African Thoughts: November 26, 2012

Zimbabwe:

YTD Mkt return is 4.84% (from 145.8 on 30 December 2011 to 152.86 on 26 November 2012). Mkt return for the last month is -0.33% (from 153.36 on 26 October 2012 to 152.86 on 26 November 2012). Mkt return for the last week is -1.29% (from 154.69 on 16 November 2012 to 152.69 on 23 November 2012). Trading is likely to remain thin to the end of the year when fund managers start to restructure their portfolios. In the interim we may see activity being constrained by the unavailability of scrip in the market as holders of blue chip stocks such as Delta; Econet; Hippo; Innscor and OK Zim appear to be reluctant to sell. Innscor Holdings had its AGM last week on Friday were all matters that were tabled before the meeting passed without amendment. Innscor Chairman David Morgan however, announced that Koumides, the former Delta finance director and Deloittes partner, had been appointed CEO, replacing Tom Brown who would be retiring with effect from Dec 31, 2012 after 27 years with Innscor. Tom Brown’s retirement came as a surprise to the market and there are rumors that his resignation could be linked to the Colcom scandal, Innscor is the majority shareholder in Colcom with an 80% shareholding. Last week New Dawn mining completed a non-brokered private placement with a Zimbabwe-focused fund managed by an international investment firm raising 2 million Canadian Dollars (CAD) mainly to fund the acquisition of ordinary shares of Falgold currently owned by minorities. The private placement was transacted at CND$1 per share through the issuance of 2 million shares. (Exchange rate: US$1 = 0.997119 CAD).

Nigeria:

The Monetary Policy Committee, as anticipated, left its benchmark interest rate unchanged at 12% pa during its last meeting for this year. The decision was based on inflationary risks and uncertainties surrounding the weak global economy. Other policy instruments such as the Cash Reserve Ratio and Net Open Position were left unchanged at 12% and 1% respectively. GDP Growth Slows & Inflation Ticks Up. Nigeria’s annual inflation rate increased by 0.4% to 11.7% in October, primarily as a result of exceptional factors such as the flooding which resulted in an increase in food inflation to 11.1%. The impact of the flooding in 12 states of the country was immediate but was not as severe as expected. Core inflation declined for the 4th consecutive month to 12.4%. This according to the MPC has created some uncertainty as to the appropriate policy stance to apply. The fact that leading economic indicators have remained positive for two months and the GDP growth figure for Q3 came in lower than the previous year at 6.48%, sends mixed signals on the direction of the Nigerian economy.

The privatization of the power sector started in the mid-2000s but the process has been lethargic due to the intertwined segments of the sector. The federal government planned to privatize 17 out of the 18 companies comprising the PHCN, 11 power distribution companies (Discos) and 6 generation companies (Gencos). A total of 79 bidders, of which 54 were bidding for the Discos and 25 were bidding for the Gencos, had signified interest in the privatization exercise. The Transmission Company of Nigeria (TCN); the 18th unbundled company of PHCN will not be privatized. A 3-year management contract was awarded to Manitoba Hydro International Limited (a Canadian Company) in April 2012 at a cost of $23.7million. The contract was scheduled to begin on June 30, 2012. However, due to disagreements between labour and the government, Manitoba Hydro is yet to assume control of the company. With this development, the PHCN workers are to control both the human and financial resources at the company, while Manitoba employees seconded to Nigeria will be responsible for the technical expansion of the nation’s power grid.

Stakeholders in the Nigerian capital market have commended the regulatory authorities for various reforms aimed at boosting investors’ confidence, while urging them to introduce new products and migrate the Over the Counter (OTC) Bond trading to the Nigerian Stock Exchange (NSE) platform. They however, expressed the need to deepen the market through the introduction of new products, as well as enhancing the visibility of bond trading as an instrument, in order to complement the reforms. According to the Chief Executive Officer, Lambeth Trust and Investment Company Limited, David Imafidon Adonri, following the meltdown of the equities market in 2008, reforms in the form of new rules and interventions have helped to significantly stabilise the market. The new rules on margin trading, he said, have remarkably curbed excessive risk taking in the market by banks and market operators. He pointed out that AMCON’s intervention has rescued the banking sector, propelling it back to the commanding height of the stock market.

The Nigerian Stock Exchange admitted the shares of Stanbic IBTC Holding Plc into the Daily Official List on Friday. First Bank of Nigeria has announced that, in compliance with regulatory requirements made by the Central Bank of Nigeria, the Company will delist from The Nigerian Stock Exchange (“NSE”) after the market closes on Friday, 23 November. The shares will subsequently be replaced by shares of FBN Holdings Plc and will commence trading on the NSE under the new ticker FBNH when the market opens today.

Egypt:

The market ended the week down 0.71% on low volumes which was attributable to Geo political unrest on the Egypt-Gaza border to internal political disagreements and conflicts (mainly on the constitution). Desperation and confusion amongst investors was quite evident, especially given that the market continues to lack a solid, reasonable catalyst to encourage investors to step back-in. Notable buying came from institutional investors mainly from GCC and international institutions, this is mainly attributed to news that the IMF reached a “Staff level” agreement with Egypt on the loan, the IMF board is expected to review the agreement in December, it’s worth mentioning that this is a major step to a long awaited catalyst for the market, yet the with clashes erupting again near Tahrir Square, which left one political activist dead, fears of further escalation are rising, considering the Calls for massive protests across the country.

Kenya:

NSE 20 +30% YTD, +4.41% for the month of October and +0.3% last week. Foreign participation is expected to remain high especially in Safaricom,EABL and BATK. The KNBS is set to release the inflation rate in a few days. Safaricom is rumored to be planning to launch a credit and savings product, enhanced on the M-Pesa platform. KenolKobil has been a bit quiet but investors are keen on the outcome of discussions with puma Energy over a potential takeover. If the price is attractive, it could lead to the oil marketer getting delisted. Distell withdrew a threat to quit a partnership with KWAL- we think the out of court settlement is as a result of an out of court deal on a roadmap to privatization of KWAL to Distell. Whereas this is a positive to Centum Investment, investors are probably holding back on the stock due to a KES 5.6bn tax dispute between its bottling companies and the revenue authority which could bankrupt the bottlers if successful. National Bank posted a 67.8% y/y dip in 3Q12 net profits. The new CEO attributed the reduction in profits to an expensive new IT system and other operational costs related to branch expansion. Net interest income also declined as the bank experienced a reduction in margins. The bank has been struggling, being a state controlled bank majority owned by the National Social Security Fund and Treasury. Kenya government converted Telkom Kenya shareholder loans into equity. The decision highlights challenges other telecommunication companies have been facing. This restructuring could help lift interest in Safaricom, which although profitable would be vulnerable if tariffs were lower and forced to follow suit- especially with regards to the expected MTR decision expected from the regulator. Jetlink Express, a low cost carrier had four of its planes detained for its lessor after it stopped its operations two weeks ago. The collapse could explain challenges facing the airline industry in the region and probably highlight the strength of Kenya Airways in a rather difficult environment despite the large loss posted in 1H13.

Mauritius:

Most of the listed companies’ end of September/quarter financials were published 2 weeks ago, along with several dividend announcements. Hence the market has since been reacting/moving accordingly, especially with regards to the larger capitalized stocks across the Industry (PBL, UBP, Gamma) as well as Commerce sectors (IBL, Innodis), along with the Banking (notably SBM and Bramer Banking Corporation) and Hotel stocks (notably Lux Island Resorts). Last week the mkt advanced +0.6% although YTD the mkt is -11.67% worse off. Going forward: Rogers FY2012 – Rogers will increase its stake in Intendance Holding Ltd (IHL) by buying ENL Investment share for Rs274m, IHL is the holding company of Swan and as a result of which Rogers will have an effective stake of 30% in Swan. Cim Financial Services – 1st quarter results on a standalone basis, NMH FY2012 – Earnings for FY 2012 is expected to be lower than last year as accounts will be impacted by difficult trading environment such as increased disequilibrium between air and bed capabilities; reduction in tourist arrivals from main markets and promotional packages.

Francophone Region:

Last week, Eti, Sonatel, Palmci, Vivo Energy and Sgbci appeared as the most active stocks recording the biggest volumes of the market. Sgbci and Palmci recorded losses and ended on top as losers while Sonatel moved sideways. The mkt closed with offers in Sonatel, Eti, Palmci and Sgbci that could be interesting for traders. The blocks should trade around these levels at XOF14 000, XOF36, XOf16 000 and XOF55 000 respectively. After the dissolution, the ‘new government’ came into being last week with 28 ministers (4 new people) instead of 39 previously. The was expected that the opposition would be included in this new government but this did not transpire. The appointment of Daniel Kablan Duncan as new Prime Minister has generally been well perceived domestically and internationally. His credentials and background will probably reassure the market. He held various positions within the Finance Ministry, IMF, BCEAO and CNPS in the 1970s and 1980s. Please have a look at the following link if you would like a list of the ministers: News Abidjan

Botswana:

The domestic board had 3 gainers and 5 losers for the week ending 23rd November 2012. Letshego led the gainers, leaping 10.81% to close at BWP 2.05. FNBB was the biggest loser of the week, shedding 4.11% to close at BWP 2.80. A total of 16.91m shares changed hands generating a turnover of USD 6.02m compared to 11.80m shares worth USD 2.92m during the previous week. Week ending 23rd November- 0.26%. Going forward there is not much to look out for. Sechaba Interim Results -29th November 2012 - it will be interesting to see how the liquor regulations have affected both BBL and KBL performance.