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

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Market Review for 2010 Both major indices saw a relatively strong performance in 2010, certainly in local currency terms, with the BRVM Composite up 20.48% while the BRVM 10 gained 27.41%. In USD terms, the BRVM Composite and BRVM 10 were 11.96% and 18.39% higher respectively, as the currency weakened over the course of the year. Fourteen counters closed the year in the black, against 25 in the red, with the best performing sector being the agricultural stocks, led by SAPH (+152.34%) and Palm (+96.97%), which both saw significant appreciation as investors expect them to benefit for rising rubber and palm oil prices respectively. Juggernaut Sonatel also had a strong year, closing 28.33% higher. The agriculture sector gained 103.24%, followed by the public services (of which Sonatel is a constituent) up 22.82% and the financials up 20.49%. Market capitalisation increased by 23.63% over the course of the year to close at USD 7.2bn. Sonatel remained the most capitalised counter on the exchange with 44.37%, followed by ETI with 13.42% and Solibra with 4.74%. Total volumes for the year were flat, up just 1.01% to 28.3m shares, while value traded fared marginally better, up 3.70% to XOF 65.4bn, or circa USD 135.2m. ETI was by far the most active stock by volumes, contributing 94.68% of the total. Value traded was led by the market cap leader, Sonatel, which had 56.28% l, well ahead of SAPH at number two with 11.13%. The liquidity ratio remained low, deteriorating to 1.89% from 2.25% in 2009. Market Outlook for 2011 The political crisis in Cote d’Ivoire has continued into 2011, and despite numerous attempts at mediation by the African Union and other organisations, Gbagbo is digging in his heels, with a Kenya/Zimbabwe style “solution” of a government of national unity perhaps occupying his mind. While initially we thought the exchange would continue relatively unscathed as it has been by the political fallout, security concerns have seen the BRVM closing its doors in Cote d’Ivoire, at least until 28 February. We assume there are contingencies for it to relocate to one of the other member states where necessary, but this scenario is likely to spook investors in the short term. Whilst we expect a positive outturn for both indices, we think the year end return may fall short of that witnessed in 2010, with the agricultural sector having already rerated significantly, although rising prices for the commodities it produces should see more upside. The financial and telecoms sectors will also be key determinants of market direction this year, with the Ivorian focused banks in particular likely to see some fallout from the electoral crisis. 10 Most Active Stocks by Volume Company Vol. (m) % of Total Ecobank Transnational Inc. 26.78 94.68 SAPH CI 0.38 1.34 Palm CI 0.29 1.03 Sonatel CI 0.27 0.95 CIE CI 0.09 0.31 SOGB CI 0.08 0.29 Bank of Africa BN 0.05 0.18 Filtisac CI 0.05 0.18 Bank of Africa CI 0.04 0.13 Onatel BF 0.03 0.12 10 Most Active Stocks by Value Company Val. (USD) % of Total Sonatel CI 76 070 014 56.28 SAPH CI 15 050 859 11.13 Bank of Africa BN 5 029 608 3.72 Total CI 5 017 785 3.71 Palm CI 4 764 965 3.53 SOGB CI 3 480 350 2.57 Onatel BF 3 168 255 2.34 CIE CI 2 653 713 1.96 Ecobank Transnational Inc. 2 623 695 1.94 Bank of Africa CI 2 305 261 1.71 Source: BRVM/Hudson/IAS Top Picks for 2011 ETI – Solid Q3 10 results; pan-African expansion drive still ongoing; strong technology platform; alliance with Nedbank may receive more attention Palm – Strong palm oil demand and prices, capacity increases on the cards SAPH/SOGB – Higher oil prices mean increase in price of synthetic rubber and hence increase in demand for natural rubber; increase in demand from China in particular pushing prices for natural rubber Sonatel – Market bell weather; dividend yield remains attractive 7
EQUITY RESEARCH GHANA FEBRUARY 2011 2010 REVIEW AND 2011 OUTLOOK Ghana’s ASI, (or GSE-CI as it is now called), had a very good 2010 after the disaster that saw it being the worst SSA performer in 2009, when it lost 54.73% in USD terms. There were many factors that contributed to the performance of the market during the year. These included the low base from which it was coming after the fall in 2009; good financial results, with some of the banks in particular having a solid 2009; a more stable currency; strong macroeconomic fundamentals highlighted by the fall in inflation to a 19 year low of 8.58% in December 2010; declining interest rates and increased foreign investor interest. By far the major driver of the stock market, and indeed broader optimism for Ghana’s economy, was the much anticipated commencement of oil production which was scheduled for and began in late 2010. Ghana’s oil reserves came to light with the announcement by UK listed Tullow Oil of the discovery of 600m barrels of light oil offshore. Reserves in the Mahogany exploration well were far greater than the 250m barrels the firm had earlier forecast. On Wednesday 15 December 2010, Ghana’s President John Atta Mills officially opened the valves at the oil field named Jubilee, thereby heralding Ghana’s admission into the league of oil producing nations. At initial production of 120,000 barrels per day, the Jubilee field ranks Ghana as the seventh largest producer in SSA, with output expected to double within three years. Estimates are that the oil from Jubilee will generate circa USD 1.2bn per annum in government revenues over the next 20 years. Aside from operator Tullow Oil Plc, major players in Jubilee include state-owned Ghana National Petroleum Corporation (GNPC), U.S.-producer Anadarko Petroleum and privately held U.S. energy firm Kosmos. As a result of the oil production, the World Bank expects Ghana to be the fastest growing economy in SSA, with a growth rate of 13.4% in 2011 and 10% in 2012. A revision to Ghanaian GDP data in 2010 raised estimates of its income by 60%, suggesting that it is now a lower-middleincome country. Outside the oil sector Ghana’s economy is still expected to register strong growth, particularly in construction services as large infrastructure projects are carried out. The World Bank does warn that inflows from the oil sector, if not managed prudently, could discourage the incentive structure for agricultural exports, or lead to the so-called ‘Dutch Disease’. The general optimism, however, suggests Ghana may avoid the dreaded resource curse and use the oil proceeds to uplift the broader economy as a whole and not just enrich the political elite. Top 5 Gainers and Losers - 2010 Opening Closing % Change % Change Company Price Price (LC) (USD) GSE ASI 5 572.34 7 369.21 32.25 27.55 Ghana Commercial Bank Ltd. 0.74 2.70 264.86 251.91 Fan Milk Ltd. 1.11 2.45 120.72 112.89 AngloGold Ashanti Depository Shares 0.30 0.60 100.00 92.90 Ghana Oil Company Limited 0.17 0.29 70.59 64.53 Golden Star Resources Ltd. 3.10 5.20 67.74 61.79 Cocoa Processing Co. Ltd. 0.03 0.02 (33.33) (35.70) Sam Woode Ltd. 0.03 0.02 (33.33) (35.70) Mechanical Lloyd Co. Ltd. 0.20 0.10 (50.00) (51.77) Aluworks Limited 0.44 0.12 (72.73) (73.70) Enterprise Group Limited 2.20 0.50 (77.27) (78.08) Source: GSE, SIC Financial Services, IAS Top Ten Shares by Market Cap. Company (GHS m) (USD m) % of Total AngloGold Ashanti Ltd. 12 328.87 8 400.13 62.63 Ecobank Transnational Inc. 1 487.17 1 013.27 7.55 Golden Star Resources Ltd. 1 455.95 991.99 7.40 Standard Chartered Bank Gh. Ltd. 869.33 592.31 4.42 Ghana Commercial Bank Ltd. 715.50 487.50 3.63 Ecobank Ghana Ltd. 690.39 470.39 3.51 Unilever Ghana Ltd. 355.63 242.30 1.81 Fan Milk Ltd. 290.83 198.15 1.48 Guinness Ghana Breweries Ltd. 256.89 175.03 1.31 SG-SSB Limited 213.69 145.60 1.09 Source: GSE, SAS, IAS GSE-ASI relative to S&P African Frontier Index 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 S&P African Frontier GSE-ASI Source: IAS 8
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