IIA Vol4 Iss11 Sonatel

8/3/2019 IIA Vol4 Iss11 Sonatel

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INVESTING IN AFRICA With Ryan Shen-Hoover www.investinginafrica.net Vol. 4, Iss. 11, November 2009

This Month’s Feature:Sonatel

Dear Reader,

When I launched this newsletter back in early 2006, I intended to illustrate two things:

1) that a diverse portfolio of African stocks would outperform major market bench-

marks and 2) how to put such a portfolio together.

Looking back, I think we achieved the first objective. While it was far from a scien-

tific study, and I made numerous boneheaded calls along the way (Simeka, Italtile, etc),

our paper portfolio trounced the S&P500 and the MSCI Emerging Markets Index. Many

picks failed to outperform the benchmarks, but the ones that did, did so in a big way.a big way.

Contents

Sonatel 2RealMoneyPort. 4Checkup:FNBNam. 5CompanyUpdates 7PortfolioPerformance 8

IIA Portfolio Performance (March 2006 – November 2009)

Average IIA Return Average S&P Return Average EEM Return

29.6% -10.4% 7.0%Picks That Outperformed the S&P500 67%Picks That Outperformed the EEM 57%

Even the real-money portfolio, which failed to fully recreate the paper portfolio due to

my inability to pump new capital into it every month, managed to eke out a win over the

EEM.

If I were starting over, I would also benchmark performance against the Market Vec-

tors Africa Index (AFK), which launched last year. AFK is an exchange-traded fund

that’s heavily weighted toward South Africa, Egypt, Morocco, and mining companies,

but also includes a number of sub-Saharan banks.

Regrettably, I made much less headway toward my second goal – proving that such a

portfolio was feasible. In fact, I may have actually been more successful in illustrating

how difficult it would be to set up and manage.

Opening up one or two foreign brokerage accounts is one thing, but a dozen is quite

another. The pages of paperwork, repeated trips to the notary public, international mail-

ings, wire transfers, frustration with illiquid stocks, frustration with unresponsive bro-

kers, and spotty reporting from both companies and brokerage houses would sap the

enthusiasm of all but the most driven bargain hunter.

So, in the absence of a single point of access, active investing in African stock markets

will remain beyond most retail investors’ reach. I’m encouraged, however, by the

launch of the AFK and the Johannesburg Stock Exchange’s efforts to attract cross-

listings from some of the continent’s largest firms. The pace may be slow, but it’s be-coming easier to put your money to work in Africa with each passing month.

Thank you for exploring this investment frontier with me over the past few years. I

hope you enjoyed the process of unearthing the continent’s stock market gems as much

as I did.

Happy Investing!

R an S hen-H oover

http://www.investinginafrica.net/

http://www.investinginafrica.net/



SONATEL Recent Share Price

XOF120,000 (USD265.36)

COMPANY PROFILE Bloomberg Ticker:SNTS:BCMarket Cap (b):US$2.64

P/E Ratio:6.9Dividend Yield:9.8%Return on Equity:43.1%Return on Assets:22.8%Avg Daily Volume: N/A

Major Shareholders: FranceTelecom 42%Gov’tofSenegal 27%SonatelEmployees 5%-AgenerousWestAfricantelcothatchurnsoutwadsofcash.

Cumulative Performance of Sonatel

vs. MSCI Emerging Markets Index(in constant US$ terms)

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09

Sonatel EEM

Fewer African industries get more

press than its wireless one does. The

continent-wide boom in mobile phone

usage set off by rising incomes and in-

novative marketing to bottom-of-the-

pyramid consumers is a great story.

Great stories, however, do not always

make for great investments. Explosive

growth has long been priced into many

of the continent’s biggest mobile opera-

tors (I’m looking at you Safaricom,MTN, and Zain), and intense competi-

tion means many market participants are

on a race to the bottom in terms of prof-

itability.

This month, however, I believe we’ve

found one of the most undervalued

businesses in the sector. It’s got room

for growth and a huge head start on its

existing competition.

The Business

Sonatel is a telecommunications group

that operates in four French-speaking

West African countries. In Senegal, it is

the sole landline telephone company and

controls two-thirds of the cellular mar-

ket. In Mali, it is the leading wireless

provider with an 82% market share. It

also operates rapidly growing wirelessbusinesses in Guinea and Guinea Bissau

where it already boasts 25% and 19%

market shares respectively after setting

up shop in 2007.

Senegal’s wireless market is Sonatel’s

bread and butter, accounting for ap-

proximately 56% of group revenue. At

present it serves more than four million

customers - 33% more than it did just 12

months ago.

The company has grown its subscriber

base so rapidly by heavily marketingprepaid simcards and by expanding its

coverage area deep into the sparsely

populated countryside. A network of

over 100 solar-powered cellular towers

now allows the company to boast that it

can service customers in 95% of all

Senegalese villages with 500 or more

inhabitants.

The Malian wireless operation is the

next most significant contributor to sales,

accounting for 31%. Its customer base is

3.1 million strong and grew at a 35%pace since June of 2008.

The remaining share of sales comes

from fixed-line telephony in Senegal,

internet data services, and wireless in

Guinea and Guinea Bissau.

There’s lots of room for continued sub-

scriber growth in each country of opera-

tion. The aggregate cellular penetration

rate in Sonatel’s markets is just 37%.

This compares to penetration rates of

47% in Kenya (where the much-hyped

Safaricom operates) and 32% in Zam-

bia.

Earlier this year, Sonatel signed a dis-

tribution agreement with Kirene, a large

Senegalese beverage company. Under

terms of the deal, Kirene will market

prepaid Sonatel simcards branded with

the Kirene logo. It appears to have beenan inspired move. In the first two

months of the partnership, Kirene has

signed up 100,000 new users – 20% of

total new subscriptions in Senegal.

Another intriguing development is the

2008 launch of Orange Money, a money

transfer service similar to Safaricom’s

M-Pesa in Kenya. Sonatel has partnered

with BICIS, a Senegalese bank, to roll

out the program. Sonatel receives a

small transaction fee each time an Or-

ange Money customer sends or with-draws funds.

As wireless penetration levels begin to

near 100%, internet and data products

must become bigger contributors to the

company’s top line. At the moment,

they account for a rapidly growing (but

small) three percent of group revenue.

Sonatel looks well placed to do this. It



was the first internet service provider in

West Africa and co-owns two undersea

fiber-optic cables plus a stake in another

that’s under development. The com-

pany’s interests in the cables are critical

because they give the company a pricing

advantage over non-owners.

France Telecom (FTE) made a bid forcontrol of the company in April. It al-

ready owns a big 42% and had hoped to

acquire an additional 10% from the

cash-strapped Senegalese government.

The deal met with stiff resistance from

unions and other Senegalese who

claimed the deal smacked of colonial-

ism. So, the transaction was scrapped,

but the government still wants to reduce

its holding. There’s been no word yet if

these shares will be offered on the mar-

ket or sold to a big investor.

The Numbers

It’s clear that Sonatel is skilled at get-

ting people to sign up for its service. It

added 900,000 customers in the past six

months! Unfortunately when your pri-

mary product is pre-paid wireless, grow-

ing subscriber rolls don’t mean a whole

lot unless those people are actually buy-

ing a lot of airtime. So, we as investors

will want to keep our eyes on ARPU

(average revenue per user) and the net

profit margin.

As of the end of June, Sonatel claimed

8.2 million customers across all of its

geographic locations and product offer-

ings. The ARPU during the previous 12

months came in at XOF79,311. That’s

only a 2.8% drop from the ARPU for

2008. That doesn’t look too bad, espe-

cially considering that the net profit

margin widened from 25.0% to 30.6%

for the same time period.

Considering the capital demands of

the telecom industry, Sonatel maintains

very low debt levels. The long-term debt

to equity ratio currently stands at 11.9%,

which is in line with Safaricom (9.3%)

and far better than Zain Zambia

(34.9%). Note, too, that the company’s

debt level is skewed to the high side,

because it secured a medium-term loan

shortly before the balance sheet date.

With most of its network now in place,

management can largely sit back and

watch it spin off cash. And spin it does.

Free cash flow over the past 12 months

has approached XOF170 billion. That

sum provides more than adequate cover-

age for dividend payments and debt fi-

nance.

The Risks

Sonatel’s primary revenue source, its

Senegalese operation, is under increased

pressure from competition. In the first

half of the year, a Sudanese company,

Sudatel, became the third entrant into the

nation’s wireless market. It has sub-

scribed 200,000 users to date. It’s other

competitor, Millicom, focuses on the

low-income segment of the population.

As the market becomes crowded, the

chances of a price war increase.

Sonatel is a divi-dend-lover’s dream.

It has upped itsgenerous payoutevery year since

2000.

Competition looks set to heat up in

Mali, too. Morocco’s Maroc Telecom

recently took a controlling stake in the

previously government-run Sotelma.

Political risk is high in Guinea and

Guinea Bissau. Violence in both coun-

tries has claimed many lives in recent

months. It’s callous to say, but these

events are unlikely to be detectable in

Sonatel’s results. When election clashes

paralyzed Kenya in early 2008, mobile

traffic continued unabated.

With most other big wireless players

avoiding Francophone Africa, manage-

ment is likely on the lookout for addi-

tional expansion opportunities. Burkina

Faso would appear to be a good candi-

date given its proximity to Sonatel’s

existing operations. In the main, how-

ever, the company’s regional expansion

will probably be constrained by its larg-

est shareholder, FTE. The French multi-

national already owns telecom assets in

most French-speaking countries, selling

mobile service under its “Orange”

brand. Therefore, it’s unlikely to support

a Sonatel expansion drive that would

cannibalize these operations.

While good subscriber growth can

probably be sustained for the next few

years, geographic expansion will even-

tually become paramount. If the com-

pany can’t find ways to add subscribers,

they will need to figure out a way to

forestall deterioration in ARPU. That’s

easier said than done. Just ask AT&T

and Verizon.

Valuation

The stock trades at just under 7x trail-ing earnings and 2.8x book value. I be-

lieve buyers at this price can expect an-

nualized share appreciation of at least

10% over the next five years. That

doesn’t likely doesn’t sound terribly

enticing, but when you tack on a big

dividend, I think you’ll agree that So-

natel shares look mighty attractive these

days.

Sonatel is a dividend-lover’s dream. It

has upped its generous payout every

year since 2000, and typically sends70% of earnings back to shareholders.

Presently, the stock offers a 9.8% divi-

dend yield.

Please note that Senegal levies a 10%

withholding tax on dividends. The fig-

ures I’ve presented here take this into

account.

Sonatel trades on the Bourse Region-

ale des Valeurs Immobilieres (BRVM).

Therefore, to purchase shares of the

company, investors must open a broker-

age account in Cote d’Ivoire.

Conclusion

With its steady, generous dividend and

healthy cash flow, Sonatel is a classic

buy and hold stock. If you want expo-

sure to the African wireless story, this is

the stock for you.

Ryan does not own shares of Sonatel.



SONATEL Key Financials (XOF 000 000s)

Income Statement

Data Unavai lab le

FY 2006 FY 2007 FY 2008 1H FY2009

409,299 504,668 546,652 279,588Total Revenue

281,847 322,494 343,592 197,831Gross Profit

185,460 203,805 194,104 119,409Operating Income

130,628 140,967 136,578 89,307Net Income

13,063 14,097 13,658 8,931Earnings per Share (XOF)

31.9%Net Profit Margin 27.9% 25.0% 31.9%

Balance Sheet

Cash and Equivalents 113,732 114,807

FY 2006 FY 2007 FY 2008 1H FY2009

114,099 137,916Property, Plant, & Equip 333,088 399,673 432,169 423,828

Intangible Assets 42,633 60,285 51,714 46,348Total Assets 655,308 743,175 831,840 816,581Long-term Liabilities 29,020 23,174 12,565 50,599Shareholders Equity 386,714 438,937 465,422 425,447

Cash Flow Statement

Net Cash from Operations - -

FY 2006 FY 2007 FY 2008 1H FY2009

- -Capital Expenditure - - - -

Ke Stati st ics

Dividends per Share 7,947 9,900

FY 2006 FY 2007 FY 2008 1H FY2009

11,700 -Return on Equity 36.7% 34.1% 30.2% 43.1%Return on Assets 21.4% 20.2% 17.3% 22.8%

REAL MONEY PORTFOLIO Trade Date Company Gross Return ($ adjusted) MSCI EEM Rtn

July 18, 2009 Protech Khuthele 33.6% 11.8%

January 22, 2009 Dar es Salaam Community Bank -3.6% 63.2%

December 23, 2008 Zain Zambia 89.3% 55.3%

November 24, 2008 State Bank of Mauritius 54.9% 80.5%

September 1, 2008 Gamma Civic -22.5% -41.7%June 3, 2008 Invicta Holdings -21.6% -35.7%

April 15, 2008 Botswana Insurance -44.9% -19.9%

April 10, 2008 MPICO -38.0% -20.5

March 27, 2008 Truworths 55.4% -20.0%

January 29, 2008 CAL Bank 12.9% -43.1%

November 9, 2007 Simeka Business Group -73.5% -27.1%

October 10, 2007 Imara Holdings -24.2% -28.7%

September 26, 2007 Ghana Oil -40.5% -24.0%

August 14, 2007 Ghana Comm. Bank -29.7% -10.2%

June 27, 2007 Onelogix -61.9% -14.1%

May 16, 2007 Fan Milk 56.4% -11.1%

Total Average Return -4.1% -5.3%



CHECKUP: FNB NAMIBIA Recent Share Price

NAD11.70 (US$1.45)

COMPANY PROFILE

Bloomberg Ticker:FNK:NWMarket Cap (m):US$291.2P/E Ratio:8.6Dividend Yield: 4.8%Return on Equity:21.6%Return on Assets: 2.7%

Major Shareholders:FirstRandBankHoldings 59.8%Gov’tPensionFund 14.5%StandardBankNoms 10.2% -Slow,butsteady,headlineearningsgrowthfromNamibia’sleadingbank.

Namibia’s largest bank, FNB Na-

mibia, has been a steady performer since

we added it to our paper portfolio in

March 2007. But the financial crisis hit

Namibia’s mining-based economy hard,

and it is not expected to fully recover

until the second half of 2010.

Does FNB Namibia offer enough up-

side for us to hold its shares for theduration of the slowdown?

The Business

FNB’s earnings held up relatively well

given the tough macroeconomic envi-

ronment during its 2009 fiscal year. Di-

luted headline earnings per share in-

creased 8.8% on net interest income

growth of 7.4%. Non-interest income

increased by a similar amount.

These earnings would have been much

better were it not for big losses in itsinsurance operation’s investment portfo-

lio. The revaluation of its investment

holdings resulted in a loss of NAD94

million, a figure equivalent to 17% of

pre-tax income.

On the underwriting side, the insur-

ance business performed admirably. Net

premium income increased by 15.6%.

Life insurance accounted for approxi-

mately three quarters of the division’s

earnings. But property insurance premi-

ums grew rapidly – by 56% to be pre-

cise.

Operating expenses increased by

12.4%. The heavier spending was driven

by costs related to the purchase of two

mainframe computers in order to satisfy

a government requirement that all bank IT infrastructure be localized. FNB had

previously used mainframes based in

neighboring South Africa. Hopefully, the

investment will lead to improved effi-

ciency in coming periods. The overall

cost to income ratio increased from 46%

to 50%.

The bank grew its lending book by

nearly 15%, which was led by signifi-

cantly more lending to the building and

property development sector. The bal-

ance sheet further shows that FNB re-

duced its average cash holding by 29%.That’s a good sign. It indicates that the

bank is finding attractive places to invest

its assets.

Non-performing loans were up 9.3%

and presently account for 3.2% of the

total loan book. Apart from that, how-

ever, asset quality looks pretty good.

The bank grew its deposit base by 10%

Cumulative Performance of FNB Namibia vs. MSCI

Emerging Markets Index

(in constant US$ terms)

-80.00%

-40.00%

0.00%

40.00%

80.00%

Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09

FNBN EEM

during FY2009, which helped solidify

the capital adequacy ratio. The CAR

now stands at 20.3%. That’s more than

twice the level required by the Namibian

central bank.

Risks

Competition remains one of the big-

gest risks to profitability. Four banksfight over a population of just two mil-

lion citizens. FNB boasts a 30% share of

the market, but the Bank of Windhoek

has developed into a formidable rival.

It’s now nearly as large as FNB. Stan-

dard Bank and NedBank comprise the

remaining market participants.

A prolonged recession, of course,

would weigh heavily on FNB’s per-

formance. The IMF expects Namibia’s

economy to shrink by nearly a percent-

age point this year and then to expand

by 1.8% in 2010.

Finally, in an attempt to shorten the

recession, Namibia’s central bank is

pressuring banks to narrow their interest

margins. FNB is obviously resisting

such a move. A local broker (Simonis

Storm Securities) estimates that bank

profits would decrease by 25% if the

Bank of Namibia insisted on a 100 basis

point reduction to banks’ net interest



margins. the bank’s tangible book value per share

(NAD6.12) to the present value of the

residual income that I expect it to gener-

ate over the next ten years. I assume the

bank will produce returns on equity

ranging between 20% and 28% over the

next decade. I further assume that it willpay out 40% of earnings as dividends

each year.

per stub.

Valuation Management boosted FNB’s dividend

nearly 10% this year, giving the stock a

yield of 4.8%.FNB Namibia presently trades at an

earnings multiple of 8.6 and 1.9x book

value. That’s a slight discount to thevaluations commanded by its South Af-

rican peers.

Conclusion

FNB Namibia is a steady performer

that appears to have reached its intrinsic

value. It may be a nice hold for investors

with the desire for exposure to the Na-

mibian economy, but due to the con-

straints of its small market, it doesn’t

represent a compelling opportunity for

most bargain hunters.

But Namibia is not South Africa. The

South African economy is considerably

more diverse, and its market is much

more accessible. Thus, I don’t put find

valuations relative to FNB’s Johannes-

burg-listed peers all that helpful.

The bank is probably fairly valued for

investors looking for a 15-16% annual

return. That’s good stuff if you already

have a Namibian brokerage account. If

you don’t already have money in Na-

mibia, however, I’d let this one pass by.

There just doesn’t appear to be a whole

lot of value at this price. Consider me

interested if the stock falls to NAD10.60

Ryan does not own shares of FNB

Namibia.

Instead, I estimate FNB’s value via a

residual income model. My model adds

Key Financials (NAD 000s)

Income Statement

FY 2007 FY 2008 FY 2009 % change

543,272 656,502 704,805 7.4%Net Interest Income

378,793 403,127 433,434 7.5%Non Interest Income

120,231 159,842 184,761 15.6%Net Ins. Premium Income

447,368 581,431 561,979 -3.3%Operating Income

434,560 568,708 551,348 -3.1%Pre-tax Income

304,348 409,067 366,759 -10.3%Net Income

1.14 1.25 1.36 8.8%Headline EPS

Balance Sheet

Loans and Advances 8,726,203 9,141,531 10,486,434 14.7%Property and Equipment 164,457 188,455 236,406 25.4%Total Assets 10,673,772 13,401,506 14,100,045 5.2%Deposits 7,817,107 9,676,281 10,600,680 9.6%Shareholders’ Equity 1,240,438 1,627,533 1,762,320 8.3%

Cash Flow Statement

Net Cash from Operations 146,052 187,472 343,017 83.0%Capital Expenditure -22,072 76,170 -87,352 -

Ke Stati st ics

Dividends per Share 1.37 0.51 0.56 9.8%Payout Ratio 120.2% 40.8% 41.2% -Return on Equity (ttm) 23.9% 28.5% 21.6% -Return on Assets (ttm) 3.0% 3.4% 2.7% -

FY 2007 FY 2008 FY 2009 % change

FY 2007 FY 2008 FY 2009 % change

FY 2007 FY 2008 FY 2009 % change



COMPANY UPDATES Letshego, the Botswana-based micro-

lender, posted 65% earnings growth for

the first half of its 2010 fiscal year. A

big share issue early in the period di-

luted earnings per share. Thus, per shareearnings growth came in at a slower (but

still impressive) 42%.

What should be equally exciting for

Letshego shareholders is the growing

earnings contribution from the com-

pany’s non-Botswana subsidiaries. Its

early-stage operations in Swaziland,

Tanzania, Uganda, Zambia, and Na-

mibia contributed 23% of pre-tax in-

come. Six months ago they accounted

for just 17%.

Unfortunately, one of the company’s

star subsidiaries ran into some serious

trouble back in March. The government

of Swaziland announced that it would

end the practice of deducting loan pay-

ments from the payrolls of its civil ser-

vants. Apparently, some workers were

borrowing from multiple payroll lend-

ers. Some of them borrowed so much

that their entire wage ended up being

deducted to service their loans. Their

paychecks amounted to zero.

Given that 95% of Letshego’s clients

are government employees, this is a

game changer for its Swazi operation. In

fact, press reports indicate that it

stopped lending money and laid off its

sales staff. It’s as yet unclear how the

company will collect on its existing

loans, but it’s likely that it will try plac-

ing debit orders on its borrowers bank

accounts.

Debit orders are a poor substitute for

deduction codes. Why? Because deduc-

tion codes give loan repayments prece-dence over all other claims on a bor-

rower’s income. As long as the borrower

remains employed, the lender will be

repaid according to schedule. Collection

via debit order, on the other hand, is

dependent on borrowers depositing suf-

ficient funds into their bank accounts.

Therefore, non-performing loans will

It’s a problem that affects all African

wireless operators and is the main rea-

son that I’m less bullish on the industry

than some others.

The company is touting its Zain Group

Drive11 program which management

says will introduce new products and

revenue generating initiatives while re-

ducing operating costs. In recent

months, the company granted its pre-

paid customers the ability to use Black-berry devices and roaming in a selection

of countries outside Zambia. It also

opened a new operations center that will

put its entire Lusaka staff under one

roof. Still, it will take much more than

this to meet the Drive11 goal of improv-ing operating margins by 5% over the

next few years.

The company now trades right around

10x trailing earnings and 3.5x book

value. In my view, it’s a rather rich

valuation and offers little margin of

safety. I’m slashing my valuation esti-

mate to ZMK455, and I plan to sell my

position in the stock before the end of

the calendar year.

LETSHEGO

Exchange: Botswana Recent Share Price: BWP13.70Market Cap: $298.6million P/E Ratio: 8.2Dividend Yield: 2.2%

likely increase substantially in Swazi-

land. And if other countries where Let-

shego operates follow Swaziland’s lead,

it would dramatically impact Letshego’s

profitability.

Thus management is actively support-

ing measures to develop central credit

registries. These registries would help

governments set limits on how much

civil servants can borrow. This would

intensify competition by making the

available market smaller, but it would

allow continued use of deduction codes.

In other news, the Mozambique gov-

ernment awarded Letshego a deduction

code, clearing the way for it to beginlending there. The company also sold its

legal insurance operation to Botswana

Insurance Holdings. The profit from the

sale will be reflected in the next earnings

statement.

Overall, I believe Letshego remains a

compelling investment at current levels,

but I am keeping my eyes peeled for

more news on the deduction code front.

ZAIN ZAMBIA

Exchange: Zambia Recent Share Price: ZMK510.00Market Cap: $558.8million P/E Ratio: 9.8Dividend Yield: 3.9%

Wireless company, Zain Zambia, re-

ported anemic earnings growth of 4.9%

for the first half of 2009 in spite of in-

creasing its customer base by 23%. The

net margin for the period narrowed to

19% from 22% a year ago.

After a brutal 2008, Botswana Insur-

ance Holdings continued to struggle

during the first half of 2009. Earnings

per share dropped 45% thanks to huge

drops in the value of its investment

portfolio.These figures illustrate the company’s

challenge pretty clearly. While Zambia’s

mobile phone penetration rate remains

relatively low, most people who can eas-

ily afford to own and use a phone al-

ready have one. To add additional reve-

nue, Zain must content itself with sub-

stantially smaller margins. All the low

hanging fruit has already been picked.

Net insurance premium revenue ac-

tually increased 32% and claims as a

percentage of premiums dropped a few

percentage points. So, the company’s

underwriting operation remains very

profitable.

As I’ve mentioned in previous is-



African markets may expose investors to any or all of the following risks: currency fluctuations, political and economic instability, accounting changes and

oreign taxation. The Investing in Africa newsletter is not intended to provide tax, legal, or investment advice for any fact-specific situation. All information

contained herein is solely the opinion of Investing in Africa and is obtained from sources believed to be reliable. All content and opinions herein are pre-

sented without warrant of any kind express and implied and are subject to change at any time without notice.

November 2009 Sonatel - - -

October 2009 PME Africa Infra. Opps. 3.55% -1.98% -3.62%

September 2009 Trustco Holdings -10.48% 1.53% 6.32%

August 2009 Ecobank Transnational 6.30% 5.81% 6.05%

July 2009 Protech Khuthele 18.36% 12.71% 16.48%

June 2009 Car and General 32.68% 12.73% 12.94%

May 2009 Hardware Warehouse 17.20% 18.72% 30.85%

April 2009 ArcelorMittal SA 85.03% 32.49% 56.99%

March 2009 Kenya Power & Lighting 52.75% 40.96% 75.09%

February 2009 Africa Cellular Towers -21.06% 25.46% 65.74%

January 2009 Dar Community Bank -5.99% 14.72% 50.34%

December 2008 Zain Zambia 22.88% 15.62% 63.57%

November 2008 State Bank of Mauritius 35.70% 6.96% 47.62%

October 2008 Pinnacle Technology -8.50% -11.16% 9.86%

September 2008 Dangote Sugar -48.01% -19.23% -5.80%

August 2008 RACEC Group -32.77% -18.25% -12.31%

July 2008 Kenya Comm. Bank -47.97% -19.05% -16.86%

June 2008 Invicta Holdings -24.18% -34.35% -36.09%

May 2008 Gamma Civic -27.93% -30.08% -47.98%

April 2008 Truworths 62.04% -22.84% -21.

March 2008 Botswana Insurance -51.61% -22.13% -19.34%

February 2008 Namibia Breweries 18.18% -24.83% -17.73%

January 2008 CAL Bank 34.96% -12.64% -20.46%

December 2007 MPICO -56.98% -30.04% -26.93%

November 2007 Simeka Business Group -73.31% -33.12% -32.64%

October 2007 Ghana Oil -40.09% -32.13% -24.64%

September 2007 Imara Holdings 62.71% -11.99% -8.45%

August 2007 Ghana Commercial Bank -13.92% -28.79% -15.45%

July 2007 OneLogix -62.22% -31.07% -13.97%

June 2007 Unilever Ghana 92.82% -40.99% -40.97%

May 2007 Investrust Bank 0.25% -30.10% -6.80%

May 2007 FMB Malawi 137.58% -39.54% -43.02%

March 2007 FNB Namibia 39.66% -26.35% 1.83%

February 2007 Grindrod -0.72% -27.95% -1.47%

January 2007 dfcu Group 68.52% 3.53% 31.65%

December 2006 Bytes Technology 46.55% 5.75% 42.36%

November 2006 Guaranty Trust Bank 45.66% -24.80% 10.25%

October 2006 Fan Milk 148.97% -12.69% 7.44%

September 2006 Oryx Properties 35.35% 1.45% 39.62%

August 2006 NICO Holdings 185.17% -18.84% 18.86%

July 2006 New Mauritius Hotels 168.82% 0.77% 46.32%

June 2006 Zambeef 218.79% 10.26% 63.76%

May 2006 Kenya Airways -21.02% 16.79% 22.05%

April 2006 Italtile -61.91% -43.69% -34.11%

April 2006 Telkom -30.64% -1.94% 38

March 2006 Letshego 172.07% -19.64% 17.88%

March 2006 Furnmart 188.96% -32.31% -9.91%

Total Average Return 29.61% -10.35% 7.02%

Issue Com an US$-Indexed Rtn S&P 500 Rtn MSCI EEM Rtn

PORTFOLIO PERFORMANCE

Ryan owns shares of Letshego, BIHL, and Zain Zambia.

sues, my preferred metric for valuing

this company is embedded value per

share. The measure discounts the profits

that BIHL expects to earn on life insur-

ance premiums and then adds them to

net asset value.

As of the end of June, embedded value

came out to BWP7.09 per share. The

stock presently trades at a 17% premium

BOTSWANA INSURANCE

Exchange:BotswanaRecent Share Price: BWP8.30Market Cap: $334.5million P/E Ratio: 17.3Dividend Yield: 9.8%

to that mark. Considering the rebound

that we’ve seen in global equity markets

since June, that may not be a bad price.

The year-end results should see the value

of the company’s investment portfolio

rebound strongly.

Given the excellent underwriting profit

BIHL generates, I’m content to hold the

stock at this price.

IIA Vol4 Iss11 Sonatel

Documents

Transcript of IIA Vol4 Iss11 Sonatel