All Eyes on Local Counters This Week, European Stocks Gain Momentum

Published 2018/03/05, 14:55
Updated 2023/07/09, 12:32

Among others, the following local companies are set to report results this coming week:

  • Standard Bank (Full Year Results): In its nine month operational update, the company reported attributable earnings growth of 16% y/y, which was well ahead of expectations (+9.2%). Per management, relative rand strength continued to dampen reported earnings while other banking interests contributed positively to the group’s performance and earnings.
  • FirstRand (Interim Results): While consensus is looking for 4.7% increase in in full year earnings, our focus will be on growth achieved in net interest income and non-interest revenue, the impairment ratio and whether the company will be able to deliver real growth in earnings and ROE of between 18% and 22% as previously guided.
  • Aspen (Interim Results): In a recent trading statement, the company guided for normalised HEPS to increase by between 23% and 27% y/y, significantly ahead of full year expectations (+14.2%). This points towards a strong half year result and depending on the detail, could result in earnings upgrades for FY18.
  • Merafe Resources (Full Year Results): In a January trading statement, management said that HEPS would increase by between 63% and 82% y/y, which was ahead of market expectations at the time. The increase in earnings was driven by substantially higher chrome ore and ferrochrome prices despite lower chrome and ferrochrome sales volumes, a stronger rand and an increase in total costs per tonne of ferrochrome and chrome ore sold.
  • Royal Bafokeng Platinum (Full Year Results): HEPS are expected to decline by between 30.8% and 41.2% y/y, to a smaller loss than the market expected. Given the apparent structural strengthening of the ZAR against the USD, the company will impair R863 million in goodwill on the balance sheet. This will influence EPS but not HEPS. Per management, an improved operational performance and enhanced cash flows left the group with a substantial cash balance and robust balance sheet at the end of the year.
  • MTN (Full Year Results): HEPS are expected to be at least 20% higher and positive (Bloomberg estimate: 498 cents) compared to a headline loss of 77 cents in the prior period which was mainly due to several non-recurring costs including the Nigerian regulatory fine and losses on MTN’s 51% equity interest in the Nigerian tower company. In the last quarterly update, management said that the group was on track to meet FY17 guidance despite tough market conditions.
  • Cashbuild (Interim Results): In a second quarter trading update, management reported revenue growth of 4% y/y, with new stores contributing 5% of the increase and existing stores declining 1%. Selling inflation came in at 3%. This equates to a revenue increase of 5% (like-for-like: flat) for 1H18. Gross profit margin will be slightly lower than that reported in 1H17.
  • Sanlam (Full Year Earnings): In a 10-month operational update, the company reported normalised HEPS growth of 22%, well-ahead of market expectations. A stronger investment performance supported returns earned on the capital base. Management reported growth in VNB and strong operational earnings achieved despite challenging trading conditions in SA and ex-SA regions, and a negative impact from the stronger rand over the period.
  • Sea Harvest, African Rainbow Capital Investments, MMI Holdings, Mpact, Clover, Exxaro, Sun International, Basil Read and Stadio will also release results next week.
  • From a local corporate actions perspective, Tuesday marks the last day to trade in Anglo American Platinum, BHP Billiton , City Lodge, Discover, Gold Fields, Kumba , NEPI Rockcastle and South32 to receive their recently declared distributions. These counters will trade ex-dividend on Wednesday.

Scheduled earnings releases in the US are limited this week, but there could still be some interest generated by the largest American-owned spirits and wine company, Brown-Forman and one of the biggest specialty apparel stores (NASDAQ:Ross Stores Inc), both set to release quarterly numbers next week. According to Bloomberg estimates, Ross Stores’ results should continue to exceed most rivals, given a robust unit-growth pipeline and higher same stores sales. In its 2Q18 earnings report, Brown-Forman reported strong EPS growth of 22.7%, which was well ahead of Street consensus. Management upwardly revised full year guidance, to a 6% to 7% increase in sales FY18 from 4% to 5% increase initially. Based on Bloomberg intelligence, the recent decline in the value of the US dollar against other major currencies may also provide support in emerging markets.

European earnings season will stay busy this week with 50 Stoxx 600 companies set to release results. European aerospace and defence company (LON:Rolls-Royce) Group will release full year results early in the week. Consensus is looking for a 12% increase in earnings per share, with revenue growth of 7.2%. According to Bloomberg intelligence, the company’s profit is under pressure, as the bulk of its large-engine fleet is relatively young, with few having had initial maintenance visits. Retirement of the older (NYSE:Boeing) 747 and 757 fleet will put more pressure on profits, as airlines look to retire these aging aircrafts at the next major overhaul point. Other companies in the spotlight include German luxury fashion house HUGO BOSS and auto-parts manufacturer Continental.

In the Asia Pacific region, the focus will likely be on one of Japan’s largest homebuilders Sekisui House, founded in 1960. In a 3Q17 report, the company printed growth of 3.4% in sales, while operating income was down 0.2%. As a measure for expanding its business areas, the company commenced the construction of Four Points by Sheraton Nagoya, a Marriott International hotel, with operations slated to begin in the fall of 2018. The hotel is close to Chubu Centrair International Airport, Nagoya, which has been experiencing an increase in passengers and an expansion in inbound demand.

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