GroupM Expands Academy To More African Markets, Appoints Subcommittee

Brand Spur
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GroupM Expands Academy To More African Markets, Appoints Subcommittee

GroupM SSA announced today that in order to meet the needs of an expanding market, it has extended the GroupM Academy GradX program established in South Africa in 2020 to Kenya and Nigeria with plans to add other markets in the future.

Furthermore, Groupm has appointed a steering committee for SSA that will harmonize processes across owned offices and affiliates.

According to Federico de Nardis, Groupm Sub-Saharan Africa CEO: “GroupM has had a strong and direct presence in all key markets in SSA for a long time. With this market expansion, we’ve recently taken a number of decisions to strengthen our focus on three strategic pillars of people, data, and technology in order to help our clients grow their businesses.”

In its first year, Groupm Academy’s 11 graduates have been absorbed internally at Groupm and the intention is to position future available graduates to clients and affiliate partners in the region. Speaking about the Academy, Serah Katusia, Groupm and Mediacom MD East and Central Africa commented, “The aim of the program is to nurture the new generation of media and marketing experts of the future.

In Sub Sahara Africa, media talent is limited, we want to drive this agenda from the front, we believe that strengthening our teams as well as those of our clients and partners in emerging media markets sets us apart in the continent.”

The steering committee includes all senior leaders from GroupM and the agency networks Mediacom, Mindshare and Wavemaker in the key markets; namely Serah Katusia and Hemang Doshi from East and Central Africa, Seni Adetu from Nigeria, and Ashish Williams, Lwandile Qokweni, Zia Namooya, and Derek Sim from South Africa. The committee will be chaired by Federico de Nardis, CEO, GroupM Sub-Saharan Africa.

The Steering Committee will leverage all the important data and technology investments done by the group at the global and regional level to benefit local and international clients in Sub-Saharan Africa.

Zeronomics: Global Carbon Tax Key To Pushing Energy Transition Agenda In Africa

Esan Bolaji
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Zeronomics: Global Carbon Tax Key To Pushing Energy Transition Agenda In Africa

More than half of African companies are delaying their energy transition targets, leaving them in danger of missing the Paris Agreement target of net-zero carbon emissions by 2050, new research from Standard Chartered has revealed.

Zeronomics, a study into the financing of a net-zero world, surveyed the senior leadership of 250 large companies and 100 investment specialists around the world between September and October 2020 and found that:

  • 55 per cent of Africa-based business leaders believe their companies are not transitioning fast enough (55 per cent of companies globally)
  • Lack of access to finance is the biggest barrier to progress for African companies, cited as a significant obstacle by 78 per cent (67 per cent globally)
  • Just 35 per cent of African companies fully support the aims of the Paris Agreement (47 per cent globally)

What are the barriers?

Many companies based in Africa are looking to delay significant action to after 2030, with the 2020s looking set to be a lost decade. Some 32 per cent of business leaders (34 per cent globally) said their companies will make the most progress between 2030 and 2040, while a further 40 per cent (37 per cent globally) said they will take most action between 2040 and 2050.

Most companies are delaying transition because they do not feel they are currently equipped to meet the target. Some 78 per cent (59 per cent globally) said they need an extensive organizational change before tackling net zero.

A lack of finance isn’t the only hurdle companies in Africa’s face on the road to 2050. Seventy-two per cent (63 per cent globally) believe a lack of consensus on net-zero definitions and targets is hampering progress, while the same percentage (60 per cent globally) say a lack of support for net-zero transition from their organization’s investors is a significant barrier to net zero.

Meanwhile, COVID-19 is forcing many businesses in the region to focus on immediate survival: A whopping 80 per cent (85 per cent globally) of African senior executives say the pandemic has delayed their company’s net-zero transition.

How To Fix It

The research also reveals what business leaders believe is needed in order to speed up the transition. 90 per cent (77 per cent globally) believe an effective global carbon tax, based on a carbon price that reflects the true cost of climate change, would help the transition.

A further 88 per cent (81 per cent globally) said cost savings from sustainable practices could help the world hit net zero by 2050. Meanwhile, the same percentage (81 per cent globally) believe standardized net-zero measurement frameworks would help with the transition, underlining the fact that what we have currently, a matrix of different definitions, measurement, and reporting requirements is a major challenge for senior executives.

What are the top accelerators of net-zero transition? Africa (%) Globally (%)
An effective global carbon tax 90 77
Standardised global net zero transition measurement, disclosure and ratings frameworks 88 81
Increased operational efficiency / cost savings from sustainable practices 88 81
Increased shareholder activism / investor scrutiny and pressure 82 78
Increased investor demand for net-zero transition themed assets 82 72
Inclusion of net zero transition as a key part of investors fiduciary duties 80 74

 

Bill Winters, Group Chief Executive of Standard Chartered says: “Our survey reveals that most companies intend to transition to net-zero by 2050 but have yet to take the action needed to get there. A majority cite funding as an obstacle and carbon-intensive industries and emerging-market companies struggle the most.

“A successful net-zero transition must be just, leaving no nation, region or community behind and, despite the hurdles, action needs to be swift. We must act now, and we must act together: companies, consumers, governments, regulators and the finance industry must collaborate to develop sustainable solutions, technologies and infrastructure.”

Sarmad Lone, Regional Head, Client Coverage Corporate, Commercial & Institutional Banking Africa & Middle East, Standard Chartered Bank added: “Our survey reveals that there is significant opportunity in Africa to pave the way for zero-net carbon emissions. Our biggest challenge, and what should be a priority for us as companies, is to reach a consensus on net-zero definitions and how the transition should be implemented across the region. It is no question that this will take time and is a mandatory collective effort by all communities in Africa. We have to reverse the damage we have done to our planet, and I am honoured that Standard Chartered is a company that has placed priority in achieving this goal.”

Zeronomics examines the economics of transitioning to a net-zero carbon future. Standard Chartered commissioned this major global study to understand how far companies have come on their journey to decarbonize and it reveals a gulf between words and action. Reaching net-zero carbon emissions by 2050 will be a considerable challenge. Every organisation in every sector has a critical role to play in limiting global warming. Commitment to this agenda must be top of mind for all companies – public and private, large and small – and to succeed they must undergo a major transformation.

NextGen Cassava Project Develops New Gari Product For Consumers In Benue, Imo, And Osun States

Esan Bolaji
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NextGen Cassava Project Develops New Gari Product For Consumers In Benue, Imo, And Osun States

Traditionally, the cassava mash used for gari production in Nigeria is left to ferment between 48 and 96 hours, depending on its quality.

Thus, there is high variability in the sensory attributes and consumer acceptability of the gari Additionally, the fermentation process takes longer in some communities where highly sour gari is preferred, reducing the quantity of gari produced within a specific period.

The backslopped method of fermentation, where portions of the previously fermented cassava mash are added to a freshly prepared cassava mash to act as an inoculum, allows for the gradual selection of lactic acid bacteria and accelerated fermentation.

Backslopped fermentation has been used for cassava products such as fufu, lafun, and stored cassava chips gari, but little or no information is available on backslopped fermented gari (BFG) produced from freshly grated cassava roots and the consumer acceptability of the gari/eba.

NextGen Cassava Project Develops New Gari Product For Consumers In Benue, Imo, And Osun States-Brand Spur Nigeria
Developing the new gari product
for Benue, Imo, and Osun consumers.

Consequently, Design-Expert software was used to get the mixing ratios of the fresh cassava mash (FCM) and backslopped cassava mash (BCM) to produce a laboratory-scale gari. Results showed that the optimum combinations of FCM and BCM for gari were 88 g FCM: 20 g BCM after 24 h, 90 g FCM: 20 g BCM after 48 h, 87 g FCM: 20 g BCM after 72 h, and 70 g FCM: 16 g BCM after 96 h.

 

The outcome of the laboratory scale gari was used for the training on the production and consumer acceptability of BFG in three different locations each in Benue (Gwei-east, Konshisha, and Makurdi LGAs), Imo (Ikeduru, Mbaitoli, and Owerri North LGAs), and Osun (Ifelodun, Olaoluwa, and Orolu LGAs) states in Nigeria.

The FCM and the BCM combinations that look like the 24 h, 48 h, and 72 h fermented gari were used in Benue and Imo states. This is because these states do not like gari that is too sour. In Osun State, the combinations of the FCM and the BCM that produced gari that looks like the 48 h, 72 h, and 96 h fermented gari were used as the people in the state like a more sour gari. The control sample was produced using the traditional methods of gari production in each location.

NextGen Cassava Project Develops New Gari Product For Consumers In Benue, Imo, And Osun States-Brand Spur Nigeria
Training local gari producers on the BFG production method.

The consumer acceptability study showed that most of the gari consumers in Benue State preferred the 72 h BFG compared to the control sample produced in each location. Gari/eba consumers in Ikeduru and Mbiatoli LGAs of Imo State preferred the 48 h BFG and the 72 h BFG compared to the control sample, respectively.

In contrast, the consumers in Owerri-North preferred the control sample compared to the eba prepared from all the BFG samples. More than 55% of the gari/eba consumers in Osun State liked the control sample compared to all the BFG.

NextGen Cassava Project Develops New Gari Product For Consumers In Benue, Imo, And Osun States-Brand Spur Nigeria
Carrying out consumer acceptability testing.

Therefore, BFG was well accepted in Benue and Imo states. Still, there is a need to increase the length of fermentation of BCM and the quantity of BCM added to FCM in producing BFG in Osun State for proper adoption and commercialization.

The NextGen Cassava Breeding project (NextGen Cassava) seeks to modernize partner cassava breeding institutions in Africa and use cutting-edge tools to deliver improved cassava varieties.

#SinachLiveYouTube: Sinach’s A Celebration Of Joy Concert To Stream Worldwide Exclusively On Youtube On Easter Sunday

Esan Bolaji
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#SinachLiveYouTube: Sinach’s A Celebration Of Joy Concert To Stream Worldwide Exclusively On Youtube On Easter Sunday

Nigerian gospel singer-songwriter Sinach is set to treat viewers to a celebration of joy and freedom during a 60-minute live stream on her YouTube channel on Easter Sunday.

The virtual concert, Sinach Live: A Celebration of Joy, will be streamed exclusively on YouTube on Sunday, April 4, 2021, at 6 PM WAT. It promises a unique performance by this global star, who will bring an uplifting message of love, healing, and hope through music during this Easter celebration.

Says Sinach: “I am particularly delighted to be able to connect with my friends from around the world on the YouTube platform, where they can expect me to minister some of my popular songs, and others from my new album, Greatest Lord.”

“Easter Sunday is a time to reflect on the resurrection of Jesus Christ and the celebration of life. I am extremely excited that, while this past year has been challenging for so many, we are able to connect on this platform to share uplifting songs during this long weekend.”

Says Google spokesperson, Addy Awofisayo, YouTube Content Partnership Lead, Google, Sub-Saharan Africa: “Music is a universal language that has the ability to uplift and connect people across the world. YouTube is proud to be able to host this very special concert from Sinach, and delighted to promote courage, optimism and joy at this time when it’s much needed.”

YouTube is a platform that helps music lovers discover music they connect with. The platform has enabled musical enthusiasts to gain access to, and inspiration from music from across the globe.

In Africa, YouTube has played an essential role in the discovery and development of the African sound, exporting African music to listeners worldwide, enabling collaborations within the global and regional music industry, and accelerating the transition to digital for fans on the continent.

“We are very excited to be able to bring Sinach’s A Celebration of Joy concert to people in their homes this Easter Sunday,” Awofisayo adds.

Jumia Announces the Completion of its At The Market Offering

Esan Bolaji
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Jumia Announces the Completion of its At The Market Offering

03/30/2021 – Jumia Technologies AG (Jumia), the leading pan-African e-commerce platform, announced that it has completed its “at the market” offering. All 8,962,961 ADSs offered by Jumia were sold at an average price of $38.90 per ADS, generating aggregate gross proceeds of $348.6 million.

Proceeds, net of commissions and estimated expenses, are expected to be $341.2 million. Jumia intends to use the net proceeds from this offering for general corporate purposes.

On March 18, 2021, Jumia filed a prospectus supplement with the Securities and Exchange Commission for the sale of 8,962,961 ADSs through an “at the market” offering with Citigroup Global Markets Inc. as Jumia’s agent.

Jumia is the leading pan-African e-commerce platform. Jumia’s platform consists of its marketplace, which connects sellers with consumers, its logistics service, which enables the shipment and delivery of packages from sellers to consumers, and its payment service, which facilitates transactions among participants active on Jumia’s platform in selected markets.

Monetary Policy: Is A Rate Hike Closer?

Brand Spur
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Monetary Policy: Is A Rate Hike Closer?

At the recent MPC meeting, the majority of members voted to maintain the status quo on all monetary policy tools, retaining the MPR at 11.5%, CRRat 27.5%, Liquidity ratio at 30.0%, and the Asymmetric corridor of +100/-700 around the MPR.

The committee’s decision to hold all policy parameters at the current level is in a bid to create a stable environment to allow for stronger economic recovery, as the recessionary pressures facing the country remain. This appears to be the right thing to do considering the current macroeconomic vulnerabilities and fragile state of recent recovery. However, the last MPC meeting saw three members shift towards tightening monetary policy in a bid to combat rising inflation.

This begs the question of whether a rate hike is around the corner. Truly, while inflation numbers have been on a consistent rise over the months, we think as the 135th MPC communique rightly affirms, inflationary pressures are largely costpush rather than demand-pull. Structural issues constraining food supply have driven food prices higher while increasing energy cost remains a significant contributor.

Going forward, we believe the MPC will eventually tilt towards tightening monetary policy particularly if Q1- 2021 GDP numbers show sustained recovery from a recession. I n addition, we note a hawkish monetary policy stance could drive improved FX flows and consequently, improve exchange rate stability. That said, we express our reservation on the efficacy of a hawkish monetary policy on surging cost-push inflation driven by supply-side constraints and rising energy costs.

 

Ecobank Wins Starsight Renewable Energy Sustainability Award 2020

Esan Bolaji
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Ecobank Wins Starsight Renewable Energy Sustainability Award 2020

Leading West African Commercial and industrial solar power and cooling provider, Starsight says Ecobank is well placed to be the market leader in the establishment of “Green Branches’ across the country.

According to Starsight it has so far delivered more than 100 branch facilities with its market-leading renewable energy solutions, reducing Ecobank Carbon footprint and making Ecobank one of the market leaders in the implementation of renewables in the Nigerian Banking sector.  It went further to state that Ecobank is well placed to be the market leader in “Green Branches’ with an addition 50 Branches scheduled to go live in Q1 2021.

Presenting the Starsight Renewable Energy Sustainability Award for 2020 to Ecobank in Lagos, Teme Jack, Head Sales, SMEs, Starsight Energy, lauded the commitment of Ecobank towards application of renewable solutions thereby reducing carbon footprints, stressing that the award was well deserving.

She was optimistic that Starsight partnership with Ecobank would further go a long way to environmental sustainability. “Our partnership with Ecobank has delivered an outstanding result in a short window time and we look at forward to expanding our partnership in Nigeria and other geographical regions of operations”

Receiving the award, Kola Adeleke, Ecobank Nigeria Executive Director, Corporate Bank said “sustainability remains an essential part of Ecobank’s mission and vision of building a world-class Pan-African bank. Our long-term success is intertwined with the sustainable actions that supports the development of Nigeria and Africa as a continent.

Ecobank is focused on mainstreaming environmental and social best practices in its operations and has adopted various Environmental and Social Governance (ESG) frameworks including the Nigerian Sustainable Banking Principles (NSBP) as benchmarks for measuring its environmental stewardship.

We have been in partnership with Starsight Energy to deliver a market-leading renewable energy solution across our branches in Nigeria, they have delivered over 100  branches facilities with renewable energy solution, thereby reducing our carbon footprint and making Ecobank one of the market leaders in the implementation of Principle 2 of Nigeria Sustainable Banking initiative”. He stated.

Further, Mr. Adeleke reiterated that to “Ecobank Group Sustainability framework is focused on four thematic areas which include: Economic Transformation, Environmental Sustainability, Socially Responsible Financing, and Human Capital Development.

These focus areas are aligned with the tenets of the Nigerian Sustainable Banking Principles (NSBP). Besides, Ecobank is a signatory member of a number of Environmental, Social and Governance (ESG) framework including the Equator Principles and the United Nations Global Compact. We have set a target of achieving the goals as regard SDG/Climate change and society’s wellbeing.

For instance, the Bank is committed to taking bold steps to reduce our carbon footprint, demonstrated in carbon emission from our business operations, travels, paper use, and office waste disposal. We further commit to investing in energy efficiency by incorporating the use of renewable energy products and practices, design architecture for energy-efficient building in new branch expansions, including retrofitting programmes; as well as mainstreaming sustainable practices in third-party contractor’s agreement for supply and procurement activities.”

Sustained Growth In The Equity Market, Market Up By 0.71%

Brand Spur
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Sustained Growth In The Equity Market, Market Up By 0.71%

Sustained Growth in the Equity Market, Market Up By 0.71%

After today’s trading session, the stock market continued to its upward trend, growing by 0.71% to 39,493.37 points. Consequently, the year-to-date performance has improved to -1.93%, from the previous session’s -2.62%.

The Banking sector saw the most growth, advancing by 2.06% following price gains in JAIZBANK (8.47%) and GUARANTY (4.28%). The Insurance sector grew by 0.56%, while the Consumer Goods and Industrial sectors gained 0.19% and 0.07% respectively. The Oil and Gas sector was the only one to record a negative performance, dropping 0.50% following a loss in OANDO.

With 28 stocks advancing and 12 stocks declining today, the market breadth moved upwards from 1.54x to 2.33x. The volume and the value of trades in the market increased significantly, compared to the most recent trading session; the volume grew by 108.10%, while the value grew by 281.75%, as investors traded a total of 522.17 million units of shares worth ₦10.65bn in 4,566 deals.

Fixed Income Market

In the bond market, the yields of short-term bonds dropped, while those of long-term bonds increased. The FGN-MAR-2024 bond yield declined by 2bps to 7.50%, along with the FGN-MAR-2025 which declined by 1bp to 10.48%. On the other end of the curve, the FGN-JUL-2045 bond yield increased by 6bps to 11.90%, and the FGN-MAR-2050 bond yield climbed up  14bps to 11.67%.

Treasury bill yields remained stable for the 91-day and 365-day instruments at 2.80%, and 6.64%, while the yield for the 180-day instrument compressed by 28bps to 4.34%.

MARKET SNAPSHOT

  • Sustained Growth in the Equities Market, Market Up By 0.71%
  • Bond Yields Compress on the Short End of the Curve And Rise on the Long End
  • US Stocks Drop After Tech and Media Stock Sell-Offs
  • Oil Drops After Ever Given Ship is Refloated
  • Parallel Market Exchange Rate Remains Stable at ₦485/1$

Dangote Cement Plc FY- 2020 Results: Exemplifying Recovery

United Capital Research
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Dangote Cement Plc FY- 2020 Results: Exemplifying Recovery

Dangote Cement Plc (“DANGCEM”, “The Company”) reported FY- 2020 results on 23rd March. Despite the pandemic-induced disruption to its activities, Group Revenue increased 16.0% y/y to N1.03trn, driven by strong growth in sales volume (+8.6% to 25.7Mt), particularly in Nigeria.

The company also weathered the storm of cost pressures, aided by price increments, with Cost of Sales increasing 15.3%,  slower than revenue growth. Overall, increased sales, efficient cost management and significant moderation in finance costs resulted in a strong bottom-line performance, with Profit Before Tax (PBT) and Profit After Tax (PAT) increasing by 49.0% and 37.7%, respectively. We update our forecasts and valuation in response to the new data and changing market dynamics.

Resilient Local Demand Boosts Top-line

DANGCEM defied the COVID-19 pandemic by printing impressive topline growth in FY-2020, despite economic restrictions in Nigeria and its markets across Africa. The company reported a 16.0% uptick in Revenue to N1,034.2bn from N891.7bn in FY-2019. This increase was driven by a robust expansion in Nigerian sales volumes (up 12.9% y/y to 15.9Mt) and surprising resilience in its Pan African operations (up 4.4% y/y to 10.0Mt). The company’s fortunes were boosted by a V- shaped recovery in cement demand through H2-2020, a result of pent-up demand from Q2-2020 when construction activity was restricted due to pandemic-induced total lockdowns. Furthermore, in Nigeria, volume growth (+14.3%) more than compensated for a drop in export volumes (-27.3%), which was subdued by pandemic-related pan- African trade restrictions and the land border closure in Nigeria.

On further analysis, the company saw increased price realization (average selling price per tonne) due to inflationary pressures, which persisted through the fiscal year, and the impact of exchange rate devaluation on costs. For context, Revenue per tonne in Nigeria increased by 4.5% to N45,165.0 in FY-2020.

The company also kicked off clinker exports with about 197kt exported from Nigeria through the year. As seen in Nigeria, the Pan African business saw improved sales volume growth, particularly following the lockdowns, with FY-2020 sales rising 12.7% y/y to N318.7bn, supported by strong performance in Cameroon, Congo, Ethiopia, and Senegal.

Operational Efficiency Drives Margin Expansion

At the cost level, the Cost of Sales rose significantly (+15.3% y/y to N468.4bn), albeit outpaced by Revenue growth (+16.0% y/y). Consequently, Gross Margin expanded by 27bps to 57.7% from 57.4%. The increase in Cost of Sales was mainly driven by an increase in energy costs from N122.8bn in FY-2019 to N146.3bn in FY-2020, an expected manifestation of the Naira’s devaluation. Notably, the cost of material consumed increased by 15.1% y/ y to settle at N134.9bn amid inflationary and FX pressures.

Operating expenses declined marginally by 0.2% y/y to N214.2bn in FY-2020 from N214.8bn in FY-2019, reflecting successful cost curtailment in the face of pandemic-related constraints. Specifically, lower haulage expenses (-7.7% y/y) led to a moderation in Selling and Distribution expenses (down 4.2% y/y) and counteracted the surge in Administrative expenses (11.5%). As a result, the group’s EBITDA increased by 20.9% to N478.1bn on the back of a 16.7% y/y increase in Nigerian business EBITDA to N421.4bn (58.5% EBITDA margin) and a 49.0% y/y surge in Pan Africa EBITDA to N71.3bn (22.4% EBITDA margin).

Notably, the surge in Pan Africa EBITDA is traceable to increased volumes in Cameroon, Congo, and Ethiopia, as well as higher pricing in Zambia and increased use of local coal and alternative fuels in Ethiopia. As such, group EBITDA margin expanded to 46.2% y/y from 44.3% in 2019.

Despite an increase in financial liabilities, the company saw a 23.7% reduction in Finance Costs, on the back of the low-interest rate environment. FX gains also drove increased finance income (+291.8% y/y), against FX losses recorded in FY-2019. Notably, we observed an 863bps increase in the effective tax rate, which management explained was due to manufacturing lines exiting Pioneer status in February 2020 and thus being unable to take advantage of tax credits for the remainder of the year. Overall, Profit Before Tax (PBT) and Profit After Tax (PAT) increased by 49.0% y/y and 37.7% y/y, respectively.

Our three-step Du-Pont analysis of the firm’s Return on Equity (ROE) showed that despite a marginal moderation in Asset Turnover (0.50x in FY-20 from 0.51x in FY-19), a surge in Net Margin (from 22.5% to 36.1%) and increased leverage (2.3x in FY-20 vs 1.9x in FY-19) boosted ROE. In line with the huge bottom-line growth, the board of directors have proposed a dividend of N16.0/share, same as the preceding years’ payout.
N100bn corporate bond issue drives leverage ratio to 2.3x DANGCEM’s debt portfolio continues to grow as the company looks to expand across its markets and boost its export capabilities. Debt/Equity and Leverage ratio increased to 1.3x (vs a 5-year average of 0.9x) and 2.3x (vs. 1.9x 5-year average), respectively, majorly driven by aggressive growth in financial liabilities. The rise in leverage is primarily attributable to the N100.0bn bond issued in April 2020, the proceeds of which are being used to fund capital expenditures related to the Company’s 3Mt plants in Okpella and Obajana (completed), as well as working capital and debt refinancing needs. However, the company’s interest coverage is very robust, at 8.8x, above the 5-year average of 5.6x.

Outlook: Topline Line Growth To Moderate Owing To High Base

Our outlook on DANGCEM for FY-2021 is positive as we expect Nigeria’s economic recovery to continue to support local demand for cement and buoy continued group revenue growth. Our expectation is also predicated on recovery in exports – given 2020s relatively low export base (due to the land border closure), the new Apapa and Onne sea export terminals and the additional 3Mt Obajana capacity. However, we do not expect any significant growth in local Real Estate demand, as interest rates rise towards pre-pandemic peaks, even as public infrastructure investment recovers.

Accordingly, we expect revenue growth for the Nigerian segment to moderate to 14.4% (from 18.0%) to N801.2bn, owing to the high base of 2020 volumes. For its Pan Africa business, we see the expected SSA-wide post-pandemic recovery sustaining volume growth, forecasted at 5.0% y/y (vs. 4.4% in 2020), as more volumes are sold in Congo, Tanzania, Ethiopia and South Africa. Overall, we project a 13.0% y/y increase in Group revenue to N1,168.3bn.

We anticipate comparable cost burdens over the course of the year as inflation persists even as the FX situation improves. We also think the effectiveness of the ‘Bag of Goodies’ promo’s relaunch in July would inspire additional marketing spend.

Thus, we forecast a 12.9% y/y EBITDA growth to N537.5b, implying an EBITDA margin moderation of 22bps to 45.01%. Finally, we expect higher financing costs as a result of higher rates amid the company’s expanded debt portfolio and the company’s increased participation in the debt markets (in view of the company’s N300.0bn bond program). We foresee this, along with the absence of pioneer tax credits, having an impact on bottom-line growth. These factors bring our forecast PBT and PAT to N407.1bn (+9.1%) and N305.4bn (+10.6%).

BUY Rating Maintained With Downgraded Target Price

Following the completion of the first tranche of its share buyback program, the company’s management noted that the SEC buyback authorization had expired but reiterated the company’s intent to repurchase 10% of its total outstanding shares, with the program’s success contingent on stock market turnout and the company’s liquidity. Accordingly, while we do not rule out another buyback, we doubt the possibility of another one this year. Based on the foregoing, and adjusting our valuation assumptions for a higher risk-free rate and country risk premium, we have revised our price target on the ticker slightly lower to N253.7 from N261.5, which still translates to a BUY rating (12.8% upside) based on its current market price.

Investors Benefit From Elevated Short-Term Interest Rates Continue, Stay Short On Duration

ZedCrest Capital
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Investors Benefit From Elevated Short-Term Interest Rates Continue, Stay Short On Duration

FGN Bonds

The FGN bond market opened the week relatively sluggish across the curve, with little demand seen despite the 2035s and 2050s bond coupon inflow hitting the system today.

Slight action was seen at the tail-end of the bond curve, albeit in light volumes, with the 2045s trading at 11.95% levels while short-covering trades continued to pressure the 2049s and 2050s which changed hands at 11.80% levels.

Overall, yields compressed by c.02bps on the average across the sovereign curve by the close of trading.

We expect market demand for bonds to stay muted in the interim as short-term rates remain elevated as well as expected slight selling pressure as the month draws to a close.

Treasury Bills

The treasury bills space opened the new week on more bullish as investors looked to reinvest inflows from bond coupons instead in short-term instruments. We saw improved demand on the short-dated treasury bills (30- to 90-day tenors), with most of the trades seen on the CBN Special Bills which offered better discount rates (at 6.00% levels).

We expect the market to trade more positively opening tomorrow, as OMO maturities improve banks’ funding positions and support some position-taking.

Money Markets

Liquidity in the Money Market opened the week relatively unchanged from last week’s close, as liquidity from coupon payments of c.N60Bn were canceled out by the annual NDIC premium debit imposed on local banks. Interbank rates climbed up by c.188bps on the average to close at 12.00% and 13.00% for OBB and O/N rates respectively.

We expect funding rates to open lower tomorrow, as OMO maturities of N180.78Bn ease the pressure on the funding positions of local banks.

FX Market

The FX space opened the week amidst poor supply, as traded volumes dropped by 57% from the previous week’s close (c.$30.84mio traded). The Naira appreciated by N0.87k to close at N409.13/$, as the bid ranged tightened to between N400.00 and N410.50 to the dollar.

At the parallel market, the Naira strengthened by N1.10k as the transfer rate closed at N496.70/$. The cash rate remained unchanged from last week’s close at N482.50/$.

Eurobonds

The NIGERIA Sovereigns opened the new week on a quiet note, with little volumes passing through during the session. The bulk of market action was noted at the curve’s belly, especially for the 2027s-2032s maturities, which shed an average of c.5bps D/D, while yields expanded by an average of c.3bps across the benchmark curve.

Similarly, the NIGERIA Corporates traded with bearish sentiments as we saw some participants seek to book some profits to close out the month. at the early start of the week.

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