Note: The following numbers are for illustration and discussion only
I have not check the accuracy, the consistency of time periods, currency conversions ratios,etc
Elmer Galbi
A view of China, Russia and South Africa
that tourist do not see
The information given here is only for Use by our Discussion Group
Do not copy or distribute this information
Do not use information given here to make investment decisions
This is a discussion of general economic and social trends.
Specific companies are discussed only to illustrate and understand economic and social trends
The numbers given here should not be used to make any kind of investment or stock decisions.
Numbers given below are nominal values only for the purpose of discussion
No attempt has been made to insure that numbers herein cover consistent time periods
What we are going to talk about
1) The size of economic activity outside the US
2) What some selected non-US companies are doing
3) We are going to focus on the growth rate
over the last five years
and hopefully we can have some fun guessing
about what that means for the future
Feel free to leave at anytime you become bored
I will stop talking when everybody leaves
Note: The following numbers are for illustration and discussion only
I have not check the accuracy, the consistency of time periods, currency conversions ratios,etc
| US | China | Europe | UK | Russia | India | South Africa | |
|---|---|---|---|---|---|---|---|
| Size economy | 17.8 | 17.8 | 16.7 | 3 | 2.1 | 1.8 | 0.3 |
| Growth rate | 2.5% | 7% | 2.4% | 1.8% | 3.0% | 8.0% | 7.1% |
| Population | 320 M | 1.4 B | 743 M | 65 M | 143 M | 1.3 B | 56 M |
| GDP per capita | 54,000 | 7,600 | 29,000 | 39,000 | 14,800 | 3,800 | 10,500 |
Note: The following numbers are for illustration and discussion only
I have not check the accuracy, the consistency of time periods, currency conversions ratios,etc
Now let's look at some companies in a bit of detail
Market Cap 350 B (Amazon 490 B Ford 46 B)
Sales 21B Amazon 61 B GE 27 B)
Employees 39,000
Revenue Growth rate: 46% (Amazon 25% )
Earning Per Share Growth rate: 40%
On November 15, 2017 Tencent reported
that 3rd quarter profit rose 70%
Tencent is the main social network site in China.
It's a gaming company.
It's a bank.-- Save with your phone ---
A VC fund.
A video streaming service.
A movie production company.
A TV sports channel.
An advertisement broker.
A cloud services provider.
A cashless payments solution.
AND Literally hundreds of other stakes and subsidiaries.
Example: It owns 5.0% of Tesla
Key products
-- Messaging App WeChat - 786 Million daily users
Half use it for 90 minutes per day
-- online Gaming
-- "Honor of Kings" 50 million daily users
-- On line payment - Weixin - 600 million monthly users
-- has mini-programs that can be downloaded to user phone"
operate within WeChat - Eliminate need to download apps from Google or Apple
-- ObEN - uses artificial intelligence-powered tools to create avatars that look and sound real
A growing international presence
For example: In India: Hike is the main messaging app
Tencent just invested 175 million in Hike
Total Revenue in 2016 -- 21.9 billion dollars
Net profit in 2016 -- 5.9 billion dollars
Good relationship with the government
China's state-run Xinhua News Agency reported that Tencent
and the Ministry of Public Security have launched a pilot digital identification system
"that allows people to create an official ID on Tencent'sWeChat smartphone app"
WeChat is used by more than 980 million people in China for text messaging, mobile payments and other functions.
Playdots Inc --
A mobile Game Creator in NY city - 40 employees -- 10M invested
Go to Playdots web site
Kamcord Inc --
Platform to broadcast on Internet a phone screen -- 15 M invested
Go to Kamcord website
Heirloom Inc --
Creates digital images from photo prints -- 1 M invested
Purchased by Mylestoned Inc
Altspace VR --
Social platform for virtual reality -- 5.2 M invested
Company closed Down August 3, 2017
Scaled Inference -- Scalable Artificial Intelligence -- 4 M invested
click for website -- scroll to see other investors
Alibaba is primarily an on-line shopping site
It has retail and wholesale platforms
In the US "Black Friday" is one of the biggest sale days
In China "Singles Day" corresponds to our "Black Friday"
In 2016 "Singles Day" was on November 11, 2017
During the first 2 Minutes - One Billion dollars of orders placed
Amount sold in 2017 exceeded 2016 sales by 54%
Total Alibaba sales on "Singles Day" in 2017 -- $14.3 Billion.
Total sales by all companies on "Singles Day" 25 Billion
25 Billion is more than all US sales on
Black Friday and Cyber Monday combined.
Alibaba was launched in 1999, Jack Ma was the founder
Leading platform for global wholesale trade.
Serves millions of buyers and suppliers around the world.
Mission --- make it easy to do business anywhere.
Buyers located in 190+ countries
Buyers and sellers exchange hundreds of thousands of messages each day.
Alibaba generates its revenues from fees it charges for use of its platform,
rather than the markups it charges from selling products like most retailers.
This fee-based business model give Alibaba far higher gross margins than Amazon.
Alibaba's gross margin over the past 12 months stands at 62%, versus 35% for Amazon.
Market Cap $384.28 B
Sales 23.34B
Profit Margin 48.9%
PE Ratio 44
Employees 50,097
Percent Mgmt Owns 12.5%
"We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at Alibaba, and that we will be a company that lasts at least 102 years."
From wall Street Journal 9/14/2017
Alibaba Money Fund
Yue Bao - Left Over Treasure
Largest Money Fund in the World
370 Million Accounts
211 Billion Dollars in the Fund
Assets Doubled in past year
J P Morgan's Money Fund is the biggest in the US
Half the size of Yue Boa
Expanding Outside of China
Alibaba invested approximately 1 billion (USD)
to increase its stake in Lazada Group,
ownership went from 51% to approximately 83%
Lazada is the number one online shopping & selling destination
in Southeast Asia
Also in Indonesia, Malaysia, the Philippines,
Singapore, Thailand and Vietnam.
Lazada has more than 100,000
local and international
sellers as well as 2,500 brands
.
Alibaba is
Investing in "new Retail" Brick and mortar stores
Brick-and-mortar stores - still make up over 80 percent of total retail sales in China.
Alibaba combining big data, artificial intelligence and logistics for Brink-and-mortar stores
"New Retail" integrates data and payment tools for offline partners,
Order using phone
Has invested upwards of $9.3 billion in brick-and-mortar stores
Has launched un-staffed concept shops, including grocery and coffee stores.
Third quarter 2017 results
For the July to September quarter,
income from operations surged 83% from a year earlier,
Alibaba raised its revenue predictions for the full-year forecast.
One final note re Tencent and Alibaba
They are competitiors
Tencent has acquired a 5% stake in Chinese supermarket chain Yonghui Superstores
Tencent teamed up with Alibaba's chief e-commerce rival, JD.com,
to invest $604 million in online discount fashion retailer Vipshop Holdings.
SOHU Sohu.Com
Sohu.com, Inc. develops online media, gaming, and mobile application
Somewhat like Google: an online media, search and game service company,
which provides online services on personal computers and mobile devices
. The search and search-related business primarily offers advertisers pay-for-click services,
as well as online marketing services.
Weibo WB
Weibo is the Chinese version of Twitter Inc (TWTR),
In Q1 Weibo's monthly user base exceeded that of Twitter for the first time.
Furthermore, While Twitter's base plateaued in its second quarter,
Weibo added another 21 million users in Q2.
Weibo stock is valued at about $19 billion
Valuation is above Twitter's ~$12 billion valuation.
Weibo is larger, more profitable and faster-growing than Twitter
Click for a quote
Click to see their code of company conduct
Click to Go to Company Web site
GSH Guangshen Railway Co
GSH is a railroad company. The Company provides integrated services in relation to railway facilities and technology, commercial trading and other industrial businesses. It also operates with other railway companies in the People's Republic of China
for the provision of freight transportation services.
Click for a quote
Click here for Comapny Web site
BIDU Baidu Inc (ADR)
Baidu, Inc. is a Chinese language Internet search provider. The Company offers a Chinese language search platform.
In addition to serving individual Internet search users,
the Company provides a platform for businesses to reach customers.
Click for a quote
Baidu Web Site
CHA China Telecom Corp (ADR)
China Telecom Corporation provides telecommunications and related businesses.
The Company provides wireline and mobile telecommunications services,
Internet access services, information services and other value-added telecommunications services.
The Company mainly operates its business in the Chinese domestic market.
Click Here for a quote
JD JD.com ADR
JD.com, Inc. is an online direct sales company.
The Company sells electronics and home appliance products and general merchandise products
(including audio, video products and books).
The products are
sourced from manufacturers, distributors and publishers in China.
It also offers an online marketplace that enables third-party sellers to sell
their products to customers on the Company's Website.
The Company also offers online and in-person payment options and customer services.
The Company operates approximately 210 warehouses with
an aggregate gross floor area of approximately four million square meters in over 50 cities.
click for a quote
JRJC China Finance Online (ADR)
China Finance Online Co. is a Web-based financial services company.
The Company provides Chinese retail investors with online access to securities and
commodities trading services, wealth management products, securities investment
advisory services, as well as financial database and analytics services to institutional customers.
The Company has three segments: commodities brokerage services, online financial information
and advisory service.
Click for a quote
TAL TAL Education Group ADR
TAL Education Group provides after-school tutoring programs for primary and secondary school
students in China.
TAL Education Group is a leading K-12 after-school tutoring services provider in China
The Company's small classes course consists of
approximately four semesters, which include approximately two school semesters in Spring and Fall,
and approximately two holiday semesters in summer and winter.
It operates a Website, www.jzb.com, which is an online education platform.
It offers personalized premium services and online courses.The
Company offers online courses on mathematics, English, Chinese, physics,
chemistry, biology and other subjects.
The Company has over 10 call centers in Beijing, Shanghai, Tianjin, Guangzhou and Shenzhen.
TAL has 2.3 million students in 42 cities all over China, with more than 18 million students
Click for a quote
Company Web site
There are also very very large private Chinese companies
For Example HNA Group
A 53 Billion dollar Chinese Conglomerate
Ranks 170 on Fortune's Global 500 rankings
HNA owns many US and European Companies
They own:
Carlson Hotels - owner of Radisson and Park Plaza hotels
Hilton Worldwide Holdings
Biggest shareholder in Deutsche Bank
Gategroup - worldwide airline catering
Swissport - worldwide aireline servicing
Avolon Holdings aircraft leasing - third largest aircraft leasing company
Realestate: 245 Park Ave in Midtown Manhattan
Ingram Micro - worlds largest technology distributor
Before this purchase Ingram only had 3% of Chinese market
Since purchase business has surged
Eight golf courses in Washington State
200 Million stake in SkyBrigdge Capital - previously owned by Anthony Scaramucci
HNA airline is China's fourth largest airline
HNA also owns a stake in 16 other airlines from Bazil to South Africa
Twenty percent of shares of HNA are owned by a Charitable Foundation in China
Company's vision:
Be a Buddhist-style practitioner of
compassion, wisdom and altruism
Before We leave China let me talk about the other side of the ledger
Let us look at the Biggest Stock Collapse in History
PetroChina
From Bloomberg News October 29, 2017
PetroChina peaked in 2007 on the first day it began trading in Shanghai
Since then it has lost 800 billion in market value
How much is that ???
Before we end our discussion of China
Lets discuss:
1) How central banks effect the economy
Monetary Policy - interst rates
2) How goverment spending effects the economy
Fiscal policy - government debt or surplus
Data on China Central Bank is somewhat hard to come by
and a discussion of China and currency manipulation
may be a bit too political for this discussion group.
So I will make my point by talking about the Central Bank of Switzerland
------------------------------------------
At the end of June 2017, the Swiss Central Bank owned
84 billion of US Stocks
20 billion of European stocks
The SNB is the 8th largest holder of US stocks
The European and US stocks comes to $10,000 for each Swiss citizen.
There was a 13.2 billion increase in Q1 2016 as the stock market was declining
What would have happened if they had not made this investment
Central banks are the only entities in the world that can
just increase their balance sheet by edict .
The point:
Central banks have a big affect the economy and the stock market
----------------------------------------------------
- low interest rates
Interst rates are at the lowest point in 5000 years.
The short term effects of low interest rates are very easy to see
The long range effect is much more speculative
-- for example, do low rate result in misallocation of capital
------------------------------
Lets move from China to Russia
Russian Economy is mostly commodity driven
Sale of Military Equipment -- important part of economy
1 |
Gazprom |
Oil and Gas |
$100 billion |
2 |
Lukoil |
Oil and Gas |
$81 Billion |
3 |
Rosneff |
Oil and Gas |
$70 billion |
4 |
Sherbank of Russia |
Finance |
$52 billion |
5 |
Russian Railways |
Transport |
$36 Billion |
6 |
VTB Bank |
Finance |
$22 Billion |
7 |
Rostec |
Industrial |
$22 Billion |
8 |
Magnit |
Trade |
$18 Billion |
9 |
Rosseti |
Power Engineering |
$15 Billion |
10 |
Inter RAO |
Power Engineering |
14 Billion |
Let's talk about a couple of Russian Companies
Gazprom -- Russia
Gazprom was formerly the Soviet ministry of gas
In 1989 Soviet Ministry of Gas was privatized an re-organized as a corporation
The government owns 50% of the stock and controls the company.
Putin, personally, is said to own 4.5% of the stock.
Gazprom owns all its main gas processing facilities in Russia.
It operates Russia's high pressure gas pipelines
It has a legal export monopoly.
The company has subsidiaries in industrial sectors including finance, media and aviation
Sales 92.8 billion
Cash flow 1.04 Billion
Dividend yield 5.53%
Shares trade on Russian exchange -- 17% of entire trading volume
Number of employees - 462,400
Number of shareholders - 479,000
Shareholders are a political force in maintaining the dividend.
On December 8, 2017 Russia launched a giant Artic gas project
A LNG gas facility to ship LNG gas to China.
Ships need icebreakers to to the plant.
A 15 Billion dollar loan from China helped finance this plant
Put said this will: " “open up the Arctic and the Northern Sea Route.”
Interestingly thie plant has low production costs becasue freezing Arctic temperatures
aid the cooling of the gas to turn it into liquid.
A second Arctic LNG plant is scheduled to be built nearby.
Moscow has been courting the Saudis as a potential buyer of Russian gas,
which could supplant crude as a fuel for the kingdom’s domestic energy needs.
Putin's pitch to the Saudiss “Buy our gas, save oil,”
The "Power of Siberia" gas pipeline,
the first to connect Russia and China,
will start pumping in December 2019,
A second pipeline to China across the
border between Mongolia and Kazakhstan,
supplied from fields in western Siberia.
Rostec
Entirely Owned by the government
Mission:
The furtherance of state policy for industrial development and modernization
Has 900,000 employees (according to their web site)
Has 495,000 employees (according to Wikipedia)
In any event, it has a large number of employees
Created to further the development, manufacturing and
export of high-tech industrial products
Rostec consists of 700 organizations,
Includes 22 direct management companies and
14 holding companies,
five specialize in the manufacture of civilian products, and
nine specialize in the manufacture of products for the military and industrial sectors
Rostec, AVTOVAZ Manufactures Automobiles
A joint venture with Renault and Nissan
Has a Joint venture with Boeing
perform primary machining of titanium forgings
for the Boeing 787 Dreamliner and
Russian airline
Only Russia USA, Great Britain and France possess
the technology for producing turbojet engines.
China does not
Titanium
Russia (Rostec)ranks third in the production of titanium sponge
after China and Japan,
Rostec produces about 20% of the world’s supply of titanium.
The greatest deposits of titanium can be found
in southern Siberia, the Far East, and
the northern, central, and southern regions of the European part of Russia.
Photonics (use of light) is an area Russia and Rostec excel
Russian school of photonics is considered one of the best in the world.
Nobel Prize in Physics awarded in 1964 to Alexander Prokhorov and Nikolai Basov
for research leading to the creation of the laser and
again in 2000 to Zhores Alferov for the development of optoelectronics.
Today a ground-based radar station requires a multi-story building.
A radar system using radio-photonics can be installed on a single truck.
the level of resolution, speed, and efficiency of the broadband radar
will become so high that it is quite possible to call it "radar vision".
Photonics radar can instantly detect obstacles in the way of high-speed trains.
Photons can replace the hot water in urban heating systems
(energy propagating through photonic crystal fiber
is converted into heat with nearly 100% efficiency).
Rostec is the biggest investor in photonics
BUT there are currently, about 850 companies in Russia are working on photonics.
Conclusion:
Internet development is not as big in Russia as in China
Russia is big in heavy industry and Photonics
Russia exports lots of oil and gas
Russia excels in Photonics, and Titanium
Questions:
1) Can Russian hardware related industry grow as fast a china's Internet companies
2) Are hardware relat4ed companies more stable than Internet related companies
3) Is there more freedom to innovate in China thatn in Russia
Let's now look at South Africa
There are some very big companies in South Africa
More Varied than Russia
| 1 | Naspers | TV,Cable,Internet | $60B | Started in 1915 |
| 2 | Steinholl | Retail- household goods | $23 Billion | |
| 3 | Sasol | Industrialk Chemicals | $21 Billion | |
| 4 | MTN Group | Internet & cell Phone | ||
| 5 | First Rand | Insurance Banking | $18 Billion | |
| 6 | Vodacom | Telecom Provider | ||
| 7 | Standard Banking | Financial | $25 Billion | |
| 8 | Dangote Cement | Construction | $13 Billion | |
| 9 | Saniam | Life Insurance | $10 Billion | |
| 10 | Aspen Phara | Pharmaceutical | $10 Billion |
For example lets look at the South African company
Naspers NPSND
Naspers is a broad-based multinational internet and media group,
It operates in more than 130 countries.
Naspers principal operations are in Internet communication
classified, online shopping, marketplaces, online payments ,
video entertainment and print media.
Market capitalization of over $66 billion
it is the largest company in Africa and
the 7th largest Internet company in the world.
Employees: 25,000
Net Profit Margin: 46%
Naspers skyscraper in Cape Town, South Africa.
tallest building in South Africa
Naspers was foundered in 1915
Has a long history in Print Media
Generates approximately 72.7% of its revenues in South Africa
Has significant operations in Sub-Saharan Africa, Greece, Cyprus,
the Netherlands, the United States, Thailand, Brazil, Poland, Russia, India and China.
Naspers primary business is to create media content,
build brand names around it, and deliver its content
through a variety of channels, including television, internet services,
newspapers, magazines and books.
The net: There are lots of big companies around the world
that are Internet centric
My guess -- if the world holds together --
Some of these companies will grow to be even bigger