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Mediclinic shakes the market with Spire write-off

Rand is pushing off its worst levels – David Shapiro on Thursday’s market.

WARREN THOMPSON:  Good evening and welcome to the SAfm Market Update with Moneyweb. My name is Warren Thompson.

Time now to have a look at the markets. The JSE all-share closed 0.62% to the better today, following a number of positive results out from companies.

The rand has continued to gain ground against all the major currencies. It’s now trading at R14.24/dollar, R18.75/pound and R16.76/euro.

Platinum closed 0.5% higher at $930/oz, while palladium was almost 0.33% weaker, at $984/oz. Gold closed flat at $1 280/oz/

Here to help me process all those company results today is our effervescent market commentator, David Shapiro. Good evening, David.

DAVID SHAPIRO:  Hello, Warren. You mentioned “cold Johannesburg”. I’ll tell you, I’m sitting in an office with a heater on in the middle of November.

WARREN THOMPSON:  It’s crazy. It’s upside down today.

Were companies ganging up on us today, David? How many results were coming out in trading statements? I could barely keep up with the Sens.

DAVID SHAPIRO:  Ja. It’s very difficult because so many come out. Accountancy, I always say, is a bit of a fraud because you can basically put [out] whatever numbers you want. I saw something today called “segmental headline earnings” – that was from Peregrine. That I’ve never seen in my life before – “segmental”.

All my screens have just gone off, including my heater! But I’ll battle on.

WARREN THOMPSON:  Just interesting to see Peregrine’s unbundling that’s going to be coming there. They are taking those what they call non-core, non-operating assets out and unbundling them to shareholders. That’s going to be happening quite soon.

DAVID SHAPIRO:  Ja. It’s interesting. You have to understand the Peregrine business. I think they want to focus on what they consider their core businesses. I know Java [Capital] has a very good name. The security side and the trading side are, it seems, very difficult, and I think they are looking for more sustainable, predictable revenue. It’s not a company I follow that closely. I watch them because I know the chaps who work there, and I’ve always liked them and their innovation. But I understand they want to get out of businesses that are not always easy to understand or to reflect on.

WARREN THOMPSON:  Ja. Let’s turn our attention to some of those big companies. Mediclinic came out with interim results – how did that end up with the market’s reaction?

Read: Doubts over Mediclinic’s $1.6bn Spire bid knock shares

DAVID SHAPIRO:  Not good. Not good at all. This is one company where you can always back the Remgro Group. You always back what they’ve done. But their backward listing into Al Noor hasn’t gone the way that everybody forecast – and they are still battling along. It’s been a major underperformer since the deal was done. They’ve still got lots of issues there. I think today we were shaken by the write-off of Spire, which we thought they are getting. Actually I think they made a bid for the company and it was rejected, or there was talk about it. Now, to see that they’ve written it down by £50 million, that took the market by surprise. We know that they’ve been making some progress in addressing issues in Abu Dhabi. Dubai seems to have steadied and Switzerland seems to have steadied. Locally here they are still facing problems. But this is one that just can’t find a bottom.

So you’ve got both Mediclinic and Netcare actually disappointing us in an area that was always regarded as defensive and steady.

WARREN THOMPSON:  And both of those are quite heavily invested in the developed markets.

One developed market that was certainly, from a banking perspective, quite a lot tougher for Investec was the UK, in parts of their business. What did you make of that?

DAVID SHAPIRO:  I think so as well. Again, I think the market didn’t warm to the results. I see that the share price lost about 2%. But the asset management side and also the wealth side, which has been the mainstay, especially during the tough times, just seem to have gone sideways.

Read: Investec legacy portfolio immaterial in 2018

On the specialist banking side they are making a bit of progress. It’s taken a lot of hard work there. It’s also a difficult one to understand because of the translation effects. You’ve got two businesses – one here in South Africa and one in the UK, so you have to do the adjustments. I was reading an account in pounds, so you’ve got to do a lot of adjustments to try and understand how we interpret it here.

And I was a bit disappointed in their asset-management side.

WARREN THOMPSON:  Ja. For so long it had been growing quite nicely and, as you say, it has dropped off quite a bit.

DAVID SHAPIRO:  Just one thing. The rand is improving even now – R14.15/dollar. You mentioned R14.24 in the introduction. I don’t know what’s pushing it. I know that global markets are doing pretty we’ll, and there is demand once again for emerging currencies. But it’s pushing off its worst levels that we’ve seen in the last few days.

WARREN THOMPSON:  And that might certainly be having an effect on our market.

DAVID SHAPIRO:  Maybe on the commodity markets.

WARREN THOMPSON:  Great. We’ll leave it there, David. Thanks a lot.

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