Sam Houlie, a money manager at Momentum Asset Management, is betting that African Bank Investments Ltd. will rebound after adding South Africa’s worst-performing stock this year to his funds.
Houlie has allocated 6 percent of the Momentum Small/Mid-Cap Fund he manages to the Johannesburg-based lender known as Abil, according to a fact sheet on the website of Momentum Asset Management, which manages the equivalent of $18 billion. Abil 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 behind in loan payments, 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, 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 dropped 59 percent over the past 12 months, the worst performer in the 165-member FTSE/JSE Africa All-Share Index, which gained 12 percent. The lender’s furniture unit, Ellerines, which sells more than half its goods on credit, posted a 21 percent decline in the quarter through December, it said last week. Abil fell 6 percent to 9.35 rand, the lowest since September 2004, by the close in Johannesburg.
Houlie is also buying shares in Impala Platinum Ltd., Pallinghurst Resources Ltd. and Anglo American Plc, while still seeing further declines in industrial stocks, he said.
The Momentum Value Fund is the second best-performing South African equity fund after a similar one run by Investec Asset Management, according to data compiled by Morningstar Research. The fund has returned 6 percent this year, according to data compiled by Bloomberg, compared with a 0.5 percent decline in the all-share gauge.