Last week, we predicted in our newsletter that African banks would benefit from rising interest rates. Kenya’s financial sector has, so far, confirmed this expectation. Last week, Absa Bank Kenya (ISIN: KE0000000067) said its pre-tax profit for 2021 was up 75.7% to KES 15.6 billion (EUR 124 million). On the news, Absa’s share price gained 1.2% to KES 12.35 (EUR 0.098). The share price of Standard Chartered Bank Kenya (ISIN: KE0000000448) also put on 1.1% to KES 141.25 (EUR 1.12) after the bank said pre-tax profit in 2021 had risen 70% to a five-year high.
Elsewhere, NCBA (ISIN: KE0000000406) plans to double its dividend to KES 3.00 (EUR 0.0238) per share after it said pre-tax profits in 2021 more than doubled to KES 10.2 billion (EUR 81 million). This will no doubt make Kenyan president Uhuru Kenyatta happy seeing that his family owns 13.2% of NCBA’s shares. The Kenyatta family can expect a payout totalling KES 652.5 million (EUR 5 million). The bank’s share price was up 2.5% to KES 25.10 (EUR 0.1992) last week.
However, shares in Equity Group Holdings (ISIN: KE0000000554) dipped 3.3% to KES 51 (EUR 0.4047) despite posting good results for 2021. Last year, Equity boosted pre-tax profit by 134% to KES 51.9 billion (EUR 412 million). The fall in Equity’s share price is also surprising considering that the bank’s management recommended the first dividend payment since 2018, namely KES 3.00 (EUR 0.0238) per share.
We attribute the poor sentiment to the fact that Equity still has a significant amount of non-performing loans on its balance sheet. The bank said that in 2021, it had reduced its risk provisioning for the bad loans to KES 5.8 billion (46 million) from KES 26.6 billion (EUR 211 million) – this is a remarkable progress, however realised at a heavy cost. It seems that analysts remain cautious about the share’s potential, having set a price target at KES 58.18. This is just 14.1% above the current price.
Moroccan retailer Label Vie (ISIN: MA0000011801) is currently one of the favourites among investors. Consider that the equity fund DWS Invest Africa LC (ISIN: LU0329759764) has allocated 3.4% of its assets to Label Vie. Partly because of this, Label Vie’s share price is up 4.6% to MAD 4950 (EUR 462.33) in the current month. Over the last twelve months, the share has gained 52.5%. Its market cap totals EUR 1.3 billion, or EUR 200 million more than in July of last year.
The company does a lot to please shareholders. For example, the board of directors proposed on 17 March to pay an additional dividend totalling MAD 200 million (EUR 18.7 million). This extraordinary payout is related to valuation gains stemming from Label Vie’s separation of supermarkets and real estate holdings into a property investment fund called OPCI Terramis. This payout will no doubt make French supermarket chain Carrefour happy seeing that it owns 50.3% of Label Vie. Label Vie can well afford the dividend: In 2020, net profit increased by 24% to MAD 524.1 million (EUR 49 million).
Label Vie is also beginning a new chapter in its history. Zouhaïr Bennani, the man behind the success of Label Vie, is resigning as chairman of its board of directors without announcing the name of the successor. Bennani founded the company in 2004. He will continue to hold some minor offices in the company. And finally, Label Vie announced a capital increase of MAD 180 million (EUR 16.8 million), which it said was dedicated to the employees of the group. No further detail was given.
Thungela Resources (ISIN: ZAE000296554), a South African producer of hard coal, has surprised investors once again. Despite the fact that some big investors in developed countries have forsaken coal, Thungela has had a phenomenal price run. Since its IPO on the Johannesburg Stock Exchange (JSE) last July, its share price is up 647% to ZAR 175.00 (EUR 10.94). Apparently, investors are assuming that hard coal will become more important to Africa’s energy mix as crude oil becomes more expensive.
The belief that Thungela will pay a key role in Africa’s energy security is so strong that news which should depress its share price isn’t doing so. Thungela is a spin-off of international mining group Anglo American (ISIN: GB00B1XZS820). On Friday morning, Anglo American, which is traded in London, announced that it would sell its remaining 8% stake in Thungela for ZAR 1.67 billion (EUR 104 million).
The sale of such a block of shares should normally depress the price. But instead, Thungela’s stock rose 8.9% on Friday – proving our point. Meanwhile, the expected proceeds from the sale should have also boosted Anglo American’s share as they will boost the company’s profits. But on Friday, it gained a mere 0.2% to GBP 39.51 (EUR 47.33).
Kenyan supermarket chain Uchumi Supermarkets (ISIN: KE0000000489) has a horrible track record on the Nairobi Securities Exchange (NSE). In the past three years, shareholders lost 62.7% of the money they invested in the company. If you look five years back, the loss totals 91.2%. Alas, Uchumi’s downward trend has continued in 2022, with the stock down 8.3% since January.
Investors have had troubles with this stock for years. A key reason is its lack of transparency: Uchumi publishes its results years after they happen and is very wary of the press. Moreover, the Kenyan Court of Appeal in February authorised the Capital Markets Authority (CMA) to investigate Ernst & Young (EY) following charges that EY helped cook Uchumi’s books. It has therefore not been a surprise that the retailer has struggled to get finance.
But last week marked a sudden reversal of fortune for Uchumi. While stock markets around the world are suffering from uncertainty due to the war in the Ukraine, Uchumi’s share price jumped 10% to KES 0.22 (EUR 0.0017) during the week. But that was obviously a trap. Shortly thereafter, the share price fell back on Friday 5% to KES 0.21 (EUR 0.0017).