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.

The Ghana Stock Exchange's performance reflects vibrant Accra

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!

Related Reading

How to Invest on the Ghana Stock Exchange
Botswana’s 5 Best Stocks of 2013
The Zimbabwe Stock Exchange’s 5 Best Performers of 2013

12 thoughts on “Ghana’s Best 5 Stocks of 2013”

    1. Those are good stocks to buys. My preference for them are just the way you arranged them. Fan Milk, SCB, then UNILEVER.
      Another stock to watch this year is CAL. I forsee CAL becoming one of the best 5 performing stocks on GSE in 2014.

  1. I expect the performance of the Ghanaian stock market to be driven by the banking and insurance sectors in 2014. I therefore believe that the stocks to watch should come from these sectors in 2014. I believe that the stocks to watch in 2014 include EBG, ETI, EGL, SIC, GCB and CAL. I expect these stocks to drive the performance of their respective sectors this year.

    Some Views

    Enterprise Group Limited (EGL): I have picked EGL as a stock to watch for the second consecutive year on the back of a significant improvement in financial performance following a reorganization exercise in 2010. I expect EGL to post record FY2013 earnings and reignite investor confidence in the stock in Q1 2014. In addition to insurance, the company is participating in a booming real estate sector via the development of Enterprise Gardens at Roman Ridge in Accra. The company is also exploiting opportunities in the pension sector following reforms that liberalized the pension sector in Ghana.

    SIC Insurance Company Limited (SIC): I expect the market valuation of SIC to improve in 2014 on the back of anticipated slowdown in the ongoing write-off of outstanding premiums, a situation that could boost the company’s earnings in 2014. In addition, the promotion of internal people to top management positions (MD, Deputy MD) for the first time in several years is expected to enhance the continuity of the company’s long-term strategy and growth plans including the establishment of a real estate subsidiary and entry into neighboring countries such as Liberia and Sierra Leone. The company is planning a rights issue, which will partly finance the development of real estate projects worth USD100 million. SIC is the manager of a pool of insurance firms which is underwriting the oil and gas sector in Ghana. However, I remain concerned about the influence of the Ghanaian government (majority shareholder) in the operations of the company.

    GCB Bank Limited (GCB) is the second largest bank in Ghana by assets and its legacy issues with Tema Oil Refinery (TOR) has been successfully resolved following the appointment of a new management in 2010, the restructuring of the TOR debt between 2010 and 2011, internal restructuring and repositioning of the bank in the retail and SME segment, which enabled the bank to deliver exceptional earnings figures in FY2012 and 2013. In my view, GCB has finally been positioned to maximize its unmatched retail presence in Ghana via cross-selling of products, improved ATM upkeep time and the decision to join the growing list of VISA enabled banks in Ghana. In addition, there is still a significant scope for expansion of the bank’s loan book in 2014. I also expect the contribution of the bank’s newly established treasury department to revenues and profits to improve in 2014.

    CAL BANK: I observed a transformation in CAL Bank’s earnings performance following a GHS75 million private placement in late 2012 that that raised the bank’s stated capital to GHS100 million thereby enhancing its Single Obligor Limit (25% of stated capital). The increased capital further enhanced the bank’s competitive edge in corporate banking by positioning it to participate in attractive big ticket transactions in the oil and gas, telecom and cocoa sectors. The bank is also opening additional branches to increase its retail presence and consequently ramp-up its retail deposit mobilization drive with a view to reducing its overall cost of funding. CAL has a diversified shareholder base, improved corporate governance system and has consistently posted a growth in dividend per share for the past three years.

    1. Many thanks for your insights, Sulemana!

      Any thoughts on the macro environment? I’m seeing inflation, interest rate hikes, and forex controls. In light of this, do you believe the All Share index will post a double digit US dollar return in 2014?

  2. Thanks for the article! It was eye-opening but I noticed after reading several such articles online that these companies are mostly Large groups/enterprises with no mention of the small-to-medium industries (even though these are the very industries driving economies everywhere). How are the SMEs doing in Ghana? & Where can I find more information on SMEs which have infiltrated the global market?

  3. So far in 2014, the Top Gainers on the Ghana Stock Exchange (in order) are:
    HFC Bank — 38.54% YTD
    TOTAL —26.48% YTD
    SCB — 21.82% YTD
    EBG —- 13.73%.
    MAC —- 12.90%
    Others inculde EGL, FML, SOGEGH, ETI, GOIL, TLW.

  4. Hi plz i have gain interest in this stock market but it’s like i don’t know how to start it all. Especially the smallest cedis i can start with. I would be much glad if i get an answer to my questions. Thanks

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