TSMC's Q3 Profit Expected to Surge 40% Amid High AI Chip Demand

LOCAL MARKET COMMENTARY

On the Johannesburg Stock Exchange, the Top 40 Index and the All Share Index gained approximately 0.3% at Monday's close, finishing at 78,230 and 86,399 points, respectively. Calgro M3, a JSE-listed property and private memorial park developer, reported a 28.5% increase in headline earnings per share (HEPS) for the six months ending August 31, 2024, though it did not declare a dividend. Meanwhile, MultiChoice is facing significant challenges, with subscriber numbers in structural decline. For the year ending March 2024, subscriptions dropped across all segments: Premium (DStv Premium and Compact Plus) fell by 8%, mid-market (DStv Compact) by 9%, and the mass market by 2%.

EUROPEAN MARKET COMMENTARY

European stocks ended Monday on a high, following positive trends in the U.S. as investors anticipate a busy earnings week. The European Central Bank is expected to announce its third rate cut of the year on Thursday, citing faster-than-expected easing of inflation risks. Meanwhile, Germany’s economy remains sluggish, with the economy ministry noting ongoing weakness in the third quarter. Preliminary Q3 GDP data from Germany’s federal statistics office is set to be released at the end of the month.

US MARKET COMMENTARY

Wall Street closed higher on Monday, with the S&P 500 and Dow hitting new record highs as investors showed strong interest in technology stocks ahead of a week filled with corporate earnings and key economic data. This week's September retail sales report will be closely monitored for insights into U.S. consumer health, which is becoming increasingly significant for Federal Reserve policy decisions. On Monday, two Fed officials signalled a cautious approach to future rate cuts: Minneapolis Fed President Neel Kashkari anticipated modest cuts as inflation nears the 2% target, while Fed Governor Christopher Waller urged caution on further rate adjustments.

ASIA MARKET COMMENTARY

Asia-Pacific markets mostly gained this morning as investors reviewed South Korea’s September trade data, which revealed a trade surplus of $6.7 billion, up from $3.7 billion in August. Meanwhile, reports from local media suggested that Beijing may issue an additional 6 trillion yuan ($850 billion) in Treasury bonds over the next three years to support its struggling economy.

CURRENCY MARKET COMMENTARY

The South African rand declined on Monday, and with minimal domestic data expected this week, analysts believe the currency will primarily be influenced by global events. The U.S. dollar reached a two-month high against major currencies this morning, driven by expectations of modest upcoming rate cuts from the Federal Reserve. Meanwhile, the yen continued to weaken, approaching

COMMODITY MARKET COMMENTARY

Gold prices dipped on Monday as China’s broad economic stimulus measures did not boost investor confidence, and a rally in the U.S. dollar to two-month highs limited gold’s gains. Meanwhile, oil prices fell 3% in early Asian trading today following reports that Israel may refrain from targeting Iranian oil sites, alleviating supply concerns. Additionally, OPEC's revised forecasts projected lower global oil demand growth for 2024 and 2025, adding to the downward pressure on prices.

Sasfin Holdings Limited (SFN) -5.63%

According to section 3.4(b) of the JSE Listings Requirements, shareholders are informed that Sasfin expects a loss for the fiscal year ending June 30, 2024, with an estimated EPS of -185.79 to -205.35 cents and HEPS of -181.41 to -200.50 cents, compared to positive figures in 2023. While core businesses like Wealth and Asset Finance performed well, the overall loss is attributed to increased credit losses, adverse fair value adjustments due to economic challenges, and high one-time costs, including administrative sanctions. Nonetheless, Sasfin has made significant progress on its strategic reset, reducing non-core activities and improving its cash position and balance sheet.

Calgro M3 Holdings Limited (CGR) -10.20%

Key highlights for the period ended August 31, 2024, include a rise in earnings per share (EPS) and headline earnings per share (HEPS) to 101.40 cents, up from 78.88 cents in August 2023. However, revenue dropped by 26.4% to R507 million. The company handed over 869 residential units, with 1 539 units still under construction. Net asset value (NAV) per share grew by 6.92% to R14.29, and cash increased by 37.73% to R168.9 million. The net debt-to-equity ratio remained steady at 0.63, and no dividend was declared for this period, consistent with the previous year.

Wesizwe Platinum Limited (WEZ) +6.00%

For the period ending June 30, 2023, administration expenses surged by 749% to R35.05 million, up from R4.13 million the previous year. The company reported net foreign exchange gains of R170 million, a turnaround from the R1 783 million loss in 2023, thanks to the strengthening Rand. Direct investment in property, plant, and equipment decreased by 37.5% to R0.5 billion. Headline earnings per share improved by 66.99 cents to reach 7.36 cents per share, compared to a headline loss of 59.63 cents per share in 2023. The board decided not to declare a dividend for this period, consistent with the prior year.

Numeral limited (XII) +0.00%

For the six months ending August 31, 2024, the unaudited financial results show significant improvements. Revenue reached USD 188 973, with an operating profit of USD 122 202, compared to a loss of USD 62 442 in the prior period. Headline earnings per share (HEPS) and earnings per share (EPS) rose from a loss of USD 0.0051 to earnings of USD 0.0098, marking a 292% increase. Net asset value per share jumped 692% to USD 0.019. No dividend was declared for this period.

Virgin Australia Holdings Pty Ltd. (Not Listed)

Virgin Australia announced on Monday that it achieved its second consecutive annual profit, with revenue growing 6.8% year-on-year, strengthening its position as it eyes a future initial public offering (IPO). Qatar Airways recently committed to purchasing a 25% stake in Virgin Australia, aiming to support its return to public ownership. Following its acquisition by Bain Capital after entering voluntary administration in 2020, the airline, Qantas’s main competitor, reported underlying earnings before interest and tax of A$519 million ($350 million) for the year ending June 30, marking an 18.2% increase from last year. In contrast, Qantas saw a 16% drop in annual pre-tax earnings, attributed to lower fares, increased customer spending, and reduced freight revenue.

Taiwan Semiconductor Manufacturing Company Limited (2330) +2.45% (11^th of October 2024)

Taiwan Semiconductor Manufacturing Co. (TSMC), the leading producer of advanced AI chips, is projected to report a 40% increase in third-quarter profit, reaching T$298.2 billion ($9.27 billion), as demand surges. This estimate, based on a SmartEstimate from 22 analysts, significantly exceeds the T$211 billion net profit from the same period last year. TSMC will update its quarterly and full-year outlook, including capital expenditure, during its earnings call on Thursday at 0600 GMT. In July, TSMC raised its full-year revenue forecast and adjusted capital expenditure plans to between $30 billion and $32 billion. Driven by the AI boom, TSMC’s stock has risen 77% this year, outperforming the broader market’s 28% gain.

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