Monthly Highlights: February 2018

•  West African equities were mixed as BRVM and Ghana strengthened whilst Nigeria underperformed. On the earnings front, we digested impressive FY17 from Seplat (T/O: +77.9% y/y; PAT: n/a) with the company reporting a PBT of USD 44m vs. a loss of USD172.5m in 2016 as average realised oil price increased +25% to USD50.4/barrel
•  East Africa posted mixed returns as gains in Kenya and Tanzania were offset by losses in Mauritius, Uganda and Rwanda
•  In North Africa, equity markets were dragged lower by Morocco after Egypt and Tunisia posted strong returns.
•  Southern African equities posted solid gains led by Malawi and Zambia. In Zimbabwe, BAT released a solid set of FY17 (T/O: +7.9% y/y; PAT: +24.7% y/y) as operating margins strengthened to 45.3% from 35.1% on reduced administrative expenses which were -26.0% lower driven by reversal of tax related provisions, once off restructuring costs and costs saving initiatives
 

West African equities were mixed as BRVM and Ghana strengthened whilst Nigeria underperformed. On the earnings front, we digested impressive FY17 from Seplat (T/O: +77.9% y/y; PAT: n/a) with the company reporting a PBT of USD 44m vs. a loss of USD172.5m in 2016 as average realised oil price increased +25% to USD50.4/barrel

West African equities were mixed as BRVM and Ghana strengthened whilst Nigeria underperformed. On the earnings front, we digested impressive FY17 from Seplat (T/O: +77.9% y/y; PAT: n/a) with the company reporting a PBT of USD 44m vs. a loss of USD172.5m in 2016 as average realised oil price increased +25% to USD50.4/barrel. Operationally, average oil production increased +43% y/y to 39,923 bpd and gas production improved 118% to an average of 114mmscf/d. Nigerian Breweries also reported positive FY17 results (T/O: +9.8% y/y; PAT: +16.3% y/y) mainly driven by a -20.7% reduction in net interest expense. In the Francophone region, Sonatel released poor FY17 (T/O: +7.5% y/y; PAT: -7.4% y/y) with profits declining due to a rise in operating costs (+9.9%) coupled by a +17.7% increase in the depreciation charge.

East Africa posted mixed returns as gains in Kenya and Tanzania were offset by losses in Mauritius, Uganda and Rwanda

East Africa posted mixed returns as gains in Kenya and Tanzania were offset by losses in Mauritius, Uganda and Rwanda. In Kenya, consumer prices rose 4.5% from a year earlier, compared with a 4.8% increase in January with the prices of food and non-alcoholic drinks, which make up more than a third of the country’s inflation basket, climbing 3.8% in February from a year earlier, compared with a 4.7% increase in January. On the earnings front, Kenya Power posted mixed 1H18 results (T/O: +15.7% y/y; PAT: -30.3% y/y) as strong top-line growth was offset by a +22% increase in total power purchase leading to lower gross profit margin (34.4% in 1H17 vs. 30.9% in 1H18). We also digested poor FY17 results from BAT Kenya (T/O: -6.0% y/y; PAT: -21.2% y/y) as top line growth was driven by declining domestic sales as a result of consumer down-trading while a +67% increase in finance costs also affected profitability. In Mauritius, MCB Group posted strong 1H18 results (GE: +4.3% y/y; PAT +10.1 y/y) as net-interest income rose by +6.9% y/y and non-interest income improved +7.2% y/y despite a slight deterioration in operational efficiency as cost to income ratio increased to 42.5% from 41.3% in 2017.

In North Africa, equity markets were dragged lower by Morocco after Egypt and Tunisia posted strong returns

In North Africa, equity markets were dragged lower by Morocco after Egypt and Tunisia posted strong returns. In Egypt, the Monetary Policy Committee (MPC) cut the overnight deposit rate, overnight lending rate, and the rate of the CBE's main operation by 100bp to 17.75%, 18.75%, and 18.25%, respectively. The discount rate was also cut by 100bp to 18.25% The CBE’s decision to cut interest rates, is in-line with our expectation; a widely anticipated move, as inflation (January headline CPI data) was already well below the corridor rates. On the earnings front, EDITA posted strong FY17 results (T/O: +21.6% y/y; PAT: +346.8% y/y) mainly driven by portfolio repricing following the devaluation of the Egyptian pound with Edita’s average price per pack in FY17 increasing by +61.1% over the previous year. Volumes for the full year were down -24.5%, however on a q/q basis, they continue to make a gradual recovery with total packs sold across all segments recording a 9.9% q/q increase in 4Q17, which follows a +48.6% q/q increase recorded in 3Q17. Elsewedy Electric released impressive FY17 results (T/O: +74.1% y/y; PAT: +65.3% y/y) mainly driven by its wires & cables and turnkey projects segments which reported 57% and 35% growth in gross profits respectively. In Morocco, Maroc Telecom reported FY17 numbers that showed slow growth (T/O: -0.8% y/y; PAT: +1.9% y/y) as International revenues growth (+2.7% y/y) was offset by a decline in Morocco’s mobile revenues (-3.6%).

Southern African equities posted solid gains led by Malawi and Zambia. In Zimbabwe, BAT released a solid set of FY17 (T/O: +7.9% y/y; PAT: +24.7% y/y) as operating margins strengthened to 45.3% from 35.1% on reduced administrative expenses which were -26.0% lower driven by reversal of tax related provisions, once off restructuring costs and costs saving initiatives

Southern African equities posted solid gains led by Malawi and Zambia. In Zimbabwe, BAT released a solid set of FY17 (T/O: +7.9% y/y; PAT: +24.7% y/y) as operating margins strengthened to 45.3% from 35.1% on reduced administrative expenses which were -26.0% lower driven by reversal of tax related provisions, once off restructuring costs and costs saving initiatives. African Distillers also reported a strong set of 1H18 numbers (T/O: +17.8% y/y; PAT: +56.6% y/y) as change in sales mix ensured top-line growth despite total volumes decreasing by -5%. Profitability was also aided by robust cost containment as EBITDA margin rose to 24.6% from 17.8% in the previous period. In Botswana, the central bank expects economic growth to accelerate to 5.3% in 2018, supported by increased government spending and lower lending rates. The diamond-producing southern African nation’s economy grew by an estimated 4.7% in 2017, after contracting in the third quarter following a sharp fall in gem exports due to weak global demand.