Title : Equity Research Edition : Weekly Bulletin Country : Botswana Date : 21 August 2020 MARKET COMMENTARY Price gainers for the week Price losers for the week Company Price (P) % change Company Price (P) % change StanChart was the week’s sole gainer, rising by 0.72% to StanChart 1.39 0.72% BTCL 0.83 -1.19% Sechaba 21.55 -0.23% BWP 1.39. On the other hand, BTCL (-1.19%) was the Sefalana 9.29 -0.11% biggest loser followed by Sechaba (-0.23%) and Sefalana (- 0.11%). The Domestic Companies Index thus closed the week 0.04% lower w-o-w at 7,062.70 pts. The Foreign Companies Index Volumes Turnover BWP USD was flat at 1,550.08 pts. Sefalana 99,749 Sefalana 927,621 79,589.87 Turnover declined to BWP 1.4m on 242,673 shares traded Choppies 77,094 BIHL 210,840 18,090.07 vs. the previous week’s BWP 23.3m on 30.0m shares. Deals BTCL 25,978 Engen 102,342 8,780.90 in Sefalana dominated volumes and value transacted with contributions of 41.10% and 65.48%, respectively. BIHL 12,048 Chobe 83,581 7,171.25 Engen 9,869 Choppies 46,256 3,968.80 The BWP strengthened against the USD (+0.58%) and EUR (+0.14%); while it weakened against the ZAR (-0.35%) and Rates GBP (-0.76%). 7 day Bank of Botswana Certificate rate 1.00% 91 day Bank of Botswana Certificate rate 1.02% NewFunds and NewGold depreciated by 3.01% and 1.57% to BWP 44.81 and BWP 214.40, respectively. 35 NewFunds Bank rate 4.25% Prime rate 5.75% units worth BWP 1,568 and 100 NewGold units worth BWP 21,440 changed hands. Latest inflation (July 2020) 0.90% Source: Bank of Botswana Highli ghts in this week’s edition: Currency 14-Aug-20 21-Aug-20 % change Bank rate maintained at 4.25 percent ZAR 1.487 1.482 -0.35% Inflation remained constant at 0.9 percent in July USD 0.086 0.086 0.58% BIHL expects significantly higher earnings for H1 GBP 0.065 0.065 -0.76% 20 EUR 0.072 0.072 0.14% Source: Bank of Botswana Economic & Company News Bank rate maintained at 4.25 percent. Figure 1: Domestic Companies Index At the meeting held on August 20, 2020, the Monetary Policy Committee (MPC) of the Bank of Botswana decided to maintain 7,800.00 the Bank Rate at 4.25 percent. Inflation was constant at 0.9 7,600.00 percent between June and July 2020 and remained below the lower bound of the Bank’s objective range of 3 – 6 percent. 7,400.00 However, inflation is forecast to revert to within the objective range in the third quarter of 2021. Key takeaways from the MPC 7,200.00 meeting were: 7,000.00 Real Gross Domestic Product (GDP) grew by 2.6 percent 21-Aug-19 21-Nov-19 21-Feb-20 21-May-20 21-Aug-20 in the twelve months to March 2020, compared to a faster expansion of 4.5 percent in the corresponding period in 2019. Mining output contracted by 6.1 percent compared to a growth of 5.5 percent in the corresponding period in Figure 2: Foreign Companies Index 2019. 1,600.00 Non-mining GDP grew by 3.6 percent in the year to March 2020 compared to 4.3 percent in the 1,580.00 corresponding period in 2019. The Ministry of Finance and Economic Development 1,560.00 estimates that the economy will decline by 8.9 percent in 2020, from an earlier forecast of a 13.1 percent 1,540.00 contraction, before rebounding to growth of 7.7 percent 21-Aug-19 21-Nov-19 21-Feb-20 21-May-20 21-Aug-20 in 2021. The International Monetary Fund forecasts the domestic economy to contract by 9.6 percent in 2020 compared to 5.4 percent in the April 2020 World Economic Outlook, before rebounding to a growth of 8.6 percent in 2021. The global economy is projected to contract by 4.9 percent in 2020 but to rebound to 5.4 percent in 2021, anchored by unprecedented policy and resource support Figure 3: DCI vs MSCI EM Index by individual countries and multilateral institutions. 1.50 1.40 1.30 (Bank of Botswana) 1.20 1.10 Inflation remains constant at 0.9 percent in July. 1.00 Headline inflation was constant at 0.9 percent between June and 0.90 0.80 July 2020, remaining below the lower bound of the Bank’s 0.70 medium-term objective range of 3 – 6 percent, and significantly 0.60 lower than the 2.9 percent in July 2019. The constant inflation Aug-19 Nov-19 Feb-20 May-20 Aug-20 between June and July 2020 reflects relatively stable prices for some categories of goods and services, as well as offsetting movements in the annual price changes for other commodity DCI MSCI EM groups. Inflation remained stable for: Education (4.7 percent); Health (1.4 percent); and Communication (0.4 percent). The inflationary pressure was further eased by inflation falling for: Miscellaneous Goods and Services (from 1.1 to 0.5 percent); Furnishing, Household Equipment and Routine Maintenance (from 2 2.3 to 1.9 percent); Restaurants and Hotels (from 3.5 to 3.1 percent); and Transport (from -6.7 to -6.9 percent). However, the downward pressure on inflation was partly offset by inflation increasing with respect to: Alcoholic Beverages and Tobacco (from 5.4 to 6.6 percent); Food and Non-alcoholic Beverages’ (from 3.6 to 3.9 percent); Clothing and Footwear (from 2.2 to 2.4 percent); Housing, Water, Electricity, Gas and Other Fuels (from 5.7 to 5.9 percent); and Recreation and Culture (from -0.8 to -0.7 percent). (Bank of Botswana) BIHL expects significantly higher earnings for H1 20. BIHL notified shareholders that its interim results (profit before tax) for the six-month period ended 30 June 2020 will be higher than those reported for the six-month period ended 30 June 2019 by between 44% to 56%, this translates to a change of between BWP 80m and BWP 100m in the Profit After Tax (PAT). The profit after tax for the six-month period ended 30 June 2019 was BWP 180m. The reasons for the higher earnings during the current period are the higher margins experienced on some business lines and the fact that in the comparative period last year the group’s investments in associates suffered unrealised losses which did not recur in the current reporting period. The group’s results for the six-month period ended 30 June 2020 are expected to be published on or around the 2nd of September 2020. Accordingly, the shareholders of BIHL group and potential investors are advised to exercise caution when trading in the company’s securities until a detailed announcement is made. (BIHL) 3 COMPANY Price (BWP) EPS P/E Hist P/BV Hist Net Div Div Yield ROE ROA Recommendation BANKING SECTOR ABC 2.00 0.17 11.91 1.35 0.03 1.30% 11.32% 1.34% HOLD Absa 5.45 0.61 8.92 2.09 0.35 6.43% 23.42% 2.77% HOLD FNBB 2.35 0.31 7.67 1.71 0.16 6.69% 22.24% 2.93% HOLD StanChart 1.39 0.18 7.56 0.37 0.25 17.95% 4.95% 0.35% BUY BBS 1.10 -0.05 N/A N/A 0.00 0.00% N/A N/A SPECULATIVE OTHER FINANCIAL SERVICES Afinitas 0.99 -0.05 NA 3.17 0.00 0.00% -15.28% -14.37% SPECULATIVE BIHL 17.50 1.56 11.22 1.69 1.14 6.51% 15.05% 2.67% HOLD Letshego 0.64 0.32 1.98 0.30 0.11 17.34% 15.10% 6.36% BUY FMCG Sefalana 9.29 0.79 11.78 1.29 0.35 3.73% 10.95% 6.80% BUY Choppies 0.60 0.03 22.79 N/A 0.00 0.00% N/A 1.35% HOLD CA Sales 3.77 0.31 12.12 1.73 0.06 1.55% 14.24% 6.72% HOLD AGRICULTURE SeedCo 2.62 0.19 14.10 1.17 0.00 0.00% 8.31% 4.75% REDUCE BREWERIES Sechaba 21.55 1.65 13.09 3.78 1.02 4.72% 28.88% 27.38% HOLD TELECOMMUNICATIONS BTCL 0.83 0.10 8.19 0.42 0.03 3.98% 5.08% 4.19% BUY PROPERTY DEVELOPMENT Letlole 2.29 0.18 13.03 0.84 0.15 6.34% 6.49% 4.57% BUY NAP 3.23 0.32 9.99 1.26 0.23 7.05% 12.66% 11.15% HOLD PrimeTime 2.92 0.24 12.09 0.90 0.08 2.63% 7.46% 3.45% HOLD RDCP 2.23 0.36 6.18 0.67 0.12 5.29% 10.91% 5.48% BUY FPC 2.40 0.26 9.24 1.08 0.16 6.60% 11.68% 6.96% SELL Turnstar 2.79 0.20 13.73 0.96 0.17 5.98% 7.02% 4.60% HOLD CONSUMER SERVICES Engen 10.37 0.81 12.82 2.55 1.01 9.72% 19.91% 12.13% HOLD G4S 3.40 0.25 13.52 2.61 0.13 3.69% 19.30% 12.31% HOLD TOURISM AND HOSPITALITY Cresta 1.35 0.19 7.15 1.17 0.00 0.00% 16.39% 5.64% BUY Chobe 9.50 1.09 8.72 2.27 0.00 0.00% 26.02% 18.27% HOLD Market Average 10.81 1.52 4.90% 12.82% 5.99% DIVIDEND SCHEDULE Gross Dividend Gross interest Last day to Declared Period (thebe) (thebe) register Payable RDCP 23-Mar-20 Final 0.072 2.065 14-Oct-20 28-Oct-20 NAP 27-Jul-20 Final 13.48 28-Aug-20 09-Sep-20 Sefalana 27-Jul-20 Final 27.50 14-Aug-20 26-Aug-20 PrimeTime 31-Jul-20 Final 0.21 18-Aug-20 28-Aug-20 PrimeTime 31-Jul-20 Interim 6.32 18-Aug-20 28-Aug-20 NewFunds 13-Aug-20 Monthly ZAR 18.4970 21-Aug-20 24-Aug-20 4 RATINGS Company 14-Aug-20 21-Aug-20 Volumes Value % change YTD % change Mkt Cap (BWP Mn) Mkt Cap (USD Mn) DOMESTIC BOARD ABC 2.00 2.00 - - 0.00% -0.99% 1,450.00 124.70 ABSA 5.45 5.45 920 5,014 0.00% -0.91% 4,644.28 399.41 BIHL 17.50 17.50 12,048 210,840 0.00% 0.00% 4,941.49 424.97 BTCL 0.84 0.83 25,978 21,565 -1.19% -12.63% 871.50 74.95 Chobe 9.50 9.50 8,798 83,581 0.00% -14.41% 849.68 73.07 Choppies 0.60 0.60 77,094 46,256 0.00% -13.04% 782.18 67.27 Cresta 1.35 1.35 500 675 0.00% 0.75% 249.26 21.44 Engen 10.37 10.37 9,869 102,342 0.00% 0.00% 1,656.32 142.44 FNBB 2.35 2.35 4,500 10,575 0.00% -17.54% 5,977.70 514.08 FPC 2.40 2.40 - - 0.00% -2.44% 1,023.67 88.04 G4S 3.40 3.40 400 1,360 0.00% -2.86% 272.00 23.39 Letlole 2.29 2.29 - - 0.00% 1.78% 641.20 55.14 Letshego 0.64 0.64 - - 0.00% -9.86% 1,372.19 118.01 Minergy 0.85 0.85 - - 0.00% -22.73% 399.48 34.36 NAP 3.23 3.23 - - 0.00% -0.31% 1,952.20 167.89 Olympia 0.16 0.16 - - 0.00% 0.00% 4.58 0.39 PrimeTime 2.92 2.92 - - 0.00% -0.34% 714.38 61.44 RDCP 2.23 2.23 - - 0.00% -0.89% 788.19 67.78 Sechaba 21.60 21.55 187 4,030 -0.23% -2.27% 2,383.79 205.01 SeedCo 2.62 2.62 - - 0.00% -12.67% 997.74 85.81 Sefalana 9.30 9.29 99,749 927,621 -0.11% 3.57% 2,329.25 200.32 StanChart 1.38 1.39 1,943 2,701 0.72% -16.77% 414.71 35.66 Turnstar 2.79 2.79 - - 0.00% -0.71% 1,596.31