Interested in learning more about Comcast, MultiChoice's partner for the new streaming platform in Africa? This is our stock of choice for Magic Markets Premium this week. The report and podcast will be released to subscribers tomorrow morning, going into great detail on the streaming side of Comcast's business. There's much more to the group than just the streaming business, as subscribers will discover. Get in on the action here>>>

A good year to be a bank...

And perhaps not a great year to be an equity holder in most other business es. Let me explain.

At Sea Harvest Group, profit attributable to shareholders fell from R470 million to R311 million. That's a R159 million nosedive. Net finance costs increased from R57 million to R124 million, with interest rates having increased 25% year-on-year. In other words, you were much better off this year being a lender to Sea Harvest Group than one of its shareholders! The economic value of the group literally shifted away from shareholders and towards bankers.

When interest rates are so high, the gap in returns between debt and equity closes significantly. We've been discussing this point at length with Westbrooke Alternative Asset Management in a series of Magic Markets podcasts, with the most recent one here. This doesn't mean t hat every company is a bad investment, obviously. It just means that you need to be really careful, as many management teams out there are busy slaving away for the bankers (and alternative debt providers) right now, not the shareholders.

Of course, this makes the banks themselves an interesting prospect. Nedbank released its full year earnings (get the entire commentary here) and they are excellent, with the credit loss ratio looking particularly strong. Of course, much depends on the extent of load shedding in 2023, something I discussed directly with the CFO of Nedbank yesterday. Although lending against solar projects etc. is a useful revenue generator for the bank, the broader economy is being hammered by load shedding and that doesn't help anyone.

Shoprite is a perfect example of that pain, with a great revenue result being ruined by huge operating costs linked to load shedding. Full marks must go to Mpact for being an early adopter in its renewable energy strategy, an approach that is (literally) paying dividends at the moment.

For the details on these companies as well as my views on Brimstone, read Ghost Bites this morning>>>

To catch up on recent news on Murray & Roberts, Aspen, Cashbuild, Caxton & CTP, Investec Property Fund, Woolworths, MultiChoice and Sasfin, listen to the most recent episode of Ghost Wrap. This podcast is brought to you by Mazars.

Foreigners are dumping our bonds

I'm afraid that this morning's macroeconomic update is a dose of cold, hard realism about our state of affairs in South Africa. TreasuryONE points out that we have had 24 consecutive days of foreigners selling South African bonds. Bloomberg reports that foreign ownership of local bonds has dropped to 25.4%, the lowest it has been in 12 years.

What was that about a lost decade?

Clearly, load shedding is a huge issue and we can see it in the G DP numbers, with the economy having shrunk by 1.3% in Q4 after growing 1.8% in Q3. With Eskom's love and tenderness continuing to grip us in Q1 of 2023, it's hard to believe that we won't have another negative quarter of growth and thus a recession.

The rand is under pressure, mostly due to our poor performance but also because of the strong dollar. In Fed Chair Jerome Powell's testimony, he noted that the "ultimate level of interest rates is likely to be higher than previously anticipated" - exactly what South Africans don't want to see. This drove 10-year yields to almost reach 4%, putting equity markets under pressure. A 50 basis points hike is being priced in for later this month at the FOMC meeting. The rand is testing the 2023 highs and it could be a slippery slope if this level breaks.

There's nothing wrong with a bit of caution, that much I can tell you.

Good luck with your day!