Stock market: profits and dividends out of danger?

The acceleration of inflation and sluggish growth raise questions about the outlook for listed companies. Despite the headwinds, they should do well, according to BKGR. The research firm predicts increased activity as well as earnings and dividends for a group of 40 companies (Scope 40) representing 90% of the national market capitalization.

After a solid rebound of 18% in the Masi in 2021, the year 2022 had started well (up 3.93% in January) before the war in Ukraine and the surge in inflation plunged the market into doubt. During Friday’s session, the flagship index of the place posted an annual loss of nearly 6%.

In April, the investor confidence index, calculated by Attijari Global Research, stood at 44.8 points against 67.4 in October 2021. “The market is under tension because it is difficult to assess the ‘impact of inflation on corporate margins and demand,’ says a market professional.

19.7 billion dirhams in dividends in 2022
In a more difficult than expected environment, with economic growth less than 2%, listed companies should do well according to forecasts by BMCE Capital Global Research (BKGR). Analysts from the research office, a subsidiary of BMCE Capital, the investment banking division of the Bank Of Africa group, even see the profits of a group of 40 companies (Scope 40) -representing 90% of market capitalization-, progress faster than initial forecasts, an increase of 8.6% to 28.9 billion dirhams against 8.3% anticipated last October.

The favorable price environment will support the results of the Oil and Gas sector, which is one of the main positive contributors to market results (+525 MDH) ahead of the Electricity (+242 MDH), Insurance (+230 MDH) and Services to communities (+160 MDH). Almost 50% of the rise in profits on the rating in 2022 will come from the banks.

Without returning to their pre-Covid level, the cumulative profits of financial companies should increase by 18% to nearly 10 billion dirhams thanks, in particular, to the continued improvement in the cost of risk. Shareholder compensation should not suffer from the economic climate. On the contrary, forecasts suggest a 2.5% increase in the pot to 19.7 billion dirhams, i.e. a dividend yield of 3.2%.

Market revenue up 6.7%
The activity of listed companies should grow significantly faster than economic growth, according to analysts. The turnover of Scope 40 would increase by 6.7% to 241 billion dirhams. In the industry, analysts anticipate an increase in revenues of 7.9% to 166 billion dirhams and 12% compared to 2019.

This growth would be mainly driven by distributors of petroleum products in a favorable price environment. Metal prices would also remain at a high level, which is good for Managem. The manufacturer should also benefit from the increase in production capacity, particularly in the Tri-K gold mine in Guinea.

In distribution, Label Vie will positively influence sector revenue after the acceleration of store openings in 2021. These positive contributions to industry revenues will be mitigated by the expected decline in Maroc Telecom’s revenue.

In the financial sector, activity will continue to be driven by demand for cash loans. Investment files are rare in a highly uncertain context. The direction of rates also raises many questions and will depend on the behavior of inflation, the situation of public finances and the decisions of Bank Al-Maghrib.

For now, BKGR expects a 4.6% increase in the sector’s interest margin. Commissions and income from market transactions should increase by 5% and 3% respectively. Net banking income is expected at 55.8 billion dirhams, up 4.1%. For their part, insurance companies will continue to benefit from the dynamism of life insurance (+7.6%) and, to a lesser extent, from the non-life business (+3%).

Premiums issued by listed operators would total 19.2 billion dirhams, up 5.1%. The positive evolution of market activity should help to cushion the increase in costs in an inflationary environment. Operating income would improve by 4.2% to 61 billion dirhams, including an increase of 3.4% to 31 billion dirhams in industries.

The operating margin there should come out at 18.6%, down 0.8 points mainly due to the rise in input costs.

Franck Fagnon / ECO Inspirations