It’s not necessary to open an African brokerage account to add a bit of the continent to your portfolio. Here are five companies that are making big bets on Africa and conveniently trade on the New York Stock Exchange.
Marriott International (MAR.US)
(P/E Ratio: 32.3; P/B Ratio: N/A; Dividend Yield: 1.3%)
Marriott is betting on tourist and business travelers’ continued demand for upscale accommodation across Africa. The hotelier opened a facility in Benin last year and plans to open more in Rwanda, Kenya, Ghana, Nigeria, Cameroon, and South Africa by 2016. This will double its Middle East and African hotel count, bringing it to a total of more than 70.
Marriott earned $19 million from the Middle East and Africa in 2011, representing nearly 10% of the company’s net income.
Kraft Foods (KFT.US)
(P/E Ratio: 16.7; P/B Ratio: 2.1; Dividend Yield: 3.0%)
Food and beverage purveyor, Kraft Foods, said that it recorded strong sales growth from South Africa during the first quarter of 2012. Unfortunately, it provided no more specifics than that.
But the company is clearly positioned for rapid growth on the continent. It bought the popular Cadbury brand in 2010 and employs 3800 staff in ten African operations. Its geographic reach includes South Africa, Kenya, Zimbabwe, Nigeria, Ghana, Botswana, and Swaziland. It recently constructed a large chocolate factory in South Africa, a chocolate drink facility in Nigeria, and will soon complete a sugar-free gum plant in Botswana.
Kraft’s sub-Saharan revenue has grown more than 10% each year since 2009.
American Tower (AMT.US)
(P/E Ratio: 50.8; P/B Ratio: 7.7; Dividend Yield: 1.2%)
American Tower owns and operates wireless communication towers throughout the world. In the past two years, it’s made a sizable investment in Africa. It started by purchasing a network of towers in South Africa, shortly followed by the acquisition of some more in Ghana, and rounded things out by buying a bunch in Uganda. It now owns more than 4000 wireless towers on the continent.
Thus far, management has shed little light on how profitable these towers have been apart from remarking that they have outpaced expectations. The company anticipates that leasing demand will remain strong as the wireless operators seek to build out their coverage areas. In the first quarter of 2012, African towers constituted almost 13% of the company’s international total. The international segment generated $106 million in operating profits during the quarter, a 51% increase from the prior year.
SPX (SPW.US)
(P/E Ratio: 15.7; P/B Ratio: 1.8; Dividend Yield: 1.3%)
Industrial conglomerate SPX has a long history in South Africa and supplies the country with everything from parts for coal-fired power plants to margarine processors. It employs roughly 400 South African citizens at its manufacturing facility.
The country has performed very well for SPX in recent years. South African sales have doubled to more than $281 million since 2009. That represented 5.2% of group revenue in 2011.
But the company’s African clientele isn’t limited to South Africa. In February, it announced that it had won a contract to supply condensing units for a Kenyan geothermal project.
Cummins (CMI.US)
(P/E Ratio: 11.2; P/B Ratio: 3.4; Dividend Yield: 1.5%)
Engine distributor, Cummins, scored a nice new contract last month to supply Zimbabwe’s second-largest mobile phone operator with 159 generator units. The gensets will power wireless towers.
But the deal came too late to reinforce Cummins first quarter African sales. The company’s profits from the region were depressed by high expansion costs, which narrowed the EBIT margin from 13.9% to 12.1%. Political unrest in Nigeria also put a damper on the segment’s results.
Even so, the company’s African sales totaled $36 million during the quarter — a 24% increase over last year. Cummins’ African sales account for just shy of 5% of its distribution segment’s total revenue.
[Disclosure: I have no position in any stock mentioned in this article, and I have no intention of taking any within the next 72 hours.]
I would love to get an email of the companies investing or planning to invest in Africa.Thank you.
Nice idea. I’ll think about putting something like that together. Are there other readers like Boaz who would have interest in such a service?
In the meantime, Boaz, I invite you to subscribe to the blog on the right-side of the page. That way you will receive an email alert every time we post a new story on the site.
Thank you for this information. It is very helpful. I am hearing a lot of buzz about Africa and want to purchase stock in a company that is investing in Africa.