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Capital Calls

19 February 2021 By Breakingviews columnists

Concise insights on global finance in the Covid-19 era.


– Petrobras’ battle

Petrobrassy. Roberto Castello Branco, chief executive of Brazil’s publicly traded national oil giant Petroleo Brasileiro, may be wading into politically toxic waters. He’s resisting pressure from President Jair Bolsonaro to resign over rising gasoline prices, Reuters reports. The $70 billion company’s CEO isn’t inclined to bow to truckers upset about higher fuel costs.

Castello Branco has made progress on asset sales, among other things, bolstering investors’ confidence in the independence of Petrobras’ decision-making from the government, which controls a majority of its voting shares. The latest news, though, caused a wobble in the company’s stock price.

Bolsonaro, a populist leader in the Donald Trump mold, promised a more market-friendly approach than his opponent when elected in 2018, including with the appointment of Castello Branco. But politicians, perhaps especially Bolsonaro’s breed, may feel more empowered to interfere given the heavy economic involvement of governments during the pandemic. Petrobras can take a stand, but in the end Brasilia calls the shots. (By Richard Beales)

Hold the Birkin. Two of Europe’s most richly valued luxury groups are justifying their premium status. Hermès International, famous for its $10,000 leather handbags and silk scarves, on Friday reported 2020 revenue of 6.4 billion euros. That was 6% lower than in 2019 – a better showing than Kering and LVMH’s equivalent 16% falls. Moncler, the maker of pricey puffer jackets, posted a relatively modest 11% decline, helped by a cold winter and relatively resilient Chinese demand. Shares in Hermès and Moncler rose by more than 5% on Friday.

The effect is to underscore the pair’s healthy valuations. Hermès, worth roughly 100 billion euros, trades at more than 60 times forward earnings, according to Refinitiv data, while investors value 13 billion euro Moncler at roughly 40 times. Kering, LVMH and Burberry on average trade at a multiple of less than 30. Even in the hyper-exclusive luxury sector, some brands are more premium than others. (By Karen Kwok)

Nothing to chirp about. Weibo, China’s answer to Twitter, is soaring thanks to a mooted secondary listing in Hong Kong, which Bloomberg on Friday reported could come as soon as this year. Similar moves have helped lift valuations at New York-listed compatriots like JD.com and NetEase.

Shareholders at parent Sina, though, will be far from celebrating. Boss Charles Chao is pushing ahead with a take-private deal that values Sina’s equity at just $2.6 billion. At the time that was already worth less than the value of its 45% stake in Weibo. After factoring in the microblog’s near-50% rally since the offer was announced in July, that discount has widened to a whopping 57%.

Chao’s super-voting stock ensured enough support. But nearly 36% of shareholders objected. Should enough formally dissent, that might put pressure on Chao to delay or even scrap the deal altogether. At the very least, Weibo’s rally provides a stronger case to push for better terms. (By Robyn Mak)



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