Monthly Highlights: November 2020

•  West African equities performance was largely positive as Nigeria and the BRVM (francophone region) outperformed while Ghana closed in the red
•  In East Africa, equity markets were mixed as Kenya, Rwanda and Tanzania closed the month lower whilst Mauritius and Uganda posted positive returns
•  North African equities outperformed amid broad-based gains across the region led by Tunisia and Morocco which both gained +5.8% in USD terms
•  Southern African markets exhibited mixed performance as strength in Zimbabwe, Namibia and Botswana were offset by weakness in Zambia and Malawi
 

In November, ten African stock markets posted positive dollar returns, with Nigeria (+13.18%), Mauritius (+9.38%) and Zimbabwe (+8.16%) posting the strongest gains, whilst Zambia (-3.38%), Kenya (-2.44%) and Ghana (-1.61%) were the laggards closing in the red. In Nigeria, stocks closed with biggest monthly gain in two years as equities attracted significant demand from investors seeking higher returns as yields from fixed income securities collapsed, with many blue-chip corporates issuing commercial paper in the low single digits. Nigeria’s performance also came as Brent Crude Oil price, Nigeria’s main export, rose by +27.0% m/m to USD 47.59, boosted by hopes of coronavirus vaccines.

West African equities performance was largely positive as Nigeria and the BRVM (francophone region) outperformed while Ghana closed in the red

West African equities performance was largely positive as Nigeria and the BRVM (francophone region) outperformed while Ghana closed in the red. In Nigeria, the MPC held its benchmark interest rate at 11.50%. Nigeria foreign currency reserves declined to USD 35.6bn in November from USD 35.7bn in October 2020 amid the economic fallout of the Covid-19 pandemic. On the earnings front, third quarter reporting season went into full swing with a plethora of financial results. Dangote Cement’s 3Q20 earnings were impressive (T/O: +34.2% y/y; PAT: +135.1% y/y) driven by strong top line growth and gross profit margin expansion of 520bps to 59.5% from 54.3%. In the financial sector, we digested relatively flat 3Q20 results from Guaranty Trust Bank’s (G/E: +2.4% y/y; PAT: +0.6% y/y) driven by a decline in interest income (-6.3%y/y), an impressive -33.4%y/y decline in interest expense which led to net income increasing by +9.8% y/y. Cost improvements meant that earnings were flat despite a +501.6% y/y increase in loan loss provisions. Zenith Bank released disappointing 3Q20 results (G/E: -2.1% y/y; PAT: -10.2% y/y) driven by a +25.6% y/y increase in operating expenses on the back of growth in IT costs (+362.8% y/y) and fuel & maintenance costs (+155.8% y/y)and despite a -73.8% y/y decline in impairment charges. United Bank for Africa reported impressive 3Q20 earnings (G/E: +14.0% y/y; PAT: +31.4% y/y) as net interest income grew by +36.7% y/y driven by higher loans and advances (+23.4% y/y) and relatively flat provisions (+3.6% y/y). Similarly, Access Bank announced good 3Q20 results (G/E: +3.6% y/y; PAT: +55.3% y/y) from net interest income growth (+27.2 y/y) and non- funded income (+23.7% y/y). FBNH posted flat 3Q20 numbers (G/E: -3.7% y/y; PAT: +1.3% y/y) as a result of a decline in net interest income (-0.6% y/y), whilst non funded income grow by +55.9% y/y.. Shifting to the consumer sector, we digested disappointing 3Q20 results from Okomu Oil Palm (T/O: -27.0% y/y; PAT: -37.3% y/y) as gross profit margin decreased by 13.6% to 78.9%. Dangote Sugar came out with a solid set of 3Q20 numbers (T/O: +54.6% y/y; PAT: +303.9% y/y) owing to a strong top-line which was supported by a tax credit of NGN 3.0bn vs. a tax charge of NGN 2.2bn in 3Q19. In Ghana, the central bank kept the interest rate at an eight-year low of 14.5% as inflation edged closer to target and inflation dropped for a third straight month to 10.1% in October 2020 from 10.4% in September 2020.

In East Africa, equity markets were mixed as Kenya, Rwanda and Tanzania closed the month lower whilst Mauritius and Uganda posted positive returns

In East Africa, equity markets were mixed as Kenya, Rwanda and Tanzania closed the month lower whilst Mauritius and Uganda posted positive returns. Kenya’s Central Bank maintained the key interest rate at 7% for the fifth meeting in a row, adding that an accommodative policy stance was having the intended effect on efforts to stimulate the economy. On the earnings front, telecom operator Safaricom released soft 1H21 results (T/O: -4.1% y/y; PAT: -6.0% y/y) reflective of the tough 1Q21 from April to June with revenue falling by -4.8% y/y attributable to the poor performance from M-Pesa (-14.5%y/y) due to a fee moratorium on transfers of KES1,000 or less, SMS (-6.9% y/y) and voice (-6.5% y/y) . KCB Group published mixed 3Q20 results (G/E: +13.9% y/y; PAT: -48.5% y/y) as strong top line growth was offset by a +219.5% y/y growth in impairment charges. The Group also announced plans to acquire 62% of Banque Populaire Du Rwanda PLC (BPR) and 100% of Banc ABC Tanzania Ltd (ABC). KCB will pay a cash consideration for the BPR shares based on the net asset value of BPR at completion of the transaction and using a price to book multiple of 1.09x. KCB also intends to make an offer to the remaining minorities of BPR at the same price. KCB. Equity Group reported satisfactory 3Q20 results (G/E: +40.7% y/y; PAT: +9.1% y/y) driven by strong top line growth in both net interest income (+31.0% y/y), as well as non-funded income (+73.5% y/y). Cooperative Bank of Kenya reported mixed 3Q20 results (G/E: +4.8% y/y; PAT: -24.5% y/y) as top-line growth was offset by a +129.1% y/y increase in loan loss provisions. NCBA Group announced mixed 3Q20 results (G/E: +80.1% y/y; PAT: -105.0% y/y) as strong top-line growth from increased loans and advances (+93.7% y/y) was offset by higher impairment charges (+697.5%). ABSA Bank Kenya released mixed 3Q20 results (G/E: +2.4% y/y; PAT: -20.7% y/y) driven by weak top-line growth and an increase in loan provisions of +53.9% y/y. In Mauritius, MCB Group exhibited poor 1Q20 results (G/E: -11.7% y/y; PAT: -24.5% y/y) driven by lower interest income (-17.4% y/y) and higher impairments (+222.6% y/y). In other corporate news, SBM Bank Mauritius CEO Mr Rao resigned effective 1 January 2021, current Chief Operating Officer Jorge Stock was appointed as new CEO effective 16 November 2020. In Rwanda, BK Group published commendable 3Q20 results (G/E: +32.0% y/y; PAT: +10.4% y/y) fuelled by both interest income (+34.1% y/y) and non funded income (+21.4% y/y).

North African equities outperformed amid broad-based gains across the region led by Tunisia and Morocco which both gained +5.8% in USD terms

North African equities outperformed amid broad-based gains across the region led by Tunisia and Morocco which both gained +5.8% in USD terms. In Egypt, the MPC decided to cut the Central Bank of Egypt’s (CBE) overnight deposit, lending rate and the rate of the main operation by 50bps to 8.25%, 9.25%, and 8.75%, respectively. On the earnings front, we digested uninspiring 3Q20 results from El Sewedy Electric (T/O: -12.6% y/y; PAT: -1.4% y/y) driven mainly by a -21.0% y/y decline in turnkey revenue.. Cleopatra Hospitals Group posted admirable 3Q20 results (G/E: +16.0% y/y; PAT: +18.8% y/y) which we attribute to a 213bp expansion in EBIT margin to 20.3% on the back of a -6.5% y/y drop in administration expenses. Education play, CIRA released stellar FY20 results (T/O: +54.4% y/y; PAT: 23.9% y/y) driven by solid growth in total enrolment of the group’s students (BUC and K–12) to 35,853 students, an effective +29.0% y/y rise in the blended tuition as the K–12 segment revenue grew by +55.0% y/y and the higher education segment revenue increased +46.0% y/y. Integrated Diagnostics Holdings published impressive 3Q20 results (T/O: +22.6% y/y; PAT: +37.5% y/y) with EBITDA margin expanding 6 percentage points to 47.6% as Egypt continued to post the highest EBITDA margin at 50%, and the Nigerian business recorded positive EBITDA for the first time since its acquisition. Edita Food Industries posted mixed 3Q20 results (T/O: -2.7% y/y; PAT: +2.9% y/y) where weak top-line growth was boosted by a net finance income of EGP 1.2bn vs. costs of EGP 2.7bn in 3Q19. MM Group for Industry and International Trade’s 3Q20 results were disappointing (T/O: -7.6% y/y; PAT: -15.2% y/y) fuelled by weak top-line, a +9.9% y/y increase in SG&A expenses, as well as an -84.0% y/y decline in investment income from associates (Ebtikar its payment platform business). Telecom Egypt reported strong 3Q20 results (T/O: +17.2% y/y; PAT: +35.2% y/y) supported by soaring data revenue from the home segment (+38.0% y/y) driven by an increase in customer base, alongside a -33.0% y/y decrease in finance costs. Tenth Of Ramadan for Pharmaceutical Industries released impressive 3Q20 results (T/O: +0.1% y/y; PAT: +133.8% y/y) supported by operational efficiencies and lower net financing expense (-68.7% y/y). We digested solid 3Q20 results from Madinet Nasr for Housing and Development (T/O: +27.8% y/y; PAT: +22.8% y/y) with gross profit margin rising to 71% from 60% in 3Q19. In Tunisia, the MPC kept its key interest rate unchanged at 6.25%, it had cut the rate by 50bps in October, and 100 basis points in March 2020 in response to the Covid-19 outbreak and an attempt to stimulate the economy. In Morocco, the unemployment rate rose to 12.7% in 3Q20 against 9.4% a year earlier, urban employment rate hit 16.5% from 12.7% in 3Q19.

Southern African markets exhibited mixed performance as strength in Zimbabwe, Namibia and Botswana were offset by weakness in Zambia and Malawi

Southern African markets exhibited mixed performance as strength in Zimbabwe, Namibia and Botswana were offset by weakness in Zambia and Malawi. In Zimbabwe, the annual inflation rate declined for third consecutive month to 471% in October from 659% in September. On the earnings front, we digested 1H21 results from Delta Corporation as lager volumes grew by +3.0% y/y, sparkling beverages volume jumped by +22.0% y/y and sorghum beer volumes at Natbrew grew by +8.0% y/y. In Malawi, the central bank cut its benchmark interest rate for the first time this year by 150bp to 12.0% to boost economic activity. In Zambia, inflation quickened for the third straight month in November to a four-year high to 17.4% from 16.0% in October 2020, mainly due to non-food inflation increasing to 18.2% from 17.7% and food inflation rose to 16.8% from 14.6%.