Investors update: June 27 2023

Nigeria banking stocks head for best quarter since 2017

Highlights

• Nigerian banks are heading for their best quarterly performance in six years as a return to more conventional economic policies and a sharp devaluation of the naira are expected to boost profits in the West African nation. 
• Banking stocks are up 34% this quarter and headed for the best quarterly performance since 2017, according to Bloomberg. 
• The NGX10 index, which tracks the performance of the lenders on the Nigerian Exchange, is up 45% so far this year, extending its gain to 54% in the last 52 weeks. That compares with a 2.3% loss on the MSCI Emerging Markets Europe, Middle East, and Africa Index over the same period.

Source: Bloomberg

Our Takeaway

While banking stocks in Nigeria are on track to have their best quarter in many years, analysts think they are still underpriced. The Nigerian banking sector has seen a significant increase in profitability over the years despite challenging economic conditions; Zenith Bank, for instance, joined the group of stocks worth over one trillion (SWOOTs) as its market capitalization crossed the N1 trillion mark last Friday. Despite these positive developments, the stocks are undervalued compared to their potential. This indicates there is room for further growth and potential opportunities in the sector for equity investors.

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Kenya’s ShopZetu raises $1m pre-seed funding to fuel growth

Highlights

• Kenyan fashion e-commerce startup ShopZetu is set to add beauty and home décor categories to its portfolio, in response to the growing needs of the young and style-conscious women in Africa. 
• This is as it currently scales regionally over the next few months while working to attract international fashion brands and more than triple the number of vendors on its platform to 1,000.
• The startup plans to trial regional delivery services in Rwanda, Tanzania, and Uganda, scaling beyond Kenya, where it launched in 2021, on the backing of a $1 million pre-seed funding it has just closed.

Source: TechCrunch

Our Takeaway

The sheer size of the African population, coupled with a growing diaspora base, means there’s a large potential market for African cultural items within and outside the continent. And this is an opportunity for local vendors and retailers to boost African exports with the help of e-commerce platforms and solutions like ShopZetu. The startup says it has in the past two years served over 30,000 customers, and sold more than 100,000 products, while achieving over 400% increase in monthly orders since January 2021.

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Dutch firm Prosus to end cross-holding with South Africa’s Naspers

Highlights

• Dutch-listed technology investor Prosus plans to end a cross-holding structure with its South African parent Naspers, sending both companies’ stock up almost 10% in early trade as investors welcomed the simplification.
• The companies also reported full-year earnings which showed a fall in profit due to lower earnings at China’s Tencent, in which Prosus holds a 26% stake.
• Prosus’ net profit for the year ended March 31 fell to $10 billion from $18.6 billion. Among e-commerce companies it considers part of its core operations, revenue grew by 10% to $5.8 billion while its trading loss increased to $617 million.

Source: CNBC

Our Takeaway

In 2021, Prosus implemented a cross-holding arrangement through a share swap, acquiring a 45.4% stake in Naspers. This move effectively transferred a portion of Naspers from the Johannesburg stock exchange to Euronext in Amsterdam. The purpose was to minimize the valuation discrepancy between the two companies and their primary asset, Tencent, while decreasing Naspers’ influence on the JSE, where it constituted over 25% of blue chip indexes. Unfortunately, the discount was not reduced as intended, prompting the company to initiate a share buyback program the following year, which yielded better results.