TIDMAOF
RNS Number : 9270O
Africa Opportunity Fund Limited
26 September 2013
26 September 2013
Africa Opportunity Fund Limited
("AOF" or "the Company")
Interim Results
The Board of Africa Opportunity Fund Limited ("AOF", "the
Company" or "the Fund") is pleased to announce its unaudited
results for the 6 month period to 30 June 2013.
Highlights:
-- AOF's net asset value per share of US$1.123 as at 30 June
2013 increased by 17.1% from the 31 December 2012 net asset value
per share of US$0.963.
-- As at 30 June 2013, AOF's investment allocation was 76% equities, 18% debt and 6% cash.
-- Dividends declared in the 6 month period in the amount of
$0.002 per share were paid on 12 April 2013 and 12 July 2013
respectively.
-- AOF's net asset value per share as at 31 August 2013 was US$1.178.
A copy of the unaudited interim financial statement is available
on the Company's website: www.africaopportunityfund.com.
For further information please contact:
Africa Opportunity Fund Limited
Francis Daniels Tel: +2711 684 1528
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett/David Hignell/Jamie Barklem Tel: +44 207 383 5100
LCF Edmond de Rothschild Securities Limited (Nominated
Broker)
Hiroshi Funaki Tel: +44 020 7845 5960
Investment Manager's Statement
Market Conditions: AOF's NAV increased approximately 4.3% during
Q2 2013. As a reference, in US terms in Q2 2013, the S&P rose
2.9%, South Africa fell 7.3%, Egypt fell 11.4%, Kenya fell
marginally - 0.3%, and Nigeria rose 7.7%.
Portfolio Highlights: The major contribution to AOF's
respectable performance in Q2 2013 was continued appreciation of a
few holdings in Ghana and Nigeria. In US Dollar terms, Enterprise
Group's share price rose by 52% in Q2 while Okomu Oil's rose by
29%. Their respective trailing 12 month P/E ratios at the end of Q2
stood at 3.9X, and 16.8X. AOF sold 78% of its Okomu Oil holdings in
April and May because its share price appreciated well above our 31
March, 2013 appraisal value. It took 7 months to acquire our entire
Okomu position in 2011 and 5 weeks to complete our sales. Clearly,
even the more illiquid of African listed companies enjoy breezes of
liquidity from time to time. This outcome illustrates that
illiquidity is often part of the challenge in acquiring
misunderstood or overlooked shares. As prices recover very often
liquidity recovers too. Happily, Okomu has generated a total US
Dollar return of 434% over 2 years.
Q2 provided challenges and disappointment too. African Bank
Investment Limited l ("ABL") lost half of its value. We considered
it one of our safe investments and its share price collapse is
humbling, to say the least. ABL announced in early May that its
interim profits would be 30% lower because of high non-performing
loans, especially among some of its Ellerines furniture retailing
customers. ABL responded by cutting its dividend 71% and reducing
its dividend payout ratio from 50% to 20%. It continues to face
serious challenges such as the possibility of a credit downgrade by
Moody's as well as the danger of South Africa's own sovereign
credit rating being downgraded in the next year. But, a crucial
ameliorating feature was that ABL continued to generate more
after-tax cash from its advances book than net income. In the long
run, net cold cash from advances is what builds a bank; not
accruing profits. African Bank remains very strong on that measure.
Undoubtedly, it will take a few years for its share price to leave
the recovery ward. Nevertheless, in the here and now, we have
increased substantially our investment in it. The other
disappointment during Q2 was the accelerated decline in the price
of gold miners like Anglogold Ashanti. They suffered grievously
from the sharp downturn in the gold price combined with the
prospect of tough wage negotiations and bitter strikes in South
Africa.
Finally, as discussed previously, we expected the Shoprite
litigation to commence in Q3. This litigation did in fact commence
in July. See our announcement which was released to the market on
29 July 2013 and available on the AOF website for more information.
We continue to remain confident that AOF holds clear title to its
shares. AOF will update the market accordingly with regards to
future developments.
Portfolio Appraisal Value: As of 30 June, the Manager's
appraisal of the economic value of the portfolio was $ 1.35. The
market price of $0.979 at 30 June represents a 27% discount. Note
the Appraisal Value is intended to provide a measure of the
Manager's long-term view of the attractiveness of AOF's portfolio.
It is a subjective estimate, and does not tell when that value will
be realized, nor does it guarantee that any security will reach its
Appraisal Value.
Outlook: We believe that AOF's portfolio possesses undervalued
companies. Its top 10 holdings combined offer a weighted average
P/E ratio of 7X, a dividend yield of 5.6%, a return on assets of
8.6% and a return on equity of 21.7%. We are excited by these
attractive valuation metrics and remain optimistic about AOF's
prospects.
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD 1 JANUARY 2013 THROUGH 30 JUNE 2013
For the period For the period
ended 30 ended 30
Note June 2013 June 2012
--------------- -----------------
USD USD
Revenue
Dividend income 932,097 1,885,893
Interest income 337,420 235,302
Net exchange gains on bank 486,340 100,690
Profit on financial assets at fair value
through profit or loss 5(a) 7,391,461 -
Profit on financial liabilities at fair
value through profit or loss 5(b) 246,236 -
Other income - 2,119
9,393,554 2,224,004
---------------- ----------------
Expenses
Performance fees 1,319,179 -
Management fees 435,441 401,054
Brokerage fees 239,871 96,537
Custodian, secretarial and administration
fees 120,976 131,926
Interest charges and other fees 102,569 98,089
Other operating expenses 44,072 102,526
Directors' fees 40,000 40,000
Audit fees 20,251 31,733
Dividend paid 20,754 114,980
Losses on financial assets at fair value
through profit or loss - 1,805,228
Losses on financial liabilities at fair
value through profit or loss - 442,561
2,343,113 3,264,634
---------------- ----------------
Profit/(loss) before tax 7,050,441 (1,040,630)
Withholding tax 663 52,995
Profit after tax 7,049,778 (1,093,625)
Other comprehensive income - -
---------------- ----------------
Total comprehensive income for the period 7,049,778 (1,093,625)
================ ================
Attributable to:
Equity holders of the Company 6,985,000 (1,090,783))
Non-controlling interest 64,778 (2,842)
7,049,778 (1,093,625)
---------------- ----------------
Basic and diluted earnings per share
for gain attributable to the equity
holders of the Company during the period 9 0.1639 (0.0256)
AFRICA OPPORTUNITY FUND LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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