All eyes on Tencent today
Google and Apple colab?
Nvidia narrative cont.
In May 2001, Naspers acquired a 46.5% stake in Tencent, a Chinese internet company known for WeChat, fintech apps, and mobile games.
This investment has been hailed as one of the most successful venture capital deals in history.
Tencent Holding’s earnings report from Q4, is due today. It is expected to have a positive impact on its shares, which have declined by approximately 60% since reaching a record high three years ago. Wall Street analysts expect Tencent will report earnings per share of $0.608.
The company is considering following its counterparts in enhancing capital returns by increasing dividends or conducting share buybacks.
Watch this space.
Apple is considering a partnership with Google to incorporate Google’s Gemini AI engine into their next batch of iPhones. This potential deal has not been confirmed by either company. Analysts believe that this collaboration would benefit both Apple and Google in different ways. As a result of this news, Apple’s shares rose by 2.7% in Monday trading, while Google’s parent company, Alphabet, saw a 6.9% increase in stock price, making it the top-performing stock of the day in the S&P 500.
Nvidia recently introduced its new AI processor called Blackwell. Despite high anticipation, the announcement failed to impress investors, leading to a decline in shares after the market closed.
Options activity indicates that some traders are speculating that the stock could more than double in value by Friday, reflecting the YOLO trading sentiment.
Time will tell.
Who are the Magnificent Seven?
In 2023, Bank of America analyst Michael Hartnett coined the term “Magnificent Seven” to refer to seven companies that are widely recognized for their market dominance, technological impact, and influence on consumer behavior and economic trends. These companies include Alphabet (GOOGL; GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), NVIDIA (NVDA), and Tesla (TSLA).
On Tuesday, these tech megacaps experienced a rebound, contributing to gains on Wall Street. Nvidia Corp.’s new chips (see above) played a role in supporting the rally, and reports of the company’s potential acquisition of Samsung Electronics Co.’s memory chips also boosted the South Korean market.
Inflation update
According to a survey conducted by the Bureau for Economic Research based in Stellenbosch, average inflation expectations for this year in South Africa decreased from 5.7% to 5.4% in the first quarter of 2024.This data was released on Tuesday, just before the rate meeting.
According to participants in a poll of analysts, business people, labor unions, and households, the projected rate of price growth for 2025 is expected to decline to 5.3% from 5.6%. Furthermore, the rate is anticipated to decrease to 5.2% in 2026.
You can read more about it here.
Spotlight on Mpact
Mpact is the biggest paper and plastics packaging company in Africa, with a strong focus on recycling.
They collect around 700,000 tonnes of recyclable materials every year. Mpact holds leading positions in various sectors including corrugated packaging, recovered paper collection, recycled cartonboard and containerboard, plastic jumbo bins, PET performs, and styrene trays.
Mpact is a well-managed business with valuable assets. They have made significant investments in projects aimed at achieving energy savings, manufacturing efficiencies, and cost reduction.
Although volumes have remained steady, improvements in product mix are expected to drive margin expansion.
However, there are challenges such as poor liquidity, a contested shareholder register, and a high level of capital expenditure that may impact the company’s valuation.
Modest cash returns are anticipated in the near term, but the balance sheet is expected to improve once the current capital expenditure program is completed.
Mpact is projected to spend a substantial amount equivalent to its market capitalization between FY22A and FY24E.
If cash generation improves in FY25/26E, Mpact may attract interest from consolidating forces in the paper industry.
