Weekly Stocktake

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	68 708	66 584	-9.68%
NASDAQ Composite	15 833	12 112	11 448	-27.69%
S&P 500	4 797	4 067	3 873	-19.25%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	146.87	146.28	-11.71%
USD/ZAR	15.96	17.33	17.62	10.40%
EUR/ZAR	17.95	17.41	17.65	-1.67%
Brent Crude	77.86	92.19	91.53	17.56%

Source: iress

Company and Market News

Last Thursday, FirstRand released their 2022 year-end results. The group CEO, Allan Pullinger, commented that earnings for the group have recovered and are above the 2019 peak levels. Return on equity (ROE) for the year was strong at 20.6% compared to the ROE of 18.4% from the previous year. Normalised headline earnings for FirstRand increased by 23% to R32.7 billion. The group also declared an annual dividends of 342 cents per a share, and a special dividend of 125 cents per a share. The total distribution to shareholders was R26.2 billion. Pullinger noted that the earnings growth for FirstRand is expected to revert back to the long term target of real GDP plus CPI plus (0% to 3%).

Comments from FirstRand indicate that the significant growth seen this year was as a result of new business origination picking up during the second half of the year. They were also able to significantly decrease their credit loss ratio (the amount they do not expect to recover from their core lending advances). Their credit loss ratio for 2022 year end was 0.56% compared to 1.10% from a year ago. The net interest income (NII) for the year increased by 6%. This was as a result of FirstRand taking a more conservative approach to who they lend to.

The poor current macro environment in South Africa poses a risk to FirstRand. The slow increase in the real GDP for the country will negatively impact the amount FirstRand will be able to earn over the long term. Another possible risk FirstRand faces is that they are currently being more conservative with the loans they are issuing. This could result in competitors increasing their market share if they are able to effectively manage their credit loss ratio.

Below is a table comparing certain metrics of FirstRand with other South African banks.

Company	Return on Equity	Credit Loss Ratio	12m Headline Earnings (ZAR’bn)	PE at Friday 16 Sep 2022
FirstRand	20.60%	0.56%	32.7	10.87
Standard Bank	11.30%	0.82%	27.7	8.09
ABSA	14.22%	0.91%	20.9	7.31
Nedbank	11.58%	0.85%	13.1	7.98

Disclosure: FirstRand is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

A&EO.

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	67 378	68 708	-6.80%
NASDAQ Composite	15 833	11 631	12 112	-23.50%
S&P 500	4 797	3 924	4 067	-15.21%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	144.43	146.87	-11.35%
USD/ZAR	15.96	17.32	17.33	8.58%
EUR/ZAR	17.95	17.23	17.41	-3.01%
Brent Crude	77.86	93.26	92.19	18.40%

Source: iress

Company and Market News

Last week, Shoprite Holdings (Shoprite) reported their full-year results for 2022. Revenue for the year was R184.1 billion, up 9.6% compared to the previous year. The increase in revenue was due to the number of customer visits increasing and the size of the average basket increasing. Profit for the year was R5.74 billion, up 18.13% compared to the previous year. The gross margin for Shoprite in 2022 was 24.48% versus 24.53% for 2021. Despite the global surge in inflation, Shoprite was able to keep their gross profit margins relatively flat. The share price for Shoprite decreased by 3.29% last week. The decrease in the price could be due to the market considering Shoprite to have been over-priced.

The July Unrest from last year is still taking effect on Shoprite. During the unrest, 231 stores were effected. As it currently stands, 37 remain closed; and 10 of those will be permanently closed. Shoprite successfully recovered R1.6 billion of its losses due to the unrest, from its insurance policies. Unfortunately, a further R145 million is expected to be irrecoverable. Shoprite still plan to open 275 stores during their 2023 financial year as they look to further increase their market share.

Shoprite Holdings is the largest South African retailer in terms of market capitalisation and revenue. Some of its brands are Shoprite, Checkers, and Usave. Shoprite Holdings primarily focus in the food retail space. The Shoprite and Usave stores account for 50.8% of the total sales and have a total of 1139 stores between them. 32.5% of Shoprite Holdings’ revenue comes from Checkers and Checkers Hyper stores, where they have a total of 284 stores. Checkers is considered more of a premium brand. On average, they account for more revenue per a store compared to the Shoprite and Usave.

Below is a table showing key metrics of Shoprite compared to some of their closest competitors. These are point-in-time figures which may contain historical anomalies.

Company	PE at close on 9 Sep 2022	Gross Margin	Net Margin	ROE
Shoprite	21.60	24.00%	3.06%	22.40%
Pick ‘n Pay	22.97	18.80%	1.24%	32.69%
Woolworths	16.41	35.48%	4.52%	31.57%

Disclosure: Shoprite Holdings is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

A&EO.

Lunar Capital Weekly Roundup

 

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	70 173	67 378	-8.61%
NASDAQ Composite	15 833	12 142	11 631	-26.54%
S&P 500	4 797	4 058	3 924	-18.19%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	149.91	144.43	-12.83%
USD/ZAR	15.96	16.88	17.32	8.52%
EUR/ZAR	17.95	16.82	17.23	-4.01%
Brent Crude	77.86	100.70	93.26	19.78%

Source: iress

Company and Market News

In 2016: the Democratic National Committee (DNC) thought that they were hacked during the 2016 US-election between Hilary Clinton and Donald Trump. They brought in Crowdstrike to assess their assumptions. Crowdstrike put their product on all the DNC members’ laptops and phones, and noticed that a number of apps were sending information to a specific Russian Hacker group known as Cozy Bear, without the DNC-members knowing. Crowdstrike were able to provide evidence to the FBI, to indicate that Cozy Bear had tried to influence the election.

Crowdstrike, founded in 2011, is a cybersecurity company that focuses on endpoint security through the cloud. Crowdstrike, essentially collects data on what applications are interacting between a person’s devices and other devices; and sends that information to Crowdstrike where their AI system continuously assesses the data to see if there are risks. If they pick up any anomalies, Crowdstrike would have the ability to contain the threat by shutting off certain applications or devices to prevent further contamination. Crowdstrike are also able to look at where the threats are coming from and compare it to all the other threats they’ve seen on the other devices of other companies in their network.

Last week Crowdstrike released their Q2 2022 results. Annual Recurring Revenue (ARR) was $2.14 billion and it grew 59% year on year. Net loss for the company was $78.7 million for six months ended July 31, 2022. This is compared to the net loss for the same period a year ago of $140.2 million. Despite the net loss, net cash from operating activities for six months ended July 31, was $424.9 million compared to $256 million a year ago. The share price decreased by 11.1% during the week.

Businesses will always require protection against cybercrimes, which is currently on the rise. This plays in Crowdstrike’s favour. Crowdstrike offers a more thorough security compared to traditional firewall security as it continuously looks for threats in the devices, whereas other firewalls generally only search for threats at the entry point. On the other hand, cyber-criminals are also continuously developing newer and more difficult-to-spot threats. Crowdstrike is operating in an ever-changing environment which makes it tougher to cement their moat compared to other business types.

Disclosure: Crowdstrike is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

A&EO.

Lunar Capital Weekly Roundup

 

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	69 719	70 173	-4.81%
NASDAQ Composite	15 833	12 705	12 142	-23.31%
S&P 500	4 797	4 228	4 058	-15.40%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	151.96	149.91	-9.52%
USD/ZAR	15.96	17.01	16.88	5.76%
EUR/ZAR	17.95	17.08	16.82	-6.30%
Brent Crude	77.86	95.78	100.70	29.33%

Source: iress

Company and Market News

Snowflake, a data cloud company, released their 2nd quarter 2023 results last week. Revenue for the quarter increased by 83% year-on-year to $466.3 million. And the gross-profit margin for the quarter was a healthy 72%. One of the interesting metrics Snowflake uses in their press release is: net revenue retention. Net revenue retention measures, as a percentage, how much the same Snowflake customers spend this year compared to the previous year. Net revenue retention for Snowflake was 171% as of 31 July 2022. This shows that the customers that use Snowflake’s platform, gain quite a lot of value from it, and thus use the product more in the future. This is especially strong, seeing as a lot of companies have been cutting back on spending this year. Snowflake’s share price increased by 31.68% between the beginning and end of last week. By the end of Friday, the market cap for Snowflake was $62.89 billion.

The data cloud allows organisations to share their data easily on the Snowflake platform, which operates on any of the major cloud infrastructures (AWS, Microsoft Azure, Google Cloud). Snowflake takes data from its clients and formats it so it can be easily accessible on their platform. All the clients on Snowflake’s platform have access to the data. Companies are able to monetise off the data that they share. Snowflake uses the pay-per-use model for the data on their platform. The more a client uses the data – the more the client pays. And the more clients Snowflake gets, the better the product becomes for all their clients.

One of the risks Snowflake faces, is that they have a lot of expensive fixed costs. If they aren’t able to grow their customer base and revenue fast enough – they face the risk of not recovering the costs quickly enough. Despite Snowflake creating the data cloud, other companies, with a lot of fire power, could try develop their own data cloud models. Snowflake, however, has the first-mover advantage.

Disclosure: Snowflake, Amazon, Microsoft, and Alphabet are held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

A&EO.

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	70731	69 719	-5.43%
NASDAQ Composite	15 833	13047	12 705	-19.76%
S&P 500	4 797	4280	4 228	-11.85%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	148.81	151.96	-8.28%
USD/ZAR	15.96	16.23	17.01	6.58%
EUR/ZAR	17.95	16.64	17.08	-4.85%
Brent Crude	77.86	97.1	95.78	23.02%

Source: iress

Company and Market News

Last week, Walmart released their Q2 2023 results. The results were good and it gave quite an interesting insight into the current spending behaviour of US consumers, primarily. Total revenue for the quarter increased by 8.4% compared to the same quarter a year ago. Gross profit for the quarter increased by 3.2%. And net income for the period increased by 20.4%.

The smaller increase in gross profit compared to the total revenue for Walmart indicates that Walmart were not able to sell all their inventory at the prices they initially planned to sell it at. The company noted that they reduced prices of some of their goods so as to not maintain a bloated inventory. This affected the gross margin for Walmart compared to the previous quarter. The gross margin for Walmart was 31.96% for Q2 2023 compared to 34.10% for the same quarter last year. The gross margin of a company is a good indicator as to how well a company can handle inflation. However, the absolute increase in gross profit resulted in Walmart increasing their net income significantly.

One of the drivers for growth in Walmart is its advertising business. Walmart has a large amount of consumer data, and are leveraging it to companies who want to advertise on their platforms. Their Ad business grew by just under 30%. An article in the Business Day suggests that Walmart could potentially roll out a platform that will allow social media influencers to market their products. Whether they are able to successfully do it or not is another question. Walmart already works with influencers to promote certain goods on other platforms. Currently, influencers are able to earn a commission on goods sold if a customer uses an influencer link to purchase a Walmart product.

The large scale of Walmart allows them to offer customers low prices for their goods. However, the net margins for the business remain quite low in comparison to other businesses, but they operate at such a large scale that they are still quite profitable in absolute values. The low margins still provide a risk for the company, as it means they are quite price sensitive to input costs. If we look at one of their competitors, Amazon, Walmart’s margins are significantly lower as Amazon has a highly profitable cloud service: AWS. This allows Amazon to offer similar prices to the eCommerce consumers while generally maintaining higher margins in their overall business.

Below is a table comparing certain metrics of Walmart to metrics of a year ago.

Period	Price at end of week of Q2 results release ($)	EPS	Gross Margin	Net Margin	ROE
Rolling 12-months Q2 2023	137.02	5.00	24.60%	2.36%	16.21%
Rolling 12-months Q2 2022	150.45	3.56	25.10%	1.78%	11.53%

Disclosure: Walmart and Amazon are held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	69 519	70731	-4.06%
NASDAQ Composite	15 833	12 658	13047	-17.60%
S&P 500	4 797	4 145	4280	-10.77%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	150.04	148.81	-10.18%
USD/ZAR	15.96	16.77	16.23	1.69%
EUR/ZAR	17.95	17.07	16.64	-7.30%
Brent Crude	77.86	94.38	97.1	24.71%

Source: iress

Why Numbers Matter: In Review

A month ago we held our Lunar Capital client event: Why Numbers Matter. We’d like to share two of the short clips with you from the event.

The story of how Lunar Capital started

And the stories of some of the people who’ve invested with us

If you would like to talk to us about our products and what we can offer you, contact us via email at: [email protected] or phone Sabir at: +27 83 305 7860

 

Company and Market News

Last week, MTN released their interim results for 2022. Overall the results were quite good. Total revenue for the interim increased by 10.3% compared to last year. And profit after tax for the interim increased by 148.89%. The increase in revenue was largely attributable to the increase in data sales. Data sales were up 33.1%. Of the total revenue, data sales account for 34%. The stock price for MTN jump 6.46% last week on the positive news.

MTN is a telecom service provider that  operates primarily in Africa. The three locations which account for the most revenue are South Africa (25.6% of revenue), Nigeria (36.4% of revenue), and Ghana (10.2% of revenue.) One of the key metrics used when valuing a telecom provider is  Average Revenue per User per a month (ARPU). ARPU for MTN in South Africa was $6.01, Nigeria: $5.01, and Ghana: $3.60. In South Africa, a year ago the ARPU was $6.91. The decrease in ARPU in South Africa is as a result of data prices decreasing.

Some of the risks that MTN faces are high levels of inflation and hyperinflation in some  of the countries they operate in. This hurts their bottom line figures which are reported in ZAR. Telecom providers also have high fixed costs. This can negatively impact their profit in the long term if they are not able to grow their customer base.

MTN’s main competitor is Vodacom. However Vodacom’s operation is primarily focused in South Africa. For Vodacom’s most recent quarter, South Africa accounted for 77.8% of total revenue.

Below is a table comparing key metrics of MTN with Vodacom.

Company	Market Cap @ 12 Aug 2022 (ZAR’bn)	PE Ratio @ 12 Aug 2022	Net Margin	ROE	ARPU in South Africa (ZAR)
MTN	287.37	13.68	12.18%	20.14%	94
Vodacom	239.97	13.51	17.26%	20.75%	89

 

Disclosure: MTN and Vodacom are held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	68 934	69 519	-5.70%
NASDAQ Composite	15 833	12 391	12 658	-20.05%
S&P 500	4 797	4 130	4 145	-13.58%
Prime Lending Rate	7.25%	9.00%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	148.08	150.04	-9.44%
USD/ZAR	15.96	16.53	16.77	5.08%
EUR/ZAR	17.95	17.00	17.07	-4.90%
Brent Crude	77.86	103.59	94.38	21.22%

Source: iress

Company and Market News

Under Armour: a creator, marketer, and distributor of branded athletic apparel, released their Q1 2023 results last week. For the quarter, revenue remained flat at $1.3 bn compared to Q1 a year ago. Net income decreased from $59m in Q1 2022 to $8m in Q1 2023. The share price of Under Armour increased by 4.06% this week despite the disappointing news.

Under Armour operates in the athleisure/athletic apparel space with other brands such as Nike and Lululemon. Despite Under Armour and Lululemon making athletics-wear for the same purpose, Under Armour sells products to the mid-income market compared to Lululemon, who sell products to an upper-income market. An example would be if we compared the price of leggings. A pair of Under Amour leggings go for just under $75; whereas a pair of leggings from Lululemon can go for just under $100, with some leggings being priced at just under $120.

One of the things we like about premium brands, at Lunar Capital, is that they have higher margins compared to other brands. People that like a specific premium brand will stick to buying that brand compared to others. A downside, however, would be that in this current market, when interest rates are going up, and the disposal income of consumers is decreasing – consumers who were on the fringe of buying premium products may hold off on buying these products.

Below is a table comparing the margins and other financial indicators of Under Armour and Lululemon.

Company	Market Cap @ 5 Aug 2022 ($bn)	PE Ratio @ 5 Aug 2022	Gross Margin	Net Margin
Under Armour	4.04	12.80	49.67%	5.43%
Lululemon	40.56	40.43	56.87%	15.35%

 

Disclosure: Lululemon is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	68 070	68 934	-6.50%
NASDAQ Composite	15 833	11 834	12 391	-21.74%
S&P 500	4 797	3 961	4 130	-13.90%
Prime Lending Rate	7.25%	9%	9.00%	24.14%
Lunar BCI WW Flexible Fund	165.68	148.08	145.24	-12.34%
USD/ZAR	15.96	16.85	16.53	3.57%
EUR/ZAR	17.95	17.21	17.00	-5.29%
Brent Crude	77.86	103.71	103.59	33.05%

Source: iress

Company and Market News

Last week, many of the big US companies released their quarterly results for the period. Overall, the companies released positive results compared to what the market was expecting. This resulted in the Nasdaq and the S&P 500 increasing by over 4% during the week. The major companies that released their results were: Alphabet, Amazon, Apple, Meta, Microsoft and Qualcomm.

Earnings this quarter were better than expected given the inflation and recessionary outlook. However, at Lunar Capital, we think that the next quarter’s earnings season will be more significant indicator with regards to the outlook of the economy. The economy would have been through a longer period of increased interest rates. Consumers would then be paying higher interest on their mortgages, for example, for a longer period; and thus, would have less discretionary spending. This arguably would be felt in the economy as a whole, potentially reducing the earnings of companies.

Below is a table showing some of the financial indicators of companies that released their results.

Company	Market Cap @ 29 July 2022 ($bn)	12m Earnings Change (%)	PE Ratio @ 29 July 2022	ROCE
Alphabet	1 519	14.44%	21.72	24.41%
Amazon	1 375	-60.57%	121.52	4.17%
Apple	2 630	14.78%	23.05	48.26%
Meta	428	15.79%	13.19	30.57%
Microsoft	2 095	18.72%	29.09	26.96%
Qualcomm	163	39.72%	12.86	36.55%

 

Disclosure: Alphabet, Amazon, Microsoft, Qualcomm, and Berkshire Hathaway (which has a significant holding in Apple) is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	65 089	68 070	-7.67%
NASDAQ Composite	15 833	11 452	11 834	-25.26%
S&P 500	4 797	3 863	3 961	-17.42%
Prime Lending Rate	7.25%	8.35%	9%	24.14%
Lunar BCI WW Flexible Fund	165.68	141.63	148.08	-10.62%
USD/ZAR	15.96	17.08	16.85	5.58%
EUR/ZAR	17.95	17.23	17.21	-4.12%
Brent Crude	77.86	102.60	103.71	33.20%

Source: iress

Company and Market News

Last week, ASML released their Q2 2022 results. Revenue and net income for the quarter both increased by 35% compared to the Q2 last year.

ASML have indicated that they expect net sales for Q3 2022 to be between €5.1 bl and €5.4 bl. And for the year they expect revenue growth to be around 10%. This is lower than they previously stated. They noted that it is due mainly to delayed revenue recognition from the fast shipments they are implementing. They noted that some customers are indicating signs of slowing demand from certain consumer-driven market-segments. However ASML are still seeing high levels of demand for their systems. They currently have strong net bookings for their systems. According to ASML, the strong demand is driven by global megatrends in automotive, high-performance computing, and green energy transition.

Due to the on-going supply-chain issues, ASML is using the process of fast shipment to deliver their products to customers. This means that ASML will skip some of the testing at their factories and will do final testing at their customers’ site. ASML will only then be able to recognise revenue at a later stage. Their customers, however, are able to test the systems they receive from ASML earlier and can begin production of microchips earlier.

With the ongoing geo-political tensions, ASML faces the risk of being forced to stop selling their DUV (Deep Ultraviolet) systems to China. Semiconductor companies require export licenses, as semiconductors are considered dual-purpose products that are used for general consumption and military use. Currently, they are unable to sell their flagship EUV (Extreme Ultraviolet) systems to China.

ASML is one of the leading suppliers to the semiconductor industry. The company provides chipmakers with the hardware, software, and services to mass produce microchips. Some of their clients include Intel, Samsung, and TSMC. ASML effectively has a monopoly on making equipment that uses photolithography (process of using light to print patterns on silicon) to produce microchips.

Below is a table comparing some of the rolling 12-month results for ASML.

Rolling 12-Month Period Ended	Net Income (€’bn)	Free cash Flow (€’bn)	PE at end of week Results Release	Return on Capital Employed
03-Jul-22	5.62	9.24	37.74	32.53%
04-Jul-21	4.78	6.55	55.64	25.09%

Source: iress

 

Disclosure: ASML is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/

The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

Lunar Capital Weekly Roundup

Index / Fund / Rate	Start of Year	Last week	This Week	% change YTD
JSE ALSI	73 723	68 327	65 089	-11.71%
NASDAQ Composite	15 833	11 635	11 452	-27.67%
S&P 500	4 797	3 899	3 863	-19.46%
Prime Lending Rate	7.25%	8.25%	8.35%	13.79%
Lunar BCI WW Flexible Fund	165.68	144.63	141.63	-14.52%
USD/ZAR	15.96	16.90	17.08	7.02%
EUR/ZAR	17.95	17.21	17.23	-4.01%
Brent Crude	77.86	107.08	102.60	31.77%

Source: iress

Company and Market News

On Friday, 15 July 2022, MTN announced that they were in talks with Telkom, to acquire the entire share capital of Telkom in return for shares in MTN, or a combination of a cash pay-out and shares in MTN.

The mobile market in South Africa is primarily made up of 4 players: Vodacom, MTN, Telkom, and Cell C. For the period ended 31 March 2022, MTN had a total of 34.5 million subscribers in South Africa and Telkom had 16.9 million subscribers. For the most recent quarter, the mobile subscription Average Revenue per User (ARPU) for MTN was R93.26 and R89.94 for Telkom
Vodacom has the biggest share of customers in South Africa (45.4 million customers) with an ARPU of R90. And Cell C had 12.9m subscribers in South Africa (the lowest market share.) Cell C have not disclosed their ARPU.

If the MTN-Telkom deal goes through, MTN would significantly be able to close the gap between itself and Vodacom in the South African mobile market. MTN would also have further access to the fibre and other ICT (information and Communications Technology) markets. However the deal would still need approval from the competition commission. We are not sure whether the approval will go through. The outcome of the deal would likely result in 2 players (MTN and Vodacom) controlling more than 80% of the mobile market in South Africa.

The share price for MTN remained flat for the week and the share price of Telkom increased by 16.6%. Below is table comparing certain metrics of MTN with Telkom.

Company	Market Cap at end of week (R’bn)	Total Assets at Year End (R’bn)	PE at end of week	ROE
MTN	267	366	13.70	5.29%
Telkom	22	66	7.34	7.73%

Source: iress

 

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