SBG Securities - Intelligent Investing
Standard Bank boasts a 150-year legacy in South Africa and started expanding into the rest of the continent in the early 1990s. The banking giant currently operates in 18 countries across Africa, as well as in other selected emerging markets, and its three main pillars of business are personal and business banking, corporate and investment banking and wealth. SBG Securities operates under the Standard Bank umbrella and with detailed research on over 140 companies across the continent, the equities research firm has set itself up as the go-to-expert for those looking to make smart investments into one of the most stimulating frontier markets in the world.
A forecast from the African Development Bank shows an optimistic economic outlook for Africa with 4.8 per cent growth in 2013 and an even faster paced growth in the Sub-Saharan region. Although the continent is brimming with innovative opportunities and foreign investments, the market still suffers from a shortage of public information that investors can base their decisions on.
SBG Securities, an equities brokering business that resulted from Standard Bank’s decision to buy out its joint venture partner in 2010, saw this gap in the market for best execution in Africa and detailed, insightful and reliable research. Aligned with Standard Bank Group’s other businesses, namely Derivatives and Equities Capital Markets, and the brokering operations of Stanbic IBTC and CfC Stanbic, SBG Securities has been working to deliver an integrated offering to both its domestic and international client base.
Marc Ter Mors, SBG Securities’ head of equity research says the company aims to deliver on a few different aspects: “in-depth fundamental research and connecting investors with decision makers, like executives of the companies, access to regulators or government officials that shape the business environment in Africa. By doing that, we hope we’re assisting Africa’s advancement in improving the capital market conditions in the region.”
With brokering operations in South Africa, Nigeria (Stanbic IBTC Bank) and Kenya (CfC Stanbic Financial Services), and the ability to execute in countries all across the continent including Namibia, Mauritius, Egypt, Morocco, Botswana, Zambia, Mozambique, Rwanda, Zimbabwe, Ghana and the BRVM (Bourse Regionale des valeurs Mobilieres) regional exchange, SBG Securities has quickly established itself as one of the leading equity brokers in the Sub-Saharan region.
“The majority of the cash equities business is trading on behalf of institutions that are either domestic to Africa or global investors who are looking for interesting investment avenues across Sub-Saharan Africa,” says Ter Mors.
With a head office in Johannesburg, the company has 30 analysts across Africa who operate as the eyes and ears on the ground; the ones with the personal relationships with the management teams of the companies SBG Securities covers.
The organisation also performs in-depth research projects for clients interested in investing in the continent. SBG Securities recently partnered with a company called Fernridge Consulting to better understand urban trends in West and East Africa. The project included studying satellite photographs of urban areas in five different cities in Nigeria and Kenya and painstakingly identifying and counting all of the dwellings. They then matched that number and compared them to other consumer trends showing how consumers spent their monthly income on things like food, beverages, out-of-home dining and entertainment.
“In Africa, generally the publically available information is still quite limited,” says Ter Mors. However this type of example shows how beneficial it is to have analysts on the ground who really live and understand those markets, providing the company with an incomparable edge.
African Hot Spots
In terms of the industry sectors that have been of most interest to clients and potential investors, Ter Mors says that can possibly be split into four areas, starting with consumer oriented staples.
“Since the global financial crisis and across both developed and emerging markets, food staples have become some of the highest valued sectors,” he says.
As retail companies are formalising and supply chains are improving across Africa, there are tremendous opportunities for branded packaged foods.
Additionally, global consumer goods companies, like Coca-Cola, Nestle and SAB Miller, are making significant in roads and placing foreign direct investment on the African continent.
The second area that is considered “hot” in Africa is the financial sector, like banks and insurance companies. This is an area that is very important in Africa because a large portion of liquidity in the stock exchange is in banking or financial stocks.
“Credit is often called the oxygen of economic growth,” says Ter Mors. “Those regions that have strong established banking systems tend to grow more sustainably.”
Not surprisingly, oil and gas exploration is another sector that is of high interest. SBG Securities covers about 17 companies in this area and with oil resources in Angola and Nigeria, as well as increasing finds on the East coast of Africa, like the coastline around Tanzania and Kenya, and the Rift Valley of Uganda and Southern Sudan, this is an area that has created a lot of international buzz.
He adds: “Shale gas development in South Africa, although hotly contested by environmentalists, could be an enormous opportunity, similar to what happened in North America, and end up being an economically viable and attractive natural gas resource in South Africa.”
“The other interesting sector is agriculture, but it’s very difficult for our investors to get access to a list of stocks,” says Ter Mors. Although agriculture makes up large components of the economy and the continent has a lot of potential opportunity with vast arable land and significant river systems, SBG Securities has found that other than a number of palm oil, sugar farmer and processing, and cattle and meat companies listed in Africa, prospects for investors to participate remains largely limited to private equity opportunities.
SBG Securities’ wide coverage of stocks across many sectors across the continent, as well as the company’s strong belief of having analysts on the ground right in the heart of the different regions they research, provides the equities brokering firm with an incredibly competitive advantage in the industry.
“It’s all about making sure we add value to our clients and to the investment community, both local and global,” says Ter Mors.
For now, SBG Securities is focused on continuing to advance its reputation as well as expand its platform in different African territories such as Ghana, and potentially Angola and Ethiopia as discussions around their respective stock exchanges are being planned.
“Although many African countries have made much headway in improving the legal systems and democratic processes, there are still risks that need to be factored and understood by investors,” explains Ter Mors. “Investors need to know that Africa is not just one continent, there are vast differences country by country. They need to take the attention and invest energy to understand regional differences and sociopolitical environments.”