All the skinny on Naspers and Gold Brands Investments
What’s going down in China? And when is food chain Chesanyama being joined by its UK stablemate?
When is Las Iguanas coming to SA?
It’s probably best to take with a pinch of salt news that fast food and restaurant franchisor Gold Brands Investments is launching the UK brand Las Iguanas in South Africa in June.
The company – which has the Chesanyama brand as its main operational platter – is planning a flagship 200-seater store in Irene Mall Centurion.
This appears to be a slight change from initial indications in November that Las Iguanas would be launched in the first quarter of this year.
Timing issues aside, the real challenge for Gold Brands will be funding such a grandiose flagship outlet and the subsequent roll-out of the brand into other locations.The company – dubbed “Cold Brands” in some quarters after failing to whet investors’ appetites after listing in 2016 – does not exactly have a balance sheet richly garnished in cash.
Optimists will hope things look sturdier in the full financial year to end February. But in the half-year to end August a much reduced turnover of R28.6-million was worryingly whittled down to an operating loss of R19.4-million. But more worrying was an operational cash outflow of R5.2-million and a larger bank overdraft of R5-million.
There’s not a lot of room to manoeuvre when it comes to funding store roll-outs and the important task of franchisee support. It would be difficult to raise fresh capital via an issue of shares at the prevailing bombed out share price. With an iffy interim income statement, funders won’t be falling over themselves to lend to Gold Brands either … at least not in an environment where discretionary spending taps are being turned off.NASPERS
Chinese regulators flex their muscles
The Naspers share price appeared utterly unaffected by the latest evidence of the heart-stopping uncertainty of the Chinese regulatory environment. On Friday, following a period of subtle and then not-so-subtle hints, the Chinese government seized control of Anbang Insurance Group, which had spent billions of dollars buying up businesses and properties around the globe often at hefty premiums.
Angbang’s sin seems to have been the use of huge amounts of debt to fund its buying spree. The Chinese government is fearful that this sort of big spending could destablise the country’s finances. It has not only taken control of the company, it has charged the former high-flying chairman Wu Xiaohui with engaging in fraudulent fundraising. Wu, who is married to Deng Xiopeng’s granddaughter, was regarded as being sufficiently politically connected to be sheltered from any aggressive moves by the Communist Party-led government.Sadly for Wu the concept of “politically connected” appears to have been altered by the recent strengthening of President Xi Jinping’s position in the party.
The move is likely to further chill the pace of Chinese investment into the US. In 2017 Chinese acquisitions were down to 10% of what they had been in 2016. And it’s likely to exacerbate tensions between the two countries.
There could be very good reasons for taking over Angbang. Using debt to pay over the odds for trophy assets while the elitist chairman leads an exceptionally lavish lifestyle should and probably would worry regulators across the globe. But few would or could act as decisively as Xi’s government.
Tencent’s modus operandi is almost the reverse of Angbang’s. It has used foreign equity to grow a Chinese IT empire. But the dramatic move should remind us all of how different things are in China.