Old Mutual Investment Group

Portfolio Manager, Peter Brooke, unpacks his latest market views with The Money Show’s Bruce Whitfield

April 05, 2022 Old Mutual Investment Group
Old Mutual Investment Group
Portfolio Manager, Peter Brooke, unpacks his latest market views with The Money Show’s Bruce Whitfield
Show Notes Transcript Chapter Markers

Peter Brooke shares his thoughts on recent market movements, focusing on reports that Woolworths might be exiting its Australian operation, as well as latest results from Aspen and their implications.

Bruce Whitfield  00:06

Peter Brooke, he is a Portfolio Manager with the Old Mutual Investment Group, and earlier on, we were talking, Peter, about South Africa's track record in Australia and Derek Lubner. Lubners are the greatest. That was the payoff line from the furniture store in those days. Enjoying the show from London this evening. Thank you, Derek. His father - that must have been... Lubner brothers, I think, Derek, Bertie? Were there two Lubners? Lots of Lubners. My father invested in Australia in 1978 via plate glass. It's still there via a company called Belron, it's doing great. So, not every company that goes to Australia has lost its shirt.

But Peter Brooke, we were just talking about the reports out of the Australian newspaper today, that Woolworth is very keen to lose its David Jones shirts. And I must put you on, I suppose, because you're not on Zoom, you're on the phone. 

Peter Brooke  00:54

I'm on, I'm on. I'm waiting to go [laughter]. Ja, I mean, you can see actually, it's kind of interesting, because today was basically a flat day and the two news stories were Woolworths and Aspen, and Woolworths was the best performer, up 4.2, and Aspen was the worst. 

And I do think there's an enormous amount of value to be released from releasing the millstone of David Jones from Woolworths, because we - it's not a company that we currently own. And in fact, because of that, we recently met with them, and their food business in South Africa is still a great business. So, the potential to release value to get the focus right. I think it would be good news if if they exited that. And that's obviously the market's response to the rumour. But rumours are rumours, we'll have to see the facts.

Bruce Whitfield  01:51

Ja, exactly right. And just, it depends on the price tag they can get for it. I didn't see the Aspen announcement; I see the share price was down about two and a half percent on the day. What have they told the market?

Peter Brooke  02:02

Well, they had their interim results out. 

Bruce Whitfield  02:03

Oh, we missed that. Yup?

Peter Brooke  02:08

And actually, they were pretty good. So, these are their half-year numbers. And they've surprised on the upside. The interesting thing, of course, is that the share price fell. And the reason for that is the whole vaccine story. So, because Aspen's got a big manufacturing business, anything that you could - if you could get extra volume through, your operating efficiencies and your leverage kick up. 

So, the potential growth story that was embedded in manufacturing vaccines in South Africa for Africa, was something that the market was quite excited about, particularly because the manufacturing business isn't doing wonderfully at the moment. And I think that, you know, that upside is fading up. So, the whole... I mean, generally sort of vaccine hesitancy in Africa is quite high. The booster rollouts are going quite slowly. I actually had my booster on Saturday, and - 

Bruce Whitfield  03:05

Is your arm still sore? Mine was sore for a week. I was delighted, because it reminded me every day that I'd been a sensible and responsible citizen, but sjoe, it was tight.

Peter Brooke  03:16

No, I think 24 hours, took a couple of Panado, been fine. 

Bruce Whitfield  03:21

You're tough. 

Peter Brooke  03:23

Ja, not so much. I think having had Covid twice, my body's probably riddled with antibodies. But the bottom line is, even I sort of asked him what vaccines people are taking and everyone chooses Pfizer. And I think sort of the fact that Johnson and Johnson was much less effective against Omicron in terms of statistics has sort of shifted that perception around Johnson and Johnson in terms of efficiency. So, actually boosting’s are going slowly, there's been less than 2 million of them. No one's taking Johnson and Johnson, so that growth optionality in Aspen has reduced.

Bruce Whitfield  04:05

I mean, it's interesting, isn't it, Aspen. We're kind of treating it as a bit like a one trick pony. But it is in more than 50 countries, they are doing incredible things in those 50 countries around the world, manufacturing in some, exporting and importing in others. The South African business is interesting because they are beefing up vaccine manufacturing. It won't just be Covid vaccines, it will be other vaccines in Gqeberha and other places. One's got to take, I suppose, a view on Aspen slightly longer term on this, in terms of where it fits into the global pharmaceutical complex?

Peter Brooke  04:38

I think it's a very interesting company for South African investors. I mean, over the last five years, it's down 6% per annum. So, it hasn't gone anywhere. And over that - once again, it's not a company we own, it's company we're keeping a very close eye on, and we met with them last week. 

And it's... to pick up a global business operating out of South Africa on a 13 times multiple is of interest. And they have sorted out their balance sheet, which was a bit of a problem that. So, they lost their way a couple of years ago. They've tidied things up. They've consolidated their portfolio. But it just needs a little bit more in terms of sort of, where's that growth coming from? Because with manufacturing, one of your big issues is where you do get caught in the value chain. And so, what impact does that have on your margins? So, definitely of interest, not one we're in at the moment.

Bruce Whitfield  05:40

Peter Brooke, Portfolio Manager at the Old Mutual Investment Group. On the day, overall, market was down a tiny fraction. Nothing really worth worrying about. We saw the All Share Index pull back a tiny bit on the day, mostly coming through in gold and resources shares. Industrials held up well and a couple of the shares in the financial sector, Capitec at one stage had record levels. 

What would the impact be of Woolworths exiting David Jones?
Discussing the interim results from Aspen
Taking a longer term view of Aspen and where it fits in globally
A summary of markets on the day