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NATIONAL

BUDGET 2017
A SECTORIAL
ANALYSIS
DISCLAIMER

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AGENDA

EXECUTIVE SUMMARY 4
KEY RATIOS 6
KEY TARGETS 7
SECTORIAL ANALYSIS 9-16
FINANCIAL 9-10 CONSTRUCTION 14

TRAVEL & LEISURE 11 TECHNOLOGY 15

CONSUMER STAPLES 12 LOGISTICS 16

CONSUMER DISCRETIONARY 13
EXECUTIVE SUMMARY

o The 2017/18 National Budget marked continuity


+3.0%
with the previous budget and with the PMs Trade
12%
address given upon taking office earlier this year.
o The innovative aspect stemmed from the welcome OTH
COND
-0.1%
9% Manuf.
introduction of a 3 Year-Plan with Targets UT 14%
21%
providing enhanced forward visibility on the HLTH
4% -0.1%
5%
highly-anticipated announced budgetary measures. GOV 6% 9% CONS Manuf.
4% 4%
o Road decongestion projects are slated to kick- COMM
6% 10% +3.7%
Agri.
start during Q4-17 boosting construction. PROP 10% 12% IND 4%
0.0%
Construction
o Major tax breaks and incentives have been put in T&L
FIN 6%
3%
place to foster an Innovation culture and 7% 7%
+3.9%
2% 3% Transp. &
encourage Research & Development in High- +6.0% Storage
+9.2%
Banking
Tech fields. Acc. & Food +5.2%
Insurance

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DEAR COLLEAGUE AND POWERPOINT AFFICIONADO

MACRO OVERVIEW
KEY RATIOS

65 66
65 63
63 63

CA Deficit [%]
61

Deficit [%]
-4.6 -4.6
Debt [%]

59 62 -1.8
-5.6 -4.5
-4.9 -5.1
-6.2
58 56 -7.2 -2.2
56 Actual
-2.5
Forecast
-9.1 -3.2
-9.6 -3.0
-3.5 -3.2 -3.5 -3.5 -3.2
-11 -3.5 -3.5
-12

o Government intends to redefine its o While the Current Account Deficit o The Budget Deficit has hovered close to
debt ceiling in terms of gross debt to be which has been revised to include GBL 3.5% since 2013, a gap which the
closer aligned with the IMFs definition. flows has been contained below 5% Government intends to lower to under
for two consecutive years, it is 3% in 2020.
o The target remains to bring it down to
forecasted to increase gradually in
under 60% although the ceiling and o Given the flat 15% rate of the three main
coming years.
timeline shall be rejigged. taxes (VAT, Income & Corporate) with

o The Debt:GDP Ratio is expected to near


o Should the incentives for establishment the exception of a few levies, driving
of a high-tech industry attract investors, growth will be key in closing the gap.
~63% in the near-term.
we would expect the CAD to improve.

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KEY TARGETS

95bn 6%
INFRASTRUCTURE
UNEMPLOYMENT
SPENDING

<60% 35%
PUBLIC DEBT RENEWABLES IN 2030

150k 100%
NEGATIVE TAX
BROADBAND IN 2020
BENEFICIARIES
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DEAR COLLEAGUE AND POWERPOINT AFFICIONADO

SECTORIAL DEEP DIVES


CAPITAL MARKETS

145 MSCI FM
4.2
Mauritius World (by IMF)
ALEX-20
4.1
MARKET PERF.

130 ALCAPEX-12
3.9

GROWTH
SEMDEX
115 3.5
3.4 3.7 3.7
100
3.5 3.5 3.5
3.4
85 3.3
3.1 3.2
70
2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017E

o The Bourse has been bullish since the start of the year. This budget o There is a strong will to help the burgeoning debt market
of continuity is unlikely to break its momentum. In fact the setting thrive through the internationalization of the SEMs debt trading
up of a Financial Crime Commission during 2018 will enhance platform. The goal is to encourage international corporates and
the existing framework converging towards international best governments to list multi-currency bonds on the SEM. The latter is
practices. expected to link up with Euroclear to enhance settlement
capabilities.
o The previously announced creation of a derivatives and
commodities trading platform (MINDEX) is slated for late 2018.

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FINANCIAL SECTOR

349 481 343 450 330 404


165 185

INCORPORATIONS
5.7 5.7 5.7 -539
-98
FINANCIAL

-324 -391

5.5 5.5 5.5 -1,559

5.3 GBL1
-2,959 GBL2

2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2017*

o The financial sector remains one of the main pillars of the o A Regional Fintech Association will be set up to advise on the
Mauritian economy with a growth averaging ~5% and is expected business and regulatory environments for Fintech activities such
to undergo a transformation in the light of changes to as peer-to-peer lending and shifting towards contactless payments.
international reporting requirements. This is likely to help banks and other service providers innovate
and become more efficient.
o Aimed at enhancing the reputation of our financial center and
providing higher quality offerings, GBL1s will be required to fulfill 2 o The doubling of the minimum capital requirement to Rs400M
out of 6 criteria to meet substance requirements. for commercial banks will not impact any of the listed banks.

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TRAVEL & LEISURE

ARRIVALS & RECEIPTS


11.4 Arr [#k] 1,340
Receipts [Rs bn] 1,275 59
TOURISM

56
7.2 1,151
6.3 965 965 50
4.7 1,038
993
3.2 0.7 44 44
1.9 43
41
2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2017E

o The tourism sector had recovered strongly in recent years on o Government intends to promote the development of adventure
the back of increased air connectivity. Tourist arrivals have sports, rehabilitate cultural sites and re-introduce in-hotel casinos
experienced double digit growth in 2015-16, as reflected by the to boost offerings to visitors.
improved domestic results for listed hotel groups.
o Aiming to better control money, cash betting above Rs2,000 will
o Budgetary measures for the sector were mainly focused on further no longer be allowed with a player instead requiring an account.
enhancing air connectivity through an Asia-Africa air corridor. ASL could therefore incur additional administrative expenses
while the impact on betting activity remains unclear.
o KLM is expected to begin flights further boosting arrivals whose
2020 target has been re-set to 1.6M.

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CONSUMER STAPLES

Sugar [kt] Fish [kt] 15.2


3.7 3.7 435
3.5
AGRICULTURE

PRODUCTION
12.4 12.7

2.3 409
405
400
0.5 386 390
1.1
5.8
5.3 4.8 366
-0.3
2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2017E

o In continuation with previous years incentives promoting self- o Government is working on a contingency plan which includes
sufficiency, Government intends to incentivise production of new boosting medical facilities for livestock following the recent
crops including Macadamia nuts, revive Tea production, and re- epizooty outbreaks which would shelter the likes of INNO and
convert abandoned sugarcane fields back to growing sugarcane. LFL from future shocks.

o With a target export of 475kt of Sugar in 2020 against 390kt, o Fishing permits for Mauritian vessels will be extended to 5-Year-
sugar millers and refiners (ALTEO, TERRA, OMNI, MEDL) Terms subject to the catch being unloaded and processed in
might experience a boost in the medium term. Mauritius which should help Freeport operators and local fish
processing companies.

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CONSUMER DISCRETIONARY

Europe [Rs bn] Africa [Rs bn]


Americas [Rs bn] AsiaPac [Rs bn]
86 87
MANUFACTURING

Total
4.7 81
78
22
72 18 14
67

EXPORTS
62
7 8 9 10 10
7
2.1 16 15 16 18 18
0.7 1.8 13
0.0 1.1 38 39 40 38 36 37
-0.1
2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2017E

o Manufacturing remains the single largest segment and is a key o The Speed to Market Scheme - offering a 40% rebate on air
peg in Government plans to further develop the domestic freight to European markets for textile companies will now be
economy. Gross Value Added stood at Rs54bn and is targeted to extended to other goods which include jewellery, medical
reach Rs81bn in 2030. Government has therefore extended devices, fruits, flowers, vegetables and chilled fish exports.
facilities to boost manufacturing.
o Companies bringing fresh investments into the manufacturing of
o Companies will benefit from being taxed at 3% on profits from pharmaceutical products, medical devices and high tech products
exports instead of 15% which is expected to have a positive will be eligible to a 8-year income tax holiday.
impact on companies.

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CONSTRUCTION

Res. [Ha]
154

PERMITS GRANTED
Non-Res [Ha] 16
CONSTRUCTION

7.0 144
Total
132 138 132 27
0.0 122 19 21
119
15 117
-3.0 32 113 111
-2.0 -4.9 104
-8.2 -8.5 90

2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2017E

o Enhancing public infrastructure remained one of the five central o Works on Jinfei, Mon Tresor (OMNI), Medine (MEDL) and Moka
foci of the 2017/18 national budget. (ENLL) smart cities are said to have commenced whereas
works for Cote DOr city would start with the sports complex
o Projects announced were in continuity with previously announced
meant to host the 2019 Indian Ocean Games later this year.
major developments which have not yet kick-started. The
timeline for commencement of works on the Metro Express at a o The extension of 8-year work permits to construction workers
cost of Rs21bn, the Fly-Over in Phoenix & the A1-M1 bridge at a is a welcome measure for building contractors.
combined Rs5bn, was revealed to be during Q4-17.
o Building materials companies UBP and GAMMA should in
o Some Rs25bn are also expected to be injected to enhance drains principle benefit from increased demand later this year.
as well as replace leaky water distribution pipes.

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TECHNOLOGY

BROADBAND TELEPHONE
863 2,141 2,204
9.3 Mobile [k]

SUBSCRIPTIONS
2,023
TECHNOLOGY

8.9 Fixed [k] 662 213 1,895 390


1,834 380
579 372
520 1,667
197 651 349 363 1,814
423 182 1,761
162 375 1,651
7.1 6.9 280 464
141 1,484 1,532
397
6.4 358
118 282 1,292
5.9 6.0
162
2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

o ICT growth has slowed from high growth rates nearing 9% to ~6% o Government has earmarked Rs450M for innovative projects and
in recent years but remains a key pillar for growth in is creating a Rs50M fund to finance Research & Development.
Governments 2030 vision.
o Broadband penetration has reached 68% and is targeted to reach
o Government has introduced tax holidays both on corporate tax 100% in 2020; with the Tech sector poised to create another 7,000
and land transfer for investors willing to develop high-tech jobs during that time.
(Medical devices, Pharmaceuticals, Ocean Economy) in Mauritius,
o We would therefore welcome the listing of Telecoms and High-
in addition to accelerated depreciation.
Tech companies on the bourse which would provide a platform for
capital raising.

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LOGISTICS

FREIGHT HANDLED
3.9 7,075
3.8
3.7 47
LOGISTICS

6,896
45 6,841
3.4
6,736
42
Sea [kt]
2.8 6,477 39
2.6 37 Air [kt]
2.4

2011 2012 2013 2014 2015 2016 2017E 2011 2012 2013 2014 2015 2016 2017E

o The logistics & transport sector has experienced growth rates in o The improved infrastructure (Berth extension, Cranes,
excess of 3% in recent years; however, freight handled has stood Breakwaters) at an estimated cost exceeding Rs10bn is expected
below the peak levels of 2012. to boost maritime freight handled to 8,600kt in 2020 and air
freight to 58kt.
o Government aims to enhance both air and maritime connectivity
by upgrading infrastructure over the course of the next few years. o Should these investments yield expected results, companies such
as ROGE, IBL, MFD and VEM are likely to benefit from the
enhanced activities.

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REFERENCES & ACKNOWLEDGEMENTS

REFERENCES AUTHORS ACKNOW-


LEDGEMENTS
Budget Speech 2017-2018 Bhavik DESAI
Three Year Strategic Plan Head of Research Damien MALLIAT
2017/18 2019/20 Trader
<http://budget.mof.govmu.org/> Prerna CHEEKHOOREE
[08 Jun 2017]. Research Analyst Krishen PATTEN
Chief Risk Officer
Data for charts Alexis CORSON AXYS Investment Partners
sourced from Statistics Mauritius,
Bank of Mauritius Statistical Investment Analyst
Bulletins, and Ministry of Finance
& Economic Development past
budget documents.

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