Monthly Highlights: June 2018

•  West African equities posted mixed performance as BRVM outperformed while Nigeria and Ghana continued their downward trajectory. In Nigeria, annual inflation slowed to 11.61% in May, its lowest level in more than two years and its 16th straight monthly drop
•  All the East African equity markets posted negative returns in June. In Kenya, the FY18/19 budget statement was delivered showing that the government is planning to sustain fiscal consolidation by lowering the budget deficit further to 5.7% of GDP, vs. 7.2% in FY17/18E
•  North African equity markets were mixed with negative returns in Egypt and Morocco while Tunisia outperformed after the World Bank has approved a new USD500m loan to support economic reforms in the country
•  In Southern Africa, Botswana, Zimbabwe and Zambia posted negative returns vs. positive returns in Malawi
 

West African equities posted mixed performance as BRVM outperformed while Nigeria and Ghana continued their downward trajectory. In Nigeria, annual inflation slowed to 11.61% in May, its lowest level in more than two years and its 16th straight monthly drop

West African equities posted mixed performance as BRVM outperformed while Nigeria and Ghana continued their downward trajectory. In Nigeria, annual inflation slowed to 11.61% in May, its lowest level in more than two years and its 16th straight monthly drop. On the earnings front, Niger Insurance posted disappointing 1Q18 results (T/O: -20.8% y/y; PAT: -39.5% y/y) as gross premiums written were -43.9% y/y lower. Dangote Cement has announced the issuance of NGN50bn (USD139m) series 1 and 2 notes under its NGN150bn Commercial Paper Programme. The series 1 and 2 notes will be listed on Nigeria's FMDQ OTC Securities Exchange on 19 July 2018. Funds raised in the Commercial Paper (CP) Programme will be used for capital expenditure, working capital and general corporate purposes. In Ghana, annual inflation for May inched up 0.2 percentage points to 9.8%, with food inflation increasing to 7.6%, from 7.4%, whilst non-food inflation remains the main driver at 10.9% vs. 10.6% in April.

All the East African equity markets posted negative returns in June. In Kenya, the FY18/19 budget statement was delivered showing that the government is planning to sustain fiscal consolidation by lowering the budget deficit further to 5.7% of GDP, vs. 7.2% in FY17/18E

All the East African equity markets posted negative returns in June. In Kenya, the FY18/19 budget statement was delivered showing that the government is planning to sustain fiscal consolidation by lowering the budget deficit further to 5.7% of GDP, vs. 7.2% in FY17/18E. The government plans to achieve its deficit target mainly by improving revenue via various tax and administrative measures. Amongst the measures, treasury raised mobile money excise tax from 10% to 12%, a move that is likely to hurt the mobile money sector. On the earnings front, Centum announced weak FY18 results (T/O: +8.2% y/y; PAT: -66.4% y/y) driven by higher operating costs (+81% y/y) and finance costs (+68% y/y). The company deferred the recognition of realised gains on the disposal of GenAfrica to the financial year ending 31 March 2019. Management anticipates that profit would have been 42.0% higher than prior year if the gains had been booked in FY18. In Tanzania, Dare es Salaam Stock Exchange Plc reported strong 1Q18 results (T/O: +23.6% y/y; PAT: +16.3% y/y) on the back of an impressive +41.3% and a +26% y/y growth in listing fees and transaction fees respectively.

North African equity markets were mixed with negative returns in Egypt and Morocco while Tunisia outperformed after the World Bank has approved a new USD500m loan to support economic reforms in the country

North African equity markets were mixed with negative returns in Egypt and Morocco while Tunisia outperformed after the World Bank has approved a new USD500m loan to support economic reforms in the country. The loan is aimed at promoting private investment and creating opportunities for small businesses, while protecting vulnerable households and increasing energy security. In Egypt, the Central Bank kept its key interest rates unchanged as expected, expressing concern that inflation will rise after the government cut some electricity and fuel subsidies resulting in prices increasing by 26% and 50% respectively. On the earnings front, we digested weak 1Q18 results for Orascom Telecom (T/O: +30.9% y/y; PAT: n/a) as the company’s consolidated EBITDA turned to a loss of EGP24mn, primarily driven by a loss of EGP78mn from Investment Property. Elsewedy Electric released in-line 1Q18 results (T/O: +2.0% y/y; PAT: -7.0% y/y) as profitability levels declined driven by normalising gross profit margins which came in at 17.3% from 19.6% in 4Q17 and 25.8% in 1Q17. Ezz Steel reported improved 1Q18 results as it continues to cut its losses (T/O: +55% y/y; PAT: n/a) aided by strong top-line growth and improved EBITDA margins of 14.2% (vs. 7.6% in 1Q17, and 13.8% in 4Q17).

In Southern Africa, Botswana, Zimbabwe and Zambia posted negative returns vs. positive returns in Malawi

In Southern Africa, Botswana, Zimbabwe and Zambia posted negative returns vs. positive returns in Malawi. In Zimbabwe, Seedco reported subdued FY18 results (T/O: -4.5% y/y; PAT: -24.5% y/y) driven by product shortages caused by seed production challenges as a result of high diseases pressure, poor pollination due to high temperatures and erratic rainfall. TSL posted a good set of 1H18 numbers (T/O: +4.1% y/y; PAT: +50% y/y) with operating profits growing by +23.7% y/y after margins improved to 14.7% from 11.7% in the prior year as the group managed to contain costs. Bindura Nickel posted strong FY18 results (T/O: +18.7% y/y; PAT: +861.9% y/y) driven by favourable nickel prices (up +11.2% to USD 7,249/tonne), improved efficiencies from effective cost management and fairly stable finance costs. In Zambia, Zambeef posted impressive 1H18 numbers (T/O: +4.6% y/y; PAT: +121.3% y/y) driven by increasing volumes and improving margins in the core divisions namely; retail & cold chain food products, and stock feed.