As I write, I am sitting, shortly after dawn, on the deck of my family’s safari tent at Mikumi National Park. But for the cellular network coverage and the road that runs through the park, nature here is undisturbed. I am hearing only the sound of birdsong, of which there is plenty. The camp’s coterie of friendly staff who look after us so well are not yet in evidence. My family is sleeping. It’s just me and nature.
Here’s the view >>>>>>
Having the ability to take my job on the road like this is something for which I am grateful. Yesterday, for instance, between morning and afternoon game drives, the highlight of which was my closest ever encounter with a herd of elephants, I spent an hour participating in the Tanzania Breweries Limited (TBL) first-half 2020 results conference call.
My family, including my 16-month old daughter and 5-year old daughter, who has been on safari once before, two years ago, are happy and excited to be on a trip such as this.
For our older daughter, who attends kindergarten back in Bali, we print out her week’s activities and lessons, and, like me, she does her work on the road. She also gets to interact with a whole different set of people, both adults, and children, along the way.
The kids benefit from new experiences, sights, sounds, and foods. If you have ever had a fussy eater, there is no better way than to make them learn to adapt and eat what they are given. Thankfully there is always an option that seems to meet with approval here.
I’d like to give a special shout out to the Fox family who owns a series of camps, including Vuma Hill, where we are staying, for being accommodative of families with children of all ages. It is not always easy to find places where there are no restrictions on bringing kids on safari.
Along with a Russian couple, we are the only guests. Tourism is still struggling to bounce back from the covid-19 shutdowns imposed elsewhere in the world.
This was also a theme of the Tanzania Breweries earnings call. Managing Director Philip Redman told us that while the North West, South and Central regions of the country are seeing good sales again, the North East region, which encompasses the most tourism-dependent areas, such as Arusha, Moshi, and Kilimanjaro, is still struggling.
TBL saw a 9% year-over-year decline in revenue for the first half of 2020. The company attributes this to the covid-19 panic and slowdown in economic activity for the earlier months. The bulk of the falls came in March, especially in April, and in May. In June, things began to stabilize.
Curiously, however, Kenya’s East African Breweries Limited (EABL), driven by its highly successful and popular “Serengeti Lite” brand, actually saw its first-half sales in the Tanzanian market grow by double digits. So, there is a loss of market share issue at play in TBL’s results as well.
Mr. Redman was at pains to point out that, based on the data that he is supplied with, the erosion of TBL’s market share is now drawing to a conclusion. He believes that the company has seen its share stabilize since July. The company plans to invest more heavily in advertising and promotion to regain its mantle as the beer company whose brands enjoy the undisputed number one position in Tanzania for “mind share” among the public.
The company’s lower-margin spirits business is doing quite nicely, but the one chink in TBL’s armour is the lack of a profitable offering in the low-end beer market. Last year they shut their unprofitable Dar Brew operation, and they have yet to replace it with anything.
I have some more work to do analyzing TBL’s future prospects. But the one thing that’s in our favour, should we look to invest, is that there are people selling shares in off-market block trades at less than half the price the shares are quoted at officially on the Dar es Salaam Stock Exchange. So, the valuation is undemanding right now.
However, for African Lions Fund, I am also looking for companies that can double their sales and profits on a 5-10 year view. TBL should make the grade given Tanzania’s demographic profile. But that is still subject to further analysis.
The same goes for the leading mobile phone company here, Vodacom (VODA), which is a stock I’ll discuss in a future missive. Being out on the road you learn a lot about the different telecom firms’ network coverage and service reliability.
For now, I’m headed to breakfast, and a morning game drive, before coming back to deal with the day’s administrative tasks, such as issuing instructions to settle recent trades, and calls with my broker’s sales trader in London.
Until next time,
Global Value Hunter
P.S. Eunice here. Tim’s editor and web designer. As we were getting this article ready for upload to the Global Value Hunter website and email distribution, Tim was virtually taking us with him and his family during their morning game drive. They spotted a lioness showing off her skills stalking prey. They were lucky to see it first-hand and we thought of sharing them with you….