Monthly Highlights: January 2020

•  West African equities performance was largely positive as Nigeria and Ghana outperformed while the Francophone region closed red as the speedy launch of the ECO currency has stoked divisions with the five Anglophone countries
•  East African equities were dragged lower by Kenya which closed down -0.98% while all the other markets closed on a positive note
•  North African equities were mixed with Egypt and Morocco closing higher while Tunisia underperformed
•  In Southern Africa, equity markets recorded negative returns amid broad-based weakness across the region
 

West African equities performance was largely positive as Nigeria and Ghana outperformed while the Francophone region closed red as the speedy launch of the ECO currency has stoked divisions with the five Anglophone countries

West African equities performance was largely positive as Nigeria and Ghana outperformed while the Francophone region closed red as the speedy launch of the ECO currency has stoked divisions with the five Anglophone countries in the 15-member Economic Community of West African States (ECOWAS) wanting to adopt the new currency on a slower timetable and as a new currency for the whole region, not just as a replacement for the CFA franc. In Nigeria, Guinness Nigeria released poor 1H20 results (T/O: +0.8% y/y; PAT: -49.0%y/y) driven by weak top line growth and a +92% growth in finance costs as short term loans increased +87% year-to-date. UACN released mixed FY19 results (T/O: +9.7% y/y; PAT: n/a) as satisfactory top-line growth was offset by a NGN15.3bn loss from the discontinued operations at UPDC, its associated property company, resulting in a net loss of NGN9.2bn. Cadbury published impressive FY19 results (T/O: +9.3% y/y; PAT: 53.9% y/y) as improved financial leverage and lower effective tax rate (down 14.7ppts y/y to 18.0%) provided a boost to the company’s profits. In other news, MTN Nigeria announced that the Attorney General of the Federation and Minister of Justice withdrew the demand for NGN242.2bn and USD1.3bn revenue indebtedness from MTN.

East African equities were dragged lower by Kenya which closed down -0.98% while all the other markets closed on a positive note

East African equities were dragged lower by Kenya which closed down -0.98% while all the other markets closed on a positive note. In Kenya, we digested healthy 1H19 results from EABL (T/O: +10.3% y/y; PAT: +9.1% y/y) as volumes grew by +5% y/y mainly driven by Senator keg, mainstream spirits in Kenya and continued growth of Serengeti in Tanzania. The Central Bank of Kenya (CBK) cut the benchmark lending rate for the second consecutive time to 8.25% from 8.5% in an effort to spur economic growth. In Tanzania, NMB released impressive FY19 results which were largely in-line with our expectations (GE: +7.9% y/y; PAT +47.2 y/y) as the banks’ bottom line was driven by lower impairment charges (-26.9% y/y). Similarly CRBD released strong FY19 results (GE: +11.0% y/y; PAT +87.4 y/y) as provisions were lower by -13.9% y/y.

North African equities were mixed with Egypt and Morocco closing higher while Tunisia underperformed

North African equities were mixed with Egypt and Morocco closing higher while Tunisia underperformed. In Egypt we digested healthy FY19 results from Obourland (T/O: +8.3% y/y; PAT: +24.1% y/y) on the back of lower SG&A expenses as the company lowered its marketing expenses by -67% y/y. Cairo Investment & Real Estate Development posted strong 1Q20 numbers (T/O: +55.9% y/y; PAT: +46.7% y/y) driven by growth of +41% y/y in the higher education segment (c48% of total revenue) on increased student count (+31% y/y to 10.3k) and a 72% increase in the K-12 segment revenues (c52% of top-line) on higher student numbers (+11% to 26.8k). In other news, the Central Bank of Egypt’s (CBE) Monetary Policy Committee decided to keep the CBE overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 12.25%, 13.25%, and 12.75%, respectively. The discount rate was also kept unchanged at 12.75%.

In Southern Africa, equity markets recorded negative returns amid broad-based weakness across the region

In Southern Africa, equity markets recorded negative returns amid broad-based weakness across the region. In Zimbabwe, Delta Corporation issued a poor 3Q20 trading statement with Lager volumes decreasing by -43% for the quarter and -46% for the nine months while volumes for Sparking Beverages declined by -41% for the quarter and by -25% for the nine months. The period was characterised by inflationary pressures and fast depreciating local currency which resulted in the erosion of disposable incomes and reduced consumer spending. Econet also reported a poor trading update for 3Q20 with voice traffic volumes declining from 2Q20 to 3Q20 following the headline tariff adjustments in August 2019 and October 2019. Consequently, voice declined by -8.0% q/q, Data -30.0% q/q and SMS -35.0% q/q. In Botswana, Letshego Holdings has appointed Andrew Fening Okai, as the Group CEO, pending regulatory approvals. Andrew is Standard Chartered’s former Global Chief Operating Officer for the international bank’s retail division.