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

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Market Outlook for 2011 Botswana’s economic revival continues alongside a slowly recovering global economy. A 3.7% decrease in total government spending is budgeted for 2010/11, including a substantial 15.7% decline in development expenditure. With the continuing cash flow constraints, the government has announced a prioritisation of project spending, tightening of budget management and implementation of measures to raise revenue, including the increase in the rate of VAT (effective April 2010) and government levies, as well as drawing dividends from parastatals. It is anticipated that the BWP 12.1bn budget deficit for 2010/11 will be financed by a combination of domestic borrowing and drawdown of accumulated savings. It is anticipated that output will be below trend in the medium-term. Although the exporting sectors will benefit from any sustained recovery in world demand, domestic economic growth will be moderated due to reduced government spending. Furthermore, it is expected that demand and its impact on economic activity will be subdued as a result of the public sector wage freeze, together with the increase in VAT, administered prices and other levies. Improving credit developments however reflect a cautious lending approach by banks and restrained borrowing due to economic uncertainty and the limited upward income effect on household credit demand. Total revenues and grants for the 2011/12 financial year are estimated at BWP 34.10bn, with mineral revenue contributing 33% of the total. The second largest source is Customs and Excise at 25%, while Non-Mineral Income Taxes and Value Added Tax come third and fourth at 18% and 15%, respectively. The proposed total expenditure and net lending for 2011/12 is estimated at BWP 41.03bn, made up of BWP 10.77bn for the development budget and BWP 30.35bn for the recurrent budget. Top Picks for 2011 FNBB – Botswana’s 2 nd largest bank in terms of loan book and the biggest company in terms of Market Cap. FNBB has a large branch network and continues to expand. It is the industry leader in the technology space. FNBB has the lowest cost-to-income ratio out of all the banks in the country. Barclays – Botswana’s largest bank in terms of loan book and is the 2 nd biggest company by Market Cap. It has the biggest branch network and enjoys the largest market share. Barclays has recently introduced new technology such as cell phone banking. ABCH – Recently awarded retail banking license in Botswana. Has the potential to gain market share from other players in the market who seem stagnant. Regional presence and the continued recovery of Zimbabwe should bolster profits. Merchant business continues to be robust. Letshego – Botswana’s largest micro lender. Letshego continue to expand its foot print regionally. Has very low NPL’s resulting from good collection controls. Letshego enjoys the majority of the micro lending market share. BIHL – Botswana’s largest life insurance and asset management company. Both the life insurance and asset management company enjoy the majority of market share in their segments. The asset management company is well positioned to take advantage of the global equity market recovery. The life insurance company continues to grow at a steady pace. The recommended Development Budget for the 2011/12 financial year is BWP 10.77bn. This budget will be funded from the Domestic Development Fund at BWP 9.47bn and loans and grants from development partners at BWP1.3bn. The Ministry of Minerals, Energy and Water Resources with a budget of BWP 2.37bn, gets the highest share of 22% of the proposed overall Development Budget. The second largest share of 19.8% is allocated to the Ministry of Transport and Communications at BWP 2.13bn. The Ministry with the third largest share of 13.0% of the proposed overall development budget is Local Government at BWP 1.4bn. Total revenues and grants for the financial year 2011/12 are forecast at BWP 34.10bn, whilst proposed total expenditure and net lending are at BWP 41.03bn. The net result is a budget deficit amounting to BWP 6.93bn which is 6.3% of forecast GDP. The DCI has gained 6.26% YTD in USD terms mainly driven mainly by the banking stocks, ABCH, FNBB and Barclays. We expect the financial sector to drive the market in 2011. 5
EQUITY RESEARCH BRVM FEBRUARY 2011 2010 REVIEW AND 2011 OUTLOOK 2010 proved to be about Cote d’Ivoire for the UEMOA region, as a disputed election saw the country descend into chaos. Following the 28 November election presidential run off, Cote d’Ivoire’s electoral commission announced that opposition candidate Alassane Ouattara had won the presidential run-off, but the Constitutional Council contested the announcement. The electoral commission head, Youssouf Bakayoko, had said Mr Ouattara had won 54% of the vote, compared to 46% for Mr Gbagbo. About the same time the head of the Constitutional Council, Paul Yao N'Dre, seen as being close to Mr Gbagbo, said it was taking over the declaration from the election commission. "Because of disagreements on the results of some regions, the independent electoral commission wasn't able to give the provisional results. "The Constitutional Council - responsible for sorting out disputes in presidential elections - finds itself in charge, to find a solution to the disagreements, and proclaim the definitive presidential election results," Mr N'Dre said. The Council then went on to name Gbagbo as the winner of the election. Since then, close to 300 people have been killed in postelection violence, according to the United Nations, while the internationally recognized president, Ouattara, has been holed up at the Golf Hotel in Abidjan, protected by United Nations peacekeepers. The stalemate is having a materially negative effect on Cote d’Ivoire’s economy, with cocoa exports having been suspended by Ouattara while economic sanctions have been applied to try and financially squeeze Gbagbo and his allies out of power. The economic impact has spread beyond Cote d’Ivoire, with the country having missed a USD 29m coupon payment on its 2.5% USD 2.3bn Eurobond that was due 31 December 2010, while world cocoa prices have jumped by close to 20% since 28 November. Despite the crisis and the fact that the BRVM is headquartered in Abidjan, the market has proven surprisingly resilient, perhaps as a reflection of its relative lack of liquidity and the fact that the most active stocks by volume (ETI) and value traded (Sonatel) are not Ivorian centred businesses, as opposed to investor indifference or apathy. Battle hardened BRVM investors would probably have factored in an element of political risk in their decision to invest in that market anyway. Top 5 Gainers and Losers - 2010 Opening Closing % Change % Change Company Price Price (LC) (USD) BRVM Composite 132.05 159.10 20.48 11.96 SAPH CI 10 700 27 000 152.34 134.48 Palm CI 7 095 13 975 96.97 83.03 SOGB CI 18 000 28 000 55.56 44.55 Sicable CI 17 385 23 000 32.30 22.94 SGB CI 37 200 48 250 29.70 20.53 Trituraf CI 2 145 1 600 -25.41 -30.69 Sicor CI 6 250 4 600 -26.40 -31.61 CFAO CI 24 875 18 005 -27.62 -32.74 Sivom CI 6 495 3 500 -46.11 -49.93 Uniwax CI 18 000 9 250 -48.61 -52.25 Source: BRVM/Hudson/IAS Top Ten Shares by Market Cap. Company (XOF m) (USD m) % of Total Sonatel 1 540 000 3 181.36 44.37 ETI 465 981 962.63 13.42 Solibra 164 444 339.71 4.74 Onatel 154 717 319.62 4.46 SGB 150 111 310.10 4.32 SAPH 138 013 285.11 3.98 Palm 108 022 223.15 3.11 Unilever 96 636 199.63 2.78 BICI 66 667 137.72 1.92 Nestle 62 487 129.09 1.80 Source: BRVM/Hudson/IAS BRVM Composite relative to S&P African Frontier Index 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 Source: IAS S&P African Frontier BRVM‐CI 6
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Sub-Saharan Africa Stock Markets 2010 Review & 2011 ... - Imara

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