Dar es Salaam Stock Exchange (DSE) net profit has slowed down by a two-third in the first quarter of this year, due to one-off prearranged transaction.
The self-listed bourse net profit, on a quarterly basis, dropped to 714.91m/- in quarter one from 2.12bn/- in last year’s fourth quarter.
Orbit Securities, Head of Research and Analytics, Imani Muhingo said the profit’s decline was the results of a prearranged transaction between Rabobank and Arise back in December which significantly hyped the equity in the quarter.
“The profits on a quarterly basis is a result of the prearranged transaction…which significantly hyped the equity turnover of quarter four in 2020, hence transaction fees and CSD fees incomes rose along,” Mr Muhingo noted.
The bourse financial statement showed that the two segments, transaction fees fell by 90 per cent to 136.57m/- from 1.32bn/- and CSD fees by 81 per cent to 178.51m/- from 938m/- in the quarter to quarter basis.
Also the exchange operational expenses, which are pegged to the magnitude of market activities, fell by 84 per cent to 921.65m/-.
“An apple to apple comparison in quarter one of last year still saw net profit declined by 15.9 per cent as the total revenue fell by 11.3 per cent,” Mr Muhingo said.
DSE registered a net profit of 714.91m/- for quarter one of this year, which was a decline compared to 849.60m/- similar quarter last year.
“The fall in this comparison was purely out of decline normal trading activities in the market,” Mr Muhingo noted further.
The transaction fees and CSD fee incomes fell by 64 per cent to 136.57m/-and 34 per cent to 178.51m/- respectively, while operating expenses fell by 44.5 per cent to 151.02m/-.
The equity turnover between these two periods fell by 76 per cent from 98bn/- to 23bn/- during this year’s quarter one while the bond turnover fell by 26 per cent as well.
“DSE’s lifeline seems to be on the listing fees and investment income which collectively accounted for 81 per cent of the exchange’s revenue during the quarter,” he said.
This shows the significance of Treasury bond to DSE, because more than 85 per cent of the listed fees originate from listed T-bonds, while 27 per cent of the company’s assets are T-bonds, and highly contribute to the investment income, while 51 per cent of the company’s assets are in term deposits.
Vertex International Securities, Advisory and Capital Markets Manager, Ahmed Nganya, said revenue declined by 11.38 per cent to 1.79bn/- in quarter one.
“[This shows] the company recorded abysmal revenue as fees income declined…,” Mr Nganya noted.
Ironically, staff cost increased to 774m/- compared to 723m/- in quarter one last year. Returns on Assets were 2.51 per cent against 3.35 per cent of last year while returns on equity were 2.79 per cent against 3.71 per cent.
“We think the company has a work to do to rectify the situation,” Mr Nganya added.