Monthly Highlights: June 2016

•  West African equities posted poor performance with all markets in the red
•  East African equity markets were mixed as gains in Tanzania and Mauritius were offset by poor performance in Kenya.
•  North African equity markets underperformed amid broad-based weakness across the region
•  In Southern Africa, Malawi & Botswana posted positive returns vs. negative returns in Zimbabwe and Zambia
 


West African equities posted poor performance with all markets in the red

West African equities posted poor performance with all markets in the red. In Nigeria, the CBN took the market by surprise with the deregulation of the FX market and allowing the NGN to float freely. The CBN had previously strongly intimated that it was looking to implement a tiered approach to the currency regulation. On the consumer front, we digested impressive 1Q16 earnings from Cadbury (T/O: +5.8%, y/y; PAT: n/a) as the company returned to profitability after making losses in 1Q15 driven by an 830bp y/y expansion in gross margin and a reduction in operating expenses by -14.0% y/y. In the financial sector, Ecobank said it is targeting a non-performing loan (NPL) ratio of 7.5% in FY16 vs. 8.2% in FY15 as part of its commitment to improving the quality of its loan book and improving its risk processes. On the economic front, annual inflation in Nigeria quickened to a six-year high of 15.6% in May, the fourth consecutive monthly increase, driven by higher food, electricity and transport prices. In the Francophone region, Sonatel reached an agreement with the Senegalese telecom regulator (ARTP) for the renewal of its operating concession and the 4G licence. The company has agreed to pay XOF100bn (USD 167m) for the entire agreement, which includes a 17-year extension for fixed, 2G and 3G services starting from 8 August 2017, and a 17- year contract for 4G services from the award date. On the earnings front, we digested strong 1Q16 numbers from PALMCI (T/O: +2.6% y/y; PAT: +291.2% y/y) as EBIT margins improved to 11.3% from 4.6% reported last year, driven by improved operational efficiency.

East African equity markets were mixed as gains in Tanzania and Mauritius were offset by poor performance in Kenya

East African equity markets were mixed as gains in Tanzania and Mauritius were offset by poor performance in Kenya. In Kenya, Centum posted sturdy FY16 results (GE: +104.3% y/y; PAT: +25.2% y/y) as interest income rose+ 271.5% y/y to KES 3.9bn as a result of the full year consolidation of Sidian Bank (formerly K-rep Bank) as well as a realignment of the group’s marketable securities to benefit from the high-interest rates in 2016. On the economic front, Kenya's revenue from the tourism sector dropped -2.87% last year to KES 84.6bn (USD 837.2m) with visitor numbers plunging consecutively over the past four years as al Shabaab militants from neighbouring Somalia launched attacks in Kenya in retaliation for Kenya's military intervention. Shifting to Mauritius, the country's trade deficit narrowed 4% in April to MUR 6.08bn (USD 172.5m) from a year earlier helped by lower cost of imports of mineral fuels and lubricants. The value of imports fell -16% to MUR 12.44bn, with the cost of mineral fuels and lubricants 51% lower at MUR 1.29bn from MUR 2.63bn the previous year. However, exports also fell 24.3% to MUR 6.36bn from MUR 8.40bn in the comparative period. In Tanzania, the Dar es Salaam Stock Exchange (DSE)IPO was oversubscribed by nearly five times. The DSE intends to list its shares on the market's main segment for trading on 12 July 2016.

North African equity markets underperformed amid broad-based weakness across the region

North African equity markets underperformed amid broad-based weakness across the region. In Egypt, we digested in-line 1Q16 numbers from Cleopatra Hospitals (T/O: +178.5% y/y; PAT: +26.2% y/y) as revenue growth was driven by the consolidation of Nile Badrawy (NBH - 99.92% owned) and Cairo Specialized Hospital (CSH – 52.7% owned) in September 2015 and Al Shorouk hospital that was acquired in late January 2016. In the financial sector, we digested solid 1Q16 results from Housing Development Bank (G/E: +21.8% y/y; PAT: +16.7% y/y) driven by strong growth in net interest income (+47.8%) and fee income (+13.7%) on the back of solid loan growth (+22.6%) and higher net interest margins. In another action, Commercial International Bank (CIB) dropped plans to sell its investment bank CI Capital to Beltone Financial after failing to secure regulatory approval for the deal. CIB agreed to the sale of its investment banking subsidiary in February 2016 for EGP 924m (USD 104m). On the economic front, Egypt’s central bank has begun negotiations with the International Monetary Fund over a USD5bn loan.

In Southern Africa, Malawi & Botswana posted positive returns vs. negative returns in Zimbabwe and Zambia

In Southern Africa, Malawi & Botswana posted positive returns vs. negative returns in Zimbabwe and Zambia. In Zimbabwe, Seedco reported FY16 results that showed slow growth (T/O: +1.4% y/y; PAT: +3.8% y/y) after drought impacted cereal sales during the rainy season. Retailer, OK Zimbabwe posted disappointing FY16 numbers (T/O: -5.4% y/y; PAT: -91.1% y/y) as increased consumption of low value and low margin basic goods impacted the top-line. This was further impacted by a highly competitive wholesale and retail market with the entry of Meikles Megastores, Choppies, Horizon Ivato and the expansion of the Pick N Pay's footprint. In Botswana, Choppies Enterprises has finally succeeded in its year-long quest to enter Kenya’s retail space through the acquisition of Ukwala Supermarkets stores. The retailer announced its takeover of eight Ukwala outlets across the country. Three of the stores are in Nairobi, four in Kisumu and one in Bungoma. Choppies first announced the intention to enter Kenya in May 2015. Shifting to Zambia, the country's copper output will rise by 5.5% to 750,000 tonnes this year and output is expected to double to 1.5m tonnes in 2017, Mines Minister Christopher Yaluma said. Copper production in Africa's second-biggest producer of the metal was at 711,515 tonnes in 2015.

contacts
  • Bermuda +1 441 278 7610
  • UK +44 20 7101 9290
  • South Africa +27 11 243 9054

© Altree Capital ("ACL")

   Terms and Conditions