Alpha Capital Monthly Research Newsletter - September 2023

Dear Mwekezaji

Headline inflation for the year ending September 2023 slightly dropped by a marginal 0.84bps to 3.33%. Core inflation maintained a marginal uptick similar to the last three months, mostly lifted by the Goods Index which slightly slowed down in August, and picked up by 2.9bps in September2023.

Energy, Fuel & Utilities Index has been moving by less than 1% since June 2023, getting in and out of deflation. The two major indices of food related inflation have both slowed down in September as food prices are stabilizing since the beginning of the year.

The month of September saw a substantial surge of market activities on the Dar es Salaam Stock Exchange originating from a number of prearranged block transactions, particularly on the TBL counter. The total equity turnover for the month of September went up 340% on a monthly basis, amounting to TZS 20.75 billion, compared to TZS 4.71 billion in August.

Tanzania Breweries Ltd (DSE: TBL) saw two major block transactions during the month. The initial block transaction was executed in the first week of the month, trading one million shares at a price of TZS 6,000/-. The second transaction was during the third week of the month, with the same of number of shares but at a price of TZS 6,500/-. Thus, the turnover for TBL amounted to TZS 12.5 billion during the month, making the counter the top mover for the month, with a 60% contribution to the total turnover.

CRDB Bank Plc (DSE: CRDB) was the second top mover following a few prearranged as well as market transactions. CRDB accounted for 19% of the total turnover during the month, while the turnover on the counter went up 34% on a monthly basis, to TZS 3.84 billion at the end of September. Other top movers were Tanzania Cigarette Company (DSE: TCC) and NMB Bank Plc (DSE: NMB) which collectively accounted for 15% of the total turnover.

Similar to the trend since last year, foreign participation was skewed on the selling side, with 55% of divestments originating from foreign investors. On the other hand, a mere 0.73% of investments during the month originated from foreign investors. As a result, the net foreign outflow during the month amounted to TZS 11.25 billion ($4.41 million), compared to TZS 466.6 million ($0.18 million) in August.

All the major indices closed the month in the green mostly a result of positive movement on the NMB counter. The Tanzania Share Index (TSI) gained 118.04 points during the month, to close at 4,280.33 points. The growth is equivalent to 2.84% monthly growth of the domestic market capitalization which closed the month at TZS 11.32 trillion. The All Share Index (DSEI) similarly went up by 7.4 points to 1,782.75 points. The DSEI uptick results from a 0.42% growth of the total market capitalization, which closed the month at TZS 14.87 trillion.

The growth of the indices was mostly influenced by the 19.2% growth of the NMB price during the month. NMB remained the top gainer for a second consecutive month as the price moved up from TZS 3,860/- in the end of August, to TZS 4,600/- in the end of September. The appreciation of NMB originates primarily from the half year performance where the six months net profit grew by 26% compared to a similar period last year.

During the end of September, NMB registered a medium note program with an approval to raise up to TZS 1 trillion in a period of ten years. In the first tranche dubbed NMB Jamii Bond, NMB plans to raise TZS 75 billion, with a green shoe option of TZS 25 billion. On the tranche, NMB already has two anchor investors, World Bank’s IFC, and British International Investment (BII). Collectively, the anchor investors can invest up to $45 million in the first tranche, which equates to approximately TZS 114.75 billion.

The bond pays an annual coupon of 9.5% which shall be paid on a quarterly basis, for the next three years, and pay back the principal amount on the last payment date. The minimum investment value is TZS 500,000/-, with integral multiples of TZS 10,000/-. The offer is open until 27th October 2023 for applicants interested in purchasing the bond.

On the same tranche, NMB plans to raise another $10 million, with a green shoe option of $5 million, denominated in the USD. The bond shall pay a floating rate which equates to 2.50% added to the six months USD term Secured Overnight Financing Rate (SOFR). SOFR is the broad measure of overnight borrowing cost in the repurchase agreement (repo) market, collateralized by U.S Treasury securities. Similarly, the USD bond’s tenor is three years and the minimum investment value is $1 million, with integral multiples of $100,000.

Other gainers during the month were TCCIA Investment Company Ltd (DSE: TICL), TOL Gases Ltd (DSE: TOL) and National Investment Company Ltd (DSE: NICO). TICL went up 10% as the price closed the month at TZS 165/-. The price of TICL is most likely uplifted by the rights issue announcement. TOL and NICO went up by 4.84% and 3.09% respectively. The price of TOL was influenced by the dividend of TZS 50/- which shall be paid on or by 20th October 2023 while the counter began trading ex-dividend on 16th September 2023. The price of NICOL was influenced by the anticipation of the dividend, as investors waited for the AGM on 7th October 2023 for approval. Eventually NICOL announced a dividend of TZS 43/- per share.

Six counters saw their prices fall during the month, but the weights were offset by the weight of NMB leading to a net gain of the TSI. Leading losers were Maendeleo Bank Plc (DSE: MBP) and Mkombozi Commercial Bank Plc (DSE: MKCB). The two banks dropped by 9.52% and 8.70% respectively.

Other losers included Tanga Cement Plc (DSE: TCCL) which dropped by 4.44% despite the announcement released by the company that the FCT hurdles have been lifted, and the FCC unconditional approval prevails. CRDB also fell by 4.35% as the counter still suffers from the mere 3% half year profit growth, down from 96% growth in the previous year. The trailing dividend yield of CRDB has risen to 10.2%, up from 8.2% when the counter approached the ex-dividend in May 2023.

DCB Commercial Bank Plc (DSE: DCB) and Dar es Salaam Stock Exchange (DSE: DSE) were other losers and fell by 3.45% and 3.30% respectively. The price of DCB has been volatile since the beginning of the year, with an initial appreciation following impressive annual results, but began falling from investors’ realization of ineligibility of DCB to pay dividends for the year 2022. The movement of DSE price is likely out of normal market volatility.

Stabilizing inflation and resilience in the private sector credit growth are setting a stage for corporate earnings growth for the year 2023 which shall maintain the bullish trend in the coming months. Private sector credit growth saw the first monthly uptick since March, with a marginal 20bps growth to 21% in August 2023. During this period, we still expect a sustained net foreign outflow due to geopolitical uncertainty and U.S tightening policy.

Head, Research & Financial Analytics

Alpha Capital