Bruce Whitfield  00:04

Chief Investment Officer at the Old Mutual Investment Group, Siboniso Nxumalo, welcome to the show this evening. After Shanghai closed at a nine-month high this morning, I would have hoped for a slightly better performance on the JSE. It just didn't happen.

Siboniso Nxumalo  00:18

Yes, Bruce, good evening to you and good evening to your listeners. Now, markets slightly down today. And actually, there are stories here, in terms of what drove it, it's the story of South Africa. It's a sad story, we'll get to that. But actually, let's start on the good side, which matches a business that's got relations to a business in China, as you started off talk about Shanghai. Naspers, Prosus, both close by just about 4%. And that was the story of the day. And why is that the case? On Thursday last week, one of the investment banks hosted what they called a "fireside chat" with the Financial Officer of Prosus. And this fireside chat doesn't involve a fire. So, it's just a call over Zoom with the Financial Officer talking to the market. And in there, actually, they've come out really, really bullish, they talked about how - now if you think about Prosus, which obviously owns Naspers, they talked about how their E-commerce business, they're still committed to making sure that the E-commerce business breaks even by the first half of 2025. 

Now, Bruce, this is an important thing, because Naspers, so it's got Tencent, the Chinese gaming and advertising and fintech business, that's the business that's the majority of the valuation. And they have then gone and taken the winnings from all of those businesses and invested then all over the world in education, in food businesses, all sorts of tech-related businesses. But those businesses make losses, and management over the last 12 months have been really focused in terms of telling the market, hey, we are going to make sure we turn those losses around, we're no longer gonna tolerate them. And this is making the market excited, because if that happens, then this so-called discount to Tencent might close, and then that valuation might go up. So, the market was very excited. Also, Bruce, one more thing, management they've got $15 billion in a cash pile that they're saying, hey, you know, we could go out there and buy some things in the market. And so therefore, again, the market is looking at this very positively.

Bruce Whitfield  02:25

Okay, $15 billion to buy things. That's very nice. How much of what Naspers and Prosus have bought in the last five years is making a positive contribution to earnings?

Siboniso Nxumalo  02:37

Well, very little, Bruce. And this is where the key is because now management are looking forward, and they're promising the market that quite a bit of it is going to break even. Now, breakeven is not making a profit. It's just hey, can the revenues and the cost equals zero. So, can we just get to zero plus a little bit? And that's what they're promising in the second half of 2025. So, Bruce, we've got two years before we can see any of this materializing. But that's what the market is getting excited about because the market always looks forward.

Bruce Whitfield  03:10

Yep, absolutely. We hope they're right on that particular one. Altron results, Altron has it got anything going for it?

Siboniso Nxumalo  03:18

Ja, Bruce, Altron came out with results today. And actually, they tell a story of South Africa. But before I delve into those, I must go somewhere else. In South Africa, our government bonds - we obviously, foreign investors invest in government bonds. And since over the last 12 years, National Treasury has kept track in terms of how many foreigners own our government bonds. Now, we’re at the lowest level we have been in years because foreign investors are like they own 25% of our government bonds, which are yielding close to 11% return. 

They're good returns, Bruce, but why then are they not buying our government bonds, these foreigners who used to own 40% or 40% in 2018? Because they're not happy about South Africa. They're looking at loadshedding, they are saying, hey, this country is not going where they want it to go. Now, relating this to the Altron results, the Altron results are actually very good results. They're saying, hey, this is - for the results ended in February, we're going to generate profits over and above 20%. Well, it's between 1 and 20%. That's what they're guiding to. But Bruce, if you read these results, they've had to make a provision for a contract that they had with the city of Tshwane, which actually because of some financial mismanagement, well, that's going to cost Altron which is an independent provider of services. And so, they've got to take a hit on that. 

And it's reading through these results, and you realize that a company like Altron is becoming really difficult to run in a country like South Africa and managements just got to really work hard. The market didn't like the result, although they are saying, hey, headline earnings will be up between 8 and 28%. The market said no, we don't like that that much. So, we're going to close you down almost 5%. 

Bruce Whitfield  04:55

Thank you Siboniso Nxumalo, the Chief Investment Officer at the Old Mutual Investment Group., on a day with the JSE lost a little bit of ground, 146 points, it's tiny. 78 723, still elevated relative to what it was a week or two ago. The market staged nice recovery last week, bit of a softer start to this one.