Naspers steady despite the seizure of Anbang

The Naspers share price appeared completely unaffected by the latest evidence of heart-stopping uncertainty in the Chinese regulatory environment.

On Friday, after a period of subtle and then not-so-subtle hints, the Chinese government seized control of Anbang Insurance Group, which spent billions of dollars buying up businesses and properties around the globe, often at hefty premiums.

Anbang’s sin seems to have been the use of huge amounts of debt to fund its buying spree. The Chinese government fears that this sort of big spending could destabilise the country’s finances. It has not only taken control of the company, it has charged the former high-flying chairman, Wu Xiaohui, with engaging in fraudulent fund raising. Wu, who is married to Deng Xiaoping’s granddaughter, was seen as being sufficiently politically connected to be sheltered from any aggressive moves by the Communist Partyled government.

Sadly for Wu, the idea of “politically connected” seems to have been altered by the recent strengthening of President Xi Jinping’s position in the party.

The move is likely to further chill the pace of Chinese investment into the US. In 2017, Chinese acquisitions were down to 10% on 2016. And it’s likely to worsen tension between the two countries.

There could be very good reasons for taking over Anbang. Using debt to pay over the odds for trophy assets while the elitist chairman leads an exceptionally lavish lifestyle should and probably would worry regulators across the globe. But few would or could act as decisively as Xi’s government. Tencent’s modus operandi is almost the reverse of Anbang’s. It has used foreign equity to grow a Chinese IT empire. But the dramatic move should remind us of how different things are in China.

It’s probably best to take, with a pinch of salt, news that fastfood and restaurant franchisor Gold Brands Investments is launching the UK brand Las Iguanas in SA in June.

The company, which has the Chesanyama brand as its main operational platter, is planning a flagship 200-seater store in Irene Mall in Centurion.

This appears to be a slight change from initial indications in November that Las Iguanas would be launched in the first quarter of 2018.

Timing issues aside, the real challenge for Gold Brands will be funding such a grandiose flagship outlet and the subsequent roll-out of the brand into other locations.

The company – dubbed “Cold Brands” in some quarters after failing to whet investors’ appetites after listing in 2016 – does not exactly have a balance sheet that is richly endowed with cash.

Optimists will hope things look sturdier in the full financial year to February. But in the halfyear to August, a much reduced turnover of R28.6m was worryingly whittled down to an operating loss of R19.4m. More worrying was an operational cash outflow of R5.2m and a larger bank overdraft of R5m.

There’s not a lot of room to manoeuvre when it comes to funding store roll-outs and the important task of franchisee support. It would be difficult to raise fresh capital via an issue of shares at the prevailing bombed-out share price.

With this iffy interim income statement, funders won’t be falling over themselves to lend to Gold Brands either — at least not when discretionary spending taps are being turned off.