Monthly Highlights: January 2019

•  West African equities performed poorly without exception, in Nigeria we saw anticipated weakness ahead of the general elections which will be held on 16 February 2019
•  East African equities were positive led by Kenya, as the IMF announced progress in discussions for a new programme after the standby facility, an insurance-type facility, that Kenya would draw from in the event of balance of payment shocks ended in September 2018
•  North African equities outperformed, with Egypt reversing last month’s negative returns as bullishness prevailed after inflation rate in dropped to 12% in December 2018 from 15.7% in the previous month
•  In Southern Africa, equity markets recorded positive returns amid broad-based gains across the region. In Zimbabwe, Delta Corporation issued a mixed 3Q19 trading statement with Lager volumes
 


West African equities performed poorly without exception, in Nigeria we saw anticipated weakness ahead of the general elections which will be held on 16 February 2019

West African equities performed poorly without exception, in Nigeria we saw anticipated weakness ahead of the general elections which will be held on 16 February 2019. Nigerians will vote for their next president, deciding who will lead Africa’s largest economy and most populous country into the next decade. They will also elect the governors of 29 of Nigeria’s 36 states, and all federal and state legislators. The elections will pit the governing All Progressives Congress (APC) against the opposition People’s Democratic Party (PDP) and many smaller parties. The two leading contenders are– the incumbent, President Muhammadu Buhari, and Atiku Abubakar, who was vice-president under President Olusegun Obasanjo from 1999 to 2007. On the earnings front, Guinness Nigeria released mixed 1H19 results (T/O: -3.9% y/y; PAT: +21.1 y/y) as weak top-line growth was offset by a-72.8% decline in finance costs driven by a 62.2% decline in loans and borrowings following a rights issue.

East African equities were positive led by Kenya, as the IMF announced progress in discussions for a new programme after the standby facility, an insurance-type facility, that Kenya would draw from in the event of balance of payment shocks ended in September 2018

East African equities were positive led by Kenya, as the IMF announced progress in discussions for a new programme after the standby facility, an insurance-type facility, that Kenya would draw from in the event of balance of payment shocks ended in September 2018. On the earnings front, we digested healthy 1H19 results from EABL (T/O: +13.0% y/y; PAT: +32% y/y) as volumes grew by +13% mainly driven by Senator keg recovery in Kenya and continued growth of Serengeti in Tanzania. The Central Bank of Kenya (CBK) retained the benchmark lending rate at 9% for the third consecutive meeting as it seeks to anchor inflation. In Tanzania, NMB released FY18 results which were largely in-line with our expectations (GE: +9.1% y/y; PAT +13.5 y/y), the banks’ bottom line driven by lower impairment charges (-6.24% y/y). Similarly CRBD released strong FY18 results (GE: +4.6% y/y; PAT +78.9 y/y) as provisions were lower by -25% y/y.

North African equities outperformed, with Egypt reversing last month’s negative returns as bullishness prevailed after inflation rate in dropped to 12% in December 2018 from 15.7% in the previous month

North African equities outperformed, with Egypt reversing last month’s negative returns as bullishness prevailed after inflation rate in dropped to 12% in December 2018 from 15.7% in the previous month. On the earnings front, we digested healthy FY18 results from Juhayna (T/O: +17.4% y/y; PAT: +106.5% y/y) as its three main segments reported decent growth: dairy (c53% of FY18 top-line) +21%, yogurt (c21% of top-line) +19% and juice (c19% of top-line) +15%. The smaller segments saw disappointing numbers especially concentrates that saw sales drop -3% y/y. Cairo Investment & Real Estate Development posted strong 1Q19 numbers (T/O: +31.4% y/y; PAT: +20.6% y/y) driven by growth of 35% y/y in the higher education segment (c54% of total revenue) on increased student count (+42% y/y to 7.85k) and a 28% increase in the K-12 segment revenues (c46% of top-line) on higher student numbers (+13% to 24.2k). Madinet Nasr for Housing and Development (MNDH) has called off a planned merger via a share-swap with the Sixth of October Development and Investment Company (SODIC). SODIC had moved to acquire MNDH through a mandatory purchase offer in October that entailed the exchange of one of SODIC’s shares for every two of Madinet Nasr’s.

In Southern Africa, equity markets recorded positive returns amid broad-based gains across the region. In Zimbabwe, Delta Corporation issued a mixed 3Q19 trading statement with Lager volumes

In Southern Africa, equity markets recorded positive returns amid broad-based gains across the region. In Zimbabwe, Delta Corporation issued a mixed 3Q19 trading statement with Lager volumes increasing by +27% for the quarter and +43% for the nine months while volumes for Sparking Beverages declined by -66% for the quarter and by -9% for the nine months. The period was characterised by inflationary pressures and acute shortage of foreign currency. Delta also announced that it has entered into binding agreements to acquire the 100% stake held by Diageo Plc in United National Breweries Pty Ltd. The transaction is expected to close in the first half of 2019 and is subject to regulatory approvals in Zimbabwe and South Africa. Border Timbers Limited published a trading update for the five months to November 2018 showing revenue growth of 18.7% y/y to USD 11.1m. The performance was on the back of +7.9% and +19.1% y/y increase in production and sales volumes for Lumber respectively.

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