Dialectic Africa Analyst

Dear Africa interested individuals,                                                         I said in the post script of my article about Forte Oil dated May 3, 2016 that Tigerbrands is an event driven 'play' that should be acted upon. The only  stock with the largest and maximum gain (10.00%)  for stocks traded on May 4, 2016 on the Nigerian Stock Exchange was Tigerbrands. I also wrote an article on where there is value and picked FBN to generate at least 200% within two years.  Both articles were published more than four hours before trading started on May 4, 2016. The stock with the largest volume & value traded for May 4,2016 was FBN Holdings .  The stock traded 117,002,338 shares valued at approximately $2.1m .  No other stock among the 87 stocks traded on May 4, 2016 traded more shares or more value.                                                 Until next time, hold on tenaciously to the                                            TRUTH: The Real Underst

Dear Africa Interested Individuals:                                                         I wrote an article about Forte Oil on August 4, 2015 on this blog.   You should read or reread it as applicable .  Prior to that article, I had sent an email about the company's Q1 2015 result which was opaque and not fully reflective of the business reality of the company at the time.  The CFO of the company respectfully disagreed with me and the stock declined briefly and then went on a run during the last four months of 2015.  My conviction did not waver.  The price was rising artificially in my opinion.  One day, the price support will end and the price will fall to its equilibrium point as we are witnessing presently.  I believe its landing point should hover around N150.00.  Wish I could short...  In February, 2016 on this blog under the title: "Passing through the Nigerian market today" I also spoke about the share price of Forte Oil which was at N342.00 on that day.

Dear Africa Interested Individuals:                                                           CRDB Bank Tanzania was trading at 125 Tanzania Shilling four years ago and now trades at 385 Tanzania Shilling.  This is a gain in excess of 200% .  Most of the movement actually happened over the past two years.  The bank's debt/capital is just at my maximum of threshold level of 30% and is expected to trend further downward.  NPL ratio of 8% still yielded a pre-tax income margin of 27%.  Its off-balance sheet items are 12% of its assets which is reasonable. CRDB is not the largest bank by assets in Tanzania.   Tanzania's economy is expected to grow close to 7% this year and Uganda just opted to route its crude-oil pipeline through Tanzania as opposed to Kenya for export purposes.  CDC group acquired a stake in CRDB in September 2015.  You may have missed out on the 200% CRDB gain thus far over four years but, this journey appears not to be over .  Over to you.   The lar

Dear Africa interested individuals:                                                                                                               I have mentioned multiple times in the past that retail investors are critical to the positive performance of any developing countries' stock market.  This has largely fallen on deaf ears in Nigeria.  The appeal of foreign portfolio investors with their large briefcases have stolen the hearts and minds of market regulators in Nigeria.   The refusal to raise the domestic retail investor to a major player from a peripheral player has been the bane of the Nigerian market for more than five years now.  This has led to market returns being consistently inconsistent.   The Exchange hierarchy have advised retail investors to invest in mutual funds instead of directly.  I have never been in support of this especially in Nigeria where their operations are shrouded in secrecy with the tacit cooperation of market regulators.   I lo

Dear Africa interested individuals:                                                        Access Bank has released its Q1 2016 earnings.  Let me state some quick observations and comments. 1. Access Bank's loan-value added has gone negative for the first time in over two years in Q1 2016.  Loan value-added is now -0.41% (negative).   It was +1.41% for FY 2015 and +1.09% for FY 2014.  It was also +0.2% for H1 2015.   This is the same quarter the bank gave out fresh loans amounting to about $355 million between January 2nd and March 31st, 2016  in a rising interest rate environment coupled with rising defaults.   2. Debt/Capital has risen from 44.4% at FY 2014 to 52.1% as at Q1 2016.  A bank is relying on capital in which it pays interest and is also depending on interest on loans disbursed to generate revenue.  Its spread will have to widen to make business meaningful.  Risks amplified.   Any bank that has a debt/capital ratio of this magnitude is living life on the edg

Dear Africa interested individuals,                                                          Business people around the world are shouting themselves hoarse for Nigeria to further devalue its currency.  Yes, it was devalued formally in February 2015 to 200 naira from 160 naira to the dollar four - five months prior.  This is a 25% devaluation.   The IMF and foreign investors want more.  The logic is that this will boost revenue oil receipts in local currency terms and help the country to generate more revenue from lower oil prices.   This will also enable foreign investors to bring in $1 million and get 300 million naira instead of 199 million naira presently.   Naira supply will flood the system, further spike inflation and send the naira on a further downward spiral post devaluation.  The naira lost a further 10% after the CBN Governor at the time (Soludo) devalued the currency in one fell swoop in December 2008 by 25% from N120 to the $.   The failure of the governme

Dear Readers :                          Ivory Coast is now the number one darling of investors interested in the continent of Africa.  The country is dependent on soft commodities for majority of its revenue with cocoa leading the way.  The country issued a $1B Eurobond in February 2015 at 6.625 per cent and in July 2014 issued a 10-year $750m Eurobond at 5.625%.  Seven months later debt investors bought more debt at a yield 100 basis points higher with a staggered repayment in 2026, 2027 and 2028.   Kenya , the number two darling of investors and multilateral institutions issued two Eurobonds in 2014 totaling $2.75B and is preparing to issue another one sometime in the second half of 2016.  Kenya is also soft commodity dependent like Ivory Coast with the country being a major exporter of tea and tobacco.  Both countries are also net crude oil importers which is looked at favorably by investors given the crude oil price decline over the past twelve months. Kenya's 2014 Eur

Dear Readers:                         On August 31, 2015, I published an article on this blog titled: "Brazil and Nigeria with a cameo from Ethiopia..."  The original article is still available on this blog for your reference.  I advise you to read/reread it before completing your visit to the blog.       On Saturday April 9th, I stumbled upon an article on page A12 in the weekend print edition of the Wall Street Journal (WSJ).  The article is titled: "Farms are Brazil's One Bright Spot."  The theme of the WSJ article is "Agriculture is the only sector growing as country faces political chaos and recession."  Brazil's economy contracted at its fastest pace in 35 years in 2015.   Brazil's crop agency, Conab, recently said it expects a record soybean crop for 2016.  A similar feat is expected for sugar cane, coffee and corn.  Exports of poultry is also expected to reach new heights. Agriculture was the only sector of Brazil's econo

Dear Readers:                         Nestlé Switzerland is cutting 15% of its workforce across twenty-one African countries because it overestimated the rise of Africa's middle class.  Nestlé says Africa's middle class is in hindsight actually extremely small and it is not really growing anywhere close to the rates in the studies they reviewed before deciding to expand capacity.  The cuts began in 2015.   Nigeria is not included among the twenty-one African countries where a reduction in workforce is expected.  Nigeria is said to have a middle class of about 8 million people.  This is less than 5% of its current population.  Barclays increased its shareholding in Absa Group from 55.5% to 62.3% in 2013 and in the same transaction handed over ownership of its banking operations in eight African countries to Absa.  Despite this, Absa did not rebrand to Barclays in South Africa.  Barclays Africa Group continued to remain a multi-branded banking group instead of the envisa

Dear Readers:                        Let us take a look at some African banks' earnings discussed some months ago on this blog and their FY 2015 earnings.  This is what investment analysis is all about; a view today of a future financial and operational performance.   Equity Group Holdings (EGH) Kenya released its FY 2015 result a week ago.  RoE came in at at 24% approximately.  EGH is the best performing bank holding company in Africa from among the core I have reviewed.  EGH was discussed on this blog along with bank holding companies from Nigeria and Mauritius.  It stood out from among the rest and this was sustained in its FY 2015 result. FCMB and FBN Holdings have already issued profit warnings prior to earnings release.  FCMB acquired Fin Bank and has been erratic in its performance since then. FBN is too big and this was expressed in my article on this blog on FBN.  It is time for FBN holdings to reduce its size and gain . Stanbic IBTC is dealing with business

Dear Africa interested professionals,                                                             Allow me to take you on a quick and concise trip to East Africa and the banking industry. Barclays Kenya offers a full spectrum of solutions to its customers through its four business units: Retail, Corporate, Treasury & Card Services . The key strategic drivers of the company's current performance and into the future are: 1. Expanded existing business through renewed SME focus including a new hire to spearhead the bank's renewed focus and optimism about the SME space in Kenya. The bank has also increased fixed income trading with 18% of its total assets being committed to fixed income trading with none held to maturity as at September 2015 (all available for sale.)  Bond yields are averaging 16% in Kenya with a relatively stable exchange rate unlike 11% in Nigeria with an exchange rate fully insulated from market forces.     2. Accelerated opening of new revenue s

Dear Viewers:                        Long time!  The current prices of popularly traded stocks on the Nigerian Stock Exchange in 2016 will appear alien to all except the regular.  What can I say?  The low price of some stocks has not been seen ever in some cases and this got me writing again on this blog for the first time in almost 5 months .  Here are two of the companies that I was taken aback by their stock prices  moving in opposite directions for varied reasons.  1. Forte Oil trading at N342.00 per share.   This is pretty much double what the stock was trading at about a year ago. The company's pre-tax income rose by 17% from FY 2014 - 2015 and its share price has pretty much doubled over the past twelve months after rising 133% from December 31st 2013 - 2014.  This movement is definitely not market driven given that the Nigerian market index has been on a downward spiral in 2015 and this has continued into 2016 unabated with the market down almost 15%.  So is the pric

Dear Africa Interested Individuals:                                                          Six years ago, Lamido Sanusi (then CBN governor) used his executive powers to take over control of 8 banks in two batches.  Six of the eight banks were later on sold to other existing banks while one was sold to a core investor who recapitalized it and the other is still awaiting sale by the Asset Management Company of Nigeria. I remember being on a conference call four years ago with Access Bank CEO when the acquisition of Intercontinental Bank was announced.  Size and the capabilities it provides clearly stuck out as the driving force behind the acquisition.  So, four years on, how is the merged entity doing compared to when either bank was independent and immediately after the merger?  Given that size is most clearly evidenced by assets and performance is most clearly evidenced by profit, the ratio pre-tax income to assets will guide our discussion in this article.     Access Ban

Dear Africa Interested Individuals:                                                         Appointments typically send a particular message to the general public.  It shows the direction the person appointing wants to go with the organization in question.  Appointments of a federal nature are supposed to be driven by national best interests and not personal best interests even though the appointments are made by people.  I picked six countries and four are in Africa to review their Central Bank appointments which were all made in the past two years (this was not a preset criterion for selection.)  I picked the USA, U.K., Nigeria, Kenya, Angola and South Africa.  I picked the USA and U.K. because they are developed countries with advanced financial systems that should understand by now the proper way to do things.  I picked Nigeria as the largest economy and most populous nation in Africa, Kenya as the dominant economy in East Africa and a prominent frontier market, Angola as a maj