Big differences among African stock markets

The African stock market landscape is as diverse as the continent itself. Our readers have asked us what criteria we use to select the stock markets we report on. One relevant criterion is the size of the stock exchange and the liquidity it offers.

The largest African stock exchange by far is Johannesburg. The bourse currently registers a trading volume of approximately EUR 940 million per day. Egypt is host to the second largest stock exchange with a daily trading volume of EUR 76 million. As one sees, the gap between the largest and the second largest African exchanges is huge. Such a gap also exists between the second and the third largest bourses: The Nigerian Stock Exchange (NSE) in Lagos is in third place with just EUR 12.5 million. Morocco is in fourth place with EUR 7 million traded daily in Casablanca.

Furthermore, the market capitalisation of the companies listed in Johannesburg stands at EUR 1,082 billion. That puts it as number one for Africa but in the 19th spot among the world’s stock exchanges. Nigeria and Morocco are in second and third place for Africa, with market caps of EUR 63 billion and EUR 60 billion, respectively. Egypt is in fourth place with EUR 35 billion and Kenya in fifth place with EUR 19 billion.

The size and the liquidity of a bourse is just one criterion we take into consideration. More important to us are an individual company's market cap and its liquidity. In this respect, we believe that Africa is more interesting than its equity markets would at first suggest. Consider that eleven companies have a market cap exceeding EUR 10 billion.

Regarding those companies, South African internet giant Naspers (ISIN: ZAE000015889) tops the list with a market cap of EUR 32.5 billion. Kenyan mobile operator Safaricom (ISIN: KE1000001402) is the biggest listed African company outside of South Africa. It ranks ninth for Africa overall with a market cap of EUR 10.3 billion. Nigerian building materials firm Dangote Cement (ISIN: NGDANGCEM008) closely follows Safaricom with a market cap of EUR 10.2 billion.


The Jumia rally was a flash in the pan

Germany-based e-commerce platform provider Jumia Technologies (ISIN: US48138M1053) has rallied recently. Since the beginning of the month, the price of its stock on the Frankfurt Stock Exchange rose 51% to EUR 8.23. The firm is currently valued at EUR 844 million.

Positive comment about Jumia seems to be supporting its share. For example, a market observer wrote on the website Seeking Alpha: “Cost reductions and reiterated revenue guidance provide signs that Jumia Technologies may have finally turned the corner.” Jumia’s recent rally should provide some comfort to its investors. Since January, its stock is still down 14%.

That said, investors betting on a reversal of Jumia’s fortune may be a bit premature. Last week, the share lost a net 10% of its value. This includes a 6% drop on Wednesday, a 5% drop on Thursday and a 2% drop on Friday.

The share’s decline came despite excellent results for the first half of 2022. Jumia, which describes itself as "Africa's Amazon,” said sales for the period were up 43.3% to USD 104.9 million (EUR 103 million for H1 2021). As part of the sales growth, the number of active customers increased 25% to 3.4 million, and orders were up 35% to 10.3 million. Jumia also said gross profit for the first half was up 14% to EUR 29.9 million. Jumia also announced the launch of a quick commerce platform in Nigeria called Jumia Food Mart to meet demand for the service there.

We would urge caution regarding Jumia. This is mostly because the analysts who follow the stock are lukewarm about the company’s prospects. They justify this by pointing out Jumia’s low profit margins. As a result, the analysts have set an average target price for the share of EUR 7.75 – or 6% below its current level.


Sibanye Stillwater bets on green hydrogen

South African mining company Sibanye Stillwater (ISIN: ZAE000259701) has announced a partnership with German tech company Heraeus. The aim is to jointly develop and market novel electrolyser catalysts for the production of green hydrogen. For Sibanye Stillwater, this partnership is very beneficial, as the platinum and iridium it provides are important components of the catalysts. A lot of R&D is being done to replace iridium with ruthenium. Sibanye also can provide ruthenium.

Interestingly, the market reacted coolly to the announcement of the venture. Sibanye’s share price shed 9.2% to ZAR 39.42 (EUR 2.33), bringing its total lost for the past twelve months to 38.4%. Still, we welcome the announcement, as it offers Sibanye the opportunity to extend its business to higher-margin metal processing. The analysts for the stock are also quite optimistic: They have set the average target price for the share at ZAR 60.33 (EUR 3.56) - or 53% above its current level.


SDX Energy does not benefit from good news

Despite reporting some good news, investors have turned their backs on UK oil and gas exploration company SDX Energy (ISIN: GB00BJ5JNL69). SDX announced last week that its losses for the first half of 2022 totalled USD 1.2 million, down significantly from USD 10.1 million the year before. But the news failed to ignite the share. Instead, it shed 2.5% to GBP 9.505 (EUR 1.12). Although the share has gained 14.5% in the past three months, it is still down 19.1% for the past twelve months.

Another bit of good news last week was the start of gas drilling on the concession Lalla Mimoun Sud in Morocco. But SDX share didn’t react to this either. It may be that a failed merger with Canadian peer Tenaz Energy (ISIN: CA88034V3048) has reflected poorly on the company. In the event, SDX sought an all-share deal with Tenaz, but only 20.2% of its shareholders approved it. One big shareholder that opposed the merger was Aleph Commodities. On 1 August, SDX said an investors group around Aleph had a combined 25.65% stake in the company.