T-Mobile Exceeds Subscriber Growth Expectations

LOCAL MARKET COMMENTARY

On the Johannesburg Stock Exchange, the blue-chip Top 40 index and the broader All Share index closed lower on Wednesday, down 0.29% and 0.33%, ending at 78,526 and 86,464 points, respectively. Domestically, South Africa's inflation in September dropped significantly to its lowest in over three years, increasing expectations of another rate cut next month. Famous Brands, despite a 9.5% rise in interim headline earnings per share, posted modest revenue growth of 2% to just over R4 billion for the six months ending 31 August 2024. Meanwhile, JSE-listed Old Mutual announced that it has paid over 200,000 claims totalling R2.3 billion since the introduction of the two-pot retirement system on 1 September 2024.

EUROPEAN MARKET COMMENTARY

European shares ended Wednesday's session in the red, with mining stocks leading the decline. Sentiment was further weighed down by weak earnings reports from major companies like Deutsche Bank and L'Oréal. European Central Bank chief economist Philip Lane highlighted concerns over the euro zone's sluggish economic data, raising doubts about the region's recovery. The STOXX 600 index has seen little progress since mid-May, with only 35.3% of companies beating third-quarter earnings expectations, compared to the usual 54%. Despite Deutsche Bank reporting a return to profit, its shares fell due to a court ruling against the bank related to its Postbank acquisition.

US MARKET COMMENTARY

Wall Street ended Wednesday's session lower as rising Treasury yields weighed on megacap stocks, and investor optimism about significant Federal Reserve rate cuts diminished. The benchmark 10-year U.S. Treasury yield hit a three-month high as strong economic data and the upcoming presidential election led investors to reassess the rate-cut outlook. Despite markets being near record highs, analysts warned that earnings, shifting monetary policy, and the election could increase volatility. Richmond Fed President Thomas Barkin noted that bringing inflation down to the 2% target may take longer than anticipated, limiting rate cuts. The Fed's "Beige Book" survey indicated little change in U.S. economic activity, though hiring saw a slight increase.

ASIA MARKET COMMENTARY

Asia-Pacific markets mostly declined this morning. South Korea narrowly avoided a technical recession, with its third-quarter GDP growing by just 0.1% quarter-on-quarter, following a 0.2% contraction in the second quarter. However, this fell short of Reuters' forecast of 0.5% growth. On a year-on-year basis, South Korea's economy expanded by 1.5%, also missing the expected 2% growth projected by economists.

CURRENCY MARKET COMMENTARY

On Wednesday, the South African rand remained steady in early trading, as market attention shifted towards the upcoming local consumer inflation data. The U.S. dollar traded near a three-month high against major currencies this morning, supported by expectations that the Federal Reserve will slow the pace of interest rate cuts. Additionally, growing speculation about a potential second Donald Trump presidency added to the dollar's strength.

COMMODITY MARKET COMMENTARY

Gold prices edged higher this morning as safe-haven demand offset the pressure from a stronger dollar. Meanwhile, palladium reached its highest level in over a month. Oil prices also rose by more than 1%, nearly erasing the previous session's losses, as renewed concerns over Middle East tensions took centre stage ahead of the U.S. election, despite mixed U.S. fuel inventory data.

Famous Brands Limited (FBR) -1.07%

In 2024, revenue increased slightly by 2% to R4 017 million, while operating profit remained stable at R371 million, maintaining a 9.2% operating profit margin. Basic earnings per share (BEPS) grew by 11% to 221 cents, and headline earnings per share (HEPS) rose by 9% to 218 cents. Cash generated from operations fell by 7% to R498 million, and there was a net cash outflow from investing and financing activities. Cash and cash equivalents decreased by 6%, while net asset value per share improved by 16%. Net debt declined by 10%, and gearing (debt-to-equity ratio) decreased from 1.33 to 1.03. Return on equity dropped to 44%, and return on capital employed dipped slightly to 32%.

EOH Holdings Limited (EOH) +8.98%

The business is undergoing a turnaround, with total group revenue down 3.1% to R6.0 billion. Excluding sold Nextec legacy entities, revenue saw a slight decline of 0.3% to R5.78 billion. International and Infrastructure services grew by 27% and 5%, respectively, while Connected Industrial Ecosystems and Digital Business Solutions declined by 15% and 12%. Gross profit margins stayed steady at 27.3%. Adjusted EBITDA dropped slightly to R307 million, and operating profit decreased by 17% to R112 million due to restructuring costs. Finance costs were reduced by 28%, and losses per share improved by 23%. The group reduced net interest-bearing loans to R644 million after repaying R41 million.

SK Hynix Inc. (000660) +4.37%

South Korea's SK Hynix posted a record quarterly profit on Thursday, driven by strong sales of its advanced chips, particularly high-bandwidth memory (HBM) chips used in generative AI. The company reported a 7 trillion won ($5.07 billion) operating profit for the July-September period, reversing a 1.8 trillion won loss from the previous year, surpassing forecasts. Revenue surged 94% year-on-year to 17.6 trillion won. SK Hynix expects HBM sales to make up 40% of its DRAM revenue in the fourth quarter, up from 30% in the third, and predicts continued growth in AI server demand next year. Capital spending is projected to increase slightly in 2025.

T-Mobile US Inc. (TMUS) +0.89%

T-Mobile US surpassed expectations for quarterly wireless subscriber growth on Wednesday, driven by its discounted plans bundling streaming services like Netflix. This strong customer growth, largely attributed to its affordable high-speed 5G plans, led to a 2% rise in shares during after-hours trading. The company reported a record free cash flow of $5.2 billion, exceeding the $4.65 billion forecast, and posted revenue of $20.16 billion, also beating estimates of $20.01 billion. Investors closely watch free cash flow as it influences dividend payouts.

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