Maandelikse Nuusbrief / Monthly Newsletter 2013/02

Transcription

1 Maandelikse Nuusbrief / Monthly Newsletter 2013/02 Disclaimer: The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG Konsult and do not constitute advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken on information in this newsletter. Should you require further information, please consult an adviser for a personalised opinion.

2 Indeks A World of High Debt 2013 Budget Fokus op Aftrede AVI Medi-Clinic A WORLD OF HIGH DEBT & LOW INTEREST RATES & FUTURE INFLATION The above heading might seem like a contrast to many and it should be. Economic theory states that at higher levels of debt the holders of the debt require higher interest rates to compensate them for the risk that they are taking in lending out their money. However, sometimes this is not the case and we are currently experiencing it on a global level. We re all aware of the high levels of Government debt around the world, especially in Europe and the USA. Despite the high debt and still high budget deficits interest rates (as can be seen on the chart below) are at decade low levels. The obvious question one asks is Why is this happening? The answer to that is not difficult at all. The calamity in the financial system in 2007 and 2008 signalled the beginning of the unravelling of the global debt super cycle. The Keynesian model (used by most Western countries) dictated that the best way to fix the problem was to run large deficits and increase the money supply to attempt to combat the deflation taking hold. Central banks around the world are keeping interest rates artificially low to try and stimulate growth. The sometimes unintended, but we view it as intended consequence of this action will be inflation. Keyens eluded to this in the following paragraph,...by a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens... As inflation proceeds and the real value of the currency fluctuates wildly, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless.

3 Between the 1940s and the early 1980s, the United States reduced its national debt from 140 per cent of GDP to just 30 per cent while continuing to run sizable deficits. The difference between then and now is the magnitude of the debt mountain on the Federal Reserve s balance sheet that will need to be eroded. A subtle shift has begun in which policymakers are starting to think of inflation as a policy tool rather than the by-product of their actions. Despite Keynes warnings, it appears that higher inflation will continue to be the monetary tool of choice for central bankers tasked with cleaning up sovereign balance sheets. The long term effect of inflation will be higher interest rates and this will directly affect the return to bondholders down the line. During the next decade the return on global bonds could well end up being negative, also known as a prolonged bond bear market. The current interest rate environment is that of a balloon being held underwater. When the Fed and ECB withdraw from the market and allow interest rates to find their economic level, the balloon will inevitably ascend. This could result in a large switch from bonds to equities, resulting in a potential bull market for stocks. Locally this could also have consequences with a strong stock market but significantly higher interest rates in our future. SA 10 year bonds are trading at decade lows; this will change in the next few years. From this we can take three things: 1. Buy stocks 2. Pay off debt quickly 3. Be wary of long term fixed interest investments

4 Budget 2013 in a Nutshell 27 February 2013 saw Minister Pravin Gordon, deliver his budget speech for The highlights of the announcements were as follows: New Tax threshold for individuals older than 75: R The proposed new tax table: Individuals and special trusts Adjusted annual interest exemption from a South African Source: R & R (over 65) By April 2015 the interest exemption will however be replaced with new investment vehicles of which the interest, dividend and CGT return will be completely tax exempt. Taxable Income (R) Rate of Tax (R) % of each R and above % of the amount above % of the amount above % of the amount above % of the amount above % of the amount above The medical tax credit is increased from R230 per month for the first two beneficiaries and R154 per month for any additional beneficiaries to R242 and R162 respectively. Primary Rebate: R Secondary Rebate for taxpayers older than 65: R Third rebate for taxpayers older than 75: R New Tax threshold for individuals under 65: R New Tax threshold for individuals over 65: R

5 As from the 1 st of March 2014 contributions by employees and employers to pension, provident and retirement funds will be tax deductible by individual taxpayers. Deductions will be limited to 27.5 % of the higher of employment or taxable income. Annual deductions will be limited to R No changes to withdrawal or retirement rates. Duties & Levies Excise duties are increased as follows: Spirits increased by between 5.7% and 10% Cigarettes increased by 10% Fuel levy increased by 15c to c RAF levy increased by 8c to 96c Die Fokus Op Aftrede Soms is die lewe so gejaagd dat ons net fokus op die oomblik. Wat gaan ons waar en wanneer doen en hoe gaan ons daarby uitkom. Maar hoeveel keer is daar wat ons fokus op ons aftrede? Statistiek toon dat 60% van Suid-Afrikaners nie kan aftree op hul verkose ouderdom, as gevolg van n tekort aan finansies. Ek is seker almal is bekend met die stelling, Vroeg ryp, vroeg vrot. Hierdie stelling kan ook in die finansiële industrie gebruik word. Indien n aftree-spaaropsie te laat geopen word en daar te vroeg onttrek word van die fonds, is die kanse goed dat die belegging vroeg vrot gaan word. Mnr. X begin spaar op ouderdom 30. Hy teken n maandelikse debiet order van R500 teen n gemiddelde rente koers van 10.5% en hou vol vir 10-jaar. Na tien jaar kanselleer hy die debiet order, maar behou sy belegging. Sy vriend, Mnr. Z, begin op ouderdom 40 spaar en, net soos Mnr. X, teken hy n R500 debiet order teen dieselfde rentekoers. Die verskil is dat hy volhou met die addisionele inbetaling tot op ouderdom 65. Op ouderdom 65 gaan Mnr. X se belegging meer werd wees as Mnr. Z s n. Die rede hiervoor is saamgestelde rente. In die voorbeeld hierbo sal Mnr. X amper dubbel die bedrag van Mnr. Z in sy belegging hê. Hierdie is die presiese rede hoekom dit van kritiese belang is om so vroeg as moontlik te begin beplan vir aftrede. Om die besluit in die begin te maak is gewoontlik nie maklik nie, veral as dit die eerste belegging is. Vanuit persoonlike ervaring het ek tot die gevolg gekom dat dit beter is om jou finansies so te struktureer dat spaargeld eerste in ag geneem word. n Vraag wat gewoontlik opkom is, Hoeveel gaan ek nodig hê? Die vraag kan beantwoord word deur n gedetaileerde begroting op te stel van wat huidiglik van sprake is. Dit sal n goeie riglyn wees van hoeveel benodig word vir aftrede, aangesien navorsing toon dat daar ongeveer 80% van die huidige inkomste benodig word na aftrede. Geen bedrag is te klein, of selfs te groot, om te begin spaar nie. Daar is n spreekwoord wat lui, Dit is makliker om n bewegende voertuig te stuur as een wat stilstaan.

6 AVI limited (AVI R56.00) All of us have preference in what type of brands we buy. Some like to enjoy a cup of Five Roses or Freshpak tea, others are House of Coffee or Ciro fans. Would I wear my Guess or Yardley fragrance today? I&J hake for lunch. Brands are AVI lifeblood. AVI is listed on the Johannesburg Stock Exchange in the Food products sector. This company is comprised of an extensive Brand portfolio including more than 50 well-known brands. I believe it is safe to say that all South Africans have at some time or another consumed or aspired to own some of these brands. The company has formed a successful structure to assist in the management of the different types of brands. The structure has four business units and a shared services section taking care of beverages, sweet and sour snacks, frozen foods, and fashion brands including personal care brands, shoes, apparel and accessories. Entyce beverages (tea, coffee, creamer, Ciro out of home coffee solutions) Revenue contribution of 28% and an operating profit of 30%. The increase in revenue of 10.3% is caused mainly due to higher selling prices of tea and coffee and creamer to offset higher input costs. Real juice (including Sir Juice) was discontinued followed by an agreement with Clover to buy the brand from AVI for R60 million. Snackworks Revenue was 12.5% higher due to higher sales volumes. This unit contributes 29% to revenue and 24% to operating profit. Revenue from continuing operations increased by 11% in the 2012 financial year, following good sales volume in all brands and export revenue in I&J due to the weaker rand. Headline earnings per share increased by 28% to cents, following a drop in finance cost and a lower effective tax rate of 31.2% compared to 33.4% in the previous year. Divisional overview Looking at the divisional contribution, we can see that that the performance of each structure in the group remains constant compared to the previous year,which means that the allocation of brands in the portfolio are strong and performing well. Chilled and frozen brands Revenue increased by 11% due to improved export and selling prices. There was a significant increase in sales volume resulting from higher hake quota. I&J contribute 19% of the group s revenue and 13% to operating profit. A project is in the pipeline to improve their processing facilities which will cost R59 million and expected to be paid back in less than 3 years. Fashion Brands Consist of personal care, footwear and apparel.revenue grew by 9% while operating profit

7 increased by 26%. Fashion brands contribute 24% to the group s revenue and 33% to the operating profit. Acquisitions The acquisition of Green Cross, South Africa s leading comfort footwear was concluded in July They believe that this acquisition is a good growth opportunity for their branded footwear portfolio. The combined impact of all transactions is expected to increase operating profit by R47 million per annum at a net capital cost of R8 million. Recommendation Despite the current PE value of 18, we expect that the profit of the company will grow with 20% in the next twelve months, bringing down the PE to a more acceptable 15. Due to the high quality of the business we recommend a long term buy. Mediclinic International Privaat hospitaal groep (MDC R57.00) To be respected internationally and to be preferred locally. Mediclinic het ontstaan in die jaar 1983 en spog tans met 68 hospitale, 8 klinieke en, altesaam, n ongelooflike 9191 beddens regoor Suid-Afrika, Namibië, Switserland en die Verenigde Arabiese Emirate. Mediclinic is bekend daarvoor om die kwaliteit van lewe van pasiënte te maksimeer en beloof om hoë standaarde na te streef deur van tegnologie en toegepaste wetenskap gebruik te maak. Mediclinic International aandeel prestasie Die groep se inkomste het met 12% gegroei in die eerste ses maande van 2013 terwyl die verdienste per aandeel ook met 45% tot op sent toegeneem het. Die onderstaande grafiek toon dat Suid Afrika nog steeds n groot bydrae lewer tot die omset van die groep, maar die sterk groei in die oorsese filiale laat die afhanklikheid van Suid Afrika afneem. Daar is vooruitsigte van verdere sterk prestasie en nuwe ontwikkelings op die horison. Die uitstekende prestasie word toegskryf aan al die besighede, maar veral deur die Verenigde Arabiese Emirate. Suid-Afrika en Namibië Mediclinics 52 hospitale is in RSA en Namibië geleë met n hoeveelheid van 7408 beddens. Hierdie afdeling van die groep het n groei in inkomste van 9% getoon wat bestaan uit 4.1% toename in beddens beset en 5.2% toename in gemiddelde inkomste per dag. Tans is daar verdere ontwikkeling van 176 beddens wat gedurende die volgende twee jaar voltooi sal word en goedgekeurde ontwikkeling vooruitsig van 196 beddens. Switserland Hirslanden Konstante verdere groei word verwag in die 14 Switserlandse hospitale wat uit 1479 beddens bestaan. Een van hulle uitdagings is om Highly Specialized Medicine (HSM) te bevorder, asook talle ontwikkelings is begin.

8 Verenigde Arabiese Emirate Emirates Healthcare Tans is daar slegs 2 hospitale en 8 klinieke wat deel vorm van die Mediclinic Groep. Met 362 beddens, het hulle n uitstekende groei in inkomste van om en by 38% getoon en daarom die sterkste prestasie tot die groep bygedra. Met die drastiese groei in populasie van 64% van die jaar 2006 tot 2010, word daar vele nuwe projekte om die groep te vergroot aangepak ten einde die toename in aanvraag te akkommodeer. Mediclinic International is n baie unieke hospitaal groep, hulle het die laaste paar jare konstante groei getoon en beplan om verder te belê in die toekoms, sodat hulle reputasie van hoë kwaliteit versorging sal voortgaan. Teen die huidige aandeelprys van R57.00, verhandel Mediclinic teen n PV van 22. Alhoewel dit nie spotgoedkoop is nie, bied die aandeel baie goeie rand verskansing en blootstelling tot twee sterk groeiende hospitaal markte oorsee. Ons verwag dat die maatskappy se winste in die volgende 12 maande sal groei met 37% wat die PV na n meer verhandelbare 18 sal laat daal en dus Mediclinic International n goeie en betroubare langtermyn belegging maak. Grondvloer Blok B Newlands Office Park 261 Lois Avenue Newlands Pretoria 0049 P.O. Box 118 Newlands 0049 Tel: (012) Faks: (012) Algemene navrae: Aandele: gerda.potgieter@psgkonsult.co.za Langtermyn beleggings: ben.fraser@psgkonsult.co.za