Australian commodities firm BHP has decided to simplify its corporate structure and stock market listings. Previously, BHP was split between an entity called BHP PLC and another called BHP Ltd. The former entity had a primary listing on the London Stock Exchange (LSE), and the latter had one on the Australian Stock Exchange (ASE) in Sydney. Since the beginning of February, both have been consolidated into one entity called BHP Group Ltd. (ISIN: AU000000BHP4) with a primary listing in Sydney. In London, BHP Group has a standard listing. On the New York Stock Exchange (NYSE) BHP Group is traded in the form of American Depositary Shares (ADS).
We always are in favour of simplifying things and especially corporate structures. But there is another reason why we welcome the restructuring: Shares in BHP Group have a secondary listing on the Johannesburg Stock Exchange (JSE). The listing not only benefits BHP's mining activities in Africa, but Africa’s capital market as a whole.
A crucial question is how much BHP’s restructuring will benefit its share. Yes, the stock is up 33% in the past 10 years. This means that BHP has outperformed most of its peers. Rio Tinto’s stock is up 35% for the period and Anglo American’s 14%. Glencore’s stock, meanwhile, lost 17% in this period. Yet when BHP’s stock performance is compared with that of major indices, it seems a bit underwhelming. Over the past 10 years, the US stock index S&P 500 has gained 233%, the Japanese index Nikkei 211% and the Euro Stoxx 50 65%. Higher inflation rates and bottlenecks in the supply of natural resources should boost BHP’s share in the midterm. Investment analysts remain sceptical, however. Those at Deutsche Bank, Barclays Capital, Jefferies, RBC Capital Markets and UBS all have BHP’s stock on “hold.”
Airtel Africa also benefits from BHP’s restructuring
By giving up its primary listing in London, BHP Group lost its place in the UK blue chip index FTSE 100. Its replacement is one of Africa’s biggest companies: telecoms operator Airtel Africa (ISIN: GB00BKDRYJ47). Airtel Africa is also currently a hot stock. Its share price has gained 89% to GBP 1.5655 (EUR 1.86) in the past twelve months. With its inclusion in the FTSE 100 Index, Airtel Africa should attract even more attention from international investors.
Airtel Africa is based in the UK and does business in 14 African countries, primarily those located in East Africa. The company is not only active in mobile telecommunications, but also in mobile payment services under the Airtel Money brand. Airtel Africa is 56% owned by Indian telecom provider Bharti Airtel Ltd. (ISIN: INE397D01024). Bharti Overseas Pvt Ltd. holds another 11.2% stake. Bharti Airtel was founded in 1995 by Indian billionaire Sunil Bharti Mittal.
On Friday, Airtel Africa reported that revenue grew 21.7% to USD 3.5 billion (EUR 3.1 billion) in the nine-month period ended 31 December 2021. Its operating profit as measured by EBITDA rose 31.3% to USD 1.7 billion (EUR 1.5 billion) in the period. The EBITDA margin was, furthermore, 48.8%. The rise in sales was attributed mostly to selling more products and services to existing clients. Airtel Africa’s customer base, on the other hand, grew by a mere 5.8% to 125.8 million.
Moroccan market regulator AMMC takes a bold stance
With regard to its capital market, Morocco has launched one of the most ambitious and thorough promotion efforts of any African country. The kingdom has the advantage that the effort is supported by all stakeholders; even the financial market regulator AMMC has made it clear that it supports the goal. AMMC said last week that it “wants to encourage the financing of the companies through the financial markets.” Specifically, AMMC will support the effort by facilitating listings of small and medium sized companies; help develop the private debt market; and promote asset management in Morocco.
You may dismiss this as the kind of Sunday rhetoric that politicians are known for. The difference, however, is that the backing does not come from politicians, but from the market regulator whose job it is to protect investors' savings. We feel therefore that the regulator is taking a bold stance. It also reflects the strong will of all stakeholders in Morocco to make the country one of the leading financial hubs in Africa.
Okomu with strong earnings growth
We like Okomu Palm Oil Company (ISIN: NGOKOMUOIL00), listed on the Lagos Stock Exchange, for two reasons. First, the company published its Q4 2021 results last week, which is quite fast for companies listed on African stock exchanges. Second, the results are exceptionally good. Net profit was up 80% to NGN 14 billion (EUR 30 million) on a 60% jump in sales to NGN 37 billion (EUR 79 million). Okomu’s earnings per share increased to NGN 14.72 (EUR 0.0316), and its share is currently trading at NGN 142 (EUR 0.3133). While the share price has gained more than 50% in the past twelve months, a price-to-earnings (P/E) ratio of 9.65 reflects that it is not overvalued.
Okomu’s main business is cultivating oil palms and processing the fruit into palm oil. It also operates rubber plantations and turns rubber lumps into rubber cake for export. Its main business accounts for 80% of sales. We are aware of the fact that the use of palm oil is criticised in some developed countries of the north. However, these critics should consider that the palm trees produce a healthy and cheap source of oil that hundreds of millions of African consumers rely on. Moreover, Nigeria has plenty of abandoned palm oil plantations waiting to be re-activated. Palm oil producers can, therefore, expand their business in Nigeria without burning down precious forests.
Through a complicated structure, Okomu is controlled by French businessman Vincent Bolloré. Let’s unpack it: The holding company Socfinaf S.A. (ISIN: LU0056569402), which is listed on the Luxembourg Stock Exchange, owns 62.7% of Okomu’s shares. Socfinaf operates palm tree and hevea plantations in Nigeria as well as in the Ivory Coast, Cameroon, Liberia, Sierra Leone, Ghana, Congo, Sao Tome and Principe.
Here is where things get complicated: Socfinaf is 58.8% owned by another Luxembourg-based holding company, Société Financière des Caoutchoucs S.A. (Sofin).
Sofin, in turn, is 27.2% owned by Vincent Bolloré’s company Bolloré SE. Sofin’s other owners include Liechtenstein-based Geselfina AG with a 42.6% stake and Compagnie du Cambodge (ISIN: FR0000079659) with an 11.5% stake.
Compagnie du Cambodge, which is listed on Euronext Paris, also has a 6.49% shareholding in Socfinaf shares. Here is where Vincent Bolloré again enters the picture: Compagnie du Cambodge is 99.2% owned by his Bolloré SE.
Bolloré SE also owns another 0.78% of Socfinaf. Why have broken down this structure? To emphasize that no important decision is made by Okomu’s management board without Vincent Bolloré’s consent.