Nigeria’s 10 Best Stocks of 2013

It was a remarkable year for the Naija exchange. The All Share Index surged 44.6% in US dollar terms thanks to impressive profit growth and a raft of market reforms.

Let’s take a closer look at the year’s best performers.

It was a remarkable year for the Nigerian Stock Exchange.

The All Share Index surged 44.6% in US dollar terms thanks to impressive profit growth and a raft of market reforms.

Let’s take a closer look at the year’s best performers.

10. MRS Oil

+106.7% (Local Currency: +117.7%)

If recent results from this service station operator are any indication, the pace of Nigerian life accelerated dramatically in 2013. Its third quarter earnings statement shows sales of petrol increased 36% over the prior year.

MRS, which owns 416 filling stations, was forced to slash its dividend in 2012 due to thinning margins and a big foreign exchange loss. But now, with sales up and costs in check, investors are banking on a much larger 2013 payout.

9. Wema Bank

+115.2% (Local Currency: +120.4%)

This smallish regional bank gave investors two big things to cheer about in 2013.

First, it returned to profitability by cleaning up its lending book, driving the non-performing loan ratio down to just 3% from a level of 14% one year earlier.

Second, it raised $250 million in additional capital, making it eligible to obtain a national banking license. The company now intends to expand nationwide from its base in the west of the country.

8. Union Dicon Salt
Nigerian Stock Exchange
Photo by S. Remeika

+125.4% (Local Currency: +130.9%)

A resurrection story.

Until last year, this salt-maker’s shares were so dormant that the Nigerian Stock Exchange was on the verge of having them de-listed.

And share illiquidity was far from its biggest problem. In their review of the company’s 2011 financial statement, auditors noted that the company reported a big earnings loss and that its current liabilities exceeded current assets by roughly $6 million. They questioned whether Union Dicon was viable as a going concern. The company has not turned a profit in many years.

Fast forward to November 2013 and enter CBO Capital. The Nigerian investment firm injected capital sufficient to give it a controlling stake in the business, valuing the company at N14.00 per share. It’s now up to shareholders to decide whether to get while getting is good, or to stick around for the turnaround attempt.

7. Conoil

+127.0% (Local Currency: +132.5%)

Nigeria’s oldest and largest domestic filling station operator, Conoil also distributes aviation fuel, asphalt, and propane.

After reporting a drop in earnings in 2012, management slashed admin and finance charges to report 329% earnings growth through the first three quarters of 2013.

Where will growth come from next? Billionaire CEO Mike Adenuga says the company will roll out more filling stations and try to capture market share in the unregulated, high-margin engine lubricants industry.

6. Fidson Healthcare

+136.7% (Local Currency: +142.5%)

Fidson makes more than 200 pharmaceuticals and consumer goods, from antacids to chemotherapy drugs. It’s one of five Nigerian drug companies approved by the World Health Organization to distribute drugs for the treatment of HIV, malaria, and tuberculosis.

In spite of intense competition from counterfeits and legitimate imports from China and India, Fidson managed to increase earnings 272% in 2012 and by 61% through the first nine months of 2013.

The completion of a new, state-of-the-art factory in 2013 and the rollout of a new dietary supplement should lead to healthy sales and margin growth over the near term.

5. Livestock Feeds

+185.5% (Local Currency: +192.4%)

Nothing real glamorous about this business. It does what it says it does, manufactures and distributes feed for cows, pigs, turkeys, chickens, ducks, rabbits. You name the critter, chances are Livestock Feeds makes some sort of mash for them.

The company’s earnings were actually down 7% through the first three quarters of the year. But the shares popped when Nigerian conglomerate UACN acquired a controlling stake of the company in April. The move gave UACN a 32% share of the country’s animal feed market.

4. Champion Breweries

+278.0% (Local Currency: +287.2%)

Champion Breweries’ financial statements aren’t pretty. There’s red ink all over the place.

Not only did the company report a loss both in 2012 and through the first three quarters of this year, its balance sheet shows the companies liabilities exceed its assets.

Not exactly the stuff that superstar stocks are made of.

Nevertheless, the company appears on this list of top gainers because Heineken acquired a majority stake in the brewer in June. Thus, the brewer is in for a major restructuring, and shareholders seem to have decided that the glass looks half full.

3. Transnational Corporation of Nigeria

+288.9% (Local Currency: +298.4%)

Transcorp has put together quite the run. Its share price not only quadrupled in 2013, but it nearly doubled in 2012.

So, what’s behind the conglomerate’s stellar share performance?

Solid sales and earnings growth helped, but the announcement that it would acquire a power plant from the federal government is what really propelled the price gain.

The Ughelli Power Plant has a generating capacity of 1000MW, which is enough to power one million American homes. But due to disrepair, it currently produces just a third of that amount. Transcorp plans to rectify this and expand total capacity by 50%. CEO Tony Elumelu believes the investment will help the company triple its profit next year.

2. Evans Medical

+374.0% (Local Currency: +385.5%)

Another one of Nigeria’s largest pharmaceuticals manufacturers, Evans Medical makes everything from calamine lotion to HIV anti retrovirals. It also operates a chain of 30 pharmacies.

The company doubled earnings per share in 2012, but, as far as I can tell, has not updated the market on its financial performance since then.

Shareholders, did however, approve a NGN3.5 billion ($22 million) rights offering in August. The proceeds would finance working capital requirements.

In spite of the stock’s huge run-up, the shares still appear reasonably priced. The company is cash flow positive and the shares trade for less than 10x 2012’s earnings.

1. Forte Oil

+959.3% (Local Currency: +985.1%)

Nigeria’s best performer by a long shot, Forte Oil owns a network of filling stations in Nigeria and Ghana. It’s a fast-growing, high-octane business. In the first three quarters of 2013 earnings spiked 316% on a 29% sales increase. Billionaire CEO Femi Otedola plans to expand the business to Liberia and Sierra Leone within the next three years.

But this isn’t the main reason that shareholders scored a ten-bagger with the stock this year.

Like Transcorp, the company recently acquired a 414MW power plant from the Nigerian government, a move that makes the company one of the few ways to invest directly in the country’s power sector. Management believes revenue from electricity sales will see Forte triple its profits in 2014.

To top things off, the company is also bidding for some of Shell’s offshore oilfields and is considering the construction of a much-needed oil refinery.

Your Turn

Which Nigerian stocks will make investors wealthy in 2014? Share your top picks with us in the comments!

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Kenya’s Five Best Stocks of 2013

In a year that saw Kenyans hold their collective breath through a tense presidential election and then be faced with a horrific terror attack, investors worldwide made their bullishness on the nation’s future clear.

The Nairobi Securities Exchange’s All Share Index soared 43.7% in US dollar terms, ranking it among the world’s very best.

While big names like Safaricom and ARM Cement recorded terrific performances in 2013, the year’s most explosive price gains came from insurance firms and investment holdings companies.

Let’s count ’em down, shall we?

In a year that saw Kenyans hold their collective breath through a tense presidential election and then be faced with a horrific terror attack, investors worldwide made their bullishness on the nation’s future clear.

The Nairobi Securities Exchange’s All Share Index soared 43.7% in US dollar terms, ranking it among the world’s very best.

While big names like Safaricom and ARM Cement recorded terrific performances in 2013, the year’s most explosive price gains came from insurance firms and investment holdings companies.

Let’s count ’em down, shall we?

The Nairobi Stock Exchange’s 5 Top Stocks of 2013

5. Liberty Kenya 114.1% (Local Currency: 115.0%)

In the lead-up to Kenya’s March presidential election, local insurance companies like Liberty Kenya (formerly known as CfC Insurance) welcomed a raft of new customers concerned about the potential for loss of property to political violence.

Thankfully, the election and its aftermath were largely peaceful, leaving Liberty Kenya with what will likely be a big underwriting profit for 2013.

The company, which operates a Tanzanian subsidiary and is majority owned by South Africa’s Liberty Holdings, should also report lots of investment income for 2013 thanks to the fantastic price gains from local stocks during the year.

Liberty specializes in General Insurance, and controls roughly 7% of the Kenyan market. Look for this to expand in coming years as it continues to capitalize on its parent’s expertise to improve sales and margins.

4. Pan Africa Insurance 128.4% (Local Currency: 129.3%)

Pan Africa Insurance started 2013 with a bang, raising its dividend by 50%. The move sent shares of the life insurer soaring. But even better news was on the way.

In August, the company announced that its earnings had nearly quadrupled during the first half of the year thanks to reduced costs and a big investment gain.

And there’s lots of headroom to grow. Kenya’s life insurance penetration rate is just a shade above 1%.

To more aggressively tap this market, the company recently announced a partnership with local cellular provider, Airtel, which allows them to sell life insurance via mobile phones for as little as 15 Kenyan shillings ($0.17) per week.

Pan Africa also plans to develop marketing partnerships with local banks, effectively transforming bank tellers into insurance salespeople.

3. British American Investments 140.3% (Local Currency: 141.3%)

Britam, Kenya’s largest insurance company, garnered a 23% increase in earnings per share during the first half of 2013 in spite of lots more expenditure (25%) on technology and personnel.

Then, in November, it announced that it would acquire Real Insurance, a mid-sized firm. The move is strategically important because Real operates in Tanzania, Malawi, and Mozambique. All are new markets for Britam, whose operations had previously been limited to Kenya, South Sudan, Uganda, and Rwanda.

The market decided it liked both news items very much. In the last quarter of the year, the share price climbed over 90%.

What’s next for Britam?

It recently teamed with Equity Bank (CEO James Mwangi sits on Britam’s board) to launch a medical insurance product, and the company is investing more of its float in Kenya’s hot real estate sector, purchasing a large stake in local property development company, Acorn Group.

2. Centum Investment Company 178.9% (Local Currency: 180.0%)

Photo by Erik Hersman
Photo by Erik Hersman

Centum delighted investors all year long, with its share price climbing steadily to a 180% local currency return.

The performance should probably come as no surprise after taking a look at its investment portfolio. Centum owns two big real estate projects (Two Rivers and Pearl Marina) which revalued upwards after meeting important milestones in 2013. And its private equity stakes doubtless benefited from the NSE’s big rise.

The purchase of a local asset manager (Genesis) and the takeover bid for land-rich REA Vipingo also generated some excitement.

But now, the company trades at a substantial premium to its net asset value, which suggests a repeat appearance in next year’s top performers list may be a stretch.

1. Carbacid Investments 289.3% (Local Currency: 290.9%)

Carbacid manufactures liquified carbon dioxide, primarily for the production of carbonated drinks. It has been doing this quietly for many years.

So, what on earth could have caused the market to decide that it is three times more valuable now than it was one year ago?

An announcement of bonus shares. One additional share for every two held. It was effectively a 50% dividend payout over and above the company’s ordinary dividend. It also proposed a 5:1 share split to be effected immediately after the bonus issue.

Why the generosity? The company had no long-term debt and had built up a huge cash pile over the years that it had been investing in stocks and bonds. The income from these investments was beginning to rival that which the company earned from selling CO2.

So, with additional demand for fizzy beverages already covered, management did the right thing. It rewarded investors and increased the liquidity of the company’s shares in one fell swoop.

If that doesn’t make for a gleeful shareholders’ meeting, I’m not sure what does!

Your Turn

Which Kenyan stocks will shoot the lights out in 2014? Your prediction is wanted in the comments!

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The BRVM’s 5 Best Stocks of 2013

Investors at the Bourse Régionale des Valeurs Mobilières reaped the peace dividend in 2013.

Less than two years after the end of its second civil war, stability has returned to Cote d’Ivoire. And Ivorian companies, which dominate the BRVM’s main index, propelled the Abidjan-based market to a 46% return in US dollar terms.

Here’s a countdown of the top performers.

Investors at the Bourse Régionale des Valeurs Mobilières reaped the peace dividend in 2013.

Less than two years after the end of its second civil war, stability has returned to Cote d’Ivoire. And Ivorian companies, which dominate the BRVM’s main index, propelled the Abidjan-based market to a 46% return in US dollar terms.

Here’s a countdown of the top performers.

The BRVM’s Five Best Stocks of 2013

5. Vivo Energy CI +130.3% (Local currency: +120.5%)

Vivo Energy operates Shell filling stations in 16 African countries. It runs 120 of them in Cote d’Ivoire, almost half of which are in and around the bustling capital, Abidjan. It also boasts a number of contracts to supply asphalt to road-building projects and, in 2012, won three tenders for the supply of jet fuel.

Vivo’s sales revved up 41% during the first half of 2013. The gain resulted from an improved economy and new filling stations acquired from cash-strapped independent operators.

Earnings were down significantly, however, due to a one-off charge. Thus, the company’s a lot cheaper than its 24x earnings multiple would suggest.

4. Bollore Africa Logistics CI +138.8% (Local currency: +128.6%)

Bollore Africa’s Ivorian subsidiary operates the shipping container terminal at the port of Abidjan and the railway that links it to Burkina Faso. It also owns a fleet of trucks and a slew of warehouses. All of which are in high demand since the country’s return to stability.

In the first six months of 2013, the company’s earnings rose 39%. This comes on the heels of a three-fold profit gain in 2012.

Bollore’s future in Cote d’Ivoire looks rosy, too. It’s a member of a consortium that recently secured a contract to build and operate a new container terminal at Abidjan port, doubling the facility’s capacity.

3. NEI-CEDA +143.9% (Local currency: +133.5%)

This company is 12%-owned by the Ivorian government and publishes school books and novels for young readers (think Junior Scholastic).

With a market cap of roughly $6 million, it’s very small and very thinly traded.

Revenues increased 12% during the first half of the year, but it also reported a big earnings loss.

Data on the company is scarce, so your guess is as good as mine as to why the stock shot up 144%.

2. Servair Abidjan +153.0% (Local currency: +142.2%)

The BRVM's home base, Abidjan
Photo by Guillaume Mignot

A subsidiary of Air France-KLM, Servair Abidjan refuels, caters, and cleans all commercial jets at Abidjan’s Felix Houphouet-Boigny International Airport.

The company has seen its business take off since the end of hostilities in 2011. A new domestic airline, Air Cote d’Ivoire, opened for business. Ethiopian Airlines increased the frequency of its flights. And Lebanon’s Middle East Airlines added Abidjan to its list of destinations.

This was all good news for Servair. In the first half of 2013, the company’s profit soared 39.9% and management predicted another good result for the remainder of the year.

1. Uniwax +579.0% (Local currency: +550.0%)

If you’ve ever traveled in West Africa, you’ve no doubt noted the colorful wax-print fabric that women often wear. These fabrics are part of a rich history. At one time, the prints expressed their wearers’ tribal affiliation, religion, and social standing.

With current production levels at 20 million yards per year, Uniwax is Cote d’Ivoire’s leading wax-print manufacturer.

What on earth did it do to merit a 579% increase to its share price?

Well, it rebounded from a $1.5 million dollar loss to a $1.9 million dollar profit in the first half of 2013 thanks in part to efforts to combat counterfeiting of its designs. It also started selling fabric in Angola and announced plans to boost its production capacity by 50% over the next three years.

Your Turn

Which stocks will top next year’s list of the BRVM’s best performers? Let us know in the comments!

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Mauritius’ 5 Best Stocks of 2013

It seems there’s less trouble in paradise.

After a disappointing 2012, which saw its main index drop over 13% in US dollar terms, the Stock Exchange of Mauritius rebounded for a solid 21% gain this past year.

Here’s a countdown of the stocks that made the biggest splash.

It seems there’s less trouble in paradise.

After a disappointing 2012, which saw its main index drop over 13% in US dollar terms, the Stock Exchange of Mauritius rebounded for a solid 21% gain this past year.

Here’s a countdown of the stocks that made the biggest splash.

The Stock Exchange of Mauritius’s Five Best Stocks of 2013

5. Sun Resorts +54.7% (Local currency: 52.0%)

You’re going to notice a theme in this list. After a long sluggish spell, tourists are returning to Mauritius. Thus, hoteliers, of which there are many on the Stock Exchange of Mauritius, enjoyed outstanding price gains.

Case in point – Sun Resorts. The company operates six upscale hotels on Mauritius and the Maldives. Its stock rallied 55% this year mostly on forecasts of higher tourist arrivals and hotel occupancy rates.

It actually lost money during the first three quarters of the year because of start-up costs at its newest resort. But revenue growth of 21% and management’s reports of strong fourth-quarter bookings encouraged enough demand for the shares for it to make this list.

4. Cim Financial +55.1% (Local currency: 52.4%)

The Cim Group has made some investors very happy since its IPO in 2012. The financial services group does everything from issuing credit cards to leasing equipment to helping gobs of foreign corporates set up tax-sheltered entities on the Indian Ocean island.

The company’s earnings nearly doubled in 2013, but much of the profit was derived from selling off investments and operations that didn’t fit with the company’s financial services focus. These included stakes in cement, building materials, and shipping companies.

Cim shares currently trade around 14x adjusted earnings and offer a dividend yield of 2.7% – perhaps an optimistic price given the modest growth record of its continuing operations. But if you’re bullish on Mauritius’ future as an offshore tax haven, this may be the company for you.

3. New Mauritius Hotels +57.2% (Local currency: 54.4%)

NMH is Mauritius’ largest and most geographically diversified hotel operator. It runs eight facilities on the island. It also owns a resort and spa in the Seychelles and two new hotels in Morocco.

Its 2013 fiscal year was something of a disappointment. Airlines scaled back flights between Mauritius and Europe, resulting in fewer guests from Italy and France. And increased competition forced NMH to heavily discount its room rates.

But management has made plain that it expects 2014 to be a more profitable year. It forecast 10% earnings growth for the first quarter, reported solid bookings through the second quarter, and anticipates that its new residential villas in Morocco will sell well.

2. Air Mauritius +61.2% (Local currency: +58.4%)

Sunny skies for the Stock Exchange of Mauritius in 2013
Photo by Mohammed Alnaser

All Mauritius’ tourists need somebody to physically transport them there, and that’s the business of Air Mauritius.

I despise airlines as investments. They’re capital intensive, extremely cyclical, and have razor-thin margins.

But these stocks do, from time to time, make take off in a way that makes airline bears like me look foolish.

That’s exactly what Air Mauritius did last year when its share price soared 61%. Mind you. It’s not because the company was actually profitable. In fact, it’s reported earnings losses for two and a half years.

The price gain has likely resulted from a gradual increase in operating profit, Mauritius’ recently renovated airport, and increased tourist arrivals from China. The airline went from one to three direct flights to the country in 2013.

1. Lux Island Resorts +148.2% (Local currency: +143.8%)

Lux Island Resorts grew revenue, kept expenses in check, and paid down debt, allowing it to report earnings growth worthy of a five-star review. The market liked what it saw, elevating the share price nearly 150%.

Investors were likely also intrigued by the announcement of the hotelier’s new “asset-light” growth strategy. Lux, which owns resorts in Mauritius, the Maldives, and Reunion Island, intends to pursue hotel management contracts instead of developing additional properties. It’s already secured a contract to design, build, and manage a resort near Dubai, and it’s working on similar deals in China.

Lux currently trades at a very spicy 43x trailing earnings and doesn’t pay a dividend. So management’s got its work cut out for it, if the stock is to top this list again next year.

Your Turn

Do you invest in Mauritius? Tell us your hot picks for 2014 in the comments!

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Ghana’s Best 5 Stocks of 2013

Ghana investors will probably pinch themselves after reviewing their portfolios’ 2013 performance.

In spite of a breathtaking 19% drop in the value of the local currency, the market still surged almost 45% in US dollar terms, ranking it among the world’s best.

Which companies notched the most impressive performances? Let’s take a look-see.

Ghana investors will probably pinch themselves after reviewing their portfolios’ 2013 performance.

In spite of a breathtaking 19% drop in the value of the local currency, the market still surged almost 45% in US dollar terms, ranking it among the world’s best.

Which companies notched the most impressive performances? Let’s take a look-see.

The Ghana Stock Exchange’s 5 Best Performers of 2013

5. Ghana Commercial Bank +90.5% (+135.2% local currency)

With a share price that nearly doubled in US dollar terms, GCB made sure investors had something to celebrate during its 60th anniversary. Ghana’s most prominent bank grew profits 51% during the first nine months of 2013.

How did it do it? Well, customer deposits increased more than 10%. This gave the bank lots of low-cost capital to lend, which it chose to deploy primarily in government securities.

The downside is that the bank now has an unsettling amount of government securities sitting on its balance sheet. These could be at risk if the government should find itself unable to service its growing debt load. Management would do well to diversify its lending portfolio into retail, small business, and corporate loans.

4. Mechanical Lloyd +105.1% (+153.3% local currency)

One of Ghana’s largest auto dealers, Mechanical Lloyd holds the rights to sell BMWs, Fords, and Massey Ferguson tractors throughout the country. In recent years, it has expanded its repair and workshop operations, helping to smooth earnings.

But the company struggled in 2013. Sales slumped roughly 11% during the first nine months of the year. Increased finance charges hit the company hard, too. The result? Profits fell 38.6%.

The company looks to be in expansionary mode, though, having borrowed nearly 20 million cedis through September. This, plus the fact that the stock still trades at less than half its book value is likely why investors believe performance will rev up again soon.

3. CAL Bank +108.9% (+157.9% local currency)

While Ghana Commercial Bank is big, conservative, and (dare I say it?) a bit sleepy, CAL Bank is young, aggressive, and quickly becoming a major national player.

Its strategic focus is to provide long-term commercial loans, and increasingly to small businesses. The approach has certainly borne fruit. Earnings through the first three quarters of 2013 jumped 113%, and the bank’s asset base is 40% larger than it was one year ago.

CEO Frank Adu maintains that the bank has no plans to “jump on the pan-African bandwagon,” and with just 19 branches throughout the country, it would appear that CAL still has plenty of room to grow at home.

2. Enterprise Group +217.2% (+291.7% local currency)

The Ghana Stock Exchange's performance reflects vibrant Accra
Photo by World Bank

In the US, we’re accustomed to seeing insurers make very little profit on underwriting. They derive their earnings from investing the float, instead.

Most African insurers, however, are in a much more enviable position. They make a healthy profit on their investments and on their underwriting, too.

Take Ghana’s oldest insurance company, for example. During the first nine months of 2013, Enterprise Group kept over 17% of the premiums it collected from clients after paying re-insurers and claims.

And it made a tidy profit from its investments. In total, the company’s earnings are up 196%, yet the company still trades at a PE ratio of less than six.

1. PZ Cussons Ghana +255.5% (+338.9% local currency)

It’s been a good few years for Ghana’s consumer goods companies. Sales at PZ Cussons Ghana, which distributes soap, cosmetics, pharmaceuticals, and small appliances, jumped 16% during its 2013 fiscal year and 46% in its first quarter of 2014.

The market responded by scarfing up shares of the stock. Its share price rocketed more than 400% at one point.

Unfortunately, with Ghana’s devaluing currency and rising competition, importers like PZC must sell more and more just to keep earnings moving in the right direction. Shrinking margins forced the company to report an earnings loss during the first quarter.

The stock now trades at nearly 21x trailing earnings, a demanding valuation given the challenging environment.

Your Turn

Which Ghanaian stock will top the charts in 2014? Let us know your predictions in the comments!

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