Category Archives: Team Commentary

Trading Statement

Bidvest Namibia released a trading statement today in which management has guided EPS and HEPS to be down by between 9% and 11%. The company expects Basic EPS of 115.3 to 117.9c (midpoint of approximately 116.6), while HEPS is expected to be between 115.2 and 117.8 (midpoint of 116.5). This in our view is a fairly big miss considering that we forecasted HEPS growth of 9.3% as opposed to the decline.

 The midpoint HEPS of 116.6cps implies 2^nd half HEPS of 60.6cps, which at first sight seems good considering the 9.3% increase on the previous half. However compared to the 75.3cps of the 2^nd half of FY13, it is actually 19.5% lower. There exists a strong seasonal factor in the company’s earnings with fishing revenue traditionally accelerating in the 2^nd half. We suspect the miss in earnings are likely top line driven, with either weaker prices or slower catches attributing to the negative surprise.

Should the company wish to maintain the previous years total dividend of 69cps, the payout rate will need to increase to 59.2%. Previous talks with management showed a reluctance to move significantly above the 50% payout level, thus there exists a high probability that we might see a dividend cut.

Target price and recommendation

Results are expected to be released on SENS on 28 August 2014 and in the press on 29August 2014; as such left our forecasts and target price unchanged and retain our BUY recommendation for the meantime.

The Bank of Namibia has hiked rates by 25BP (0.25%) at their August MPC meeting. The key concerns noted by the Bank were the strong growth in PSCE to households, utilised to finance “unproductive spending on luxury goods”, most of which are imported, and the pressure that these imports are putting on the country’s reserve position.

We view this move as positive from the perspective of the Namibian macro-economy (albeit bad for the individual consumer), and have been calling for higher rates for some time – In our January outlook, we noted – “In light of expectations of a weakening external position for Namibia, we believe that 2014 may see BON taking the lead by making interest rate moves before South Africa. While this would be a first for the Bank, given our growth and inflation projections, as well as expectations of strong expansion in private sector credit extension, a weak balance of payments, plummeting reserves and high household indebtedness, we believe that economic conditions in Namibia are likely to be substantially different from those in South Africa, and that should a hike appear imminent in South Africa, that BON may act first by tightening rates” This view now appears to be playing out.

The full MPC statement can be seen below:

Download (PDF, Unknown)

At the August meeting of the MPC, the Bank of Namibia hiked rates by a further 25BP (following the 25 point hike in June). While not completely expected, this move is positive for the broad macro-conditions in Namibia.

More to follow…….