INVESTMENT NEWSLETTER AUGUST

UGANDA

?Stocks to watch:

MTN??–?BUY TP UGX 240.00??

MTN Uganda is releasing its half-year results on the 5th of August 2022. Based on the huge capital expenditure that increased by 280% to UGX 114.1 billion in the first quarter of 2022, we should expect stellar results. MTN Uganda is the market leader in subscriptions, voice and fintech while catching up to the competition in data services. The telco’s opportunity lies in diversifying fintech usage to the higher margin advanced services and improving 4G data usage metrics which will not only drive 12% y/y revenue growth but also a boost in EBITDA margins from 51% currently to 54% in FY24e. Find our research report here:?MTNU Research report

UMEME?–?UMEME Uganda is currently at a market price of UGX 190.0000. This provides a firm buying support level for the long-term investor. Having government consider the buy-out clause that is priced at 3.7X the current market price (UGX 190), provides you with leverage and a massive capital gain. As per our DCF model, UMEME Uganda is trading below our fair value (UGX 1,243) by 20%

KENYA

Stocks to watch:

EQTY – TP KES 61.8 - BUY

• NIM expansion through BCDC
• Favourable loan book characteristics
• Leader in digital banking

Fixed Deposit, Treasury Bills and Bonds

?Trade Recommendations :?

Local Bond:?UGANDA??–?UGX?

13?Year Bond

Maturity: 08/NOV/2035???Coupon rate:?16.20%

18?Year Bond

Maturity: 01/NOV/2040??Coupon rate: 17.50%

Offshore Bond: KENYA KENINT – USD?

Maturity: 24/JUNE/2024?Coupon rate: 6.875%

COMMODITIES MARKET

Gold falls as US Dollar, yields rise on hawkish fed comments

Gold slipped as the dollar and U.S. Treasury yields advanced after hawkish comments from Federal Reserve officials hinted at continuing aggressive interest rate hikes in the near term.?

A trio of Fed officials from across the policy spectrum signalled they and their colleagues remain "completely united" on getting U.S. interest rates up to a level that will more significantly curb economic activity and put a dent in the highest inflation since the 1980s

https://economictimes.indiatimes.com/markets/commodities/news/gold-falls-as-u-s-dollar-yields-rise-on-hawkish-fed-comments/articleshow/93310378.cms

Inflation:

With all this talk about inflation have you ever stopped to consider if you really know what inflation is? Here is a summary read and solutions.?

Inflation is an economic term that describes a general increase in prices and a fall in the purchasing power of money.

• A little inflation is normal and even good for a healthy economy. Inflation becomes a problem when it grows too quickly
• Money losing value at a rapid rate can lead an entire economy to spiral out of control. All governments and central banks try and control inflation with regulation and monetary policy.?

Inflation is expressed as a percentage. (In 1950 you could buy a cup of coffee for Ugx 500 while today an average cup of brew costs Ugx 9,000)

Inflation??= Rise in costs of goods and services.?

Inflation Rate?= % increase or decrease in prices over a period of time.

What causes inflation?

• “Inflation is always and everywhere a monetary phenomenon, resulting from and accompanied by a rise in the quantity of money relative to output” – Milton Friedman.
• In simple terms, inflation occurs when there’s an increase in production costs OR when demand for products and services increases faster than supply. Inflation can come about in many different ways. All these causes are most commonly classified into three types of Inflation.?

?3 Main types of Inflation( By Causes)

• Cost-Push Inflation – Prices increase when the cost of production increases.
• Demand-Pull Inflation – Prices increase when demand increases faster than production.
• Built-In Inflation(Wage-Price Spiral)?– Workers want higher wages to keep up with the cost of living

?What to do during times of high inflation?

• Don’t keep an excess of cash on hand.
• Explore the bond market and compound.
• Weigh real estate and commodities.
• Think about value stocks in the consumer staples arena.
• Look for tax efficiencies.
• Pay off existing variable debt.
• Maintain an emergency fund.
• Invest smartly in your employer-sponsored retirement plan.

At Stanbic we can help you solution for all the items above, We have a?Money Markets desk, Real estate desk, Equities desk, Insurance desk, Advisory and many more. Reach out to the numbers at the end of the Newsletter.?

UGANDA

Uganda’s Inflation continues to soar higher

Inflation rose from 6.3% to 6.8% and last week to 7.9% for the month of July. This is largely influenced by external cost pressures stemming from higher global food and energy prices, and persisting global production and distribution challenges. In addition to the rising domestic food prices due to dry weather across the country. Annual food crop inflation has sharply risen from 0.7% in February 2022 to 14.5% in June 2022. The rising food and energy prices, intensified by a weaker Uganda shilling, have worsened the inflation outlook for the remaining part of 2022 and into 2023. The headline and core inflation are now forecast to average 7.4% and 6.3%, respectively, in 2022.

Market Real Estate reports issued?

https://www.stanbic.co.ug/static_file/Uganda%20Holdings/Downloadable%20files/REAL%20ESTATE%20BASELINE%20REPORT.pdf

https://content.knightfrank.com/research/2388/documents/en/h2-2021-kampala-market-update-h2-2021-8746.pdf

Tanzania poised to host East African central bank

As East African countries prepare to have a single currency by the year 2024, the competition to host the regional monetary institute and the Central Bank of East Africa is in full gear.

https://www.newvision.co.ug/category/business/tanzania-poised-to-host-east-african-central-139758

Bancassurance to supplement insurance brokers - IRA?

The advancement of Bancassurance and its adoption by commercial banks in Uganda will supplement the role that has for years been played by insurance brokers and consequently lead to an increase in insurance penetration.?

https://www.newvision.co.ug/category/news/bancassurance-to-supplement-insurance-brokers-136453

BAT Uganda to pay shareholders sh10.2b in dividends

According to BAT Uganda Managing Director, Mathu Kiunjuri, despite the adverse impact of an exceptionally difficult environment in 2021, they were able to post a profit.?

https://www.newvision.co.ug/category/business/bat-uganda-to-pay-shareholders-sh102b-in-divi-136483

REGIONAL

Kenyan Stocks Face Election Risk After Record 15% July Rally

Kenyan stocks have just posted their strongest-ever July performance, driven by a rally in the main index’s biggest company. Downside risks now loom large for the Nairobi market, however, as investors brace for next week’s general election

https://www.bloomberg.com/news/articles/2022-08-01/kenyan-stocks-face-election-risk-after-record-15-july-rally

Treasury seeks Sh50bn from three reopened bonds

The National Treasury is in the market seeking Sh50 billion from the sale of three reopened bonds this month. The bonds on auction are a three-year, 10-year bond and a 20-year paper, which were first auctioned earlier on different dates. The three-year bond was first sold in April when its coupon (interest) rate was recorded at 11.76%.

https://www.businessdailyafrica.com/bd/markets/capital-markets/treasury-seeks-sh50bn-from-three-reopened-bonds-3899520

GLOBAL

Surging Stock Market Is Heading Into Riskiest Months of the Year.

Before investors get too excited about the July surge in stocks, here’s something to keep in mind: August and September are historically the two worst months for the S&P 500 Index. Despite a 12.6% advance from a low of 3,666.77 on June 16, the S&P 500 could be facing an ugly stretching just after it had its best month since November 2020.?

https://www.bloomberg.com/news/articles/2022-08-01/surging-stock-market-is-heading-into-riskiest-months-of-the-year#xj4y7vzkg

First grain shipment since Russian invasion leaves Ukraine port

The first shipment of Ukrainian grain since the Russian invasion in February left the port of Odesa on Monday (1 August) under a landmark deal to lift Moscow’s naval blockade in the Black Sea. The five-month halt of deliveries from Ukraine — one of the world’s biggest grain exporters — has contributed to soaring food prices, hitting the world’s poorest nations especially hard

https://www.euractiv.com/section/global-europe/news/first-grain-shipment-since-russian-invasion-leaves-ukraine-port/

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Disclaimer:?The views expressed in this publication are those of the writers where particulars are not warranted. This publication is meant for general information only and is not a warranty, representation, advice, or?solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor.?