One of the stellar large capitalisation performers in the market has
been SAB Miller. A single share these days will cost you more than R510 which
is R110 up on its price at the start of the year. That’s a gain of almost 30%. In
a trading update, published a month ago, the company suggested that its
forthcoming results (now due next week) would show only single figure (i.e.
less than 10%) growth. The average forecast by the analysts who do this sort of
thing, is that annual earnings will be around R20 per share and the annual
dividend will be close to R8.70 a share. On these numbers, the price to
earnings ratio of SAB Miller is almost 26 and it offers a (pre-tax) dividend
yield of only 1.7%. In my book, that’s very very rich. But despite this data, day
after day, for several months, buyers have been happy to pay more and more in
order to own shares in this company. Undeniably it is a great company with a
great product and with great management (the recently retired CEO and I shared
a school desk for 4 years) but it is impossible to justify buying them at these
levels unless you plan to sell them and reap a capital profit. But beware the
day when more profit takers than buyers call their broker.
Wouldn’t it be fun to watch the communist-infested Cabinet reach the
conclusion that they need to sell off state assets. When it comes to raising
money, ideology takes a back seat. Left-wing politicians are going to have to
wrestle with their ideals when they decide how much of which assets they are
prepared to sell to the dreaded capitalists. They will find few takers if they
choose to “do a Telkom” and retain control and the right to appoint management.
From where I sit, with a view of the many ships waiting to enter Durban harbour, the ports
are clearly a candidate for privatisation as indeed should be the state owned
airline and airports. Doubtless there are others and developments will be
interesting and maybe even tempting. But don’t hold your breath. The pictures
of Marx, Lenin and Castro are still hanging in the Cabinet room.
Also in the vein of scratching for cash is the looming deadline for
anyone who tries to earn a crust by helping other people with the ridiculously
difficult task of completing a tax return. Within a few weeks these advisors
must not only be registered with the taxman but also be a member a professional
accounting body. It is totally unclear what risk the government is attempting
to cover with this new law. Presumably they are worried that physicists like me
might find a worm-hole in the space-time continuum where we can hide our income.
This old bear’s lack of a financial education continues to hinder
his progress in understanding matters such as the need to “recapitalise” the
National Empowerment Fund. Despite assurances that it is a going concern and
has reserves it appears to have run out of money. Apparently this is not the
same as “broke”. An entertaining squabble between itself and the National
Treasury has broken out and in the meantime the outfits to which it makes “disbursements”
are left waiting for their money. Are they required to pay it back ever? How
does this all work? Who will recapitalise me?
Here in the kingdom, the head that wears the crown surprised his
subjects, especially those in need of healthcare, by raising the priority of
renaming the hospitals above that of getting them actually to provide medical
services. It is unclear why naming health department facilities after his ancestors
is a necessary step for attracting suitably qualified and dedicated staff. Assuredly
the sick people have no interest in what the place is called as long as it’s
open and they can find it. Puzzlingly, however, the boss of the provincial
health department supports the program but did add that “we are focussing on
changing the names of the mortuaries first.” It’s really not encouraging to
think that these sorts of items fill the agendas of those whom we elect.
The Sharks at last have broken the run of ignominious losses which
various uncharitable fellows at the bowling club had begun to attribute to my
support for the team. I trust I will be able to drink there unmolested tonight.
James Greener
World Information Society Day 2013.
