TCM Africa High Dividend Equity is a high dividend equity fund, investing in listed shares in the northern and sub-Sahara regions of Africa. Initially it will focus on Egypt, Morocco and Nigeria. In addition, it will invest in Kenya, Ghana, Botswana and Mauritius. In principle, its portfolio will have limited exposure to South Africa.
The funds investment policy will be aimed at achieving capital growth as well as dividend pay outs. In principle, the fund will pay out dividend once a year with an expected dividend yield of approximately 4% per annum.
The risk profile is high, due to investments being channelled into frontier/emerging markets in Africa. The relationship between global financial markets and African markets is low, because the latter are less sensitive to international developments.
To achieve its objective, the Fund invests 95% to 100% of its total assets through TCM Investment Funds Luxembourg in units of TCM Africa High Dividend Equity (Lux). The Fund qualifies as feeder-structure.
TCM has entered into an agreement with Sustainalytics for the screening of the portfolios of the TCM equity funds on ESG criteria (UN Global Compact and Controversial Weapons).
The Fund Manager writes
The markets in Africa were mainly positive in November which resulted in a return of 7.5% for the fund compared to a benchmark return of 2.5%. Nigeria had a positive month, where the Nigerian Main-board rose by 3.30%. During the month, we took some profit in the Access Bank in Nigeria with the aim of keeping the banking sector below the 40% limit from a risk management perspective. Banks in Nigeria performed strongly in November. For example, within the portfolio Access Bank in Nigeria rose by more than 24%. Still the stock trades at only 3 times expected earnings with a dividend yield of 5.5%.
In the portfolio we also saw a 30% increase in the stock Airtel Africa. The telecom company, which is mainly active in East Africa, reported excellent half-year figures. Profit before tax was $ 316 million dollars compared to $ 122 million dollars the year before. Furthermore, the company passed the milestone of 100 million customers.
Amid trade tensions between the U.S., China and Europe and the U.K.’s departure from the European Union, African leaders are moving in the opposite direction to establish the world’s largest free-trade zone. This and other trade-facilitating measures should increase intra-continental commerce by more than 50% in four years, according to the UN Economic Commission for Africa. According to the IMF, Africa's growth prospects will be among the highest in the world between 2018 and 2023. Of the twelve fastest growing economies in the world six are in Africa (Ethiopia, Democratic Republic of Congo, Ivory Coast, Mozambique, Tanzania and Rwanda).
Despite the promising outlook, African stocks are relatively cheap. The price/earnings ratio of the Frontier Emerging Africa Index (ex-South Africa) is only 10.85 compared to 14.01 for the Emerging Market Index and 18.51 for the World Index (developed markets). To quote President Cyril Ramaphosa of South Africa during his opening speech at the Africa Summit in London last month: "there has never been a better time to invest in Africa".
The fund currently holds positions in 31 stocks in 7 different countries. The countries with the largest weightings are Egypt (25.9%), Nigeria (21.7%) and Morocco (17.3%).
These markets currently have the most interesting high dividend shares that meet the quality requirements. The weighting of a country is therefore mainly determined by the relative attractiveness of the market compared to other countries. Consequently, the composition of the fund can differ significantly from the benchmark index.
No rights may be derived from this publication. You are referred to the prospectus and Key Investor Information Document for the fund's terms and conditions. These documents may be obtained from the website or the address mentioned below. The manager of the fund has obtained a licence for this fund from the Netherlands Authority for the Financial Markets in accordance with the provisions of the Financial Supervision.