Monthly Highlights: April 2020

•  West African equity markets exhibited mixed performances as Nigeria and the Francophone region closed on a positive note whilst Ghana was negative
•  East African markets recorded mixed performance as strength in Uganda, Tanzania and Rwanda was offset by weakness in Mauritius and Kenya
•  North Africa posted mixed returns as Morocco and Tunisia underperformed while Egypt reversed previous month’s negative returns to recoup some of March’s losses
• Southern African equity performance was mixed as weakness in Namibia, Zambia, Botswana and Malawi was offset by strength in Zimbabwe using the OMIR
 


In April, the African markets were mixed with seven posting positive performances in dollar terms led by Egypt (+9.98%), Nigeria (+7.75%) and Zimbabwe (+8.25%) using the OMIR, whilst Namibia (-5.58%), Tunisia (-4.59%) and Zambia (-4.54%) posted weak returns. Most markets recovered from the mid- March lows, amid growing optimism as more economies moved toward easing the COVID-10 lockdowns restrictions. Egypt posted the strongest recovery led by the country largest private sector bank, Commercial International Bank, which rallied following the announcement by the Central Bank of a EGP 23bn stimulus package. In other economic news, the IMF revised GDP growth forecasts globally, with sub-Saharan Africa GDP growth now expected at -1.6% in 2020 from +3.5% previously forecasted, the countries with the largest revisions downward are Botswana (4.3% growth to -5.4% contraction), Zimbabwe (0.8% growth to -7.4% contraction) and Morocco (3.7 growth to -3.7% contraction) The number of confirmed COVID-19 cases in Africa was 37,757 as at 30 April 2020. On the commodity front, oil came under significant pressure, with the unprecedented event of the WTI crude future trading as low as -$37.63, due to storage concerns, whilst the crude price fell to its lowest since April 1986 in New York, leading to similar weakness in Brent crude, whilst Nigeria and Angola joined OPEC in efforts to reduce production in a bid to stabilise oil markets.

West African equity performance was broadly weaker as Nigeria and the BRVM led the markets lower, while Ghana outperformed in dollar terms as the GHS appreciated by +1.96%

West African equity markets exhibited mixed performances as Nigeria and the Francophone region closed on a positive note whilst Ghana was negative. Nigerian inflation rate surged to 12.26% in March 2020 as border closures continued to push prices higher. On the earnings front, we digested weak growth from Guaranty Trust Bank 1Q20 results which were largely in-line with our expectations (GE: +2.3% y/y; PAT: +1.6% y/y), as relatively strong net interest income growth (+10.4% y/y) and robust FX gains on earnings were dampened by higher operating expenses (+10.9% y/y) and higher loan impairment charges (+87.8% y/y). Zenith Bank also published flat 1Q20 results (GE: +5.5% y/y; PAT: +0.6% y/y), as strong non-funded income (+42.8%) was offset by high impairment charges (+88.8% y/y). United Bank of Africa posted satisfactory 1Q20 numbers (GE: +11.75% y/y; PAT: +5.01% y/y) as strong net interest income (+12.6% y/y) was offset by an increase in impairment charges (+54.1% y/y). We also digested impressive 1Q20 results from FBN Holdings (GE: +14.5% y/y; PAT: +62.7% y/y) largely driven by a +88.9% y/y growth in non-funded income coupled by a -29.9% y/y drop in impairment charges. Stanbic IBTC Holdings exhibited satisfactory 1Q20 earnings (GE: +4.6% y/y; PAT: +7.6% y/y) driven by recovery on impairment charges vs. an impairment loss in the prior year. We also digested satisfactory 1Q20 results from MTN Nigeria Communications (T/O: +16.7% y/y; PAT: +5.6% y/y) driven by growth across key revenue lines, voice (+7.2% y/y) and data (+59.2% y/y), as well as increased traffic on the network as evidenced by the +13.7% y/y growth in subscribers to 68.7m. In the consumer sector, Nigerian Breweries reported 1Q20 results that showed a decline in profitability (T/O: -1.4% y/y; PAT: -27.8% y/y) reflecting pressure within the industry as brewers struggled to grow revenues amid weaker disposable income and a partial impact following the restriction of alcohol sales in some states from late March 2020. Guinness Nigeria released poor 3Q20 results (T/O: -17.6% y/y; PAT: -97.2% y/y), on the back of volume decline driven by the company’s price increases and the initial impact of Covid-19 pandemic restrictions. Unilever Nigeria also exhibited weak 1Q20 results (T/O: -30.7% y/y; PAT: -26.7% y/y) as revenue decline was driven by food revenue (-19.9% y/y) and home & personal care sales (-40.6% y/y) coupled by a +99.3% y/y increase in finance costs. Cadbury Nigeria announced mixed 1Q20 (T/O: -7.9% y/y; PAT: 26.1% y/y) as the decline in revenue was offset by lower cost of sales (-9.3%y/y) and operating expenses (-13.1% y/y) as well as strong growth in other income (+69.0% y/y). Lafarge Africa posted good FY19 results (T/O: -2.2% y/y; PAT: n/a) as the company returned to profitability reporting a pre-tax profit of NGN115bn compared to pre-tax loss of NGN9.2bn in FY18, despite the decline a revenue of -2.2% y/y to NGN213.bn. In Ghana, we digested good 1Q20 earnings from Ghana Commercial Bank (GE: +41.2% y/y; PAT: +15.8% y/y) as net-interest income grew by +28.08% y/y and impairment charges declined by -38.02% y/y. In other news, Ghana’s inflation rate remained unchanged at 7.8% in March 2020, for third consecutive month and the country’s economy expanded by 6.5% in 2019 vs. 6.3% in the previous year driven by the services sector (+7.6% y/y), industry (+6.4% y/y) and agriculture (+4.6% y/y) sectors.

East African markets recorded mixed performance as strength in Uganda, Tanzania and Rwanda was offset by weakness in Mauritius and Kenya

East African markets recorded mixed performance as strength in Uganda, Tanzania and Rwanda was offset by weakness in Mauritius and Kenya. In Kenyan economic news, the MPC cut interest rate to lowest since 2011 to 7% from 7.25% to boost the economy. Kenya’s the inflation rate climbed in April as food prices jumped amid the COVID-19 pandemic and the desert locust outbreak. On the earnings front, Safaricom published strong FY19 results (T/O: +4.9% y/y; PAT: +19.5% y/y), mainly attributable to a +12.1% y/y growth in mobile data revenue and a +12.6% y/y rise in M-PESA (mobile money) revenue. Efficiencies were the major driver of bottom line growth with operating costs down -11.3% y/y driving operating profit a sturdy +14.1% y/y. WPP Scangroup released mixed FY19 results (T/O: +12.6%% y/y; PAT: -19.7% y/y) as strong top line performance was offset by +383.9% y/y growth in FX losses and -44.3% y/y decline in interest income. In Mauritius, we digested negative FY19 results from SBM Holdings (T/O: +9.1% y/y; PAT: -98.8% y/y) driven by another year of very high NPL provisions, despite write-backs from its Kenyan subsidiary, staff costs were 48% higher and depreciation rose 132%. Profit before tax was -65% lower, coupled with a 46% increase in the tax charge led to the very poor bottom line of MUR15m from MUR1.5bn the previous year. In Tanzania, we digested solid growth from Tanzania Breweries FY19 results (T/O: -4.9% y/y; PAT: +13.79% y/y) despite revenue decrease as a result of the scaling down of the Darbrew operations and strong cost improvements, operating profit increased by +5.0% y/y as a result of increased productivity in the breweries, lower brewing and packaging raw material prices, efficiencies in logistics and lower overhead costs. In Rwanda, BK Group published sturdy FY19 numbers (GE: +16.3% y/y; PAT: 36.3% y/y) driven by interest income (+24.0% y/y) on the back of growth in the loan book (+20.9% y/y). In Uganda, the MPC slashed key interest rate to a record low of 8.0%.

North Africa posted mixed returns as Morocco and Tunisia underperformed while Egypt reversed previous month’s negative returns to recoup some of March’s losses

North Africa posted mixed returns as Morocco and Tunisia underperformed while Egypt reversed previous month’s negative returns to recoup some of March’s losses. In Egypt, Commercial International Bank (CIB) announced that it acquired a 51% stake in Kenya's Mayfair Bank for USD35.35mn, following approval from the Central Bank of Kenya and the National Treasury. Mayfair Bank has a market share of 0.17% with 5 branches in Nairobi as well as a presence in Eldoret and Mombasa. The transaction value of USD35.35mn will see USD35mn injected in the bank, CIB’s initial strategy will be focussing on the facilitation of inter Egypt and East Africa trade. On the earnings front, Obour Land for Food Industries, dairy manufacturer, posted strong 1Q20 results (T/O: +1.2% y/y; PAT: +28.4% y/y) primarily as a result of a 4.6ppt improvement in reported gross margin to 24.6% due to decreased industrial and running costs, in addition to packaging material discounts received after the firm installed 3 new Tetra Pak packaging lines in December 2019. Cairo for Investment and Real Estate Development, the education provider, posted impressive 2Q20 numbers (T/O: +58.3% y/y; PAT: +32.5% y/y) driven by the higher education segment which grow +73.0% y/y mainly on increased student count (+33% y/y to 10.45k) with average tuition fee increasing up +7.0% y/y. Integrated Diagnostics Holdings posted relatively flat FY19 results (T/O: +15.9% y/y; PAT: +1.5% y/y) driven by slower revenue growth (+6.3% y/y) in 4Q19 and higher salaries in Egypt due to increasing employees profit share as well losses from the launch of its new subsidiary “Wayak”, a data-driven healthcare services company that contributed EGP0.6mn to revenue for the year. Juhayna Food Industries reported impressive 1Q20 results (T/O: +2.7% y/y; PAT: +59.8% y/y) driven by lower SG&A expenses (-0.7% y/y) and net financing expense (-39.3% y/y).

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

Southern African equity performance was mixed as weakness in Namibia, Zambia, Botswana and Malawi was offset by strength in Zimbabwe using the OMIR. In Zimbabwe, we digested strong FY19 results from NMBZ Holdings (GE: +295.3% y/y; PAT: 69.1% y/y) fuelled by asset quality improved as the NPL ratio improved to 1.4% from 7.4% in FY18 on better collections and stricter underwriting standards. In corporate news, Econet Wireless Zimbabwe appointed Roy Chimanikire as Deputy CEO, Roy joined Econet in 2009 from Deloitte, where he was a partner. He was subsequently promoted to the position of Finance Director and he played a significant role in the unbundling and listing of Cassava Smartech on the ZSE. In economic news, Zimbabwe announced that it will maintain its fixed and dual exchange rate system over the next five years. In Malawi, the central bank cut the reserve liquidity requirement on domestic currency deposits by 125bps to 3.75% and maintained policy rate at 13.5%.

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