Sub-Saharan Africa Stock Markets 2011 Review & 2012 ... - Imara

Sub-Saharan Africa Stock Markets 2011 Review & 2012 Outlook
February 2012
Analysts:
Addmore Chakurira Aobakwe Mokgethi Batanai Matsika Belvas Otieno
addmore.chakurira@imara.co aobakwe@capital.bw batanai.matsika@imara.co belvas.otieno@imara.co
Brian Mugabe Farai Vengesai Jimmy Mwambazi Nontando Sibanda Zunga
brian.mugabe@imara.co farai.vengesai@imara.co jmwambazi@stockbrokerszambia.com.zm nontando.zunga@imara.co
www.imara.co

Table of Contents
Executive Summary ...........................................................................................2
Botswana ...................................................................................................... 4
BRVM ........................................................................................................... 7
Ghana .......................................................................................................... 9
Kenya ......................................................................................................... 11
Malawi ........................................................................................................ 14
Mauritius ..................................................................................................... 17
Namibia ....................................................................................................... 19
Nigeria ........................................................................................................ 21
Rwanda ....................................................................................................... 24
Uganda ........................................................................................................ 25
Tanzania ...................................................................................................... 27
Zambia ........................................................................................................ 29
Zimbabwe .................................................................................................... 32
Imara Contact Details ...................................................................................... 35

Q2
After a solid recovery by the bulk of Africa’s major
frontier markets in 2010, led by the Uganda Stock
Exchange which returned 33.81% in USD terms, risk
aversion were the buzzwords in 2011, as concerns
surrounding the Eurozone debt crisis and the advent of
the “Arab Spring” all led to foreign investors taking a
very cautious view of the continent. Local investors
were also wary of equities, especially as monetary
tightening in Nigeria and East Africa due to rising
inflation and attempts by the central banks in these
countries to shore up their currencies, meant that
fixed income securities were relatively more attractive
as the year progressed.
Of the twelve main indices covered in this report,
(Rwanda is yet to introduce an index), just five closed the
year in the black in USD terms, two marginally so, while
seven closed weaker. Comparatively, eight exchanges
closed firmer in 2010.
The top performer was the Lusaka Stock Exchange, LuSE-
ASI, which was up 15.79% in USD returns. This
performance was led by Puma Energy, Bata Shoe Company
and African Explosives, which all recorded USD price gains
in excess of 100% over the year. Tanzania’s DSEI was the
second best in USD terms, although some way behind the
LuSE with a 5.14% return, followed by Namibia’s NSX-
Local with a 3.62% return. Both performed far better in
local currency terms, with the DSEI up 11.97% and the
NSX-Local up 28.06%, but dollar strength diluted the hard
currency returns.
In a sharp reversal of fortunes, Kenya and Uganda were at
the bottom of the pile in 2011, having headed the table in
2010. The NSE-20 shed 32.52% in USD terms, while the
closely linked USE-ALSI showed a very similar decline of
32.17%. Politics and the impact of the drought in East
Africa weighed negatively on sentiment in these markets
during the year. Nigeria’s NSE-ASI was the third worst
performer, down 20.35% in USD terms. Politics again
played a role, as Nigeria held its presidential elections
during the year, while concerns around the resolution of
the banking sector crisis also had a negative bearing.
With SSA’s more liquid markets now driven to a large
extent by foreign investors (which unfortunately has
somewhat increased their correlation to developed
markets), we expect the Eurozone debt crisis to play a
large role in determining risk appetite for emerging and
frontier markets. With low interest rates in the developed
world and quantitative easing still a reality, a resolution
of the Eurozone issues should see the search for yield find
its way to SSA. Fundamentally, Africa’s prospects remain
relatively bullish, with the World Bank anticipating real
GDP growth for the region of 5.3% and 5.6% for 2012/13
respectively, against global forecasts of 2.5% and 3.1%.
2
Source: IAS/Stock Exchanges
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
3-Jan-11
2-Feb-11
4-Mar-11
3-Apr-11
EQUITY RESEARCH
AFRICA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Index Open Close % Change (LC) % Change (USD)
LuSE - ASI 3 322.47 4 040.35 21.61% 15.79%
DSEI 1 163.89 1 303.23 11.97% 5.14%
NSX - Local 172.72 221.19 28.06% 3.62%
M SE-DSI 3 922.61 4 238.39
8.05% 0.35%
Semdex 1 967.45 1 888.38 -4.02% 0.09%
ZSE-Industrials 151.27 145.86 -3.58% -3.58%
BSE-DCI 6 412.94 6 970.94
8.70% -6.57%
GSE-Composite 1 000.00 969.03 -3.10% -11.33%
BRVM -Composite 159.10 138.88 -12.71% -14.85%
NSE-ASI 24 770.52 20 730.63 -16.31% -20.35%
USE-ALSI 1 188.07 864.45 -27.24% -32.17%
NSE-20 4 432.60 3 205.02 -27.69% -32.52%
Growth in SSA closes in on pre-GFC average…
Source: World Bank
Various S&P indices relative to S&P Africa Frontier Index 2011
3-May-11
Source: IAS/Standard & Poors
2-Jun-11
S&P 500 S&P Euro 350 S&P Bric 40
2-Jul-11
S&P Latin America 40 S&P Asia 50 S&P Africa Frontier
1-Aug-11
31-Aug-11
30-Sep-11
30-Oct-11
29-Nov-11
29-Dec-11

SSA Movers and Shakers 2011
TOP 20 GAINERS (USD Terms) BOTTOM 20 LOSERS (USD Terms)
Company Country % change Company Country % change
Fidelity Zimbabwe 700.00% Chemco Zimbabwe -93.33%
Pelhams Zimbabwe 466.67% Zeco Zimbabwe -93.33%
PBL Mauritius 443.23% Star Africa Zimbabwe -85.71%
TN Holdings Zimbabwe 421.57% Paints & Coatings Nigeria -85.30%
Cafca Zimbabwe 294.12% G4S Botswana -83.83%
Puma Energy Zambia 239.63% PZ Cussons Ghana -81.73%
Truworths Zimbabwe 179.41% Rio Zim Zimbabwe -81.58%
Roads Nigeria Nigeria 174.23% Bindura Zimbabwe -80.77%
Bralirwa Rwanda 140.20% Diamond Bank Nigeria -75.68%
Union Bank Nigeria 139.73% Fidson Healthcare Nigeria -75.48%
Bata Zambia 138.03% Gulliver Zimbabwe -75.00%
ZBFH Zimbabwe 135.29% Paladin Energy Limited Namibia -73.75%
Nictus Namibia 130.12% CCNN Nigeria -73.33%
RTG Zimbabwe 123.08% UBA Nigeria -73.11%
DCB Tanzania 114.11% Trust Bank Ghana -72.52%
ABC Holdings Zimbabwe 111.11% Dangote Sugar Nigeria -72.10%
AELZ Zambia 110.42% Dangote Flour Mills Nigeria -71.73%
SOGB BRVM 96.09% DN Meyer Nigeria -71.04%
Capital Hotel Nigeria 95.15% Afribank Nigeria -70.81%
FBCH Zimbabwe 85.71% Bank PHB Nigeria -70.15%
TOP 20 VOLUME TRADED TOP 20 VALUE TRADED
Company Country Volume (m) Company Country Value (USD m)
Transcorp Nigeria 8,317 Zenith Bank Nigeria 589.16
Zenith Bank Nigeria 6,424 GT Bank Nigeria 446.69
UBA Nigeria 4,942 First Bank of Nigeria Nigeria 399.39
First Bank of Nigeria Nigeria 4,880 Nigerian Breweries Nigeria 231.36
GT Bank Nigeria 4,460 Oando Nigeria 169.32
Access Bank Nigeria 3,331 UBA Nigeria 168.23
Safaricom Kenya 3,196 Access Bank Nigeria 154.56
Diamond Bank Nigeria 2,711 Safaricom Kenya 133.42
Fidelity Bank Nigeria 2,648 Vivo Energy Mauritius 131.73
Finbank Nigeria 2,523 MCB Mauritius 131.17
Oceanic Bank Nigeria 1,603 Guinness Nigeria Nigeria 130.72
Skye Bank Nigeria 1,470 Equity Bank Kenya 119.28
Unity Bank Nigeria 1,451 EABL Kenya 111.05
TNM Malawi 1,446 Nestle Nigeria Nigeria 107.12
Intercontinental Bank Nigeria 1,357 Econet Zimbabwe 104.66
FCMB Nigeria 1,108 Flour Mills Nigeria 102.21
Bank PHB Nigeria 1,106 KCB Kenya 100.03
Japaul Oil Nigeria 1,105 Diamond Bank Nigeria 93.28
Sterling Bank Nigeria 1,077 Puma Energy Zambia 92.48
N.E.M Insurance Nigeria 1,065 Dangote Cement Nigeria 83.41
3

On a y-o-y basis, Botswana’s economy grew by 12.4%
driven mainly by both the mining and non-mining sectors.
It against A subsidiary this back of drop the Imar that total credit extended by
commercial banks increased to USD 3.64bn from 2.83bn
in the previous year, thus reflecting this recovery in
economic performance. The market was largely driven by
the banking sector during the year, but despite this, the
stock exchange ended the year with a negative return in
USD terms. However, in BWP terms, the stock exchange
recorded a positive return.
GDP figures for the 1 st quarter ended June 2011 indicated
that, q-o-q, the economy contracted by 2.2%, mainly due to
lower output in the mining (-4.2%), financial and business
services (-6.1%) and general government sectors (-7.6%).
However, on a y-o-y basis, the economy grew by 6.4%,
reflecting recovery of both the mining and non-mining
sectors. Mining grew by 7.2%, while there was also strong
growth in agriculture (+10.9%), construction (+25.8%) and
transport and communication (+12.6%). The economy
picked up pace in the 2 nd quarter, with GDP figures
indicating that the economy expanded by 12.4% compared
to the same period in 2010, while output was also higher
than in the first quarter of the year by 9.6%. Overall growth
was driven by continued recovery in the mining sector,
which grew by 23.7% y-o-y. But non-mining growth was also
robust at 7.4%, led by expansion in manufacturing (+11.8%),
water and electricity (+12.2%), construction (+28.3%) and
transport and communication (+12.5%). The World Bank
Report estimates that GDP growth for 2011 to December
will be 6.8%.
As mentioned, the banking sector was the main market
driver during 2011, as the four banks posted impressive
results amidst an uncertain trading environment
characterised by increasing competition from unlisted
entities. On average, the share price of the four banks
increased by 34.90% during 2011, making it the best
performing sector on the domestic board. Net interest
margins continued to grow although the main focus was on
cost containment rather than purely balance sheet and
margin growth. Impairments growth for most commercial
banks has slowed and this will encourage banks to advance
more credit especially to the business sectors of the
economy going forward.
BancABC continued on its retail expansion programme,
opening 4 branches during 2011 in country, with plans to
open a further 5 during 2012. Barclays revamped its
technological platform which has it put it on par with its
major competitors on the technological front. FNBB and
Stanchart focused on retail lending.
4
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
02-Mar-11
01-Apr-11
EQUITY RESEARCH
BOTSWANA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
DCI 6412.94 6970.94 8.70% -6.57%
G4S 3.19 6.00 88.09% 61.67%
ABCH 2.42 4.55 88.02% 61.61%
Barclays 5.55 6.90 24.32% 6.86%
FurnMart 1.31 1.60 22.14% 4.98%
FNBB 2.20 2.65 20.45% 3.54%
FSG 1.80 1.48 -17.78% -29.33%
Letlole 1.50 1.20 -20.00% -31.24%
Imara 3.25 2.10 -35.38% -44.46%
Cresta 1.50 0.79 -47.33% -54.73%
Olympia 0.45 0.23 -48.89% -56.07%
Source: BSE
Top Ten Shares by Market Cap.
Company (BW P m) (USD m) % of Total
FNBB 6 742.53
911.59 22.08%
Barclays 5 879.91
794.96 19.25%
Letshego 3 017.20
407.93 9.88%
BIHL 2 754.49
372.41 9.02%
StanChart 2 723.89
368.27 8.92%
Sechaba 1 602.83
216.70 5.25%
NAP 1 329.67
179.77 4.35%
FurnMart 952.12
128.73 3.12%
Wilderness 900.90
121.80 2.95%
Engen 880.07
Source: BSE
DCI relative to S&P Africa Frontier Index
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
DCI S&P Africa Frontier
118.99 2.88%
28-Sep-11
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011
During the year the market had 6 new listings, 2 through an IPO
and 4 as secondary listings, while only 1 company delisted.
Letlole and New Africa Properties listed on the domestic board
during the 2 nd and 3 rd quarter respectively through IPOs, bringing
the number of listed property companies to 5. The foreign board
saw Botswana Diamonds and Firestone listed during the 2 nd
quarter, while Lucara and African Energy listed during the 3 rd
and 4 th quarters respectively. IAMGold was the only counter that
delisted on the foreign board during the Q4 2011.
The DCI started the year on a positive note, up 18.15% to end Q1
2011 at 6,938.33 points. The biggest gainers for the quarter
were ABCH (+38.78%), RPC Data (+20.00%) and FNBB (+19.46%).
Volumes increased significantly in Q2 2011 to just above 2x
those witnessed in Q1 2011. The index experienced some
volatility during the quarter, edging up 0.45% to close the
quarter at 6,969.89 points on the back of increases in Prime
Time (+23.56%), G4S (+13.72%) and Stanchart (+11.24%). In Q3
2011, volumes and turnover pulled back significantly. The DCI
closed the quarter at 7,146.94 points representing a 2.54%
increase from the Q2 2011 close. The biggest gainers for the
quarter were ABCH (+50.29%), G4S (+36.07%) and Barclays
(+12.20%). Volumes and turnover picked up in Q4 2012 although
the index closed the quarter in the red. The DCI was down 2.46%
to close at 6,970.94 points weighed down mainly by Cresta (-
21.00%), Letlole (-19.46%) and Sefalana (-14.85%). The DCI was
down 6.57% in USD terms for FY 2011 but was up 8.70% in pula
terms, the biggest gainers being G4S (+61.67%), ABCH (+61.61%)
and Barclays (+6.86%) in USD terms.
The FCI closed Q1 2011 up 7.67% at 1,802.41 points driven
mainly by A-Cap (+45.61%), Aviva (+7.69%) and African Copper
(+6.06%). Volumes and turnover were marginally down during Q2
2011. Only two counters, Blue Financial (+37.93%) and Aviva
(+1.43%) closed the quarter in the black. The FCI ended Q2 at
1,802.74 points, representing a 0.02% increase. Market activity
picked up in Q3 2011, although A-Cap (+22.00%) was the only
counter that registered positive growth. The FCI closed the
quarter at 1,850.42 points representing a 2.64% increase. The
foreign board took a nose dive in Q4 2011 as the index lost
7.92% to close at 1,703.91 points, weighed down mainly by A-
Cap (-31.56%), Aviva (-26.19%) and Lucara (-17.71%). The FCI
was down 12.33% in USD terms for FY 2011, but was up 1.79% in
local currency, the biggest gainer being Blue which gained
56.67% in local currency terms and (+34.94%) in USD terms.
A total of 458.7m shares changed hands during the year,
generating turnover of USD 133.95m, compared to 308.66m
shares at a turnover of USD 149.5m in the previous year,
representing a 48.62% increase and 10.41% decline respectively.
Q2 2011 recorded the highest volume and turnover at 181.1m
shares worth USD 47.38m. Letshego dominated the year’s
volume and turnover at 68.67% and 54.72% respectively. The
major reason for Letshego’s dominance was that one of its
major foreign shareholder was liquidating their position during
the year. The total market PER stood at 10.16x compared to
10.77x in 2010, while the liquidity/turnover ratio stood at 3.42x
compared to 2.06x in 2010.
5
10 most active stocks by volume
Company Vol (m) % of Total
Letshego 315.00
68.67%
Turnstar 33.48
7.30%
FNBB 26.93
5.87%
ABCH 15.07
3.29%
Sefalana 13.42
2.93%
Barclays 9.00
1.96%
BIHL 8.39
1.83%
RPC Data 6.84
1.49%
PrimeTime 6.00
1.31%
FSG 3.93
0.86%
Source: Capital Securities/BSE
10 most active stocks by value
Company Val (USD) % of Total
Letshego 73 301 739 54.72%
BIHL 12 150 190 9.07%
FNBB 9 519 948 7.11%
Barclays 7 941 239 5.93%
ABCH 6 378 377 4.76%
Turnstar 5 988 525 4.47%
Sefalana 5 157 748 3.85%
Sechaba 3 466 111 2.59%
PrimeTime 1 574 729 1.18%
StanChart 1 309 183 0.98%
Source: Capital Securities/BSE
5%
4%
19%
9%
Market Cap. Composition
10%
53%
Banking
Property
Hotel
Brewery
Financials
Other

Market Outlook for 2012
According to the World Bank, Botswana’s GDP should grow by
6.8% in 2011, slowing to 6.2% in 2012 and 5.0% in 2013. The
forecasts for 2011 and 2012 are both higher than the projected
SSA averages of 4.9% and 5.3% for 2011 and 2012, respectively.
The economy’s projected growth in 2011 will be one of the
highest among sub-Saharan countries. Botswana’s projected
GDP growth ranks 12 th highest in Africa after Ghana, Ethiopia,
Angola, Cape Verde, Eritrea, Rwanda, Serra Leone, Tanzania,
Zambia, Niger, Nigeria and Mozambique and at par with
Uganda.
Inflation continues to be above the central bank’s target range
of 3% - 6%. Inflation rose from 7.9% in January 2011 to 9.2% in
December 2011 driven mainly by upward pressures from
international fuel and food prices, as well as increases in
domestic electricity tariffs and other levies. As a result, the
bank rate and the prime lending rate were maintained at 9.5%
and 11% respectively for the year 2011. We are of the view that
the bank rate will be maintained at the current rate during
2012 as the central bank endeavours to bring inflation within its
target range.
Looking ahead, we expect credit extension to the banking
sector to pick up albeit slowly in line with continued
uncertainty in the local economic conditions. In November
2011, the central bank reduced the amount of BoBCs issued in
the market by approximately BWP 3bn to about BWP 10bn,
citing rising costs associated with issuing more BoBCs to mop-up
increased levels of excess liquidity. In light of this recent
development by the central bank and the subsequent reduction
of the BoBC rate, we expect to see some of the excess liquidity
directed in to loans and advances and subsequently into the
stock exchange as institutional investors and large corporates
look for alternative investments.
It is for the reasons stated above, that we believe that we
expect the banking sector to continue dominating and driving
the market in 2012. Although banking sector valuations may not
be as compelling when compared to some Pan-African peers,
we believe they are still attractive when you consider the local
market in isolation. We also expect mid-cap stocks of the likes
of Choppies and some property counters to contribute positively
to the market growth.
6
Top Picks for 2012
Choppies - The market leading mass grocery retailer
in Botswana, and retails fast moving consumer
goods, household goods, fruit and vegetables, meat
products, dry, fresh and baked goods through its
stores in Botswana and South Africa; the Group
operates 49 stores in Botswana, and 9 stores in South
Africa; the investment attraction for Choppies is
mainly strong revenue, margin expansion growth,
significant market share and attractive dividend
policy.
G4S – G4S is the country’s leading security solutions
group; just agreed, subject to regulatory approvals,
to acquire the assets of Trojan Security Services.
Trojan is the third largest security services provider
in Botswana. Its primary operating areas are manned
security; cash in transit and alarm and response; also
set to acquire The Facilities Management Group
(Pty) Ltd (“FMG”). FMG trades in three divisions:
security, facilities management and cleaning
services. If approved, these transactions will
significantly strengthen the strategic development of
G4S Botswana in terms of both footprint and
capability and allow the company to deliver a wider
range of outsourced solutions to both existing and
new markets.
ABCH – The retail expansion has boosted profitability
of the group; it has the potential to gain market share
from some players in the market who seem stagnant;
regional presence and the continued recovery of
Zimbabwe should continue to bolster profits; merchant
business continues to be robust.
Barclays – Botswana’s largest bank in terms of loan
book and is the 2nd biggest company by market cap; has
the biggest branch network and enjoys the largest
market share; recently introduced new technology such
internet and cell phone banking.

Just like the year 2010, the focal point for the WAEMU
region was Cote d’Ivoire, as the country emerged out of its
post-election chaos.
Efforts to reinvigorate Ivory Coast‘s economy after the
disputed November 2010 elections took off in earnest in 2011,
but the new President, Alassane Quattara, faced and continues
to face, a formidable task in re-building the nation. He faces
the twin challenge of hauling the conflict-crippled economy to
its feet whilst fostering reconciliation. Quattara must heal
ethnic divisions that were aggravated by the conflict. While his
government is making strides on both fronts, the political
environment remains strained. Inside the country, the forces
of former president Gbagbo have been all but defeated while
the remaining threat from Gbagbo loyalists comes principally
from forces that fled to Liberia (and to a lesser extent Ghana).
In July, and again in September 2011, raids from Liberia killed
several dozen people in the tense western region.
Nonetheless, the end of the post-electoral conflict has
provided an opportunity to push democratisation forward and
unify the country on the terms agreed in the March 2007 peace
deal. The interim unity government continues to function, and
both the incumbent regime and former rebels agree on the
need for economic reform in line with IMF and donor
recommendations.
Given the challenges experienced by Cote d’Ivoire during the
year, the latest World Bank estimates are that the country’s
real GDP shrank by 5.8%. However, a return to growth is
expected in 2012 and 2013, with forecast real GDP growth of
4.9% and 5.5% respectively.
GDP growth rates in the other WAEMU countries for 2011 were
as follows:
o Benin – 3.4%
o Burkina Faso – 5.8%
o Guinea Bissau -4.8%
o Mali – 5.4%
o Niger – 6.0%
o Senegal – 4.2%
o Togo – 3.7%
Reflecting the dominance of Cote d’Ivoire’s economy in the
regional body, is the fact that while the other seven member
states had decent to very good growth numbers, the negative
out turn from Cote d’Ivoire diluted the aggregate forecast for
the region in 2011 to just 1.9%, as per the IMF’s last regional
economic outlook.
While some sectors such as agriculture had a good year on the
BRVM, the overall sentiment driven by Cote d’Ivoire’s travails
was negative, which saw the BRVM closing 2011 in the red.
7
EQUITY RESEARCH
BRVM
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
BRVM-Composite 159.1 138.88 -12.71% -14.85%
SOGB 28 000 56 000 100.00% 95.09%
Servair 4 500 7 445 65.44% 61.38%
Sode 11 500 18 000 56.52% 52.68%
SAPH 27 000 40 000 48.15% 44.51%
Bernabe 19 345 25 500 31.82% 28.58%
Trituraf 1 600 1 000 -37.50% -39.03%
Unilever 60 000 38 000 -36.67% -38.22%
Safca 24 800 17 000 -31.45% -33.13%
Crown Siem 31 995 22 850 -28.58% -30.34%
Shell
Source: BRVM
18 000 12 960 -28.00% -29.77%
Top 10 shares by market cap.
Company XOF (m) USD (m) % of Total
Sonatel 1 250 000
2 470.5 38.78%
Ecobank (ETI) 489 233
966.9 15.18%
SAPH 199 352
394.0 6.18%
Onatel 147 560
291.6 4.58%
Solibra 134 983
266.8 4.19%
SGBCI 121 333
239.8 3.76%
SOGB 120 970
239.1 3.75%
PALM-CI 115 945
229.2 3.60%
Unilever-CI 61 267
121.1 1.90%
SITAB 56 648
112.0 1.76%
Source: BRVM
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
BRVM Composite relative to S&P Africa Frontier Index
02-Mar-11
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
BRVM Composite S&P Africa Frontier
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011
Along with Cote d’Ivoire’s political and economic
challenges, a major setback for the BRVM remained the
relative lack of liquidity, with ETI and Sonatel dominating
stock activity by volume and value traded, respectively.
Looking at returns, the BRVM Composite declined 12.71%
in XOF terms and 14.85% in USD terms to close at 138.88
points. 14 counters closed the year in the black, against
25 in the red. The best performing sector was agriculture,
led by SOGB (+100%). Other major gainers were Servair
(+65.44%), Sode (+ 56.52%), SAPH (+48.15%) and Bernabe
(+31.82%), which saw significant appreciation.
Notable on the losers were Shell (-28.00%), Crown Siem
(-28.58%), Safca (-31.45%), Unilever (-36.67%) and
Trituraf (-37.50%). Sonatel remained the most capitalised
counter with 38.8% of the total, followed by ETI with
15.2% and SAPH with 6.2%. However, Sonatel weighed
negatively on the BRVM, as its stock fell 22.0% y-o-y. The
counter was the most traded by value, constituting
58.48%, well ahead of SAPH with 11.39%. Total value
traded for the year was USD 126.1m. Total volumes for
the year amounted to 18.1m shares, with ETI by far the
most active, contributing 90.09% of total volumes.
Market Outlook for 2012
The World Bank predicts that Cote d’Ivoire’s economic
growth will rebound to 4.9% in 2012. This recovery in the
Cote d’Ivoire combined with solid growth in the rest of
the region (Togo with the lowest estimate of 4.0% and
Niger the highest at 8.5%) will see the WAEMU registering
growth of an estimated 6.6% in 2012.
Despite the launch of a reconciliation commission,
tensions may linger in Cote d’Ivoire. Some sections of
society strongly opposed Quattara (Gbagbo won 48.6% of
the vote in the election) as they view him as a stooge of
the French. There are also presidential elections set for
Guinea Bissau, Mali and Senegal in 2012. The latter has
already seen rising tensions, as the incumbent Abdoulaye
Wade seeks to run for a third term on a technicality. His
rivals say his participation breaches rules setting a twoterm
limit, but Wade argues that his first term should
not be counted as limits were added after he had already
begun his time in power.
The Eurozone crisis also presents potential risks to the
WAEMU region, with the AfDB estimating that over 36%
of the region’s exports are destined for Europe. Falling
demand could thus have a negative impact, although
given the CFA’s Euro peg, a weakening Euro would to
some offset the fall in demand as WAEMU exports
became more competitive. Other major risks would be
around liquidity, given the dominance of foreign banks in
Benin, Burkina Faso, Cote d’Ivoire and Niger in
particular, and higher cost of borrowings on repriced
sovereign borrowing risk.
On the whole, given the lower base effects of GDP
growth in 2011, we expect company results and by
extension the BRVM to reflect the improved economic
conditions in the region and record a positive outturn in
2012.
10 Most active stocks by volume
Company Vol % of total
ETI 16,286,748 90.09%
Sonatel 272,293 1.51%
Palm 234,071 1.29%
SAPH 188,360 1.04%
SOGB 71,372 0.39%
SGB 37,282 0.21%
Filtisac 30,272 0.17%
CIE 15,909 0.09%
BOA CI 15,274 0.08%
BOA BN
Source: BRVM
14,638 0.08%
10 Most active stocks by value
Company Val (USDm) % of total
Sonatel 73.77 58.48%
SAPH 14.37 11.39%
Palm 7.13 5.65%
SOGB 6.69 5.30%
SGB 2.90 2.30%
Sitab 1.57 1.25%
ETI 1.53 1.21%
BOA BN 1.51 1.20%
Onatel 1.10 0.87%
BOA CI
Source: BRVM
0.96 0.76%
15.20%
Source: BRVM
7.94% 8.02%
24.78%
Top picks for 2012
Market Cap. Composition
44.06%
Our top stocks for 2012 are as follows;
Telecoms
Financial Services
Agro Processing
Food and Beverages
Others
SAPH- The largest rubber company in Cote d’Ivoire, with total
production capacity of rubber of c98,000 tonnes; international
rubber prices have recovered; the risk of low rubber/tyre
demand has also lessened given that the rebuilding exercise in
Japan is expected to sustain rubber demand.
PALM CI- The bullish outlook on palm oil prices is likely to be
the main earnings driver.
SOGB- Engaged in the production of both rubber and palm oil,
SOGB’s key strength is that it has more attractive margins
compared with its peers given that its earnings come mainly
from its own plantations.
SONATEL- Our BUY recommendation is endorsed by the
relative resilience of the sector in general, the healthy
dividend yield of 11.5%, and the operator’s diversified
revenue streams (across various geographies) underpinned
further by VAS as a new revenue stream.
8

The rise of a Black Star. Ghana is not only making progress
in the game of soccer with its so called “Black Stars”
national team, but is also scoring goals on various other
fronts. Forecast by the World Bank to have had by far the
fastest growing economy in SSA and indeed, the world in
2011 at 13.6%, the country continues to exhibit a solid
macroeconomic performance.
Oil, of course, was the key driver of this GDP growth, and
thus as in 2010, was a key theme in the country’s economic
make up in 2011, as the country benefitted from the
commencement of oil exports. Given the discovery of new
oil at the Jubilee Oil fields, it is estimated the country will
account for approximately 1.6% of regional oil supply by
2015. State-controlled Ghana National Petroleum
Corporation (GNPC) currently operates in partnership with
various international oil companies (IOCs), including Tullow
Oil, Anadarko Petroleum and Kosmos Energy, in the
development of the Jubilee oil field, which should reach
plateau production of 120,000 bpd. The start-up of the
Jubilee oil field in December 2010 will transform the
country into a net exporter.
In line with the positive reviews that its democracy has
received, Ghana has taken early measures to manage its
fledgling oil industry and the receipts thereof. The
government and opposition parties in Parliament have
passed into law the Petroleum Revenue Management Act
(Act 815), which makes it possible for the government to
access the annual budget funding amount from oil proceeds
and, also makes room for setting up Stabilization and
Heritage Funds. Parliament has also passed the Petroleum
Commission Act to regulate activities of the use of
petroleum resources, with a goal of achieving optimal
resource exploitation while ensuring high health and
environmental standards.
Other positive economic news during the year included the
country achieving its lowest inflation rate since June 1992’s
8.37%, when it recorded 8.39% in July.
Politically, the country was stable during the year, with the
fight to see who would lead the various parties in the 2012
presidential election done in the ‘voting booth’ as it were.
Following successful August primaries by the ruling NDC,
incumbent President Mills successfully faced down a
leadership challenge by Nana Konadu Agyemang Rawlings,
the wife of Jerry Rawlings, former president and the
founder of the NDC.
Despite the general good news, Ghana’s stock exchange had
a negative return for the year, with much of the oil
euphoria possibly having already been priced in (too
aggressively perhaps?) into the exchange’s very strong
performance in 2010.
9
EQUITY RESEARCH
GHANA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
GSE-Composite 1000 969.03 -3.10% -11.33%
Total 10 19.83 98.30% 81.46%
PBC 0.13 0.25 92.31% 75.97%
BOPP 0.75 1.1 46.67% 34.21%
Unilever 5.69 6.64 16.70% 6.78%
UT Bank 0.28 0.32 14.29% 4.58%
PZ Cussons 1.2 0.24 -80.00% -81.70%
TBL 1.33 0.4 -69.92% -72.48%
GSR 5.2 2.75 -47.12% -51.61%
Clydestone 0.07 0.04 -42.86% -47.71%
SPL
Source:GSE
0.05 0.03 -40.00% -45.10%
Top 10 shares by market cap.
Company GHS (m) USD (m) % of Total
Tullow Oil Plc 28 019 16 421.6 59.19%
AngloGold Ashanti 12 963 7 597.4 27.38%
ETI 1 240 726.9 2.62%
Standard Chartered Ghana 886 519.0 1.87%
Ecobank Ghana Limited 727 426.2 1.54%
Golden Star Resources 702 411.7 1.48%
Ghana Commercial Bank 504 295.1 1.06%
Unilever (Ghana) 425 249.1 0.90%
Guinness Ghana Breweries 323 189.5 0.68%
Fanmilk Ghana
Source: GSE
279 163.5 0.59%
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
GSE-CI relative to S&P Africa Frontier Index
02-Mar-11
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
GSE-CI S&P Africa Frontier
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011
The saying that “trees do not always grow to the sky”
may be true for the GSE in the year 2011. While the main
index gained 27.55% (USD terms) in 2010, it nose-dived
11.33% (USD terms) in 2011. The extent of the decline
can to some extent be attributed to a weaker currency,
given that the index lost 3.10% in local currency terms.
Overall, we attribute the lacklustre performance to
developments in the Eurozone that led to frontier market
redemption and less appetite for frontier market
equities, while the markets lack of liquidity also remains
a deterrent.
The main highlight on GSE, however, was the successful
listing of Tullow Oil, which had initially been slated for
late 2010. As a result, Tullow Oil now constitutes 59% of
the entire market capitalisation of USD 27.7bn, followed
by Anglo Gold Ashanti, which constitutes 27.7%. Given
that these are listed across various exchanges and foreign
owned, liquidity still remains a key constraint. The most
active stock by value-traded was Fan Milk Ghana, which
constituted 25.0%, followed by Ghana Commercial Bank
(19.12%) and Standard Chartered Bank (10.36%). In terms
of volume traded, the most active was CAL Bank, which
constituted 22%, followed by PBC (20%) and UT Bank
(8.85%).
Market Outlook for 2012
The World Bank estimates real GDP growth of 9.0% in
2012 for Ghana. The 2010 Oil & Gas Journal (OGJ)
annual reserves and production survey attributes
660.0m bbl of proven oil reserves to the country.
Headline figures of revenue from the oil and gas sector
– USD 1.97bn in 2011- look promising, as the offshore
Jubilee Field is yet to reach planned peak production,
which will make Ghana the sixth largest crude-oil
exporter in Africa. We therefore expect the oil-led
growth spurt to have positive spill-over effects to nonoil
sectors of the economy. Furthermore, as a leading
gold-producer, we expect the firm prices (cUSD
1,600/oz) to also fuel growth in the West African
nation. The net effect of these positive economic
drivers should ultimately be an increase in disposable
incomes, which will in turn drive the growth in
consumer demand.
Liquidity on the GSE is also set to improve on the back
of new listings on the bourse. The GSE has recently
signed an MoU with Fidelity Capital Partners Limited
(FCPL) in which the two organisations intend to work to
promote the growth and future listing of companies,
especially SMEs on the exchange. Under the MOU, the
exchange will be promoted to investee companies of
FCPL, thus enhancing the success of SME listings on the
GSE.
Ghana’s mandatory government pension scheme which
entails an injection of cUSD 400.0m/annum on local
capital markets through privately managed funds is also
expected to boost efficiency and liquidity on the GSE
given that 25.0% of the funds will be invested in equities.
The new reform is part of a 2008 law that created a
pension plan aimed at boosting savings in the country.
10
10 most active stocks by volume
Company Vol (m) % of total
CAL Bank 52.08 22.29%
PBC 47.27 20.23%
UT Bank 20.67 8.85%
Fan Milk 14.59 6.24%
SIC Insurance 14.42 6.17%
ETI 14.34 6.14%
GCB 12.99 5.56%
Ayrton Drugs 11.10 4.75%
Enterprise Group 10.42 4.46%
Ghana Oil 9.28 3.97%
Source: GSE
10 most active stocks by value
Company Val (USD m) % of total
Fan Milk 24.72 25.02%
GCB 18.89 19.12%
SCB 10.23 10.36%
CAL Bank 9.18 9.29%
PBC 7.74 7.84%
Ecobank Ghana 5.01 5.07%
SIC Insurance 3.84 3.89%
UT Bank 3.61 3.65%
GGBL 2.92 2.96%
Unilever 2.70 2.73%
Source: GSE
Source: GSE
28.89%
8.26%
Top Picks 2012
Market Cap. Composition
2.25% 0.67%
59.92%
The following are our top picks for the year 2012;
Petroleum
Resources/Gold
Financial Services
Consumer Goods
Others
Guinness Ghana Breweries Limited (GGBL) - The brewer
recently raised GHS 70.0m through a rights offer; optimal
capital structure (with manageable debt levels) will afford
GGBL the flexibility to continue to grow its business in an
expanding economy; company plans to grow its market share
of the beer-market in Ghana by 9.0% over the next five years.
Fan Milk – a producer of Fanyogo which is arguably Ghana’s
most popular dairy product and also the producer of Fanice,
is likely to continue benefiting from consumer-driven
demand. Definitely one for the long term.
ETI – We like the group’s pan-African expansion drive which is
still ongoing, strong technology platform and strong alliances
with international banking groups. Its local subsidiary
Ecobank Ghana is also one to watch, with the holding
company having just purchased Trust Bank of Ghana, which
will be merged with Ecobank Ghana. Scale benefits should be
value accretive.

A year in which deteriorating economic conditions led
to the NSE being the worst performer in SSA…
In 2011, inflation soared from 4.50% in December 2010 to
a high of 19.72% in November 2011 before easing slightly
to 18.93% in December. This was mainly as a result of a
drought which led to food shortages and a rise in the
price of oil due to the ‘Arab Spring’ earlier in the year.
The situation was further exacerbated by the Central
Bank’s reluctance to tighten monetary policy which led
to a plunge in the value of the Kenya shilling.
The shilling lost about a third of its value over the year
to October 2011, hitting a record low of 107:1 against
the USD. This plunge was originally as a result of the
Eurozone debt crisis which led to a flight from emerging
and frontier market currencies into the USD. It was
worsened by the Central Bank’s reluctance to raise
interest rates in light of rising inflation, arguing that the
causes were purely external.
As macroeconomic conditions looked set to deteriorate
further, the Central Bank belatedly embarked on an
aggressive series of interest rate hikes. This saw the
Central Bank Rate almost treble from 6.25% in
September 2011 to 18.00% at the end of November 2011.
This helped the shilling to recover to c83 against the
dollar by the end of the year with inflation seeming to
have peaked, as it eased for the first time in the year to
18.93% in December.
The deterioration of economic conditions as the year
went by was reflected in the downward trend of
quarterly GDP growth rates. In Q1 the economy grew at
4.9% (4.3% in Q1 2010). This rate slowed to 4.1% in Q2
2011 (4.6% in Q2 2010) and 3.6% in Q3 2011 (5.7% in Q3
2010). We expect GDP growth rate to have remained
subdued in Q4 2011 or even trended lower. In December,
the World Bank downgraded its 2011 annual GDP growth
forecast to 4.3% from 4.8%.
The Nairobi Stock Exchange went from hero in 2010 to
zero in 2011, as the slowing economy as well high fixed
income rates led to poor returns for the local bourse,
this despite a relatively stable political environment with
the fireworks expected come election time in 2013.
EQUITY RESEARCH
KENYA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
NSE - 20 4 432.60 3 205.02 -27.69% -32.52%
City Trust 160.00 280.00 75.00% 63.32%
Williamson Tea Kenya 185.00 282.00 52.43% 42.26%
Kapchorua Tea 100.00 125.00 25.00% 16.66%
Limuru Tea 300.00 335.00 11.67% 4.21%
CMC Holdings 12.25 13.50 10.20% 2.85%
Access Kenya 13.50 5.15 -61.85% -64.40%
Kenya Airways 46.00 20.75 -54.89% -57.90%
Housing Finance Co. 26.50 12.40 -53.21% -56.33%
Car & General (K) 47.00 22.75 -51.60% -54.83%
KenGen Co. Ltd 17.00 8.45 -50.29% -53.61%
Source: NSE
11
Top 10 stocks by market cap.
Company KES (m) USD (m) % of total
East African Breweries 139 967 1 601 16.01%
Safaricom 120 000 1 373 13.73%
Barclays Bank of Kenya 71 153 814 8.14%
Equity Bank 58 504 669 6.69%
Kenya Commercial Bank 49 280 564 5.64%
Standard Chartered Bank 46 219 529 5.29%
Bamburi Cement 45 370 519 5.19%
Co-operative Bank of Kenya 44 528 509 5.09%
KPLC 29 836 341 3.41%
BAT Kenya 26 300 301 3.01%
Source: NSE
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: NSE/S&P
NSE-20 relative to S&P Africa Frontier Index
02-Mar-11
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
NSE-20 S&P Africa Frontier
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011
With the NSE-20 having been up 36.50% (local
currency) and 27.70% (USD) in 2010, it was expected
to at best register a modest gain in 2011 if not a pull
back. The deterioration in economic conditions
caused the equity market to come under pressure and
the surge in interest rates made investors shift away
from equities to the more lucrative fixed income
market. The benchmark NSE-20 index finally ended
the year 2011 as the worst performer in SSA, down
27.69% (local currency) and 32.52% (USD). Likewise,
the all-share index (NASI) shed 30.45% (local
currency) and 35.10% (USD).
Annual market activity contracted to 5.72bn shares
worth USD 892.46m in comparison to 5.9bn shares
valued at USD 1.15bn that changed hands in 2010.
The telecommunication & technology sector
accounted for 56.74% of total volumes mainly as a
result of Safaricom’s dominance. The banking sector
was the most active in terms of turnover, contributing
40.83% to the total. The turnover ratio slightly
improved to 8.87% from 7.63% in 2010.
Foreign investor participation improved to KES
39.86bn (USD 0.48bn) from KES 26.93bn (USD 0.35bn)
in 2010. This represented 51.10% of 2011 turnover in
comparison to 30.0% of turnover in 2010.
Market capitalisation shrank to KES 868.24bn (cUSD
10.89bn) as at the end of 2011 from KES 1,166.99bn
(cUSD 13.96bn) as at the end of 2010. Market PER also
contracted to 8.35x at the close of 2011 from 14.71x
at the end of 2010.
There were three new listings in 2011. CFC Insurance
and Trans-Century listed by introduction in April and
July, respectively. Tough market conditions were
evident in British American’s IPO which only realised
subscription levels of rate of 60%. We think the
valuations may also have been a bit rich on this IPO.
The NSE achieved a major milestone in November
with the introduction of two FTSE backed tradable
indices: the FTSE NSE Kenya 25 Index and the FTSE NSE
Kenya 15 Index. We believe this development will lead
to increased visibility of the exchange amongst
foreign investors, hence boosting liquidity. It also
creates an opportunity for the development of index
based products, e.g. exchange traded funds.
The exchange changed its name from the Nairobi
Stock Exchange to the Nairobi Securities Exchange to
reflect its position as a trading platform of other
securities other than equities. It also reclassified
listed securities into twelve sectors to bring them in
line with the various sectors of the economy.
12
10 most active stocks by volume
Company Vol (m) % of total
Safaricom 3 195.65 55.87%
Equity Bank 456.46 7.98%
Kenya Commercial Bank 399.73 6.99%
KPLC 240.44 4.20%
Co-operative Bank of Kenya 222.66 3.89%
KenolKobil 185.86 3.25%
Mumias Sugar 161.02 2.82%
Barclays Bank of Kenya 146.32 2.56%
CMC Holdings 70.70 1.24%
KenGen 68.89 1.20%
Source: NSE
10 most active stocks by value
Company Val (USD m) % of total
Safaricom 133.64 14.97%
Equity Bank 119.47 13.39%
East African Breweries 111.23 12.46%
Kenya Commercial Bank 100.20 11.23%
KPLC 57.92 6.49%
Co-operative Bank of Kenya 43.57 4.88%
Barclays Bank of Kenya 40.92 4.58%
KenolKobil 22.10 2.48%
Kenya Airways 20.47 2.29%
Scangroup 19.63 2.20%
Source: NSE
20.15%
2.09%
3.31%
Source: NSE
13.71%
7.63%
1.05% 1.16%
7.97%
Market Cap. Composition
36.52%
6.40%
Agriculture
Automobiles & Accessories
Banking
Commercial & Services
Construction & Allied
Energy & Petroleum
Insurance
Investment
Manufacturing & Allied
Telcommunication & Technology

Market Outlook for 2012 Top Picks for 2012
We expect to see the effects of the difficult economic
environment in 2011 reflected in upcoming company
results. For example, banks’ results are expected to
take a hit from the marking to market of their bond
portfolios and a rise in NPLs. However, we believe this
information is already priced in most banking counters.
Inflation is likely to ease gradually as food prices drop
and on the back of a stronger shilling. The Central Bank
is therefore likely to hold the CBR at elevated levels
with slow easing. Developments in the Eurozone are
also likely to play a role in the country’s economic
outlook. This is mainly due to the fact that more than
25% of Kenya’s exports go to Europe.
Kenya is set to hold presidential elections later this
year or in early 2013. The contest is likely to be as
tight as the 2007 elections which plunged the country
into ethnic related chaos. Furthermore, two of the
frontrunners have cases pending at the International
Criminal Court, for their role in the 2007 post-election
violence. Some glimmer of hope to avoid a repeat of
the bedlam witnessed in the last election lies in the
adoption of a new constitution in 2010. This new set of
laws is meant to devolve some resources away from
central executive control to the grassroots. It may help
to ease any desire by the different ethnic groupings to
want ‘one of their own’ to be in power.
On a more positive note, the NSE CEO, Peter Mwangi
has said that eight new listings are expected in 2012,
with three companies having already confirmed. The
demutualisation of the exchange is also in the offing
and is expected to improve transparency and corporate
governance. An alternative exchange for SMEs; Growth
Enterprise Market Segment (GEMS); is also expected to
be launched soon.
There is no doubt that the NSE currently provides
numerous buying opportunities having closed the year
2011 at a PER of 8.35x. However, we expect the
market to trade sideways mainly because the economy
is expected to remain under pressure for a significant
part of the year. Additionally, political risk will be
heightened by the upcoming elections with most
investors sitting on the side-lines. We believe that it
may be a good time for investors to start looking for
good entry points at the NSE, especially the closer we
get to elections, in readiness for a possible bull run in
2013.
13
Kenya Commercial Bank - It is East Africa’s biggest bank
by assets with the most extensive branch network,
therefore best positioned to benefit from the region’s
integration and economic growth prospects. It is also the
biggest mortgage provider in East Africa, a region with
relatively low mortgage uptake and a housing shortage.
Furthermore, it’s one of the cheapest in the sector on a
PER of 5.62x relative to a sector average of 7.22x. Its main
weakness has been its high cost to income ratio relative to
peers but having started a restructuring process following
the appointment of McKinsey to review its processes, we
expect the group to realise greater efficiencies.
Equity Bank – The bank’s focus on the lower end of the
market has been a huge success leading it to be East
Africa’s most profitable bank as at 9M 11. It now seeks to
replicate its Kenyan model across East Africa. We believe
that microfinance still has huge potential in the region due
to the high number of unbanked people. Currently, trading
at a PER of 8.96x, we’re of the view that it offers an
attractive entry point into this fast growing sector.
KenolKobil – A fast growing oil marketer present in Kenya,
Uganda, Tanzania, Rwanda, Zambia, Ethiopia, Burundi,
Zimbabwe and Mozambique. It exhibits further regional
ambitions and has been touted as a possible takeover
target by global oil marketers. Its main drawback remains
fuel price controls in its key Kenyan market although from
its latest results, it seems to be weathering this well. It
currently trades at a PER of 8.58x.

The market retreated on negative sentiment and share
overhang
The MSE traded in negative territory, impacted indirectly by
the global financial crisis through foreign funds’ attempts to
exit the market as risk appetite declined leading to an
increase in redemption calls. Coinciding with Malawi’s foreign
exchange shortage and combined with the MSE’s relatively
low liquidity, this meant sell orders remained outstanding,
creating a share overhang in most counters.
The total market cap declined 20.1% in US dollar terms.
The total market cap for the Malawi registered stocks
declined 20.1% to US$ 1.0bn using the OMIR* rate. Although
the market gained 8.05% in kwacha terms, real returns were
negatively impacted by the depreciation of the local
currency. Only eight domestic counters (from a total of 13)
registered positive returns in local currency terms.
Market activity was constrained during the year
Although both volume and value traded improved on 2010
figures, they remained generally depressed with average daily
value traded of USD 0.2m or a market turnover of
approximately 0.02%. The counters which were active
included TNM, NMB, Illovo, NITL and FMB.
Acute foreign exchange negatively impacted economic
growth
The Malawi economy slowed down on acute foreign exchange,
electricity and fuel shortages. This can be attributed to policy
profligacy and the fallout with donors who contribute
approximately 40% of the country’s national budget. Although
the RBM devalued the USD/MWK by 10% to 165 from 150 in
early August 2011, this failed to eliminate the forex shortages
as the devaluation remains insufficient and well below the
parallel market rate of approximately MWK 260 : USD 1. The
fuel shortage impacted negatively on most industries with the
agriculture, manufacturing and transport sectors the hardest
hit. Although the Minister of Finance expects growth of 6.9%
in 2011 and 6.6% in 2012, the IMF doubt these will be
achieved due to a number of structural constraints e.g. fuel
and electricity shortages. Manufacturing capacity utilisation
has slowed to approximately 60% from highs of above 70%
with the viability of most operations threatened. The World
Bank forecasts growth rates of 5.6% in 2011 and 5.0% for
2012.
*OMIR: Average exchange rate calculated during the
hyperinflationary era using the Old Mutual share price.
14
Top 5 Gainers and Losers Opening Closing % Change % Change
Company Price Price (LC) (USD)
DSI INDEX 3 923 4 238 8.05% 0.35%
OML 28 000 42 600 52.14% 41.30%
REAL 100 120 20.00% 11.45%
NICO 920 1 100 19.57% 11.04%
ILLOVO 11 000 13 000 18.18% 9.76%
BHL 640 700 9.38% 1.58%
NITL 1 600 1 600 0.00% -7.13%
MPICO 310 300 -3.23% -10.12%
NBS 1 100 1 000 -9.09% -15.57%
NMB 5 865 5 250 -10.49% -16.87%
SUNBIRD 890 700 -21.35% -26.96%
Source: M SE
Top 10 shares by market cap.
Company MWK (m) USD (m)* % of Total**
Old Mutual 1 632 457.3 7 982.4 -
Illovo 92 747.8 453.5 41.77%
NBM 24 513.6 119.9 11.04%
Standard Bank 22 400.1 109.5 10.09%
PCL 21 646.0 105.8 9.75%
TNM 19 076.9 93.3 8.59%
FMB 16 353.8 80.0 7.36%
NICO 11 473.5 56.1 5.17%
NBS 5 207.4 25.5 2.35%
MPICO 3 447.1 16.9 1.55%
Source: M SE
*OM IR
** Local Index
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
02-Mar-11
DSI relative to S&P Africa Frontier Index
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
DSI S&P Africa Frontier
EQUITY RESEARCH
28-Sep-11
MALAWI
FEBRUARY 2012
2011 REVIEW & 2012 OUTLOOK
28-Oct-11
27-Nov-11
27-Dec-11

Market Outlook for 2012
Currency shortages to persist
With the authorities arguing that a devaluation would
trigger inflation and hurt the poor, a substantial
devaluation is unlikely in the short-term or at least before
the harvest. However, we believe the benefits of a
devaluation far outweigh the negative repercussions
especially given that the devaluation could pave the way
for constructive dialogue between Malawi and the IMF as
well as other international lenders. Furthermore, the
liberalisation of the FX market is also part of the IMF
requirements. Foreign reserves are at low levels of
approximately USD 200.0m, equal to 1.5 months import
cover from 3.4. Given the looming BOP deficit combined
with escalating inflation, the MWK will remain under
duress.
Inflation likely to soar
With food prices accounting for 58% of the consumer price
index, weather conditions tend to influence the inflation
outcome. The current agricultural season has been
impacted by the reduced government inputs (especially
fertiliser which was cut to about a quarter) support due to
forex shortages. Inflationary pressures are still
predominantly driven by supply side factors, with food and
fuel price increases accounting for most of the upward
pressure. With no IMF funds to shore up the currency in the
short to medium term and start restoring both international
and local confidence, the pending BOP crisis will further
shake the currency and fuel inflation. On the ground
anecdotal evidence suggests the inflation figure is running
at closer to 20%. Although the currency is pegged at USD
165: MWK, imported goods are priced at the parallel rate.
In our view, the first quarter of 2012 is likely to be
characterised by skyrocketing consumer prices exacerbated
by the lower agriculture output. We expect the average
inflation rate for 2012 to be at least 15%.
Real assets well poised for upside
In light of the spiralling inflation and the continued
currency weakness we believe it is a matter of time before
investors move into real assets away from the negative
returns on the money market where yields for 91-day TBs
are around 7.0% versus official inflation of 8.1%. This might
eventually push the demand for equities whose valuations
remain surprisingly low in light of the continued currency
weakness. The case for equities is further strengthened by
the generally good dividend yields with a market average
dividend yield of about 5.0%. The MSE (excluding Old
Mutual) is only capitalised at MWK 1.2bn (approximately
USD 1.0bn using the OMIR). Ratings remain attractive in
relation to Sub-Saharan Africa peers, in our view.
Furthermore, the foreign exchange shortage is unlikely to
last into perpetuity, and once the share overhang has
cleared, stock prices are likely to rebound fairly quickly.
15
10 most active stocks by volume
Company Vol (m) % of Total
TNM 1 446.27 90.96%
NBM 43.15 2.71%
FMB 29.73 1.87%
NITL 16.78 1.06%
MPICO 15.43 0.97%
NBS 11.83 0.74%
NICO 10.44 0.66%
Illovo 8.56 0.54%
REAL 4.44 0.28%
Standard Bank 1.39 0.09%
Source: MSE
10 most active stocks by value
Company Val (USD m) % of Total
TNM 16.56 36.27%
NBM 16.04 35.13%
Illovo 6.11 13.38%
NITL 1.67 3.65%
FMB 1.29 2.81%
PCL 0.98 2.15%
Standard Bank 0.91 1.99%
NBS 0.78 1.71%
NICO 0.78 1.70%
MPICO 0.30 0.66%
Source: MSE
Source: MSE
51.54%
Market Cap. Composition
1.55%
31.78%
5.30%
1.23%
8.59%
BANKING
INSURANCE
TOURISM
TELECOMS
PROPERTY
MANUFACTURING

Top Picks for 2012
PER PBV
Company Price
Hist. T+1 T+2 Hist. T+1 T+2
Recom.
FMB 650.0 8.6 6.7 5.3 2.0 1.7 1.4 BUY
MPICO 300.0 0.0 0.0 0.0 0.0 0.0 0.0 BUY
NBM 5,250.0 7.1 5.5 4.5 1.8 1.5 1.2 BUY
NBS 976.0 3.6 2.5 2.1 1.4 1.1 0.8 BUY
NICO 1,050.0 3.7 3.1 2.6 1.2 0.9 0.7 BUY
Press Corp. 18,000.0 4.1 2.9 1.9 0.8 0.6 0.5 BUY
Std. Bank 10,600 15 14 12 0.8 0.6 0.5 BUY
NBS 976 3.6 2.5 2.1 1.4 1.1 0.8 BUY
Source: MSE
We think the current market pull offers some buying
opportunities for long-term investors. Nonetheless,
investing on the MSE is a long-term play given issues
with repatriation of currency for now, while there is the
devaluation risk to consider which can erode any gains
overnight.
However, earnings growth for most listed companies is
generally expected to be weaker given the economic
woes. Deposit growth for banks has generally been
slower and most account holders are multi-banked as
they chase facilities. Provisions for banks are set to
increase given the economic slowdown, with those with
significant exposures to tobacco, transport and
construction likely to be the hardest hit. For banks,
forex income has slowed and focus is on efficiency.
However, we believe listed banks will weather the
storm given the generally solid balance sheets and
stringent credit control.
16
In our view, companies that rely on local inputs
commanding a dominant market share do well going
forward, especially Press Corp and NICO.
The tourism sector has been negatively impacted by the
fuel shortages and the reduced donor activities which
affected the conferencing business. Furthermore, the
overvalued local currency means that Malawi is, relatively,
an expensive destination for international visitors.
Property companies should perform reasonably well and
MPICO can potentially surprise on the upside.
We expect companies with significant export earnings and
external links to perform strongly in light of the weak
currency especially Illovo and Old Mutual and to a lesser
extent Press Corp. Old Mutual with a large part of its
business external to Malawi will probably continue to
reflect the street value of its external holding. The
current Old Mutual price indicate an exchange rate of
about MWK 230 : USD1, implying investors can bring in Old
Mutual shares and invest in other counters that offer
significant upside.

Given its traditionally strong economic ties with the
Eurozone, the debt crisis on that continent continued
to weigh negatively on the economy, and by extension,
on the Stock Exchange of Mauritius.
In August last year, the finance ministry cut its growth
targets for the period from 2012-2014 to 4% from 5%, due
to declining tourism revenues from the crisis-hit
Eurozone. At the same time it announced a raft of
reforms that would look to favour growth, improve
welfare and reinforce crisis-prevention systems. The
important Mauritian tourism economy generates about
10% of the country’s GDP, and visitors from debt-mired
Europe traditionally account for around two thirds of
arrivals.
Thus the broader economy remained the major mover of
the exchange in 2011, with economic commentators,
including the African Development Bank, AfDB, noting the
need for the country to restructure its economy, saying
that future overall growth will rely in some part on
Mauritius tackling its fiscal and current account deficits,
high dependency on traditional export partners, high
import-dependence, and relatively poor infrastructure.
According to statistics published by the statistical office,
the economy ended up growing by 4.1% in 2011, with the
performance of the main industry groups as follows:
Sugarcane +0.6% compared to decline of 6.4% in 2010;
manufacturing +3.5% (+2.1% in 2010); construction -1.8%
(+4.3% in 2010), hotels and restaurants +4.0% (+6.0% in
2010); transport, storage and communications +5.5%
(+5.3% in 2010) and financial intermediation which grew
by 5.5%, compared to 4.3% growth in 2010.
Positively, Mauritius continued to score highly in the in
terms of ease of doing business indices, with the World
Economic Forum’s ‘Global Competitiveness Report 2011-
2012’ ranking Mauritius second in Africa, (just 4 places
behind South Africa), at number 54 in the world in terms
of its competitiveness.
Politically, the country was relatively stable, although
there was a slight wobble in July when the then finance
minister and five other members of his alliance partner
Militant Socialist Movement (MSM) party quit the
government in protest against the arrest of the health
minister by an anti-graft watchdog after she was accused
of inflating a government tender to acquire a private
hospital. The finance minister was subsequently replaced
and the cabinet reshuffled, with no real change in policy,
thus restoring any lost investor confidence.
17
Source: SEM/CIM
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
02-Mar-11
01-Apr-11
EQUITY RESEARCH
MAURITIUS
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
Semdex 1 967.45 1 888.38 -4.02% 0.09%
Gamma Civic Ltd 297 398 34.01% 39.74%
Innodis Ltd 31.8 39.8 25.16% 30.52%
Vivo Energy M auritius Ltd 137 161 17.52% 22.55%
M CFIndustry Ltd 38 43.3 13.95% 18.83%
Rogers & Co. Ltd 293 325 10.92% 15.67%
M SM 17.1 13.5 -21.05% -17.67%
United Docks 124 96 -22.58% -19.27%
Dale 20.5 15.8 -22.93% -19.63%
NM H 110 81.5 -25.91% -22.74%
Caudan 2.05 1.5 -26.83% -23.70%
Top 10 shares by market cap.
Company MUR (m) USD (m) % of Total
M CB 41 812.70 1 486.47 24.38%
SBM 25 514.20 907.05 14.88%
NM H 13 156.00 467.71 7.67%
ENL Land 8 884.10 315.84 5.18%
Rogers 8 191.50 291.21 4.78%
IBL 5 572.20 198.10 3.25%
Sun Resorts 5 397.70 191.89 3.15%
Gamma Civic 5 303.40 188.54 3.09%
Omnicane 4 925.40 175.10 2.87%
Vivo Energy 4 720.90 167.83 2.75%
Source: SEM/CIM
Semdex relative to S&P Africa Frontier Index
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
Semdex S&P Africa Frontier
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011
The Stock Exchange of Mauritius’ main board, the
Semdex, shed 4.02% in local currency terms to close at
1,888.38 points, while reflecting a flat return in USD
terms, as it put on a marginal 0.09%, thanks to the
currency strengthening against the dollar as at FY 2011.
The net result for the year was a disappointment after a
strong start to the year had seen the index hit a record
high of 2,113.61 points in May. Foreign investors were net
sellers to the tune of MUR 480m, inclusive of a 5.2%
disposal of shares in Rogers. Without that exceptional
sale, net outflows were MUR 117.0m.
Market capitalisation closed at USD 5.7bn, up 0.74% y-o-y,
while turnover increased by 32.99% to USD 499.1m.
Turnover by volume was 244.0m shares vs. 339.4m in
2010, a 28.11% decline. The market PER ended the year
at 11.29x, lower than 2010’s 14.05x, while the dividend
yield was at 3.04% compared with 2.50% as at FY 2010.
There was one new listing on the exchange in 2011, with
Go Life International PCC being the first company to be
listed on the official market whose securities are traded
and settled in USD. The company is structured as a
protected cell company and is regulated by the Financial
Services Commission. It was established to effect the
acquisition of 45% of the equity shareholding of Go Life
Health Products Ltd (SA). Go Life (SA) is involved in the
“nutraceutical” market. The term “nutraceuticals” refers
to extracts of foods having a medicinal effect on human
health. Having listed at US10c per share, the company
reached a high of US16c before eventually closing at US9c
per share.
Market Outlook for 2012
In sympathy with the concerns around the Eurozone, the
market has opened the year on a weak note, shedding
3.19% to the end of January 2012, with the Sem-7 down
2.66% as SBM and NMH in particular have started poorly.
Looking at the economy as a whole, the Central Statistics
Office expects GDP to grow by around 4.0% in 2012,
slightly lower than the 4.1% registered in 2011. Exclusive
of sugar, the growth rate would be 3.9% compared to
4.2% in 2011. The key tourism sector is expected to grow
by 3%, with tourist numbers which grew to 964,642
against a forecast 980,000 in 2011, expected to increase
to 1.01m in 2012 as the country continues to increase its
marketing efforts towards Asia.
The World Bank has the same estimate growth rate for
2011 of 4.1%, but is rather more negative on the outlook,
forecasting real GDP growth of 3.3% in USD terms for
2012, before recovering to 4.3% in 2013. The sooner the
Eurozone crisis is resolved, the better for Mauritius, but
given the relatively cautious GDP outlook, we think the
market will reflect the same chariness in 2012.
18
10 most active stocks by volume
Company Vol % of total
MDIT 42 248 066 17.31%
ENL Land 25 987 774 10.65%
VIVO Energy 22 614 974 9.27%
MCB 21 222 117 8.70%
ENL Land (P) 18 342 422 7.52%
Caudan 15 839 346 6.49%
NMH 10 763 420 4.41%
SBM 9 021 668 3.70%
Lux Island Resorts 8 711 415 3.57%
Air Mauritius 8 629 606 3.54%
Source: SEM/CIM
10 most active stocks by value
Company Val (USD) % of total
VIVO Energy 131 727 318 24.77%
MCB 131 169 237 24.66%
ENL Land 41 166 074 7.74%
NMH 38 740 928 7.28%
ENL Land (P) 30 055 299 5.65%
SBM 29 539 100 5.55%
Lux Island Resorts 9 166 238 1.72%
MDIT 8 610 886 1.62%
Air Mauritius 5 341 924 1.00%
Caudan 996 434 0.19%
Source: SEM/CIM
13.08%
12.77%
8.25%
Source: SEM/CIM
8.05%
12.91%
Top picks for 2012
Market Cap. Composition
0.95%
0.24%
43.75%
Banks & Insurance
Commerce
Industry
Investments
Leisure & Hotels
Sugar
Transport
Foreign
MCB - Our preferred banking stock on the Mauritian
bourse; earnings growth expected to be fairly mundane
in 2012, but longer term fundamentals are sound;
Growth to be driven more by product diversification and
regional expansion.
LUX Island Resorts (formerly Naiade Resorts) – The
tourism sector has lagged in terms of performance over
the past couple of years, saddled by poor demand from
its key European market as well as high indebtedness as
expansion capex was pursued just as the GFC hit in
2008; in our last sector report we had Lux as a hold, at
its then price of MUR 29 per share. It has since dropped
to MUR 23.20. While 2012 is likely to prove challenging
once more, we think long term investors should look to
accumulate shares at current levels.

The next hot spot for oil exploration? In a positive
development for Namibia, the Ministry of Mines and Energy
announced last year that an estimated 11.0bn barrels in oil
reserves were found off Namibia's coast, with first
production planned within four years. The find could put
Namibia on par with neighbouring Angola, whose reserves
are estimated at around 13.0bn barrels and whose
production rivals Africa's top producer, Nigeria. These
potential crude oil resources will have a considerable
impact on the country.
Having a strongly mining biased economy, Namibia has
largely benefited from the boom in commodity prices and
GDP growth has been strong in the past five years (4.4% on
average). However, the reliance on mining (41% of goods’
export earnings in 2010 and 9.0% of GDP) renders the
economy vulnerable to external shocks.
Like other countries in the region, Namibia has sought to
cash in on historically high commodity prices. In August
2011, the Namibian government decided not to implement
its plan to raise the corporate income tax rate for the nondiamond
mining sector from 37.5% to 44%, following
concern from the industry. The finance ministry has
instead proposed a formula-based surcharge to “capture
additional mining revenue during better economic
periods”. The government is also pushing through
parliament plans for the state-owned Epangelo Mining
Company to be assigned all mining and exploration rights
for strategic minerals, which include zinc, copper, coal,
uranium and gold, but not diamonds.
Amidst positive news was the potentially investor
unnerving situation involving Walmart’s takeover Massmart
Holdings and its African operations, including Namibia. The
Namibian Supreme Court ruled on appeal that the decision
by competition authorities to impose conditions on
Walmart's purchase of Massmart, which has three local
subsidiaries, should stand, setting aside a High Court ruling
from earlier in the year that had scrapped the conditions
imposed by the Competition Commission. The ruling also
gives Trade and Industry Minister Hage Geingob a final say
over whether conditions attached to the deal by the
Competition Commission are adequate. As was the case
with South Africa, there are concerns that too many
conditions applied to such transactions interfere with the
free market and could dissuade FDI.
Politically, the country remained stable, no surprise really
given the massive dominance of President Hifikepunye
Pohamba and the ruling South West Africa People’s
Organisation (SWAPO) party.
The local index seemed to take a cue from the positive
economic developments and was the third best performing
in SSA in 2011.
19
EQUITY RESEARCH
NAMIBIA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
NSX - Local 172.72 221.19 28.06% 3.62%
Nictus 1.05 3.00 185.71% 131.18%
Nambrew 7.86 12.00 52.67% 23.53%
Shoprite 99.85 136.20 36.40% 10.37%
Old Mutual 12.98 17.06 31.43% 6.35%
Oceana Group 38.5 48.00 24.68% 0.88%
Paladin Energy 33.57 10.94 -67.41% -73.63%
Afrox 20.65 16.20 -21.55% -36.52%
Investec 55.98 44.07 -21.28% -36.30%
Anglo-American 345.43 296.40 -14.19% -30.57%
Standard Bank 107.55 99.25 -7.72% -25.33%
Source: NSX
Top 10 shares by market cap.
Company NAD (m) USD (m) % of Total
Anglo-American plc 399 910 50 239 35.63%
Standard Bank Group 157 683 19 809 14.05%
Firstrand 117 720 14 789 10.49%
Old Mutual Plc 98 953 12 431 8.82%
Shoprite Holdings 74 022 9 299 6.59%
Nedbank Group Limited 73 577 9 243 6.56%
Sanlam Limited 60 585 7 611 5.40%
Truworths 33 888 4 257 3.02%
MMI Holdings Limited 25 673 3 225 2.29%
Barloworld Limited 17 385 2 184 1.55%
Source: NSX
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
NSX Local relative to S&P Africa Frontier Index
02-Mar-11
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
NSX Local S&P Africa Frontier
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011
The NSX local index was one of the few indices that
ended the year on a positive footing. The index gained
28.06% in local currency terms and 3.62% in USD terms to
close the year at 221.19 points. On the other hand, the
NSX overall index lost 3.34% in local currency terms to
close at 838.42 points.
The key point, however, is the fact that the Namibian
Stock Exchange (NSX) comprises mostly JSE dual-listed
shares, with Anglo-American representing 36% of the
total market capitalisation. Other big constituents
include Standard Bank (14%), First Rand (10.5%), Old
Mutual plc (8.8%) and Shoprite Holdings (6.6%). The seven
listed local Namibian companies constitute less than 1.0%
of total market capitalisation. The NSX local index is
therefore less exposed to global market influences.
Furthermore, local stocks have largely benefited from
regulation forcing local asset managers to hold 35% of
their portfolios in domestic companies. Thus, the NSX
overall index tends to move in line with the JSE.
Looking at performances, the top gainers in 2011 were
Nictus (+185.71%), Nambrew (+52.67%), Shoprite
(+36.40%), Old Mutual (+31.43%) and Oceana (+24.68%).
Anchoring the losers were Standard Bank (-7.72%), Anglo
American (-14.19%), Investec (-21.28%), Afrox (-21.55%)
and Paladin Energy (-67.41%). Anglo American was the
most active in terms of value traded as it constituted
20.29% of the total, whilst Old Mutual was the most
active by volume, contributing 25.07% to the total.
Market Outlook for 2012
GDP growth which has largely been propelled by
investment in mining is expected to average between
4.0% and 5.0% through to 2015. Growth in the mining
sector should continue in 2012 owing to significant
investments. Namibia was the world’s fourth largest
producer of uranium in 2010 after Kazakhstan, Canada
and Australia. Several new large-scale projects should
significantly increase production in the medium term.
We opine that Pohamba is likely to maintain SWAPO’s
broadly pro-business policies to ensure Namibia
continues to attract sizeable FDI inflows, particularly
into the mining sector. FDI expanded 147% between
2005 and 2010 to USD 858.0m and inflows are set to
continue growing in 2012, with investments in uranium,
gold, manganese and marine phosphates projects and
associated industrial projects associated industrial
developments. We also expect external debt liabilities
to remain relatively modest with little risk of external
debt servicing problems.
Namibia’s outlook is closely tied to that of South Africa,
which may suffer from its relatively close connection to
the sputtering developed markets in Europe. Given the
fact that the NSX comprises mostly dual-listed shares
(FTSE or JSE/FTSE) and that the NAD is pegged, one-toone
against the ZAR (under the CMA agreement),
prospects on the NSX overall are also hinged mainly on
global factors. With the JSE expected to have a strong
year given its performance thus far, we expect the NSX
to follow suit.
20
10 most active stocks by volume
Company Vol (m) % of total
Old Mutual Plc 24.80 25.70%
Firstrand 16.16 16.74%
MMI Holdings Limited 15.14 15.69%
Bidvest Namibia Limited 5.66 5.87%
Afrox 4.99 5.17%
Investec Limited 4.97 5.15%
Sanlam Limited 4.44 4.60%
Standard Bank Group 3.79 3.92%
Barloworld Limited 2.81 2.91%
Anglo-American plc 2.08 2.15%
Source: NSX
10 most active stocks by value
Company Val (USD m) % of total
Anglo-American plc 92.53 20.29%
Standard Bank Group 52.16 11.44%
Old Mutual Plc 49.04 10.75%
Firstrand 44.68 9.80%
MMI Holdings Limited 35.50 7.78%
Investec Limited 34.34 7.53%
Nedbank Group Limited 28.80 6.31%
Barloworld Limited 26.86 5.89%
Sanlam Limited 17.37 3.81%
Truworths 16.67 3.65%
Source: NSX
Source: NSX
9.63%
35.63%
1.55%
Top Picks 2012
Market Cap. Composition
2.63%
50.57%
Financials
Industrial Metals
Retailers
Industrials
Others
Our recommended strategy for investors on the NSX would
be to focus on local equities;
We like FNB Namibia given its consistency in earnings
growth (CAGR of c13% over the past decade), a lucrative
dividend payout ratio of 40% that is often augmented by
special dividends (NAD 1.70 per share in FY 11), as well as
stable and consistent growth in valuation.
Nambrew is also unique in that is has penetrated regional
premium markets in countries such as South Africa and
Angola. Furthermore, it has managed to launch products in
the UK, Cameroon, Kenya and Uganda through a global
distribution, brewing and licensing agreement with Diageo
Plc for some of its brands. At a forward PER of 12.0x,
Nambrew definitely looks undemanding compared with its
peers in SSA. While the share price has galloped to historic
highs, we still see value in the stock.

With the banking sector expected to have stabilised in
2011 following the passing of the AMCON Bill and
subsequent mopping up of NPLs from the sector to the
tune of an estimated NGN 2.8tn or (cUSD 17.4bn), the
NSE seemed set for a recovery, with the only caveat
seemingly likely to arise from what was set to be a
highly charged political environment with presidential
elections set for 2011.
The election, finally held on 16 April after
“administrative” delays, was conducted relatively
peacefully and saw the incumbent, Goodluck Jonathan,
garner 59% of the 38.2m votes cast, against 32% for his
main rival, Muhammadu Buhari, a former military ruler
from the country’s arid north. The conduct of the
election was generally hailed as a big improvement on the
polls held in previous years, and with the result meaning
a continuation of the ruling PDP/Goodluck
administration’s policy reform agenda, the plebiscite
should have proved market positive, but it did not provide
the spark required.
All hope for the market then turned once again to the
banking sector, as AMCON went about the business of
cleaning up NPLs from the banking sector. With the mop
up operation targeted for 31 October 2011, AMCON’s CEO
Mustafa Chike-Obi estimated that all in all the company
would have purchased NGN 2.8tn (cUSD 17.4bn) in NPLs
from 21 banks at a cost of about NGN 1.2tn. Aside from
the NPL purchases, Bloomberg quoted Chike-Obi as saying
AMCON had also bought loans that while performing were
considered a risk to the sector, with 3 companies (Zenon
Petroleum, Seawolf and Geometric) in particular owing
various banks a combined NGN 275bn alone.
Along with the AMCON clean-up, the Central Bank of
Nigeria, CBN, also required that the rescued banks be
recapitalised by 30 September 2011. Wema Bank and
Unity Bank were successfully recapitalised, while five
banks entered into different M&A deals. Union Bank
shareholders approved a USD 750m injection by a group of
private equity investors led by African Capital Alliance
who now own 60% of its equity; Intercontinental Bank Plc
merged with Access Bank; Oceanic Bank was recapitalised
by Ecobank Transnational Inc and was to be merged with
its Nigerian subsidiary Ecobank Plc; FinBank was taken
over by FCMB and Equitorial Trust Bank was to be merged
with Sterling Bank. In August, the CBN revoked the
licenses of three banks for failing to show ability to
recapitalise ahead of the deadline, for all intents and
purposes nationalising Bank PHB, Afribank and Spring
Bank. The assets of these banks were transferred to three
newly created entities: Keystone Bank, Enterprise Bank
and Mainstreet Bank, respectively.
21
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
02-Mar-11
01-Apr-11
EQUITY RESEARCH
NIGERIA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % change % change
Company Price Price (LC) (USD)
NSE ASI 24 770.52 20 730.63 -16.31% -20.35%
Roads Nigeria 3.01 8.69 188.70% 174.76%
Union Bank 4.20 10.60 152.38% 140.20%
Capital Hotel 3.30 6.78 105.45% 95.53%
Champion Breweries 2.23 4.03 80.72% 71.99%
Okomu Oil 15.20 23.10 51.97% 44.64%
Paints & Coatings 3.36 0.52 -84.52% -85.27%
Diamond Bank 7.50 1.92 -74.40% -75.64%
Fidson Healthcare 3.06 0.79 -74.18% -75.43%
CCNN 15.49 4.35 -71.92% -73.27%
Dangote Sugar 16.00 4.70 -70.63% -72.04%
Source: NSE
Top 10 stocks by market cap.
Company NGN (m) USD (m) % of total
Dangote Cement 1 716.27 10 762.08 26.24%
Nigerian Breweries 714.06 4 477.58 10.92%
GT Bank 419.39 2 629.86 6.41%
Zenith Bank 382.41 2 397.94 5.85%
Guinness Nigeria 368.73 2 312.17 5.64%
Nestle Nigeria 353.26 2 215.13 5.40%
First Bank of Nigeria 290.43 1 821.15 4.44%
Stanbic IBTC 155.63 975.86 2.38%
Lafarge Wapco 129.82 814.05 1.99%
ETI 129.80 813.95 1.98%
Source: NSE
NSE-ASI relative to S&P Africa Frontier Index
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
NSE ASI S&P Africa Frontier
28-Sep-11
28-Oct-11
27-Nov-11
27-Dec-11

Other positive developments that should have boosted
market sentiment during the year included ongoing
exchange reforms such as directing all stockbroking firms
to segregate their accounts from those of clients, a new
code of corporate governance for operators, the
enforcement of minimum capital requirement for
stockbroking firms, a commitment to push for the
adoption of IFRS by all listed firms and active discussions
around the demutualisation of the exchange.
Despite the progress made towards resolving the banking
sector crisis, as well as the aforementioned market
reforms, the banking sector and the broader NSE index
still closed the year in the red. We believe the main
reasons for the market reticence in 2011 were reduced
risk tolerance from foreign investors to frontier and
emerging market equities because of Eurozone debt
concerns as well as tight liquidity in Nigeria for much of
the year as banks remained cautious with regards lending
while the increase in the Monetary Policy Rate by the CBN
from 6.25% in January to 12% in December made fixed
income securities relatively more attractive versus
equities, adding further downward pressure on the NSE.
Market Review for 2011
Given the above, the NSE All Share Index shed 16.31% to
close at 20,730.63 in 2011, (2010: +18.93%). The decline
in USD terms was approximately 20.35%. All four quarters
recorded negative returns during the year, with Q3 in
particular taking the biggest hit, the market shedding
17.51%. The Q3 performance was precipitated by the
three bank nationalisations, the 30 September
recapitalisation deadline, further monetary tightening by
the CBN with new prudential guidelines being issued and
political instability due to an escalation in Boko Haram
bomb attacks, including an attack on the UN compound in
Abuja in August. All four main NSE sector indices closed
the year in the red, namely the Food & Beverage
(-24.26%), Banking (-31.28%) and Oil & Gas (-35.04%),
while the Insurance sector lost 14.73%.
Total equity market capitalisation closed at NGN 6.54tn
(cUSD 40.87bn) compared with NGN 7.92tn (cUSD 51.6bn)
in 2010. There were no new listings in 2011, where 2010
had seen market behemoth Dangote Cement coming to
market. The banking sector sub index, following its poor
performance, lost its status as the most capitalised,
contributing 28.16% (2010 – 34.20%) to the total equity
market capitalisation and was overtaken by the
admittedly Dangote Cement skewed building materials
sector with 28.97%, (2010 - 26.00%). The breweries sector
remained in third place, although with an increased
contribution from 11.10% to 16.85%. Financials remained
the most traded, with 61% of volumes and 58% of value.
Looking at market activity, aggregate stock market
turnover by volume between January and December 2011
was 89.6bn shares (2010 - 93.3bn shares), a 3.97%
decline, while value traded at NGN 634.9bn (2010 - NGN
797.6bn) fell by 20.40%. In USD terms, value traded in
2011 equated to approximately USD 4.1bn compared with
USD 5.4bn in 2010. Q1 was the most active quarter by
volume and Q4 the most active by value.
22
The turnover ratio deteriorated to 8.36% from 12.51%.
Foreign portfolio investment amounted to a net inflow of
NGN 177.1bn, (2010 - NGN 171.0bn), or circa USD 1.2bn,
with inflows amounting to NGN 511.7bn and outflows to
NGN 334.6bn (2010 - NGN 350bn and NGN 178.8bn,
respectively). Average volumes per day were 364.15m,
while average value traded was approximately USD
16.99m (2010 - 377.9m shares and USD 21.1m
respectively).
10 most active stocks by volume
Company Vol (bn) % of total
Transcorp 8.24 9.20%
Zenith Bank 7.76 8.66%
Guaranty Trust Assurance 7.60 8.48%
First Bank of Nigeria 5.98 6.68%
UBA 5.22 5.82%
GTB 4.45 4.96%
Access Bank 3.33 3.72%
Diamond Bank 2.72 3.03%
Fidelity Bank 2.66 2.97%
Skye Bank
Source: NSE
1.49 1.66%
Nigeria
10 m ost active stocks by value
Company Val (USD m) % of total
Zenith Bank 721.69 17.53%
First Bank 477.74 11.61%
Guaranty Trust Bank 446.48 10.85%
Nigerian Breweries 239.70 5.82%
UBA 186.43 4.53%
Oando 169.31 4.11%
Access Bank 155.04 3.77%
Guinness Nigeria 130.79 3.18%
Nestle Nigeria 107.18 2.60%
Flour M ills Nigeria
Source: NSE
102.65 2.49%
0.95%
0.52%
Source: NSE
0.13% 3.33%
29.27%
1.05%
Market Cap. Composition
30.82%
0.34%
0.98% 1.98%
30.64%
Agriculture
Conglomerates
Const./Real Estate
Consumer Goods
Financial Services
Healthcare
ICT
Industrial Goods
Natural Resources
Oil & Gas
Services

Market Outlook for 2012
While we had thought politics would potentially be the
only caveat in our relatively bullish expectations for the
market in 2011 with the banks driving a recovery, the
reverse turned out to be the case, as the elections were a
success while the banking sector remained in the
doldrums.
In 2012, politics have already shown that it will be a
major factor, with Goodluck Jonathan having already had
to deal with a civil service strike related to his attempts
to remove the fuel levy (estimated cost USD 8bn a year)
as part of his reform agenda, while the militant group
Boko Haram, has escalated its attacks in the country’s
second city of Kano in the North, adding fire to the
tenuous political environment and by extension, investor
concerns.
The fuel levy issue seems to have been resolved, for now,
with a compromise that saw a 50% reduction in the fuel
levy, taking the price of petrol to NGN 97/l from NGN
65/l (full subsidy removal would have seen the price
shoot up to NGN 141/l).
With regards Boko Haram, Goodluck has vowed to hunt
down and crush the grouping, and will need to show a
strong hand to maintain a semblance of control and
order. This however, is likely to lead to increased attacks
by Boko Haram in response. While we don't expect this to
escalate to widespread civil strife/Muslim vs. Christian
violence, we think the situation will remain volatile in the
short to medium term.
Implications for the market of the above are that while
we see value on the NSE, particularly in the banks which
are now on a much more solid footing, investors are likely
to remain circumspect about the environment and this
will see the NSE oscillating around current levels. Any
continued delays in resolving the Eurozone issues will also
add to the risk aversion Nigeria’s internal problems may
create, which will further limit foreign investor
participation which is crucial to liquidity in a market in
which foreign investors contribute more than 70% to
market activity. Relatively high rates on the fixed income
side may also continue to see local investors reticent
about the equities market, as the effects of the fuel
increase on inflation are likely to see the CBN maintaining
a tight monetary policy.
Despite the immediate challenges facing Nigeria, the
longer term prospects for the economy and by extension
the market, remain positive. The World Bank in its
‘Global Economic Prospects January 2012’ notes that
growth prospects for Nigeria remain “robust, forecast at
7.1% and 7.4% for 2011 and 2012 respectively, driven
again, by the non-oil sector, primarily on the consumer
front. We expect consumer driven stocks to reflect this
growth in the future and would encourage investors to
look for value while the market is seemingly out of
favour.
23
Top Picks for 2012
We continue to see plenty of value in the Nigerian
banking sector in particular, with ironically, its liquidity
counting against it as the primary exit for the “risk off”
trade. The wider consumer and infrastructure related
sectors should also remain on the radar screen. Our top
picks are the following:
Banking
Access Bank – In our view likely to be the biggest
beneficiary of the sector’s M & A activity. Well run bank,
middle market focus a differentiator.
ETI – Oceanic acquisition to give it critical mass in
Nigeria, which is a huge positive; has also scaled up in
Ghana with Trust Bank acquisition; Nedbank alliance
could become more tangible if Nedbank exercises
convertible option and takes up equity.
First Bank – Top tier bank, remains Nigeria’s largest by
most metrics, in a market where size is viewed as a sign
of safety and stability, while enabling it to consistently
write large ticket business.
GTB – Impressive management team; technologically
driven growth strategy; strong presence in the corporate
market. Remains our favourite pick in the sector.
Zenith Bank – Another of the tier 1 banks, well placed to
benefit from Nigeria’s growth. Very liquid, so room to
grow risk assets and profitability. Ex-Nigeria operations
profitable, should add further to profits going forward.
Consumer
Nigerian Breweries – High current PER, but Nigeria’s per
capita beer consumption remains low at c7.0l pp
suggesting massive potential upside. Has consolidated its
position in the sector via acquisition.
Flour Mills Nigeria - Attractive valuation, arguably the
best value proposition among Nigerian consumer
companies; 50% of the Nigerian flour market share;
cement business set to contribute positively to the group.
PZ Cussons – Benefiting from improved efficiency
following plant rehabilitation, diversified product mix
with white goods expected to underpin performance.
UACN – Ideally placed to benefit from growing middle
class consumers; JV with Tiger Brands making solid
progress; actively pursuing franchise model.
Infrastructure
CCNN – Speculative buy. The program to raise funds and
implement the expansion and energy source substitution
is now in motion; share price expected to recoup some of
its losses, while a gain in installed capacity share
indicates brighter business prospects post the expansion.

Rwanda fared better than its EAC peers in 2011 with the
RWF largely retaining its purchasing power and inflation
remaining in single digit territory. The 2011 GDP growth
outturn is expected at 8.8%, an improvement from
2010’s 7.5%, although it is expected to slide to 7.6% in
2012. Better than expected growth from the
agricultural sector, underpinned by the government
sponsored Crop Intensification Program (CIP) was the
key driver in 2011 and we expected agriculture to play a
similar pivotal role in 2012.
While inflation rose and the RWF depreciated in 2011,
Rwanda was not impacted to the extent observed
amongst some of its EAC peers. The National Bank of
Rwanda (RNB), hiked its key repo rate in October from
6.0% to 6.5% in response to spiking y-o-y inflation which
rose from 0.2% in December 2010 to reach 8.3% in
December 2011. A region wide improvement in food
supply is however expected to ease inflationary
pressures in 2012, but for Rwanda, expectations are
that further monetary tightening will be required to
tame inflation.
The RWF, likewise, depreciated by a smaller margin
compared to EAC peers, opening the year at USD/RWF
584.40 and ending 2011 1.8% weaker at USD/RWF
594.95. Indications are that the RWF will remain
resilient in 2012, especially given improvements in local
food supply and the fact that it retained its lustre in the
face of significant headwinds in 2011.
Market Review for 2011
The Rwanda Stock Exchange (RSE) officially commenced
operations in Q1 11 as Brasseries eLimonaderies du
Rwanda (Bralirwa), a government exit, debuted. Four
counters have since been listed with the second
domestic stock; Bank of Kigali (BoK) – another
government exit, coming on board in H2 11 via an IPO.
Other listed counters are National Media Group and
KCB, both with primary listings in Kenya. The RSE is yet
to have an index, but, with the number of listed
companies increasing, we expect one to be created
soon.
Activity started slowly, but peaked progressively during
the year. A total of 118m shares worth USD 207m
changed hands with BoK accounting for half of the
volumes and BRALIRWA weighing in with 60.8% of
turnover. Domestic listings were the most liquid and we
expect the trend to be carried forward into 2012 with
activity improving as and when more local companies
list.
24
EQUITY RESEARCH
RWANDA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Gainers and losers - 2011 Opening Closing % Change % Change
Company Price Price (LC) (USD)
BRALIRWA 136 333 144.85% 140.20%
NMG 1 200 1 200 0.00% -1.90%
KCB 174 175 0.57% -1.33%
BOK 125 127 1.60% -0.33%
Rank by market c ap. RWF (m) USD (m) % of Total
KCB 1 391 608 2 338.42 61.63%
National Media Group 501 522 842.75 22.21%
BRALIRWA 287 624 483.32 12.74%
Bank of Kigali 77 431 130.11 3.43%
Activity by volume Vol (m ) % of Total
Bank of Kigali 60.45 51.17%
BRALIRWA 57.67 48.82%
KCB 0.01 0.01%
NMG 0.00 0.00%
Activity by value Val (USD '000) % of Total
BRALIRWA 126 538 60.85%
Bank of Kigali 81 407 39.14%
KCB
Source:IAS/RSE
22 0.01%
Market Review for 2011
Rwanda has been among the top global performers on
the IFC’s ‘Doing Business’ report which should augur
well for FDI going forward. The country wants to
establish itself as a regional technology hub with the
completion of a 3,200km national fibre-optic backbone
testifying to that conviction. However, 2012 GDP growth
is expected to show a slowdown, with the World Bank
forecasting 7.6% for 2012 on the back of anticipated
anti-inflation monetary tightening. Further government
exits from companies such as MTN, CEMERWA and
Sonarwa are, nonetheless, expected to spur activity at
the RSE in 2012, should they occur. We do not expect
any significant changes in the trading trend; domestic
listings are expected to dominate with activity
progressively improving as the RSE’s visibility increases.
Top Pick for 2012
BRALIRWA is the leading beer and sparkling beverages
producer in Rwanda and is 75% owned by the Heineken
Group. It has two subsidiaries, Bramin, a maize growing
company and Cogelgas, a company involved in methane
gas production. Rwanda’s per capita beer consumption
of 7.0l pp is way below the East African peers average
(Kenya 11l and Burundi 18l pp) and we believe that this
gap represents upside potential for Bralirwa.

Developments in the oil and gas sector dominated the
Ugandan landscape, notwithstanding the fact that
production was only expected to commence properly in
2012. The glaring regulatory deficiencies in the sector
and corruption allegations were topical in 2011 and look
set to remain so ahead of the commencement of full
production. Additionally Uganda held elections early in
the year in which the incumbent, Yoweri Museveni,
won. The results were disputed and sowed more seeds
of political tension that subsequently erupted into food
riots in Q2 11. Uganda has seen further organised
protests at the onset of 2012 as business operators
closed their shops to register their displeasure with the
rising cost of borrowing, while the main challenger in
the election, Dr Kizza Besigye, was barred from carrying
out demonstrations.
The 2011 GDP outturn is expected to be 6.3%, having
declined from 2010’s 6.4%, with 2012 forecast to post
6.2% growth. 2011 had its fair share of challenges, with
significant headwinds emanating from spiralling
inflation and the depreciation of the UGX. Y-o-y
inflation closed 2010 at 3.10%, peaked at 30.4% in
October 2011 and ended the year showing signs of
relenting at 27.0%. The UGX on the other hand opened
the year at USD/UGX 2,288, sank to an all-time low of
USD/UGX 2,887 in October and recouped a huge chunk
of its losses to end the year at USD/UGX 2,359.
Food price shocks on the back of a crippling drought in
East Africa and rising energy prices occasioned by
political disturbances in the major oil supplying MENA
region, coupled with low hydro-electricity generation
capacity, were the key drivers. With agriculture
stuttering, exports for the largely agricultural economy
suffered. As a result, the BOP position worsened with
consensus forecasts pointing to a deficit of c12.1% in
2011. However, with oil inflows expected in 2012, we
expect the situation to turn quickly.
The Bank of Uganda (BoU) responded by adopting a
tightening monetary stance, progressively hiking the
bank rate from 13% in July to 23% in November 2011.
This, together with improved agricultural output on the
back of good rainfalls has been pivotal in propping up
the UGX and easing inflationary pressures. The BoU’s
remedial strategies, however, brought about additional
hardships to ordinary citizens and further stoked the
flames of social unrest.
25
EQUITY RESEARCH
UGANDA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 gainers and losers - 2011 Opening Closing % Change % Change
Company Price Price (LC) (USD)
USE ALSI 1 188.07 864.45 -27.24% -32.17%
DFCU 822 1 000 21.65% 13.40%
New Vision 580 700 20.69% 12.51%
BAT Uganda 1 740 1 960 12.64% 5.00%
National Insurance Corporation 70 75 7.14% -0.12%
KCB Group 619 488 -21.16% -26.51%
Equity Bank Limited 762 488 -35.96% -40.30%
Bank of Baroda Uganda 504 230 -54.37% -57.46%
Kenya Airways 1 323 602 -54.50% -57.58%
Stanbic Bank Uganda
Source: USE
268 120 -55.22% -58.26%
Top 10 shares by market cap.
Company UGX (m) USD (m) % of Total
East Africa Breweries Ltd. 3 994 990 1 631.22 37.91%
Equity Bank Ltd 1 806 960 737.81 17.14%
KCB Group 1 439 680 587.85 13.66%
Stanbic Bank Uganda 1 228 530 501.63 11.66%
National Media Group 646 070 263.80 6.13%
Kenya Airways 277 890 113.47 2.64%
DFCU Ltd 248 600 101.51 2.36%
Centum Investment Co. 241 370 98.56 2.29%
Bank of Baroda Uganda 230 000 93.91 2.18%
Jubulee Holdings
Source: USE
204 840 83.64 1.94%
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
USE ALSI relative to S&P Africa Frontier Index
02-Mar-11
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
USE ALSI S&P Africa Frontier
28-Oct-11
27-Nov-11

Market Review for 2011
The stock market performed largely in line with
developments in the broader economy with the USE ALSI
shedding 27.24% to close the year at 862.45 points and
the USE LCI, likewise, giving up 39.01% from its
inception in February 2011 to end the year at 225.14
points. Capital shunned equities in favour of high
yielding government securities and the weak demand
sent share prices lower. Carry trades dominated fixed
income investments and were pivotal for the aggressive
appreciation of the UGX in Q4 11.
Total market capitalisation slipped from USD 5.6bn in
2010 to USD 4.5bn. This was, however, on the back of
improved activity as 268m shares worth USD 21.46m
changed hands, compared to 225m shares valued at USD
16.84m for 2010. The domestic listings’ market
capitalisation, on the other hand, slipped 2.68% to USD
0.82bn and moved 158m shares worth USD 14.38m.
Stanbic Bank Uganda (SBU) was the most active
counter, accounting for 72% of total volumes and more
than half of 2011’s total turnover. Domestic listings
were the most liquid and we expect the same trend to
be carried forward into 2012. Corporate activity was
however low in 2011 with Centum Investments Company
being the sole addition via a cross listing and only two
companies undertaking capital calls.
Market Outlook for 2012
On the domestic scene, headwinds that dragged
performance have shown clear signs of easing. The UGX
has largely recovered and we expect it to be broadly
stable in 2012, although the risk of instability remains
tied mainly to the price of oil. In the future, however,
we expect this risk to reduce as Uganda transforms from
an oil importer to an exporter. We expect inflation to
decline with the pace quickening in H2 2012 as high
base effects kick in. Electricity tariff hikes in January
2012, however, pose the greatest risk to our model. The
government expects to pass on a 45% hike to consumers
which we expect to have significant implications for
inflation, regardless of the fact that the country was
already facing acute power shortages with expensive
diesel powered generators used as backup power
sources.
Eurozone sovereign debt challenges on the other hand
occasioned lower foreign participation across SSA
markets, Uganda included. Consensus among analysts is
that a recession in the Eurozone is inevitable and that
the US Economy is going to post slower growth in 2012.
Africa, alongside other emerging economies is,
however, expected to more or less maintain its growth
tempo, all things being equal. Despite this, the picture
is thus not convincing regarding investors taking on risk
and hence we do not expect activity among foreign
investors to scale pre-Lehman levels.
26
10 most ac tive stoc ks by volume
Company Vol ('000' ) % of T otal
Stanbic Bank Uganda 193 358.5 72.24
Uganda Clays Ltd. 28 057.5 10.48
Bank of Baroda Uganda 21 863.2 8.17
National Insurance Corporation 11 270.2 4.21
Centum Investment 5 408.2 2.02
DFCU Ltd. 4 583.3 1.71
New Vision 2 937.4 1.10
BAT Uganda 166.5 0.06
Equity Bank Ltd. 2.1 0.00
KCB Group
Source: USE/IAS
1.9 0.00
10 most ac tive stoc ks by value
Company Val (USD) % of T otal
Stanbic Bank Uganda 11 915 510 58.71
Bank of Baroda Uganda 3 300 653 16.26
DFCU Ltd. 1 785 283 8.80
Centum Investment 1 451 868 7.15
New Vision 959 521 4.73
Uganda Clays Ltd. 507 182 2.50
National Insurance Corporation 299 122 1.47
BAT Uganda 74 261 0.37
Equity Bank Limited 647 0.00
KCB Group
Source: USE/IAS
533 0.00
37.91%
0.38%
0.91%
6.64%
Top Pick for 2012
Source: USE/IAS
Market Cap. Composition
2.64%
51.52%
Banking and Finance
Media
Tobacco
Industrial
Beverages
Commercial Services
Stanbic Bank Uganda: SBU is Uganda’s biggest bank by
market capitalisation, branch network and balance
sheet. The bank is better poised than its listed peers to
benefit most from the anticipated oil boom. Uganda’s
biggest bank operates 98 branches which are
complimented by more than 200 points of
representation (ATMS and POS terminals) and focuses on
personal, business, corporate and investment banking
services. SBU stands out because it shed more than half
of its value in 2011, driven we believe, largely by
expected mark to market losses on its bond portfolio.
With interest rates now expected to trend lower in line
with inflation, we expect this position to reverse and
the share price to recoup some of its losses.

Efforts by the Bank of Tanzania (BoT) to prop up the
depreciating TZS and bring down spiralling inflation
were the major highlights for Tanzania. Like some of its
EAC peers, Tanzania saw inflation soar to double digit
figures and the TZS hit all-time lows. Strategies
implemented have shown signs of success as inflationary
pressures have generally eased and the TZS recouped
some of its losses. The country is undertaking
unprecedented infrastructure investments especially in
housing and roads with more planned for the energy
sector. On the political front, Tanzania has commenced
on a constitution making process that has since proved
to be divisive and looks set to shake the country’s
hitherto stable political climate.
The 2011 GDP growth outturn is expected at 6.4% and
the World Bank forecasts 6.7% for 2012. The country
faces significant structural issues that have retarded
economic growth, the major one being a massive
infrastructure deficit, particularly in housing, roads,
railways and power generation. We expect that
investments in an effort to plug this gap will underpin
growth in 2012 and beyond.
Inflation (y-o-y) opened the year at 4.2% and reached
19.2% in December 2011, and while we believe the rate
is yet to peak, a strengthening currency and improving
food supply suggest that the top is near. The TZS on the
other hand opened the year at USD/TZS 1,450, slipped
to a low of USD/TZS 1,749 in November 2011 and closed
the year at USD/TZS 1,572 having appreciated
remarkably from the November lows. The drivers
remain the same; the food price shocks that wreaked
havoc in East Africa and a burgeoning energy bill
emanating from higher oil prices and exacerbated by
low electricity generation capacity in the region.
The BoT adopted a tighter monetary policy, hiking the
minimum reserve ratio from 20% to 30% in a bid to mopup
liquidity. Additionally, the BoT lowered the foreign
exchange net open position limit for banks from 20% to
10% in a bid to discourageholding speculative positions.
Positive results have subsequently been achieved on the
currency front, but y-o-y inflation remains stubborn. We
expect further monetary tightening as Tanzania fights
inflation which should maintain the drag on economic
activity.
27
S
EQUITY RESEARCH
TANZANIA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 gainers and losers - 2011 Opening Closing % Change % Change
Company Pric e Pric e (LC) (USD)
DSEI 1 163.89 1 303.23 11.97% 5.14%
Dar Es Salaam Community Bank 280 640 128.57% 143.43%
CRDB Bank 115 172.5 50.00% 59.75%
Tanzania Cigarette Company 2 220 3 140 41.44% 50.64%
Swissport Tanzania 600 820 36.67% 45.55%
Nation Microfinance Bank 660 850 28.79% 37.16%
Kenya Airways 1 300 1 020 -21.54% -16.44%
TATEPA
Source: DSE/IAS
490 265 -45.92% -42.40%
Top Ten Shares by Market Cap.
Company TZS (m) USD (m) % of Total
African Barrick Gold 5 396 725 3 692 46.62%
East African Breweries 1 317 957 902 11.38%
Kenys Commercial Bank 1 298 074 888 11.21%
Tanzania Breweries 595 755 408 5.15%
National Media Group 487 068 333 4.21%
Kenya Airways 470 848 322 4.07%
Nation Microfinance Bank 425 000 291 3.67%
CRDB Bank 375 452 257 3.24%
TWIGA 374 240 256 3.23%
Tanzania Cigarette
Source: DSE/IAS
314 000 215 2.71%
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
02-Mar-11
DSEI vs S&P Africa Frontier Index
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
DSEI S&P Africa Frontier
28-Sep-11
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011 10 Most active stocks by volume
The DSEI closed 11.97% firmer at 1,303.23 points with a
total of 131.64m shares worth USD 31.98m changing
hands in 2011. NMB dominated, accounting for 35.80%
of volumes, while CRDB Bank weighed in with 65.61% of
turnover. Banks had a good year with three making it to
the top five and Dar-es-Salaam Community Bank topping
the charts for 2011.
2011 saw Nation Media Group of Kenya and African
Barrick Gold, a United Kingdom domiciled gold miner
with assets in various African countries, cross listing on
the DSE. Additionally Precision Air Services, Tanzania’s
foremost carrier which is partly owned by Kenyan
Airways,undertook an IPO. On the other Hand, National
Investment Company was delisted and the DSE closed
the year with seventeen listed counters.
Market Outlook for 2012
The year began with the government introducing
reforms in the energy sector and we believe this,
together with the drafting of the new constitution, will
be 2012’s topical issues. Infrastructure projects, in
particular road construction, (funded by a USD 250m
syndicated bank loan), will also stand out and help
underpin growth which otherwise should be dragged
down by the tight monetary regime. Additionally,
Tanzania has plans to issue a sovereign USD 500m Euro
bond to fund infrastructure development and we expect
the process that generally stalled in 2011 to reach a
conclusion in 2012.
Public investment in power generation is receiving a lot
of air play especially from legislators who have become
more vocal. Tanzania has been relying on more
expensive emergency power plans, a reality that will
sadly remain with the country for the rest of 2012. Two
long term projects however stand out; a USD 684m
Chinese sponsored gas fired plant at Mnazi Bay and a
USD 3bn coal fired plant at Mchuchuma, with a
combined capacity of 1,000MW. Both projects can only
bring relief in the long term, but for now, Tanzania will
continue to rely on expensive options which have the
potential of sustaining inflationary pressures.
We do not expect a significant shift in historic trading
patterns in 2012. Domestic listings are expected to
continue dominating and the market is expected to
register yet another positive year.The regulatory limit
to foreign ownership of DSE listed shares has kept
foreign participation low and hence the market rarely
reflects international trends. Tanzania allows only 60%
foreign ownership in DSE listed stocks. The country is
however looking at undertaking reforms that will see
the restrictions fall away. This is being promoted at the
EAC level and there is a strong possibility that the
mooted regional stock exchange will emerge with time.
28
Company Vol (m) % of total
CRDB Bank 86.36 65.61%
NMB 22.79 17.31%
TATEPA 9.75 7.41%
DCB 6.66 5.06%
Tanzania Cigarette 2.13 1.62%
Twiga 1.73 1.31%
TBL 1.10 0.84%
Swissport 0.48 0.36%
Tanga Cement 0.46 0.35%
Tol Gases 0.14 0.11%
Source: DSE
10 Most active stocks by value
Company Val (USD m) % of total
NMB 11.45 35.80%
CRDB Bank 9.33 29.16%
Tanzania Cigarette 3.42 10.69%
Twiga 2.17 6.77%
DCB 2.00 6.24%
TATEPA 1.44 4.50%
TBL 1.33 4.16%
Tanga Cement 0.62 1.94%
Swissport 0.22 0.68%
Tol Gases 0.02 0.06%
Source: DSE
46.62%
Source: IAS
4.21%
Stock Picks for 2012
Market Cap. Composition
5.15%
Commercial Services
16.53%
20.13%
2.83%
4.54%
Beverages
Manufacturing
Construction and allied
Banking and Fi nancial Services
Mining
Media
Tanga Cement – 62.30% owned by Holcim; 1.25mtpa
installed capacity and 34% of Tanzania cement market;
relatively among the cheapest cement stocks in SSA.
Twiga Cement - 69% owned by Heidelberg Cement. The
company has 1.4mtpa installed capacity and 42% of Dares-Salaam
market. Like Tanga, foreign ownership limit
is the biggest value trap and we expect the price to
firm once shareholder restrictions are lifted.
Tanzania Breweries Limited - Tanzania’s foremost
brewer; we expect changing consumer dynamics due to
rapid urbanisation, a growing population and increasing
disposable incomes to underpin performance.

For Zambia, the year 2012 proved to be a highly
“eventful” one both on and off the capital markets; and
both domestically and internationally. With global
instability arising from uncertainty in the Eurozone owing
to the extent of its debt crisis, global commodities
markets were volatile to the detriment of the copper
price. Despite less than stellar copper prices globally, the
commensurately flat y-o-y copper production for Zambia,
and GDP expectations falling 1.1% short of the revised
7.6% GDP growth earlier projected for 2011, corporate
actions on the LuSE increased relative to the prior year.
Meanwhile, the September 2011 presidential elections
spelt the end of 20 years of rule by the Movement for
Multi-Party Democracy (MMD). The result was the ushering
in of current president Michael Chilufya Sata and his propoor
Patriotic Front (PF) Party. Unafraid to ruffle
feathers, Sata, while toning down on the rhetoric towards
Chinese investment into the country, moved against other
transactions involving foreign investors that he felt
needed to be reviewed. One example was the cancellation
of the sale of Finance Bank, Zambia’s fifth largest, to
South Africa’s FirstRand Group, citing “political
motivation” in the sale of the bank which had been put
under administration. This occurred following Sata’s
appointment of a new central bank governor as well as
finance and mines’ ministers.
Talk of mine nationalisation did the rounds around
election time, adding to investor uncertainty (the
currency temporarily hit a 12 month low against the USD
the morning Sata’s election victory was). However, the
new government subsequently reiterated that this was not
the intention, although royalties and taxes for the
industry would be looked at. A ban on metal exports to
“sort out irregularities and increase transparency” on
copper exports lasted just two days, while the 2012
budget saw minerals royalties double from 3% to 6% for
base metals and to 6% from 5% for precious metals.
The World Bank estimates that GDP growth for Zambia in
2011 was 6.8%, while initial forecasts by the Central
Statistical Office point to real GDP growth of circa 6.5%
for the year, which is 0.3% and 0.1% higher than the 2011
projection made in our last report respectively. Similar to
2010, we expect the key contributors to GDP in 2011 to
be: mining – and specifically copper mining on the back of
similar aggregate production in 2011 relative to 2010;
agriculture – which is expected to contribute marginally
higher to GDP owing to a third successive maize bumper
harvest, and attract investment, notably in the biofuels
sector; energy – with various new power projects planned
or commenced in 2011, the sector attracted significant
investment; and construction, which remains a key
industry, and continues to grow, particularly in terms of
commercial developments.
29
EQUITY RESEARCH
ZAMBIA
FEBRUARY 2012
2011 REVIEW AND 2012 OUTLOOK
Top 5 Gainers and Losers - 2011 Opening Closing % Change % Change
Company Price Price (LC) (USD)
LuSE ALSI 3 322.47 4 040.35 21.61% 15.79%
Puma Energy Zambia 321.00 1 145.00 256.70% 239.63%
Zambia Bata Shoe Company 80.00 200.00 150.00% 138.03%
African Explosives 1 810.00 4 000.00 120.99% 110.42%
Standard Chartered Bank 46.33 90.10 94.46% 85.15%
Shoprite Holdings Ltd 32 000.00 60 000.00 87.50% 78.53%
ZCCM 10 000.00 10 000.00 0.00% -4.79%
Zambia Sugar 310.00 309.00 -0.32% -5.09%
BAT (Zambia) 1 650.00 1 590.00 -3.64% -8.25%
First Quantum Minerals (DRs) 4 700.00 4 400.00 -6.38% -10.86%
Zambeef Products
Source: LuSE
3 700.00 2 901.00 -21.59% -25.35%
Top 10 shares by market cap.
Company ZMK (m) USD (m) % of Total
Shoprite Holdings Ltd 32 608 767.60 6 363.95 65.9%
Zain Zambia Plc 3 692 000.00 720.53 7.5%
Standard Chartered Bank 2 213 757.00 432.04 4.5%
Zambia Sugar Plc 1 956 411.16 381.81 4.0%
ZANACO 1 559 250.01 304.30 3.2%
Lafarge Cement Zambia 1 520 303.27 296.70 3.1%
Zambian Breweries 1 365 000.00 266.39 2.8%
ZCCM 892 964.28 174.27 1.8%
Zambeef Products 719 384.74 140.40 1.5%
Copperbelt Energy Corporation
Source: LuSE
700 000.00 136.61 1.4%
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
01-Jan-11
31-Jan-11
Source: IAS/S&P
LuSE ALSI relative to S&P Africa Frontier Index
02-Mar-11
01-Apr-11
01-May-11
31-May-11
30-Jun-11
30-Jul-11
29-Aug-11
28-Sep-11
LuSE ALSI S&P Africa Frontier
28-Oct-11
27-Nov-11
27-Dec-11

Market Review for 2011 Despite volatility during the year, the LuSE ended as
Following global uncertainty and reduced demand, copper
prices declined from circa USD 9,147/tonne in December
2010 to circa USD 7,568/tonne, representing a 17%
decline. Copper production for the 11 months to
November 2011 was 789m MT versus 779m MT over the 11
months to November 2010 representing a minor increase
of 1.3%. The Zambian Kwacha depreciated against the US
Dollar by 10% from ZMK 4,640.56/USD to ZMK
5,117.04/USD in 2011. CPI inflation increased slower in
2011 with year-end CPI of 7.4% versus 7.7% y-o-y in 2010.
Food inflation accounted for 1.9% of the 7.4% growth in
CPI inflation, and had a weight of approximately 50%.
Interest rate yields on 91-day treasury bills closed 2011 at
7.1% versus 7.7% in 2010. Save for the 0.6% drop in 91-day
t-bill rates, yields across the maturity spectrum over the
year increased from the 182-day t-bill (by 1.2% to 9.53%)
to the 15-year bond (by 0.7% to 16.2%). Weighted average
base-lending rates by commercial banks reduced further
in the year from 19.2% in January 2011 to 17% in
December 2011.
The LuSE All-Share Index closed 2011 at 4,040.35 points
versus 3,322.47 points in 2011, representing a 21.61%
increase y-o-y in Kwacha terms and 15.79% y-o-y in USD
terms. Turnover declined by 20% to ZMK 775bn in 2011
versus ZMK 962bn in 2010. Similar to the case with Zain in
2010, a significant portion of the turnover was due to the
transfer of ownership of BP Zambia shares to Puma
Energy Zambia, following the acquisition of BP Africa by
Puma Energy Holdings Limited. Trades in Puma accounted
for 57% of turnover on the LuSE, whilst trades in Zambeef
accounted for 20%, which included capital raised from its
rights offer during the year. Domestic activity accounted
for 81% and 74% of total turnover and volumes traded
respectively, with the balance accounted for by foreign
investment. The LuSE recorded a net inflow of USD 13.5m
in Foreign Portfolio Investment (FPI), an improvement
from the USD 10m outflow in 2010 (excluding the Celtel
transaction).
The LuSE saw its fair share of corporate actions with
Investrust Bank, Zambeef and Zambian Breweries looking
to the capital markets to raise ZMK 31.6bn (USD 6m), USD
55m, and ZMK 351bn (USD 60m) respectively via rights
offers, all for the purposes of expansion. During the year,
First Quantum Minerals, listed on the Toronto Stock
Exchange, sought to place USD 50m in “Zambian”
Depository Receipts (ZDRs), the first ZDRs on the
exchange, at least indicating some headway towards
getting domestic mining companies listed given the
industry’s core positioning in the Zambian economy.
The market was driven by healthy price appreciation in
market heavyweights, notably Standard Chartered
(increased demand following bonus-issue); Zanaco,
Lafarge, Bata and CEC on strong H1 2011 numbers and
Puma, the best performing company, on strong H1 results
and mandatory offer prospects. African Explosive’s rally
was triggered by its second dividend payment, negating
the fact that it posted weaker y-o-y H1 2011 results.
30
the best performing SSA exchange in 2011. The closing
average PER and PBV on the LuSE in 2011 were 19.9x
and 6.5x respectively, versus 11.8x and 3.9x in 2010.
10 most active stocks by volume
Company Vol (m) % of Total
Puma Energy Zambia 380.57 33.1%
Investrust Bank 284.45 24.8%
Standard Chartered Bank 246.31 21.5%
Zambeef 52.15 4.5%
Zambia Sugar 47.98 4.2%
Cavmont Capital Holdings 44.64 3.9%
ZANACO 34.55 3.0%
Copperbelt Energy Corporation 33.19 2.9%
Bata Shoe 5.05 0.4%
Investrust Bank Rights
Source: LuSE
3.82 0.3%
10 most active stocks by value
Company Val (USD) % of Total
Puma Energy Zambia 92 480 013 57.1%
Zambeef 33 141 244 20.5%
ZANACO 8 235 353 5.1%
Standard Chartered Bank 5 830 393 3.6%
Shoprite 4 776 834 3.0%
Copperbelt Energy Corporation 4 685 503 2.9%
Zambia Sugar 2 648 037 1.6%
Farmers House 1 749 984 1.1%
Lafarge Cement 1 537 405 1.0%
Zambian Breweries
Source: LuSE
1 500 782 0.9%
7.48%
66.71%
Market Cap. Composition
5.42%
7.76%
1.42%
0.13%
2.22%
7.44%
1.16%
0.27%
Agri-business
Banking
Energy
Hospitality
Investments
Manufacturing
Oil Marketing
Property
Retail Trading
Telecommunications

Market Outlook for 2012
The outlook for Zambia in 2012 is arguably more sensitive
to government policy than it has been over the last few
years. The primary reason for this, particularly with
respect to FPI on the LuSE, is that how external investors
perceive government policy, which tends to rank high up
in the list of significant country-risk factors for African
countries in particular, will impact on FPI.
With the campaign promise of making significant and
progressive changes to the benefit of Zambians within 90days,
the Patriotic Front has since made quite a few
changes, notably including:
� Commissions of enquiry into recent government
transactions including the aforementioned
Finance Bank, as well as Zamtel
� Doubling the mineral royalties tax
� An increase in tax exempt income from ZMK 1m
per month to ZMK 2m per mth
� Increasing in maximum PAYE threshold from ZMK
4.2m/mth to ZMK 5.7m/mth
� And more recently
� Introduction of a tiered minimum capital
requirement structure
� Increase in the minimum capital requirement
from ZMK 12bn to ZMK 104bn for “local” banks
and ZMK 520bn for “foreign” banks
On the back of these developments, and the expected
volatility on the world market, we expect volatility on
the LuSE to continue through Q1 of 2012 and into Q2.
Nonetheless, we expect the following to be key growth
factors:
� Mining – barring a further decline in commodity
prices through 2012, we expect increased mining
activity overall, and higher royalties revenues to
contribute more to GDP
� Agriculture – remains government priority,
continues to attract local/foreign investment
� Construction –commercial property development,
and the construction of power stations
� Export companies – further dollar strength will
aid export oriented companies, particularly
those exporting primarily to SSA and Asia
The primary risk factors in 2012 will be any significant
changes in government policy; downward pressure on
copper prices and the resultant lower or flat copper
production on a per-mine basis; exchange rate volatility;
and weak external demand for Zambian exports despite a
weak Kwacha. All in all though we expect the
expansionary budget to be market positive, with the
retail sector in particular set to benefit.
In terms of corporate actions, Farmers House received
shareholder approval on 27 January 2012 to complete its
acquisition of Arcades for circa USD 25m, whilst Puma
Energy Zambia will be looking to make a mandatory offer
to minorities. It remains to be seen whether the much
awaited and often delayed listing of Vedanta’s Zambian
operation KCM on the LSE and LuSE will occur in 2012.
31
Top Picks for 2012
Despite the uncertainty shrouding 2012, we still think
there is value on the LuSE, especially on a medium-term
basis, despite the higher relative valuations at the end of
2011 compared with 2010. For 2012, we like:
� Zambia Sugar – bet on better net profit margins
following debt restructuring and reversion to
historical payout levels of circa 70% in the
medium-term.
� Lafarge Cement Zambia – remains dominant
industry player, with Dangote construction still
awaiting. Bet on higher cash payout coupled with
modest volume growth owing to regional growth.
� Zambian Breweries – new expansion project on
the Copperbelt is a worthwhile long-term bet –
no dividends foreseen in the near future though.
� National Breweries – on higher demand from
higher disposable income from the poorest owing
to budget relaxation on lowest income tax
bracket.
� British American Tobacco – higher domestic
demand + higher divi-payouts.
Also, look out for the following companies:
� AEL Zambia – more demand versus erratic
margins.
� Copperbelt Energy Corporation – Zambia or
Nigeria?
� Zambeef – ramifications of colossal tax
assessment.
� Certainly all the banks! – who will survive?

The unstable geopolitical environment in the Middle East and
North Africa led to increased risk aversion and together with the
Eurozone debt crisis led to a reduction in the total funds being
availed for investments in perceived “riskier” emerging markets.
Interestingly however, foreigners were net buyers on the ZSE in
2011 and accounted for 71% of average daily turnover. Constraints
within the country including the scarce liquidity and unclear
policies around economic empowerment and indigenisation,
however, limited the growth of the indices as the Industrial index
eased 3.58% while the Mining Index slumped 49.8%. Consequently,
the market retreated although on thin volumes in normal trade as
daily average value traded amounted to approximately USD 1.9m,
representing an average market turnover of a mere 0.04%.
Although the prices of most heavyweight counters remained fairly
steady, AICO, which went up a marginal 5.6%, Econet down 16.1%,
Barclays down 53% and Meikles down 64%, disappointed. Most of
the smaller cap counters, however, recorded stronger returns and
topped the movers. The bottom laggards for 2011 were generally
characterised by massive undercapitalisation, unsustainable
gearing levels and poor management and boards of directors.
Generally, investor sentiment remains low as uncertainty about
the macroeconomic aspects remains. The downward spiral on the
Zimbabwean Stock Exchange has been mirroring international
markets, as the lack of progress in dealing with sovereign debt
issues especially in Europe has reduced investor confidence in
emerging and frontier market equities.
Bank asset quality a major concern
The use of multiple currencies in the economy is still in play with
the United States dollar, South African Rand, and Botswana Pula
being the dominant currencies. Although there has been talk of
bringing back the ZWD, relevant authorities have confirmed that
the multi-currency system will remain in use for the foreseeable
future. As at 30 November 2011, consolidated deposits (net of
interbank deposits) were estimated at USD 3.2bn up 41.7% from
30 November 2010. Lending to the private sector grew by 84.3% to
USD 2.9bn in November 2011. As a result of the growth in the
deposit base and expanded credit, the loan to deposit ratio
(excluding offshore lines of credit) increased from 61.9% in
December 2010 to over 71.7% by end of December 2011. We
premise that the overall under-capitalisation of most banks
remains a challenge especially when non-performing loans are
taken into account. In our view, most of the lending decisions have
been based on the size of the collateral being offered and
relationships rather than cashflow. Good information is also scarce
in the absence of a national credit bureau. Furthermore, the value
of the collateral, which is real estate in most cases, tends to be
overstated and inevitably harder to realise if the need arise. This
has allowed the official NPLs numbers to be low. In our view, most
banks are sitting on a significant unknown quantity of NPLs and
these continue to grow.
32
Top 10 Gainers and Losers - 2011 Opening Closing % Change
Company Price Price USD
ZSE Industrial Index 151.27 145.86 -3.58%
Fidelity 2.00 16.00 700.00%
Pelhams 0.15 0.85 466.67%
TN Holdings 0.77 3.99 418.18%
CAFCA 17.00 67.00 294.12%
Truworths 3.40 9.50 179.41%
Bindura 13.00 2.50 -80.77%
Rio Zim 190.00 35.00 -81.58%
Star Africa 7.00 1.00 -85.71%
Chemco 45.00 3.00 -93.33%
ZECO
Source: ZSE/IES
Top 10 shares by market cap.
0.15 0.01 -93.33%
Company LC (m) USD (m) % of total
Delta 829.4 829.4 20.82%
Econet 677.7 677.7 17.01%
Innscor 295.2 295.2 7.41%
Hippo 222.0 222.0 5.57%
SeedCo 212.3 212.3 5.33%
OK Zimbabwe 102.1 102.1 2.56%
AICO 101.0 101.0 2.54%
CBZH 95.8 95.8 2.40%
Barclays 90.4 90.4 2.27%
Old Mutual 87.9 87.9 2.21%
Source: ZSE/IES
1.20
1.10
1.00
0.90
0.80
0.70
0.60
03-Jan-11
02-Feb-11
04-Mar-11
03-Apr-11
03-May-11
02-Jun-11
02-Jul-11
EQUITY RESEARCH
ZSE Ind. relative to S&P Africa Frontier Index
Source: IES/S&P ZSE Industrial S&P African Frontier Index
01-Aug-11
31-Aug-11
30-Sep-11
ZIMBABWE
FEBRUARY 2012
2011 REVIEW & 2012 OUTLOOK
30-Oct-11
29-Nov-11
29-Dec-11

Market Outlook for 2012
Cash budgeting has been maintained
According to the 2012 MoF budget, revenue is estimated at
USD 4.0bn with tax and non-tax revenue of USD 3.4bn and
diamond revenue estimated at USD 600.0m. The Minister
maintained the cash budgeting framework with recurrent
expenditure projected at USD 3.2bn (80% of budget). Vote
of credit is estimated at USD 500.0m. The diamond receipts
are budgeted to go towards selected infrastructure and
other expenditures.
Economy is expected to remain on a growth path
GDP has been on the rise, growing by 5.7% in 2009, 8.1% in
2010 to an estimated 9.3% in 2011 and is projected to grow
by 9.4% in 2012. Major propellers of economic growth have
been the mining and agricultural sectors. The Ministry of
Finance (MoF) estimates that the mining sector (projected
to grow by 15.9%) will remain the major driving force of the
economy. The sector is expected to benefit from firm
international commodity prices, strategies to lower
electricity supply interruptions and additional private
capital injections.
Nonetheless, the IMF has highlighted the following as
possible downside risks:
� Political disturbances
� Export price declines
� Higher-than-anticipated increases in imported food
and fuel prices
� Unfavourable weather
� Reversals of capital inflows
� Banking system instability.
“Early” election unlikely in 2012
Although there are divergent statements relating to the
possibility of elections in 2012 from the main political
parties, we believe it is unlikely that elections will
materialise in 2012 although the electioneering will be
heightened. However holding early elections might be
impossible due to certain prerequisites that first have to be
fulfilled including political, media and electoral reforms.
Furthermore, the term of the current legislature expires in
2013 after its five year term runs out and cutting short its
term might see increased financial liabilities for the
government and increased intra-party in-fighting.
While the crystal ball is difficult to read at this juncture
given the uncertainties, we believe that ZSE valuations are
generally attractive. In our view, the ZSE still carries good
long-term growth potential given the economy’s strong
growth prospects, albeit off a low base. Nonetheless, the
economy remains hugely undercapitalised with most
companies still saddled with heavy and expensive
borrowings. Volatility is likely to stay high until the local
uncertainties clear and the Eurozone and US financial crisis
stabilise.
33
10 most active stocks by volume
Company Vol (m) % of Total
Pelhams 587.55 12.71%
RTG 333.07 7.20%
Dawn Properties 252.23 5.45%
Pearl Properties 239.73 5.18%
Steelnet 226.67 4.90%
African Sun 187.87 4.06%
NMB 169.82 3.67%
Celsys 144.03 3.11%
ART ZDR 139.88 3.03%
MASH 139.19 3.01%
Source: ZSE/ IES
10 most active stocks by value
Company Val (USD m) % of Total
Econet 104.66 22.38%
Delta 77.62 16.60%
Innscor 25.21 5.39%
ABC 23.11 4.94%
AICO 22.45 4.80%
Meikles 19.35 4.14%
SeedCo 18.68 3.99%
Dairibord 15.55 3.32%
CBZH 12.43 2.66%
Hippo 11.59 2.48%
Source: ZSE/ IES
3.35% 2.90%
3.47%
4.37%
4.80%
4.98%
9.34%
Source: ZSE/ IES
2.19%
14.81%
Market Cap.Composition
0.93% 1.39%
30.23%
17.24%
Beverages, Hotels and
Leisure
Technology
Agricultural
Financial
Food
Building and Allied
Retail stores

Top Picks for 2012
The ZSE is well-poised for upside, longer-term
Market capitalisation to GDP is 39% against a regional
average of 51%. We believe that the ZSE offers
significant upside potential, off a low base for those who
do not leave their entry too late. The prospects of
continued good earnings growth will provide further
upside potential from current levels.
Given the demand for infrastructure reconstruction we
believe that construction companies are well poised to
take advantage of the opportunities and counters likely to
benefit include Lafarge, M&R and Turnall.
Although disposable incomes will remain low, we expect a
gradual improvement enhanced by the recovery in
agriculture and mining sectors. However, it should be
noted that the country’s agricultural production remains
susceptible to the vagaries of the weather as no
meaningful investment has been made in irrigation post
the land reform exercise. Consumer stocks and agro
processors should thus continue to perform well
especially the likes of Colcom, Delta, Econet, Innscor,
National Foods and OK Zimbabwe.
34
In our view, the financial sector provides speculative
opportunities as we are wary about the growth of NPLs, the
general under provisioning by most banks and weak
capitalisation levels. Our picks in the financials would be
Barclays for long-term while CBZH and NMBZ Holdings offer
speculative opportunities.
For our top picks, we are not sector specific and recommend
investors adopt a bottom up strategy. There are attractive
opportunities to buy rapidly growing, monopolistic, well
managed companies and strong cash generating companies
such as AICO, BATZ, Dairibord, Delta, Econet, Innscor,
M&R, OK Zimbabwe, Padenga and Seed Co.

Imara Africa
Securities
Ground Floor
Plot 64511
Showgrounds
Gaborone
Botswana
Tel: +267
3188660
Fax: +267
3188113
Imara
Securities
Angola SCVM
Limitada
Rua Rainha
Ginga 74, 13 th
Floor,
Luanda
Angola
Tel: +244 222
372 029/36
Fax: +244 222
332 340
Capital Securities
Ground Floor
Plot 64511
Showgrounds
Gaborone
Botswana
Tel: +267 3188886
Fax +267 3188887
Members of the
Botswana Stock
Exchange
Imara Edwards
Securities (Pvt.) Ltd.
Tendeseka Office Park
1 st Floor Block 2
Samora Machel Avenue
Harare
Zimbabwe
Tel: +263 4 790590
Fax: +263 4 791435
4 Fanum House
Cnr. Leopold
Takawira/Josiah
Tongogara Street
Bulawayo
Zimbabwe
Tel: +263 9 74554
Fax: +263 9 66024
Members of the
Zimbabwe Stock
Exchange
Imara S.P. Reid
(Pty) Ltd
Imara House
257 Oxford Road
Illovo 2146
P.O. Box 969
Johannesburg 2000
South Africa
Tel: +27 11 550
6200
Fax: +27 11 550
6295
Members of the
JSE Limited
Stockbrokers
Malawi Ltd
Able House
Cnr. Hanover
Avenue/
Chilembwe Road
Blantyre
Malawi
Tel: +265
1822803
Members of the
Malawi Stock
Exchange
Namibia Equity
Brokers (Pty)
Ltd
1st Floor City
Centre
Building, West
Wing
Levinson Arcade
Windhoek
Namibia
Tel: +264 61
246666
Fax: +264
61256789
Members of the
Namibia Stock
Exchange
Stockbrokers
Zambia Ltd
2nd Floor,
Design
House
P O Box 38956
Lusaka
Zambia
Tel: +260
1227303
Fax:
+2601221055
Members of
the Lusaka
Stock
Exchange
This research report is not an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The securities referred to in this report may not be eligible for sale in some jurisdictions. The
information contained in this report has been compiled by Imara S.P. Reid (Pty) Ltd, (“Imara”) from sources that it believes to be reliable, but no representation or warranty is made or guarantee given by
Imara or any other person as to its accuracy or completeness. All opinions and estimates expressed in this report are (unless otherwise indicated) entirely those of Imara as of the date of this report only
and are subject to change without notice. Neither Imara nor any other member of the Imara group of companies including their respective associated companies (together “Group Companies”), nor any
other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Each recipient of this report shall be
solely responsible for making its own independent investigation of the business, financial condition and prospects of companies referred to in this report. Group Companies and their respective affiliates,
officers, directors and employees, including persons involved in the preparation or issuance of this report may, from time to time (i) have positions in, and buy or sell, the securities of companies referred
to in this report (or in related investments); (ii) have a consulting, investment banking or broking relationship with a company referred to in this report; and (iii) to the extent permitted under applicable
law, have acted upon or used the information contained or referred to in this report including effecting transactions for their own account in an investment (or related investment) in respect of any
company referred to in this report, prior to or immediately following its publication. This report may not have been distributed to all recipients at the same time. This report is issued only for the
information of and may only be distributed to professional investors (or, in the case of the United States, major US institutional investors as defined in Rule 15a-6 of the US Securities Exchange Act of 1934)
and dealers in securities and must not be copied, published or reproduced or redistributed (in whole or in part) by any recipient for any purpose. © Imara S.P. Reid (Pty) Ltd.
35