Monthly Highlights: August 2017

•  West African equity performance was broadly mixed as positive performance in Ghana was offset by weakness in Nigeria
•  East African equity performance was broadly mixed, Tanzania posted another weak month whilst Kenya was positive
•  North African equities were positive for the fourth consecutive month, amid broad based gains across the region
•  Southern African equities rose, spurred by positive performance from Zimbabwe and Malawi
 

West African equity performance was broadly mixed as positive performance in Ghana was offset by weakness in Nigeria

West African equity performance was broadly mixed as positive performance in Ghana was offset by weakness in Nigeria and the Francophone region. In Nigeria, we digested impressive 1H17 results from GT Bank (GE: 2.2% y/y; PAT: +16.4% y/y) as net-interest revenues rose +63.7%, offsetting a -52% decline in non-interest income, largely driven by negative base effects arising from strong FX revaluation gains in 1H16. Zenith Bank also reported strong 1H17 results (GE: +77.1% y/y; PAT: +112.4% y/y) as non-interest income rose by +253.8% y/y driven by strong FX trading income (NGN46.42bn in 1H17 vs. FX trading loss of NGN2.80bn in 1H16). Access Bank released positive 1H17 (GE: +41.7% y/y; PAT:+17.3% y/y) as net interest income grew by 21.3% y/y in 1H17 supported by higher yields on loans and investment securities despite the drop in gross loans and investment securities by 3.3% and 27.2% YTD. UBA reported impressive 1H17 results (GE: +35.0% y/y; PAT: +56.2% y/y) as interest income (+45.9% y/y and +44.3% y/y in 2Q17 and 1H17 respectively) was lifted by high yield on assets. By contrast, Ecobank released weak 1H17 results (GE: -6.0% y/y; PAT:-20.1% y/y) as net-interest margin came in lower at 6.1% in 1H17 vs. 7.5% in 1H16. Shifting to the consumer sector, Presco reported inspiring 1H17 results (T/O: +70.6% y/y; PAT: +84.4% y/y) with strong top line performance influenced by the favourable movement in the local prices of refined, bleached & deodorized oil (RBDO), in line with the trend in the international market. In Ghana, the International Monetary Fund (IMF) has approved an amount of USD94.2m for Ghana. This brings the total disbursements under the arrangement to USD565.2m with the remainder being tied to the remaining reviews. Also, the Finance Minister announced that he anticipates Ghana’s GDP growth to improve over the medium term to 9.2% whilst he is targeting inflation falling to 8.2% and fiscal and current account deficits improving to 3.7% and 4.9%, respectively in 2017.

East African equity performance was broadly mixed, Tanzania posted another weak month whilst Kenya was positive

East African equity performance was broadly mixed, Tanzania posted another weak month whilst Kenya was positive after President Uhuru Kenyatta was declared the winner of Kenya's presidential election. According to official figures, Kenyatta secured 54.3% of the ballots cast, while his rival, Raila Odinga, won 44.7%. However, post month-end on 1 September, Kenya's Supreme Court nullified the results and ordered a new vote to be held within 60 days. The verdict to nullify the presidential election results came as a huge surprise, a first for Kenya and true display of an independent judicial system. We are concerned that this will produce some short term headwind and additional costs that the country can do without, however, the long term message of this verdict is exceptionally encouraging for the country. The full report regarding the Supreme Courts' decision and findings will be published within 21 days of the decision. The limited information available appears to indicate that there were irregularities at the IEBC (Independent Electoral & Boundaries Commission). In terms of the market reaction, we witnessed some short term selling but most counters have subsequently recovered On the earnings front, we digested in-line 1H17 results from Equity Bank (GE: -2.6% y/y; PAT: -7.4% y/y) on back of on the back of an -11.8% y/y decline in interest income to KES23.0bn as yields from interest earning assets declined 322bps y/y to 10.8% while the net-interest margin fell 300bps to 8.3%. KCB reported satisfactory 1H17 results (GE: -0.4% y/y; PAT: +7.6% y/y) on the back of a -2.9% y/y decline in provisions and a +10.5% y/y increase in non-funded to KES11.5bn. COOP released disappointing 1H17 results (GE: +3.7% y/y; PAT: -10.4% y/y) as net-interest income declined -7.2% y/y driven by a -10.3% y/y decrease in interest income. In the materials sector, Bamburi Cement reported muted 1H17 results (T/O: -8.2% y/y; PAT: -38.6% y/y) on the backdrop of a tough operating environment in Kenya, typified by an overall reduction in cement consumption. In Tanzania, Vodacom finally listed on the Dar-es-Salaam stock exchange after months of delay fulfilling a government-imposed requirement for all telecom companies to list at least 25% of their shares locally.

North African equities were positive for the fourth consecutive month, amid broad based gains across the region

North African equities were positive for the fourth consecutive month, amid broad based gains across the region. In Egypt, we digested positive 1H17 results from Integrated Diagnostic Holdings (T/O: +24.0% y/y; PAT: +26.0% y/y) largely boosted by a decline in FX loss to EGP8m (on revaluation of supplier balances) in 1H17 from EGP31m in 1H16 (on currency swaps).  Cleopatra Hospitals reported impressive 1H17 results (T/O: +26.7% y/y; PAT +70.8% y/y) on the back of higher revenue from inpatient clients (+43%), surgeries (+28%), and laboratories (+53%), with the three segments contributing 70% to revenue growth in absolute terms. The improved performance came as price increases offset lower volumes, with the month of Ramadan and a prolonged Eid vacation coinciding with the second quarter of the year. In the industrials, El Sewedy reported robust 1H17 results (T/O: +24.0% y/y; PAT: +26.0% y/y) mainly driven by its wires & cables and turnkey projects segments, as well as the translation into local currency of international and export revenues denominated in foreign currencies. Shifting to the consumer sector, Juhayna announced mixed 1H17 numbers (T/O: +17.4% y/y; PAT: -23.3% y/y) as earnings were down on a combination of +20% y/y increase in sales and distribution costs and higher net interest costs (+89% y/y).

Southern African equities rose, spurred by positive performance from Zimbabwe and Malawi

Southern African equities rose, spurred by positive performance from Zimbabwe and Malawi. In Zimbabwe, Barclays released strong 1H17 results (GE: +38.6% y/y; PAT: +191.1% y/y) on back of a +15.1% growth in net interest income and a +51% rise in non-funded income. Hotelier, African Sun reported an improved set of 1H17 (T/O: +16.8% y/y; PAT +n/a y/y) showing a PBT of USD24.8m vs. a loss of USD1.2m, for the prior period. The performance was on the back of increased occupancies, cost containment and the reduction in finance costs. In Zambia, the central bank cut its benchmark lending rate for a third time this year as inflation remained below the government’s target. The Bank of Zambia lowered the rate to 11% from 12.5%, the lowest level since February 2014.