Sam Houlie, a money manager at Momentum Asset Management, is betting that African Bank Investments Ltd. (ABL) will rebound by adding South Africa’s worst-performing lender to the portfolios of his funds.
Houlie’s Momentum Small/Mid-Cap (RMBECOS) Fund has 6 percent invested in the Johannesburg-based lender, according to a fact sheet on the website of Momentum Asset Management, which manages the equivalent of $18 billion. Abil, as the country’s largest provider of unsecured lending is known, is also the largest holding in Houlie’s Momentum Value Fund, comprising 11 percent, the data show.
One in every two South African consumers with credit are in arrears, according to the National Credit Regulator, as the economy expands at the slowest pace since the 2009 recession, inflation accelerates and unemployment stays around 25 percent. While there will be a “significant” drop in Abil’s fiscal first-half profit, steps to bolster capital and improve the quality of new loans will start to produce improved results from the second half of 2014, the lender said Feb. 5.
“The business is now so well capitalized that they will definitely survive the current difficult patch for unsecured lenders in South Africa,” Houlie said by phone from Cape Town Feb. 7. “There is no need for African Bank to go out there and grow aggressively, they will survive.”
Abil has dropped 56 percent over the past 12 months, the second-worst performer in the 165-member FTSE/JSE Africa All-Share Index (JALSH), which has gained 12 percent. The lender’s furniture unit, Ellerines, which sells more than half its goods on credit, saw sales drop 21 percent in the quarter through December, it said last week.
Houlie is also buying shares in Impala Platinum Ltd. (IMP), Pallinghurst Resources Ltd. and Anglo American Plc, while still seeing further declines in industrial stocks, he said.
The Momentum Value Fund (RMBVALF) is the second-best performing South African equity fund after a similar fund run by Investec Asset Management, according to data compiled by Morningstar Research. The fund has returned 4 percent this year, according to data compiled by Bloomberg, compared with a 0.8 percent decline in the all-share gauge.
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