Monthly Highlights: October 2019

•  West African equity performance was broadly weaker as Nigeria and Ghana led markets lower
•  In East Africa, Kenya, Uganda and Tanzania posted positive returns vs. negative returns in Rwanda and Mauritius
•  North African equities were mixed as Egypt and Tunisia reported positive returns whilst Morocco was weaker
•  Southern African equities recorded mixed returns with Malawi and Botswana trading in positive territory while Zambia, Zimbabwe and Namibia were weaker
 

West African equity performance was broadly weaker as Nigeria and Ghana led markets lower

West African equity performance was broadly weaker as Nigeria and Ghana led markets lower. In Nigeria, the central bank raised banks’ loan to deposit ratio to 65% from 60% effective December 2019, aimed at boosting bank lending. On the earnings front third quarter reporting season went into full swing a plethora of financial results, Dangote Cement 3Q19 earnings were mixed(T/O: +4.5% y/y; PAT: -22.2% y/y) with slow top line growth driven by lower volumes (-10.6% q/q) in Nigeria and profitability was also lower as finance and operating expenses rose by +74.0% y/y and 13.7% y/y respectively. The company also announced a share buy-back of up to 15% of its capital and is planning to expand with new plants in Nigeria, Niger and Gabon. Lafarge Africa posted good 3Q19 results (T/O: -37.3% y/y; PAT: n/a) as the company returned to profitability after the completion of the sale of Lafarge South Africa Holdings. In the financial sector, Guaranty Trust Bank released mixed 3Q19 results (GE: -5.9% y/y; PAT: +2.6% y/y) with net interest income growing by +7.3%y/y while non-interest income fell -13.2% y/y driven by a by a decline in net trading income (-97.9% y/y). Zenith Bank 3Q19 results were mixed(GE: +4.8% y/y; PAT: -1.0% y/y) as profitability was affected by a tax expense of NGN2.50bn vs. a tax credit of NGN2.67bn in the prior year. United Bank for Africa published strong 3Q19 results (GE: +14.0% y/y; PAT: +39.0% y/y) as net interest income grew by +23.1% y/y driven by higher loans and advances (+21.3% y/y) and non-interest income improved by +14.1% y/y on the back of an increase in net fee and commission income (+51.9% y/y). Stanbic Bank reported impressive 3Q19 earnings (GE: +7.7% y/y; PAT: +15.8% y/y) driven by a decrease in impairment charges of -66.0% y/y. Ecobank posted weak 3Q19 results (GE: -23.6% y/y; PAT: -32.2% y/y) as a result of lower net interest income-20.3% y/y. In the consumer sector Cadbury Nigeria posted poor 3Q19 numbers (T/O: +0.6% y/y; PAT: n/a) due to cost pressures from the newly agreed cocoa price floor set by leading producers in West Africa. Nestlé Nigeria released mixed 3Q19 results (T/O: +2.4% y/y; PAT: -9.1% y/y) as top line growth was offset by an increase in effective tax rate by of 6 percentage points to 34.3%. Flour Mills of Nigeria posted strong 1H20 results (T/O: +0.4% y/y; PAT: +16.4% y/y) driven by growth in finance income of +509.9%. Nigerian Breweries reported weak 3Q19 returns (T/O: +0.1% y/y; PAT: n/a) reflecting pressure within the industry as brewers struggle to grow revenue amid weak consumption and tough competition. Guinness Nigeria published disappointing 1Q20 (T/O: -4.3% y/y; PAT: n/a) as gross profit margin decreased by 290bp to 29.5%. Similarly International Breweries posted poor 3Q19 (T/O: -5.3% y/y; PAT: n/a) as losses position increased by NGN5.30bn to –NGN9.60bn.MTN Nigeria Communications exhibited sturdy 3Q19 results (T/O: +11.9% y/y; PAT: +18.2% y/y) on the back of +0.2% q/q increase in subscribers to 61.6mn as well as the +29.9% y/y and +7.6% q/q growth in active data subscribers to 22.3mn, with data traffic growth of +68.9%. We digested strong 1H20 results from Airtel Africa (T/O: +9.8% y/y; PAT: +77.4% y/y) driven by +10.4% y/y growth in voice subscriber base to 103.9mn, +17.7% y/y, increase in data subscribers to 31.9mn and +19.9% y/y jump in mobile money subscribers to 15.5mn. Whilst in Ghana 9M19 numbers were weak Ghana Commercial Bank (GE: -0.5% y/y; PAT: -2.6% y/y) driven by an +18.1% increase in impairment charges. MTN Ghana reported impressive 9M19 results (T/O: +22.7% y/y; PAT: +14.8% y/y) supported by growth in voice revenue of +19.0%y/y attributable subscriber growth and strong mobile financial service revenue +45.0% . In the BRVM we digested strong 1H19 results from Socgen (GE: +14.6% y/y; PAT: +18.7% y/y) driven by a decrease in impairment charges of -29.6% y/y.

In East Africa, Kenya, Uganda and Tanzania posted positive returns vs. negative returns in Rwanda and Mauritius

In East Africa, Kenya, Uganda and Tanzania posted positive returns vs. negative returns in Rwanda and Mauritius. In Kenya, WPP Scangroup announced the sale of its shareholding in Katar Millward Brown (100.0%) and 80.0% of its shareholding in Research and Marketing Group Investment, the holding company for Kantar business. This follows the sale of 60.0% of its stake in Kantar to Bain Capital PE. The sale price was agreed at KES5bn vs. market capof KES6bn at the time. . In Tanzania, CRDB Bank Tanzania released impressive 3Q19 results (GE: +111.2% y/y; PAT: +35.6% y/y) driven by an increase in other operating income (+798.6% y/y). In economic news Uganda’s economy expanded +5.4% in 2Q19 as agriculture grew by+4.5% y/y.

North African equities were mixed as Egypt and Tunisia reported positive returns whilst Morocco was weaker

North African equities were mixed as Egypt and Tunisia reported positive returns whilst Morocco was weaker. In Egypt, Juhayna Food Industries published mixed 3Q19 results (T/O: +5.8% y/y; PAT: -6.9% y/y) as yogurt sales grew (+13.9%y/y) but were offset by an increase in SG&A +17.9% y/y due to increasing spending on marketing. . Edita Food Industries released positive 3Q19 results (T/O: +7.0% y/y; PAT: 19.2% y/y) supported by higher prices, as the average price per ton was up by +5.0% y/y vs. an increase of +2.0% y/y in terms of pack. Other corporate news CIRA received presidential approval to begin offering seven new majors at its flagship university Badr University in Cairo (BUC), these faculties are expected to add c500-600 students in Spring 2020 and an additional 2k in Fall 2020 (10.3k+ currently enrolled. In Tunisia the central bank kept its benchmark rate steady at 7.75%, citing success in meeting inflation and deficit targets.

Southern African equities recorded mixed returns with Malawi and Botswana trading in positive territory while Zambia, Zimbabwe and Namibia were weaker

Southern African equities recorded mixed returns with Malawi and Botswana trading in positive territory while Zambia, Zimbabwe and Namibia were weaker. In Zimbabwe, we digested FY19 results from Simbisa Brands (T/O: +90.9% y/y; PAT: +134.4% y/y) driven by regional operations revenue growth of +118.0y/y and benefiting from the exchange rate conversion. CBZ Holdings reported 1H19 numbers (GE: +172.1% y/y; PAT: +300.5% y/y) as non-interest income improved by +317.3% buoyed by contribution from fair value adjustments on investment properties. On the economic front in Namibia’s annual inflation rate slowed to 3.3% in September 2019 from 4.8% in September 2018, representing a slowdown of 1.5 percentage points.