Tuesday, 28 May 2013 - 20:00
Charts
The Case for Investment in Africa Over the past few years the attention paid to Africa as an investment destination has increased dramatically – more recently Africa has been given a major platform by various asset management companies. Africa is another ‘investment story’ and as with any investment story, investors should remain sceptical until they have found out why the story is being told.
There are a couple reasons for the increased coverage:
• Legislation was recently changed in South Africa to allow retirement funds an additional 5% allocation to Africa on top of their 25% offshore allowance – this has radically boosted the demand for African investment options, and the supply has followed in close pursuit.
• Performance over the past 18 months has been excellent (after a poor 2011) – product providers can therefore offer a product with a ‘compelling investment case’.
At Seed we think that the first reason is a good reason – essentially it allows retirement fund investors a broader investment universe. The second reason shouldn’t be a major consideration. We would rather look at performance through at least one investment cycle – and then also determine how African investments are expected to perform in relation to other high risk investment options.
The basis for the investment case (to be differentiated from a ‘feel good story’) is one of shifting demographics, notably the growth in the middle class population over the next 10 – 30 years (depending on the specific country).
A couple charts can show how a small shift in income distribution can have a large impact on the demand for certain products. Chart 1 below shows how the average Kenyan in 2011 earned US$832pa vs US$478 just 7 years prior, and how this 74% increase in income resulted in car sales growing 385% as a bulge of Kenyans moved into middle class! Note that there is still a large portion of the population that still doesn’t earn enough to buy a car.
Chart 1: Kenyan income distribution
Source: Imara
Chart 2 gives a graphic illustration of the per capita demand for beer across various developed and developing countries. Notice that, in general (excluding us South Africans and the Angolans), beer consumption is extremely low in comparative to the other developing countries (like China, Peru and Argentina), and even more so than developed markets. Make no mistake, beer companies aren’t expecting consumption to move to levels seen in Australia and the UK, as these countries have big beer drinking cultures. What they are hoping for is for per capita consumption to increase 3 or 4 fold (putting them on par with China) on a growing adult population base. If this kind of growth can be achieved over the next 30 odd years – the companies supplying these countries with beer will be sitting pretty.
Chart 2: Beer consumption in selected countries
Source: GondoVisio
While the shifting demographics are naturally key to the success or otherwise of Africa as an investment destination, Africa is fortunate in that it is relatively politically stable when compared to the past 40 – 50 years and at the same time governments aren’t heavily indebted – see Chart 3 below.
Chart 3: African Government debt versus Developed Markets
Source: Momentum Asset Management
There are risks attached to any investment, and investing in Africa is no different. There are just different risks that need to be managed when compared to other countries.
At Seed we haven’t yet taken an active position in Africa, but are currently in the process of further investigating the investment case. Should we make an allocation of our clients’ capital into Africa we want to be very sure that they will be adequately rewarded. An investment in Africa (like any other investment) needs to be done at the right price (i.e. ensure that the markets aren’t overly expensive) and with an investment horizon far in excess of the 3 – 7 year horizon that we typically have at Seed. Further, the manager should be benchmark agnostic, spend the majority of his time ‘on the ground’ visiting companies in his investment universe, be significantly co-invested in the fund, and have been through a full market cycle.
Take care,
Mike Browne
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 28 May 2013
Top News
South African stocks extended their gains to a third trading day on Tuesday, led by coal producer Exarro and petrochemicals group Sasol, as policy support from Japanese and European central banks drove world shares higher. Full story
Revenue from continuing operations increased to R387.5 million (R342.5 million). Operating profit decreased to R83.8 million (R90.3 million). While, attributable profit increased to R93.8 million (R78.3 million), and headline earnings per share grew to 749.9cps (588.3cps).
Dividend
A gr Full story |
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German Finance Minister Wolfgang
Schaeuble warned on Tuesday that failure to win the battle
against youth unemployment could tear Europe apart, while
abandoning the continent's welfare model in favour of tougher
U.S. standards would cause "revolution". Full storyRotting wooden
planks heave as dozens of barefoot Wayuu Indians carry washing
machines, fans and stereos on their backs from the hull of a
cargo ship docked on the tip of northern Colombia. Full storyBritain and France said on
Tuesday they did not have to wait until Aug. 1 to arm rebels
fighting Syrian President Bashar al-Assad, contradicting
European Union officials, but both countries stressed they had
no plans to do so yet. Full story |
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Markets | U.S. stocks rallied more than 1
percent and oil rose while gold, the yen and safe-haven U.S.
debt fell on Tuesday as investors. . . Full story | | European shares headed back
towards recent multi-year highs on Tuesday as pledges of
continued monetary policy support from central banks in Japan
and Europe. . . Full story | | Strong buying of physical
bullion on Tuesday reversed an early gold decline caused by a
dollar rise and technical selling, but the metal. . . Full story | | U.S. stocks rallied on Tuesday
following their first three-day losing streak of the year, after
central banks reassured investors that they will keep. . . Full story |
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| Britain's benchmark equity index
rebounded back towards near 13-year highs on Tuesday, led by
gains in heavyweight bank HSBC and pharmaceuticals
group GlaxoSmithKline.. . . Full story | | European shares pushed back up
towards recent multi-year highs on Tuesday as pledges of
continued monetary policy support from central banks in Japan
and. . . Full story | | U.S. stocks opened higher on
Tuesday as supportive comments from central banks around the
world reassured investors that monetary policies designed to
support the. . . Full story | | Gains in HSBC and
GlaxoSmithKline, seen as more resilient to any economic
downturn, led a rebound in Britain's benchmark share index on
Tuesday, pushing. . . Full story |
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SA Business | South Africa's MTN Group said on Tuesday it had named former chief executive Phuthuma Nhleko as its chairman, replacing Cyril Ramaphosa. . . Full story | | South African telecoms operator MTN Group said revenue grew by nearly 6 percent in the first four months of the year,. . . Full story | | South Africa's economic growth slowed more than expected in the first quarter of 2013, the weakest print since a 2009 recession,. . . Full story | | South Africa's rand extended losses against the dollar on Tuesday, falling more than 1.5 percent to a fresh 4-year low after. . . Full story |
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| South African outsourcing firm Mvelaserve Ltd is to seek independent advice on Bidvest's $67 million cash offer to buy out minority. . . Full story | | South Africa's Nampak Ltd barely grew first-half profit on Tuesday after Africa's biggest packaging company cut prices to secure long-term contracts. . . Full story | | South African-listed paper maker Sappi is considering closing more mills in Europe as falling demand and rising costs for inputs such. . . Full story | | South Africa's Treasury sold a total 2.35 billion rand of its 2023, 2026 and 2031 government bonds on Tuesday.. . . Full story |
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| South Africa's rand fell against the dollar early on Tuesday and was likely to stay under pressure with market players anticipating weak economic growth data later in the session.. . . Full story |
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Company News | Mvelaserve shareholders are referred to the SENS announcements dated 13 May 2013, wherein Mvelaserve shareholders were advised that the Board of. . . Full story | | Shareholders were advised that at the general meeting of Keaton Energy held on 28 May 2013 at The Ultramarine Conference Room,. . . Full story | | Shareholders are advised that at the annual general meeting of shareholders held on 28 March 2013, all the ordinary and special. . . Full story | | Linked unitholders are referred to the audited condensed results for the year ended 31 March 2013 announcement ("results announcement"), released on. . . Full story |
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Company Results | Revenue for teh year grew to R2.3 billion (R1.8 billion). Results from operating activities increased to R151.0 million (R53.1 million). Total. . . Full story | | Revenue for the period jumped 17% to R2.5 billion (R2.2 billion). Operating profit was 13% higher to R465.8 million (R412.7 million).. . . Full story | | Revenue increased by 21% to R11.1 billion (R9.2 billion). Operating profit rose to R1.9 billion (R1.3 billion). Net attributable profit soared. . . Full story | | Gross operating revenue declined to R156.1 million (R180.5 million). Operating profit was recorded at R20.4 million (operating loss was at R29.2. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 41971.17 | 538.71 | 1.30% | JSE Top 40 | 17:00 | 37445.94 | 530.67 | 1.44% | JSE Gold | 17:00 | 1351.40 | -7.74 | -0.57% | JSE Financial | 17:00 | 31794.47 | 374.24 | 1.19% | JSE Industrial | 17:00 | 54765.43 | 848.52 | 1.57% | JSE Indust 25 | 17:00 | 48040.63 | 815.23 | 1.73% | JSE Resource | 17:00 | 47144.62 | 417.21 | 0.89% | DJ Futures | 24/05 | 13431.20 | -1857.80 | 0.00% | DJ Ind | 20:00 | 15401.35 | 98.25 | 0.64% | SP 500 | 20:00 | 1659.01 | 9.41 | 0.57% | Nasdaq | 20:00 | 3486.07 | 26.93 | 0.78% | FTSE 100 | 17:35 | 6762.01 | 107.67 | 1.62% | DAX | 18:08 | 8480.87 | 97.57 | 1.16% | CAC40 | 18:08 | 4050.56 | 55.40 | 1.39% | Nikkei | 08:32 | 14311.98 | 169.33 | 1.20% | Shanghai | 09:32 | 2321.32 | 28.24 | 1.23% | Hang-Seng | 10:28 | 22924.25 | 238.20 | 1.05% | All Ords | 08:44 | 4950.60 | 12.00 | 0.24% | NZSE 50 | 07:48 | 4478.25 | .05 | 0.00% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1383.70 | -9.91 | -0.71% | Gold R | 20:00 | 13521.10 | 151.55 | 1.13% | Gold R/kg | 20:00 | 434703 | 5778 | 1.35% | Silver $ | 19:59 | 22.2600 | -.3330 | -1.47% | Platinum $ | 19:58 | 1453.75 | 5.25 | 0.36% | Palladium $ | 19:58 | 751.00 | 15.50 | 2.11% | R157 | 17:42 | 5.27 | .04 | 0.86% | R186 | 17:43 | 7.19 | .12 | 1.70% | R204 | 17:43 | 5.97 | .09 | 1.62% | R207 | 17:00 | 6.27 | .11 | 1.79% | Brent Crude | 20:00 | 104.37 | 1.73 | 1.69% | Rand / Dollar | 19:59 | 9.7717 | 0.1792 | 1.87% | Rand / Pound | 19:55 | 14.6695 | 0.1825 | 1.26% | Rand / Euro | 19:55 | 12.5646 | 0.1394 | 1.12% | Rand / NZD | 19:58 | 7.9087 | 0.1490 | 1.92% | Rand / AUD | 19:55 | 9.4150 | 0.1608 | 1.74% | Yen / Dollar | 19:59 | 102.0750 | 0.9900 | 0.98% | Euro / Dollar | 19:55 | 0.7771 | 0.0042 | 0.54% | Dollar / Euro | 19:59 | 1.2860 | -0.0067 | -0.52% | Pound / Dollar | 19:55 | 0.6641 | 0.0026 | 0.39% |
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The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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28/05/2013 | 214 | 139 | 83 | 436 | 226,964,086 | R14,267,497,369 | 161293 | 1663220 | 27/05/2013 | 226 | 131 | 73 | 430 | 146,707,260 | R7,975,052,452 | 117089 | 141684 | 24/05/2013 | 179 | 166 | 86 | 431 | 198,362,715 | R10,908,522,198 | 143860 | 90468 | 23/05/2013 | 106 | 253 | 77 | 436 | 244,697,898 | R16,068,250,431 | 190407 | 2028940 | 22/05/2013 | 199 | 173 | 68 | 440 | 240,882,671 | R15,242,690,248 | 191987 | 1946574 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 37,445.00 | 530.00 | 1.44% | Industrial | 54,765.00 | 849.00 | 1.58% | Mid Cap | 56,342.00 | 389.00 | 0.70% | Small Cap | 45,117.00 | 142.00 | 0.32% | Resource 20 | 47,144.00 | 417.00 | 0.89% | Industrial 25 | 48,040.00 | 815.00 | 1.73% | Financial 15 | 11,960.00 | 174.00 | 1.48% | Financial & Ind. 30 | 51,193.00 | 853.00 | 1.69% | All Share | 41,971.00 | 539.00 | 1.30% | Oil & Gas | 33,940.00 | 833.00 | 2.52% | Mining | 28,553.00 | 144.00 | 0.51% | Gold Mining | 1,351.00 | -7.00 | -0.56% | Platinum Mining | 38.00 | .00 | 1.68% | GENERAL MINING | 8,239.00 | 42.00 | 0.51% | Oil & Gas Producers | 18,248.00 | 447.00 | 2.52% | Basic Materials | 25,160.00 | 166.00 | 0.67% | Chemicals | 20,527.00 | 49.00 | 0.24% | Forestry & Paper | 22,389.00 | 634.00 | 2.92% | Industrial Metals | 25,353.00 | 344.00 | 1.38% | Industrials | 42,397.00 | -202.00 | -0.48% | General Industrials | 127.00 | -1.00 | -1.23% | Consumer Goods | 52,350.00 | 1173.00 | 2.29% | Automobiles & Parts | 7,835.00 | 68.00 | 0.88% | Household Goods | 156.00 | 2 | 1.92% | Health Care | 68,140.00 | 2013.00 | 3.04% | Beverages | 176.00 | 3.00 | 1.83% |
| | Index Name | RP | Move | % Move | Food Producers | 71,881.00 | 970.00 | 1.37% | Personal Goods | 923.00 | 32.00 | 3.70% | Consumer Services | 91,512.00 | 1645.00 | 1.83% | General Retailers | 65,756.00 | 1372.00 | 2.13% | Travel & Leisure | 5,447.00 | 37.00 | 0.69% | Media | 162.00 | 3.00 | 2.38% | Support Services | 2,403.00 | -79.00 | -3.20% | Telecommunications | 86,080.00 | 83.00 | 0.10% | Financials | 31,794.00 | 374.00 | 1.19% | Banks | 50,918.00 | 464.00 | 0.92% | Non-life Insurance | 48,492.00 | 256.00 | 0.53% | Life Insurance | 31,378.00 | 539.00 | 1.75% | General Financial | 2,904.00 | 80.00 | 2.85% | Technology | 39,446.00 | -117.00 | -0.30% | SHARIAH TOP40 | 3,456.00 | 44 | 1.29% | FTSE/JSE SHARIAH ALL | 3,574.00 | 38 | 1.10% | COAL MINING | 18,984.00 | 996 | 5.54% | FTSE JSE Fledgling | 5,790.00 | 5 | 0.10% | FTSE/JSE Alt X | 985.00 | -10 | -1.04% | SA LISTED PROPERTY | 544.00 | | -0.17% | CAPPED PROPERTY | 445.00 | | -0.10% | RESOURCE | 25,698.00 | 215 | 0.85% | DIVIDEND PLUS | 212.00 | 2 | 1.40% | FTSE/JSE RAFI 40 | 8,275.00 | 91 | 1.12% | Capped Top 40 | 19,777.00 | 282 | 1.45% | Capped All Share | 21,255.00 | 273 | 1.30% | JSE TABACO | 7,134.00 | 177 | 2.55% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | NPK | NAMPAK | HOLD | 27/05/2013 | MPC | MR PRICE GROUP LIMITED | SELL | 24/05/2013 | TON | TONGAAT HULETT LTD | BUY | 24/05/2013 | RLO | REUNERT LIMITED | HOLD | 24/05/2013 | MMI | MMI HOLDINGS LTD | SELL | 24/05/2013 |
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Results Expected** Expected | Company Name | Fin. Date | 29/05/2013 | ADCOCK | March 2013 (Interim) | 29/05/2013 | CROOKES | March 2013 (Final) | 29/05/2013 | KIBO | December 2012 (Final) | 29/05/2013 | NAMPAK | March 2013 (Interim) | 29/05/2013 | NAMPAK 6%P | March 2013 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | ILLOVO | 27/05/2013 | 28/06/2013 | 08/07/2013 | R 0.6100 | FAMBRANDS | 27/05/2013 | 05/07/2013 | 15/07/2013 | R 1.4200 | CADIZ | 27/05/2013 | 21/06/2013 | 01/07/2013 | R 0.0700 | VUKILE | 27/05/2013 | 13/06/2013 | 24/06/2013 | R 0.7456 | WILDRNESS | 27/05/2013 | 13/06/2013 | 24/06/2013 | R 0.0400 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | ANGLD | 13/05/2013 | 24/05/2013 | 14/06/2013 | R 0.5000 | OASIS | 08/05/2013 | 24/05/2013 | 03/06/2013 | R 0.4372 | FPT | 09/05/2013 | 24/05/2013 | 03/06/2013 | R 0.2611 | AFRIMAT | 09/05/2013 | 24/05/2013 | 03/06/2013 | R 0.2000 | ARROWA | 08/05/2013 | 24/05/2013 | 03/06/2013 | R 0.1500 |
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Upcoming AGMs** Code | Company Name | Date | Status | ADH | ADvTECH Ltd. | 28/05/2013 | Confirmed | BCK | Blackstar Group SE | 28/05/2013 | Confirmed | MTN | MTN Group Ltd. | 28/05/2013 | Confirmed | SNT | Santam Ltd. | 29/05/2013 | Confirmed | GNDP | Grindrod Ltd. | 29/05/2013 | Confirmed |
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