Simon Shares

• Local inflation came in at 4.3% in August from previous of 4.0%. This a little higher than expected with food one of the main drivers. Maybe we're finally seeing food inflation that will help the retailers. MPC rate announcement on Thursday, 20 out of 25 economists say no change. If they'e right then I think a November cut is certain.
• Prosus (JSE code: PRX) remains in the Top40 and Indi25 indices that it went into when spun out of Naspers (JSE code: NPN). I haven't been able to confirm weightings but the big question is does the two of them exceed what Naspers was weighted? For capped indices this gets real messy, say Naspers was capped at 10%, it'll still be 10%, but will now also include Prosus.
• Flavoured vaping, flavoured cigarettes next? Two states and President Trump are hitting out against flavoured vaping with a ban the likely outcome. I have spoken about this before, the tobacco industry went full tilt into vaping as a new gateway into getting new smokers and it's working. Except now regulators are pushing back and the question is if menthol cigarettes will be next? If it is then the industry is dead in the US market.
  • Breaking news is that "India's cabinet approves ban on e-cigarette sales and production".
• Saudi Arabia oil production is coming back, majority this week 100% within 2-3 weeks. Currently we have over supply (before the attacks) so oil will revert back lower.
• Sasfin (JSE code: SFN) results show a book value of around 5000c yet the share has, for years now, traded well below book value. Otherwise not bad results, but they cut the dividend cover from 40% of HEPS to only 20%?
• Comair (JSE code: COM) results boomed on the back of the payment from SAA (ie: us). But otherwise it seems that the market is ignoring their non airline businesses that are now some 40% of group profits. They also seem to be benefiting from SAA reducing their flights early last year and the grew air traffic.
• Up coming events;
  • 10 October ~ Is it time to buy listed property?
  • 31 October ~ Live Fat Wallet Show recording

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The Netflix Challengers

Apple has launched Apple TV+ for $5 or free for a year if you buy a device. Disney+ also launches in November for $5.99 or $12.99 if you also take Hulu and ESPN+.

We also have HBO, Peacock (coming next year), Amazon Prime (essentially free in the US) and a bunch of others.

Locally we only have Netflix, Amazon and Showmax.

But don't forget YouTube, I mostly watch YouTube, but I am a very light TV watcher, maybe 5 hours a week at most. YouTube is of course free, or you can pay to make the ads go away.

So now things get real for Netflix. At last results they had 151.6million globally with some 55million in the US. A recent price increase saw 130k US subscribers exit, but at an extra $1 per month that still added over US$600million to annual revenue.

But here's the Netflix problem;

• They're spending some US$15billion on content which is US$100 per subscriber who is paying around US$150 on average in the IS and lower in the rest of the world. So the numbers add up. But that content bill will continue to grow and competition has got real in the last year.
• Disney has an advantage of a serious back catalogue whereas Netflix has a much shorter and weaker back catalogue and has lost a lot to Disney, Stars etc. who have pulled their content for their own services.
• The idea was that cutting the cable and moving to streaming would markedly cut the bill. But now with all these services it ends up the same or even more. Users are going to start to be icky abut what and when they subscribe. For example, subscribing to HBO when GoT is on, then pausing.

Netflix is not dead, but for the first time competition is real and investors need to watch subscriber numbers and content spend.

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