Unicorns are real at Canva, Evergrande's Lehman Moment and Markets.
Canva got a breakthrough, Evergrande Group is about to default on bond repayments and Markets are rolling.
Hey, Hisa fan,
Starting a new week is cool, but starting from what caught our cowries over the past week is even cooler. The markets globally have been mixed, with lots coming from the real estate sector in the east, Joe Biden & a few moves from the European Commercial Bank (ECB).
Canva
These posters you see, the social media posters out there, there is definitely one of them that has been made via Canva. Canva Inc, an Australian based design-collaboration platform raised $200 million in fresh capital. The capital raise by Canva pushed the valuations for the company to one of the most valuable private software companies in the world.
Canva now joins the league of the top five most valuable startups following:
ByteDance - (the company that owns video app tik tok), China.
Stripe Inc. - (owned by the Collison brothers), United States.
SpaceX - (Elon Musk owned), United States.
Klarna Bank AB - (Fintech firm owned by Sebastian Siemiatkowski), Sweden.
Canva Inc - ( Graphics design & collaboration platform), Australia.
Canva’s valuation has almost tripled from $15 billion just five months ago when it raised $71 million. Canva Inc was valued at just $6 billion in June 2020 and $3.2 billion in late 2019.
Why does this matter?
In Africa, there has been a wave of fintech spring ups which continue to raise the valuation over the continent’s 1 billion population.
African tech companies have long ways to move despite undervaluation. In Africa, oPay, Flutterwave, Chipper cash are just some of the few companies that have emerged as top Unicorns in Africa.
As Canva rise up the ranks, this opens up a challenge for Africa’s startups including Kenya’s very own, Hisa App.
Evergrande’s Lehman Moment
The 2008 financial crisis, the latest in modern times was caused by subprime mortgage-backed securities (MBS), as China’s third-largest real estate company, Evergrande Group, nears insolvency levels.
With a debt load of US$300 billion, the threat of bankruptcy is real, especially as Evergrande hinted on Tuesday that it may not be able to pay its creditors. In fact, on Saturday, the company kicked off a process to repay investors in its overdue investment products with discounted properties in lieu of cash.
In an effort to steer investors away from cash repayments, the company is pushing steep discounts on property assets. Investors can invest in residential housing units at a 28% discount, offices at a 46% discount, and stores and parking units at 52%.
Evergrande currently has 1,300 real estate projects in 280 cities in China.
The conglomerate has recently expanded to other industries, including electric vehicle production, property management, film and TV, theme park construction, life insurance, a hospital, a football club, and the production of food, mineral water and baby formula.
Is this important?
Yep, we sure think it does. You see, Evergrande’s ability to settle over $300 billion of liabilities is already spilling into China’s financial markets.
In the past few weeks, the shares of real estate firms in China and across major global markets have plunged. An inversely correlated yield on an index of dollar-denominated junk bonds (some compared to the subprime mortgage bonds) have climbed to about 14%, the highest level in nearly a decade.
Both locally and globally, we have seen risks of real estate companies with analysts terming these as tickling financial markets bombs.
While we don’t think Evergrande is going to drop the “little boy” or the “fat man”, we know that if analysts are right, then Evergrande could just be the first link to a chain of financial nuclear reactions across the global real estate sector.
Coffee Break…
Manchester United Plc, one of our cowries for the previous week on Friday posted a wider full-year loss following a season marred by pandemic-induced lockdowns and empty stadiums hit matchday sales and commercial revenue.
Man-United said its net loss for the year ended June 30 was 92.2 million pounds ($127.2 million), compared with a loss of 23.2 million pounds in the year-ago period as the onset of covid-19 in 2020 disrupted all walks of life globally.
Looks like Cristiano couldn’t save united from this one. Here is Man-Utd in numbers:
Player CapEx for FY21 was £92.2 million further the period. Net debt was £419.5 million, a decrease of £54.6 million compared to the prior year.
The current committed net player CapEx in fiscal year ‘22 is approximately £80 million with amortization costs of £150 million.
Cash balances stood at £110.7 million, up £59.2 million compared to a year prior.
Net finance income for the full year stood at £12.9 million credit, a favourable movement of £38.9 million, due to foreign exchange benefits on the unhedged portion of the company’s U.S. dollar-denominated debt.
Depreciation and amortization costs over the fiscal year 2021 was at £139.4, a reduction of £5.9 million from the FY2020.
Markets
Global - Markets were mixed but traded lower. Investors were had mixed concerns about Evergrande’s bond repayment default and the U.S. Federal Reserve's timeline for tapering asset purchases.
Local - Back home, the markets were flat but stayed in positive territory, with the benchmark NSE All Share Index (NASI) gaining 1.5% during the week. The NSE25 share index was on the gain, adding 1.67% to close the week while the NSE 20 dropped by a marginal 0.1% over the week.
By activity, the market turnover edged up by 24.68% to Kes 2.5 billion from the Kes 2.02 billion posted a week earlier. The volume of shares exchanging hands on the bourse rose by 16.81% to 76.3 million shares from the 65.3 million shares transacted a week earlier.
What Cowries are we collecting this week?
NIKE Inc, [NYSE: NKE] - What are you wearing to the gym? Well, the world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings on Thursday. Our cowry collectors will be looking at the impact of the closure of the company’s Vietnam factory on the full-year revenue guidance.
Costco Wholesale Corporation [NYSE: COST] - Thursday will be big because the world’s fifth-largest retailer will also be releasing the 4Q21 financials and boy oh boy, are our cowries packed to see just to what extent has the pandemic hit on the retail companies (If Costco is among them).
Longhorn Publishers Plc [NSE: LKL] - CBC looks good on someone! Longhorn posted a profit of Kes 7.4 million for the half-year earnings. The earnings saw the share price gain traction, and move up 3.5% on Friday. Let’s see how the week holds.
TotalEnergies Kenya Plc [NSE: TOTL] - With fuel prices rising in Kenya, it’s a time we take a look at the local oil marketing companies in Kenya. With KenolKobil (Now Rubis Energies SAS) off the stock market, TotalEnergies is now what investors have on the market. And our cowry collectors are in for it.
How about you, what stocks are you watching for the week? Let us know on the Hisa App.
Disclaimer: This article does not constitute any investment recommendation, investors and the general public are advised to do their own research before investing.