News & Insights

Canal+, the new owner of MultiChoice Group, has ambitious plans for pay-TV and wants to be in half the households in South Africa and the other African countries in which it operates. Commenting on the combined entity, Mergence CIO Peter Takaendesa said that it will have better scale in content and equipment procurement, and should be able to extract synergies in due course from shared services and technology platforms. The African macro-economic cycle is also turning conducive to growth but time will tell if Canal+ can leverage the strengths of the combined entity to navigate industry headwinds and various risks of doing business in Africa, he said.

Nicola Mawson writes in ITweb about the take-over by Canal+ of Multichoice and speaks to analysts about aspects of the deal, including changes to the Board. Mergence CIO Peter Takaendesa says that the executive changes are probably designed to better execute growth and profitability targets. He added that the combined business will have better scale in content and equipment procurement: these are some of the key cost lines for pay-TV businesses. They will also be able to extract other synergies over time from shared services and technology platforms.

In this article on ITweb, Nicola Mawson discusses consolidation in the telecoms sector, following speculation that MTN could re-attempt to acquire Telkom. MTN CEO Ralph Mupita said a deal with Telkom is not currently on the cards although market consolidation is needed and inevitable over the medium- to longer-term as profit pools are fairly limited in South Africa. Commenting on the topic, Peter Takaendesa, Chief Investment Officer at Mergence Investment Managers, said:  “MTN can’t close the chapter of a potential deal with Telkom yet, given the need for consolidation to ensure long-term sustainability”. Peter added that the deal between Vodacom and Remgro-owned Maziv “is an additional catalyst in that direction”.

In this thinkpiece in the retirement fund publication IRFA Talk, Mergence Head: Private Equity, Chito Siame, describes the benefits of including infrastructure as an asset class into retirement fund portfolios. He says that trustees are increasing taking infrastructure into account, in the knowledge of the fact that infrastructure can diversify portfolios, hedge against inflation and deliver meaningful developmental impact.

Commenting on MTN’s recent results, Mergence Chief Investment Officer Peter Takaendesa said that apart from weaker performance in South Africa, the new leadership had achieved enhanced operational performance and profit with MTN’s rest-of-Africa operations likely to drive stronger growth in the interim. Risks to the group’s investment case include regulatory concerns in Nigeria, US geopolitical issues and African macro-economic headwinds. The results are sound notwithstanding yesterday’s massive share slump following MTN’s announcement of a United States grand jury investigation into its business in Iran and Afghanistan.

The proposed separate listing of Cell C, South Africa’s fourth-largest mobile operator, on the JSE could mark a pivotal moment for the debt-laden company. Commenting on the development, Mergence CIO Peter Takaendesa said that a listing could benefit Blue Label if the market assigns an attractive valuation to Cell C shares although the telco itself was unlikely to benefit unless fresh capital were raised; additionally the listing was unlikely necessarily to improve Cell C’s competitiveness against Vodacom, MTN and Telkom – although a stronger balance sheet from the restructuring and continued growth in the mobile virtual network operator offering could help.

Salome Maruma, Co-Portfolio Manager at Mergence Investment Managers, provides some stock comment in the Financial Mail this week. She indicates her relative preference for two retailers, with a Buy for Shoprite and Sell for Boxer.the two food retailers with a “turnaround” investment thesis.

In the latest issue of HedgeNews Africa, Mergence Portfolio Manager Fazila Manjoo looks at the past and potential future of US stocks and the need for diversification. The case for continued US dominance of equity markets relies heavily on the assumption of US exceptionalism. While this idea has been fully embraced by Trump and the big tech billionaires that have swung right to support him and wave the American flag, the problem with buying into the performance of nationalism is that leaders and investors risk being blinded. Blinded not just to the risks, but more interestingly, to the lives, hard work, and aspirations of the more than 95% of the world’s population that lives outside of the US.

On Thursday, the SA Reserve Bank MPC reduced the policy rate by 25 basis points, to 7%. Commenting on the development, Mergence portfolio manager and property investment expert, Unathi Hewana, said that the lower interest rate environment will benefit the local property sector and that any improvement in consumer sentiment, driven by the lower interest rate environment and the consumer’s own ability to better manage their debt financing costs, will benefit the sector as well, given potentially higher retail spend. One can expect positive property revaluations and better total return generation as these factors are supportive of both an increase in rental growth and a decrease in capitalisation rates.

MoneyMarketing writes about AI for financial advisers in their August edition. Adding to the debate and with an investing lens, Siviwe Jeyi, Business Development Analyst at Mergence Investment Managers, says that AI is likely to be adopted as a support tool to enhance, rather than replace, existing fundamental and quantitative approaches. It is likely to be increasingly integrated into the investment decision-making process to enhance data analysis, improve forecasting and support portfolio construction. However, human oversight will remain essential to validate model outputs and provide contextual judgement.