South Africa's platinum miners yesterday reached an agreement to end a five-month long labour strike - the third longest in the country's history within that industry. However, while in this instance labour seems to have scored a victory over those who believe in the inevitable march towards increased automation investors in Anglo American are in fact betting that its platinum operations will be employing far less people in the future. Thus, the share price has moved higher by a tenth year-to-date despite the fall seen in the price of iron ore.
As the vast majority of the outfit's profits are provided for by a third of its assets the stock reflects investors' faith in its ability to diversify. Wage deals like yesterday's may provide the impetus for further diversification, away from its labour intensive underground platinum portfolio and towards open-top mines. Given that Anglo is trading at 10 times' forecast 2016 earnings the upside from an exit may be worthwhile. Hence, in the end machines may win again, says the Financial Times' Lex column.
Of late oil companies have been splitting off some of their North American assets, promoting divorce if you will. That has been the case at BP, Shell and Hess. The idea behind these so-called 'spin-offs' is to unlock value. In the case of the latter, in reaction to pressures from activist investors the company spun off its petrol stations sending its shares
higher by a fifth. BG Group is not up against investors of that ilk. However, it has seen a serious decline in the profitability of its Egyptian assets. The strong pound has hit its US dollar
Even so, its stock has barely fallen, sending its valuation on a price-to-earnings basis towards 20, its highest in about a decade. The market may be perceiving some hidden value in the firm. One clear candidate is its 10bn barrels of oil equivalent in reserves. Nomura calculates that the net asset value of those is greater than that of the entire company. So should the company split its LNG and upstream assets? Only if it serves to cut the discount at which the latter are now trading and if it does not undermine the LNG business. Sometimes there is a reason to stay together, writes the Financial Times' Lex column.
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