Sub-Saharan Africa Stock Markets 2010 Review & 2011 ... - Imara

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EQUITY RESEARCH MAURITIUS FEBRUARY 2011 2010 REVIEW AND 2011 OUTLOOK The Mauritian economy is highly dependent on Europe, which accounts for approximately 70% of its exports. The slow recovery in Europe has hampered the recovery of key industries, such as textiles. Despite the challenges it faced, the Mauritian economy grew by 4.2% in 2010 up from the 3.1% attained in 2009. Amongst the challenges were the Greek debt crisis, the volcanic ash cloud which disrupted air travel, the unfavourable weather conditions that disrupted air travel in Europe towards the end of the year and the depreciation of the Euro against the Rupee. In 2010, Mauritius had a budget deficit of 4.5% of GDP and expects this to decline to 4.3% in the 2011 fiscal year. In 2010 the government collected MUR 63bn in revenue and had current expenditures of MUR 68bn and capital expenditures of MUR 8bn. In 2011, the government projects that it will collect MUR 70bn in revenue and spend MUR 84bn. Growth in GDP was mainly driven by real estate and property development, which registered growth of 6.3%, followed by transport, storage and communications at 5.5% and financial services and construction which both grew by 4.3%. Despite the challenges faced by the tourism industry, tourist arrivals grew by 7.3% in 2010. The GFC and the euro-zone crisis have revealed the need for Mauritius to reduce its heavy dependence on Europe. In his budget speech, Finance Minister, Pravind Kumar Jugnauth, stated that by 2015 Mauritius expects more than 50% of tourists to come from non-euro-zone countries, in contrast to the current level which is less than 40%. Inflation has declined from highs recorded in late 2008 to December’s m-o-m level of 2.9%. However, y-o-y inflation stood at 6.1%. The Monetary Policy Committee of the Central Bank has reduced the repo rate from its March 2008 high of 9.5% to the current level of 4.75%. Given the likely rise in inflation due to oil prices, we do not expect to see any changes in the repo rate for at least the first half of 2011. The unemployment rate reached 7.6% in Q3 2010 and is estimated to have declined to 7.5% in December 2010. This level is relatively low compared to regional peers and given the challenges faced by the export oriented sectors which are labour intensive. Top gainers and losers 2010 Opening Closing % change % change Company price price (LC) (USD) SEMDEX 1660.87 1967.45 18.46% 16.23% ENL Land 19.00 45.90 141.58% 137.03% Harel Mallac 89.00 215.00 141.57% 137.03% Swan Insurance Co. 153.00 300.00 96.08% 92.39% Mauritius Leasing Co. 4.10 8.00 95.12% 91.45% Ireland Blyth 40.50 74.00 82.72% 79.28% Automatic Systems 127.00 120.00 -5.51% -7.29% New Mauritius Hotels 134.00 110.00 -17.91% -19.45% Mauritius Stationery Manuf. 21.00 17.10 -18.57% -20.10% Sun Resorts 69.00 56.00 -18.84% -20.37% Naiade Resorts 36.00 25.50 -29.17% -30.50% Top 10 shares by market cap. Company MUR (m) USD (m) % of total Mauritius Commercial Bank 41,562.30 1,369.43 23.44% State Bank of Mauritius 27,488.50 905.72 15.51% New Mauritius Hotels 17,756.60 585.06 10.02% ENL Land 9,662.90 318.38 5.45% Harel Freres 8,451.50 278.47 4.77% Rogers & Co. 7,384.90 243.32 4.17% Sun Resorts 6,350.30 209.24 3.58% Ireland Blyth 5,286.40 174.18 2.98% Omnicane 4,958.90 163.39 2.80% Promotion and Development 4,042.10 133.18 2.28% Source: SEM SEMDEX relative to the S&P African Frontier index 1.3 1.2 1.1 1.0 0.9 0.8 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 SEMDEX S&P African Frontier 15
Market Review for 2010 The Stock Exchange of Mauritius started the year with the finalisation of the merger of sugar producers, Mon Desert Alma and Savannah Sugar Estates. The merged company (Savannah) rebranded itself and is currently known as ENL Land. British American Investment on the other hand delisted from the official market, following the acquisition of all its shares by Seaton Investment Limited. ENL Land raised MUR 933.6m through the issue of preference shares. Naiade Resorts issued new shares and a convertible loan and raised MUR 1.0bn, to finance its MUR 1.5bn restructuring. The remaining MUR 0.5bn will be raised through the sale of assets. There was increased activity on the Stock Exchange of Mauritius, with volume up 47.8% to 334.5m shares and turnover up 12.2% to MUR 11.69bn. The SEMDEX gained 18.5% y-o-y in local currency terms and due to the slight depreciation of the rupee against the US dollar, the index gained 16.2% y-o-y in USD terms. The SEM-7 on the other hand gained 3.5% in local currency and 1.5% in USD terms. Harel Freres and ENL Land are now SEM-7 constituents, replacing Naiade Resorts and Omnicane. Foreign investors were net sellers of MUR 1.54bn worth of transactions, compared to 2009 when they were net sellers of MUR 184.91m worth of shares. 10 Most Active Stocks by Volume Company Volume (m) % of total Mauritius Development Inv. Trust 102.15 30.3% British American Investment 48.33 14.3% Caudan Development 45.58 13.5% Mauritius Commercial Bank 22.00 6.5% State Bank of Mauritius 13.41 4.0% New Mauritius Hotels 12.13 3.6% Naiade Resorts 9.86 2.9% Sun Resorts 8.65 2.6% Harel Freres 8.06 2.4% P.O.L.I.C.Y. 7.32 2.2% 10 Most Active Stocks by Value Company Val. (USDm) % of total Mauritius Commercial Bank 100.97 26.2% New Mauritius Hotels 46.36 12.0% State Bank of Mauritius 36.56 9.5% Mauritius Union Assurance 29.10 7.6% British American Investment 25.50 6.6% Sun Resorts 18.20 4.7% Mauritius Development Inv. Trust 17.22 4.5% Rogers and Co. 10.35 2.7% United Basalt Products 10.00 2.6% Naiade Resorts 9.60 2.5% Market Outlook for 2011 In the 2011 budget speech, the Finance Minister proposed that the Bank of Mauritius and Financial Services Commission merge into a single regulatory institution. The BoM would be empowered to issue a larger variety of instruments, extend advances from 3 months to 6 months, broaden the list of collateral and develop the forex and derivatives market, amongst others. As a result, we expect increased liquidity in the Mauritian market. Mauritius is seeking to tap into the USD 1tn Islamic finance industry. The central bank will offer Shariacompliant short-term liquidity tools, and according to the governor, the first Islamic bank will be operational by the end of Q1 2011. Given that a sixth of Mauritius’ population is Muslim, we anticipate that this development will be highly successful. The CSO forecasts that Mauritius will grow by around 4.2% in 2011, with growth mainly driven by the business activities, financial institutions, and transport, storage and communications sectors. The SEMDEX has gained 8.73% y-t-d in USD terms, mainly driven by the banks, MCB and State Bank. We expect the banks and hotels to drive the market in 2011, given the recovery of the overall market and tourist arrivals. Top picks for 2011 Mauritius Commercial Bank – Mauritius’ largest bank with the highest market share of loans and deposits, diversified product range, engaged in other non-vanilla banking activities such as leasing, factoring, credit cards, investment management, stock broking and registry services, income from foreign sources at around 40% of the Group’s net results, global business desk to help foreign institutional clients take advantage of the double taxation treaties, falling impairment charges. Naiade Resorts – The Group has returned to making profits, diversified hotel base – Mauritius, Maldives and Reunion Island; improved occupancies in all markets, revenue set to further increase when average room rates recover, plans to increase stake in White Sands Resort and Spa. Air Mauritius – Tourist arrivals forecast to continue rising, MTPA continues to promote Mauritius in the Asian market, fuel hedge losses realised, increased revenue in recent results as a result of increases in both passenger and cargo volumes. 16
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