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MICROFINANCE

AFRICAN BANK INVESTMENTS LIMITED OPERATIONAL REVIEW It’s also a game of numbers. African Bank opened a total of 32 new branches during H1 2011. African Bank kiosks were also rolled out within EHL stores and contributed ZAR 188.0m of sales while the new carve-outs (full branches) in EHL stores contributed ZAR 140.0m in sales. African bank is planning a further rollout of kiosks and carve outs to all appropriate EHL stores, which is expected to substantially increase African Bank’s footprint at a low incremental cost.

Analysis of Dividend Payout 160

140

120

100

80

60

40

20

H1 2007

H1 2008

H1 2009

EPS (cents)

H1 2010

H1 2011

DPS (cents)

Source: Joab’s Technologies and Research. Capital Equity Partners

New product development and VAS (Value Added Services) to drive customer demand. The banking business unit launched a variety of new products, including a Payment Break product, an Interest Buster product, a loan-by-phone capability and a consolidation loan product during the period. An INSECONDS facility which provides an instant quote for clients by SMS or web was also launched. The ATM pilot has now been concluded and operationally embedded and more ATMs will be rolled out during FY 2011. As a result of these product development initiatives, the group managed to add 347,000 new customers In H1 2011, representing an increase of 16% on the 300,000 new customers added in H1 2010. The rollout of the African Bank credit card within the EHL stores is expected to increase its target market substantially. A successful entrance into the international bond market. On 10 June 2011, African Bank Limited successfully priced its debut USD 300.0m, 5-year bond (EMTN). The bond is listed on the London Stock Exchange and will be maturing in June 2016. Despite the volatility on international capital markets on the back of head line risks around peripheral Europe , management note that there continues to be net inflows into Emerging Market dedicated bond funds and therefore appetite for South African issuers remains strong. During the capital raising process, the order book reached a comfortable level of just under USD 600m, allowing African Bank to price the desired amount of USD 300.0m in line with the official price guidance of MS+425bp (yield of 6.048%).

Funding (Distribution by Gegraphy) Other, 9% Europe, 9%

UK, 49%

Switzerland , 13%

Asia, 20% Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

Funding (Distribution by Investor Type) Others, 2% Banks, 11%

Private Banks, 24% Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

Joab’s Technologies and Research.

Asset Managers,

COMPANY STRATEGY & OUTLOOK Refining its strategic vision. ABIL’s strategic focus has been the acceleration of value creation from EHL. This involves the maximization of credit volumes from the EHL network. Through products such as EziCash and EziLoan and access offered by African Bank kiosks and carve-out branches within EHL stores, the group has an opportunity to substantially increase the size credit business. ABIL's financial objective is to more than double the size of its business in the next four years and to deliver a ROE of greater than 30%. Building EHL into a premier cash retailer. From a strategic point of view, the retail business unit has come to the end a restructuring and re-engineering phase and can now, focus on its core business of retailing. Management is looking to improve the sales performance with particular focus on Wetherlys, Geen & Richards and Furniture City. Store development in respect of new stores, store refurbishments, kiosks and carve-outs and continuing to take costs out of the business. We see significant opportunities in the target market. In 2008, the annual disposable income of the South African population was ZAR 1,357bn. Debt servicing costs made up ZAR 258.0bn, of which about ZAR 15.0bn was collected by ABIL, representing a share of wallet of c6.0%. The low ratio of debt servicing payments to total disposable income is an indication of the extent that the lower LSMs are underserved. Given the group’s low cost strategy and ability to manage risk, there is an opportunity not only to grow its share of wallet but also increase the overall wallet size.

63%

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Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

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