David Eborall
@davideborall
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SaltLight Capital Management - Portfolio Manager. Betting on Durable and Indispensable Businesses across the Globe. 🏋️♀️ Long-Term Investing Takes Courage !
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Joined June 2009
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Our 2Q24 SaltLight WWF letter is out:
- We've done a deep dive on capital allocation and "second acts".
- Big question: Where should a company start a new business line?
- Sea Ltd ( $SE ) and Brookfield Corporation ( $BN / $BAM ) as examples
Letter:
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The concept of
@LangChainAI
is perhaps the future of enterprise LLM adoption.
A superbly easy wrapper to interface into LLM base models (OpenAI currently).
We were able to easily create a fine-tuned model on our investment thesis database. Effectively OpenAI is trained to
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Just received this bold email from Google.
They're just passing on their regulatory fines to their advertising customers in certain jurisdictions.
Only something a, dare I say it, *monopoly* would do.
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Watch this explanation 👇👇
$BN $BAM Insurance business in a nutshell (valued at 0 by the market)
Spent $10bn to buy $100bn of float (or 10 year money that costs 4%).
Reinvest the float across the capital structure in AM business
Any asset return > 4% is banked to FCF
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This "Less Than Free" article (from 2009!) on Google's entry into maps makes me think about the $META open-source strategy.
@bgurley
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$JSEPPE I Think this Easy Equities government bond product is going to change the SA Market.
Most brokerages don’t offer it because they can’t handle the custody and pricing.
If I had to bet, EE are going to raise billions of AUM from this product from older income-focused
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Absolutely fascinating how new brands are being built on NFT/Web 3.0 architecture.
@CyberKongz
is a brilliant case study where scarcity + social proof + brand are combined to create value.
Before one dismisses it, remember wines, collector cards etc are all the same principles
🚨 CyberKongz &
@Uniqly_io
proudly present a timeless, classic, and redeemable NFT Streetwear collection for you to enjoy!
Anyone owning CyberKongz: Genesis, Baby or VX, can mint 2 pieces and redeem them for real life merchandise.
👉
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Purple Group now a 10 bagger for our clients since May ‘20.
Investing is sometimes about serendipity.
We finally pulled the trigger on PPE after we happened to listen to a Capitec AGM (held on a Friday afternoon!)
This was the day that PPE story changed.
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All we have to say on Purple Group (PPE) is pointed out in the the two blocks below.
1) Scale operating leverage
2) Probably the lowest CAC in financial services.
A competitor would spend that CAC in 2-3 clicks on high-demand financial services search keywords.
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These Ho Nam letters are awesome. I feel like so many CEOs need to read this.
(h/t
@kevg1412
for putting them together)
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Mr Price added R5bn of revenue that only contributed R400m in profit.
The empire building strategy is just not working.
ROICs going backwards.
Building another 200 stores 🤦♂️
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This investing approach by $BN $BAM is very simple.
Lock in as many variables as possible upfront.
This is why these assets are superior for long-duration capital.
The only 'unhedged' variable is inflation-linked revenue.
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Sea Ltd is starting to print cash. $SE
3P model = 'loss leader' to sell high margin financial services (~30%) ( $MELI model )
Gaming franchise earning @ $1.2bn EBITDA run rate. DE growing 20% without incremental CAC spend.
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Some long (apologies!) thoughts on Purple Group.
@CharlesHSavage
and the Purple management team provide all the unit economic data in their results.
In aggregators, we find GAAP accounting provides mixed signals about performance. One has to drive down to unit economics.
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It's been a over decade since I worked at RMB but it's interesting to see the backgrounds of new managers of FirstRand. The era of 'mavericks' that the founders liked to hire is slowly moving on to 'steady hands'.
Not a bad thing but the entrepreneurial culture is likely fading.
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There were signs that the quarter was going to be good. $META
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1/ On Grand Strategy by John Gaddis has been one of the most interesting books that I've ready in a while.
This book is highly recommended.
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@AnnikaLarsen1
@eNCA
Such an important interview.
I realise eNCA would love to acquire viewers by airing it again on their own VOD platform, but this interview has such national interest - think about releasing it on every platform available (incl Youtube).
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Argent Industrial (ART) vs. Trellidor (TRL) is such a great case study on how out-of-favour small caps can determine their own destiny.
ART has poorer ROICs than TRL and is a middle of the range business. But they've been masterful in capital allocation (mostly repurchasing
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This is rather ludicrous that these users pay 70 bps and a perf fee(??) for this ETF. Forex tax leakage too.
@CharlesHSavage
surely your team can create a template (for 10 bps ) with these FANG stocks and save your clients 60 bps?
Over 45K users have invested more than R1,3 billion in Sygnia products on our platform – an amazing achievement!
Now you can also get Sygnia Itrix Fang .AI AMETF in your ZAR wallet and TFSA👇
|
#EasyEquities
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Great results
@CharlesHSavage
and
@EasyEquities
Investors should focus on these helpful charts provided in the results to get a simple understanding of the business.
The Thrive Fee has only been active for ~2 months which should boost non-activity revenue going forward.
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The Fish That Ate the Whale is one of my favourite biographies of all time.
Why has there not been a movie made about Sam Zemurray? Such a great story.
@FoundersPodcast
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Interesting how a R270m JSE small-cap can pay it’s CEO a US$1.3m basic salary (R25m or 10% of the market cap a year).
CEO Median pay for a Russell 2000 index company is $500k (min Russell market cap is 21x bigger).
Question how their shareholders would allow this?
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Amazon SA is live today.
$AMZN
Book selection is very good. My obscure selections, generally not available by mainstream retailers, are all here.
Most impressive thing: 1 day delivery. For R95, I could get it this afternoon.
SA Retail doesn't know what is going to hit them.
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PnP.
I live close to one of the most expensive rent/sqm malls in the country with a large PnP (and a small WW) - it has a captive market yet the PnP store is empty except for lunchtime traffic. Recent refurb didn’t make a difference.
This store has been my canary for years.
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Just finalised sale of my vehicle with We Buy Cars. The process is so slick.
Moats sometimes can be created by doing a lot of 'little' things well - taking friction out of every step.
Those 'little things' add up to a formidable competitive advantage.
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The first 15 mins of this $KKR strategic update presentation is one of the clearest I've heard in my career about where the company is going and how they are getting there.
Clear numbers and strategy. A masterclass for any CEO.
They've studied that once a company hits $50 bn
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Always good to visit the “commodity clock”...
Seems that we’re at the ‘goble up’ M&A phase.
Next stop: massive exploration spend and mega-mergers.
IMPE RBP Impala Platinum Holdings Ltd/Royal Bafokeng Platinum Ltd: Joint cautionary announcement
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The SaltLight SNN Worldwide Flexible Fund is now available on the EasyEquities Platform (and via TFSA)..
We invest in durable and indispensable businesses across the Globe (including Purple Group ($JSEPPE))
@EasyEquities
@carelnolte
@CharlesHSavage
@saltlightfunds
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Interesting article from
@MarcHasenfuss
on Trellidor.
Totally agree that Trellidor should be a resilient business given its products.
We use to own it. But management wouldn’t take some critical advice and we sold out. Now, here we are in a troublesome financial predicament.
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Lessons Learned in a ‘Zero’ Beta Market: slides from
@manualofideas
Ideaweek 2020.
Talk about:
- stuff I wish I had known,
- handling liquidity and
- ‘quality’ companies.
Hope I can pass on lessons from the war to generate returns.
Slides:
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Some refreshing honesty! Prosus ex-Tencent returns. 8% IRR.. 1.3x MOIC.
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Received our Meituan shares from Tencent today.
Incredible value unlock through various levers.
Tencent buying back stock + distributing investment portfolio.
AND
Prosus arbitraging their shares through -0700/+PRX (actually increases NAV/sh exposure to Tencent).
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Some lessons about fraudulent behaviour from Steinhoff:
“there was an external buying group. This buying group would be in charge of volumes of products purchased from different brands. The buying group would renegotiate with suppliers to get rebates for the group."
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$U ad business is in tatters. Negative 9% growth.
They "should" be winning with the publisher distribution that they have. 70% of the top mobile games are built on Unity.
How the world would be very different for $U shareholders if $APP had bought them.
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Unbelievable events at Ascendis.
It seems like the adults left the room a few months ago and now the lenders have a gun to the company’s head.
Recording this for all to learn about over-leveraged companies and what the potential endgame is.
👇👇👇👇
ASC Appointment of CEO, Debt Facilities and Cautionary Announcement
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As a principle, state-owned companies are misallocators of capital. But this Petrobras 2024-2028 Strategic plan is very impressive. $PBR
23% avg project IRRs with a $25/bbl prospective breakeven.
Even talking about buybacks
Trading at 2.8x NTM EBITDA
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Our 3Q23 letter was sent out to clients yesterday.
We discuss:
- Successful investing requires a time dimension of assessing 'what is' against 'what could be'
- MercadoLibre / SEA Ltd
- Transaction Capital, Purple Group and $KARO
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1/ Fascinating report of the British Empire Trust (founded in the Transvaal, South Africa in 1890s) as a EM investment fund. Initial capital £500,000 - now £750m.. H/T (
@jfc_3_
) Link: ...
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With Tencent at HK$400 (aided by their $12bn of repurchases this year), Prosus will hopefully be upping their sale programme to sterilise the Tencent share price appreciation.
At HK$450 and a 35% discount, Prosus starts to pay a 17% withholding tax in NL.
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Reading Rich Dad's Cashflow Quadrant again. Staying in the B quadrant and steering far away from E...
#richdadpoordad
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“Buy when the cannons are firing, and sell when the trumpets are blowing.”
— Nathan Meyer Rothschild
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The absurd result of Purple Group going above a R2bn market cap (from 30c a year ago)
1) institutional interest will grow and
2) unit trusts are allowed to buy more because CIS regs deems it less risky🤷♂️.
You can now buy a 10% position.
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The SaltLight SNN Worldwide Flexible Fund 2Q22 letter is out.
We had a lot of fun writing it. Subjects:
- Prosus
- Wile E. Coyote and Road Runner
- Holding Company Discounts
- $BAM
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2/ Our wishlist:
1) management flip minority investors in EE (ahem Sanlam) to the top (to clean out NCI earnings)
2)
@MichaelJordaan
swaps his stake in
@VALRdotcom
for PPE equity 😜 (merge EE Crypto with VALR)
3) Exit GT247/Emperor
4) Rebrand PPE HoldCo to Easy Technologies
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Received my How Do You Know book from
@manualofideas
.Authored by
@chriswmayer
. Looking forward to reading it.
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Interesting read-across for Capitec.
This data from SA Taxi and TCRS is alarming... Inflation is strangling disposable income.
63% of lower income segment in default!
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Phenomenal book that is applicable to any investor valuing businesses.
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Balwin announcing that they’re going into rentals.
Maybe another indicator that they can’t move inventory.
Calgro tried this and it was a terrible idea. Same logic: "annuity income" and "defensive" but it’s capital intensive.
Calgro even had a REIT backing them.
Link 👇
BWNE Voluntary Update: Use of Balwin?s Land Portfolio for Development of Balwin Estates for Rental
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I thought that the BofA analyst asked the AI question of the year: $NVDA
"The computing intensity for Generative AI... does it limit the market size to just a handful of hyperscalers? if the market gets very large... attract more competition ... from cloud ASICs?"
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Our 4Q23 letter is out...
- Concerns with AI infrastructure
- Where we are finding opportunity
- Advertising as a 'switch' for margins.
Meta Platforms $META,
AppLovin $APP and
Transaction Capital (TCP) (WeBuyCars)
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Transaction Capital is going to have to grow into its multiple from here.
+ equity dilution over last few quarters which will dent NTM EPS.
If you assume 15%-20% core NTM EPS growth, the core multiple is around 27x, not ridiculous but the incremental buyer is paying up.
TCP TCII Trading Statement in respect of the full year ending 30 September 2021
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Very good introductory presentation by WBC management.
We had to adjust our WeBuyCars numbers quite a bit after this pres.
It appears as if management are not going to get into the finance game themselves. This is going to be a high cash gen business doing simple stuff.
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Great article by
@_inpractise
: Carvana, America's Car-Mart, & Auto Subprime Financing.
Some superb digging into the unit economics of the auto sub-prime financing. Learned a bunch of things I did not know.
#InPractise
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Transaction Capital:
It appears, based on management’s further communications, that the liquidity challenges in SA Taxi are on the fringes rather than the core asset base (the 30k economic units).
There is no doubt that management tried to widen access in lower credit quality
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One positive of living in Africa - being close to this.
I highly recommend the Kgalagadi Transfrontier Park
Two weeks of being out of comms.
Complete mission to get to
But, all worth it.
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This is going to be very interesting to watch. Zero commissions suggest that trading flow is the ultimate product.
Investec is going to have to spend significant capital to acquire enough of a high-frequency customer base to make it worthwhile for trading partners.
Investec
Investec to launch Clarity trading platform to the public – taking on EasyEquities
In its current form, Clarity has no admin fees, zero commission, and offers users competitive fees.
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@Richards_Karin
@sharenetsa
@iswiegers
Karin, I respect you tremendously. But EE is the greatest deal in town for their average investor (R30k AUM).
Sharenet (also a business) charges 4x the fee, a higher brokerage (30 bps vs 25) AND won’t serve the average EE user (> R50k AUM).
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Convinced that the JSE is not the right bourse to build an emerging business in public.
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Listening to the Prosus call.
Clear personality differences between CFO+CIO (Corporate Employees) vs The Entrepreneur (the new CEO). Fabricio is a breath of fresh air.
Worry that Prosus going to watch this Bull market pass by when they could have monetised their holdings.
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@talkcentss
Unlikely gov will ever default on these bonds because they can just print ZAR. Sovereigns usually default on foreign currency bonds.
Only question is whether interest rate compensates for inflation and liquidity.
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Such a treat to have
@marketplunger1
read our SaltLight Capital 4Q23 letter on his podcast.
@saltlightfunds
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$APP CEO Adam Foroughi on the growth prospects of their software business.
At 13x Earnings, he only needs to be half right, and it is a good deal.
Cons only has 11% from FY25.
Stock repurchases alone could get a chunk of the way there at 40% FCF margins.
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Great to see Karooooo disclosing their unit economics.
3x contribution margin vs. CAC.
Scale economics in fixed costs should add EBITDA margin expansion over time.
Impressive CAC has also improved too (-24%).
I hope that they invest in subscriber growth (>30%) for now.
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Interesting discourse going around on Transaction Capital.
It looks like management are in tough negotiations with lenders for rollovers of SA Taxi funding (7 months of liquidity if nothing changes).
TCP management are known as tough negotiators. Yest was about signaling that
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It took me a too long to realise it but Calgro essentially works for debt holders.
Equity value is just a mirage.
Cash flow is sucked in by working capital and debt repayment.
CGRE Unaudited Condensed Consolidated Interim Financial Results For The Six Months Ended 31 August 2022
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Macro investors always sound so smart.
They generally produce wonderful charts, plausible theories and are some of the best storytellers.
The problem is they’re trying to predict the ‘hive mind’ of a complex adaptive system.
Macro also generally lacks a ‘ground truth’
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Capitec Bank running a 1,000 person call centre from staff homes (up within 10 days)
Looking at micro-jobbing during peak periods post-lockdown.
This is all so bearish for REITs.
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I always thought Capitec did well when they were attacked by short-sellers. They provided facts to dispute averments.
Trustco went for the approach below and look where it got them.
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$BABA a swear word. But 👀 at some maths (in ps values):
Share price $95
Cash -$30
Repurchased -$1.32 in 4Q
Buyback auth -$8 next two years
-----------------
FCF FY22 $4.55
~ 8% eff yield
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Spur on a 12% FCF yield is undemanding.
One only needs to have toddlers to understand how well the Spur brand is positioned for parents with kids.
I think management should supply each franchise with a hollowed out plane for kids to play on.
I have to buy a few extra coffees
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Tencent's repurchases were a good way to sterilise the Prosus sales.
The question must be asked: if Tencent is doubling the number ($6.8bn to $12bn), is Prosus doubling their number?
Prosus market cap $88bn - what % of $12bn will be bought back?
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Short and sweet interview with Zak Calisto, founder of Cartrack.
His logic highlights why it pays to back founder-led management:
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Purple's headline earnings for 1H23 came in at a loss of -R10m. This trading statement says the full-year loss (-R23m, -R26m). So 2H23 loss is roughly R13-R16m
Not quite the train smash everyone was expecting.
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Too little is written or appreciated about Tencent’s capital allocation skills.
5% of TSLA, 16% of NIO, JD, PDD, SE, Epic.
They were early and held on.
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60% of Takealot’s GMV comes from 3P sellers.
It’s actually quite sad that with SA’s unemployment statistics, there are only 10,500 sellers in a pop of 60m.
Comparatively, Shopee in Malaysia (30m pop) onboarded 250k new sellers in 2022 alone.
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Transaction Capital's SA Taxi business focusing on second-hand vehicles makes sense to reset demand and supply.
Here is a hypothesis: Are they kitchen-sinking equity write-downs to build it back later?
Since COVID, they've been drowning in repossessed taxis (Google Maps
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Balwin must be hoping for interest rates to come down very soon.
Cash burn can't continue. They desperately need to complete and trade out of stock.
R6.3bn sitting in developments under construction.
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Sad to not see $KARO even mentioned in this report. Much higher quality biz.
$PWFL and $MIXT is really an interesting case of 💩+💩=🌸🌹
Love the in-depth research by
@CorneliaLake
The two businesses are going to be financially engineered into passive indices.
$PWFL $MIXT $IOT
Lake Cornelia Research Management announces new long position in $PWFL. Sees $6+ target, with potential for a full-rate into comp group with Samsara $IOT (ie $21 = 8x EV/Revenue vs. $IOT at ~15x). Our $6 target is ~8x forward EBITDA. Management really doesn't
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$BABA up 54% since the JPM ‘China is uninvestable’ note.
In that time:
- severe COVID lockdown
- worst financial results (slowest growth headlines, loss of market share)
- Big name investors sold out
But… the valuation was very attractive.
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$KARO repurchase announcement.
Roughly ~3.2% of the company.
However the context is that 80% is already held by insiders.
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What a beautiful business...
Growing Rev 17% YoY% (EBITDA +83% Yoy%)
(even better under the hood)
CF $1bn
- Capex $0.077bn
Repurchases $1.1bn (now 10% of sh/outstanding)
Another $1.25bn this year
Was trading at 10x EBITDA until last night.
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Great piece from
@verdadcap
"Today's 63% Allocation to the US appears to be the highest weight since the Nifty Fifty era"
"...index followers who assign 63% of market value to 26% of economic output must be willing to overpay for income that’s generated in the United States."
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Cap. Appreciation could be 10x business with some new management & strategy
- CEO runs biz from NYC
- Low value cloud consulting business does not mix with pmt terminal real estate
- capital allocation to side businesses rather than monetising core
Activist investor needed
CTAE Summarised consolidated financial results and cash dividend declaration for the year ended 31 March 2021
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Stadio is dirt cheap considering the optionality from mainstream qualifications being approved and contact learning campuses opening in the next 1-3 years.
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Thoroughly impressed with the $NET AI inference functionality added last week. Well done
@eastdakota
!
Took an hour to get the $META LLaMa model working on digesting some operational emails. Traders need to scan emails to find unmatched trades (such a waste of time).
Two
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$AMZN AWS used to be the cloud provider every tinkerer used because it was cheap and had a variable cost model. Some tinkerer’s turned an idea into a business and AMZN captured the long-tail economics.
But, in ML they’re losing the race.
We’d like to deploy a simple ML model
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Crazy that MTN need to spend the first 1.5 hrs of their investor day on SA Macro.
Highly recommend that every SA Inc. investor listen.
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$TSLA bulls - I love you but he's telling you what you want to hear.
He says they're actually accelerating the low cost model to less than 10 months from today.
Meanwhile in the last year:
Head of powertrain and engineering is fired.
CFO resigns.
IRO resigns.
10%
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Spent a few days at the
@BizNewsCOM
conference last week in the Drakensberg.
Such divergent views on politics and investing.
Great to meet
@SeanPeche
@CharlesHSavage
@pietviljoen
@Cy36ONE
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This was the most interesting piece of the $NVDA CFO interview post earnings.
They’re trying to integrate all the way up the software stack.
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This is arguably a very decent business Telkom is letting go.
FCF in FY23 of ~R500m + interco man fees ~R200m on sales price EV of R6.7bn = 10% cash yield
Actis will lever up 2-3x
IRRs will be very good.
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Temu shipping to SA is improving significantly. I don’t know how they do it unless they’re holding inventory on behalf of merchants.
I ordered yesterday morning (six items, six different merchants). Shipped < 24 hrs.
$PDD
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