It’s not necessary to wire money to a far-flung African locale to invest in the rise of the African consumer. Here are three companies that are making big bets on the continent and conveniently trade on the New York Stock Exchange and the Pink Sheets.
Olam International (OLMIY.PK)
(P/E Ratio: 12.5; P/B Ratio: 1.8; Dividend Yield: 2.2%)
Singaporean agricultural commodities trader, Olam International, believes African farmland is bargain-priced and has committed to a slew of major African investments in the past three months amounting to nearly half a billion dollars.
In February, it bought the oddly-name Nigerian biscuit and candy maker, Titanium Holdings, for $167 million.
Shortly thereafter it announced the completion of a $55 million wheat mill in Ghana and that it would soon begin construction of a large cashew mill in the north of the country.
Next, it bought a controlling stake in a Gabonese rubber plantation for $183 million. They plan to nearly double the plantation’s existing 69,000 acreage, making it one of the continent’s largest rubber producers.
Then, last week, it shelled out $50 million for a 49% stake of Africa’s largest cotton company, the Zimbabwe-based Aico Africa.
These investments will likely increase Olam’s African exposure. They are already present in 26 African countries, and the continent accounted for 17.1% of group revenue in 2011 and provided 17.6% of its total product.
(P/E Ratio: 24.9; P/B Ratio: 3.1; Dividend Yield: 2.2%)
Brewery giant, SABMiller, announced last week that it would spend $2.5 billion on new African breweries over the next five years. Management says the expenditure is needed in order to keep pace with rising demand, which it believes could quadruple by 2030. The company’s African sales rose 11% during the last three months of 2011.
Notably, the new investment excludes South Africa, and will involve the construction of two to three new breweries per year. It’s also experimenting with sorghum and cassava-based brews. Both ingredients are widely used in traditional African beers and cheaper than barley.
SABMiller presently operates 31 breweries and 22 bottling plants on the continent and employs over 13,400 people. Its African assets contributed 13% of group EBITA.
Yum! Brands (YUM)
(P/E Ratio: 24.6; P/B Ratio: 15.9; Dividend Yield: 1.5%)
The parent company of KFC and Pizza Hut, Yum! Brands, plans to begin selling the Colonel’s fried chicken in seven new African countries this year. It also intends to introduce South Africans to my guilty pleasure, Pizza Hut. (C’mon, you know you love the stuffed crust, too!) Yum! already operates 656 KFC locations in South Africa and entered Ghana, Zambia, and Kenya in 2011.
The 2012 expansion drive will involve opening 130 stores and will cost roughly$74 million. By next year, Yum! will boast 1,000 African locations.
South Africans bought roughly $1 billion worth of KFC in 2011, equivalent to about 9% of Yum!’s total revenue.
[Disclosure: I have no position in any stock mentioned in this article, and I have no intention of taking any within the next 72 hours.]