The Botswana Stock Exchange had a disappointing year. As of this writing, its Domestic Companies Index had increased just 5.0% in dollar terms (17.9% in local currency).
Botswana has been slow to recover from the big gem price crash of 2011. Diamonds account for roughly 30% of the southern African nation’s GDP.
But while the market as a whole may have been mediocre, several companies posted terrific performances.
Here’s a countdown of the top five performers on the Botswana Stock Exchange in 2013.
5. Engen Botswana
+16.4% (+30.7% local currency)
Talk about high-octane performance! This subsidiary of South Africa’s leading service station operator profited from new pricing, a weak rand, and an upward revision in the value of its fuel inventory on its way to recording 89% earnings growth during the first half of the year.
Management celebrated by raising the mid-year dividend 40%, which gives the stock a 5.3% yield.
Will shareholders be pumped by the company’s final results next year? Well, the company does spin off wads of cash, and it has no interest-bearing debt to speak of. It also recently opened two more filling stations in the north of the country. But margins may be squeezed by higher fuel prices.
4. FNB Botswana
+24.0% (+39.3% local currency)
FNB Botswana banked 23% earnings growth over the past 12 months. Falling diamond prices be darned! How did it manage such a solid result? Rock bottom interest rates helped. At 8.5% the bank rate is the lowest it’s been in 13 years. This enticed Botswana’s intrepid consumers to take on more debt – 32% more to be exact.
Yet, CEO Lorato Boakgomo-Nthokhwana and her team deployed most of their capital in more staid loans backed by property and other hard assets. In total, they increased the lending portfolio 23%.
The bank also managed to grow its customer deposits 13%, giving it a nice pile of inexpensive money to lend.
FNB Botswana shares can now be had for a shade more than 14x trailing earnings and offer a dividend yield of 3.8%.
+37.2% (+54.1% local currency)
Choppies, which boasts a 30% share of Botswana’s grocery market, bagged a 19% profit increase in 2013. The upstart retailer’s expansion into South Africa remains a drag on profitability, but management has assured shareholders that the move will soon bear fruit. It opened four new stores in the Rainbow Nation over the past 12 months, bringing its total there to 17.
The balance sheet looks decent, showing a growing cash pile and that the company paid down a big chunk of its long-term debt.
Smart share shoppers will probably steer clear of Choppies, though. Because with a P/E ratio of 24.2, this stock doesn’t appear terribly cheap.
2. FSG Limited
+50.6% (+69.2% local currency)
FSG shareholders must think they’ve died and gone to heaven. Shares of the funeral service company have surged nearly 70% over the past year and it still trades at just 9.2x trailing earnings after reporting profit growth of 22%.
The company’s in the midst of an impressive round of geographic expansion which has taken it from its Gaborone home into the north of Botswana and beyond into Zambia. It currently generates more than 10% of its revenue in Zambia, and management believes it will become a major player there in coming years.
The company’s outstanding performance has turned heads. Botswana Insurance Holdings made a bid to purchase the company earlier this year, but CEO Mike Nikolic turned the offer down – a good indication that the company’s got a bright future.
1. Sefalana Holdings
+76.5% (+98.2% local currency)
It’s not often that you see an exclamation point in a financial report, but Sefalana management couldn’t resist describing their company’s 2013 performance as “Fantastic!”
It’s tough to quibble with them.
The retail, manufacturing, and property group posted a 35% earnings surge over 2012’s record-breaking results. The growth came on the back of strong retail sales and the acquisition of two big government contracts for the manufacture of subsidized baby food and sorghum meal.
Investors were certainly cheered by the news. The stock soared 98%, a figure that doesn’t factor in the sizable dividend.
And more happiness may be in store. With a P/E ratio of 10.5, Sefalana’s got a less demanding valuation than its rival, Choppies, and the company has alerted the market that some big news is in the offing.
Are you a Botswana investor? Let’s hear your predictions of 2014’s best performers in the comments!