Monthly Highlights: August 2018

•  West African equity performance was negative led by Nigeria as official data from the National Bureau of Statistics showed the economy was –0.45 percent points slower than 1.95% recorded in the 1Q18
•  East African equities underperformed amid broad-based weakness across the region as Kenyan lawmakers voted to retain the lending rate cap at a maximum of 4% above the Central Bank Rate (CBR - currently 9%).
•  North African equities were broadly negative, as positive performance from Egypt, mostly as a result of strong gains in index heavy weight CIB (+4.6%)was offset by underperformance in Morocco and Tunisia
•  Southern African equities posted mixed results as Malawi was positive while Zimbabwe, Zambia and Botswana underperformed
 

West African equity performance was negative led by Nigeria as official data from the National Bureau of Statistics showed the economy was –0.45 percent points slower than 1.95% recorded in the 1Q18

West African equity performance was negative led by Nigeria as official data from the National Bureau of Statistics showed the economy was –0.45 percent points slower than 1.95% recorded in the 1Q18. However, growth was 0.79 percent points higher when compared to 2Q17 which recorded a growth of 0.72%. On a quarter on quarter basis, real GDP growth was +2.94% and encouragingly driven by non-oil growth. On the earnings front, we digested impressive 1H18 results from GTBank (GE: 5.85% y/y; PAT: +14.22% y/y) as non-interest revenues rose +34%y/y, largely driven by net trading gains (+123% y/y). Zenith Bank also reported strong 1H18 results (GE: +3.2% y/y; PAT: +26.2% y/y) as net interest income rose by +10.8% y/y and provisions were lower by -77% y/y. By contrast, Access Bank released flat 1H18 (GE: -2.62% y/y; PAT: +0.42% y/y) driven by lower non-interest income (-21.7% y/y) as a result of FX losses. Shifting to the consumer sector, Guinness Nigeria reported positive 1H18 (T/O: +13.5% y/y; PAT: +249.2% y/y) primarily supported by sharp declines in administrative costs (-27.7% y/y) and finance expenses (-42.3% y/y). UACN reported mixed 1H18 results (T/O: -21.9% y/y; PAT: +14.3% y/y) as sales in its Food and Beverages segment (its main business, c.75% of sales) declined by -27% y/y while profitability was boosted by declining net finance costs (-57% y/y). Shifting to Ghana, MTN’s unit in Ghana raised GHS1.1bn (USD236m) as the wireless carrier sold a third of the shares it had made available in for the initial public offering, falling short of its target of GHS 3.5bn (USD750m)

East African equities underperformed amid broad-based weakness across the region as Kenyan lawmakers voted to retain the lending rate cap at a maximum of 4% above the Central Bank Rate (CBR - currently 9%)

East African equities underperformed amid broad-based weakness across the region as Kenyan lawmakers voted to retain the lending rate cap at a maximum of 4% above the Central Bank Rate (CBR - currently 9%). They however voted to repeal the floor on interest-earning deposits, which was previously set at a minimum of 70% of the CBR. On the earnings front, we digested impressive 1H18 results from Equity Bank (GE: +7.1% y/y; PAT: +17.2% y/y) on back of higher net interest income (+9.1% y/y) and lower impairments (-57% y/y). Similarly, KCB reported strong 1H18 results (GE: +4.4% y/y; PAT: +18.0% y/y) on back of lower provision (-59% y/y). COOP released satisfactory 1H18 results (GE: +5.4% y/y; PAT: +7.6% y/y) on back of a +10.4% y/y increase in net interest income & a decline in provisions (-27.6% y/y). In the materials sector, Bamburi Cement reported disappointing 1H18 results (T/O: -1.1% y/y; PAT: -6.0% y/y) as operating margins were 819bps lower to 6.6% driven by higher operating costs (+9.2% y/y). Britam released muted 1H18 results (T/O: +11.5% y/y; PAT: -1.2% y/y) as strong growth in premiums written was offset by a +13.1% increase in net insurance benefits & claims. Nations Media Group reported weak 1H18 results (T/O: -6.7 y/y; PAT: -35.4% y/y) as a challenging operating environment led to 12%, 10% and 9% y/y decline in revenues for Mwananchi, Daily Nation and NTV Kenya respectively. In Tanzania, we digested mixed 1H18 numbers from CRDB (GE: +5.4% y/y; PAT: -7.6% y/y) as strong growth in non-interest income (+15.9% y/y) was offset by growth in provisions (+24.9% y/y) and operating expenses (+7.5% y/y). Tanzania Cigarette reported weak 1H18 results (T/O: +0.5% y/y; PAT: -11.3% y/y) as results were impacted by a change in product mix as well as the carry-over impact of the 5% excise tax increase in 2017.

North African equities were broadly negative, as positive performance from Egypt, mostly as a result of strong gains in index heavy weight CIB (+4.6%)was offset by underperformance in Morocco and Tunisia

North African equities were broadly negative, as positive performance from Egypt, mostly as a result of strong gains in index heavy weight CIB (+4.6%)was offset by underperformance in Morocco and Tunisia. In Egypt, headline inflation (urban CPI) amounted to 13.5% in July, compared to 14.4% in June. On a m/m basis the inflation rate increased to 2.4%, compared to 3.5% in June. On the earnings front, we digested positive 1H18 results from Integrated Diagnostic Holdings (T/O: +26.4% y/y; PAT: +33.8% y/y) on the back of both better pricing supported by increased contribution from the walk-in segment as well as higher patient and test volumes. Walk-ins (c42% of total revenue) saw a 24% y/y increase in number of patients to 0.93m and +13% y/y in number of tests to 3.1m. Contract revenue (c58%) rose +21% y/y in 1H18 with number of patients increasing +5% y/y to 2.3m. Arabian Cement reported impressive 1H18 results (T/O: +18.5% y/y; PAT +200% y/y) driven by higher volumes which increased by +9% y/y and an improvement in EBITDA margin (27% in 2018 vs. 19% in 2017).

Southern African equities posted mixed results as Malawi was positive while Zimbabwe, Zambia and Botswana underperformed

Southern African equities posted mixed results as Malawi was positive while Zimbabwe, Zambia and Botswana underperformed. In Zimbabwe, CBZ reported impressive 1H18 results (GE: +15.8% y/y; PAT: +187.8% y/y) amid declining impairments (down -90.9% y/y) and higher non-funded income, increasing by +29.6%. Similarly, Barclays released strong 1H18 results (GE: +15.3% y/y; PAT: +42.7% y/y) on back of a +87.8% growth in net interest income buoyed by +27.7% y/y loan growth. Afdis reported a study set of FY18 results (T/O: +22.9% y/y; PAT: +90.4% y/y) driven by increased sales volumes, margin expansion, favourable mix and cost containment. Dawn Properties reported impressive 1H18 results albeit off a low base (T/O: +35.3% y/y; PAT: +912% y/y) on the back of strong revenue growth, a 2.6% reduction in operating expenses and lower net finance costs (-9.9% y/y).