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Altech Autopage subscribers being sold off: Wayne McCurrie – Momentum Wealth

‘The resource shares, particularly Glencore, were hammered.’

HANNA BARRY:  We are talking markets now with Wayne McCurrie of Momentum Wealth.

The all-share index traded fairly tepidly on the day and ended quite flat at 50 331 points, slightly down from its Wednesday close. It was of course closed yesterday for Heritage Day and didn’t seem to pick up today, Wayne, on quite strong global equity markets – certainly in the US and Europe.

WAYNE McCURRIE:  Look, our market wasn’t bad. The resource shares, particularly Glencore, were hammered. Glencore was down 15% at one stage. I think it closed down 12%.

Otherwise there wasn’t really all of that much happening. Gold shares were up a little bit. There wasn’t much corporate news but we’ll chat about that later on. And I suppose there is just no one in our market today – if we drive around Sandton now there is no one. It’s wonderful

HANNA BARRY:  It’s quiet. People on holiday Volumes were very thin, as you say. We did see some news out of the US, an upwardly revised US second-quarter GDP growth figure of 3.9%. The dollar strengthened off the back of that, but the rand did not weaken.

WAYNE McCURRIE:  The rand didn’t weaken much. The rand is already approaching all-time record lows. Look, the US economy is growing quite strongly. Janet Yellen today said interest rates are going up this year, and that seemed to calm some fears about the state of the global economy. It was so funny last week – if she had upped rates, the market would have been worried. She didn’t up rates and the market was still worried because now it is worried why she didn’t up rates – that there is something terrible out there that we don’t know about. But it looks as though everything’s relatively as anticipated and as people expect. To me it actually doesn’t make that much difference when it happens. It could have happened last week, but maybe now it only happens in November at the next meeting. Interest rates are going up in America and they are going to go up by the massive amount of 25 basis points.

HANNA BARRY:  So nothing to get too excited about.

WAYNE McCURRIE:  Ja – the market is terribly excited about all of this.

HANNA BARRY:  [Laughing] As you say, Janet Yellen laid out a detailed case for that rate-hiking cycle. She was addressing a crowd at the University of Massachusetts yesterday. And I think after that speech the rand did weaken, breaking the R14 mark – R14.08/dollar. Slightly stronger today if you can even call it that. But, as you say, the rand at all-time lows.

The corporate news that was out today included Tiger Brands. You heard me discuss that. That share price rallied on the back of Matlare’s resignation announcement. The market was not too big a fan of all the acquisitions that they’ve been doing.

WAYNE McCURRIE:  Look, unfortunately the Nigerian acquisitions were a disaster. That’s the only way you can describe them. Now, if you wonder whether Tiger and other South African companies should have gone into Nigeria, the answer is clearly yes. When the oil price was above R100 Nigeria was growing at 5, 6, 7%; it was a great place to be. They bought the wrong asset. They didn’t do their homework properly because it has cost way more than they anticipated to fix it. I’m not even sure they have fixed it yet and it has taken three times longer to actually fix it. So that was really poor. The current state of the Nigerian economy is terrible – you can’t get foreign exchange. With the oil price at $48 there is no more money. But that is a temporary thing. The oil price will eventually recover and the economy will go. But clearly Peter thought well, maybe someone else should just come along now and take over and move forward.

HANNA BARRY:  Altron – that share price is up 15.8% after it announced that it will sell the subscriber base of Altech Autopage Cellular for R1.5bn to Vodacom, MTN and Cell C, really just to cover its debt and improve its cash flow. Altron is really struggling.

WAYNE McCURRIE:  This was a great company 15, 20 years ago. It really did well. But then they also went all over the place and made acquisitions that were completely disastrous and they are selling the assets to get some money, to put some money in the bank to settle debt and hopefully go forward. I’ll have to look at the company again to see what all is left there. But the regulation and the desk-top decoders – this all hasn’t helped.

HANNA BARRY:  And Altron actually blames the impact of steep cuts to mobile call termination rates – that’s of course the fees that operators charge each other to carry calls between their networks. Icasa cut those. It has really hit the bottom line of all cellular operators. Autopage is South Africa’s largest independent cellular service provider, about a million clients on its books. So interesting, we’ll have to watch that one.

Also, staying with telcos, some noise that Cell C is considering a listing on the JSE. What do you make of that?

WAYNE McCURRIE:  It wouldn’t surprise me at all. I don’t know the quantum of money that’s been poured into Cell C, but it must be astounding, and there is no positive cash flow and there are no profits there yet. It’s very similar to Neotel. Neotel also eventually had to sell out. So Cell C is talking to Telkom, maybe a combination with Telkom Mobile or they are going to list it, because they just need some money,. They’ve worked out that this is almost a bottomless pit.

HANNA BARRY:  Wayne, let’s talk about that R12bn-a-year game industry, just for a second. You heard me mention the sable bull sold for R27m.

WAYNE McCURRIE:  Astounding. We are in the wrong business here.

HANNA BARRY:  Absolutely.

WAYNE McCURRIE:  Look, this must be a bull market.

HANNA BARRY:  Excuse the pun.

WAYNE McCURRIE:  Very much so. It cannot be seen any other way, because it is just simply not worth it. Now, the character of bull markets is that everyone will justify the price. So it will always seem it was well worth it, look at this. And bull markets always last longer than you think and the prices go up higher. We heard a while back when the buffalo was sold for that fortune, and I think this is still the early stages of a bull market. This could carry on for a long time. But is a wild animal worth R20/30/40m? I just cannot see it. But in previous bull markets people have paid a fortune for artwork and stuff like that. They all eventually collapse. But, as I said, they last longer than you think and prices go up higher than you think. Everyone who is involved in the industry will slate me and say this is entirely justifiable. The same as in classic cars – overseas the prices are astounding, you cannot believe them. And a motor car is seen as a work of art. It’s actually an art exhibit.  It’s a car! But people are prepared to pay astounding prices for them.

HANNA BARRY:  Well, there is a very happy game farmer from Letsitele in Limpopo this evening who paid R27m for that Zambian sable antelope bull.

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