Market outlook for the day – Thursday 28 August 2008

Commodity prices were little changed from yesterday’s prices at JSE close. World markets are painting a mixed picture and this is all reflected in this morning ALSI futures which are basically unchanged from yesterday’s close. Two Top 40 companies released results this morning, Impala Platinum and MTN. Impala’s HEPS growth was at the upper end of its trading statement guidance and MTN results look like they will be well received by the market. Aspen and Sun International are also expected to release their full year results today. South African Producer inflation data will be out later on this morning.

 

Company news:

PPC (PPC)

Cement producer PPC will sell a 15 percent stake worth 2.7 billion rand ($346.6 million) to black investors to meet government requirements on black ownership, it said on Thursday. Pretoria Portland Cement (PPC), which was spun off from industrial group Barloworld last year, said the deal would benefit 3.5 million people in South Africa. Strategic black investors will get a 7 percent stake while PPC's black staff, community groups, an educational trust and a construction industry association trust would get 8.15 percent of PPC's ordinary issued share capital after the deal.

 

MTN (MTN)

Sub-Saharan Africa's biggest cell phone operator is due to report first-half results at about 0600 GMT. The company said last week it expected adjusted headline EPS to climb 23.3-28.3 percent.

 

Impala Platinum (IMP)

Impala Platinum Holdings Ltd (Implats), the world's No. 2 platinum producer, on Thursday posted a 57 percent rise in headline earnings per share to 20.65 rand, driven primarily by higher metal prices. Implats forecast stronger output in the current year, but warned that cost pressures would continue to rise much more than the previous year.

 

Mvela Group (MVG)

The black investment group reported a headline loss per share of 362.6 cents compared to a profit of 304.8 cents the previous year, at the bottom end of its own forecast.

 

 

These are the leading articles in the South African financial press:

Business Day

- Inflation at 13 percent, near its peak, say experts.

- Controversial land expropriation bill is "shelved".

- Construction riding high.

- Petrol price cut: good news and bad.

 

Business Report

- Black economic empowerment war looming over coal exports.

- Skill promotion bombshell surprises members of parliament.

- Bond investors unfazed as consumer price index soars to 13 percent record high.

 

What happened yesterday?

South African Markets

South African stocks rallied on Wednesday as gold prices buoyed miners and Murray & Roberts rose on strong results while bonds got a boost from data which reinforced expectations that interest rates had peaked. The Johannesburg Top-40 index of blue-chip stocks gained 1.58 percent to 25,370.27 points, while the broader All Share index climbed 1.49 percent to 27,426.59 points.

 

Wall Street

U.S. stocks rose on Wednesday as surprisingly strong data on durable goods orders soothed some concern about the sluggish economy while Fannie Mae and Freddie Mac led a rally in financial shares. The Dow Jones industrial average was up 89.64 points, or 0.79 percent, at 11,502.51. The Standard & Poor's 500 Index was up 10.12 points, or 0.80 percent, at 1,281.63. The Nasdaq Composite Index was up 20.49 points, or 0.87 percent, at 2,382.46.

 

Global Markets

Oil prices climbed for a fourth day on Thursday on worries a storm may gather force to become the worst threat to U.S. offshore production since 2005, while the euro rose on tough inflation talk from the European Central Bank. Asian stocks were little changed, but commodity-related shares received a boost from crude prices, which have recovered $7 since hitting a three-month low two weeks ago to trade above $118 a barrel.

 

Commodity and currency report

Gold rose as much as 1 percent on Thursday on safe-haven buying as oil continued its ascent and on a sliding dollar, but it would have to crack key resistance levels to sustain the uptrend. Physical buying ahead of the festive season in Asia has helped gold rebound more than 7 percent since tumbling to nine-month lows around $773 an ounce in mid-August.  Gold  firmed to $832.60/833.60 an ounce from $826.05/827.45 an ounce late in New York on Wednesday, having hit an intraday high of $834.35 an ounce. Oil rose for a fourth straight day to stay above $118 a barrel on Thursday, on fears Tropical Storm Gustav may hit the Gulf of Mexico after it morphs into a major hurricane, paralysing the heart of U.S. offshore production.

 

The euro edged up to $1.478, recovering from a six-month low of $1.4570 hit on Tuesday, after comments by a European Central Bank official the previous day scaled back speculation about an ECB rate cut. Spot platinum rose to $1,436.00/1,456.00 an ounce from $1,434.00/1,454.00 late in New York.

 

Higher gold prices spurred speculative buying in platinum but investors remained cautious after the metal sank to an 11-month low around $1,296 last week.  Automakers were also on the sidelines. A slowing U.S. economy and poor car sales have sparked worries about falling demand for autocatalysts, which account for more than 50 percent of global platinum use. The metal was well below a lifetime high of $2,290 hit in early March.

  

Toyota Motor Corp said it would miss its goal of selling more than 10 million vehicles next year, cutting its forecast by nearly 7 percent due to a downturn in western markets driven by high fuel prices and a credit crunch. Spot palladium inched up to $290.50/295.50 an ounce from $288.50/296.50 an ounce. Silver firmed to $13.61/13.67 an ounce from $13.49/13.55 an ounce late in New York.

 

Results released yesterday

GijimaAst final results to June 2008

The 25% increase in revenue to R2 515 million (2007: R2 017 million) was driven by the 26% growth reported by Managed Services and 22% by Professional Services. The Application Products business unit more than doubled its revenue for the year, whilst the Networks and Enterprise Resource Planning ("ERP") business units also delivered excellent performance and GMSI continued to grow strongly in the international market. Earnings before interest, tax, depreciation and amortisation improved by 70% and operating profit by 81%.

 

Basic earnings per share was reported at 11.63cps (2007: 5.57cps) and headline earnings was 11.7cps (2007: 5.54cps). Reflecting the higher levels of activity, cash generated from operations before working capital changes increased by 93% to R167 million (2007: R87 million). However, free cash was tempered by an increase of R196 million in debtors, reflecting the sharp increase in turnover and tougher debt collection environment.

 

In view of the good earnings performance and sound liquidity position the board has proposed a cash dividend of 3.5 cents per share. The ICT industry remains buoyant despite the generally subdued domestic economy. Opportunities in the sector include the Government’s infrastructure investment programme, driven by the demand for improved service delivery, as well as the pursuit of increased efficiencies across the private sector. The group's brand has gained recognition in all our chosen areas of focus, as demonstrated by the strong deal flow during 2008.

 

Murray and Roberts final results

Revenue increased to R27.9 billion (R17.8 billion) and EBITDA rose to R3.1 billion (R1.8 billion) for the year to 30 June 2008. Net profit attributable to ordinary shareholders more than doubled to R1.7 billion (R702 million). Headline earnings grew to 562cps (329cps). A final ordinary dividend of 119cps has been declared.

Capital expenditure is set to increase by a further 30% at least in the year ahead. This level of investment is made possible by the margins and cash flows available in the current market and ensures the capacity needed for future growth. There is little indication that current levels of activity will be significantly affected by the turmoil in international financial markets although signs of increased volatility are evident in some market sectors. M&R has embraced the growth challenge offered by increased investment into its domestic and international markets and despite the associated risks, maintains its non-negotiable commitment to sustainable earnings growth and value creation.

 

Imperial final results to June 2008

Revenue from continuing operations rose 3% to R55.9 billion (R54.5 billion), however operating profit declined by 20% to R2.9 billion (R3.8 billion). In addition, a loss attributable to ordinary shareholders of R870 million (profit of R2.8 billion) was recorded and headline earnings fell to 718cps (1 377cps). A final ordinary dividend of 245cps has been declared, as well as a preference dividend of 554.384cps.

Imperial expects low consumer spending to continue for most of our 2009 financial year, causing the motor retail and ancillary businesses to remain under severe pressure, as they were for the past financial year. These conditions affect dealerships, distributorships, insurance, banking and, partially, the car rental business. The car rental division will, however, benefit from the Europcar merger and brand refocusing.