Charismatic Capital Founder Bets on Listed Shares Financing

Media Outreach
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SINGAPORE
– Media OutReach – 30
July 2020 – Despite buoyant stock markets around the world, the COVID-19 crisis
has spelled doom for many mid-cap firms that are unable to raise cash. Into
this void steps Lam Ching Ching, CEO of Charismatic Capital, an investment firm
focused on listed companies valued at under $1 billion. Charismatic has been
able to secure impressive ROI injecting funds into cash-strapped firms across
Asia.

 

Lam is Founder and Chief Investment Officer of
Charismatic Capital, the investment manager to Charismatic Debt Equity Fund, a direct
lender to shareholders
of listed companies secured against their listed
shares. The banking veteran boasts over two decades of a banking career with Citibank,
Credit Industrial et Commercial, EFG and UBS. She climbed the corporate ladder
to advise high net-worth clients on investments and credit, managing over USD1bn
worth of assets.

 

Quality stocks selection

 

Lam started Charismatic Capital in 2015 when she
noticed that listed companies with market capitalization below USD1b were
underserved by banks. Banks had lost their lending appetite after the 2008
global financial crisis and to date, mainly focused on large and established
corporations.

 

Concurrently, the ultra-low interest rate environment
post-2008 made it difficult for investors to find attractive high yield-generating
assets. With the Covid-19 pandemic, banks have become even more selective of
borrowers.

 

Charismatic Capital thus provides stock loans to
shareholders who pledge their shares as collateral. In return, its investors
are compensated with attractive double-digit yields. Empowered by financial technology,
it created a user-friendly online portal to streamline and accelerate the
processing, allowing loan cases to be swiftly assessed and closely tracked.
Investors can also access to its investments and their performance via the
portal.

 

Tapping on her networks and expertise, Lam established
a diversified portfolio of stock loans with over collateralization of stocks. She
credits her years in banking for giving her a sharp eye in selecting quality stocks
and doing in-depth credit assessment, resulting in two stellar years with a double-digit
net return as expected, and zero rate of default by borrowers.

 

The future of Asian finance

 

In countries like Thailand, Indonesia, and Singapore, Lam
foresees higher growth ahead over the next decade. Lam credits this positive
outlook on the countries’ high domestic savings rates, good infrastructure, and
stable political situations.

 

“Even with Hong Kong’s unstable political outlook, many
US-listed companies with Chinese ownership have returned to dual list in Hong
Kong, suggesting Hong Kong will continue to remain a leading financial hub,”
She notes. This increase in variety of stocks to lend against bodes well for
Charismatic Capital, as Hong Kong is their biggest market at 50%.

 

To aspiring women in the banking industry, the mother
of four graduate children and the avid ballet dancer says, “The sky is the
limit. Go all out to establish a successful banking career without compromising
on building a family concurrently,” emphasizing the importance of being
financially independent.

AIA to Host Its First Regional Online Health and Wellness Event to Promote Healthier, Longer, Better Lives

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SINGAPORE – Media OutReach – 29 July 2020 – AIA, the largest independent publicly listed pan-Asian
life insurance group, today announced plans to host its first ever regional
online health and wellness event, spanning 13 markets and headlined by AIA’s
Global Ambassador David Beckham.

 

AIA Live will be broadcast on Sunday 2nd
August and will include more than 30 unique sessions, delivering health and
wellness content to inspire, motivate and educate people across the region as
part of AIA’s commitment to helping them live Healthier, Longer, Better Lives.
Key themes will include mental wellbeing, exercise, activity and rest,
nutrition, personal growth, as well as light-hearted moments of music and
comedy.

 

AIA Live has been designed to appeal
across all age groups and multiple markets, celebrating the cultural diversity
of the region while at the same time bringing people closer together to deepen
their knowledge of health and wellness in a fun and engaging way.

 

David Beckham will open and close the event,
and also share personal stories on how he and his family have dealt with the
extraordinary events of 2020, together with some of the lessons he has
learnt.  Celebrity chef Jeremy Pang will
cook a series of recipes with different ingredients from across Asia, and
coaches from AIA’s partner Tottenham Hotspur Football Club (“Spurs”) will
challenge participants to try some easy and fun football skills. They will be
supported by more than 20 other regional influencers and keynote guests,
bringing together AIA’s family of ambassadors for the first time ever.

 

AIA Live will be hosted on AIA’s
Healthy Living YouTube channel and AIA Vitality members will be able to earn
AIA Vitality Points for taking part. By registering for the event, participants
will also earn the chance to win significant prizes including trips to London
to watch Spurs play and meet their first team players, as well as signed
footballs from David Beckham, virtual cooking lessons with Jeremy Pang, and
merchandise from our other ambassadors. AIA also plans to host similar days in
China and India in early September, with tailored content for those markets.

 

Stuart A. Spencer, AIA Group Chief Marketing
Officer, said: “In this COVID world we live in, we see mindsets and
behaviours changing and we are committed to keeping connected with our
customers and supporting them with knowledge and practical tips for health and
wellness. We know our audiences are online now more than ever before and are
looking for new ways to stay motivated, active and live a healthy lifestyle –
often within the confines of their own home. We are therefore very excited to
be presenting AIA Live, a first of its kind event, which will be a day of powerful and inspiring content and a meaningful way
for us to deliver on our commitment to helping people live Healthier, Longer,
Better Lives.”

 

AIA’s Global Ambassador David Beckham said: “I’m very proud to be
involved in AIA Live alongside my fellow AIA ambassadors, sharing our
thoughts and experiences with people across Asia about how we can live
healthier, longer, better lives. We’ve all faced unexpected challenges this
year and looking after ourselves, mentally and physically, has never been more
important.

 

“I’ve been lucky enough to see first-hand the
transformational work that AIA are doing in markets all over the region to help
their customers and communities. I hope people will feel inspired to make the
little changes in their lives that can make a big difference and that this
unique event will really motivate them.”

 

Please register for AIA Live by 30
July 2020 to learn more about the full programme here: https://www.aia.com.sg/en/aialive.html

 

BACKGROUND FOR GROUP RELEASE

AIA appointed David Beckham as our Global
Ambassador in 2017. As an internationally famous sporting icon and a dedicated
family man, David is playing a leading role in helping AIA to promote
achievable steps people can take to improve their health and wellness. David
makes frequent visits to AIA markets to help drive the Healthier, Longer,
Better Lives movement, where he engages with large numbers of AIA customers,
agents, partners and employees.

 

AIA has partnered with Spurs since 2013 and
is the Club’s Global Principal Partner. The partnership and the international
coaches based in Asia have been used to promote the vital role that active
participation in sport plays in helping people to live Healthier, Longer,
Better Lives.

 

AIA teamed up with Jeremy Pang, celebrity
chef and founder of the award-winning School of Wok, in 2019 to bring our
customers an array of delicious recipes that are perfect for preparing at home.
Focusing on healthy, flavour-packed dishes, Jeremy combines his easy-to-follow
style with tips, ingredient swaps and wok-loads of recipe inspiration. Jeremy
has featured at a number of AIA events including hosting a Dim Sum Masterclass
in Singapore as part of our Centennial celebrations. Jeremy’s easy-to-follow
recipes showcase how simple swaps and healthy combinations can help you live
Healthier, Longer, Better Lives.

 

WHO’S JOINING FROM SINGAPORE?

Over 20 influencers from all over the globe–including
Singapore–will be joining this exciting online health and wellness event. Viewers
can tune in to watch actor and host Andie Chen keep up with Jeremy Pang’s
instructions in a cook-along session titled “Good Food for Good Health”, whilst
both guests also open up about their experiences in lockdown and the kitchen. Join
actress and host Amanda Chaang as she learns some football drills from the
Spurs coaches and challenges them to perform some cheerleading moves in a “Cheers
and Drills” session, and get up close and personal with actor and musician
Andrew Marko in “Marko My Words: Nothing Can Get Me Down!”. In this raw and
unfiltered session he shares about how he fights stress and manages to find the
brighter things in life. Whether you are looking at building healthier diets,
finding new fitness inspiration or simply looking for an outlet to unwind, we
have got something planned for everyone at this one-day online extravaganza!

 

AIA Live starts at 10 AM SGT this 2 August
2020 on AIA’s Healthy Living YouTube channel: https://www.youtube.com/AIAHealthyLiving     

 

About AIA

AIA Group Limited and
its subsidiaries (collectively “AIA” or the “Group”) comprise the largest
independent publicly listed pan-Asian life insurance group. It has a presence
in 18 markets in Asia-Pacific — wholly-owned branches and subsidiaries in Hong
Kong SAR, Thailand, Singapore, Malaysia, Mainland China, South Korea, the
Philippines, Australia, Indonesia, Taiwan (China), Vietnam, New Zealand, Macau
SAR, Brunei, Cambodia, Myanmar, a 99 per cent subsidiary in Sri Lanka, and a 49
per cent joint venture in India.

 

The business that is
now AIA was first established in Shanghai a century ago in 1919. It is a market
leader in the Asia-Pacific region (ex-Japan) based on life insurance premiums
and holds leading positions across the majority of its markets. It had total
assets of US$284 billion as of 31 December 2019.

 

AIA meets the
long-term savings and protection needs of individuals by offering a range of
products and services including life insurance, accident and health insurance
and savings plans. The Group also provides employee benefits, credit life and
pension services to corporate clients. Through an extensive network of agents,
partners and employees across Asia-Pacific, AIA serves the holders of more than
36 million individual policies and over 16 million participating members of
group insurance schemes.

 

AIA Group Limited is
listed on the Main Board of The Stock Exchange of Hong Kong Limited under the
stock code “1299” with American Depositary Receipts (Level 1) traded on the
over-the-counter market (ticker symbol: “AAGIY”).

Microsoft Forecasts a Hybrid New Normal of Work in Asia-Pacific

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Released whitepaper assesses the key trends shaping Asia Pacific’s workforce, and the critical role of organizations, people and technology in realizing a hybrid workplace

 

SINGAPORE – Media
OutReach -29 JULY 2020 – As the COVID-19 pandemic continues to
transform our daily lives, Microsoft, with research from TechRepublic Premium,
looked into the impact the pandemic has had on the region’s legacy work styles,
business operations and how it has accelerated an increase in overall technology
adoption, realizing a hybrid new normal of work.

Through a
qualitative research study the whitepaper, titled “Transitioning
Asia-Pacific to a New Normal of Work“, sees business and
thought leaders across industries — banking, healthcare, education, telecommunications,
research, and professional consultancies — share their insights on how organizational cultures in Asia-Pacific are evolving
to a new paradigm of work.

 

“As different parts of the world were hit by COVID-19,
life and work were changed overnight for everyone,” said Kady Dundas, Head of Marketing, Microsoft Teams, Microsoft Corp.
“All of a sudden we’ve gone from working in conference rooms to working in living
rooms, and when you do that you have a high dependence on video. We know that
we have about 200 million meeting participants each day, which equates to 4.1
billion minutes of meetings[1]. Those data points show
the tremendous movement to remote work.”

 

Technology: The Enabler

Amid the
pandemic, Microsoft found that while organizations have prioritized technology
adoption to enable remote working environments and
overall business transformation, the change was not driven through technology
alone.

 

“The technology side has been relatively
straightforward,” said Dr Joseph Sweeney, IBRS Advisor and Future of Work
Expert. “When COVID-19 came and everyone had to start working from home,
Microsoft Teams was an obvious and natural tool to push out. It was already
there, and the environment is familiar to anyone using Microsoft Office 365. It
skyrocketed.”

 

A forced mindset change was in play encouraging organizations
to rethink ways of working, how individuals, groups, and managers
interact with one another and the change management needed to adjust to the new
normal of work focusing on the emotional impact of the change.

 

“Often
the reluctance to allow remote work has to do with a quite outdated concept of
how managers need to manage — for instance, you need to be able to ‘see’ people
to police that they are doing what they are meant to,” said Sarah Kaine, Associate Professor,
Management Discipline Group and Core Member, CBSI – Centre for Business and Social Innovation, University of Technology, Sydney.

 

Emerging Trends in
the New Normal of Work

Some of
the emerging trends that organizations need to be aware
of as they plan for the hybrid new normal of work include:

 

  1. The risk
    of burnout     — Organizations need to be mindful of the new perception
    of availability.  According to IBRS Advisor and Future of Work Expert, Joe
    Sweeney    , one common response amongst people in their jobs is to “work
    harder and not switch off.” Those who have started working from home are
    fielding calls from their bosses late into the evening, underlining the need to
    re-draw boundaries for out-of-hours contact.

  2. Career progression concerns — Organizations
    will need to reassess how performance is measured. Collaboration tools can measure activity but not the value that an
    individual has brought to the organization. Organizations are
    now finding that it is the “introverts” that are delivering while working from
    home, while the “star player” extroverts are no longer the center of attention.

  3. The need for flexibility and empathy — Research finds that nearly half (47 per cent) of
    people working from home reported managing at-home distractions as a challenge[2]. Organizations as
    well as managers and teammates should do their part to not
    only help employees create a distraction-free environment but also be more
    flexible in the delivery of work and empathize with people’s challenges of
    working from home.

  4. Tech training and preparedness — As
    technology becomes a growing staple for employees, training will need to go
    hand-in-hand to unlock the full potential of hardware and software. “There have been people who were resistant to change —
    it was usually the seniors, because they never needed to learn how to use
    technology. They always had IT support in the room when they needed it,” said
    Dr. Nitin Paranjape, CEO and Founder, MacOffice Services Private Limited based
    in India    .

  5. Incorporating a social element — Organizations need
    to intentionally focus on policy and company culture rather than raw
    technology. The Microsoft Work Trend Index[3] released in April 2020 reflected
    this ongoing quest for human interaction — the number of people turning on
    video in Microsoft Teams meetings had doubled from before working from home
    became mainstream. Beyond enabling video conferencing, organizations need to
    find ways to encourage innovation, creative flow of ideas, and camaraderie that
    makes an employee feel that they are a valued part of an organization.

 

The Future of Work
is Now and Hybrid

At
Microsoft’s FY20 Q4 Earnings call[4] which reported a 6 percent
revenue increase in Productivity and Business Processes this fiscal year,
Satya Nadella, Chief Executive Officer of Microsoft shared, “The last five
months have made it clear that tech intensity is the key to business resilience.
Organizations that build their own digital capability will recover faster
and emerge from this crisis stronger.”

 

Undoubtedly, COVID-19 had accelerated the transition
to new ways of working and honed the focus on innovation across the region. At
the same time, social and cultural environments also have a considerable impact
on how organizations approach the new normal of work.

 

In some cases, organizations are in the process of
aligning themselves to the national government’s own response to the changing
nature of work. Hidekazu Shoto, Innovative
English and Information and Communications Technology (ICT) Teacher, Ritsumeikan
Primary School in Japan shared how the primary school had to find ways to
respond to the changing regulatory environment around work that the government had
been implementing. “We just started a new working time system, to follow the
new labor laws in Japan. With that in mind, and each teacher’s individual circumstances
at home, we had to think about how to match compliance with flexibility,” said Hidekazu
Shoto. 

 

In
countries where commutes are longer, organizations will find that more staff
wish to work remotely. “The appeal is often due to the convenience of
professionals being able to manage their own timing,” Andy Khoo, Maybank
Head of Customer Experience, based in Singapore, said. “There’s less
transportation and time spent on the road — particularly in countries like
Indonesia, Thailand and India, where commutes can be long. For other places,
like Singapore, it’s simply that staff find they’re more productive when
working from home.”

 

Meanwhile,
countries with expensive real estate — such as Australia and Singapore — will
find financial benefit in transitioning to a model where office space is shared
and cycled among employees that spend part of the time in the office, and other
times working from home.

 

The hybrid approach in the future of work reflects how
the lines of work and personal life are blurring. Microsoft’s second Work Trend
Index[5] found that beyond the
typical 9am-5pm work day, Microsoft Teams chats outside of the typical workday
(from 8-9 a.m. and 6-8 p.m.) have increased more than any other time during the
day, between 15% and 23%. Weekend work is spiking as well — Teams chats on and
Saturday and Sunday have increased over 200%.

 

To cultivate the future workplace, organizations would
need to accelerate the process of developing policies enabling individuals to
break away from the standard 9 to 5 hours, setting reasonable expectations
around availability and relooking performance indicators.

 

Great Place to Work Institute, Chief Operating
Officer, Alicia Tung based in China said, “As far as emotions are concerned, we’re not there yet. But it is
happening. In ten years’ time, if I were to make a very broad prediction, I
would say 60-40 in terms of working in the office compared to working
remotely.”

 

Business leaders must
refresh their focus on policies that enable the upkeep of robust security
strategies and effective collaboration. As
lockdowns continue to ease across the region, the next step will be a renewed
focus on policy during this hybrid new normal of work.

 

For more information on how organizations throughout
Asia-Pacific are grappling with — and succeeding with — remote work, read the
full paper here.

About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital
transformation for the era of an intelligent cloud and an intelligent edge. Its
mission is to empower every person and every organization on the planet to
achieve more.

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International Breweries: Under-perform Rating Maintained Despite Upside in Q2 2020 Results

George Martins
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International Breweries: Under-perform Rating Maintained Despite Upside in Q2 2020 Results

International Breweries‘ (IB) Q2 2020 results suggest that volumes declined by double-digits y/y, largely because of the lockdown during the quarter. This marks the biggest volume loss since the company’s merger in 2017.

That said, pretax loss improved by 18% y/y on the back of a 19% y/y decline in opex and a 6x y/y increase in other income. Indeed, amid the lockdown, IB cut spending on promotional activities by half; this drove the opex decline.

Also, gains from derivative and sundry income booked for the quarter boosted other income. Looking beyond Q2, we continue to see sustained pressure on volumes because of subdued demand.

We also expect competitive and fx headwinds and the likely non-recurrence of other income to squeeze earnings. We have made modest cuts to our sales and gross margin forecasts in response to -9% and -57bps negative surprises respectively in H1.

Nevertheless, the cuts for 2020E are offset by favourable adjustments to opex and other income. As such, our 2020E pretax loss forecast is now 35% lower. We, however, model an average increase of 6% in our 2021-22E pretax loss forecasts, largely driven by marked cuts to our interest income estimates considering the lower yield environment.

Essentially, we forecast an average decrease of 8% to pre-tax losses for 2020-22E. Our new price target of N6.9 is 15% higher because we rolled over our valuation to 2021.

Year-to-date, IB shares have sold off by -65%, underperforming the broad market by -57%. Our new price target implies an upside potential of 109%.

Despite the considerable upside, we retain our Underperform rating for the following reasons: i) the market continues to discount the valuation argument, and ii) we see bearish sentiments persisting given negative earnings over forecast years.

Bottom line improvement supported by opex and other income

Q2 sales declined by -25% y/y to N25.3bn while gross margin contracted by -380bps to 13.3%. These negatives were however offset by the favourable y/y changes in opex and other income. These supported the 18% y/y reduction in Q2 pretax loss.

On a sequential basis, sales and gross margin fell by -29% q/q and -414bps q/q respectively. The pretax loss was however better by 44% q/q as a result of a 13% q/q decline in opex, and other income of N1.1bn versus a -N5.6 loss in Q1.

Relative to our forecasts, gross margin was -168bps narrower. Opex, however, surprised positively by 15%, while other income compares to our loss forecast of -N5.8bn. These positive surprises led to a 56% lower-than-forecast pretax loss for Q2.

Dangote Cement is #9jaSuperbrandOfTheMonth for July – Report

George Martins
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Dangote Cement is #9jaSuperbrandOfTheMonth for July – Report

The management of BrandEscort has nominated Dangote Cement Plc as its #9jaSuperbrandOfTheMonth for July.

Dangote Cement was nominated for launching a campaign that promised to make 1,000 Nigerians millionaires, not minding the challenges faced by businesses globally, as a result of COVID-19 pandemic.

Dangote Cement Plc. on July 15, 2020, launched the Dangote Cement Bag of Goodies Season 2, targeted at making 1,000 Nigerians millionaires cushion the economic hardship caused by COVID-19.

At the unveiling of the promo in Lagos, the company’s Group Managing Director, Mr Michel Puchercos, said the promo was instituted to reward its loyal customers.

Puchercos gave the assurance that the company, through the promo, would change the standard of living of its consumers and end-users during the COVID-19 pandemic.

He said that 1,000 lucky Nigerians would win a star prize of one million nairas each, over a period of 16 weeks of the promo.

Puchercos, who observed that many families lost their sources of livelihood as a result of the pandemic, said that the company launched the promo to alleviate the pains.

He said that the company opted for a cash prize to enable the beneficiaries to set up small businesses in the face of COVID-19.

Puchercos said that the Season 2 Promo, launched following a huge success recorded in the 2019 promotion, would run from July 15 to Nov. 15.

He said that the company was determined to reward the consumers and add value to their economic well being, with the promo.

According to him, other prizes to be won apart from one million naira cash, include tricycles, refrigerators, television sets, generators, goodies packs, smaller monetary prizes and airtime.

Other brands such as MTN Nigeria, First Bank, Amber Energy Drink Ltd etc. also made a significant impact in the lives of the consumers in July.

For instance, MTN Nigeria on July 15 became the first telecommunications company to launch eSim technology for mobile phone users in the country.

FirstBank in July activated Free Fuel Promo in collaboration with Verve International and Oando Plc to reward its customers.

Amber Energy Drink Ltd offered free BRT tickets to commuters in Lagos.

Access Bank Plc in July gave out N87.74 million to over 1,000 customers who emerged winners at the second quarterly draw of its DiamondXtra Season 12 reward scheme.

#9jaSuperbrandOfTheMonth is monthly awards initiated by BrandEscort, aimed at inspiring innovation and creativity in brands to enhance the lives of the consumers.

Managing Director/CEO, BrandEscort, Mr Bamidele Adeleye says the company is looking out for innovative brands that are determined to impact the lives of the Nigerian consumers.

Impact of Conflict and Political Instability on Banking Crises in Developing Economies

George Martins
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0
Impact of Conflict and Political Instability on Banking Crises in Developing Economies

While the economic effects of conflict and political instability have been analyzed extensively, much less attention has been paid to how banks are affected.

Our IMF staff paper addresses this gap by investigating whether rising conflict and political instability globally over the past several decades has led to more banking crises in developing countries.

Our study focuses on the potential impact of conflict and political instability on the systemic banking crisis in 92 developing countries over the period 1970-2016.

We find that the odds of a banking crisis are 2.5 times greater when a country is affected by conflict. Conflicts and political instability in neighbouring countries increase the likelihood of banking crises in a given country.

And the probability of experiencing a banking crisis is 25 percent when the conflict lasts 10 years, against 16.4 percent when it lasts two years.

Our chart displays the relationship between the number of countries in banking crises and in conflict. It shows that major waves of conflict tend to be associated with a higher rate of occurrence of banking crises.

For instance, during the Sierra Leone civil war (1991-2002), more than 40 percent of banking system loans were non-performing and the license of one bank was suspended in 1994.

In the Central African Republic, bank non-performing loans increased to more than one-third of total loans and some banks became undercapitalized following the outbreak of the conflict in 2013.

The primary channel of transmission is the occurrence of fiscal crises following a conflict or political instability.

Conflicts and political instability can have a negative impact on the productive capacity of a country and this, in turn, can reduce government revenue and increase unproductive spending, including military expenditures, leading to fiscal crises. This can also lead to government dysfunctionality and weakening of institutions.

Governments facing conflict and/or political instability need to address their root causes and try to mitigate their negative effects with the appropriate design and implementation of economic policies.

Creating adequate fiscal space in normal times can reduce the likelihood of fiscal crises and in turn lower the probability of systemic banking crises.

Our findings also suggest that policymakers should pay attention to conflicts in neighbouring countries even if they themselves are not conflict-afflicted as their banking systems may suffer negative spillovers from their neighbours given that banks operate across borders.

Unilever and Algenuity partner to explore use of microalgae protein

George Martins
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0
Unilever and Algenuity partner to explore use of microalgae protein

Today Unilever and biotech start-up Algenuity are announcing a new partnership to delve into the huge potential microalgae bring in innovating future foods for Unilever’s plant-based portfolio.

Algenuity, which specialises in developing microalgae for use in consumer products, will work with the R&D team within Unilever’s Foods and Refreshment (F&R) division to explore ways of bringing foods made with microalgae to the market.

Developing alternative protein sources like microalgae represents a significant step forwards in the critical shift needed to an equitable and resilient food system.

By 2050, the world will need to produce 70% more food to feed a growing population of 10 billion people. These foods will need to meet a high nutritional standard while reducing their impact on the environment.

Unilever and Algenuity recognise the key role that diverse, plant-based proteins like microalgae will play in transitioning towards this new food system. Chlorella Vulgaris, a widely recognised (micro)algae, is a nutrient-rich, plant-based source of protein and fibre, with a low environmental footprint.

Chlorella possesses a number of additional beneficial nutrients including antioxidants, vitamins, minerals and essential fatty acids. It has been consumed globally for many years, yet its high chlorophyll content, which gives plants their green colour and a bitter taste and smell, has proven a barrier to its inclusion in mainstream diets.

Innovative technology unlocks new potential

Algenuity has developed innovative technology to overcome this limitation. Its Chlorella Colours® palette significantly reduces the chlorophyll content of microalgae while still allowing them to retain their natural nutrients.

This unlocks a wealth of potential applications for microalgae in the food and beverage sector. It brings the opportunity to develop a sustainable source of protein that meets increasing consumer demand for nutritious foods that taste great.

“Microalgae offer much-untapped potential as a viable, climate-friendly protein alternative,” says Alejandro Amezquita, Future Bio-based Ingredients R&D Director, Unilever F&R. “They have a significant part to play in food system transformation.

We are very much looking forward to working with Algenuity to explore the possibilities of making foods that contain microalgae more mainstream.” 

Andrew Spicer, CEO and Founder of Algenuity says: “We are delighted to partner with Unilever on this. Our Chlorella Colours® platform provides plant-based ingredients that are sustainable, natural, non-GM and protein-rich with neutral flavours. They are also vegan-friendly making them extremely relevant for today’s growing consumer appetite for more plant-based foods with additional functional benefits.”

“We are very excited about the huge potential working with Algenuity brings to advance nutritious foods that taste great and are a force for good,” says Manfred Aben, VP Science & Technology R&D and Site Leader of Hive, Unilever’s Global Foods Innovation Centre, in Wageningen.

“Transitioning to a sustainable food system requires all of us to work together. It’s one of the world’s greatest challenges and will not happen without partnerships and collaborations. This is what our Hive ecosystem is all about. We are delighted to welcome Algenuity to our community.”

Dangote Cement Plc – Against the Whirlwinds

George Martins
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0
Dangote Cement Plc – Against the Whirlwinds

Recently, Dangote Cement Plc published its unaudited H1- 2020 financial result. According to the report, Revenue saw an increase of 2.0%y/y to N466.9bn, amid the disruption in economic activities by COVID-19.

However, volume declined by 1.5% y/y. Overall, the company profit before and after-tax increase by 4.7% and 5.8% to settle at N162.9bn and N126.1bn, respectively. Hence, we maintained our BUY rating on DANGCEM but revised our TP to reflect recent volatilities in the equity market.

Better Averages prices enhance topline performance

Dangote Cement Plc (DANGCEM) defied the whirlwind of COVID-19 pandemic by printing a y/y improvement in Revenue in Q2-2020, despite restrictions on movement its markets across Africa.

Notably, the Group Revenue increased by 4bps y/y in Q2-2020 and 2.0% y/y in H1-2020 to settle at N227.7bn and N476.9bn, respectively. The surprising increase in revenue was buoyed by the better average net prices realised in Nigeria and the Pan Africa market as well as the increase in volumes sold across the Pan Africa market.

Specifically, Net revenue per tonne in Nigeria increased by 3.8% to N44,855.0 in H1
-2020. Taking a deeper look into the Group’s Revenue, we observed that there was a decline in volume sold for the period under review as the overall volume declined by 1.5% y/y dragged solely by the 2.8% decline from the Nigerian market that accounted for over 60.0% of the Group’s Sales.

The management attributed the decline in volume from the Nigerian market to the restriction in movement implemented by the Nigerian government from the end of March-2020 and highlighted that the relaxation of lockdown in May and June-2020 had since paved way for the management to push volumes.

As expected in our previous report titled “Is DANGCEM’S “holiday” over?”, the company launched its maiden shipment of clinker with about 27.8tonnes exported from Nigeria to Senegal through the now commissioned Apapa Export Terminal.

Manufacturing Cost Analysis: Pressuring gross margin

Cost of Sales (+4.8%y/y to N202.4bn) rose faster than revenue growth (+2.0%) in H1 2020, mainly driven by the increase in the Nigerian manufacturing costs from N93.6bn in H1-2019 to N101.1bn in H1-2020.

Pan Africa manufacturing costs increased by 1.8% due to the increase in Pan Africa sales as well as the depreciation of the naira. A cost analysis of the Nigerian operation showed that the increase was spurred by higher energy costs due to unfavourable fuel mix which resulted in the use of more gas whose price increased compared to H1-2019.

The general increase in salaries also pushed Nigeria manufacturing costs upward relative to H1-2019. Notably, material consumed increased by 6.0% y/y to settle at N60.1bn.

Cost efficiency and improved income boost bottom-line

DANGCEM’s Operating Expenses (OPEX) declined by 1.5%y/y to settle at N103.7bn in H1- 2020. This was as the Group’s Selling and Distribution (S&D) expenses declined by 3.3%y/y to N77.6bn, offsetting the 4.3%y/y increase in administrative expenses to N26.1bn.

A sub-component analysis of the S&D expenses showed that Haulage costs saw a significant reduction, down 9.2%y/y to settle at N50.7bn, and the management attributed the decline to the reduced haulage costs seen in their Tanzania and Zambia operation due to the reduced volumes when compared to H1-2019.

The company’s aggressive promotional strategy in a bid to recoup some of the lost revenue (in the early part of Q2-2020) due to COVID-19 induced lockdown, spurred the management to spend more on the advertisement and promotional expenses (+70.0% y/y to N5.3bn).

Depreciation charge declined by 15.3% y/y to settle at N10.0bn, buoyed by reduced depreciation charges from the Pan Africa segment (mainly in Ethiopia) as some of the trucks approach the end of their useful lives.

Also, Net finance cost saw a huge decline of 29.2% to settle at N10.6bn and management guided that the significant decline was fueled by the Nigerian Naira devaluation from about ₦365/1US$ to ₦387/1US$ which resulted in net exchange gains from inter-Group assets and liabilities that do not eliminate in full on consolidation in the Nigerian operations.

Overall, the Group’s EBIT for H1-2020 saw a mild increase of 1.7% y/y to settle at N173.5bn. Notably, we observed a mild reduction of 0.8% y/y in the effective tax rate for H1-2020, which the management guided was as a result of the amendment to the commencement rules based on the new Finance Act in Nigeria.

Accordingly, the Profit Before Tax and Profit After Tax increased by 4.7% y/y and 5.8% y/y to settle at N162.9bn and N126.1bn, respectively.

Financial Position Analysis

To further give context to the surprise increase in Revenue, DANGCEM’s Trade Receivable surged by 26.0%y/y to N17.6bn which clearly speaks to management’s aggressiveness in driving sales.

Also, we saw a 31.2% y/y spike in borrowing (recall that the cement issued an N100bn Bond during the period), which speaks to the increase of 6.3% y/y seen in finance cost.

Also, the Cash and cash equivalents witnessed a significant decline of 16.6% y/y to N103.3bn driven mainly by a whopping 63.1% y/y decline in a short term deposit to settle at N14.7bn. Overall, total assets increased by 3.7% to settle at N1.8trn for H1-2020.

Outlook: BUY rating maintained with downgraded TP

Going into H2-2020, we maintain our expectation for Revenue to grow by 2.4% to N912.8bn by year-end as stated in our earlier report titled Is DANGCEM’S “holiday” over? as we believe that the company is on course, having achieved 52.2% (N476.9bn) of our full-year revenue target in H1-2020 despite the COVID-19 pandemic that obstructed economic activities.

Our optimism is buoyed by the commencement of Apapa and Onne export terminals which we believe will continue to enable the business export cement via waterways rather than land which is likely to remain closed for a better part of H2-2020.

Also, we expect to see further the benefit of promotional campaigns embarked on in Q2-2020 on FY-2020 performance, especially as majority of Federal Government capital project are scheduled to take place in H2-2020.

Overall, we estimate a 26.1%y/y jump in the company’s PAT to N252.3bn in FY-2020E, buoyed by moderation in OPEX and finance charges growth as seen in H1-2020, exchange rate translation gains coupled with a reduction in the effective tax rate for the Nigeria operation which accounts for over 60% of the Group’s earnings.

Overall, we maintain our BUY rating on the ticker. However, factoring the current volatilities in the Nigerian equity market, we revise our Target Price (TP) to N175/share which gives an upside potential of 23.4% at the current price of N141.8 Again, we insist that the planned 10.0% share Buy-Back will remain positive for market valuation.

United Capital Research

 

International Breweries PLC – Operational challenges outweigh the benefits of capital restructuring

George Martins
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International Breweries PLC – Operational challenges outweigh the benefits of capital restructuring

Recently, International Breweries Plc published its unaudited H1-2020 financial result. According to the report, Revenue declined by 11.7%y/y to N60.6bn, dragged by the underwhelming performance in Q2-2020 (-24.7%y/y) amid the negative impact of the restriction in movements and social gathering since March-2020.

Overall, the company’s Loss before and after-tax worsened from N10.5bn and N6.8bn in H1-2019 to N12.0bn and N9.4bn respectively in H1-2020. Below, we update our model estimates for INTBREW, based on the recently published numbers and reassess our expectations for the rest of the year.

Restrictions in social gathering drag Q2-2020 Revenue: As expected, INTBREW’s revenue declined in Q2-2020 and H1-2020 by 24.7%y/y and 11.7%y/y respectively due to economic lockdown measures imposed from March-2020, especially in Ogun State (where the company’s factory is situated) and Lagos (where bars, pubs, and clubs where outrightly shutdown).

This hampered the brewer’s ability to push volumes. Clearly, the continued restriction on social gatherings, especially weekend parties such as the Nigerian wedding ceremonies
(very popular for its extravagance) and other forms of ceremonial social events across the country must have had a more telling negative impact on the topline number, during the period.

Elsewhere, Cost of Sales (-5.3%y/y) declined amid weaker production activity that characterized the period, but at a relatively slower pace to Revenue (-11.7%y/y). Accordingly, gross margin further weakened to 15.7% (vs. 21.4% in H1-2019). Additionally, Operating Expenses (OPEX) declined by 11.3%y/y to c. N16.0bn.

However, a surge in the Other Expense line-item, by 23.7x to N4.6bn, worsened the company’s Operating Loss (EBIT) position from -N3.5bn in H1-2019 to -N11.0bn in H1-2020. Notably, the surge in the Other Expense line-item was on the back of the recognition of a combined net FX loss (realised and unrealised) of N11.3bn (vs. net FX gain of N429.5mn in H1-2019), which outweighed a derivative gain of N6.4bn in H1-2020.

The bottom-line number received some support from Net Finance Costs, which declined sharply by 86.5% to N948.1mn after management used the proceeds from its right issue, closed out in Q1-2020, to offset N164.53bn debt during the same period.

However, this was not enough to protect the company from a deteriorated loss position as Loss-before and-after-tax further weakened from N10.5bn and N6.8bn in H1-2019 to c. N12.0bn and N9.4bn respectively in H1-2020.

Successful rights issue in Q1-2020 improves leverage position

INTBREW’s leverage (debt/equity) ratio improved to 0.7x (vs. 35.3x as at FY-2019) as managements used the proceed from the N165.0bn rights issue raised in Q1-2020 to deleverage the company’s balance sheet. Accordingly, the company’s leverage ratio now compares reasonably to peers – NB: 0.6x and GUINNESS: 0.2x.

Meanwhile, Cash and cash equivalents declined marginally by 0.6%ytd to N31.6bn and Net CAPEX dropped from N18.8bn to N6.3bn.

INTBREW rated a SELL at the current price

Our short-term outlook for the brewer remains underwhelming, especially if the ban on social gatherings remains in place throughout H2-2020.

However, we hold a more optimistic outlook on the company’s topline performance beyond 2020, as we expect economic activities to return to their pre-COVID-19 levels by Q1-2021. Yet, we expect the company’s high-cost structure (Cost-of-Sales margin of above 80.0%) to keep earnings depressed post-2020.

Also, given the company’s low cash position and our expectation for the earnings to remain depressed through 2021, we expect the company to revisit the Nigerian capital market, especially the debt market, ahead of the maturity of its outstanding term-loan of $278.0mn (or N107.6bn) on May-2021.

Although INTBREW’s management has entered into non-deliverable forward contracts to mitigate the forex risk on the contractual interest and principal repayments, the company is still exposed to FX losses in 2021, especially if the Nigerian FX market remains illiquid at the time of settling the outstanding debt.

Adjusting our model assumptions for the above, we revise our year-end Target Price to N2.25/share with a SELL rating on the stock. Also, the lack of prospect for the company to pay dividend either in 2020E and 2021E, makes the stock less attractive to domestic peers.

United Capital Research

Unilever Nigeria’s Tight credit terms and lockdown woes derail performance in H1 2020

George Martins
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Unilever Nigeria’s Tight credit terms and lockdown woes derail performance in H1 2020

Recently, Unilever Nigeria Plc published its unaudited H1-2020 financial result. According to the report, Revenue sharply declined by 35.9%y/y to N27.3bn, amid the continued negative impact of the management’s decision to tighten credit terms since H2-2019, on the y/y volume growth.

Overall, the company recorded a Loss before and after tax of N566.8mn and N519.1mn respectively (vs. Profit before and after-tax of N4.7bn and N3.5bn respectively in H1-2019).

Below, we update our model estimates for UNILEVER, based on the recently published numbers and reassess our expectations for the rest of the year. An underwhelming H1-2020 performance: UNILEVER’s revenue declined in both Q2-2020 and H1-2020 by 40.2% y/y and 35.9%y/y respectively.

Beyond the obvious challenging operating conditions that characterized the period, amid lockdown in the two states where the company’s factories are located (Lagos and Ogun state) in April and May-2020, we believe the management’s decision to tighten credit terms since H2-2019, to address rising trade receivables and excess stock-in-trade, remains a key driver of the sharp decline in revenue.

As expected, the more essential Food segment (-28.5%y/y to N15.3bn) performed relatively better than the Home and Personal Care (HPC) segment (-43.3% to N12.1bn). Overall, competition in the trading environment remained intense, during the period amid declining purchasing power.

Elsewhere, Cost of Sales sharply declined by 32.4%y/y to N21.2bn, thanks to lower commodity prices induced by the COVID-19 pandemic as well as weaker production activity on the back of weaker demand.

Notably, Gross Margin mildly declined to 22.5% (vs. 26.6% in H1-2019), dragged by the steeper decline in Revenue (-35.9% y/y) relative to Cost of Sales (-32.4%y/y). Additionally, Operating Expenses (OPEX) rose by 1.2%y/y to N7.6bn, spurred by c. 2.0x increase in impairment losses on trade receivables while Operating Loss came in at -N1.4bn (vs N3.9bn profit in H1-2019).

The bottom-line number received less support from Net Finance Income, which remained flat at N844.2bn, as Finance Income (-29.3% to N849.3mn) fell at a relatively slower pace to Finance Cost (-98.6%y/y to N5.2mn).

Also, the company recorded a Loss before and after tax of N566.8mn and N519.1mn respectively (vs. Profit before and after-tax of N4.7bn and N3.5bn respectively in H1-2019).

Working capital management spurs healthy cash positions

The management’s strategic decision to tighten trade credit terms with trading partners led to 47.6% YTD decline in net trade receivables balance. However, Trade and Other Receivables declined at a slower pace, down 15.8%ytd to N20.3bn.

Also, Inventory sitting on the balance sheet declined by 17.1% YTD to N9.8bn due to management’s strategy on working capital management as well as the impact of COVID-19 on material sourcing.

Meanwhile, Trade and Other Payables increased by 8.4%ytd to N37.6bn. Consequently, Operating cash flow improved from -N16.04bn in H1-2019 to N9.2bn in H1-2020. Also, its current ratio remained healthy at 2.0x, though marginally lower when compared to FY2019’s 2.1x.

With this performance, UNILEVER continues to sit on an increasingly higher cash balance (now at N44.6bn) compared to peers and relatively debt-free balance sheet (debt/equity down from 1.1% in FY-2019 to 0.7% in H1-2020). At this stage, the strategic intent of the company is unclear as management significantly slowed down on capital expenditure (-84.3%y/y to N427.2mn) in H1-2020.

H1-2020 as worst as it gets for 2020

Clearly, the H1-2020 outcomes reflected management’s decision in H2-2019 to tighten terms around credit sales as well as the operational challenges due to restriction in movements across states in Q2-2020.

Although the company was able to carry on partial operations on the basis of the essential nature of its products for personal and home hygiene, operations were carried out under extreme conditions with epileptic support from partners in its value chain, which do not necessarily fall within the government exemptions.

Looking ahead, we expect Revenue in H2-2020 to reflect the recovery in the operating environment as lockdowns are being lifted across states. Also, our optimism is buttressed by the lower base effect in Q3-2019 (when the management implemented the restriction in credit lines) and Q4-2019.

However, dwindling consumer income and intense competitive pressure are likely to constrain overall Revenue growth in H2-2020E. Also, margins and profitability are likely to remain depressed through H2-2020E, due to pressure on consumer spending.

Specifically, we have forecasted a 2.0%y/y decline in Revenue in FY-2020E as we expect a marginal rebound in H2-2020E thanks to the low base effect in H2-2019.

Adjusting our discounted cash flow estimates for the above, we review our year-end target price to N14.86/share largely buoyed by the company’s healthy cash position. Notably, the stock currently trades at a market price of N12.85/share, a 13.5% discount to our year-end Target Price. Thus, we maintain our HOLD rating on the Ticker.

United Capital Research

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