Global and local market conditions
Most of the major developed and emerging stock market indices moved only marginally in the week. The exception was the Bovespa (Brazil) which dropped by 3.2%. The drop in Brazilian equities was triggered by a hike in taxes on foreign fixed-income flows from 4% to 6%. This hike was preceded by several other foreign inflow tax increases over the past year aimed at arresting the appreciation of the real which has gained over 30% against the US dollar in the last eighteen months.
US listed companies reported buoyant third quarter earnings growth. Companies in several sectors of the economy: Amazon (online retailing), KeyCorp (banking), United Parcel (freight), Caterpillar (heavy machinery), Travelers (insurance), Xerox (document management), reported double digit and in some cases triples digit profit growth. A vast majority of the earnings beat Wall Street analysts’ expectations. The strong growth in earnings and the fall in jobless claims reported this week point to an ongoing recovery in the US and global economy.
Tea prices at the Mombasa auction rose by 5% this week, while the volume of tea sold increased by 27% for a second consecutive week. Palm Oil and Arabica Coffee futures prices have been on a gradual rise over the past month and are up 12% and 10% respectively. These movements, if sustained, should augur well for Benso Oil Palm Plantation (Accra), Kakuzi Limited (Nairobi) and Sasini Limited (Nairobi). Crude oil prices dropped marginally in the past two weeks, but seem to be stuck in the $80- $81 range.
Accra, Ghana
GSE Movers
Top gainers
UT Bank +25.00%, Enterprise Insurance +2.94%
Top losers
Aluworks -13.64%, Accra Brewery -8.33%,
UT Bank
UT’s share price leaped on Friday. 11,610,000 shares were traded; an unusually high volume. Accordingly to a Reuters report, an international player is planning to take up a strategic stake in the bank. The huge trade could be the entry of the as yet unknown investor. The current price values UT Bank at a premium to other local listed banks. Using the June 2010 financial results as a base; UT bank’s PE is 18, Ecobank Ghana’s is 13, Ghana Commercial Bank’s is 14 while HFC Bank’s is 11.
Nairobi, Kenya
NSE Movers
Top gainers
Diamond Trust Bank +15.83%, Rea Vipingo Plantations +8.38%
Top losers
Sameer Africa -4.82%, Olympia Capital -4.79%
Rea Vipingo Plantations
Rea Vipingo reported a loss of Kshs 8.1 Million for the first six months of 2010 on falling revenue from sisal leaf harvests and an increase in operating costs. Although the company has a low price to book value of 1.2, the illiquidity of the share and uncertain earnings outlook make this a relatively unattractive stock.
Diamond Trust Bank
While we had anticipated a rise in DTB’s share price, it has been much quicker than expected. The total market value of Kshs 22.6 Billion puts the bank close to overhauling CFC Stanbic bank (at Kshs 24.3 Billion) as the 6th biggest listed bank by market cap. Positive press coverage including news of a Kshs 2 Billion loan facility from the IFC and a general rally in the sector has added fuel to DTB’s share price climb.
Accra, Dar es Salaam, Kampala, Lagos, Nairobi: Week ended October 15, 2010
Global and local market conditions
Most Asian markets declined slightly in the week. Of the three indexes that we track: the Sensex of India fell by 0.62%, and the Nikkei by 0.92%. The Chinese stock market bucked the Asian trend with the SSE Composite rising by an eye popping 8.49%. The Chinese shares rose on expectation of strong corporate earnings and on hopes of further yuan appreciation. Even after the recent strong performance, the Chinese stock market has underperformed other Asian equities.
In Africa, Nigeria’s stock market posted another strong performance. The Nigerian All Share Index moved up 5.49%, driven by a recovery in banking stocks. South Africa’s JSE All Share edged 1.14% hitting the 30,000 mark, which it had last touched in June 2008. The Nairobi 20 Share Index scrapped a 0.12% gain, while the Ghana All Share rose by 0.61%.
Commodity prices have continued to advance driven by strong demand from Asia. Over the last six weeks Crude Oil is up 9.83%, Gold 9.73%, Copper 9.76%, Palm Oil 10.74% and White Sugar 23.75%.
Accra, Ghana
GSE Movers
Top gainers
Unilever Ghana +4.70%, SG-SSB Bank +4.62%
Top losers
UT Bank -8.00%, Ghana Commercial Bank -1.00%
Unilever Ghana
Unilever’s share price has been edging upwards since the big jump in September 10, 2010 on posting excellent half year results. The share is now up 22% over the last 6 six weeks. While the company is not cheap on a pure PE basis, the growth in profits over the last five years (with the exception of 2009) has been impressive. The projected high growth in the Ghanaian economy and the attendant increase in the middle class population will sustain demand for the types of consumer goods that Unilever produces.
Dar es Salaam, Tanzania & Kampala, Uganda
DSE & USE Movers
Top gainer
British American Tobacco +18.75%
Top loser
Uganda Clays -9.09% '
British American Tobacco
The only publicly available information on British American Tobacco Uganda that explains the strong performance of the share is a Bloomberg article which notes that the full-year profit for the year ended December 2009 more than doubled after export volumes and the quality of the green leaf improved. Exports were higher last year, while improvement in leaf quality enhanced British American Tobacco Uganda Ltd’s competitiveness in the global market for its export. An expectation of similarly good results in the course of 2010 could be behind the current demand for this counter.
Lagos, Nigeria
NGSE (Top 100 Market Capitalization stocks)
Top gainers
Intercontinental Bank +20.65%, Cadbury Nigeria +20.39%
Top losers
Beco Petroleum Products -19.40%, Ikeja Hotel -8.33%
Intercontinental Bank
Nigeria’s banking stocks as a whole rose in the week. The Nigerian banking sector stocks were badly battered following a crisis precipitated by careless lending. A big chunk of the lending was on margin loans for purchases of shares on the Nigerian Stock Exchange which is dominated by banking stocks. A fall in the shares triggered by the global credit crisis shrunk the collateral on these loans exposing the banks to huge losses. Several former banking CEO’s including Intercontinental’s are due to stand on trial and could be jailed for careless and fraudulent lending. This week’s price jump is merely a recouping of some of the heavy losses to date. Even after the 20% climb, Intercontinental is still 8% down in the year to date. Nigerian banks are fundamentally strong and well capitalized, and should eventually get back on a sound footing. With the local banking crisis being resolved the share prices should continue recovering albeit with significant volatility.
Nairobi, Kenya
NSE Movers
Top gainers
Housing Finance +12.04%, Olympia +5.80%
Top losers
Scangroup -13.42%, KenGen -7.14%
Housing Finance
Housing finance recently announced a 41% oversubscription for its 7-year bond offering. The company raised Kshs 5 Billion, 80% of which was at a fixed rate of 8.5%. The 8.5% is a big discount to other listed company bonds: Safaricom’s 5 year bond is at 12.25%, KenGen’s is at 12.50%. Housing Finance mortgate rates stand at 15.50%. Assuming a 2% drop in the mortgate rate and 100% lending of the fixed Kshs 4 Billion bond component, the extra annual revenue on the 5% net interest margin will be Kshs 200 Million. This is a significant boost considering that Housing’s 2009 full year profit before tax was Kshs 350 Million.
Most Asian markets declined slightly in the week. Of the three indexes that we track: the Sensex of India fell by 0.62%, and the Nikkei by 0.92%. The Chinese stock market bucked the Asian trend with the SSE Composite rising by an eye popping 8.49%. The Chinese shares rose on expectation of strong corporate earnings and on hopes of further yuan appreciation. Even after the recent strong performance, the Chinese stock market has underperformed other Asian equities.
In Africa, Nigeria’s stock market posted another strong performance. The Nigerian All Share Index moved up 5.49%, driven by a recovery in banking stocks. South Africa’s JSE All Share edged 1.14% hitting the 30,000 mark, which it had last touched in June 2008. The Nairobi 20 Share Index scrapped a 0.12% gain, while the Ghana All Share rose by 0.61%.
Commodity prices have continued to advance driven by strong demand from Asia. Over the last six weeks Crude Oil is up 9.83%, Gold 9.73%, Copper 9.76%, Palm Oil 10.74% and White Sugar 23.75%.
Accra, Ghana
GSE Movers
Top gainers
Unilever Ghana +4.70%, SG-SSB Bank +4.62%
Top losers
UT Bank -8.00%, Ghana Commercial Bank -1.00%
Unilever Ghana
Unilever’s share price has been edging upwards since the big jump in September 10, 2010 on posting excellent half year results. The share is now up 22% over the last 6 six weeks. While the company is not cheap on a pure PE basis, the growth in profits over the last five years (with the exception of 2009) has been impressive. The projected high growth in the Ghanaian economy and the attendant increase in the middle class population will sustain demand for the types of consumer goods that Unilever produces.
Dar es Salaam, Tanzania & Kampala, Uganda
DSE & USE Movers
Top gainer
British American Tobacco +18.75%
Top loser
Uganda Clays -9.09% '
British American Tobacco
The only publicly available information on British American Tobacco Uganda that explains the strong performance of the share is a Bloomberg article which notes that the full-year profit for the year ended December 2009 more than doubled after export volumes and the quality of the green leaf improved. Exports were higher last year, while improvement in leaf quality enhanced British American Tobacco Uganda Ltd’s competitiveness in the global market for its export. An expectation of similarly good results in the course of 2010 could be behind the current demand for this counter.
Lagos, Nigeria
NGSE (Top 100 Market Capitalization stocks)
Top gainers
Intercontinental Bank +20.65%, Cadbury Nigeria +20.39%
Top losers
Beco Petroleum Products -19.40%, Ikeja Hotel -8.33%
Intercontinental Bank
Nigeria’s banking stocks as a whole rose in the week. The Nigerian banking sector stocks were badly battered following a crisis precipitated by careless lending. A big chunk of the lending was on margin loans for purchases of shares on the Nigerian Stock Exchange which is dominated by banking stocks. A fall in the shares triggered by the global credit crisis shrunk the collateral on these loans exposing the banks to huge losses. Several former banking CEO’s including Intercontinental’s are due to stand on trial and could be jailed for careless and fraudulent lending. This week’s price jump is merely a recouping of some of the heavy losses to date. Even after the 20% climb, Intercontinental is still 8% down in the year to date. Nigerian banks are fundamentally strong and well capitalized, and should eventually get back on a sound footing. With the local banking crisis being resolved the share prices should continue recovering albeit with significant volatility.
Nairobi, Kenya
NSE Movers
Top gainers
Housing Finance +12.04%, Olympia +5.80%
Top losers
Scangroup -13.42%, KenGen -7.14%
Housing Finance
Housing finance recently announced a 41% oversubscription for its 7-year bond offering. The company raised Kshs 5 Billion, 80% of which was at a fixed rate of 8.5%. The 8.5% is a big discount to other listed company bonds: Safaricom’s 5 year bond is at 12.25%, KenGen’s is at 12.50%. Housing Finance mortgate rates stand at 15.50%. Assuming a 2% drop in the mortgate rate and 100% lending of the fixed Kshs 4 Billion bond component, the extra annual revenue on the 5% net interest margin will be Kshs 200 Million. This is a significant boost considering that Housing’s 2009 full year profit before tax was Kshs 350 Million.
Accra, Nairobi: Week ended October 08, 2010
Global and local market conditions
The performance of global stock markets was mixed. The Sensex(India) declined by 0.95%, the Bovespa (Brazil) rose by 0.83%. The S&P 500, the Nikkei (Japan), and the FTSE 100 (UK) climbed by 1.65%,1.96% and 1.16% respectively. The SSE composite (Shanghai) leaped by 3% after Moody’s Investors Service said it might raise the country’s debt rating. China’s economy has performed strongly throughout the financial crisis.
In the emerging Africa, Nairobi’s NSE-20 Share index and Ghana’s All Share fell by -0.34% and -3.71% respectively. Nigeria’s stock market outperformed; rising by 3.13%. While the Nigerian market as a whole seems to be on an upward trend, the movements of individual stocks have been extremely volatile over the past three weeks.
Commodities advanced robustly. Crude oil was up 1.44%, Gold 2.08% and copper 2.25%. A US Department of Agriculture report indicating that the final harvest for soybeans and wheat will be lower than expected added fuel to the agricultural commodities rally in the year to date. Wheat futures leaped by 9.81% during the week.
Accra, Ghana
GSE Movers
Top gainers
Golden Star Resources +19.95%, AngloGold Ashanti +4.44%, UT Bank Limited +4.00%
Top losers
Aluworks -24.14%, Ecobank Ghana -10.18%, Ecobank Transnational -6.67%
Golden Star Resources
Golden Star resources Ltd continues to rally strongly for a fourth consecutive week. While international gold prices continue to climb at a fast clip, the price jump on this stock is far higher that would be justified by the rise in gold prices. The rise in this counter appears to be a convergence (probably driven by arbitrage trading) between the value of the shares listed on the Ghana stock exchange and shares listed on the American and Toronto stock exchanges. The Ghana listed shares have been trading at a steep discount to the AMEX and TSE shares prices. The Ghana listed shares still relatively cheap; they are now at a discount of roughly 30% to their North American counterparts.
Nairobi, Kenya
NSE Movers
Top gainers
Scangroup +18.25%, Safaricom +8.99%, Diamond Trust Bank 8.26%, KCB +7.74%
Top losers
Kenya Airways -6.88%, StanChart-5.84%, Standard Group -5.76%, Bamburi -5.19%
Scangroup
The huge jump in the past week was followed by an even heftier leap this week. The share price dipped slightly on Friday probably indicating that the rally on this counter is finally running out of steam. The current price and the rally to date are difficult to justify with publicly available information. Unless the deal with Ogilvy turns out to be hugely transformational, there should be a correction at some point.
Diamond Trust Bank
Diamond Trust reported excellent half year results, both interest income and non-interest income rose strongly in the first half of the year. Non-interest income was boosted in the second quarter by huge gains on fixed income investment disposals. This week’s rally could have been driven by investors seeking bargains after the gains in the big bank stocks over the last few weeks (DTB is a medium sized bank).
The performance of global stock markets was mixed. The Sensex(India) declined by 0.95%, the Bovespa (Brazil) rose by 0.83%. The S&P 500, the Nikkei (Japan), and the FTSE 100 (UK) climbed by 1.65%,1.96% and 1.16% respectively. The SSE composite (Shanghai) leaped by 3% after Moody’s Investors Service said it might raise the country’s debt rating. China’s economy has performed strongly throughout the financial crisis.
In the emerging Africa, Nairobi’s NSE-20 Share index and Ghana’s All Share fell by -0.34% and -3.71% respectively. Nigeria’s stock market outperformed; rising by 3.13%. While the Nigerian market as a whole seems to be on an upward trend, the movements of individual stocks have been extremely volatile over the past three weeks.
Commodities advanced robustly. Crude oil was up 1.44%, Gold 2.08% and copper 2.25%. A US Department of Agriculture report indicating that the final harvest for soybeans and wheat will be lower than expected added fuel to the agricultural commodities rally in the year to date. Wheat futures leaped by 9.81% during the week.
Accra, Ghana
GSE Movers
Top gainers
Golden Star Resources +19.95%, AngloGold Ashanti +4.44%, UT Bank Limited +4.00%
Top losers
Aluworks -24.14%, Ecobank Ghana -10.18%, Ecobank Transnational -6.67%
Golden Star Resources
Golden Star resources Ltd continues to rally strongly for a fourth consecutive week. While international gold prices continue to climb at a fast clip, the price jump on this stock is far higher that would be justified by the rise in gold prices. The rise in this counter appears to be a convergence (probably driven by arbitrage trading) between the value of the shares listed on the Ghana stock exchange and shares listed on the American and Toronto stock exchanges. The Ghana listed shares have been trading at a steep discount to the AMEX and TSE shares prices. The Ghana listed shares still relatively cheap; they are now at a discount of roughly 30% to their North American counterparts.
Nairobi, Kenya
NSE Movers
Top gainers
Scangroup +18.25%, Safaricom +8.99%, Diamond Trust Bank 8.26%, KCB +7.74%
Top losers
Kenya Airways -6.88%, StanChart-5.84%, Standard Group -5.76%, Bamburi -5.19%
Scangroup
The huge jump in the past week was followed by an even heftier leap this week. The share price dipped slightly on Friday probably indicating that the rally on this counter is finally running out of steam. The current price and the rally to date are difficult to justify with publicly available information. Unless the deal with Ogilvy turns out to be hugely transformational, there should be a correction at some point.
Diamond Trust Bank
Diamond Trust reported excellent half year results, both interest income and non-interest income rose strongly in the first half of the year. Non-interest income was boosted in the second quarter by huge gains on fixed income investment disposals. This week’s rally could have been driven by investors seeking bargains after the gains in the big bank stocks over the last few weeks (DTB is a medium sized bank).
Accra, Dar es Salaam, Kampala, Lagos, Nairobi: Week ended October 01, 2010
Global and local market conditions
The main emerging stock markets rallied strongly this week. The Sensex of India was up 1.99%, the Shanghai Composite Index rose by 2.47%, and the Bovespa Index (Brazil) by 2.98%. South Africa’s JSE all share index rose by 4.13%. The developed markets dipped slightly likely because of profit taking after four straight weeks of gains. The Nikkei (Japan), the S&P 500 and FTSE 100(UK) Indexes fell by 0.71%, 0.21% and 0.10% respectively.
In the emerging Africa, Nairobi’s NSE-20 Share index rose by 1.19%, Ghana’s All Share by 4.18% and after a several weeks of decline, Nigeria’s All Share index eked out a 1.59% gain, driven by a slight bounce bank in banking sector stocks.
Accra, Ghana
GSE Movers
Top gainers
Ecobank Ghana +12.46%, Golden Star Resources +7.78%,
Top losers
Produce Buying Company -6.67%, UT Bank Limited -3.85%
Golden Star Resources
The three week rally on this counter is likely driven by news of the continued rise in the price of Gold in world markets. Gold rallied this week to an all time high of $1,317 per 100 ounce.
Dar es Salaam, Tanzania & Kampala, Uganda
DSE & USE Movers
Gainer
National Insurance Corporation +4.29%
Loser
National Microfinance Bank -1.43%
National Insurance Corporation
National Insurance Corporation is the biggest life insurer in Uganda. The company has branch and agency offices across the country and plans to open an office in Southern Sudan where it already writes some business. The current share price translates to a PE of just 7.4. The share is a long term buy: the cheap valuation and the huge potential for future growth given the low insurance penetration in the country provide a significant margin of safety.
Lagos, Nigeria
NGSE (Top 100 Market Capitalization stocks)
Top gainers
Skye Bank + 21.61%, Diamond Bank +17.78%
Top losers
Unity Bank -23.91%, Ashaka Cement -20.82%
Skye Bank
Most Nigerian banking stocks rallied this week; a part-reversal of the steep sell-offs over the previous several weeks. Banking sector stocks, which comprise a large portion of the total stock market capitalization, were badly hit by Nigeria’s domestic banking crisis. The recent upheaval at the stock exchange culminating in the departure of its chief executive has not helped. The stock market in Nigeria is extremely volatile and is likely to remain so until at least after the January 2011 presidential elections are concluded.
Nairobi, Kenya
NSE Movers
Top gainers
Scangroup +11.50%, Kenya Commercial Bank +7.97%
Top losers
Crown Berger -5.81%, KenGen -3.80%
Scangroup
Scangroup continues to rally strongly after the announcement of plans to acquire 51% of Ogilvy’s African business through a share swap transaction. The deal will give Scangroup an even bigger share in its market leading position in Kenya and a foothold in several African advertising markets. The full financial impact of the deal is not yet clear: the rally on this counter appears to be mainly momentum driven.
Kenya Commercial Bank
KCB is one of our conviction picks (see September 3, 2010 report). Even after the jump in price this week, the share is cheap in relation to its peers. The Friday closing price of Kshs 21 translates into a market capitalization of Kshs 62 Billion for KCB, compared to Kshs 99B for Equity Bank, Kshs 92B for BBK, Kshs 74B for StanChart, Kshs 64B for CO-OP Bank. KCB is ahead of all its rivals in terms of branch network, total deposits and total assets. Of the big banks in Kenya only BBK is more profitable.
The main emerging stock markets rallied strongly this week. The Sensex of India was up 1.99%, the Shanghai Composite Index rose by 2.47%, and the Bovespa Index (Brazil) by 2.98%. South Africa’s JSE all share index rose by 4.13%. The developed markets dipped slightly likely because of profit taking after four straight weeks of gains. The Nikkei (Japan), the S&P 500 and FTSE 100(UK) Indexes fell by 0.71%, 0.21% and 0.10% respectively.
In the emerging Africa, Nairobi’s NSE-20 Share index rose by 1.19%, Ghana’s All Share by 4.18% and after a several weeks of decline, Nigeria’s All Share index eked out a 1.59% gain, driven by a slight bounce bank in banking sector stocks.
Accra, Ghana
GSE Movers
Top gainers
Ecobank Ghana +12.46%, Golden Star Resources +7.78%,
Top losers
Produce Buying Company -6.67%, UT Bank Limited -3.85%
Golden Star Resources
The three week rally on this counter is likely driven by news of the continued rise in the price of Gold in world markets. Gold rallied this week to an all time high of $1,317 per 100 ounce.
Dar es Salaam, Tanzania & Kampala, Uganda
DSE & USE Movers
Gainer
National Insurance Corporation +4.29%
Loser
National Microfinance Bank -1.43%
National Insurance Corporation
National Insurance Corporation is the biggest life insurer in Uganda. The company has branch and agency offices across the country and plans to open an office in Southern Sudan where it already writes some business. The current share price translates to a PE of just 7.4. The share is a long term buy: the cheap valuation and the huge potential for future growth given the low insurance penetration in the country provide a significant margin of safety.
Lagos, Nigeria
NGSE (Top 100 Market Capitalization stocks)
Top gainers
Skye Bank + 21.61%, Diamond Bank +17.78%
Top losers
Unity Bank -23.91%, Ashaka Cement -20.82%
Skye Bank
Most Nigerian banking stocks rallied this week; a part-reversal of the steep sell-offs over the previous several weeks. Banking sector stocks, which comprise a large portion of the total stock market capitalization, were badly hit by Nigeria’s domestic banking crisis. The recent upheaval at the stock exchange culminating in the departure of its chief executive has not helped. The stock market in Nigeria is extremely volatile and is likely to remain so until at least after the January 2011 presidential elections are concluded.
Nairobi, Kenya
NSE Movers
Top gainers
Scangroup +11.50%, Kenya Commercial Bank +7.97%
Top losers
Crown Berger -5.81%, KenGen -3.80%
Scangroup
Scangroup continues to rally strongly after the announcement of plans to acquire 51% of Ogilvy’s African business through a share swap transaction. The deal will give Scangroup an even bigger share in its market leading position in Kenya and a foothold in several African advertising markets. The full financial impact of the deal is not yet clear: the rally on this counter appears to be mainly momentum driven.
Kenya Commercial Bank
KCB is one of our conviction picks (see September 3, 2010 report). Even after the jump in price this week, the share is cheap in relation to its peers. The Friday closing price of Kshs 21 translates into a market capitalization of Kshs 62 Billion for KCB, compared to Kshs 99B for Equity Bank, Kshs 92B for BBK, Kshs 74B for StanChart, Kshs 64B for CO-OP Bank. KCB is ahead of all its rivals in terms of branch network, total deposits and total assets. Of the big banks in Kenya only BBK is more profitable.
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