Monthly Highlights: October 2021

•  West African equities were mixed with Ghana closing lower whilst Nigeria and the Francophone region posted positive returns
•  East African equity performance was broadly weaker as Kenya, Tanzania and Uganda led markets lower
•  North African equities were mixed amid weakness in Tunisia versus strength in Egypt and Morocco
•  Southern African equities were also mixed as Zambia and Malawi underperformed, offsetting positive performance in Zimbabwe and Botswana
 

In October, African markets were mixed, with nine markets posting positive performance and eight in the red in US dollar terms led by Zimbabwe’s Industrials Index which gained +19.4%, Egypt +8.7%, BRVM +5.7%, Mauritius +4.8% and Nigeria +4.3%, whilst the biggest laggards were Kenya -4.2%, Tunisia -3.3%, Zambia -3.3%, Tanzania -2.0% and Uganda -1.4%. Egypt’s positive return came as the International Monetary Fund (IMF) raised its forecast for the growth of economy for 2021, while lowering its estimates for the growth of the global economy. In the latest World Economic Outlook report, the IMF expects Egyptian GDP growth in 2021 at 3.3%, up from their previous forecast of 2.5% in April.

West African equities were mixed with Ghana closing lower whilst Nigeria and the Francophone region posted positive returns

West African equities were mixed with Ghana closing lower whilst Nigeria and the Francophone region posted positive returns. In Nigeria, Guaranty Trust Holding Company released improved 3Q21 results (G/E +2.1% y/y; PAT 4.1% y/y), as non-funded income growth of +38.1% y/y was offset by lower net interest income (-16.1% y/y) and higher operating costs (+18.3% y/y) as a result of the conversion to a holding company structure. Nestlé Nigeria Plc reported strong 3Q21 results (T/O +25.7% y/y; PAT +17.2% y/y) driven by revenue in the food segment which grew by +42.3%% y/y and accounting for 59.0% of total revenue. Flour Mills reported mixed 1H22 results (T/O +47.2% y/y; PAT +6.0% y/y) with strong topline growth offset by increased costs, in particular raw materials, which resulted in slower growth at the bottom line.  Lafarge Africa Plc reported impressive 1H21 results (T/O +25.0% y/y; PAT +148% y/y) as strong bottom-line performance was driven by a tax credit of NGN 4.9Bbn and a -4.5% decline in finance costs. Unilever Nigeria Plc released impressive 3Q21 numbers (T/O +12.5% y/y; PAT NGN 368m) as the company managed to return to profitability from a loss position in 3Q20, lifted by improved cost efficiencies as the gross profit margin expanded by 917bps to 30.6% from 21.4% in 3Q20 and higher finance income (+284% y/y). Stanbic IBTC Holdings released disappointing 3Q21 results (G/E -20.0% y/y; PAT -39.6% y/y) due to lower net interest income (-4.0% y/y) and non-funded income which declined -29.7% y/y. Seplat Petroleum released its mixed 3Q21 results (T/O +12.1% y/y; Loss NGN 222m) as revenue growth was driven by an increase in gas production (+13.1% y/y) while profitability was weighed down by higher income tax (+5827% y/y). UBA Group reported a strong set of 3Q21 results (G/E +7.8% y/y; PAT 34.6% y/y) driven by strong net interest income growth (+21.7% y/y) and net recovery from previously impaired loans of NGN 732m from an impairment charge of NGN 3.7bn in 3Q20. Guinness Nigeria reported strong 1Q21 results (T/O +58.1% y/y; PAT NGN 4bn) buoyed by resilient consumer demand and improved coverage of its trade outlets, as well as headline price increases in key brands coupled by a -38.1% drop in net finance costs. Airtel Africa reported impressive 1H22 numbers (T/O +25.2% y/y; PAT +131.0% y/y) as strong topline growth was supported by growth across all key services; voice (+19.7% y/y), data (+36.95 y/y) and mobile money (+42.0% y/y). Whilst in Ghana, MTN reported impressive 9M21 results (T/O: +24.9% y/y; PAT: +34.0% y/y) supported by growth in data revenue of +51.9% y/y attributable to 4.6% y/y subscriber growth and strong mobile financial service revenue +45.3% y/y. In the BRVM we digested strong 3Q21 results from Sonatel (T/O: +10.0% y/y; PAT: +35.2% y/y) as cost efficiencies drove EBITDA margin higher by 120bps to 43.7% in 3Q21.

East African equity performance was broadly weaker as Kenya, Tanzania and Uganda led markets lower

East African equity performance was broadly weaker as Kenya, Tanzania and Uganda led markets lower. In Kenya, Nairobi Business Ventures (NBV) concluded the buyout of 4 new businesses in a deal that was valued at KES 3bn. The four companies are Delta Automobile, Air Direct Connect Ltd, Aviation Management Solution Limited and Delta Cement. Two Rivers Power Company (TRPC), which is wholly owned by Two Rivers Development Limited, which is in turn 58% owned by Centum Investment Company received KES 775m (USD 7m) convertible loan from GridX Duara Holdings, a commercial and industrial solar financier to expand renewable energy infrastructure projects. Kenya’s energy regulator, EPRA, reinstated fuel subsidy following intervention from State House, cutting pump prices for the first time since June. The Energy and Petroleum Regulatory Authority (EPRA) cut petrol and diesel prices by KES 5 per litre to KES 129.72 and KES 110.60 respectively, while kerosene dropped KES 7.28 to KES 103.54. East African Breweries Ltd has been granted approval by Capital Markets Authority to offer Medium Term Notes worth KES 11bn under its Domestic Term Note Program. The proceeds of the issue will be used to repay borrowings, provide working capital for the Group and to refinance certain short-term borrowings. The Medium Term-Notes will have a tenor of 5 years with an interest rate of 12.25% payable semi-annually. The offer opened on 6 October 2021 and closed on 21 October 2021. In Rwanda, MTN Rwanda recorded growth in its 3Q21 results (T/O +23.5% y/y; PAT +8.7% y/y) as top-line was boosted by growth in mobile subscribers (+9.1% y/y). Profitability growth was slower driven by higher operating costs (+25.9% y/y) as well as higher depreciation and amortization charges (+37.2% y/y).

North African equities were mixed amid weakness in Tunisia versus strength in Egypt and Morocco

North African equities were mixed amid weakness in Tunisia versus strength in Egypt and Morocco. In Egypt, state-owned fintech company e-finance for Digital and Financial Investments completed one of the largest initial public offerings (IPO) in the country, recording the highest oversubscription rate of (61.36x in the retail tranche and 7x in the institutional placement) despite increasing the issue size. The company gained 65.7% in the first three days of trading. Telecom Egypt announced it had obtained a USD500m medium-term syndicated loan to support capital expenditure and refinance existing short-term facilities. Edita Food Industries has increased the selling prices of its bakery products. Molto, with products previously priced at EGP2.0/pack now to be sold at EGP3.0 (+50%), and products previously priced at EGP3.0/pack now at EGP4.0/pack (+33%). Edita’s bakery products priced at EGP5.0/pack are not subject to the increase. Cleopatra Hospitals Group executed an agreement on 5 October that will transform a brownfield project located in East Cairo into a 400-bed medical facility. The deal is subject to Ministry of Health (MOH) approval in addition to other conditions precedent. In Tunisia, Smart Group has announced its intention to list on the Tunisian Stock Exchange, with IPO expected to be completed by the end of November. The company is a retailer and a wholesaler for computers, smart phones and printers.

Southern African equities were also mixed as Zambia and Malawi underperformed, offsetting positive performance in Zimbabwe and Botswana

Southern African equities were also mixed as Zambia and Malawi underperformed, offsetting positive performance in Zimbabwe and Botswana. In Zimbabwe, National Foods issued a brief trading update for 1Q22 reporting that volumes expanded by +24% y/y on firm consumer demand while profitability was within expectations. Volume growth was driven by the stock feeds division which grew volumes by +29% y/y as demand for poultry feed, notably from small scale producers, continued to remain firm. Dairibord Holdings also issued a trading update for 3Q22 that showed sales volume growth of +78.0% y/y anchored by its Beverages category which increased by +165% y/y and the Foods category that grew by +49% y/y. Lafarge Cement Zimbabwe advised that on 11 October 2021, a critical on-site incident occurred involving the collapse of the roof over one of the company’s cement mills. There were no fatalities or injuries, the incident may have an impact on the company’s business performance for the remaining quarter of 2021. On the earnings front, Cassava Smartech reported mixed FY21 results (T/O: +369% y/y; PAT: n/a y/y) as huge top-line growth was offset by a foreign exchange loss of ZWL2.2bn, dragging the company into a loss of ZWL227m. In Zambia, Zambeef issued a trading update, announcing that for the year ended 30 September 2021, revenue (reported in USD) is expected to be between 10% – 15% ahead of current market expectations, with EBITDA and EBIT being ahead by 10% – 12% while adjusted PBT is expected to be 65 – 75% ahead of current market expectations.