Monthly Highlights: August 2019

•  West African equities recorded negative return across the region led by the BRVM down -3.9% in USD while Ghana followed closely behind declining -3.4%
•  East African equities markets were mixed as Kenya, Uganda and Rwanda dragged the markets lower offset by marginally positive returns in Tanzania and Mauritius
•  North African equities were mixed as Egypt and Tunisia reported positive returns while Morocco was weaker. Tunisia’s central bank left its benchmark interest rate unchanged at 7.75%
•  Southern African equities continue to be dragged lower by Zimbabwe with only Malawi recording positive returns. In Zimbabwe, we digested distorted results from most companies due to the adoption of the ZWL and its subsequent devaluation
 

West African equities recorded negative return across the region led by the BRVM down -3.9% in USD while Ghana followed closely behind declining -3.4%

West African equities recorded negative return across the region led by the BRVM down -3.9% in USD while Ghana followed closely behind declining -3.4%. In Nigeria, with the reporting season in full swing, we digested a plethora of financial results. In financials, Guaranty Trust Bank exhibited relatively flat 1H19 results (GE:-2.1% y/y; PAT: +3.7% y/y) as growth in non-interest income of +12.9% was offset by an increase in impairment charges of +7.6%. Zenith Bank posted satisfactory 1H19 results (GE: +2.9% y/y; PAT: +8.7% y/y) as non-interest income grew by +23.9% y/y driven by fees on electronic products, which grew 1.7 times y/y contributing 43% to total fee and commission income. Stanbic IBTC Holding released disappointing 1H19 results (GE: +2.8% y/y; PAT: -15.9% y/y) as non-performing loans increased by 6% the back of some newly classified loans mainly in the Agricultural sector. Fidelity Bank announced impressive 1H19 numbers (GE: +12.3% y/y; PAT: +15.55% y/y) driven by recovery on impairment charges vs. an impairment loss in the prior year. UBA reported a solid set of results (GE: +14.0% y/y; PAT: +29.6% y/y) as impairments were down by -53.65% y/y coupled by lower effective tax rate of 19% vs. 25% in 1H18. In the consumer sector, PZ Cussons Nigeria posted disappointing FY19 results (T/O:-7.7% y/y; PAT: -40.0% y/y) as revenue declined due to weakness in Home and Personal Care segment -19.3% y/y due to increased competition from cheaper unbranded products . Guinness Nigeria released negative FY19 results (T/O: -8.0% y/y; PAT: -18.4% y/y) driven by a decline in Lager sales as Malt, Spirits and Stout which remained in growth were insufficient to lift revenue.

East African equities markets were mixed as Kenya, Uganda and Rwanda dragged the markets lower offset by marginally positive returns in Tanzania and Mauritius

East African equities markets were mixed as Kenya, Uganda and Rwanda dragged the markets lower offset by marginally positive returns in Tanzania and Mauritius. Uganda’s August inflation slowed to 2.1% y/y, lowest in 15 months as the central bank of Uganda held the benchmark rate for the fifth time. On the earnings front in Mauritius SBM Holdings reported impressive 1H19 results (GE: +24.7% y/y; PAT: +680.4% y/y) which was mainly due to lower impairment charges (-90.9% y/y) and major growth in government securities which drove interest income higher. New Mauritius Hotels released week 3Q19 results (T/O: +3.5% y/y; PAT: n/a) on the back of an increased depreciation charge. In Kenya, inflation fell in August as food-price increases slowed. On the earnings front, banking giant KCB Group reported satisfactory 1H19 results (GE: +8.4% y/y; PAT: +5.0% y/y) earnings were mostly driven by higher non-funded income growth +14.7% y/y. Equity Group also exhibited positive 1H19 results (GE: +14.8% y/y; PAT: +8.9% y/y) mainly driven by a +25% increase in non-funded income and a +9.2% growth interest income. We also digested good 1H19 from CO-OP Bank (GE: +5.5% y/y; PAT: +4.6% y/y) driven by non-Interest revenue which grew 25.7% y/y spurred by a 39.0% y/y rise in other fees and commissions. Diamond Trust Bank Kenya published mixed 1H19 results (GE: -4.0% y/y; PAT: +11.0+% y/y) mainly supported by lower-operating costs and lower loan loss provisions (-68.1% y/y). StanChart Bank Kenya reported relatively flat 1H19 results (GE: -0.7% y/y; PAT: +4.4% y/y) as Interest income from loans and advances remained unchanged. We digested relatively flat 1H19 from Barclays Bank Kenya (GE: +4.2% y/y; PAT: +3.1% y/y) as interest income rose by +7.4% y/y offset by a +30.8% rise of interest expense. NIC Group posted weak 1H19 results (GE: +12.5% y/y; PAT: -4.2% y/y) mainly attributable to an 18.0% increase in operating expenses. WPP Scangroup released impressive 1H19 results (T/O: +32.3% y/y; PAT: +27.18% y/y) attributed to the acquisition of Kantar TNS which has a presence in Nigeria and the wider West Africa. We digested impressive 1H19 results from Britam (T/O: +0.6% y/y; PAT: +70.5% y/y) fuelled by a 6.6% y/y decline in total expenditure. Bamburi Cement poor 1H19 numbers (T/O: +0.58% y/y; PAT: -1.50% y/y) we attribute the poor performance to slowdown in construction, higher power and fuel costs, access to market challenges due to the closure of Uganda-Rwanda border and incremental depreciation charges due to the additional capacity installed last year in Kenya and Uganda. Nation Media posted disappointing 1H19 results (T/O: -8.4% y/y; PAT: -23.7% y/y) primarily attributed to the challenging operating environment characterized by reduced advertising spend, continued consumer shift to digital media and competition. In Uganda Stanbic Bank Uganda reported sturdy 1H19 results (GE: +13.7% y/y; PAT: +39.5% y/y) fuelled by a +27.2% growth in net-interest income. We digested relatively flat 1H19 results from Umeme (T/O: +10.1% y/y; PAT: +0.3% y/y) due to a higher income tax charge for the period arising from prior year assessments. In Rwanda, Bralirwa announced satisfactory 1H19 results (T/O: +3.9% y/y; PAT: +8.9% y/y) encouraging to see healthy volume growth of 5.2% and lower marketing and sales expenses. In Tanzania, Tanzania Cement Company released strong 1H19 results (T/O: +7.8% y/y; PAT: +16.8% y/y) driven by strong domestic and export volume, strategic pricing, stable product mix and operational cost efficiencies.

North African equities were mixed as Egypt and Tunisia reported positive returns while Morocco was weaker. Tunisia’s central bank left its benchmark interest rate unchanged at 7.75%

North African equities were mixed as Egypt and Tunisia reported positive returns while Morocco was weaker. Tunisia’s central bank left its benchmark interest rate unchanged at 7.75%. In Egypt, we digested weak 1H19 from Juhayna Food Industries (T/O: +7.7% y/y; PAT: -24.7% y/y) owing to higher sales and marketing expenses, an increase in the income tax expense and a slightly higher interest expense. El Sewedy Electric reported disappointing 1H19 results (T/O: +7.2% y/y; PAT: -19.1% y/y) driven by weaker-than-expected GP margins at the wire and cable segment owing to higher exported volumes to Europe, a more competitive market. Arabian Cement posted poor 1H19 results (T/O: -2.5% y/y; PAT: -88.1% y/y) on the back of high cost of goods sold (+17.1% y/y). Ibnsina Pharma published solid 1H19 results (T/O: +26.8% y/y; PAT: +34.8% y/y) driven by retail sales that increased 68.9% y/y. We digested weak 1H19 results from Egyptian International Pharmaceutical Industries Company (T/O: +21.5% y/y; PAT: +2.6% y/y) driven by a significant increase in cost of goods sold, mainly due to a jump in raw material costs. Telecom Egypt reported mixed 1H19 results (T/O: +25.4% y/y; PAT: +3.5% y/y) as solid top-line growth was offset by once-off employee costs of EGP1bn for an early retirement program. SODIC released mixed 1H19 results (T/O: 92.0+% y/y; PAT: -9.9% y/y) as revenue almost doubled while bottom line was offset by low margins and higher operating expenses. GB Auto published poor 1H19 results (T/O: +4.3% y/y; PAT: n/a) largely due to increase in cost of sales by +6.1% and increase in net provisions. We also digested weak 1H19 results Madinet Nasr Housing (T/O: -14.1% y/y; PAT: -15.7% y/y) impacted by the company’s decision to push the new sales launches in 2Q19 to 3Q19 slowing down revenue growth.

Southern African equities continue to be dragged lower by Zimbabwe with only Malawi recording positive returns. In Zimbabwe, we digested distorted results from most companies due to the adoption of the ZWL and its subsequent devaluation

Southern African equities continue to be dragged lower by Zimbabwe with only Malawi recording positive returns. In Zimbabwe, we digested distorted results from most companies due to the adoption of the ZWL and its subsequent devaluation. First Capital Bank’s 1H19 (GE:+60.3% y/y; PAT: +400.5% y/y) were fuelled by the revaluation of investment property (USD17.3m) and share of fair value gain of joint venture (USD56.8m) relating to the 50.0% holding in Makasa Sun. FBC Holdings strong 1H19 results (GE: +207.7% y/y; PAT: +266.0% y/y) can be attributed to the revaluation of investment property (USD27.1m) and higher net trading income as well as cost control. ZB Financial Holdings reported a solid set of results (GE: +143.9% y/y; PAT: 364.2+% y/y) as total income was up on the back of exchange rate gains and continued uptake of insurance products as well as adjustments of commissions rates. British American Tobacco (BAT) Zimbabwe published 1H19 results indicating that revenue is ahead of the prior year (T/O: +48.4% y/y; PAT: +14.7% y/y) despite a decline in volumes in all of its 3 brand segments due to inflationary pressures, foreign currency shortages, power cuts and eroded disposable incomes. In Zambia, Shoprite Holdings released weak FY19 results (T/O: +3.6% y/y; PAT: -18.2% y/y) as top line growth was offset by a significant increase in employee benefits and operating expenses. We also digested positive 1H19 results from Zambian Breweries (T/O: -9.1 % y/y; PAT: +40.1% y/y) despite revenue falling by -9% mainly due to lower volumes (-20% y/y). Profitability was also boosted by a decline in the effective tax rate from 36.8% to 20.6% in 1H19. BAT Zambia reported unimpressive 1H19 results (T/O: +47.7% y/y; PAT: -93.3% y/y) mainly attributed to the increase in finance costs resulting from the depreciation of the local currency against the USD thereby impacting the cost of borrowings which are denominated in USD. Due to impairment of receivables arising from delayed and/or non-payment of power invoices by one of their customers Copperbelt Energy Corporation published weak 1H19 numbers (T/O: +514.5% y/y; PAT: -60.5% y/y). In Malawi, National Bank announced uninspiring 1H19 results (GE: +9.4% y/y; PAT: +6.9% y/y) driven by growth in customer deposits and loan book by 8% and 21% respectively.