Monthly Highlights: May 2019

•  West African equities recorded mixed returns, Nigeria was the only market to report positive performance despite weaker economic growth of +2.0% y/y in 1Q19, down from +2.4% y/y growth recorded in 4Q18
•  East African equity markets were broadly weaker as Uganda and Kenya led markets lower
•  North African equity markets were mixed as Egypt and Morocco dragged the markets lower offsetting positive returns in Tunisia
•  Southern African equity performance was mixed as weakness in Zambia, Zimbabwe and Botswana was offset by strength in Malawi
 

West African equities recorded mixed returns, Nigeria was the only market to report positive performance despite weaker economic growth of +2.0% y/y in 1Q19, down from +2.4% y/y growth recorded in 4Q18

West African equities recorded mixed returns, Nigeria was the only market to report positive performance despite weaker economic growth of +2.0% y/y in 1Q19, down from +2.4% y/y growth recorded in 4Q18. Dynamics were mixed across economic sectors as the utilities sector continued to outperform expanding by 18% y/y. In addition, output from the financial sector shrunk by a further 8% y/y while the real estate sector that had been in recession for 12 consecutive quarters recorded a modest growth of 0.9% y/y. In other news, the MPC voted in favour of retaining the Monetary Policy Rate (MPR) at 13.5%. The asymmetric corridor was also left unchanged at +200bps/-500bps while the Cash Reserve Requirement (CRR) and the liquidity ratios of banks were kept at 22.5% and 30.0% respectively. On the corporate front, MTN Nigeria, listed its shares by introduction on the Nigerian Stock market (NSE) once the telco giant received regulatory approval from SEC and NSE to list 20.3bn shares at a price of NGN90 per share. The listing added NGN1.8tn to the market capitalization of the NSE, making the company the 2nd largest entity on the Nigerian Bourse.

East African equity markets were broadly weaker as Uganda and Kenya led markets lower

East African equity markets were broadly weaker as Uganda and Kenya led markets lower. In Kenya, Safaricom released sturdy FY19 results (T/O: +6.9% y/y; PAT: +13.0% y/y) as strong growth in MPESA (+19.2% y/y) and fixed data (+22.8% y/y) fuelled the top-line. EBITDA margins expanded to 49.7% (up +145bps) as costs were well managed. In the financial sector, KCB posted satisfactory 1Q19 performance (GE: +7.6% y/y; PAT: +11.4% y/y) driven by a +11.2% growth in net-interest income. Equity Bank posted 1Q19 results that were slightly disappointing, however in line with our expectations (GE: +6.7% y/y; PAT +4.9% y/y) on back of +6.3% y/y growth in net-interest income. In Mauritius, MCB posted impressive 3Q19 results (GE: +21.7% y/y; PAT +37.6% y/y) fuelled by lower provisions (-24.8% y/y) and strong growth in net interest income (+17.6% y/y).

North African equity markets were mixed as Egypt and Morocco dragged the markets lower offsetting positive returns in Tunisia

North African equity markets were mixed as Egypt and Morocco dragged the markets lower offsetting positive returns in Tunisia. In Egypt, annual urban consumer price inflation eased to 13% in April from 14.2% in March 2019. On the corporate front, we digested strong earnings from CIB Egypt (GE: +30.5% y/y; PAT +30.7% y/y) driven by higher net interest income (+52% y/y), which resulted in widening net interest margins to 5.9%. Cheese & fruit juice manufacturer, Obourland, reported mixed results 1Q19 (T/O: +25.6% y/y; PAT: +5.5% y/y) as solid top-line growth was offset by significant increases in cost of sales (+30%) and SG&A (+55%) expenses respectively. Snack food producer, Edita, reported impressive 1Q19 numbers (T/O: +10.8% y/y; PAT: +88.7% y/y) as wafer and rusks revenues increased by +42.6% and 50.5% y/y respectively following the introduction of new Bake Rolz SKUs at EGP3/pack. In the healthcare sector, IDH reported a solid set of results in 1Q19 (T/O: +22.4% y/y; PAT: +21.8% y/y) driven by +18% y/y increase in number of patients (c2.0mn) and +28% increase in number of tests performed (8.4mn), both aided by the ongoing 100mn Healthy Lives campaign in Egypt and 23 net branch openings in 1Q19 (+26 in Egypt, +1 in Jordan, closed 4 in Sudan) to reach a total of 421 branches. Similarly, Ibnsina Pharma published solid 1Q19results (T/O: +28.8% y/y; PAT: +46.6% y/y) driven by +17% y/y increase in volumes sold as a result of : i) the addition of four DCs in 1Q19, a total of 59 DC’s; ii) stronger deliveries of 2.0mn (+5.4%); iii) higher clients served now 42,143 customers (+6% y/y); and iv) Novo Nordisk contract (signed in Mar 2018, started distribution in Sep 2018; expected to generated EGP300mn in the first 12 months).

Southern African equity performance was mixed as weakness in Zambia, Zimbabwe and Botswana was offset by strength in Malawi

Southern African equity performance was mixed as weakness in Zambia, Zimbabwe and Botswana was offset by strength in Malawi. In Zimbabwe, we digested weak FY18 results from GB Holdings (T/O: -0.3% y/y; PAT: n/a y/y) impacted by volume declines in the two division (Rubber and Chemicals), forex shortages and high finance costs (+24.4%). Nampak Zimbabwe Limited published a trading update for 1H19, indicating that group revenue is ahead of prior year in the RTGS. Volumes were significantly lower in the plastics and metals segments and marginally ahead in the printing and converting segment. In other news, Meikles has advised shareholders that discussions to sell some of its hospitality assets are still ongoing. The company will be seeking the approval of shareholders for the proposed disposal at an EGM to be convened at a future date.