Monthly Highlights: November 2019

•  West African equities recorded mixed returns, with Nigeria recording the only positive performance
•  East Africa equity performance was broadly weaker as Rwanda and Mauritius led the markets lower
•  North African equity markets were mixed as Egypt and Tunisia closed lower offsetting positive returns in Morocco
•  Southern African equities posted mixed results as Zambia and Malawi underperformed while Botswana, Namibia and Zimbabwe were positive
 


West African equities recorded mixed returns, with Nigeria recording the only positive performance

West African equities recorded mixed returns, with Nigeria recording the only positive performance. In economic news, the CBN kept the benchmark rate at 13.50% with inflation surging to a 17 month high in October 2019. On the earnings front, we digested weak 3Q19 results from FCMB Group (G/E: -6.0% y/y; PAT: -41.9% y/y) fuelled by lower net interest income (-2.2% y/y) as well as increased operating costs (+20.5%). In other corporate news, Airtel Nigeria announced that it signed an agreement with Intercellular Nigeria to acquire additional 10MHz spectrum in the 900MHZ band for USD70m, excluding NCC Fees. The deal will allow Airtel Nigeria to expand and strengthen its LTE network across the country. In Ghana, the central bank kept the benchmark rate at 16.00% as October’s inflation increased to 7.7% from 7.6% in the previous month.

East African equities underperformed amid broad based weakness across the region

East Africa equity performance was broadly weaker as Rwanda and Mauritius led the markets lower. In Kenya, the central cut the key rate for the first time in 16 months to 8.50%. On the earnings front, Safaricom released satisfactory 1H20 results (T/O: +5.67% y/y; PAT: +14.37 % y/y) attributed to the +18.2% y/y growth in M-PESA revenues coupled by a -0.9% decline in operating costs. In the financial sector, Equity Group released an impressive set of 3Q19 results (G/E: +6.8% y/y; PAT: +25.7% y/y) driven by the increase interest income ( +15.2% y/y) as the company grew its loan book by +21.0% y/y. y. The Group also announced the acquisition of a 66.53% stake in Banque Commerciale du Congo (BCDC), subject to regulatory approvals. At the same time as acquiring KfW’s 7.67% stake in Equity Bank Congo. KCB Group also published solid 3Q19 earning (G/E: +9.5% y/y; PAT: +25.1% y/y) on the back of growth in other income of +20.7% as well as improved efficiency with the cost-to-income ratio declining to 42.8% in 3Q19 vs. 49.1% in the prior year. We digested satisfactory 3Q19 numbers from Cooperative Bank (G/E: +11.8% y/y; PAT: +8.3% y/y) as non-funded income grew by +49.3% y/y. In Mauritius, we digested strong 1Q20 results from MCB Group (G/E: +17.3% y/y; PAT: +19.2% y/y) as non funded income grew by +11.1% y/y and operating expenses were contained, increasing by only +5.7% y/y. In Tanzania, Vodacom Tanzania released satisfactory 1H20 results (T/O: +6.0% y/y; PAT: +8.4% y/y) as over 760,000 new customers joined the Vodacom Tanzania network, a +5.5% y/y increase to 14.8m, of which 7.2m use M-Pesa and 8.2m access data services .

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

North African equity markets were mixed as Egypt and Tunisia closed lower offsetting positive returns in Morocco. In Egypt, we digested strong 3Q19 results from Commercial International Bank (G/E: +23.6% y/y; PAT: +25.6% y/y) as interest income grew +23.9% y/y driven by the increase in average interest bearing assets along with slightly higher net interest margins (+19bps). El Sewedy Electric reported mixed 3Q19 results (T/O: +27.2% y/y; PAT: -26.6% y/y) as profitability was affected by the wire and cable sales whose gross profit dropped -32% y/y. Madinet Nasr for Housing and Development released uninspiring 3Q19 numbers (T/O: -64.9% y/y; PAT: -57.9% y/y) driven by slower deliveries as over 80% of the deliveries in Tag Sultan (phase one in Taj City) have been completed, while deliveries in phase two of Taj City are set to start during 4Q19-1Q20. Ibnsina Pharma exhibited impressive 3Q19 earnings (T/O: +25.9% y/y; PAT: % +24.9y/y) which we attribute to continued increase in market share growth up 60bp to 20.8% y/y. In other news the Company announced that it signed an importation and distribution agreement with Mundipharma to distribute Mundipharma’s imported products in addition to the company’s local products, which it already distributes. We also digested outstanding 3Q19 results from Obour Land for Food Industries posted strong 3Q19 results (T/O: +15.4% y/y; PAT: +72.7% y/y) on the back gradual price increases during FY19 ( +6.0% y/y) in white cheese and +8.0% y/y in milk as well as +11.0% y/y increase in volumes sold. Cairo Investment & Real Estate Development announced strong FY19 results (T/O: +36.2% y/y; PAT: +57.2% y/y) mainly driven by strong growth in the higher education segment (+44%y/y) accounting for 52% of total revenue on higher student numbers (+42.0% y/y) and a +29.0% increase in the K-12 segment revenues (+48.0% of total; students +13% y/y). Egyptian International Pharmaceutical Industries Company reported good 3Q19 (T/O: +24.7% y/y; PAT: +18.3 % y/y) as local sales grew by +31.0% y/y. MM Group released robust3Q19 results (T/O: +16.1% y/y; PAT: 40.5% y/y) with consolidated consumer electronics sales (69% of total sales) increasing by +13% y/y, mainly due to the consolidation of Kanawat, which improved mobile phone sales as well as a strong recovery in Bosch sales. Cleopatra Hospitals Group posted mixed 3Q19 results (T/O: +19.0% y/y; PAT: -21.1% y/y) as strong top-line growth was offset by an increase in SG&A expenses (+82% y/y) with EBTIDA margin contracting by 6.2 percentage points to 21.6% in 3Q19.

Southern African equities posted mixed results as Zambia and Malawi underperformed while Botswana, Namibia and Zimbabwe were positive

Southern African equities posted mixed results as Zambia and Malawi underperformed while Botswana, Namibia and Zimbabwe were positive. In Zimbabwe, Delta Corporation issued a trading update for 1H19 as volumes declined across all segments due to escalating inflation and the continued depreciation of the local currency against the USD. Larger beer, Sparkling beverages and Sorghum beer volumes were down (-40%y/y), (-36% y/y) and (-29%y/y) respectively while Natbrew Zambia volumes-13.0%y/y lower. Dairibord Holdings published a weak 3Q19 trading update as sales volumes plunged -40.0% y/y due to erratic water and electricity supplies and a shortage of foreign currency. OK Zimbabwe also released an uninspiring 1H20 trading update as Sales volumes declined -23.0% y/y as a results of the unstable trading environment as well as foreign currency scarcity. Innscor Africa posted a poor 1Q20 trading update as volumes were generally suppressed across the group. We also digested strong 3Q19 results from CBZ Holdings (G/E: +587.3% y/y; PAT: 1,240.1% y/y) as non-funded income improved by +1,113.0% buoyed by contributions from fair value adjustments on investment properties. In Zambia, we digested impressive FY19 results from Zambia Sugar (T/O: +25.1% y/y; PAT: +72.3% y/y) on the back of improving cane supply which increased by +15.0% and resultant sugar production increased to 399,000 tons from 351,000 tons in the previous year.

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