Monthly Highlights: October 2020

•  West African equity markets performance was largely positive as Nigeria and BRVM posted strong performance while Ghana closed in the red
•  North African equities were dragged lower by Egypt and Tunisia which closed down -3.94% and -3.26% respectively, while Morocco closed on a positive note
•  In East Africa, equity markets recorded negative returns amid broad-based weakness across the region
•  Southern African equities were mixed as Zimbabwe, Zambia and Malawi reported negative returns while Namibia and Botswana were stronger
 


African markets were generally negative in October, with eleven posting negative performance in dollar terms led by Zimbabwe (-9.80%), Uganda (-4.68%) and Egypt (-3.94%), whilst the biggest gainers were Nigeria (+12.67%), Morocco (+5.78%) and Namibia (+1.94%). In economic news, the IMF released an updated World Economic Outlook report and revised GDP growth forecasts for Africa painting a gloomy picture with sub-Saharan Africa GDP growth now expected to be -3.4% in 2020 from -1.6% previously forecast in June 2020. African countries that are dependent on tourism and commodity exports, especially the oil exporters, will be the hardest hit. According the IMF, the most impacted African economies will be Mauritius (-14.20%), Zimbabwe (-10.38%), Botswana (-9.63%) and Tunisia (-7.04%), whilst the least affected economies will be Egypt (+3.55%), Côte d’Ivoire (+1.80%), Tanzania (+1.90%) and Kenya (+1.05%). Overall, the outlook for sub-Saharan Africa, will be shaped by the availability of additional financing and the transformative domestic reforms to promote resilience (including revenue mobilization, digitalization, and fostering better transparency and governance), lift medium-term growth and create opportunities for a wave of new job seekers.

West African equity markets performance was largely positive as Nigeria and BRVM posted strong performance while Ghana closed in the red

West African equity markets performance was largely positive as Nigeria and BRVM posted strong performance while Ghana closed in the red. On the earnings front, we digested impressive 3Q20 results from BUA Cement (T/O: 39.7% y/y; PAT: +48.3% y/y) driven by strong top line growth and gross profit margin expansion of 240bps to 47.6% from 45.2%. Lafarge Africa exhibited mixed growth in 3Q20 results (T/O: +31.4% y/y; PAT: % +2.8%y/y) as strong top line growth was dampened higher variable costs (+61.2% y/y) and production costs (+66.4% y/y), both of which offset lower maintenance costs (-26.4% y/y). MTN Nigeria Communications reported mixed 3Q20 results (T/O: +16.6% y/y; PAT: -0.7% y/y) as strong top line growth was offset by NGN devaluation induced cost pressure on direct costs in particular, which led to a lower EBITDA margin of 50.6% in 3Q20 from 53.2% in 3Q19. Airtel Africa also released mixed 1H21 results (T/O: +10.7% y/y; PAT: -36.4%y/y) due to higher finance costs (+29.2% y/y) and a higher effective tax rate of 48.4% compared to 27.8% in 3Q19. In the consumer sector, Nigerian Breweries exhibited impressive 3Q20 results (T/O: +25.6% y/y; PAT: n/a) with EPS of NGN 0.17, a big swing from the EPS loss of NGN 0.13 in 3Q19, driven by impressive top line growth, coupled with disciplined cost control. Guinness Nigeria’s 1Q21 results were mixed (T/O: +11.6% y/y; PAT: n/a) as strong top line growth was offset by elevated costs of sales (+21.4% y/y). Flour Mills Nigeria posted excellent 1H21 results (T/O: +31.2% y/y; PAT: +68.3% y/y) driven by broad-based volume growth across all business segments as its gross profit margin increased to 14.2% from 11.7% in 1H20. Nestlé Nigeria reported disappointing 3Q20 results (T/O: +3.3% y/y; PAT: -4.6% y/y) driven by weaker revenue from the food segment (-14.2% y/y) as well as cost pressures as evidenced by the higher cost of goods sold (+8.5% y/y). Stanbic IBTC Holding posted mixed 3Q20 results (GE: -3.5% y/y; PAT: +8.6% y/y) where a decline in interest income (-11.3% y/y) was more than offset by a decline in interest expense (-25.5% y/y) and improving non funded income (+5.8% y/y), profitability increased fuelled by a decline in the effective tax rate to 14.3% from 21.1% in 3Q19. In Ghana, MTN Ghana withdraw its supreme court case against the National Communications Authority challenging its designation as a significant market player, the company is pursuing dialogue with the regulator to reach an amicable resolution. On the economic front, Ghana’s inflation rate slowed for second straight month in September to 10.4% from 10.5% in August as food-price growth slowed further. In the Francophone region, we digested uninspiring 3Q20 results from Sonatel (T/O: +3.2% y/y; PAT: -2.0% y/y) as net profit margin declined to 15.6% vs. 16.5% in 3Q19 mainly due to a significant increase in amortization expense and financial charges. Société Générale Côte d’Ivoire posted relatively flat 3Q20 growth (GE: +13.6% y/y; PAT: +1.4% y/y) as strong top line growth was dampened by a +108.6% increase in loan loss provisions.

North African equities were dragged lower by Egypt and Tunisia which closed down -3.94% and -3.26% respectively, while Morocco closed on a positive note

North African equities were dragged lower by Egypt and Tunisia which closed down -3.94% and -3.26% respectively, while Morocco closed on a positive note. The major detractor in Egypt was the country’s largest listed bank, Commercial International Bank (-8.29% m/m), which collapsed following the resignation of the Chairman, Hisham Ezz Al Arab after the central bank raised concerns over bank’s governance. On the earnings front, Juhayna Food Industries released impressive 3Q20 results (T/O: -0.1% y/y; PAT: +36.5% y/y) where despite a flat top line, gross profit margin increased by 4 percentage points to 34.2% on lower raw material costs and EGP appreciation, as 35% to 40% of COGS are dominated in foreign currency. In economic news, remittances from Egyptian expats record highest level ever in 2019/2020 at USD 27.8bn, (+10.4% y/y), compared to USD 25.2bn during the fiscal year of 2018/2019. Cairo for Investment and Real Estate Development released a statement regarding the group’s number of students for the 2020/2021 academic year, indicating +10.0% y/y growth with enrolments reaching 40,700 students and in the K–12 segment, the number of students increased +5.0% y/y to 29,907. The higher-ed segment total enrolled students at Badr University in Cairo (BUC) was up by +23.0% y/y to 12,800 students.

In East Africa, equity markets recorded negative returns amid broad-based weakness across the region

In East Africa, equity markets recorded negative returns amid broad-based weakness across the region. In Kenya, 2Q20 GDP growth contracted by -5.7%, for the first time in seventeen years due to the Covid-19 pandemic, compared to a growth of +4.9% in the three months through to March and expansion of +5.3% in the same period a year earlier. In Tanzania, we digested impressive 3Q20 results from NMB Bank Tanzania (GE: +17.7% y/y; PAT: +102.3% y/y) driven by strong growth in non-funded income (+22.6% y/y) and lower impairment charges (-26.7% y/y). CRBD Bank also posted a solid set of 3Q20 results (GE: +9.6% y/y; PAT: +60.8% y/y), fuelled by lower interest expense (-8.0% y/y) and impairment charges (-3.3% y/y). In Mauritius, January to September 2020 tourism arrivals fall -69.0% y/y to 305,612 from 973,642 a year ago, September 2020 arrivals plunge to 369 from 100,837 a year earlier as borders remained closed during the month.

Southern African equities were mixed as Zimbabwe, Zambia and Malawi reported negative returns while Namibia and Botswana were stronger

Southern African equities were mixed as Zimbabwe, Zambia and Malawi reported negative returns while Namibia and Botswana were stronger. In Zimbabwe, Econet Wireless reported a satisfactory trading update for 1H21 with data traffic rising +10.8% y/y, voice traffic increased by +4.1% y/y and SMS traffic was up +2.2% y/y. Cassava SmarTech also published a mixed 1H21 trading update where revenue grew by +443.0% y/y on account of increased transactional values occasioned by hyperinflation. Dairibord Holdings released a satisfactory 3Q20 trading statement where production output grew on the back of improved supply of raw and packaging material, however, materials, labour, electricity, fuel and water costs continued to escalate. Sales volumes increased by +32.0% y/y as growth was recorded across all product categories with Liquid milks, Foods and Beverages growing by +15.0% y/y, +74.0% y/y and +50.0% y/y respectively. In other news, the Reserve Bank of Zimbabwe maintained the key interest rate and medium-term lending rate at 35% and 25% respectively. In Botswana, the Central Bank cut the interest rate to a record low of 3.75% from 4.25% after its biggest economic contraction ever in 2Q20. Inflation was 1% in August, and has been below the central bank’s target of 3%-6% for the past eleven months. In Zambia, China Development Bank agreed to defer debt service of a commercial-loan facility insured by Sinosure, interest due on 25 October 2020 was deferred to 25 April 2021 and principal due by same date to be rescheduled over the life of the facility.

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