Monthly Highlights: March 2020

•  West African equities were mixed as weakness in Nigeria and the Francophone region offset positive returns in Ghana. In Nigeria, the Central Bank of Nigeria’s Monetary Policy Committee unexpectedly cut its key rate by 50bp to 13.5%
•  East Africa also posted mixed returns as strong performances in Rwanda and Uganda were dragged down by weakness in Kenya, Tanzania and Mauritius
•  North African equities posted mixed results with only Egypt posting positive returns, as the county’s upward momentum continued for the 3rd consecutive month
•  Southern African equities were negative on the back of broad-based losses across the region
 

West African equities were mixed as weakness in Nigeria and the Francophone region offset positive returns in Ghana. In Nigeria, the Central Bank of Nigeria’s Monetary Policy Committee unexpectedly cut its key rate by 50bp to 13.5%

West African equities were mixed as weakness in Nigeria and the Francophone region offset positive returns in Ghana. In Nigeria, the Central Bank of Nigeria’s Monetary Policy Committee unexpectedly cut its key rate by 50bp to 13.5%. The rate cut comes as the central bank of Africa’s most populous nation and top oil producer wants to explore steps to help boost growth in an economy that is still recovering from a 2016 contraction. On the earnings front, Guaranty Trust Bank reported positive FY18 results (ROE: 30.9%, GE: +3.7% y/y; PAT: +10% y/y) as strong growth in non-interest income (up +39% y/y) and lower impairment charges (-59.7% y/y) fuelled the bank’s full-year performance. We similarly digested strong FY18 results from Access Bank (GE: +14.9% y/y; PAT: +58.1% y/y) mainly driven by lower provisions (-57% y/y). Stanbic IBTC also reported strong FY18 results (GE: +4.7% y/y; PAT: +53.9% y/y) on back of +15.1% y/y growth in non-interest income and credit impairment write-backs (NGN2.94bn in FY18 or 3.9% of profits). Shifting to the energy sector, Seplat posted excellent cash generation in its FY18 results (T/O: +65% y/y; PBT: 498%; PAT: -44.5%y/y; Net Cash: USD135m) as strong top line growth was supported by the 35.0% y/y increase in working interest production to 49,867bpd and a higher realised oil price (+39.0% y/y to USD70.10 per barrel) in FY18. Profit before tax increased by +498% to USD80.6m, while net profit was lower after the company reported a tax charge of USD117.05m in FY18 compared to a tax credit of USD221.48mn in FY17, reflecting an effective tax rate of 44.3% and the impact of the expiration of its three-year tax concession. In the consumer sector, we digested weak 9M18 results from PZ (T/O: -12.9% y/y; PAT: -36.6% y/y) as volumes across all product segments (Home & Personal Care and Electricals) continued to suffer as disposable income remain under pressure and customer spend was squeezed. Nestle Nigeria reported admirable FY18 numbers (T/O: +9.1% y/y; PAT: +27.5% y/y) mainly driven by an 82.7% y/y decline in interest expense to NGN2.61bn as total borrowings declined by -65.5% y/y after the repayment of NGN12.54bn and NGN1.14bn intercompany and bank loans respectively. In Ghana, Ghana Commercial Bank reported strong FY18 results (GE: +13.2% y/y; PAT: +51.9% y/y) on back of a +41.8% y/y rise in non-interest income and slower operating expenses growth (+2.4% y/y).

East Africa also posted mixed returns as strong performances in Rwanda and Uganda were dragged down by weakness in Kenya, Tanzania and Mauritius

East Africa also posted mixed returns as strong performances in Rwanda and Uganda were dragged down by weakness in Kenya, Tanzania and Mauritius. In Kenya, Equity Bank posted weaker than expected FY18 results (GE: +3.3% y/y; PAT: +4.8% y/y) as strength in net-interest income (+10.4% y/y) was offset by a -6.3% decline in non-funded income. KCB reported commendable FY18 earnings given the tough environment (GE: +3.0% y/y; PAT: 21.8% y/y) driven by improving operational efficiency as the bank’s cost-to-income ratio declined from 50.9% in FY17 to 48.7% in FY18 after operating expenses declined by -3.7% and lower provisions (-50.2% y/y). Co-operative Bank reported satisfactory FY18 results (GE: +5.0% y/y; PAT: +11.6% y/y) as net income margins widened after net interest income rose +9.5% y/y coupled by -48.9% y/y decline in impairments. In Tanzania, Twiga Cement reported impressive FY18 results (T/O: +30.1% y/y; PAT: +59.7% y/y) driven by a +9% y/y volume growth and a gross profit margin expansion of 474bp.

North African equities posted mixed results with only Egypt posting positive returns, as the county’s upward momentum continued for the 3rd consecutive month

North African equities posted mixed results with only Egypt posting positive returns, as the county’s upward momentum continued for the 3rd consecutive month. On the earnings front, we digested positive results from Integrated Diagnostics Holdings (T/O: +26.8% y/y; PAT: +29.4% y/y) driven by improved pricing and test mix as well as higher patient (+11% y/y) and test volumes (+12% y/y). Raya Contact Centre posted positive FY18 results (T/O+19.7% y/y; PAT: +13.9% y/y) buoyed by the new 973 work stations added, after the company signed 20 new clients in 2018; out of which 7 were offshore clients. Cleopatra Hospitals reported impressive FY18 numbers (T/O+29.2% y/y; PAT: +178.3% y/y) mainly driven by higher average pricing across all segments (blended revenue per patient +20% y/y) and increased patient volumes (cases +6% y/y). Cleopatra hospital was the largest contributor to revenue (47%), followed by Cairo Specialized Hospital (CSH; 20%), Nile Badrawi (18%), and Al Shorouk (17%). In Morocco, we digested venerable FY18 numbers from Label Vie (T/O: +9.2% y/y; PAT: +17.7% y/y) as growth in sales came from the full year contribution of stores opened in 2017. In 2018, the group managed to open 16 supermarkets, with most happening towards the end of the year, thus did not contribute much to sales in 2018. SBM released weak FY18 results (T/O: +6.6% y/y; PAT: -20.4% y/y) as higher sales were offset by lower margins due to a negative product mix.

Southern African equities were negative on the back of broad-based losses across the region

Southern African equities were negative on the back of broad-based losses across the region. In Zimbabwe, we digested solid 1H19 results from National Foods (T/O: +41.2% y/y; PAT: +78.6% y/y) on the back of a +18.3% increase in total volumes to 310,000mt and a +19.3% rise in average selling prices compared to 1H18. Innscor reported admirable 1H19 numbers (T/O: +60.7% y/y; PAT: +170.3% y/y) driven by double digit volume growth across all categories, well-priced raw material pipeline and improved sales mix. In Botswana, Letshego released mixed FY18 results (G/E: +15.0% y/y; PAT: -25.1% y/y) as strong top-line growth was offset by higher impairments (+52.4% y/y) as well as higher operating costs (+20.4% y/y)