an email.

 

Morningstar analyst Michael Wong said for Schwab shareholders the deal probably would have been more accretive if it was cash financed, but he does think that TD Ameritrade would have balked at a $26 billion valuation in cash. “Even if Schwab shareholders gave up a little bit of the value by issuing shares, both are better off from this deal.”

 

That’s because the long-term synergies that would result from the combination of the similar businesses — which should reach into billions of dollars — would have required a much higher cash premium in a deal. A stock deal allows shareholders to benefit from those synergies — albeit always uncertain in the initial estimation on deal date — that can accrue over time.

 

 

Schwab is trading at 19.5x 2020 earnings, while AMTD is at 16.5x. Both stocks have risen since news of the deal was first broken by CNBC.

 

“Both shares rising is an indication that investors see the merit in the expected 15%-20% cash EPS accretion by this third year,” Biggar wrote. “While true that financing is currently inexpensive, keep in mind Schwab is trading at 19.5x 2020 earnings, while AMTD is at 16.5x, so Schwab is buying a similar revenue stream with a more favorable currency.”

 

Biggar also noted that TD Ameritrade shares are 43% held by Toronto-Dominion, a large shareholder unlikely to sell.

 

Schwab did not immediately respond to a request for comment.

 

Where Buffett sees market opportunity

Buffett also says to consider buying part of the business rather than all of it. Buying shares in open markets, as Berkshire often does (it has reported stakes in about 45 other public companies) lets Buffett and his team, led by vice chair Charlie Munger and investment officers Todd Combs and Ted Weschler, avoid paying takeover premiums in order to get a piece of the business, while still building value for Berkshire stockholders.

 

In fact, right now that is Buffett’s publicly stated preference. Even as Berkshire’s cash hoard has grown to near-$130 billion, Buffett has been reluctant to make big deals. Buffett wrote in last year’s annual letter that he continues to hunt for the “elephant-sized” acquisition:

 

“In recent years, the sensible course for us to follow has been clear: Many stocks have offered far more for our money than we could obtain by purchasing businesses in their entirety. That disparity led us to buy about $43 billion of marketable equities last year, while selling only $19 billion. Charlie and I believe the companies in which we invested offered excellent value, far exceeding that available in takeover transactions. ... That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition.”

 

Buffett on buybacks and dividends

Here are some more of Buffett’s biggest beliefs for the C-suite.

 

Don’t fall in love with your own management skills. Too many acquirers think their kiss alone will turn a toad of a company into a prince, Buffett wrote in a witty 1981 letter. It rarely happens. That leads to Buffett’s most famous rule of acquisitions: It’s better to buy a good company at a fair price than a fair company at a good price, an idea he explained in 1992.

 

“We have occasionally tried to buy toads at bargain prices,” Buffett said. “Clearly our kisses fell flat. We’ve done well with a couple of prices — but they were princes when purchased. At least our kisses didn’t turn them into toads.”

 

A similar combination of skepticism (about the market) and belief (in Berkshire’s own business) explains why Buffett doesn’t believe in cash dividends, Cunningham said.

 

Dividends should be paid in cash only when the company doesn’t have a better place to invest the money in its own business, a point Buffett explained in 1984 with a math-dense illustration of why that’s rarely so for a well-run company.

 

Buy more of your own stock. One place where the cash can often be put to good work is on stock buybacks, as long as management is disciplined, Buffett said, on a topic he has revisited five times in shareholder letters, as recently as 2018. Bought at the right price, the shrinking share base will boost earnings per share.

 

But management too often falls for the hype around their own stock and overpay, Buffett wrote in the bubble year of 1999. At Berkshire the rule had long been that the company won’t pay more than 110% of shares’ intrinsic value, a subjective measurement of the value of future cash flows projected by management, but it has more recently broken that rule to snag large blocks of shares when they became available.

 

 

“By making repurchases when a company’s market value is well below its business value, management clearly demonstrates that it is given to actions that enhance the wealth of shareholders, rather than to actions that expand management’s domain but that do nothing for (or even harm) shareholders,” Buffett wrote in 1984. “Investors should pay more for a business that is lodged in the hands of a manager with demonstrated pro-shareholder leanings than for one in the hands of a self-interested manager marching to a different drummer.″

 

Look beyond earnings. One place where Buffett isn’t all that traditional is in thinking about earnings, Cunningham said. While Berkshire follows accounting rules in reporting its results, Buffett is open about the fact that he thinks more about other measures of economic results than accounting earnings. Beginning In 1980, he has devoted parts of several letters to a concept he calls “look-through earnings,″ advocating for investors and managers to look beyond reported profits and losses under generally accepted accounting principles.

 

In Berkshire’s case the big difference between the two is that its reported profits can fluctuate based on the value of its investment holdings. A U.S. accounting rule requires earnings to incorporate unrealized gains, including on investments such as Apple and Bank of America. Buffett said the resulting volatility can mislead investors.

 

And Buffett reserves particular scorn for managers who put too much emphasis on consistent yearly growth in earnings per share, Cunningham said. Berkshire doesn’t issue profit guidance, unlike more than half of big companies, because he thinks “no one has any idea what next year looks like.”

 

But the avoidance of short-term forecasts, and the emphasis on steady quarterly profit gains they induce, is only part of a good CFO’s task of communicating clearly and promoting a stable financial base for their company, Cunningham said. Buffett thinks of steady financial stewardship as the center of an ongoing strategy to attract shareholders who behave like Berkshire’s — they hold the shares a long time and give management running room to succeed. That’s the CFO’s ultimate job, he said.

 

“The CFO is the public face of a company’s shareholder orientation,” Cunningham said. “If the CFO doesn’t want activist shareholders telling them what to do, speak day to day is high-quality language. That attracts high-quality investors. Ask yourself, What would Buffett like to do? And you’ll get shareholders like that.″

 

On the long-term view, Morningstar’s Wong said the Schwab deal shows concern well beyond the next quarter.

 

He said Schwab made this deal now because its future competitive set may not be limited to a handful of online brokers, but the Wall Street giants like Bank of America, J.P. Morgan and BlackRock, as technology allows the biggest firms to go down-market in terms of average client size, direct to investors through online arms, and across more business segments.

 

It is not just going to be E-Trade, TD Ameritrade, Vanguard and Fidelity in 10 years’ time when it comes to online and wealth management competition, and Schwab is thinking long-term by preparing for greater competition today, even if it costs them in stock, Wong said.

 

Biggar said there is a “first-mover advantage” for Schwab in an industry that is fragmented today. “Future big tie-ups will necessarily mean less competition, while Schwab will have already gotten approval – i.e. regulatory scrutiny will be much higher when future partners will be trying to justify themselves as a second player with a 30-40% market share.”--cnbc

 

 

 

 

89% of Chinese Blockchain Firms Have Tried to Issue Crypto: Report

89% of China’s blockchain firms have allegedly tried to create their own cryptocurrency, according to a senior exec at a local blockchain association. 

 

According to the state-run CCTV on Nov. 21, Yedong Zhu, the president of the Beijing Blockchain Technology Application Association (BBAA), revealed that the vast majority of blockchain industry in China is focused on tokens, not blockchain. 

 

In addition to Zhu’s remarks, the report by CCTV covered a new study led by the People’s Bank of China (PBoC).

 

Co-authored by five local financial and technology authorities, the “Bluebook on Blockchain” report reveals that there are 28,000 blockchain enterprises in China. 

 

The authors of the “bluebook” included the Chinese Academy of Social Sciences, the Payment and Clearing Association of China, the Beijing Blockchain Technology Application Association and Social Sciences Academic Press.

 

BBAA president: 4,000 out of 28,000 Chinese DLT firms are focused on pure DLT

According to the BBAA president, only 4,000 Chinese blockchain companies are focused on pure blockchain technology, while as many as 25,000 have purportedly tried to issue their own cryptocurrency or token.

 

The news comes amidst the recently sparked Chinese push into blockchain technology development, which was triggered by President Xi Jinping’s call to embrace blockchain in October. 

 

The push was accompanied by a renewed wave of pressure on local crypto-related businesses.  On Nov. 21, the PBoC's Shanghai unit announced it was taking action against entities allegedly involved in trading cryptocurrencies such as Bitcoin (BTC). On Nov. 22, authorities in Shenzhen province claimed that 39 exchanges fell afoul of China’s cryptocurrency trading ban.

 

State-led publications have emphasized that the country’s blockchain push should be limited purely to blockchain technology, and not include cryptocurrency-related initiatives.

 

More than 50% of blockchain enterprises are located in Guangdong province

The majority of such companies are located in the Guangdong and Shenzhen provinces.

 

Additionally, the report claims that the scales of the “black industry” associated with online fraud in China has reached 100 billion Chinese yuan ($15.6 billion.)--cointelegrpah,com

 

 

 

 

Viagogo buys rival ticketing website StubHub in $4bn deal

Secondary ticketing firm Viagogo has announced a $4bn (£3.1bn) deal to buy its rival StubHub, in a move it said would create more choice for customers.

 

Viagogo is buying its rival from eBay, which bought StubHub in 2007 for $310m.

 

It means Viagogo's boss Eric Baker will be reunited with StubHub, which he co-founded but left before the eBay sale.

 

The deal comes after the UK's competition authority suspended legal action against Viagogo after it made changes to the way it operates.

 

In September, Viagogo amended the way it presents information to customers which the Competition and Markets Authority (CMA) said meant the website was now "worlds apart" from the one that prompted the legal action.

 

Viagogo sidesteps legal action with website fixes

The CMA had asked operators such as Viagogo to improve the information they provided about tickets, such as the risk a buyer would be turned away at the door, which ticket they were getting, and the availability and popularity of tickets.

 

In May 2018, the then Digital Minister Margot James told the BBC that if fans had to use a secondary site to buy tickets, "don't choose Viagogo - they are the worst".

 

'Wider choice'

Mr Baker, who is co-founder and chief executive of Viagogo, said that it had "long been my wish to unite the two companies".

 

"I am so proud of how StubHub has grown over the years and excited about the possibilities for our shared futures.

 

"Buyers will have a wider choice of tickets, and sellers will have a wider network of buyers. Bringing these two companies together creates a win-win for fans - more choice and better pricing."

 

StubHub has a bigger presence in the US than Viagogo, which is better known in the UK and other parts of the world.

 

They are "pretty perfect complementary businesses," Cris Miller, Viagogo's managing director, told the BBC.

 

He acknowledged the controversies surrounding Viagogo - which two years ago did not turn up to a hearing with MPs - and did not rule out StubHub becoming the preferred brand.

 

"The reality is we don't know quite yet," Mr Miller said.

 

"We, at Viagogo, have made a considerable amount of changes to the website, have addressed a considerable amount of the concerns that regulators have seen over the world... so it remains to be seen. Certainly we have a lot to learn from them [StubHub]."

 

The takeover is subject to regulatory approval. Mr Miller said he expected that "steps would be required for us to adhere to" and added that Viagogo would work with regulators to ensure the deal was approved.

 

He said the deal was good for ticket buyers as sellers had to compete on price on the website.

 

"The sellers are required to compete with each other, so the more sellers that are on the platform the more ticket inventory that is up there. That puts pressure on the prices and brings prices down, which is ultimately better for the customers"

 

Shares in eBay rose 3% after the deal was announced. It comes after the company faced pressure from activist investors - Elliott Management Corp and Starboard Value - to sell off parts of its operations, including StubHub.

 

Scott Schenkel, interim chief executive at eBay, said the deal was a "great outcome and maximises long-term value for eBay shareholders".--BBC

 

 

 

Uber loses licence to operate in London

Uber will not be granted a new licence to operate in London after repeated safety failures, Transport for London (TfL) has said.

 

The regulator said the taxi app was not "fit and proper" as a licence holder, despite having made a number of positive changes to its operations.

 

Uber initially lost its licence in 2017 but was granted two extensions, the most recent of which expires on Monday.

 

The firm will appeal and can continue to operate during that process.

 

London is one of Uber's top five markets globally and it has about 45,000 drivers in the city. Overall, there are 126,000 licensed private hire and black cabs in the capital.

 

If its appeal is unsuccessful, some think Uber drivers would move over to rival ride-sharing firms such as Bolt and Kapten."There would be competition that would fill that void quite quickly," Fiona Cincotta, a market analyst at City Index told the BBC.

 

Why won't Uber get a new licence?

TfL said it had identified a "pattern of failures" in London that placed passenger safety at risk.

 

These included a change to Uber's systems which allowed unauthorised drivers to upload their photos to other Uber driver accounts.

 

It meant there were at least 14,000 fraudulent trips in London in late 2018 and early 2019, TfL said.

 

The regulator also found dismissed or suspended drivers had been able to create Uber accounts and carry passengers. In one example, a driver was able to continue working for Uber, despite the fact his private hire licence had been revoked after he was cautioned for distributing indecent images of children.

 

Uber's paradox: Gig work app traps and frees its drivers

What do drivers think of Uber?

Helen Chapman, director of licensing at TfL, said: "While we recognise Uber has made improvements, it is unacceptable that Uber has allowed passengers to get into minicabs with drivers who are potentially unlicensed and uninsured."

 

London Mayor Sadiq Khan said: "I know this decision may be unpopular with Uber users, but their safety is the paramount concern. Regulations are there to keep Londoners safe."

 

'I feel safe using Uber'

 

Donna Stevens says her experiences of using Uber in London have "always been positive".

 

In her job as a carer she often works late, so regularly uses the service. "The drivers are friendly, courteous and professional. I can't afford to get a metered taxi."

 

She says that if Uber were to go, she would probably have to go back to using public transport late at night, which does not make her feel safe.

 

However, another reader, Kay, says she would not be sad to see Uber go.

 

"I complained a couple of months ago about a driver who made me feel so uncomfortable I abandoned the ride and walked home in the dark at 11 o'clock at night instead of staying in his cab."

 

She says Uber gave her a £5 credit but did not apologise. "How is it OK to employ drivers that make women feel unsafe?" she says.

 

Is this the end of Uber in London?

Uber lovers in London, fear not! The company's cars will not suddenly disappear from the capital's streets.

 

Uber is going to appeal against this decision so a magistrate will have to decide whether Uber is fit to hold a licence in London, or not.

 

A decision from a magistrates court could take weeks or months and unless the court decides otherwise, Uber will retain its licence during this period too.

 

When TfL decided not to renew Uber's licence in 2017, the company addressed some of the issues raised by TfL back then and then a magistrate later granted Uber a new licence.

 

On the face of it TfL is standing tough against perceived failings by Uber. But in effect it is letting the courts decide, at a later date, whether Uber should have a licence, or not.

 

What does Uber say?

Uber said the decision was "extraordinary and wrong". It said it had audited every driver in London over the past two months and strengthened its processes.

 

Boss Dara Khosrowshahi tweeted: "We understand we're held to a high bar, as we should be. But this TfL decision is just wrong. Over the last 2 years we have fundamentally changed how we operate in London."

 

According to Uber, 24% of its sales come from just five cities, including London. The others are Los Angeles, New York City, San Francisco and São Paulo in Brazil.

 

In a public filing, it said: "Any inability to operate in London, as well as the publicity concerning any such termination or non-renewal, would adversely affect our business, revenue, and operating results.

 

"We cannot predict whether the TfL decision, or future regulatory decisions or legislation in other jurisdictions, may embolden or encourage other authorities to take similar actions even where we are operating according to the terms of an existing licence or permit."

 

In May, hundreds of Uber drivers in London, Birmingham, Nottingham and Glasgow staged a protest against the firm over pay and conditions

What do others say?

Business lobby group the CBI said customers valued Uber, and encouraged both sides to find a resolution.

 

But the Unite union - which believes Uber has unfairly taken business from black cab drivers - welcomed the news.

 

"Uber's DNA is about driving down standards and creating a race to the bottom which is not in the best interests of professional drivers or customers," said Jim Kelly, chair of Unite's London and Eastern cab section.

 

Where else has banned Uber?

Uber has faced pressure from regulators around the world over the way it treats its drivers, competition concerns, and fears about passenger safety.

 

The US firm pulled out of Denmark in 2017 because of new taxi laws that required drivers to have fare meters and seat sensors.

 

Bulgaria and Hungary both stripped Uber's right to operate following pressure from local taxi unions.

 

And in May, the ride-hailing firm pulled its UberXL service in Turkey without saying why.

 

What happened in London in 2017?

TfL first declined to renew Uber's licence in September 2017, again over safety concerns. Back then it cited Uber's approach to carrying out background checks on drivers and reporting serious criminal offences.

 

Uber's use of secret software, called "Greyball", which could be used to block regulators from monitoring the app, was another factor, although Uber said it had never been used in the UK.

 

However, TfL granted Uber a 15-month licence extension - later extended by two months - conditional on it making improvements to its business.

 

TfL can offer licences of up to five years, but it has been more stringent of late.

 

In July, Indian ride-hailing company Ola got a 15-month agreement for its entry into the London market, while ViaVan got a three-year licence renewal.--BBC

 

 

 

Louis Vuitton buys jeweller Tiffany for $16bn

The world's biggest luxury goods company is buying US-based jeweller Tiffany & Co for more than $16bn (£12.5bn).

 

The largest luxury goods deal to date gives LVMH's billionaire owner Bernard Arnault a bigger slice of one of the fastest growing upmarket sectors.

 

He said Tiffany had an "unparalleled heritage" and fitted with his other brands.

 

Tiffany has been hit by lower spending by tourists and a strong US dollar.

 

Tiffany is something of a New York institution and its flagship store is next to Trump Tower on 5th Avenue. The company hit global fame after being featured in the 1961 Audrey Hepburn film Breakfast at Tiffany's.

 

Founded in 1837, it employs more than 14,000 people and operates about 300 stores - 12 of them in the UK.

 

Mr Arnault has coveted the business since buying the Bulgari brand in 2011 for $5.2bn.

 

"We have an immense respect and admiration for Tiffany and intend to develop this jewel with the same dedication and commitment that we have applied to each and every one of our Maisons [brand houses]," he said.

 

LVMH has 75 brands, 156,000 employees and a network of more than 4,590 stores. Its other brands include Kenzo, Tag Heuer, Dom Pérignon, Moet & Chandon, and Christian Dior.

 

"We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come," Mr Arnault said.

 

Known for its signature robin's-egg blue packaging, Tiffany rebuffed LVMH's initial advance made just five weeks ago, arguing it significantly undervalued the company.

 

The new deal values each Tiffany share at $135 in cash and is higher than the initial offer of $120 a share - which valued the business at $14.5bn.

 

Tiffany chairman Roger Farah said the board had concluded this deal "provides an exciting path forward with a group that appreciates and will invest in Tiffany's unique assets and strong human capital".

 

The brand is associated with diamond rings but it has lost its appeal in recent years, according to Fiona Cincotta, market analyst at City Index.

 

She told the BBC's Today programme that there had been a "changing of the times".

 

"It's not quite keeping up with millennials so it just needs a re-boost and a re-brand," she said.

 

LVMH has experience of revitalising businesses. Ms Cincotta cited jeweller Bulgari, which when LVMH took it over in 2011 had operating margins of 8%. These have now widened to 25% on double the sales.

 

"This something that LVMH appears to do very well... this is a real turnaround story," Ms Cincotta said.

 

Step through the doors of the Tiffany & Co flagship store on Fifth Avenue in New York and you go back in time to the 1960s.

 

You don't quite expect Audrey Hepburn to be gazing longingly at one of the glass display cases, but the shop's atmosphere is redolent of the eponymous film that did so much to make the jewellery chain an international name.

 

That ready association is an asset - everyone knows what Tiffany does - but is also a weakness.

 

Millennials don't want to shop where their parents did, which is why Tiffany has been struggling in recent years and has now given up the fight to remain an independent company.

 

LVMH is paying a decent price - $135 a share is not far off its all-time high - but it's worth bearing in mind that luxury brands are notoriously difficult to value. Tiffany's staff will be hoping that LVMH can repeat what it did with Bulgari, turning a rather old-fashioned brand into something more cutting edge, and doubling sales in the process.

 

Investment bankers, ever eager for the sniff of a deal, will also be wondering whether this move by LVMH might trigger a reshuffle of its sprawling empire.

 

One obvious deal - which has been touted many times but never made it off the drawing board - would be the sale of its majority holding in Moet-Hennessy to Diageo, the drinks giant that currently owns a one-third share. Diageo would be an eager buyer, but over the years LVMH has shown itself reluctant to sell.

 

Tiffany has attempted to broaden its appeal to younger customers.

 

Last year, actor Elle Fanning was named as the face of the brand and fronted an advertising campaign to the strains of Moon River - the theme tune to the film Breakfast at Tiffany's - but remixed and featuring the rapper A$AP Ferg.

 

It also secured Kendall Jenner, one of the biggest "influencers" on Instagram with 119 million followers, as one of the models for this year's spring and summer collection.

 

In 2018, it brought in Reed Krakoff, widely credited for transforming the US handbag brand Coach into a multi-billion dollar business, as its chief artistic officer.

 

One of his first collections when he joined Tiffany was called "Everyday Objects" and features products such as a sterling silver ball of yarn for £8,750 and a set of 10 Lego-like silver and walnut building blocks which cost £1,550.

 

Its main focus, though, is jewellery which was one of the strongest performing areas of the luxury industry in 2018. Consultancy Bain & Co forecast that comparable sales in the $20bn global market were expected to rise by 7% this year.

 

This has encouraged firms to expand in the sector. Luxury goods firm Kering has launched high-end jewellery lines for its fashion brand Gucci, while Switzerland's Richemont - a sector leader with labels such as Cartier - recently bought Italy's Buccellati.--BBC

 

 

 

TSB to close 82 branches next year to save costs

TSB is to close 82 branches next year as part of a plan by new chief executive Debbie Crosbie to make £100m of cost savings by 2022.

 

The Spanish-owned bank has 540 branches and is trying to restore its reputation after last year's huge IT failure, which hit 1.9 million customers.

 

The outlets to be shut will be named on 28 November after staff have been told.

 

TSB would not comment on job numbers, but it is thought that between 300 and 400 positions will be affected.

 

Ms Crosbie replaced Paul Pester, who stepped down in September last year following the IT debacle that began in April 2018 when an attempt to move data to a new computer system went wrong.

 

Last week, customers again faced problems, this time with wages and other payments being paid into their accounts.

 

Announcing the new strategy, Ms Crosbie said: "The plan we're sharing today involves some difficult decisions, but it sets TSB up to succeed in the future.

 

"Our new strategy positions TSB to succeed in a challenging environment at a time when we know customers want something different and better from their bank."

 

TSB lacked common sense before IT meltdown, says report

Reduced opening hours announced at 93 TSB branches

The bank - which was spun out of Lloyds Banking Group - will spend £180m closing the branches and on other restructuring costs.

 

TSB was created in 2013 under the instruction of the European Commission after Lloyds was bailed out by UK taxpayers in 2008.

 

It started with 631 branches, which included those that were branded Cheltenham & Gloucester as well as all Lloyds branches in Scotland.

 

That network has already been reduced in size and it is thought that under this latest reduction the staff affected will be offered redeployment opportunities where possible.

 

Lloyds floated TSB as a stand-alone bank on the London stock market, but it was then bought by Sabadell of Spain in 2015.

 

As well as closing branches, Ms Crosbie said the bank would spend £120m on improving its digital offering and automating some of its branches. By 2022, it expects 90% of transactions to be self-service.

 

The bank also wants to speed up the time it takes to open and start using a current account from seven days to 10 minutes.

 

In April, TSB had already announced that 71 branches in Scotland and 22 in England would open for only two or three days a week.

 

Dominic Hook, national officer at union Unite, urged Ms Crosbie to rethink the latest branch closures. "With over 3,300 bank branches having closed since 2015 this TSB news will hit High Streets extremely hard," he said.

 

Last year's IT failure drove the bank to a loss in 2018, although in the first half of this year it reported a profit of £21.1m. Ms Crosbie is aiming for profits of between £130m and £140m in 2022.

 

The humiliation of last year's catastrophic breakdown has forced TSB to abandon grandiose promises.

 

When it was hived off from Lloyds six years ago, it pledged to be a bank you could trust, without the "funny stuff" that tainted other scandal-ridden banks.

 

It wowed people with a current account paying 5% interest.

 

Its then chief executive, Paul Pester, attacked rivals for "savagely cutting branches" and made a firm commitment to his outlets, promising to expand the network.

 

The IT failure knocked a deep dent in customer trust, and then TSB cut its flagship interest rate.

 

And now Debbie Crosbie, the boss brought in to steady the ship, is targeting branches.

 

It is true that the rise of the internet is forcing the industry to change.

 

But that's the point. TSB promised it would be something different. Now we see it is just another bank.--BBC

 

 

 

 

 

 

 

 


 

 


 

INVESTORS DIARY 2019

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has 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 suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of 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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