AFKInsider Market Journal: Six Upcoming African IPOs

AFKInsider Market Journal: Six Upcoming African IPOs

The African IPO market cooled off dramatically in the wake of the global financial crisis. Many stock exchanges went years without adding any new local listings.

Now, however, with share prices recovering, an increasing number of African firms are looking to go public. In the past 12 months, nearly two dozen companies debuted on the continent’s stock markets.

So, which companies will be in the next wave of debutantes? Here’s a list of six African businesses that have announced their intention to list within the last month.

6 New and Upcoming African IPOs

Anchor Group

Johannesburg-based asset manager and stockbroker Anchor Group (ACG) listed on the JSE’s Alt-X on September 16, raising R60 million ($5.4 million) in a private placement before the company went public. It deployed the proceeds in one of its best-performing funds.

Judging by the market’s reaction to the listing, management probably could have asked for much more. The shares have climbed 150 percent from their pre-offer price of R2.00 per stub thanks to a low earnings multiple and a hefty dividend. After the big run up, the stock trades at more than 20 times its forecast 2014 earnings. Management believes earnings will grow over three quarters in 2015.

East African Data Handlers (EADH)

An IT firm that specializes in data recovery, EADH boasts an impressive client list that includes the likes of Safaricom, East African Breweries, and KCB Bank. The company, which is staffed primarily by Russian expatriates, plans to list on the Growth and Enterprise Market Segment (GEMS) of the Nairobi Securities Exchange before the end of the year.

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Specifics of the listing are yet to be released, but CEO George Njoroge recently reported that company revenue was approximately 100 million shillings ($1.12 million) over the past year and profit margins are in the order of 30 percent. The company already operates in Kenya, Tanzania, and Uganda and plans to grow continent-wide, with Johannesburg, Cairo, and Lagos being initial expansion destinations.

Nakumatt Holdings

The IPO for this popular East African supermarket chain still appears to be a ways off, but this month management reiterated its intention to eventually go public. Managing director Atul Shah foresees listings on the Nairobi, Dar es Salaam, Uganda, and Rwanda Stock Exchanges within three to four years.

Last month, the company opened a new store in Arusha, Tanzania, bringing its total store count to 50. It reports annual revenue of $450 million.

Quantum Foods Holdings

South Africa’s Pioneer Foods (PFG) plans to spin off its poultry and animal feed division as an independent firm on October 6. The new entity, Quantum Foods, intends to expand into the rest of Africa with a brand line that includes Nulaid eggs, Nova feeds, and Tydstroom chicken.

It’s the egg business that makes Quantum Foods unique. No other JSE-listed firm specializes in eggs, a key protein source that looks to become more in demand on the continent as household incomes rise.

The company won’t be raising any fresh capital through its IPO as management believes the balance sheet is strong enough to fund expansion in the near-term. Existing shareholders of PFG will receive shares of Quantum at a ratio of 1:1.

Rhodes Food Group

While Quantum Foods focuses on the production and sale of commodity foods, South Africa-based Rhodes Food Group (RFG) markets a wide range of packaged meals, canned goods, and cheeses. It is the market leader in canned pineapple and tomato paste and exports to major brands and supermarkets around the globe.

The firm plans to raise $122 million in an IPO on the Johannesburg Stock Exchange on October 2. It will use the cash injection to fund the purchase of additional brands, to reduce debt, and to allow the partial exit of private equity investor, Capitalworks.

RFG’s recent financial performance has been impressive, with revenue growing 34.5% in the first nine months of its 2014 fiscal year as a weakened Rand stimulated export sales.

Transcorp Hotels

In another spinoff, Nigerian conglomerate Transcorp (TRANSCOR) will list its hospitality business as an independent entity on November 5. Transcorp Hotels Plc will raise NGN8 billion (roughly $50 million) in its IPO for the purpose of building two new Hilton hotels in Lagos and Port Harcourt by the end of 2017.

The company already owns controlling stakes in two hotels in Abuja and Calabar, which also operate under the Hilton brand.

Management forecasts annualized earnings growth exceeding 14 percent over the next five years, and shares will be on offer at a multiple of 15.9 times its projected 2014 earnings. The Nigerian government will hold a 12 percent stake in the new company.

Your Turn

Let’s add to this list. Do you know of any other upcoming African IPOs? If so, let’s hear them in the comments.

Ryan Hoover is an investment analyst with Africa Capital Group and the founder of InvestingInAfrica.net. Contact him at ryan@investinginafrica.net.