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MARKET COMMENTARY

LOCAL MARKET COMMENTARY

On the stock market, South Africa's Top 40 and broader All Share indices closed approximately 0.3% higher, ending yesterday at 72,408 and 78,686 points, respectively. Anglo American rejected a raised takeover bid of £34 billion from BHP Group, stating it undervalued the company. Vodacom Group, Africa's largest wireless carrier, announced a full-year dividend below estimates due to start-up losses and currency pressures. The dividend for the year ended March 31 is R5.90 per share, down from R6.70 the previous year. Additionally, JSE-listed Calgro M3 declared its first-ever dividend.

EUROPEAN MARKET COMMENTARY

Europe's STOXX 600 ended the day unchanged as investors awaited upcoming economic data from the eurozone. The index, hovering near record highs, saw gains in the automobile sector after a recent decline, while defence stocks suffered a 1.2% loss. Last week, the STOXX 600 recorded its largest weekly gain since January, propelled by robust corporate earnings. Despite a dip in April due to geopolitical tensions and monetary policy uncertainties, the index regained momentum in May.

US MARKET COMMENTARY

The S&P 500 edged slightly lower on Monday as investors paused following three consecutive weeks of gains, awaiting key inflation readings and earnings reports scheduled for the week ahead. Concerns about inflation were highlighted by a survey showing consumers anticipate a rise to 3.3% in the next year, up from March's 3%, with expectations of 2.8% inflation three years from now. This sentiment followed a University of Michigan report indicating a decline in consumer sentiment due to worries about the cost of living.

ASIA MARKET COMMENTARY

Asian shares held near 15-month highs this morning, with Japan's Nikkei 225 edging up 0.1% and the broader Topix rising 0.06%. In Hong Kong, the Hang Seng index climbed 0.6%, while mainland China's CSI 300 advanced 0.3%. South Korea's Kospi remained flat, while the smaller-cap Kosdaq gained 0.9%. Data from the Bank of Japan revealed steady corporate inflation in April compared to the previous year, but import prices surged by 6.4% year-over-year, likely influenced by the yen's sharp depreciation.

CURRENCY MARKET COMMENTARY

On Monday, the South African rand gained ground against a weakening dollar, with investors anticipating crucial U.S. data that could influence the Federal Reserve's stance on interest rates. Meanwhile, this morning, the dollar held steady as investors awaited an upcoming inflation report, which is expected to impact the outlook for U.S. interest rates. The yen remained near a two-week low, raising concerns about potential intervention measures.

COMMODITY MARKET COMMENTARY

Gold prices edged higher today as investors turned their attention to crucial inflation reports scheduled for later in the week, which could provide further clarity on the Federal Reserve's interest rate cut plans for the year. Meanwhile, oil prices remained relatively unchanged as market participants awaited upcoming U.S. inflation data and the monthly report from the Organization of the Petroleum Exporting Countries (OPEC) later this week, which could serve as new catalysts for price movements.

LOCAL COMMENTARY

Vodacom Group Limited (VOD) -2.33%

Vodacom Group's annual results for the year ended March 31, 2024, showed significant growth, with group revenue reaching R151 billion, a 26.4% increase largely due to the acquisition of Egypt. Group service revenue also saw strong growth at 29.1%, or 9.2% including Egypt on a pro-forma basis. EBITDA grew by 24.3%, or 7.8% on a pro-forma basis, and free cash flow generation reached R18.2 billion, contributing to lower leverage. The group now serves over 203.1 million customers, including Safaricom, and boasts 78.9 million financial services customers, transacting US$1.1 billion per day. Financial services revenue increased by 32.2% to R13.0 billion, contributing 10.8% to Group service revenue. The company announced a full-year dividend of 590cps, in line with its policy.

Raubex Group Limited (RBX) +10.33%

The audited results for the year ended 29 February 2024 reveal significant financial growth for the company. Revenue surged by 13.8% to R17.43 billion, while operating profit saw a robust increase of 20.4% to R1.54 billion. Both headline earnings per share and earnings per share experienced notable growth, climbing by 21.3% and 20.7% respectively. Despite a slight dip in cash generated from operations to R1.90 billion, the net asset value rose to R6.61 billion. Capital expenditure increased to R1.76 billion, and the order book expanded to R25.55 billion. In light of these results, the company declared a final dividend of 92 cents per share, reflecting an increase from the previous year.

 

We Buy Cars Holdings Limited (WBC) +4.35%

The consolidated interim results for the six months ended 31 March 2024 highlight significant growth compared to the same period in 2023. The number of units bought and sold increased by 13.7% and 13.4% respectively. Revenue surged by 15.9% to R11 403.0 million, while core headline earnings saw a substantial rise of 26.6% to R402.0 million. Core headline earnings per share also increased by 26.1% to 119.9 cents. However, basic earnings experienced a significant decline.

Calgro M3 Holdings Limited (CGR) +7.08%

The audited consolidated financial statements for the year ended 29 February 2024 reveal several noteworthy features. These include the delivery of 1,794 units during the year and 1,748 units currently under construction, with 1,100 planned to commence construction on a staggered basis. The gross profit margin increased to 27.25%, reflecting improved profitability. Earnings per share (EPS) rose to 192.01 cents per share, while headline earnings per share (HEPS) increased to 189.87 cents per share. The net debt to equity level remained stable at 0.63, and the loan-to-value ratio stood at 31.97%. Additionally, the company initiated a share buyback of 25.91 million shares, equivalent to 18.5% of shares outstanding, and declared a maiden dividend of 9.49350 cents per share. Notably, the net asset value (NAV) per share reached its highest ever level, increasing by 40.60% to R13.37, with assets valued at the lowest of cost or net realizable value.

INTERNATIONAL COMMENTARY

Tencent Music Entertainment Group Class A (1698) +4.08%

Tencent Music Entertainment Group exceeded first-quarter revenue expectations, driven by robust growth in paid subscriptions and advertising services on its music streaming platform, causing its shares to surge over 8% in morning trade in New York. The company reported a record quarterly increase in paying users, reaching 113.5 million, a 20.2% rise from the previous year. Despite beating revenue estimates with 6.77 billion yuan ($935.9 million), overall revenue declined by 3.4% year-on-year due to the lingering impact of the Chinese government's crackdown on online gambling, marking the third consecutive quarter of revenue decline.

 

Azul SA Pfd Registered Shs (AZUL4) +1.36%

Azul, the Brazilian airline, announced a narrower net loss for the first quarter as operating figures reached all-time highs, driven by strong demand for air travel in Brazil. The adjusted net loss for the January-March period stood at 324.2 million reais ($62.86 million), an improvement from the 727.6 million-real loss recorded a year earlier, attributed primarily to financial expenses and foreign exchange fluctuations. Azul's shares surged by up to 3.4% following the announcement, making it one of the top gainers on Brazil's Bovespa stock index, which rose by 0.5%. The company had previously raised its earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate for the year due to increasing demand in Latin America's largest economy. In the first quarter, Azul's EBITDA reached 1.42 billion reais, marking a 37.4% year-on-year increase, while net revenue grew by 4.5% to 4.68 billion reais, slightly below analysts' expectations of 4.88 billion reais.

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About the Author

Research Team
Media, Sasfin Wealth

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