Thursday 09/05/19

  1. In FINANCIALS NEWS, JP Morgan takes control of a Chinese fund, Germany’s Wirecard looks optimistic, Revolut is to be investigated and Bitcoin’s security is breached
  2. In UK HIGH STREET NEWS, the Debenhams sale process is looking tricky, Mike Ashley reveals thoughts for House of Fraser’s makeover and ‘spoons suffers from rising costs
  3. In RIDE-HAILING NEWS, Uber prices its IPO and Grab considers spin-offs (a la Alibaba)
  4. In TOBACCO/VAPING NEWS, Imperial’s shares are dented and Walmart cracks down on tobacco and vapes
  5. In OTHER NEWS, I show you how to stack your dishwasher properly. For more details, read on…



So JP Morgan nears control of a Chinese fund, Wirecard hikes forecasts, Lithuania votes to investigate Revolut and Bitcoin suffers a security breach…

In JP Morgan to be first foreign firm to control a Chinese fund (Daily Telegraph, Harriet Russell) we see that JP Morgan Asset Management could shortly become the first non-Chinese company to own a majority stake in a Chinese fund manager after its joint venture partner, Shanghai International Trust (SIT), put a 2% equity stake in China International Fund Management (CIFM) up for auction. JP Morgan already owns 49% and is expected to buy the 2%, giving it control. * SO WHAT? * This is big news as China relaxed rules to let foreign asset managers to own up to 51% of mutual fund joint ventures back in 2017, but no such deals have been done until now. No comment has been made on this stake, but this will definitely be an important development in JP Morgan’s wider China expansion strategy if it goes ahead. The auction is set to conclude on June 4th.

Germany’s Wirecard lifts profit forecast on rising payment volumes (Financial Times, Olaf Storbeck) heralds some good news for the German financial services company as it said that it would raise its operating profit forecast after payment volumes shot up by 37% in the first quarter. * SO WHAT? * This is a welcome bit of news for a company that has been rocked by an accounting scandal at its Asian operations which forced a delay in the publication of its annual report. Wirecard said that an independent investigation into the scandal by an external law firm

concluded that the dodgy transactions at its Singapore operations should have “no material impact” on its financial reports.

On the other hand, Lithuanian parliament votes to investigate Revolut Russia links (Daily Telegraph, James Cook) heralds some difficult news for the fast-growing London-based fintech start-up as allegations of its links to the Kremlin will be officially investigated in Lithuania, following a parliamentary vote. The bank’s chief exec, Nikolay Storonsky, was born in Russia and his father is a director at a division of Gazprom, the Russian national gas business that has been on the US sanctions list since 2014. * SO WHAT? * Storonsky obviously denies that Revolut is “politically vulnerable”, but if the investigation finds any links Revolut’s European banking licence – granted by Lithuania at the end of last year – could be taken away. This could seriously dent plans for the company to launch services like cryptocurrency and stock trading globally. I suspect that this will be a bit of a cloud over Revolut while the investigation is ongoing but if it is exonerated, sentiment will sky-rocket. If it isn’t, things could get nightmarish for a company that has, so far, attracted a great deal of investor interest.

Bitcoin security in question after £30m cryptocurrency raid (Daily Telegraph, Matthew Field) highlights a breach in security of Binance, one of the world’s biggest cryptocurrency exchanges, as hackers stole over £30m in 7,000 bitcoin. Binance said that it would use backup funds to ensure users didn’t lose any money. * SO WHAT? * This is obviously on a much smaller scale than the infamous 2014 hack on Mt Gox which went bankrupt after it lost £353m in bitcoin, but it will show that cyptocurrencies are still vulnerable to attacks. I suspect that this will be a one-off, but if there are any more breaches in the near future, cryptocurrencies could take a big hit.



The futures of Debenhams and House of Fraser are currently under discussion while JD Wetherpoon feels rising costs …

Debenhams sale process ends with no acceptable bids (Financial Times, Jonathan Eley) gives us an idea of the current state of affairs at the ailing department store as it heads towards a vote today on a company voluntary arrangement (CVA) having attracted precisely zero bids in a recent marketing process. Bidders would have had to refinance the company’s debts immediately – and given that these account for over £500m, you can see why no-one was particularly keen. Sports Direct to vote against Debenhams store closures (The Times, Tabby Kinder) shows that Sports Direct (which had a 29% stake in the department store) has not given up the fight yet and is preparing to vote against the CVA, which requires at least 75% in value of creditors’ approval to go ahead. * SO WHAT? * Given that Sports Direct’s Mike Ashley effectively lost £150m when Debenhams’ shares were delisted last month, you can see why he’s trying to stir things up and make it hard for Debenhams to push forth their agenda. Other creditors, however, are expected to wave the CVA through – but if he did manage to put a spanner in the works, it’s not clear as yet what he could do. We’ll see soon enough, anyway!

The Mike Ashley news continues in House of Fraser: up to seven stores to become luxury mini-chain (The Guardian, Sarah Butler) as it turns out that he’s told suppliers that he wants to divide the group into two, with a rebranded “Frasers” being more designer label-focused and “House of Fraser” being more mass market. Rebrand work is likely to commence in the group’s flagship Glasgow store, which is already called “Frasers” as Ashley is expected to spend tens of millions of pounds on the revamp. Suppliers have

been told that an official announcement will be made in the next few weeks as Ashley sees opportunity at the top end of the market. * SO WHAT? * Things have been changing at House of Fraser since Ashley bought it out of administration for £90m in August last year. On the downside, some key upmarket brands such as And So to Bed, Chanel cosmetics, Clarins beauty salons, Weekend by Max Mara and the Fragrance Shop have moved out and some stores have been in noticeable decline as whole floors have been shut down with cheap clothing from Sports Direct’s own brands such as Karrimor and Lonsdale filling the shelves. However, the company has updated the store’s tills and IT systems and cut costs by moving warehousing and distribution to its main facility in Shirebrook, Derbyshire and merging the HQ of House of Fraser and Ashley’s luxury chain Flannels. Suppliers are also positive about new trading terms under which they are being paid more quickly but it remains to be seen whether they will stay the course given that Ashley has said in the past that his turnaround plan will take two years. The drama continues…

Rising costs leave market in need of a drink (The Times, Dominic Walsh) highlights trying times at JD Wetherspoon as the share price fell by 4% on concerns that profit margins would be squeezed by rising costs despite it reporting best-in-class underlying sales growth figures. Founder and chairman Tim Martin observed that “The picture is one of higher sales and higher costs – that’s the underlying reality. Labour costs account for a third of every pint…Costs are significantly higher than last year, labour costs especially, stemming from very low unemployment. Other cost increases include business rates and repairs, the latter as a result of an ageing estate of pubs”. * SO WHAT? * It’s interesting to see Tim Martin talk about rising labour costs – and I suspect that is something being felt by pretty much every employer at the moment. It seems to be flowing through to consumption at the moment, though – which is a good thing overall.



Uber takes the cautious approach and Grab wants to emulate Alibaba

Uber set to price IPO at midpoint of target range or below (Wall Street Journal, Corrie Driesbusch and Maureen Farrell) shows that Uber seems to be avoiding the “grab-the-money-and-run” approach to IPO pricing and pitching itself to investors at the midpoint of its previously stated $44-50 a share or below according to those close to the company, following rival Lyft’s dismal performance since its flotation. The share price will be announced later on today. * SO WHAT? * Lyft’s share price has fallen by almost 27% since it floated and Uber will be aware that this will be playing on the minds of its potential investors. The fact is that Uber is still hugely loss-making (and will be for quite some time to come) and it will be nervous that investors’ current willingness to overlook things like that at the

moment is not something that will last forever. I wonder what the disgraced founder Kalanick would have done?!? Out of all of the ride-hailers I’ve seen so far, I’m more inclined to be supportive of Gett because I think it has a better product, seems to be a nice compromise between Uber’s broader and Gett’s narrower geographic exposure and looks like it’s way closer to making a profit than then others. 

Grab eyes spin-off payments and financial services units (Financial Times, Henry Sender) shows that the Singapore-based ride-hailing company is thinking about hiving off its payments and services businesses to increase growth prospects. Grab is south-east Asia’s biggest start-up, valued at about $13bn and backed by Japan’s SoftBank. * SO WHAT? * If it went ahead with separating out its business units, it would be emulating the much bigger Alibaba, which spun off its Alipay and Ant Financial businesses with great success. Given that investors can see the precedent that Alibaba set, I’m sure that there will be a lot of interest if Grab decides to do the same thing!



Imperial Brands suffers from vaping concerns while Walmart cracks down on both cigarettes and vaping…

Profits rise but vaping fears cut Imperial share to five-year low (Daily Telegraph, Jack Torrance) highlights investor unease with vaping developments despite Imperial Brands’ pre-tax profits shooting up by two-thirds in the six months to March. This was due to a slowdown in vape sales in its key US market via its Blu vaping brand as the US Food and Drug Administration (FDA) continues its efforts to crackdown on youth vaping. * SO WHAT? * I think that, on balance, the concern is overdone at the moment given that sales of “next generation products” such as Blu and its new heated tobacco brand Pulze account for only 1% of total

revenues. Still, the FDA’s crackdown isn’t great for sentiment.

Walmart to raise tobacco age to 21, drop fruit-flavoured e-cigarettes (Wall Street Journal, Sarah Nassauer and Jennifer Maloney) illustrates concerns I highlighted in the Imperial Brands story from a different angle as Walmart, one of America’s biggest tobacco sellers, has taken measures to restrict purchases by children and teens after the FDA accused it of being the top violator of illegally selling tobacco products to minors. The new restrictions will start on July 1st across all Walmart locations. * SO WHAT? * This is a pretty big deal and will be an even bigger deal if other retailers adopt similar guidelines. I’d say that this is more of an issue for companies like Juul (and Altria, which bought a big stake in the e-cigarette market leader at the end of last year) but I guess if you like this sort of thing it will just prove to be a minor inconvenience. Who knows, maybe it’ll drive people back to traditional smokes if they are easier to get…



And finally, in other news…

I thought I’d leave you with something practical today: Ultimate four step dishwasher stacking guide – including common tablet error we ALL make (The Mirror, Zahra Mulroy Yes, I think you can tell that I live my life very much in the fast lane. Keeping it real for y’all ????