Morgan Stanley Capital International (MSCI) announced the results of its May 2017 Semi-Annual Review for the Frontier Market Index. We’ll take a look at the four new additions to the index.
Transportadora de Gas del Sur SA (Argentina)
Established in 1992, Transportadora is the largest extractor of natural gas in Argentina. A handful of analysts have recently expressed positive outlooks for the company, with many giving “Buy” or “Strong Buy” recommendations, indicating significant upside and projecting a target price of $18.80. Transportadora is currently trading around $15.35, up from $9.02 at the beginning of the year. If the analysts’ price targets are achieved then the price will be more than double the starting price.
Argentina’s stint as a Frontier Market may come to an end in mid-June when MSCI announce whether or not the country will be upgraded to an Emerging Market. Companies like Transportadora will definitely be in a stronger position to benefit from the improved status if it materialises.
Gulf Finance House (Bahrain)
Gulf Finance House, now know as GFH Financial Group, is a Bahrain-based Islamic investment bank with a strong client base in its four main activities: wealth management, commercial banking, asset management and real estate development. It’s most recent award was being crown as 2015’s “Best Investment Bank in the Middle East” at the 10th Islamic Business & Finance Awards.
GFH has posted strong finance results in recent times. Its share price is currently up 19.24% year-to-date and 197% since May last year. Net profits increased almost 20-fold in 2016, with the figure standing at $233.05 million. Due to the strong performance, shareholders have proposed a increase in cash dividend to 12%, up from 10%.
Zagrebacka Banka (Croatia)
Zagrabacka Banka (ZABA) is the largest bank in Croatia and was the first bank to be privatised and listed on the Zagreb Stock Exchange. At the end of 2016, ratings agency Standard & Poor’s revised ZABA’s outlook from negative to stable while reaffirming its “BB” credit rating, citing improving operating conditions for Croatian banks. ZABA will also have a significant role in Croatia’s largest IPO in 9 years.
Despite the positive news, ZABA suffered in the first quarter due to the ongoing crisis with food and retail company Agrokor. The bank recorded a post-tax loss of $24.45 million in the first three months of 2017, which was also one of the main reasons Croatia was one the worst performing Frontier Market in April this year having also “achieved” the same title for the preceding month.
Greenbay Properties (Mauritius)
Finally, Greenbay Properties is a real estate company based in Mauritius and invests primarily in European properties that provide strong sustainable income. The firm has enjoyed a 20% increase in its share price since the start of the year and over 53% since March 2016.
Greenbay recently posted a substantial increase in pre-tax profits which stood at £5.9 million ($7.62 million) compared to a loss of £356,451 ($460,605.98) a year ago. The company also announced a dividend of 0.2p per share and expects a 25% growth in dividends before the end of September 2018. The Mauritian property market may experience an uptick in demand after some restrictions on foreigners purchasing property were lifted in April.
What else happened to the Frontier Market Index?
Due to Pakistan being upgraded to an Emerging Market, MSCI have decided to remove 16 Pakistani stocks from the Frontier Market Index in anticipation of the Asian economy’s reclassification.
There was further good news for Pakistan after MSCI announced that 6 companies will be added to the All-Country World Index. These companies are Engro Corporation, Habib Bank, Lucky Cement, MCB Bank, Oil & Gas Development and United Bank. The MSCI World Small Cap Index also welcomed 27 new Pakistani stocks to the index, the largest increase in the Asia-Pacific region (compared to 22 for China and 15 for India).