Is it worth putting investments in DSE?

Is it a worthwhile investment to put money into the Dar es Salaam Stock Exchange?

Judging from the performance of different stocks on the exchange and the performance of unit trusts that include equity stocks, one can confidently answer, YES, it is indeed worth it.

Upon reviewing the past six months, we can observe several stocks that have shown exceptional performance.

Leading the pack is Tanga Cement, which has experienced a remarkable increase of 64 per cent. This surge is attributed to investors speculating on the company’s potential acquisition by Scancem International DA, a subsidiary of Heidelberg Cement AG, which already owns Tanzania Portland Cement Plc (Twiga Cement).

Despite Tanga Cement’s recent financial report indicating a significant loss of 22bn/- last year, this hasn’t deterred investors who are eager to acquire its shares in the hope of selling them later at a profit.

It’s important to note that the impressive growth of Tanga Cement is primarily driven by investor sentiment and behaviour, rather than the company’s underlying fundamentals.

NICOL, a closed-ended fund listed on the DSE, has also experienced a remarkable year. In the past six months, its share price has risen by 38 per cent. The main driving force behind this impressive performance is the fund’s strong fundamentals and exceptional portfolio.

Last year, NICOL witnessed a substantial increase in total investment income, soaring by 46 per cent to 8.3bn/-. The primary contributor to this growth was dividend income, accounting for 64 per cent of the total.

Notably, NICOL’s equity holdings in NMB resulted in a significant dividend payment of 5.1bn/-, representing 60 per cent of the company’s total income and an impressive 96 per cent of its dividend income.

Interest income also experienced a notable increase, rising by 36 per cent to 2.99bn/-. The majority of this revenue came from holdings in 20-year government bonds, which contributed 71 per cent of the interest income.

Additional sources of interest income included 25-year bonds, fixed deposits, and interest on normal bank balances.

NICOL’s total assets underwent substantial growth, increasing by a significant 70 per cent to 127.6bn/-. This growth was mainly attributed to an expansion in government bond holdings.

The company recently diversified its portfolio by increasing its government bond investments, resulting in a twofold rise in bond holdings from 15bn/- in 2021 to 35bn/- last year. Despite this growth, equity holdings still make up the majority of NICOL’s portfolio, accounting for 65 per cent of total assets.

A closer examination reveals that NICOL’s equity portfolio is heavily concentrated in its NMB holdings, constituting nearly 93 per cent of the company’s equity investment portfolio.

This implies that investors holding NICOL shares indirectly hold NMB shares at a discounted rate. In fact, when considering both equity and bond holdings, NMB holdings account for 60 per cent of NICOL’s total investment portfolio.

Consequently, NICOL’s share price should ideally trade at a minimum of 60 per cent of NMB’s price, with a range of 1,700/- to 2,000/- per share.

In addition to NMB, NICOL’s equity investment portfolio includes TPCC, Swissport, Tanga Cement, CRDB, DSE, TBL, Vodacom, and TCC. However, the company has recently shifted its focus and diversified into government bonds, with a particular emphasis on 20 and 25-year bonds.

As of now, NICOL’s net asset value stands at 1,687/-, while its share price trades at 475/-, indicating that the stock is trading at a discount.

Among the notable performers in the past six months were the banking stocks CRDB and NMB, which both saw gains of 19 per cent and 15 per cent respectively.

In the service sector, Swissport stood out as the top performer with a 14 per cent increase in its share price. Additionally, Swissport successfully paid dividends for two consecutive years after failing to do so in the previous two years.

The self-listed DSE experienced an 8.2 per cent increase, and Twiga Cement also saw a positive growth of 8.1 per cent in the past six months.

However, it’s important to highlight that not all counters had a successful first half of this year. Maendeleo Bank experienced a decline of 11 per cent, JATU dropped by 9.0 per cent, DCB Bank decreased by 7.0 per cent, TOL declined by 6.0 per cent, and TICL saw a decrease of 3.2 per cent.

Turning to collective investment schemes, JIKIMU emerged as the top-performing fund in the last six months, with a gain of 10.4 per cent. The fund boasts a diversified portfolio consisting of both stocks and bonds. Wekeza followed closely with an 8.8 per cent increase. This fund operates as a life insurance scheme. Other notable performers included Watoto Fund (+7.5 per cent), Umoja (+6.7 per cent), Bond Fund (+6.1 per cent), and Liquid Fund (+5.6 per cent).