Traders’ Voice…All Shades of Red

Comercio
-
0
Traders’ Voice…All Shades of Red

It is still the month of love. We hope you had a fantastic Valentine’s Day, besides the crazy traffic that usually comes with it. While most of us know Valentine’s day to be a day of showing love to your significant other or family members, we at Comercio Partners would like to encourage you to take it a step further and show love to everyone around you.

After all, with everything going on around the world, I think it is safe to say we all need love. Lest I forget, it is Black History Month, and we would like to commend all the fallen heroes and everyone fighting for racial equality and justice.

We truly appreciate you and stand with you. Speaking of Black excellence and gender equality, we would like to congratulate our very own Ngozi Iweala for becoming the first female leader of the WTO.

Nevertheless, while so many of us wore the usual Valentine uniform, a touch of red, to church, on our dates or family gatherings, the Nigerian Bourse which was the best performing stock market index last year, was also in all shades of red last week (is it just me or did the song “blood on the dance floor” by the great Michael Jackson just come to mind?)

Bulls or Bears? – You Decide

Although illegal in several parts of the world, allow me to crave your indulgence in an animal fight between two terrestrial mammals – a bull and a bear. Now keep this strictly within your realm of imagination and place your imaginary bets on the likely victor.

Hold that thought for a second and let us discuss an identical sport that is being played in a real market, which is the equities market. Most players in this market had envisaged a scenario where the bulls maintained dominance in the earlier part of the year, after which we see the bears get a hold of the bourse following the earnings season.

The premise behind this was that dividend plays will dominate the year’s start, after which we would see yields in the fixed income market retrace as we moved into the year, which would not bode well for equities given the history of a strong inverse correlation between fixed-income yields and equity market performance.

So, the oracles were half right; yields are retracing as we move into the year, but at a much faster pace than envisaged. Hence, the market bulls are losing control of the local bourse during an earnings season that should be somewhat positive.

NGSE ASI

Traders' Voice…All Shades of Red

Over the past two weeks, the benchmark index for the local bourse lost -4.65%, erasing most of the gains recorded in January 2021, where the market ticked up by 5.32% by the month’s end.

As at the close of the market last Friday, the year-to-date return stood at 0.42%, following a second consecutive weekly decline of -3.04%. While profit-taking activities could bear some of the blame for the downtrend, the major driver behind the selloff was the increase in yields in the fixed income market.

The major signal of a retracement in yields was seen two weeks ago after the OMO auctions, and the nail to the coffin came from last week’s treasury bill auction.  

PMA RESULT 

The result of the NTB auction of 10.02.2021 for settlement on 11.02.2021

 

(91-Day)

(182-Day)

(364-Day)

Stop Rates (%):

1.0000

2.0000

4.0000

Previous Stop Rates (%)

0.5500

1.3000

2.0000

 

Before we posit our expectations for the equities market, it is imperative that we briefly note three key points. First, at current prices, the market is still performing at a discount when compared to its emerging peers, and there are still several attractive stocks in terms of both fundamentals and dividend yields.

Secondly, the current tone of the fiscal authorities implies that given their plans for increased domestic borrowings, they are still looking to keep rates low, but the levels achieved last year might prove difficult to achieve; and lastly, a review of the equity market performance from 2005 till date, shows that what succeeds a yearly gain that is above 40% is a bearish year for equities.

Traders' Voice…All Shades of Red Brandspurng1

The keyword for an approach to the equities market is caution. While the pockets of bargain hunters are expected to continually hunt for fundamentally attractive stocks after every market correction, the underlying theme of the market appears to be bearish.

Hence, while several factors that would determine the market performance by year-end could still change, the current facts and historical precedence point to a bearish close. So, taking you back to our earlier imaginary fight between a bull and a bear, I wonder which animal your bet is on.

As for us, our take on the animal fight is the same as our view on the equities market – when all is said and done, the omnivore wins. 

New Eurobond issuance: ECOTRA 26s 

Ecobank Nigeria successfully issued the first Eurobond out of Nigeria in 2021, with a total outstanding of US$300m for 5-year paper and a 7.125% coupon. The paper was highly sought after with a 3x oversubscription despite the current macroeconomic headwinds and covid-19 induced disruption. Which begets the question “is this the best time for Nigeria to issue a sovereign bond?”

Issuer

EBN Finance Company B.V.

Borrower

Ecobank Nigeria Limited

Borrower Rating

B – / B – (S&P / Fitch)

Expected Issue Rating

B – / B – (S&P / Fitch)

Status

Senior Unsecured

Format

144A/RegS

Settlement

16 February 2021 (T+4)

Tenor

5 Year

Coupon

7.125%

Size

USD 300mn

Books

USD 900mn (excl. JLM interest)

 

We expect to see sustained interest in coming weeks given as ECOTRA 26s remains the most attractive Nigerian bank Eurobond paper in terms of yield. We see it settling at around 6%.

Hyundai Reveals Redesigned 2022 Kona and Kona Electric SUVs

Esan Bolaji
-
0
Hyundai Reveals Redesigned 2022 Kona and Kona Electric SUVs

Feb. 16, 2021 – Hyundai today provided details for its significantly redesigned and enhanced 2022 Kona and Kona Electric SUVs for the U.S. market. The new Kona receives a variety of updates driven by U.S. customer research.

The fresh design, including an all-new sporty N Line trim, offers a dynamic new appearance. An enhanced powertrain line-up provides both sporty and eco-friendly options to suit a wide variety of buyers, while upgraded connectivity and convenience features make for an even more satisfying ownership experience.

Hyundai Kona: Governor Sanwo-Olu Unveils First Locally-Assembled Electric Car In Nigeria (Photos)

The safety suite has also been improved with new active and passive safety features available. 2022 Kona gasoline and Electric SUVs are produced in Ulsan, Korea and will arrive in the spring.

Kona plays a key role in Hyundai’s broader electrification strategy, combining electrified powertrains with a stylish sub-compact SUV body configuration. In fact, Kona was the first Hyundai SUV available with a fully-electrified powertrain in the U.S.

“For 2022, Kona and Kona Electric have been freshly redesigned with new safety and convenience features that ensure they remain at the top of SUV buyer lists. Whether they desire the eco-focused Electric, Turbo or sporty new N Line version, we’re confident this new Kona will exceed the most demanding compact SUV buyer expectations,” said Olabisi Boyle, vice president of Product Planning and Mobility Strategy, Hyundai Motor North America.

Sporty and Sophisticated Design

Kona design elements in the front and rear give it a sophisticated look while keeping its distinct illumination signature. The striking new front design stands out with sporty character lines and bold protective cladding.

The stretched hood drops sharply over the grille with a wide, distinctive shape, giving the Kona a powerful demeanour. Enhanced LED daytime running lamps (DRLs) provide a narrow, piercing look forward. Below, the bumper fascia connects smoothly to the wheel arch cladding, forming a robust armour-like motif in contrast to the body.

2022 Kona is 1.6 inches longer than the previous model, giving it a proportional, dynamic look to balance its wide visual stance.

Skid plate elements embrace the lower air intake and visually complement the surfaces surrounding the grille. Integrated into the bumper corners are vertically-oriented aerodynamic inlets that improve airflow.

The profile retains the muscular and sculpted shape of the previous model, but the wedge-shaped silhouette is accentuated by a connection between the shoulder creases and the angular front end. From the rear, new taillights feature horizontally-stretched graphics, reflecting the unique identity of the forward illumination signature.

A new rear fascia, which also follows the protective armour concept of the front and profile, is also constructed with a contrasting material. In addition, new alloy wheel designs are visible from a variety of angles.

Interior Design

The interior of the new Kona was designed to express a more sophisticated and progressive appearance. A rugged, yet refined look matches the exterior boldness, appealing to customers with an active lifestyle.

A new console is disconnected from the instrument panel to stress the horizontal layout, appearing wide for a spacious atmosphere. An optional electronic parking brake is now available on premium trims as a convenience feature.

New ambient lighting illuminates the cup holder and footwells, while an aluminium-like finish adds refinement. Kona’s rear cargo area has been increased and second-row legroom has also been improved, along with USB-port access for second-row passengers.

Kona Electric Design

The Kona Electric has also been freshened with a new, sleeker front fascia design. The former dimpled grille area has been replaced with a sleek new aerodynamic shape with a prominent horizontal character line immediately below the badging and DRLs.

New headlamps and DRLs provide a fresh new illumination signature, and the lower fascia opening boasts clean horizontal strakes. New lower fender sculpted vents are both sporty and aerodynamically functional.

In profile, a sporty new alloy wheel design has been optimized for efficient airflow. From the rear, a new bumper fascia design carries the lower valance strake elements through to the rear of the vehicle, and a new tail lamp design neatly finishes the rearview. 

Inside, the centre-stack and centre-cluster displays are all-new for the Electric as well, with large 10.25 screens in each area for superb driver visibility. The lower centre console storage area has also been redesigned with wireless charging capability and efficient use of space.

New Kona N Line Adds Sporty Variant

As part of Hyundai’s growing N brand, Hyundai has created an N Line version of the Kona to appeal to enthusiast buyers, available for the first time as an N Line version, combining fun-to-drive character with sporty differentiation. Kona N Line stands out through its sporty front and rear end, body colour cladding, and specific diamond-cut alloy wheel design. The front view is characterized by the dynamic features of the front bumper, harmoniously connected and unified with the body colour treatment of the wheel arch cladding. Instead of the rugged skid plate design of the new Kona, the N Line version features an N design aerodynamic lip with low corner fins for a more road-oriented demeanour. Larger, more technical air intake features are further distinguished by a unique mesh design and surface treatment.

In profile, body colour cladding and rocker panels are complemented by a dedicated N Line 18-inch alloy wheel design. The rear completes the dynamic and emotional image, incorporating a large central aerodynamic diffuser in contrast to the body, with dual exhaust tips.

At the rear corners, the bumper fascia is formed with sharply-creased lines and strakes enhancing airflow. The N Line interior offers a dedicated N Line colour package with black seats and distinctive red stitching, black headliner, metal pedals, and N logos for the seat, steering wheel and gear shift lever, with a sporty presence.

Powerful and Efficient Powertrains

Kona powertrain offerings have top efficiency levels as a primary target. Kona offers a choice of two gasoline powertrains. A 2.0-litre 4-cylinder Atkinson engine produces 147 horsepower at 6200 rpm and 132 lb.-ft. of torque at 4500 rpm, paired with a new Smartstream Intelligent Variable Transmission (IVT) for maximum efficiency.

The Atkinson cycle design maximizes the effective cylinder expansion ratio (compression stroke vs. power stroke) for greater efficiency.

N Line and Limited trims offer a 1.6-litre 4-cylinder direct-injected, turbocharged engine generating an estimated 195 horsepower at 5500 rpm and 195 lb.-ft. of torque from 1500-4500 rpm, an advantage over key competitors.

Peak torque delivery starts at only 1,500 rpm and holds through 4,500 rpm, for low-RPM responsiveness and performance in everyday driving conditions. The 2022 Kona turbo engine coupled to a retuned seven-speed EcoShift® dual-clutch transmission (DCT) for outstanding efficiency with quick, seamless shifting and brisk acceleration.

Kona Electric Powertrain – Powerful Electric Propulsion with 258-mile Range

The Kona Electric powertrain employs a high-efficiency 150 kW (201 horsepower) permanent-magnet synchronous electric motor supplied by a high-voltage 64 kWh lithium-ion battery. The motor develops 291 lb.-ft. of torque distributed to the front wheels. The battery system is liquid-cooled and operates at 356 volts. In addition, Kona Electric estimated MPGe is 132 city, 108 highway, and 120 combined based on internal testing.

Kona Electric utilizes a standard Level-II on-board charging system capable of a 7.2 kW rate of charge for rapid recharging characteristics, with an estimated range of 258 miles based on internal testing.

Kona Electric, using a Level-III fast charge rate, can charge from 10 to 80 percent in approximately 47 minutes using its SAE-Combo charging port. This convenient fast-charging capability is standard on the Kona Electric. With Level-II charging, it can also charge from 10 to 100 percent in approximately nine hours and 15 minutes.

For more charging convenience, the charging port is located in the front grille area for head-in parking ease when charging. A battery warmer system is standard on SEL Convenience models and above. The system helps prevent excessively long battery-charging intervals in cold temperatures. In addition, in Winter Mode, the battery warmer can minimize battery-power losses due to low winter temperatures.

Responsive and Refined Chassis Tuning

Kona was developed with a focus on enhanced driving dynamics and responsive performance for a variety of urban and multi-surface driving conditions. The long wheelbase, short overhangs and wide track create a planted stance that results in exceptional agility in urban environments with enhanced linear stability and ride comfort.

For 2022, noise, vibration and harshness (NVH) is reduced by new acoustic windshield glass, new instrument panel insulation and additional cargo area insulation. Available 18-inch alloy wheels with 235/45R18 tires give surefooted, agile handling character on a variety of road surfaces.

Connectivity & Technology

The new Kona has been equipped with the latest in-car connectivity and technology. New to this model is a 10.25-inch digital cluster and 10.25-inch navigation center stack display, bringing with it new connectivity features.

The new screen comes with a split-screen function, multiple Bluetooth connections and additional voice-recognition features. Drivers can activate and control features like climate, radio station, rear window and side mirror heating as well as steering wheel heating through Dynamic Voice Recognition.

Drivers can even check stocks, weather, or perform POI searches using their voice when connected to Blue Link®. Kona is equipped with standard Display Audio, with the screen increased from seven to eight inches.

It also offers wireless Android Auto® and Apple CarPlay®, so customers do not have to use a cable to connect their phones. Even more, Kona offers Digital Key, supported via a dedicated smartphone app, allowing smartphones to control selected vehicle systems remotely.

Users can lock and unlock the vehicle, activate the panic alert and start the engine. Digital Key allows owners to leave traditional keys at home and allows secure sharing of keys with family and friends.

Advanced Driving Assistance Systems

Kona is available with a range of safety and driving assist features for added peace of mind. Smart Cruise Control (SCC) is available and includes the stop-and-go function. Available Blind-Spot Collision-Avoidance Assist (BCA) has been enhanced, engaging the vehicle’s brakes to help prevent a collision if another vehicle is detected near the rear corner (blind spot) and the driver attempts to change lanes.

In addition, Highway Drive Assist is a newly available feature that can help keep the vehicle in the centre of its lane with a specified following distance to a leading vehicle and even make speed adjustments to the posted speed limits on interstate highways. Another feature is Forward Collision-Avoidance Assist (FCA) with pedestrian and cyclist detection.

FCA uses a radar sensor in addition to a camera to help better detect potential collisions. If the system senses a potential collision and the driver fails to react in time, it may automatically apply the brakes. Available Rear Cross-Traffic Collision-Avoidance Assist (RCCA), also a first for the new Kona, works to help avoid a collision when backing up by applying the brakes if another vehicle is detected.

This is an upgrade from the former Rear Cross-Traffic Collision Warning, which provided a warning. Another available safety feature-focused primarily on the protection of children, Safe Exit Warning (SEW) can warn passengers from exiting the vehicle if it is not yet safe to do so.

Hyundai SmartSense Available Active Safety Features

  • Forward Collision-Avoidance Assist (FCA)
  • Blind-Spot Collision-Avoidance Assist (BCA)
  • Rear Cross-Traffic Collision-Avoidance Assist (RCCA)
  • Rear Occupant Alert (ROA)
  • Smart Cruise Control (SCC) with stop and go
  • Highway Drive Assist (HDA)
  • Lane Following Assist (LFA)
  • Safe Exit Warning (SEW)

Blue Link® Connected Car System

The new Kona receives many Blue Link® Connected Car System enhancements. As with most Hyundai models, Blue Link is complimentary for three years and includes features such as Remote Start with Climate Control, Remote Door Lock/Unlock, Stolen Vehicle Recovery and Destination Search by Voice and others.

Blue Link features can be accessed via interior controls or through the MyHyundai.com web portal, the MyHyundai with Blue Link smartphone app, the Amazon® Alexa Blue Link skill and the Blue Link Google Assistant app. Some features can be controlled via Android Wear™ and Apple Watch™ smartwatch apps.

2022 Kona improvements include:

  • Remote profile management—stores select vehicle settings to the Blue Link cloud, with the ability to remotely update and push back to the vehicle, personalized to driver preferences
  • Remote start enhancements:
    • Remote seat heating and (ventilation – EV only)(on/off/level for individual seats)
      Profile selection (preloads individual driver settings for seating position/side mirrors)
  • Vehicle Status Notifications—if the vehicle is left with doors unlocked or windows open, customers will receive a notification
  • POI Send to Car now with Waypoints (ability to add up to three-way points, to be delivered to the vehicle together and automatically set order of destinations)
  • Maintenance Alert Enhancement—maintenance interval tracking is now visible in the multimedia system, with the ability to reset

MYHYUNDAI with Bluelink App (Kona Electric-specific functions)

Owners can manage and monitor the Kona Electric remotely via the Blue Link smartphone app. With the app, owners can access real-time data from their Kona Electric and perform specific commands like starting the vehicle and locking doors. Users can search for points of interest with voice or text and receive the directions when they start their Kona Electric.

For Kona Electric owners who charge at their residence, one of the most useful features of the app is the ability to manage their charging schedule.

Owners receive vehicle-charging options that they can select while in the car and manage them remotely via their smartphone. Immediate charge is the simplest option, as charging begins as soon as the Kona Electric is plugged-in.

Individuals that have different electric rates at off-peak times may want to schedule the charge to reduce cost as well as reduce peak demand on the electricity grid. Users can do that with the new app based on time and date. For example, charging could be set to start at 10 p.m. on Wednesdays and Thursdays on a weekly basis.

Connected Charge Management Services:

  • Start or stop charging
  • Set-up charging schedule with days of the week and time
  • Current battery level with real-time electric and fuel range
  • Real-time fuel range
  • Plug status (in/out)
  • Charge status
  • Time left until fully charged

EA Acquires Glu Mobile For USD2.1B

Esan Bolaji
-
0
EA Acquires Glu Mobile For USD2.1B

U.S.-based video game giant Electronic Arts (EA) enter into an agreement to acquire U.S.-based mobile game developer Glu Mobile for $2.1B in enterprise value and equity value of $2.4B, including a ~$364m net cash on the balance.

The price consists of a 36% premium to Glu Mobile share price of $9.19 on February 5, 2021, which is about $12.5 in cash for each ordinary share. The total transaction is planned to be financed by EA’s cash on hand.

EA Acquires Glu Mobile For USD2.1B Brandspurng

Based on Glu Mobile financial performance (Revenue of $540.5m and EBITDA of $29.5m FY 2020), the transaction multiplies are 3.9x EV/Revenue and 71.2x EV/EBITDA (or 24.2x EV/ adj. EBITDA). The acquisition is expected to be finished in the Q2’21

Strategic Rationale

  • EA further expands into the mobile space with the acquisition of Glu’s diversified portfolio across sports, RPG, lifestyle, casual, and mid-core genres
  • Though Electronic Arts is primarily known for its PC&console activity, many of its sports titles have their mobile versions. Moreover, EA’s mobile sports games four-year CAGR is 24%, which is notably higher than that of PC&console sports games (13%)
  • A huge team of 780 employees on board will significantly increase EA’s mobile game development expertise, especially its products scaling capabilities
  • Glu Mobile’s portfolio seems to perfectly fit EA’s range of lifestyle and sports titles:

    • Such games as Design Home, Covet Fashion, and Kim Kardashian: Hollywood will complement The Sims mobile

    • Tap Sports Baseball, Deer Hunter, and Tap Sports Fishing will be a great add-on to EA’s vast portfolio of spots titles, including FIFA, Madden NFL, NHL, NBA, and UFC

  • Revenue from PC&console premium games publishing is tied closely to the new product releases. That is why the expansion into the mobile F2P space can help EA to stabilize their financials

Glu Mobile’s History

  • Founded in 2001, Glu has first made its name as a publisher of mobile premium games, made for old mobile phone models, characterized by the slow network, phone keypad controls, and single-player games
  • In 2007, Glu mobile went public and shortly reached $14+ price per share, which remains one of the highest Glu share price levels up to date. After not meeting the market expectations, the price dropped.
  • In the following years, the market started its shift towards F2P smartphone games, characterized by different monetization system, multiplayer focus, switch from keyboards to touchscreen and accelerometer, as well as a whole new technical level of games. This led Glu Mobile to search for new ways of doing its business.
  • In 2011, Glu Mobile laid a foundation for its acquisition strategy, buying Blammo Games, which would later be known for Kim Kardashian: Hollywood casual game. During the next several years, Glu mobile made several deals, acquiring one popular IP Deer Hunter (2012), and three studios, that would become crucial for Glu’s inorganic growth: Pick 6 Studios (2013), PlayFirst (2013), and Crowdstar (2016)

Major Concerns

  • Based on Capital IQ consensus financials forecast, forward multiples are 18.7x EV/EBITDA’21 and 14.4x EV/EBITDA’22 (or 10.2x EV/adj. EBITDA’22)
  • A few months ago, Electronic Arts announced the acquisition of UK-based racing games developer Codemasters Group (LON: CDM) for a total consideration of $1.2B. This means, in 2021, EA will have to integrate two large businesses into its ecosystem. So there’s a high possibility that it will take some time before the synergy effect will finally take place
  • In 2011, EA acquired PopCap Games, a developer behind popular indie title Plants vs Zombies, for up to $1.3B. However, now we can see that neither the franchise nor the company, manage to significantly contribute to EA’s performance

Glu Mobile’s Financial Highlights

  • For 2020, Glu Mobile reported $540.5m of revenue, compared to $411.4m in 2019, and $366.6m in 2018
  • Bookings, which include revenue that is yet to be counted, increased by 32.4% compared to $423.3m in 2019 and reached $560m in 2020
  • In 2020 Glu Mobile’ net income reached $20.4m demonstrating a 129.2% growth compared to $8.9m in 2019
  • Approximately 56.5% of sales are coming from App Store, while Google Play contributes about 33%
  • U.S. generates about 80% of total revenue, while EMEA brings approximately 10.5%

Business Highlights

  • 2.9m DAU and 14m MAU in Q3’20
  • 98m downloads LTM Sep’20 with ~77m of in-app transactions
  • ~27% Bookings CAGR over the 2016-2020 period
  • 30%+ of Bookings generated by Design Home title over the first nine months of 2020
  • Team of 780 employees with 5 offices in the U.S., Canada, and India
  • More than 80% of downloads coming from North America

Aerial Shot: The Pandemic and the Film Industry

FBNQuest
-
0
Aerial Shot: The Pandemic and the Film Industry

Prior to 2020, Nigeria’s creative industries (arts and entertainment) were seen as a bright spot. Combined, they grew by 4.1% y/y in 2019, albeit from a low base. The emergence of the COVID-19 pandemic has dampened growth for the sector.

However, we still consider it as a potentially sound private consumption indicator. According to the national accounts for Q3 ’20, the arts and entertainment industry contracted by -4.7% y/y.

Aerial Shot: The Pandemic and the Film Industry

Before the pandemic, streaming video-on-demand (SVOD) had a huge impact on the film industry globally. However, the pandemic has upended the global film industry, halting film production and closing cinemas.

Normality should resume in the medium term. We note that production has restarted in some countries and the industry has adopted remote-work protocols where possible. However, the virus creates uncertainty, and the biggest short-term risk seems to be consumers’ dwindling confidence to congregate physically.

Well-funded SVOD providers with significant content budgets are shifting the power balance. While Netflix and Amazon release movies directly to consumers, the pool of movies available to brick-and-mortar distributors have reduced substantially.

The wealth of content available via SVOD services is expected to put downward pressure on cinemas even after COVID-19.

The Nigerian film industry (Nollywood) is recognised as the second-largest globally. The industry is a significant part of the Arts and Entertainment Sector within the national accounts.

The move industry value chain has been adversely affected. Scores of film shoots have been placed on hold or scrapped and professionals across the industry, including make-up artists and technicians among others, have struggled to earn wages over the past months.

Industry sources suggest that the estimated losses for the sector over the past eleven months have reached c.USD9m and that at least 50,000 jobs have been lost.

To adopt to the new norm, movie producers and directors are increasingly looking to release their films on online streaming services like Netflix and its home-grown competitor Iroko TV.

Strengthening the creative industry (Nollywood inclusive) will assist with easing pressure on Nigeria’s unemployment rate as this industry caters largely to the youth population and provides jobs for skilled youths.

For instance, the Ethiopian Jobs Creation Commission recognised creative industries as a high potential sector for job creation in its national plan ‘Plan of Action for Job Creation 2020-2025.’

The government proposed several strategies to support the music, film, fashion, photography, and fine arts sectors, such as reducing the tax burden on artists, establishing a multipurpose physical space, providing protection for artists, and developing an arts education curriculum.

Creative activities rely on local intellectual creativity, skills, and artistry, not on natural resources. Nurturing these would support countries’ efforts toward sustainable social and economic development.

Interest Rates: How Much Higher?

Coronation Merchant Bank
-
0
Interest Rates: How Much Higher?

Naira interest rates are rising fast. Last Thursday, and for the second week in a row, the CBN sold an open market operation (OMO) bill with an annualized yield of 10.1%, far above the 1-year Treasury yield (T-bill) which itself had shot up to 4.00% at auction on Wednesday.

What is going on? New high-yielding OMO bills do not immediately translate into T-bill yields. The new OMO bills are destined for foreign investors holding Naira in the country, and for banks. However, they are a powerful signalling device, in our view, showing how the CBN is prepared to see interest rates develop.

Interest Rates How Much Higher Brandspurng
Photo by ismail seghosime

How much higher will rates go? It looks as if the CBN wishes to normalize interest rates in Nigeria after T-bill rates fell from 5.40% in January last year to 0.15% in early December. And this raises the question of what normal interest rates are.

In large emerging markets (like Brazil, Russia, India and China) one-year risk-free (government-issued) local currency bill rates are close to the inflation rate. In small markets (e.g., Ghana, Kenya) the rate is often well above the rate of inflation (see chart).

Interest Rates Brandspurng How Much Higher

In this regard, Nigeria is an outlier with a very negative rate when adjusted for inflation.

Does this mean that Nigerian 1-year Treasury Bill rates need to go all the way up to – and even beyond – the rate of inflation? Inflation stood at 15.75% y/y in December. It would be a remarkable adjustment for banks and their customers to make. It would be difficult for borrowers but good for holders of savings accounts and money market mutual funds.

It seems likely that the authorities might want to phase in the changes over several months, in order to give time for the financial system to adjust. In this case, we would not be surprised to see 1-year T-bills rates of 10.0%, or more, by the middle of this year.

Another way to interpret the CBN’s OMO auctions is to see them as the creation of a two-tier interest rate market: a class of OMO bills for foreigners; ordinary T-bill rates for domestic investors. However, such a strategy would face two hurdles, in our view.

First, it would require incoming foreign portfolio investors to purchase OMO bills when the issue of foreign exchange liquidity is still not fully resolved (NAFEX volumes remain lower than a year ago).

Second, it would encourage Nigerian domestic investors to become foreign portfolio investors, moving offshore (however difficult that is) to benefit from superior rates.

The bond market clearly thinks that rates are on the rise, with the yield curve in Federal Government of Nigeria T-bills and bonds shifting rapidly upwards so far this year, even though investors are liquid and there is plenty of cash around. T-bill rates and FGN bond rates look poised to continue trending upwards for several months, in our view.

Model Equity Portfolio

Last week the Model Equity Portfolio fell by 3.05% compared with a fall in the Nigerian Stock Exchange All-Share Index (NSE-ASI) of 3.04%, therefore underperforming it by 1 basis point. Year to date it has gained 0.33% against a gain in the NSE-ASI of 0.42%, underperforming it by 9bps.

Last week we wrote that it was fortunate that the price of GT Bank had held up when most other bank stocks were correcting, and we did not expect to be so fortunate again. Indeed, GT Bank corrected 15.8% last week and our notional position cost us 138bps.

There were few rallies, last week, in the mid-cap stocks where we have few notional positions, and this deficit remains a weakness which we intend to redress.

Interest Rates Brandspurng How Much Higher1

As forewarned in this publication last week, we made notional sales in Airtel Africa, MTN Nigeria, Dangote Cement and BUA Cement last week with a view to raising our notional cash position by between one and three percentage points.

We took advantage of reasonable liquidity and raised the notional cash position by three percentage points, with the decline of the market bringing the notional cash position up to 10.7%.

We will continue with these tactics this week to raise the notional cash position by up to a further five percentage points but will broaden the scope of our notional sales to include sales in Nestle Nigeria, Okomu Oil and Presco if necessary.

Note that we do not intend to reduce our notional positions in banks, whose results for the full-year 2020 are due to be reported soon. We think that the results will be received well by the market.

iPhone 12 Models Lead The Way For 5G-Capable Devices

Kantar
-
0
iPhone 12 Models Lead The Way For 5G-Capable Devices

iOS accounts for 26.2% of all smartphone sales across the five major European markets (EU5), with share also up in Australia and flat in the USA.

What is happening to sales of smartphones, and the share of the market each operating system commands?

In Q4 2020, Android grew year on year in Japan (+3.3 percentage points) and China (+4.7% points). A closer look at China shows local brands driving sales growth in the latest quarter; Huawei took a 46.5% share (+2.3% points) and Xiaomi 11.7% share (+1.5% points).

OS-share Brandspurng iPhone 12 models lead the way for 5G-capable devices

Chinese brands continue to expand their global footprint, with Xiaomi making up almost 1 in 5 sales across the EU5; it has seen impressive growth of 5 percentage points year on year, largely driven by Italy and Spain. Oppo, although still relatively small, also grew in all reported markets.

Global brands that track smaller sales share experienced some successes relative to their market size: Motorola was up by more than 1.5 share points year on year in Germany and the USA. Google grew in Japan by +2.1% points year on year.

Samsung, meanwhile, has held its fort across all reported markets in Q4 2020, with sales share up by 2.3% points year on year across the EU5, driven by France and Germany.

iPhone 12 proving popular

While still in the early stages of launch, iPhone 12 models are tracking well. The iPhone 12 model proves popular and is already the second most sold smartphone in Q4 2020 in the USA, China and Australia. The iPhone 11 continues to attract buyers and is the number one model sold across the EU5, USA and Australia.

In Japan, smaller form factors are most desired with iPhone SE (2nd generation) topping the sales list, making up almost 1 in 5 devices sold and was followed by iPhone 12 Mini in second place.

Interestingly, when comparing the specific features driving sales of each iPhone 12 model, the iPhone 12 Pro Max skews heaviest among consumers looking for “quality of the camera” across the EU5 and USA.

Prior to purchasing, they attained their main source of information direct from Apple.com and, across the EU5, are more likely to have “watched new product launch event”. Other specific features to also rank in the top 3 for buyers of iPhone 12 models were “reliability and durability” (across EU5 and China), and “size of the screen” (across EU5, Japan and Australia).

The importance of 5G

With much noise around 5G, iPhone 12 certainly stands out for driving sales through this capability. In all reported markets, at least 25% of iPhone 12 models were bought for ‘5G capability’, the most being 51% of buyers in the USA. Compared to average smartphones sold, iPhone 12 models indexed by at least 117, the highest index being 367 across EU5.

In Q4 2020, the share of smartphone owners connected to a 5G network was a higher year on year in Great Britain, Italy, Spain, Urban China and Australia. Across all reported markets, at least 50% of smartphone owners intending to buy in the next 6 months, intend to buy a 5G enabled smartphone; compared to intenders of last year, this is up in all markets except in France and Japan.

Where are smartphone purchases made?

Over half of the smartphones were sold online in the latest quarter, across all report markets. Online smartphone sales were up in EU5 (+8.7% points), USA (+7.3% points) and Australia (+11% points) where the top source of information prior to buying was through websites.

This highlights the continued need to develop and deploy digital marketing strategies to respond to the aggressive channel growth of the category.

Also not to be underestimated is the power of influence through friends and family. This touchpoint finds itself in the Top 5 purchase touchpoints across all reported markets and is number one in China, with 20% of smartphone buyers going to their friends and family as the main source of information prior to purchasing.

It’s not new news that smartphone sales slowed through 2020, as a result of the pandemic, with many consumers delaying their smartphone purchases and some even cancelling their plans completely; this will certainly push out replacement cycles further.

Almost a third of smartphone owners have held their current device for at least 2.5 years, and these figures have increased year on year. With many consumers being repressed by current environmental and economic challenges, this year is set to be extremely interesting as we monitor and anticipate returning consumers to the market.

iPhone 12 Models Lead The Way For 5G-Capable Devices Brandspurng

Do We Think Women Are Suited To Lead In Science?

Kantar
-
0
Do We Think Women Are Suited To Lead In Science?

The Reykjavik Index shows acceptance in the G7 of women leading in science, but seats at the table and airtime have not kept pace with attitudes.

Today, 11 February, is marked by the United Nations as the International Day of Women and Girls in Science. The purpose of the annual day is to achieve “full and equal access to and participation in science for women and girls”.

Do We Think Women Are Suited To Lead In Science Brandspurng

The day focuses on the reality that tackling some of the greatest challenges on the Agenda for Sustainable Development will rely on harnessing all talent, which means getting more women working in these fields.

The COVID-19 pandemic has reminded us all of the critical role of science in our everyday lives and the health and prosperity of our societies, and the day is a timely reminder of promoting full and equal access to participation. But how does society really feel about women in positions at the highest levels of science? Do we really feel women and men are equally suited to lead?

The Reykjavik Index: Pharma and Natural Science

The Reykjavik Index for Leadership from Kantar and Women Political Leaders was created to better understand society’s perceptions of equality in leadership, revealing where significant prejudice against female leadership remains.

It measures the extent to which society is comfortable with women in leadership positions, as compared to men, and it reveals high levels of acceptance of women in positions of leadership in science.

The study assesses perceptions towards suitability to lead across twenty-three sectors and finds that two scientific sectors, Natural Sciences and Pharmaceutical & Medical Research, have some of the highest average Index scores at the G7 level – 81 and 80 out of 100 respectively, where any score less than a 100 shows an indication of prejudice against women.

The study, which has been conducted three times, has also shown very little change in Index scores at the G7 level for these sectors year-on-year, indicating that perceptions are stable:

G7 Average score  2018/19 2019/20  2020/21 
Natural Science  82  80 81
Pharmaceutical & Medical Research  81  78  80

From perceptions to participation

As the scientific response to COVID-19 shapes the impact of the pandemic, there has been a spotlight on women behind the vaccine: Prof Sarah Gilbert, the woman who designed the Oxford vaccine, Özlem Türeci, Co-Founder and Chief Medical Officer of BioNTech, and World Health Organisation’s chief scientist, Soumya Swaminathan.

Whilst the public perceptions of equality in leadership found in the Reykjavik Index in these sectors are encouraging, it is not translating more widely into the participation and inclusion of women in the highest positions in these sectors. Research from UNESCO shows that less than 30% of the world’s scientific researchers are women.

As for the highest levels of advisory and decision making in science in response to the pandemic, in the UK, 17 of the approximately 55 members of the government’s Scientific Advisory Group for Emergencies (SAGE) are women, but in Italy, where COVID-19 had an early and devastating impact, leading female scientists demanded that they be included in the national response.

Initially, there were no women on Italy’s 20-member technical-scientific committee Comitato Tecnico Scientifico (CTS) – a group of experts advising the government during the coronavirus outbreak. However, now six women have joined the committee. In the US, only two women are on The White House Coronavirus Task Force of 27 people.

Share of voice

Female voices have also been remarkably absent in news reporting of the pandemic, according to research from the International Women’s Media Foundation, with a substantial bias towards men’s perspectives in both newsgathering and news coverage of the pandemic, spanning across all regions.

Within scientific expert commentary in global news coverage, men were quoted between 2.9 (UK) and 5.1 (India) times more frequently than women in COVID-19/coronavirus stories in the six analysed countries. 60% of medical doctors quoted were men, in comparison to 21% women, and in academia, 75% were men, with 22% of quotes coming from women.

The power of attitudes

Our research looked at perceived suitability of women in leadership positions from a sector perspective and found that Natural Sciences and Pharmaceutical and Medical Research are those with the highest average G7 Index scores.

Both women and men continue to demonstrate some prejudice against women in these subsectors. The average G7 score for Pharmaceutical and Medical Research is 76 for men, with women scoring 83. For Natural Sciences, scores for women are 84 and for men 78.

This dissonance in scores indicates that any efforts to counter prejudice towards women in leadership in these sectors will need to account for the higher amounts of prejudice demonstrated by men.

FG Looks to Public-Private Partnerships in Tackling Infrastructure Deficit

Brand Spur
-
0
FG Looks to Public-Private Partnerships in Tackling Infrastructure Deficit

CSL Brokers – Last week, President Muhammadu Buhari approved the establishment of a Public-Private Partnership styled Infrastructure company named Infra-Co with an initial seed capital of N1tn expected to grow to N15tn in assets and capital over time.

The proposed establishment will attract private sector participation in the nation’s quest to bridge its infrastructure deficit necessary for the growth across all sectors of the economy.

FG Looks to Public-Private Partnerships in Tackling Infrastructure Deficit Brandspurng

According to media reports, the board of Infra-Co will be chaired by the Governor, Central Bank of Nigeria (CBN); Managing Director, Nigeria Sovereign Investment Authority (NSIA); President, Africa Finance Corporation (AFC) as well as representatives of the Nigerian Governors Forum; Ministry of Finance, Budgets and National Planning including 3 independent directors from the private sector.

Nigeria’s growing infrastructure deficit remains a major concern among economic experts and stakeholders as poor infrastructure is one of the biggest impediments to smooth business operations and limiting capital inflows into the country.

There is no gainsaying that the paucity of investment in physical and social infrastructure over the years has continued to limit the growth potential of Africa’s largest economy, restricting its ability to exploit its vast amount of natural and human resources towards achieving a broad-based, sustainable and inclusive growth.

Nigeria’s infrastructure stock of c.25% of GDP remains far below the 70% international benchmark, underscoring the need for the government to consider unconventional methods of financing to bridge this huge infrastructural deficit.

In past times, several actions had been taken by the government in tackling infrastructure challenges with a combination of domestic and external borrowings to finance capital projects. However, this appears unsustainable in the long run.

The continuous underperformance in revenue targets evidenced by weak fiscal purse, elevated recurrent expenditure and high debt servicing costs have further contributed to the government’s inability to self-finance infrastructure projects.

Prior to this, similar policies had been signed in previous years under the current administration but seem not to have achieved the desired impact. For instance, the Road Trust Fund (RTF) that was signed in 2017.

The RTF allowed several companies to pull resources into a standalone Collective Infrastructure Fund (CIF). Although, the scheme did not bear much fruit as private sector participation was relatively muted due to restriction on the percentage of cost that could be recovered.

President Muhammadu Buhari also signed the Executive Order 007 in 2019 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme.

In our view, tapping into private sector financing in bridging the widening infrastructure deficit is a step in the right direction.

However, as with previous innovative ideas from past governments that have not yielded positive results due largely to poor implementation, we believe effective implementation and continuous monitoring of the arrangement are critical factors that should not be neglected if the government is to realize the full benefits associated with the scheme.

With the recent operationalization of the African Continental Free Trade Area (AfCFTA) agreement, building its derelict infrastructural base puts the country in a better position in expanding its terrain in other African markets.

Addressing Skills Shortage Tipping Point Must Be Major Focus For 2021 – RMB CEO

Esan Bolaji
-
0
Addressing Skills Shortage Tipping Point Must Be Major Focus For 2021 – RMB CEO

  • On average between 21,000 and 23,000, South Africans leave each year

  • Skills loss evident in medical, construction industries

  • Economic and political stability needed to stem the tide

A skills shortage is one of South Africa’s biggest economic risk factors and could hamper the country’s economic recovery plan and infrastructure ambitions say Rand Merchant Bank CEO, James Formby.

“Skills are often judged by the matric pass rate or the number of university graduates.

RMB Addressing Skills Shortage Tipping Point Must Be Major Focus For 2021 - RMB CEO Brandspurng
Rand Merchant Bank CEO James Formby | www.wordpress-1516176-5827464.cloudwaysapps.com

While improving our education system is important, most of our skills are gained through learning on the job and by observing experienced role models.

“People with more than ten years of experience, particularly in a specialist field become very difficult to replace. As experience leaves, there are fewer role models to train those that are keen to learn,” he said.

Any evidence-based discussion about South African emigration is made difficult by the fact that there is no official bureau that collects emigration data. To ascertain a trend, RMB refers to the UN’s Total International Migrant Stock dataset from 2019 according to which the number of South African-born persons residing outside of South Africa increased from 330,000 in 1990 to 900,000 in 2017 – an average of 21,000 South Africans per year.

This is slightly less that the assumptions made by StatsSA in its 2019 mid-year population estimates, which suggests an annual average outflow of roughly 23,000 people per year between 2016 and 2021.  Anecdotal evidence suggests that a growing number of individuals leaving are professionals but due to a lack of official data, the exact proportion cannot be verified.

Formby noted that other countries are actively attracting South Africans with proven work experience. The UK and Australia are the two preferred destinations for South African emigrants while Canada and New Zealand are proving increasingly popular.

“We have lost many skilled South Africans to emigration in the last few years. While Covid may have slowed this temporarily, it won’t take much for the constant stream to turn into a torrent. The sense we get is that a lot more people will take the leap if there are no signs of turnaround policies.”

He added that the next couple of years could prove the real tipping point for South Africa where skilled people leaving simply cannot be replaced – even by upping training or making it easier for foreign workers to come to South Africa. Granted, migrants comprised 7.2% of SA’s population in 2019 according to the UN, more than 3.5 times the number recorded in 1990. There is no definitive evidence of relative skills levels, but the sense is that we have attracted those with fewer skills while losing those with more.

While often mooted, the government has still yet to take formal steps to introduce skills visas.

“We must be open to bringing in skills from elsewhere. Those skills create jobs by transferring knowledge and enabling businesses to grow around them. Welcoming talent to a country is simply fundamental to creating prosperity.”

Much has been written about South Africa’s need to attract and retain economic capital – to fund the fiscal deficit and restart growth.

“But skilled human capital is equally important and are attracted by the very same factors. Just as organisations think carefully about their employee value propositions, it is vital that South Africa considers its skills value proposition in offering greater economic and policy stability.

“Skilled people need to have confidence in the future, they need the freedom to invest their savings both inside and outside South Africa and they are attracted by the opportunity to learn from others,” Formby said.

He added that while the banking industry was not yet severely affected, skills loss was particularly apparent in the medical industry and the construction industries, just as more skills are needed to develop government’s long pipeline of infrastructure projects.

A survey conducted by the South African Medical Association (SAMA) found that 38% of respondents (from public and private healthcare) said they would consider emigrating if the NHI was fully implemented while 6% would emigrate for other reasons.

In 2019, the South African Institution of Civil Engineering (SAICE) reported that in the past three years it had lost 1.73% of its members, aged 30-60, to emigration

“There is enough capital in South Africa for these projects but we are thin on skills. The real trick in pulling off our infrastructure-led growth is accessing and enabling specialist skills. “We may well have to tap those in retirement, the private sector and those who have given up on the construction sector and moved to other industries. Embracing non-conventional skillsets that will enable the fourth industrial revolution is as important,” Formby said.

January 2021 Inflation Rate Rises to 16.47% as Food Inflation Jumps to 20.57%

Esan Bolaji
-
1
January 2021 Inflation Rate Rises to 16.47% as Food Inflation Jumps to 20.57%

Headline Inflation Rate Increases by 16.47% YoY In January 2021, 0.71% Higher Than December 2020 Rate

The consumer price index, (CPI) which measures inflation rate increased by 16.47 percent (year-on-year) in January 2021. This is 0.71 percent points higher than the rate recorded in December 2020 (15.75 percent).

Increases were recorded in all COICOP divisions that yielded the Headline index.

On a month-on-month basis, the Headline index increased by 1.49 percent in January 2021. This is 0.12 percentage points lower than the rate recorded in December 2020 (1.61 percent).

Inflation Rate to rise by 13.49% YoY in September - Analyst
Photo by Ima Enoch on

The percentage change in the average composite CPI for the twelve months period ending January 2021 over the average of the CPI for the previous twelve months period was 13.62 percent, representing a 0.37 percentage point increase over 13.25 percent recorded in December 2020.

The urban inflation rate increased by 17.03 percent (year-on-year) in January 2021 from 16.33 percent recorded in December 2020, while the rural inflation rate increased by 15.92 percent in January 2021 from 15.20 percent in December 2020.

On a month-on-month basis, the urban index rose by 1.52 percent in January 2021, down by 0.13 percentage points when compared to the rate recorded in December 2020, while the rural index also rose by 1.46 percent in January 2021, down by 0.12 compared to the rate that was recorded in December 2020 (1.58 percent).

The corresponding twelve-month year-on-year average percentage change for the urban index was 14.23 percent in January 2021. This is higher than the 13.86 percent reported in December 2020, while the corresponding rural inflation rate in January 2021 was 13.04 percent compared to 12.67 percent recorded in December 2020.

Food Index

The composite food index rose by 20.57 percent in January 2021 compared to 19.56 percent in December 2020.

This rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, yam and other tubers, Meat, Fruits, Vegetable, Fish and Oils and Fats.

November 2020 Inflation Rate Rises to 14.89% as Food Inflation Jumps to 18.30% Brandspurng1
Wempco Road, Nigeria | www.wordpress-1516176-5827464.cloudwaysapps.com

On a month-on-month basis, the food sub-index increased by 1.83 percent in January 2021, down by 0.22 percent points from 2.05 percent recorded in December 2020.

The average annual rate of change of the Food sub-index for the twelve-month period ending January 2021 over the previous twelve-month average was 16.66 percent, 0.49 percent points higher than the average annual rate of change recorded in December 2020 (16.17 percent).

All Items Less Farm Produce

The “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 11.85 percent in January 2021, up by 0.48 percent when compared with 11.37 percent recorded in December 2020.

On a month-on-month basis, the core sub-index increased by 1.26 percent in January 2021. This was up by 0.16 percent when compared with 1.10 percent recorded in December 2020.

The highest increases were recorded in prices of Passenger transport by air, Medical services, Hospital services, Passenger transport by road, Pharmaceutical products, Paramedical services, Repair of furniture, Vehicle spare parts, Motor cars, Miscellaneous services relating to the dwelling, Maintenance and repair of personal transport equipment,

The average 12-month annual rate of change of the index was 10.52 percent for the twelve-month period ending January 2021. This was 0.21 percent points higher than 10.31 percent recorded in December 2020.

State Profiles

In analysing price movements under this section, note that the CPI is weighted by consumption expenditure patterns which differ across states. Accordingly, the weight assigned to a particular food or non-food item may differ from state to state making interstate comparisons of consumption basket inadvisable and potentially misleading.

All Items Inflation

In January 2021, all items inflation on year on year basis was highest in Kogi (21.38%), Oyo (20.17%) and Bauchi (19.52%), while Kwara (13.96%), Abuja (12.96%) and Cross River (12.22%) recorded the slowest rise in headline Year on Year inflation.

On month on month basis, however, in January 2021 all items, inflation was highest in Oyo (4.28%), Ebonyi (3.95%) and Lagos (3.33%), while Abuja, Edo and Cross River recorded price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).

Food Inflation

In January 2021, food inflation on a year on year basis was highest in Kogi (26.64%), Oyo (23.69%) and River (23.49%), while Ondo (17.20%), Abuja (16.73%) and Bauchi (16.37%) recorded the slowest rise.

On month on month basis, however, January 2021 food inflation was highest in Oyo (4.47%), Lagos (3.86%) and River (3.11%), while Akwa Ibom (0.25%) and Bayelsa (0.13%) recorded the slowest rise with Edo recording price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).

1...2,1022,1032,104...3,966Page 2,103 of 3,966