ABC Holdings share value remains subdued

Harare Bureau
DESPITE reporting strong interims for a period ending 30 June and bright future prospects, ABC Holdings’ performance has not been reflected by the company’s shares, market analysts have said. Analysts who spoke to this paper believe the financial group, with operations in Botswana, where it is primary listed, Tanzania, Zambia, Mozambique and Zimbabwe has demonstrated a sustainable level of profitability but its share value remains subdued.

The group is trading at 490 thebe on the Botswana Stock Exchange or price to book value ratio of 0,9 and US55c on the Zimbabwe Stock Exchange (price to net asset value ratio 0,5.)

But analysts have given the company an out performing rating, setting a price of at least US130c per share. Shares on the local register peaked at US95c in December 2011.

“Ratings are undemanding at price to book value (ratio) of 0,5 against sub-Saharan Africa (excluding South Africa) peer average of 1,6,” said Imara Securities in an advisory note to shareholders yesterday. The company was yesterday due to hold an analysts briefing in the afternoon.

A Harare-based stockbroker said the financial group has “generated a lot of positives” since 2009, and has achieved an average 17,4 percent in attributable profit.
“If the bank is generating this kind of results and paying dividends, then it has to be certainly one of the blue chips,” said the stockbroker who spoke on condition of anonymity.

“Even under the difficult conditions, the bank has managed to raise $50 million through a rights offer supported by its principal shareholder (African Development Corporation) and $13 million from International Finance Corporation.”

During the first half, ABCH reported 157 percent growth in attributable earnings to BWP 143 million pula ($17,2 million) compared with the same period last year.

The performance was largely driven by solid growth in both funded and non-funded income on significant growth in advances coupled with higher transactional volumes.

A reduction in the effective tax rate to 24 percent from 42 percent also boosted net income growth.

Total income was up 47 percent from BWP 476 million to BWP701 million. Operating income was up 40 percent from BWP379 million to BWP529 million due to branch expansion. Cost income ratio improved to 62 percent from 75 percent.

Net interest income grew 74 percent on growth in consumer lending mainly in Botswana and Zimbabwe.
Non funded income was up 31 percent driven by fees and commission income and rentals collections.

An interim dividend of 14 thebe (approximately $1,69c) a share was declared, implying an annualised dividend yield of 4,8 percent. The balance sheet rose 2,5 percent from year end to BWP13,4 billion ($1,6 billion). Deposits and advances grew 2,5 percent and 7,8 percent, respectively.

The 351 percent increase in impairments was attributed to BWP129 million charge in respect of three clients in Zimbabwe, Tanzania and Mozambique. The group opened an additional nine branches.