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Listed EV/EBITDA multiples

Following the volatility of listed multiples post the financial crisis, the developed, African and BRICS markets’ multiples appear to be moving much more closely in line with one another.

 

Source: S&P Capital IQ, RisCura analysis

Valuations of African markets have dipped marginally below the other markets through 2015 as a result of negative sentiment to emerging markets globally. African markets have tracked LatAm markets more closely over the past two years as emerging markets have begun to slow, and developed market capital has flowed to safe havens.

Egypt’s stock exchange was one of the worst performers in 2015, declining from an average EV/EBITDA of 8.94x at Dec14 to 6.71x at Dec15.

Nigeria’s exchange has begun to recover from the decline in the last quarter of 2014 when uncertainty over elections and a sharp fall in the oil price diminished investor confidence in Africa’s largest economy. The median EV/EBITDA of the Nigerian market was up 24% from Dec14, reaching 7.67x at the end of 2015.

Both South Africa and Southern Africa excluding South Africa have trended downward in 2015, by 19% and 14% respectively, on the back of lower growth expectations for the region.

Francophone West Africa (the BRVM) has been an interesting case in 2015. This is a small sample of stocks, most of which are based in Côte d’Ivoire. There seems to have been a significant increase in share prices that is not equally supported by earnings growth. The exchange has increased in value by 87%, from a 9.11x multiple in Dec14 to 17.09x in Dec15. Because this exchange is within the West African Monetary zone, it is traded in CFA franc, a currency used in West and Central Africa, which is pegged to the Euro. One reason for this boost in the BRVM’s performance could be that the use of the CFA franc has made the exchange a haven from the currency volatility plaguing other markets.

Overall, Africa’s major markets finished 2015 trading in the range of 7-10x EV/EBITDA.

 

Source: S&P Capital IQ, RisCura analysis

 

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