Booster — Good piece here from TH at NBR on the Booster KiwiSaver debacle — I wonder if it’s time to bring on independent directors? Frankly, I think this is a little bit of a storm in a tea cup — but it is a harbinger of more concerning things that could happen should the KiwiSaver regime remain the same in terms of regulatory checks.
Steel and Tube — Not a bad trading update, forecasting EBIT of $14mn – $15mn. Probably most telling in the release is “…demand for steel has been at lower levels than the GFC”. If that doesn’t concern you, read it again.
Scales — Settled Bostock acquisition ($47.5mn). Accretive to the group — more premium/higher margin fruit. Scales remains trading at a materially lower value than our internal investments.
Synlait — Bonds were 121% y’day. This thing is dead in the water.
Guyman y Gomez — The Aussie fast-casual chain is looking at listing. Bless defensive investors — reprinting remarks of investor and co-founder of Seek, Paul Bassat:
“I’ve had a lot of amusement in the last week reading Rear Window about Guzman y Gomez being expensive,” Bassat said.
“I’ll tell you, if it’s the choice between some great investors like Capital and Cooper and Aware and a bunch of other folks and some guys who write a column, a gossip column, on the back page of the Financial Review, I know whose opinion I’m going to listen to.
As they say in southern American — “god bless you”. The company seems expansive whatever way you value the chain (like it matters — they already have institutionals ready to gobble up shares). At 32x – 48x EBITDA it looks expensive. Remember the McDonald’s parable we talked about earlier this week — if you bought McDonald’s at the height of its god-given growth powers in the 70s, you still would’ve lost money.
Wise
Wise had great earnings. Everything grew. I encourage you to read the full presentation — link here — underlying customers grew +29%, while underlying profit grew +31% to 1.2bn. An underappreciated fact of Wise’s growth is that the service can be used as a de-facto bank account — 48% of personal users and 60% of business users use the service as a bank account, with +16bn sterling held.
The stock dropped anyway (-15%, then -11%). The market didn’t like the fact that the company is cutting fees to obtain more customers. I love that. It is basic economics. Cut prices — more customers — more volume and market share1.
Bought more Wise for myself after the drop. It subsequently recovered a little. I think the way the genius analysts are looking at the stock in their Canary Wharf towers is flat out wrong — if you have the best product at the best price, and you invest aggressively in growth, you will do well.
Oh, Elon
Elon Musk owns i) multiple multi-billion dollar companies ii) a platform he bought to troll other people and iii) promises lots of things, some of which come true and others which never do. He also has a habit of ransoming shareholders. He wants +$53bn, based on a giant options package he was granted in 2018. He is getting it? I think?
The “logic” is — i) I am Elon Musk, ii) I may or may not do AI things iii) if you would like me to do AI things with Tesla, then pay me my money, iv) also, I am Elon Musk so pay me this massive package. There is a good article here which speculates AI is the real reason Tesla shareholders want to approve Musk’s package. Read it here.
It is very funny to me because as far as I know Elon Musk is not an AI expert. But — remember, this is Musk-world. Anything can happen! If Tesla would like Elon Musk to help develop “AI”, then it should pay him a squillion dollars!
OK then. In the meantime the rest of us will continue to pay $10 for eggs at Woolworths, I guess.
Oh, Shari
We all thought that Shari has sold Paramount, but it turns out she said to David Ellison — ok, actually, I don’t want the deal! Sources close to the deal say that it was for a couple of reasons — Shari wanted to be indemnified from shareholder lawsuits (i.e. Mario Gabelli, etc). Obviously that is nuts since the deal was, by definition, unfair to class B shareholders. She also wasn’t happy with only receiving $1.7bn, after the deal was made a little more equitable to said class B shareholders. The third unspoken reason is that she wasn’t ready to have the company her father built pried from her cold little hands.
Paramount, in this state, is dead in the water. What is it? A content studio, with some good content? A TV station? A legacy media company with once-relevant channels like MTV?
I don’t think the deal is dead entirely. At some point Shari’s advisors are going to have to tell her that the value of Paramount and its future cash flows is an ever-shrinking number (plus — there’s the debt that National Amusements, the Shari holding company, owes to Byron Trott and co). Both Logan Roy and Rupert Murdoch saw the writing on the wall when they sold their (fictitious and non-fictitious) media companies. The problem with standing on a melting ice-cube is that eventually you are left standing in a puddle.