Africa Opportunity Share Discussion Threads

[jonwig] 01/2/2013 15:25

Frontier Markets, including Africa:

[tenapen] 29/1/2013 16:17

My account does not hold AOF shares so im out already :(

back to lonr

[praipus] 28/1/2013 14:40

I'm tracking the rest of Laxey's holdings on the WAM thread if you know of any others not listed there please let me know.

Cheers P.

[tenapen] 25/1/2013 16:01

Hi John,
I noticed that and the other RNS so i jumped in for a few. They have been on my watch list for too long already. :)

Regards,

[jonwig] 25/1/2013 15:50

Why would Laxey Partners buy? (1,000,000 is 2.35% - needn't be disclosed, or need it?)

They usually have motives of agitation, I believe.

[tenapen] 03/1/2013 09:08

Thanks for that John,
I will keep them on my watch list.

Best Wishes.

[jonwig] 03/1/2013 09:04

Hi, tenapen.

I'm happy to limit my Africa exposure to AOF rather than look at individual stocks, and I've plenty of USD income which I can use to add to my holding.

AOF did underperform significantly in October (explained in their newsletter) but caught up in November. The December NAV will be announced shortly.

Incidentally, AFMF (which holds lots of AOF) has a continuation vote in 2016 and is looking at ways to return assets at NAV.

[tenapen] 02/1/2013 20:20

Happy New year John, All,
Can I ask how happy you's are with the way AOF are growing ?. I keep my eye on the RNS,s but i just can not get excited enough about the company to start buying them.

No problem if you do not have the time or interest to reply and good luck with it all the same.

[jonwig] 02/1/2013 12:41

"Africa is Hooked on Growth" -

[loganair] 24/10/2012 12:07

From a couple of months back - Still an interesting read - Chris Mayer August 2012:

A year ago, I wrote to you about my favorite play on Africa - the Africa Opportunity Fund. (I also covered it in my book World Right Side Up.) It trades in London, ticker AOF. At the time, AOF traded for 83 pence. It is today about 78 pence. For all of 2011, a share in AOF fell 10.4% in price. The net asset value of the fund actually rose, however. At the end of May, AOF's NAV was nearly 90 pence.

That effort looks heroic when you consider what happened in African markets last year. South Africa (-15%), Nigeria (-19%), Kenya (-30%) and Egypt (-52%) were all down. It also compares favorably with what the large emerging markets did. Brazil (-27%), Russia (-20%), India (-37%) and China (-26%) all cost investors dearly. Last year, AOF proved its mettle. It is the safest way to invest in African stocks that I know of.

Robert Knapp and Francis Daniels are the headmasters of AOF. I caught up with Francis to get an update on the fund. He had recently completed his annual report. It is worth reading (visit www.africaopportunityfund.com).

The fund's biggest winner was Shoprite, a grocery store chain, which rose 79%. I am, however, drawn to the discussion on one the fund's losers. Losers are always more instructive. In this case, it was Great Basin Gold. The stock fell 67%, but the fund held bonds that lost 37%. The reason for the disappointment is one all gold investors will appreciate.

In 2011, Great Basin said it was going to produce 110,000 ounces of gold from its Burnstone mine. By March, that goal fell to 96,000 ounces. By June, it was down to 58,000. In July, Great Basin amended the forecast yet again to 30,000 ounces. Its actual production for the year came out to 21,989 ounces! Ah, you gotta love mining!

But the lesson Francis pulls out is a gem. He quotes from Sir Theodor Gregory's biography of Sir Ernest Oppenheimer, the great mining magnate who founded
Anglo American in South Africa:

Ernest Oppenheimer throughout his business life insisted on the necessity of
liquidity, in the sense of always having available a large margin of uncommitted
resources; this implied, among other things, a cautious dividend policy and large reserve funds... The supreme need of a mining house, he held, was to maintain, at all times, an adequate margin of liquidity, not only so as to be able to take advantage of new opportunities, if and when they arose, but to prevent dependence on the vagaries of the money market.

A great bit of wisdom from an old mining crow - pin that up on your wall and don't forget it. "Great Basin Gold experienced a misfortune that forced it to breach Sir Ernest's financing policy," Francis writes, "a failing all too common among the mining and oil and gas exploration and development industries." So true...

But let us move on to the present-day opportunities. I was most fascinated by AOF's forays into agriculture, which make up 18% of the fund. Francis highlighted Okomu Oil, which makes crude palm oil and rubber. Palm oil is an ingredient in all kinds of soaps, cosmetics, edible oils and even biodiesel. AOF was able to pick up Okomu for less than replacement cost. The cost of starting a brand-new plantation comes to about $5,000 a hectare. Okomu was trading for about $3,600 a hectare. It also had a price-earnings ratio of less than 5 and pays an 18% yield.

These are the kinds of exposures that are nearly impossible for you get on your own but that you get in spades by owning AOF. I asked Francis what the biggest difference is today versus a year ago.

"The biggest difference I think is that the real cost of money in our markets has risen a lot, therefore harming stock market performance," Francis told me. "For example, the yield on 3-year treasury bills in Ghana, denominated in cedis, is 23% today. Inflation is 9%, so the real yield is 14%. It is tough for a stock market to compete with such money market returns. A year ago... Ghanaian government cedi-denominated treasury bill rates were in the 12% range for 182-day paper."

Across many markets in Africa there is a similar story. This creates competition for stocks. After all, why invest in a stock if you can get 23% on a 3-year t-bill? But these things ebb and flow, and AOF is in great position when the markets rise again, as they inevitably will.

Another big difference is in commodity pricing. Oil, coal, rubber and many others are all down. As natural resources are still an important part of the story for Africa, these declines have dampened stocks as well.

Even so, big investments in mining projects still move ahead. I asked Francis if there was a Mongolia of Africa, a country with a small population on the cusp of enjoying a huge windfall from natural resources.

"The Mongolia of Africa, to me, is Mozambique," Francis offered. "We have very modest exposure to Mozambique, but I would like to increase it a lot." Over the long term, Africa is rich in possibilities and deserving of a slot in your portfolio. AOF is a great way to get exposure to Africa. Francis is a friend of mine and worthy of your trust. As his annual report makes clear, he is a thoughtful money manager who follows a proven process. He has a great track record and has his own skin in the fund. The results should be good for patient investors.

[jonwig] 24/10/2012 06:53

Thanks, lots of talk but less money at the moment!

I'm getting a fair amount of USD dividend income, and most of it goes here.

[tenapen] 23/10/2012 20:15

Hi John,
I was trying to find this thread again after reading this article on investing in African Funds / ETF . A full list of opportunities and ZAM also get a mention ;)

------------------
loganair
3 Aug'12 - 18:01 - 31 of 48

I've been looking to invest in an African Fund for a couple of years now, seems to be where the corporate money is going at the moment.
---------------



October 22 2012 at 11:32am
By Laura du Preez

Individual South African investors who want exposure to the good returns that are expected from African equity and other markets still have relatively little choice of investments.

Cont...

[jonwig] 10/9/2012 07:35

The calculation would have been:

NAV ($0.933) x LIBOR (1.115%) = DIVI ($0.0104)

Current USD 3-mth LIBOR is about 0.4% so next year's divi will be even lower I expect.

[jonwig] 08/9/2012 09:00

flash - the latest divi announcement gives a clue:

Africa Opportunity Fund Limited is pleased to announce that a quarterly dividend of US$0.0026 per share will be paid on 13 July 2012. The shares will be marked ex-dividend on 27 June 2012 and the record date will be 29 June 2012. This is the second instalment of an aggregate annual dividend of an amount equal to the product of Net Asset Value on 31 December 2011 multiplied by the one year LIBOR rate (as derived from Bloomberg) on the 3 January 2012. This is payable in four equal quarterly instalments of which this is the second, with the following payments expected to be made in October of 2012 and January of 2013.

So they pay LIBOR% of NAV as at January each year, divided into four payments.
Their first year's payments were pretty hefty (2008), but miserly nowadays, of course.

[flashheart] 08/9/2012 08:43

Bit confused with dividend amount/yield here? Finding conflicting info. Could any of you gents shed any light please. I am considering joining here with a similar view to you loganair. Thanks in advance.

[jonwig] 08/9/2012 08:18

Ten Things you didn't know about Africa's Economy:

[loganair] 14/8/2012 09:59

I'm glad the share price is drifting down, hopefully there is going to be another financial hiccup in the next 6 months as I'm looking for a 50cent to 60cent entry point.

Malawi now going full ahead exploring for oil and gas, may follow the like of Ghana.

Listening to the news this morning they were saying that over the next 10 years China will lose 80 million manufacturing jobs with the liklihood that a good number will be transferred over to Africa, with Africa as a continent maintaining plus 5% growth over the next 10 years, even though it's from a low base.

"The raw numbers reveal China's massive economic impact in Africa. Trade between Africa and China has more than trebled since 2006, passing US$166 billion last year. [3]

The majority of this figure comes from Africa's $93 billion of exports to China - most of which is raw materials, especially petroleum and copper. African imports from China consist largely of consumer and electronic goods. According to Beijing, the past decade has seen $15 billion worth of Chinese commercial investment in Africa. In 2009 China overtook the United States to become Africa's No 1 trading partner.

However, China's footprint in Africa extends far beyond the bustling trade in natural resources and manufactured goods. Last month, at the fifth Forum on Africa-China Cooperation, China promised to lend African governments $20 billion. This figure has consistently doubled at the last three forums - in 2006 $5 billion was pledged, and in 2009 $10 billion in loans were agreed upon. Inter-government ties between Africa and China were further solidified by China's building of the African Union headquarters in Addis Ababa free of charge.

The Chinese government clearly expects dividends on its massive investment in the African continent. Many of the loans to Africa are focused on infrastructure. New roads, railways and ports (this is where India is letting themselves down and why they are struggling with growth), while obviously useful to the Africans themselves, will help facilitate the export of natural resources to China.

China's image problem in Africa resides primarily in the minds of Western observers. Although there are significant concerns about unsustainable trading practices, these concerns do not constitute a continent-wide anti-China sentiment.

Charges of Chinese "neo-imperialism" in Africa are primarily based on a pattern of trade: importing materials and exporting finished goods typical is a formula typical of colonial powers. However, the major defining factor of imperialism - military dominance and use of force - is simply not present in China's Africa policy. This is not true of China's prime Western critics, especially the United States of America.

During the past decade of China's rapidly increasing trade and investment in Africa, the United States was primarily focused on "security" issues in the continent.

The myopic focus of the US on security and counterterrorism gave China an important opportunity to make economic inroads in Africa. Nowhere in the world is the foreign-policy focus of these two nations better contrasted than in the African continent. While the US was busy been bombing and arming, China was buying, selling, building and lending."

[loganair] 06/8/2012 09:50

There is a high probability that I'll make a small investment in AOF, see how it pans out then put a few more bob-in. These sorts of investments, like my one in JP Morgan Russian Securities are a long term investment, 10 to 15 years at least, in otherwords for my pension.

Unlike investing regularly in a normal pension which invests in such areas, then taking out an annuity, at least at the end of the day I still own my investment and can pass down on to my children, unlike with an annuity once I'm gone so is the annuity and is why I've always thought that a regular pension is a real con.

[loganair] 05/8/2012 11:37

In another sign fund groups are once again seeing long-term potential on the continent, J. P. Morgan has reopened its $377m Africa Equity fund. The fund soft-closed in 2010 but the team is now comfortable it can offer new capacity while investing on a sustainable basis. Like most the other Africa only funds has over 75% invested in South Africa as does the Neptune Fund.

As for the Frank Templeton Africa Fund - 5% initial Charge plus 2.1% annual fee:

25% - Nigeria
25% - South Africa
15% - Egypt
08% - United Kingdom
Plus Canada, Ireland and Norway

No - Angola, Zambia, Ghana or many other of the other Sub-Saharan African countries who are growing at over 6% per year.

I think many of the other new funds that may come along will follow a similar pattern with the vast majority of their respective investments being in South Africa, Nigeria and Egypt.

While AOF invests in, in order of percentage:

Zambia, Ivory Coast, Nigeria, South Africa, Senegal, Ghana, Zimbabwe, Namibia
Botswana, Republic of Congo, Mauritius, Mozambique, Democratic Republic of Congo & Africa General.

Also Angola, Sierra Leone, Botswana and Ivory Coast Government Bonds

AOF no initial charge and 2% annual management fee.

[loganair] 05/8/2012 11:29

tenapen - Finn seem to have a high initial charge (only for retail investors and not Institutional investors with the annual charge being twice the percentage for the retail investor compared to the Institutional investor), not easy to find which countries they are invested in and at what percentage which are easy and simple to find when it comes to AOF. In other words AOF seem to be far more open and up-front in their investments and information readily available than Finn.

This has already set alarm bells ringing.

jonwig - the fall in the AFMF's share price however doesn't mirror the AOF share price and doesn't really answer why the AFMF share price is still around the price it was in 2009 while in the same period AOF share price has risen some 60%.

[jonwig] 05/8/2012 06:50

loganair - yes the holdings in the header are a bit adrift: will right them when I have the chance.

The fall in AFMF's share price in Q1 2011 seems to mirror a sharp drop in the FTSE100 (from 6000 to 5600) in March that year. In some 'global panic' phases, emerging markets dropped more sharply than developed ones as a 'flight to safety'.
I don't keep a diary of these things, though.

tenapen - I'd be wary of funds such as the JM Finn, if only because they are open-ended (unit trusts or OEICS). If they hold illiquid assets and there's a market panic they will be forced into sales to meet redemptions. This happened with a New Star Africa fund in 2008 or 09. However, her's another one:

[tenapen] 04/8/2012 18:53

Hi Loganair, There will be better African plays out there for sure. But when this finacial crisis blows over and peoples appetite for risk returns, Africa growth could be in all the papers. Lonrho is the brand name for Africa and IMO a safe haven for peoples 1st steps when looking to invest in that continent. the Board are Greedy but hopefully the recient spat over their bonuses and the 'shareholder spring' will temper their greed in the future. Time will tell.
I Hold

Another Fund that is a pure african play is from JM Finn. Again No advice intended.

[loganair] 04/8/2012 10:12

jonwig - Your header of significant share holders in AOF seems incorrect to me as Lazard's and South Yorkshire Pension Funds etc are major holders in AFMF rather than AOF. Even according to the AOF last report apart from the directors only AFMF have a significant holding in AOF.

tenapen - I notice that when reading how to play Africa IC always seem to push Lonrho very hard.