Monthly Highlights: May 2022

•  East African equities ended the month broadly negative with Tanzania the only market closing in the green. In Kenya
•  North African equities were mostly in the red except for Tunisia
•  West African equities were mixed as strong performance in Nigeria was offset by negative returns in Ghana and the Francophone region
•  Southern African equity performance was broadly weaker with Zambia the only exception
 

In the month of May, Frontier Africa markets were mostly in negative territory, with twelve markets posting weak performance and only four in the positive in US dollar terms led by Nigeria +8.0%, Tunisia +3.1%, Tanzania +2.2% and Botswana +0.2%, whilst the biggest laggards were Zimbabwe’s Industrials -18.6%, Malawi -14.3%, Egypt -8.7% and Uganda -7.3%. Zimbabwe closed lower as the government increased the capital gains tax to 40% from 20% on shares held for 270 days or less compounded with a ban on bank lending and inflation surging above 100% while in Malawi the Central bank increased the main policy rate to 14.0% from 12.0% and devalued currency by 25% against the USD.

East African equities ended the month broadly negative with Tanzania the only market closing in the green. In Kenya

East African equities ended the month broadly negative with Tanzania the only market closing in the green. In Kenya, NCBA Group released positive 1Q22 results (G/E +11.1% y/y, PAT +20.3% y/y) with the profitability driven by +10.6% y/y increase in net interest income and +15.5% y/y increase in non funded income. Safaricom Plc released mixed FY22 results (T/O +12.9% y/y, PAT -1.7% y/y) on the back of +12.3% y/y growth in service revenue driven by +30.3% y/y growth in M-Pesa revenue while profitability was dragged lower by a +218.4% y/y increase in net finance costs. Equity Group released impressive 1Q22 results (G/E +21.7% y/y, PAT +35.9% y/y) on +31.1% y/y increase in interest income and +9.7% y/y increase in non-interest income. KCB Group released impressive 1Q22 results (G/E +26.0% y/y, PAT +56.3% y/y) with the profitability driven by +47.2% y/y increase in net interest income and higher fee income (+49.1% y/y) derived from increased lending and acceleration in transaction volumes on the alternative channels. Cooperative Bank of Kenya posted strong 1Q22 results (G/E +16.9% y/y, PAT +68.8% y/y) mainly attributable to a +41.6% y/y increase in non-funded income and a -32.3% decrease in impairments. In Mauritius, MCBG Group released relatively flat 3Q22 results (G/E +7.3% y/y, PAT +1.8% y/y) as net interest income decreased by -2.1% y/y to MUR 3.7bn, dragged by a +31.1% y/y increase in interest expense with cost of funds increasing to +0.7% in 3Q22 from 0.6% in the prior year.

North African equities were mostly in the red except for Tunisia

North African equities were mostly in the red except for Tunisia. In Egypt, Credit Agricole released positive 1Q22 results (G/E +7.0% y/y, PAT +30.3% y/y) as the net interest income grew +9.0% y/y while fees and commissions decreased by -20.5% y/y due to special one off transactions in 1Q21 related to tax refund in addition to lower retail fees. Abu Dhabi Islamic Bank released strong 1Q22 results (G/E +23.4% y/y, PAT +33.9% y/y) supported +22.5% y/y growth in net interest income and +27.7% y/y increase in non-interest income. Export Development Bank of Egypt released strong 1Q22 results (G/E +24.6% y/y, PAT +140.7% y/y) mainly due to +23.5% y/y growth in non funded income. Orascom Development Egypt released positive 1Q22 results (T/O +32.3% y/y, PAT +60.2% y/y) with the bottom line mainly driven by lower income tax expense on the back of the recognition of deferred tax due to devaluation of EGP. Medinet Nasr released mixed results (T/O +70.8% y/y, PAT +5.2% y/y) with the top line driven by a jump in units deliveries during the quarter and further supported by +111.0% y/y growth in gross contracted sales. TMG Holdings released impressive 1Q22 results (T/O +12.0% y/y, PAT +27.4% y/y) as top line growth was driven by +55.2% y/y increase in contracted sales.

West African equities were mixed as strong performance in Nigeria was offset by negative returns in Ghana and the Francophone region

West African equities were mixed as strong performance in Nigeria was offset by negative returns in Ghana and the Francophone region. In Nigeria, Flour Mills reported disappointing FY22 results (T/O +50.8% y/y, PAT -12.4% y/y) with the strong top line growth offset by +58.8% y/y increase in cost of sales and +36.6% y/y increase in finance costs. FBN Holdings released mixed FY21 results (G/E -0.15% y/y, PAT +100.0% y/y) driven by +99.2% y/y increase in non funded income. Nigerian Breweries recorded excellent 1Q22 results (T/O +30.4% y/y, PAT +77.7% y/y) buoyed by -51.5% y/y decrease in finance costs which was attributable to a decline in total loans and borrowings which fell -48.2% y/y. MTN Nigeria released strong 1Q22 results (T/O +22.2% y/y, PAT +31.3% y/y) with the revenue driven by +5.8% y/y growth in voice revenue, +54.0% y/y growth in data revenue, +35.3% y/y increase in digital revenue and +46.5% y/y increase in fintech revenue.

Southern African equity performance was broadly weaker with Zambia the only exception

Southern African equity performance was broadly weaker with Zambia the only exception. In Zimbabwe ZB Financial Holdings Limited issued 1Q22 trading update reporting that total income jumped +111.0% y/y underpinned by +291.0% y/y increase in fair value credits and foreign exchange income . Non interest income increased +79.0% y/y on the back of a 4.0% growth in earnings assets while banking commissions and fees rose by +20.0% y/y as a result of a 30.0% increase in number of accounts and a +8.0% increase in the number of transactions. First Capital Bank Limited released 1Q22 trading update announcing that total income was +37.0% y/y higher in inflation adjusted terms driven by +37.0% y/y growth in non interest income and +36.0% growth in non funded income. Truworths Limited released positive 1H22 results (T/O +106.2% y/y, PAT +70.9% y/y) driven by +102.0% y/y increase in retail merchandise sales and the high inflationary pressure. Simbisa Brands Limited released 3Q22 trading update stating that group revenue grew +19.5% y/y with Zimbabwe operations growing by +41.0% y/y on the back of increased customer counts and a +11.9% y/y growth in USD average spend. Larfage Cement Zimbabwe Limited issued a trading update for 1Q22 reporting that cement volume declined by -55.0% y/y for the quarter, due to start up start-up mode as the cement mills were restarted in February 2022 following the collapse of the cement mill house roof in October 2021 while historic revenue increased by +36.0% y/y during the quarter.