While there are many other factors at play, the past few trading days have shown once again just how much of an influence China’s Tencent has on the performance of the JSE.
Tencent plunged another 6.8% on Thursday, taking its losses since September 21 to 20%. Along with a broader global stock sell-off, that dragged the JSE further into the doldrums, since part-owner Naspers tracks Tencent closely.
Despite regulatory challenges hurting its gaming business in China, analysts remain overwhelmingly bullish about Tencent’s prospects. Even today, not one of the 50 analysts tracked by Bloomberg has a sell recommendation on the stock.
Momentum Securities’s Francois Strydom said on Thursday Tencent is trading at a five-year low on a one-year forward earnings multiple, meaning that the recent sell-off provides a good entry point into the stock.
Strydom stressed that there is more to Tencent than gaming and WeChat. For instance, Tencent’s cloud and artificial intelligence business, which services companies, has been doing well.
“Cloud services revenue doubled year on year in the last quarter … This is also a key theme in our portfolio with the likes of Amazon Web Services and Microsoft’s Azure already playing major roles in our exposure to the cloud computing theme.”
Tencent is also taking clear steps to drive advertising revenues, which are growing 39%.
Considering that the JSE now takes its cue from a company in China every morning, here’s hoping that analysts are right.
After touching a record high of R13.49 at the end of August, the shares of Namibian investment company Trustco have nearly halved in value.
The sudden deflation in Trustco’s share price appears to coincide with continued efforts to restructure its debt load — a development that took a most curious turn last week when an entity aligned to CEO, founder and major shareholder Quinton van Rooyen proposed making a loan to the company of up to R1bn.
What is really strange is that Van Rooyen — via Next Investments — wants to raise part of the capital sum to be loaned to Trustco by selling a portion of his shares to current shareholders and new investors.
One might argue that placing Trustco shares at 700c/share is an easier task than trying to peddle shares at a price north of R13/share. However, the bigger issue really is why even go this route to recapitalise Trustco?
Surely it would be far simpler for Trustco to raise fresh capital to cull its debt by issuing new shares for cash?
Do we assume there is not much appetite from deep-pocketed institutional investors, who are conspicuous in their absence of Trustco’s share register?
One might also presume Trustco could have turned key (and enthusiastic) shareholders in form of the US-based Riskowitz Value Fund (RVF) and Conduit Capital for fresh funding.
RVF recently invested heavily in Trustco’s unlisted subsidiary Legal Shield, and Conduit was recently singing the praises of the Namibian company in commentary accompanying its latest set of financials.
It seems, judging by the crunched share price, that the market suspects Van Rooyen — who will have an option to be paid back in Trustco scrip — is a lender of last resort?
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