Analysts optimistic about Capricorn’s results

Local analysts are optimistic about Capricorn Group's interim financial results for the six months ended 31 December 2022.The locally-listed company achieved solid results with profit after tax of about N$698.2 million for the period under review – an increase of 20.3% compared to the prior period. Capricorn declared an interim dividend of 39 cents per ordinary share. The interim dividend per share for the period under review is 21.9% higher than the interim dividend per share of 32 cents declared in the comparative period.Net interest income increased by 14.9% year-on-year, aided by year-on-year increases in the repo rate in Namibia and Botswana of 300 basis points and 151 basis points, respectively. Bank Windhoek managed its cost of funding effectively, which resulted in a 54-basis point improvement in the net interest margin to 4.88%. Impairment charges decreased by 14.9% in credit impairment charges. Despite the global economic difficulties attributable to the geopolitical instability in the wake of the war in Ukraine, the region saw an improved operating environment compared to the prior period impacted by Covid-19, which positively impacted the key credit risk indicators.Non-interest income increased by N$103.1 million (12.3%), mainly attributable to a 23.3% increase in transaction-based fees, driven by increased transaction volumes specifically using digital channels, particularly EasyWallet, digital fund transfers, ATM withdrawals and point-of-sale transactions. Operating expenses increased by 16.1% (N$165.3 million) year-on-year from a low base environment attributable to COVID-related economic restrictions in the comparative period. Gross loans and advances increased by N$1.4 billion year-on-year, mainly driven by mortgage loan growth of N$460.8 million (2.4%), commercial loan growth of N$453.6 million (4.2%) and article finance growth of N$388.0 million (10.8%). Analysts According to IJG Securities, the group’s diversified portfolio delivered another set of impressive results, driven in large part by endowment coupled with robust non-interest revenue growth from rising transaction volumes.“Using a panel of standard valuation techniques, a cost of equity of 16.9% and a long-term sustainable return on equity of 17.0%, we derive a target price of N$c1449. Coupled with an expected final dividend of 48cps, we derive a potential total return of 11.3%. Based on the discount, we view the current share price as undervalued and upgrade our recommendation on CGP to buy.”Simonis Storm said: “We are pleasantly surprised by the resilience of the sector loan books thus far. We are also starting to see some of the positive endowment effects trickling down because of interest rate hikes and sticky defaults. This should be a material boost for net interest income (NII) as we move forward with loans and advances being more exposed to higher rates.”“In addition, there is the economic recovery phase that we believe we are in, also contributing as evident with the NIR displaying double digit growth. We think these tailwinds will ensue and permeate further earnings.”“We are however concerned with the double-digit growth in operational expenses, specifically with regards to staff costs .The first half of 2023 report alluded to staff annual increases and vacancies being filled exerting pressure on this line item. We remain cognizant of the current elevated inflation, with the latest local print being 7%. Private sector credit extension growth still remains a concern.”“We remain optimistic, specifically toward Capricorn Group as we think they can lever from the current environment and to the benefit of the ordinary shareholder,” Simonis Storm said.-phillep@nmh.com.na

Analysts optimistic about Capricorn’s results

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Republikein 2025-12-16

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Analysts optimistic about Capricorn’s results

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Republikein 2025-12-16

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