International stockbroker Exotix (www.exotix.co.uk) is bullish on African equities and on growth prospects. According to the latest report “Top 30 Companies: sub-Saharan Africa excluding South Africa”, many share prices still have to catch up with the improved fundamentals and Africa has lagged the recovery in the stock markets of Brazil, Russia, India and China.
Analyst Christopher Hartland-Peel writes: “We expect 2010 to be a strong year for sub-Saharan African markets and we think the improving fundamentals that we have seen in the region were not reflected in stock prices during 2009. Many investors believe that BRIC markets have outperformed the improving fundamentals; Sub-Saharan Africa has been the reverse and has underperformed the improving fundamentals. Now, we see a significant valuation gap between the BRIC’s, other emerging markets and frontier markets.
He adds: “Emerging markets continue to lead global growth and commodity prices will likely stay around current levels. This backdrop should be the equity sweet spot for frontier markets, especially since the 2009 global rally barely touched frontier markets.”
The research team, which also includes David Aserkoff and Stuart Culverhouse, highlights Nigerian banks which will be “interesting”. Regulators have spent considerable time and funds clearing up some banks last year, and share prices plunged. The report says: “The Nigerian banks clearly have value. The big four Nigerian banks – First Bank Nigeria, Guaranty Trust Bank, UBA and Zenith Bank are trading only marginally above book value at 1.4 times… The average big BRIC bank is trading at twice the book value of the average big four Nigerian banks.”
He also backs Nigerian non-financials, citing strong GDP growth including 8% for the non-oil sectors, and higher oil prices in the $70-$80 range.”Food companies and cement would be our favourites. The breweries are hurting from rising competition”.
He also highlights low-capital and early-stage resources and mining – “High commodity prices are back” – picking out stocks such as Mwana Africa and Bowleven. He adds that African assets listed in UK can give investors better liquidity and balance the portfolio.
Other highlighted economies are Kenya (4.0% growth forecast), Mauritius (2.0% growth forecast) and Botswana (4.1%). “We look closely at consumer stocks in Kenya such as East African Breweries, Safaricom and the banking sector…. Better harvests in Kenya would drive the agricultural sector, which still accounts for 22% of GDP.”
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