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Arisaig Africa Diary
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January 2010
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The Africa Fund
made a quiet start to 2010, dropping 0.3% in January. It was
not an easy month for equities generally. Africa was spared
the worst thanks in part to low volumes on its main
exchanges and limited foreign involvement.
The performance of our stocks was sharply divergent. Some of
our best performers of last year rolled over – Cashbuild
fell by 5.1%, Spar by 2.6%, and Brasseries du
Maroc by 6.7%. Other, smaller positions went like
rockets – Tunisie Leasing rose by 14.1%, Unilever
Nigeria by 24.1%. A couple of heavyweight positions did
well too; East African Breweries rose 3.4% and
Shoprite increased 4.5%.
No Turkey Puns Here
Torquil, Suren, and Jonathan kicked off the year with a trip
to Istanbul. Turkey, like other mainstream developing
economies, was hit hard last year. Gross Domestic Product
fell 6%.
Even as it did this, however, the Istanbul stock exchange
was discounting a very robust recovery, advancing 101% (in
USD) for the year. This was in spite of the Lira’s poor
performance versus the Dollar relative to other emerging
markets currencies, weighed down by Turkey’s perpetual
budget and trade deficits.
We still like the market. Turkey’s corporate culture is
excellent – conservative, thoughtful, and alert to risks, as
befits inhabitants of a high inflation, high volatility
economy. It also enjoys relative excellence in education,
democracy, quality of government, etc.
Shopping in the Free World
Our 5.5% holding BIM Birlesik enjoyed a dream 2009.
Its share price went up 122% and earnings advanced at a
commensurate pace. We are forecasting 68% EPS growth for the
full year. Its back-to-basics style suits the mood of the
moment perfectly, and unsurprisingly it claimed the title of
Turkey’s largest food and beverage retailer during the year.
We are not worried that it will run out of “gas” when
economic good times return. Its format is very well suited
to the needs of rural migrants in freshly urbanising areas.
It also has a lot of relevance to other countries in the
region.
Its metrics reflect the skill with which management handle
capital and growth; it generates a 51% return on capital
whilst ungeared and paying out 50% of net earnings as
dividends, a very impressive number for a “growth stock”.
Growth is clearly what investors expect from BIM, given that
its forecast 2010 earnings are capitalised at a 24x forward
PER.
Results
Three of our holdings reported results in January, all of
them positive. Cashbuild announced sales up 9% in the
half-year to December. Like-for-like sales were up 3%, a
creditable performance in a testing year.
Tunisie Leasing reported full-year earnings for 2009
up 20% year-on-year. Its 30% stake in Maghreb Leasing of
Algeria is a secular driver to earnings and has liberated
TLS from the vagaries of the Tunisian credit cycle.
Blom Bank of Lebanon also reported preliminary
results for the full year of 2009. Net earnings increased
17% YOY. Once again, we were impressed by the bank’s ability
to control costs and risks, as well as its success in
growing its liability base. Total deposits increased 19% to
US$ 17.8bn. They remain the engine of Blom’s profitability. |
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The Arisaig Africa Fund is a
daily valued, open-ended, Mauritius domiciled Investment
Company, listed on the Irish Stock Exchange. The Fund’s NAV
is shown in the Financial Times and on Bloomberg under
ARIAFRI MP. This Diary is intended to be for the information
of holders of the Arisaig Africa Fund. It is not intended to
constitute investment advice and should not be relied upon
as such. Investors should be aware that the Fund is invested
in the securities of smaller companies, whose share prices
can be more volatile and trading liquidity much lower than
those of larger companies. |
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ARISAIG PARTNERS
Al Fattan Marine Towers II, First Floor, Office 115, Dubai
Marina, Dubai
United Arab Emirates
Tel (971) 4399 4969 / Fax (971) 4 399 4970 |
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