Deere's strong earnings aided by pricing boost, shares hit record high

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange rose yesterday, with the Top-40 index closing up 1.01%, the broader All-Share index ending 0.9% higher at 72,891 points and all major indices ending the day in the green. Earlier in the day, data from Statistics South Africa showed the country's headline consumer inflation quickened to 7.6% year-on-year in October, from 7.5% in September. In sector news, the Pharmaceuticals and Biotechnology was the biggest winner on the day, gaining 2.84%. Looking at companies, Karoo and Alphamin performed strongly, gaining 9.51% and 7.72% respectively, while Redefine was at the bottom end of the scale, losing 4.21%.

EUROPEAN MARKET COMMENTARY

European markets closed higher yesterday as investors digested euro zone economic data and awaited the U.S. Federal Reserve's latest meeting minutes. The pan-European Stoxx 600 index closed up 0.7%, extending its gains later into the session. European investors were also inspecting yesterday's flash November PMI (purchasing managers' index) readings, which reaffirmed that the 19-member currency bloc has entered recession but showed the downturn in business slowing slightly. Looking at sector news, Travel and Leisure stocks rose 1.9%, Retail and Mining stocks both added around 1.8%, and Technology stocks were up 1.4%.

US MARKET COMMENTARY

U.S. stocks closed higher yesterday after minutes from the Fed's November meeting signalled that the central bank is seeing progress in its fight against high inflation and is looking to slow the pace of rate hikes into 2023. Jobless claims data came in higher than expected at 240,000 for the week signalling that the labour market may be weakening. At the same time, however, durable goods orders for October were stronger than anticipated, coming in at 1%, more than the 0.5% expected. In company news, shares of Nordstrom fell 4.24% after the department store chain reaffirmed its forecast. Markets will be closed today for the Thanksgiving holiday and will close early on Friday.

ASIAN MARKET COMMENTARY

Markets in the Asia-Pacific traded higher today as the U.S. Federal Reserve said they expect to switch to smaller rate hikes "soon". The Bank of Korea opted for a smaller 25 basis point hike, widely in line with expectations. Major Apple supplier Foxconn said that new recruits to its iPhone factory in Zhengzhou "appealed to the company" regarding compensation. A mass protest of hundreds of workers appeared to be triggered by a delay in bonus payment, with videos circulating on social media showing people smashing surveillance cameras and windows.

CURRENCY MARKET COMMENTARY

The rand strengthened yesterday ahead of a highly anticipated interest rate decision by the South African Reserve Bank (SARB). At the close of the session, the rand was trading at R16.97 to the dollar, 1.63% firmer. The U.S. dollar fell across the board today, after minutes from the Federal Reserve's November meeting showed that most policymakers at the central bank agreed it would soon be appropriate to slow the pace of interest rate hikes. The dollar was down against the euro, sterling and yen.

COMMODITIES MARKET COMMENTARY

Gold prices firmed above the key $1,750 an ounce level today, consolidating gains after minutes of the U.S. Federal Reserve's latest policy meeting signalled slower interest rate hikes. Oil prices fell this morning, as fears of supply disruption eased on news that the Group of Seven (G7) nations were considering a high price cap on Russian oil while a greater-than-expected build-up in U.S. gasoline inventories added to downward pressure. Oil prices also came under downward pressure after the Energy Information Administration (EIA) said on Wednesday that U.S. gasoline and distillate inventories had both risen substantially last week.

Primeserv Group Limited (PMV) +5%

Revenue is up by 9% to R394.7 million while operating profit is up 135% to R10.8 million. Earnings per share are at 12.41 cents per share, up 49% from the previous year and headline earnings per share are up 48%, at 12.41 cents per share. Net asset value per share is up by 13% at 232 cents per share. Finally, a gross cash dividend of 2.00 cents per share (2021: interim dividend of 1.50 cents per share) for the interim period was declared on Wednesday, 23 November 2022, payable to shareholders recorded in the share register of the company at the close of business on Tuesday, 17 January 2023 while the date of payment will be Monday, 23 January 2023.

Prosus N.V. (PRX) +1.4%

Group revenue from continuing operations grew 1% (9%) to US$16.5bn. This was driven by a healthy 35% (41%) increase in Ecommerce revenues. Trading profit declined to US$1.4bn, reflecting a lower share of profits from Tencent and investment in new Ecommerce extensions. Their Ecommerce businesses maintained strong top line momentum. Growth came from core businesses and expansion into adjacent opportunities. Consolidated revenue from continuing operations grew 18% (33%) to US$3.2bn, with meaningful contributions from all main segments (Classifieds, Food Delivery, Payments and Fintech, and Edtech). Given a sharp rise in the cost of capital, M&A investment of US$230m was considerably lower than in recent periods. While addressing cost, they still invested in growth, and consolidated trading losses increased by US$ 209 million to US$ 449 million, driven by earlier-stage Ecommerce extensions. On a consolidated basis, total revenue increased by US$ 487 million, or 18% (33%), from US$ 2.8 billion in the prior period to US$ 3.2 billion. This was primarily due to strong revenue growth in OLX Autos and iFood. The operating loss increased by US$ 213 million to US$ 531 million, representing increased organic investments to scale Ecommerce extensions. Headline earnings decreased by US$ 2.3 billion to a loss of US$ 6 million. This was due to lower profitability across our associates, including fair-value losses of US$ 371.5 million in Tencent. This was partially offset by reduced share-based compensation expenses related to remeasurement of the group's cash-settled scheme and no grants to executive directors, as well as lower net finance costs due to a revaluation gain on our euro bonds. Core headline earnings were US$ 897 million - a decrease of 60% or US$ 1.3 billion, primarily due to lower contributions from our associates (US$ 1.1 billion); US$ 879 million of this relates to Tencent.

Deneb Investments Limited (DNB) +0.4%

Revenue increased by R242 million (18.2%) to R1 576 million, from R1 334 million in the prior corresponding period. Headline earnings per share ("HEPS") increased by 6 cents per share (59.1%) to 16 cents per share, from 10 cents per share in the prior corresponding period while earnings per share ("EPS") increased by 10 cents per share (111.8%) to 18 cents per share, from 8 cents per share in the prior corresponding period. Net asset value per share ("NAVPS") increased by 29 cents per share (8%) to 393 cents per share, from 364 cents per share in the prior corresponding period. Profit increased by R42 million (112.4%) to R79 million, from R37 million in the prior corresponding period. No distribution was declared for the six months ended 30 September 2022 (2021: Nil).

Guess (GES) -1.2%

Guess reported third-quarter fiscal 2023 results, with the bottom-line declining year over year and falling short of estimates. The top line fell year over year but exceeded the consensus mark. The company posted adjusted earnings of 44 cents per share, down 29% from the 62 cents reported in the year-ago quarter. Net revenues amounted to $633.4 million, surpassing the consensus mark of $614 million. The company's gross margin contracted to 42.5% from the 45.7% reported in the year-ago quarter. In the third quarter of fiscal 2023, earnings from operations came in at $54.8 million, down from $65.7 million reported in the year-ago quarter. The operating margin came in at 8.6%, down from the 10.2% reported in the year-ago quarter. Guess exited the quarter with cash and cash equivalents of $174.1 million and long-term debt and finance lease obligations of $153.7 million. Net cash used by operating activities for the nine months ended Oct 29, 2022 amounted to $21.4 million. Guess declared a quarterly dividend of 22.5 cents, payable on Dec 23, 2022, to shareholders on record as of Dec 7. During the nine months ended Oct 29, 2022, management repurchased nearly 0.5 million shares, amounting to $11.7 million. Guess stocks have gained 18.3% in the past six months compared with the industry's 11.5% decline.

Deere (DE) +5.0%

Deere & Co yesterday posted a quarterly profit that easily beat Wall Street estimates with strong sales accelerated by price hikes for its agriculture and construction equipment, sending its shares to a record high. Despite supply chain challenges, the world's largest farm equipment maker reported a 75% increase in profit for its final quarter of its fiscal year and forecast higher net income for next year. Deere's revenue surged 37% year over year to $15.5 billion in its fiscal 2022 fourth quarter, which ended on Oct. 30. The heavy equipment manufacturer enjoyed broad-based gains across its major business lines. Net sales in its production and precision agriculture, small agriculture and turf, and construction and forestry divisions rose 59%, 26%, and 20%, respectively. Higher crop prices are enabling farmers to invest in new tractors and other machinery. At the same time, government incentives are helping to spur spending on infrastructure projects. These sales gains also drove a sharp increase in profits. Deere's net income soared 75% to $2.2 billion. And its earnings per share, which were boosted by stock buybacks, increased over 80% to $7.44.

Manchester United (MANU) +25.8%

Manchester United PLC shares surged a further 21.45% today as attention turned to potential buyers of the Red Devils after the Glazer family hoisted the for sale sign up over the Premier League football club. The Glazers' 17-year ownership has seen fortunes decline on the pitch, but gain off it, as the global appeal of the 20 times league champions continued to generate huge sponsorship deals and commercial revenues. But fan disquiet and the failed attempt to launch a European Super League may have prompted them to call time on their investment. Potential suitors will need deep pockets, with reports suggesting they are looking for as much as £8 billion for the club which would be a world record sum for a sports team.

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