Mega IPOs: Don’t go chasing

Ajouté : 2026-05-28

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[00:00:19]I'm Simon Brown coming at you live and loud from the Moneyweb studios in Houghton, Johannesburg. On the show today, we've got Glapius G Auto Southern Sun results. Good numbers, of course, GT 20 B20 helped and I think that the surcharge in airlines, maybe not helping. But then I want to touch on mega IPOs. SpaceX confirmed for June.

[00:00:40]Open AI and Tropic shortly thereafter.

[00:00:43]Any interest? How does one get in on them? We'll get Glapius' view. Andrew Middleton, he's CEO of Go Solah. Latest revenue grab by municipalities and it is your power bill. And then thought for me, higher bond yields as a risk-free rate for valuing stocks. Higher yields, lower valuations. At least, that's the theory. This podcast is brought to you by Stanlib Asset Management. Invest in more global opportunities through their partnership with JP Morgan Asset Management. Morning headlines Moneyweb, FlySafair to be prosecuted for overbooking flights. National Consumer Tribunal has been asked to impose an administrative penalty of 10% on turnover and to have its conduct declared prohibited. Business Day, Investec targets fastest growing affluent market dominated currently by FNB and Standard Bank, aims to add 120,000 South African private bank clients and boost profit by 3 billion rand by 2030. Morning markets, the US is green, S&P and Nasdaq up 0.2 of a percent. The East is all green, Sydney 0.1 of a percent higher. Turkey are flying again, 2.3% up. Hong Kong just over 1% and Tencent 0.4% up. Commodities are mixed. Gold is red at 4,523.

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[00:02:22]Moneyweb now [music] on the money.

[00:02:25]Also available on podcast. Uh Chilenas Koklo PSG Old Oaks Kok. Good to have you on the show. Southern Sun results yesterday. Certainly massive boost from G20 B20, which was their Q3.

[00:02:39]I thought not bad numbers. Certainly what I like about them is that potential operating leverage. They sell more room nights. That pretty much drops to the bottom line. Question is, can they sell more room nights? Your thoughts on the numbers?

[00:02:51]Uh let's start at the beginning.

[00:02:53]Good morning, Simon, and good morning to all the listeners. When you look at a graph, you sort of close not close your eyes, but look at this graph and and it starts at the left bottom end corner and it ends at the top right. That's usually something you need to go and look at and and why. And and and Southern Sun is one of these. We know these are the the companies that's really struggled in in in the COVID midst of the COVID. And I'm so glad that these companies actually recovered so well. So yes, occupancy 2.1% 62. Well, close to 63% occupancy. Very, very good. Income rose 9%. EBITDA up 12%. Earnings up 19%. So that is great, great numbers. Just shows you, Simon, just shows you us South Africans, we can host a party.

[00:03:39]>> [laughter] >> We can host a party. 2000 Yeah, yeah, yeah. 2010 World Cup, we did it. 2023 BRICS. And last year's, as you mentioned, G20, no different. I mean, it was really good. Over 6,000 delegates, nearly 1,500 international media attended. This was They're talking about a 3 billion economic impact for for Gauteng. That was was great, and we've seen it now in in Southern Southern Sun's results. We've seen it in the likes of uh City Lodge, also in Sun International. So, yeah, it was was good. But now, I think I don't want to say the party is over.

[00:04:17]At these fuel prices at these fuel prices, I mean, people are going to think twice before traveling.

[00:04:22]>> Yeah. Yeah. Um this was good. I mean, they mention it in this this report. I mean, when you look at the the the visitors outside of South Africa that visited South Africa, it was up 11.6%.

[00:04:34]Now, you need to ask the question with the current oil price, with the current unrest geopolitical unrest, will we see the same? I think the market has told us over the past few weeks with the Southern Sun share price that that might be a bit of a worry. So, let's see.

[00:04:49]Yeah. I take your point. And I did I zoomed out on the chart. I should have zoomed out more. Man, you go back to pandemic lows. It was a one rand stock.

[00:04:56]It's now a 10 rand stock. That's insane.

[00:04:59]But anyway, I take your point. Maybe the the the party's going to slow. Let's move to some IPOs. We've got SpaceX coming rumored for for for that in fact not rumored. It is now confirmed for 12 June. Shortly thereafter, I expect Open AI and Anthropic both coming. These are going to be mega IPOs. And I I mean, I'm just I I I I worry about them. I look at the Cerebras, which was a 185 IPO price, traded 350, it's now 280. If you've bought post IPO, you have you are underwater. How do you look at these mega IPOs?

[00:05:32]Uh you know, Simon, yesterday I was sitting sitting in my office, and I've always got Bloomberg playing in the background.

[00:05:38]And and I I kid you not, it it you sort of get get just every second or third word that you hear or if you're term that you hear, it's it's it's the term AI. AI this, AI that. And and it it worries me. It it it it seriously worries me and when I look at the current market environment, I mean, we were talking about the geopolitical unrest, the the war that's still not over. I mean, we can, you know, inflation that that is that's a big problem, not just currently, but we're looking at most probably looking at at the rate hikes, not cuts anymore, higher petrol, diesel, gas prices. Yet, the S&P 500 is trading at all-time highs and and and still still improving. And this is this is the the AI I don't want to call it AI bubble.

[00:06:21]Uh let's focus for a second on on on SpaceX and Tropic and OpenAI. I mean, this is going to be massive massive IPOs.

[00:06:30]SpaceX the first one they're talking about the biggest IPO ever. And and when I read through the whole space epic, people tend to think, "I mean, it's it's just a space company.

[00:06:40]It's putting people either in in satellites in an orbit. They're putting people on the moon."

[00:06:48]This is a company that's saying that they are going to become the biggest AI company in the world. And and why?

[00:06:55]Because they've got all these unbelievable computer systems all over to get people on the moon. And they said, "Well, why not use this while it's not busy putting people on the moon, why not use it for for AI?"

[00:07:09]>> [laughter] >> That worries me.

[00:07:11]Quick story. I mean, I never forget 2022 I had two kids.

[00:07:16]I had Obama kids.

[00:07:17]I computer. I want to teach them how to use a computer from day one. I bought a Pentium 4. Got the got the space Oh, wow. It was massive. I paid 15,000 rand for this thing back then. I mean, this thing was massive. And when I said massive, we're not talking about the 512 megabyte RAM and 40 gig hard drive.

[00:07:40]I'm talking about a thing that was standing on a disk as large as the Eiffel Tower. I mean today today you can buy a let's call it a Samsung A35 for 7 and 1/2 thousand rand. It's got six times the storage. It's got 15 times the memory and and it's it's it's it's priced at 7 and 1/2 thousand rand today.

[00:08:04]What I want to encourage people is don't go you know chase chasing Kruger rands when when when the you know gold price trading at all time highs.

[00:08:16]Be very careful because the the shortages that we're seeing today ultimately will end. We will eventually end up with a much smoother you know pipeline semiconductors and those kind of things. It's not a might, could, should. It will happen very similar to the computer bubble that we've seen in that early 2000s. I like that. I like that. Don't go chasing. That's the lesson. And man pinch him for your kids were there there there was rocking. That was absolutely rocking. We'll leave it there. Skull PSG always appreciate the early morning time.

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[00:09:01]>> [music] >> Money web now on the money.

[00:09:05]Joining me with Andrew Mnisi CEO of Go Solar. Great report out from them recently around the state of this power market if we should call it.

[00:09:16]Andrew appreciate the early morning time. Your headline claims Africans are now being essentially punished for using less electricity. Walk us through how this is actually sort of representing itself on our bill that we get every month from from our various different municipalities.

[00:09:33]Good morning Simon and thanks for having me.

[00:09:35]>> [snorts] >> Yeah, I I I what we what we seen right now is is is one crisis has been replaced for another. Initially, we were talking about load shedding crisis, availability of power, and now it's an affordability crisis. Tariffs over the last um close to 20 years since this load shedding um term that we that we hear so often has gone up over 1,000%.

[00:09:57]Uh so that means, uh you know, at least in the especially in the last 10 years, a household that was using 1,000 rand a month of electricity is now spending over 3 and 1/2 thousand, which is just completely un- sustainable.

[00:10:08]Uh and and all the incentives that that that should be in place to encourage using less electricity from the grid that's under pressure are slowly getting removed, and it's getting replaced with fixed tariffs, which which doesn't encourage any um saving on electricity, any reduction investment in the grid, and effectively punishes um users for being energy efficient or trying to generate some of their own electricity.

[00:10:31]So so we feel quite strongly that those are the wrong moves. Hey, I I take your point. I mean, the fixed charge I mean, I'm I'm on the I'm on the the prepaid in the the city of Joburg. I think I pay 200 rand a month just just just just just because, for no good reason. Um Eskom charges uh 543, again, just for for I mean, I I for no real good reason.

[00:10:50]You haven't even turned on your light yet, and these are these are new fees and and increasing fees that that that is as you say, uh hurting the consumer, and we're not even using the power yet.

[00:11:01]Absolutely, Simon. And uh and unfortunately, you one of the lucky ones with 230 rand on prepaid.

[00:11:07]If you're on a if you're on a postpaid uh tariff in Johannesburg, it's now 1,761 rand, which we just cannot fathom.

[00:11:15]Um so so the 230 rand is is new and never used to be there with prepaid. Uh but the but the fixed charges are are are much higher with Eskom, as you've noted.

[00:11:24]And um and in in Johannesburg postpaid, uh these these types of tariffs don't exist in other cities such as Cape Town.

[00:11:30]So we're just not understanding why there is such a a huge disconnect between these fixed charges. And we we calling for more transparency.

[00:11:39]Uh we have no uh issue with with there being an infrastructure related charge.

[00:11:42]So, you know, you you you need to have you need to pay for access to the grid and maintenance of the grid.

[00:11:48]But, you know, for someone spending 3,000 rand a month in Johannesburg on on postpaid, almost 60% of it, 60 to 65% of it is related to a fixed charge, and the other part is is the power they use. And that split should be inverted, and that's what we've seen in other markets.

[00:12:03]It should be 60% related to what you use, and and 40% uh roughly on on the infrastructure charge. And and that's the the the let's call it the Johannesburg solar penalty.

[00:12:14]I I've heard and I don't know I mean you can confirm this that that that that folks on on on solar are being pushed onto that that uh postpaid, which therefore gets that giant uh extra fee, which is I mean this is just essentially punishing people for for going off-grid.

[00:12:31]That's correct. Um and we don't see any reason why uh solar users should be treated any differently, be forced to move to a certain tariff. Again, um to use the Cape Town example, in Cape Town, you're able to select your tariff.

[00:12:44]You've got a feed-in um option, so you can also sell your excess, which we don't quite have yet in Johannesburg.

[00:12:49]And whether you are um on solar or not, um it shouldn't inform which um which method of payment, whether you want to be on prepaid or postpaid. And the fixed tariff should be the same regardless.

[00:13:02]The selling the excess, is that I mean does it does it generate much? I suppose there's a lot of T's and C's and and and complexities around it. Is it is it meaningful for for someone who's able to do it?

[00:13:13]It's getting there. It's helpful. It's um it it the benefits started off quite marginally um because of the cost of replacing your meter to be enabled that.

[00:13:21]But, those costs are coming down, and we'd like to try and assist municipalities in bringing those those down further. Uh the the main benefit there is is a lot of solar users would would see that they've got excess power when they're potentially not at home or on holiday or at work. And they're getting absolutely no return then. So, it it does improve the the the returns, and it's getting better and better.

[00:13:41]Yeah. Now, I I I got a friend who mines Bitcoin when he's got excess power, which is another way of doing it. What we have at Eskom though, and this is this is kind of getting worse, and it's the it's the death spiral, which is quite simple. They are Eskom sells less power because more of us are going on to solar. And to be clear, there's other reasons, lack of economic growth, etc. But more people going on to solar, so they sell less power. Um so, they raise prices they raise prices, so more people leave, so they sell less power, and that that I mean that really does just end very poorly, particularly considering they've got a quite a quite a debt pile there attached to their balance sheet.

[00:14:16]Absolutely. And and and really what they what should be doing is trying to increase volumes and getting more customers. But as you as you say, the the the tariffs and the pushing and the fixed charges, the structure of the tariff, are forcing more and more um re- households we our household users ask us daily whether they can go off grid off grid, which we do not recommend cuz you know, we still think it's um it's good to have the grid and your solar there as a hybrid. But businesses in particular, big big businesses are uh the solar is really booming in this segment of the market. So, Eskom in the last um two to three years has lost four to five gigawatts of daily consumption. So, that you know, that's a move to four to five stages of load shedding. So, we've seen the the end of load shedding, but it's it's it's come from huge drop in demand uh not for power, but for power from the grid.

[00:15:05]Um and as you mentioned, the prices keep on going up and up, and it continues to incentivize people to produce their own and businesses to produce their own power.

[00:15:14]Which just makes uh Eskom's job harder and harder cuz they're they're forced to continue to push prices up to cover fixed costs, and that then continues the spiral that you need.

[00:15:23]>> Yeah. Yeah. Yeah. A last question.

[00:15:26]Listener out there who's who's got these insane power bills, and to be clear, I am in some cases one of them. Um and I unfortunately live in an apartment block, so solar on the roof is is is not an option for me. But what is a an easy win for a for a household in this environment, or is it just a a a really really tough corner we find ourselves in?

[00:15:45]Well, look, in in an apartment, I think we are seeing a lot of apartment blocks finding new innovative ways to get solar. You know, there are concepts of balcony solar that are taking up in an area where you can effectively hang the panels over there, and those are interesting models that that we see in some companies look at, and we we're certainly looking at it. Obviously, trying to keep the efficiencies in your home as low as possible, managing things like geyser timers, LED lights, those all work.

[00:16:14]But hopefully, as the as more energy trading happens in the market, you in your apartment block, you will have more options on where you can buy your power, and you can choose the lowest cost of power because the the market for energy is liberalizing, and you shouldn't have one one single option. I think you can you should be able to choose, so hopefully that's coming soon. Yeah. I've actually seen the the balcony solar, that looks quite interesting. And the the apartment block across from me has just put their roof is now all solar panels. Andrew Middleton, CEO of Go Solar, appreciate the early morning time.

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[00:16:59]Money web [music] now, on the money.

[00:17:03]So, some thoughts from me on higher bond yields and the impact on valuations. And And there's two components here we we we sort of need to dig into. The first is just a good old-fashioned valuation on a stock. It is worth the present value of its future cash flows. In other words, how much money are you going to get? How much cash flow are you going to get from it over over the the rest of its life?

[00:17:24]And and that present value is calculated by discounting those cash flows at a rate built on a risk-free rate. Whole lot of complicated jargon there, but in essence, your risk-free rate would be South Africa, you'd use a 10-year bond yield. In the US, you would use the 10-year, which has gone up to four almost 4.6 as we speak. It has been higher than 4.6. The point being is that using that that that current risk-free rate, as that rises, it devalues the present value. In other words, the value of the stock technically comes down.

[00:17:58]Now, this is a highly technical. This is discounted cash flows. This is Gordon dividend valuations, but the theory is that higher risk-free rates does mean lower stock market valuations. And we could certainly see that play out over time.

[00:18:15]It's not going to happen in a weekend.

[00:18:17]We need the rates to stay higher for longer, but I think we're going to get rates higher for longer. This is one of the implications. The other one is just good old-fashioned competition. What I mean by that? So, there's an investor out there who's looking for a fairly low-risk investment, but you were getting 1% on government bonds. So, you had to go into the stock market and try and find low-risk return in the market.

[00:18:40]But now you can get 4.5% on a US 10-year. That is a risk-free return of 4.5% in dollars. Suddenly, you don't need to go to the stock market. So, there's less competition, less less buying in the market. So, short version, higher bond yields potentially bad for valuations in the market.

[00:19:02]That's it for today. Yesterday, we were chatting with Kieran Wootton. He of course from Anchor. We're talking around Investec's results. Earnings per share back 87, well above the 176. They have beaten expectations for 32 quarters in a row. That is 8 years. I we asked you what you thought about the numbers. Half said excellent as always, a third said about as expected, and the rest said, "Yeah, that valuation, it needs more work."

[00:19:30]This podcast is brought to you by Stanlib Asset Management. Invest in more certainty to navigate volatile market conditions. We're live every weekday morning, the Moneyweb website and the app, 6:30 a.m. Podcast just after 7:00.

[00:19:43]Thanks to my team, Eddie and the booklet and Nicole, to you for listening, my guests for their time. My name is Simon Brown. This is Moneyweb Now. We'll chat again Monday, fintech across the continent.

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