Everybody loves a sharp dressed bank
Plus: Comvita, Lithium, and UMG
Kiwibank — billion dollar baby — Rebecca in BD writes on the potentiality of an partial float of KiwiBank on the NZX. Again shows the potential upside to NZX ltd’s materially undervalued stk px — would be catnip to fundies — everybody’s going crazy ‘bout a sharp dressed bank. We think there’s a strong likelihood of public/private listings occurring in 24/25 — esp with the govt we have — and think this would be extremely accretive to the exchange, where listings have been about as frequent as visits to Chernobyl as of late. What we hope this will do is encourage more of those great private companies we have in NZ to list by way of offering a vote of confidence… continue to hold NZX as a high-conviction idea, but we expect to engage further with the board and management. TP: $1.30.
We took NZX to task “a little” in our last note — and deservedly so (great funds mgmt biz, meh market operator) — stk hasn’t done anything in a decade. We think a listing like KiwiBank could be just the ticket — but still more to be done…keep watching this one…
Honey I shrunk the bees — Comvita issued yet another downgrade — FY24 Revenue was $103M, down 8.1% vs prior corresponding period, and EBITDA down by ~32%. No view here, except never invest in fish, cows, milk, chicken or honey…stk is trading at historic decade lows but we just don’t have much faith in the China market…sorry, Xi.
NZ conviction list — continues to be NZX RAK EBO THL MFT. We continue to view Rakon offer as good arb (+40% if takeover accepted). EBOS continues to trade ‘down and dirty’ and we think it remains good buying…Stryker, their largest customer medtech distribution customer, announced double-digit growth YoY — bodes well for EBOS. We like mgmt, straight shooters, and we like think of EBOS as a mini-conglomerate which buys when the price is right.
THL — have you been to Queenstown lately? Campervans booked out. Or if you have had the (dis)pleasure of walking down Queen St (a good reality check on the infrastructure investment we desperately need) you will notice hordes of tourists from the cruise ships…tourism is showing no signs of slowing down…while Mainfreight continues to truck along…
Aussie
Lithium — has taken a brutal beating in the last few months — see below. We still like lithium-adjacent Lynas which is down ~20% on the past month — we’ve been adding in smalls to our Aussie model portfolio. Also taking note that Australia’s richest woman Gina Rinehart just spent $1.7bn or so buying lithium producer Azure while RM-wearing Andrew Forrest has been investing heavily in the sector too…these guys are not stupid, and we expect that they are looking at least 5 years into the future.
Going nuclear, baby
Uranium continues to go on a tear…URNM up +7% alone today…we wrote up our thesis on Dec 4 on why we love the toxic commodity and we love to make you money. We expect it to continue to go on a tear until 2028…expect bumps in between of course…
Amazon
A great quarter — FY revenue +13% to $574bn (like I keep writing you — what recession??!). All-important AWS sales grew +12%, a sign that the “profit center” is starting to reach maturity (compare to GOOG and MSFT’s cloud growth rates…but AWS still is still the biggest boy of all). Stk is up. Here’s the really interesting thing — remember how I was rambling on about live sports being the last frontier — it has a great big target on its back that NFLX, etc, are all running at like Jonah Lomu in his prime…anyway, Thursday night football is going pretty good!
Increased total viewership for the second season of Thursday Night Football (TNF) on Prime Video by 24% year over year, and had double-digit growth (14%) for the second consecutive season in the hard-to-reach 18–34-year-old demographic, according to Nielsen. The November 30 Seahawks-Cowboys game attracted 15.3 million viewers, becoming Prime Video’s most watched TNF game ever, according to Nielsen.
And that’s the most interesting thing here — people love sports and it’s now become a feeding freezing for who can get broadcast rights…
A reader wrote in asking about how all this hoo-ha with the streamers effects Sky TV. Short answer is, we think Sky TV continues to be a prime acquisition target because it has so many broadcasting rights to so many “much watch” games — it’s almost a monopoly with the end of Spark’s foray into sport. Sky rejected a NBIO last yr but we wouldn’t be surprised to see another…~$400mn buys you a whole lotta sports rights — the rest is noise.
And by the way — think about how many people tuned into watch all 103 minutes of Wolves v. Manchester United today…continue to see value in MANU and other sports franchises as streamers line up with pockets full of cash to pay for the broadcast rights…Formula One Group (FWONK) is one idea — why not just own all of Formula One? Well — you can.
Speaking of fast cars — Baby got a fast car — Ferrari posted record earnings — 1.26bn euros…I keep telling you and I will keep saying — buy luxury! The average selling price of a Ferrari for last yr, by the way, was 397,000 euro (that’s $702,000 NZD). We hold Ferrari in several of our model portfolios via Exor NV, the Agnelli family holding company which owns ~22% of the co.
UMG and TikTok — and Hipgnosis
UMG, which is a position in our global portfolio (~2% position size) recently started pulling songs from its vast catalogue of music from TikTok. UMG said TikTok wanted to pay a “fraction” of what other services pay — and UMG promptly said no thank you. This is big. TikTok is an increasingly more important platform and licenser of songs — UMG controls around ~30% of the music market. They control everything from the rights to The Beatles to Kanye West and Taylor Swift. TikTok users not being able to use those songs poses a problem: frequently TikTok content is paired with “trending songs”.
Gut feeling — UMG gets a better deal — it owns such a large portion of the market that TikTok is in a weaker position. Sony and Warner Music could also make threats (I believe the legal term is a “a conversation over lunch at Nobu”). CEO Lucian Grainge has been this through before with Spotify, etc — he knows how to negotiate. Mkt seems to agree with my gut feeling as UMG stock sits at ~27 eur, mostly unchanged. Grainge is one of those CEOs who wears a velvet glove — but when the gloves come off…
Hipgnosis — waiting for the miracle…
We wrote about Hipgnosis before in our “discount” issue (most successful idea out of there so far has been NZL, which we continue to think trades at good value). Today’s FT had a piece on the ever-melting iceberg, which continues to melt…
We did some rough math and came up with a NAV of 90p per share; an analyst in the FT suggests 100p. Either way, Hipgnosis trades at 67.65p, which is a discount to what we think the value of the book is if Hipgnosis ends up selling all its catalogues. It’s increasingly likely they do, as they bought all those song rights with a lot of debt. Song rights are attractive still (see: UMG, WMG) — a distressed seller, as Hipgnosis may become, could be very interesting to the right buyer…