Ivory Coast Capital Markets: Interview with Kadi Fadika-Coulibaly of Hudson

Interview with Kadi Fadika-Coulibaly, Managing Partner at Hudson & Cie

What is your analysis of the market and your assessment of the Stock Exchange and its performance in 2016?

The Index grew 17 percent in 2015, 40 percent in 2014 and another 5 percent in 2013. Compared to recent years, 2016 was somewhat down in that trend. The Index lost ten percent year to date. We have seen companies release results that they were not up to speed with the growth that we have been seeing in the past three years.

What would explain this?

One explanation is the offer of stock that we have on our market. For the past ten years, we have seen the market growing, and two to three new companies being listed. The demand is so huge from the local, regional, and international investors that there are not enough shares for everyone. As a result, the prices were a bit inflated and became decolorated from the fundamentals of the company.

Is there a lack of awareness of the market itself?

When we look at the economy, we see that things are moving on the micro level as well. At Hudson, for example, we have hired four people last year and look to hire four more in 2017.

There is not a lack of awareness anymore. In the region, we still have work to do to make our market known. The Stock Exchange culture has poured into the economy and the people think of the Exchange as a saving option or an investment option. But much has been done so far, and we see it in the IPOs. The latest IPOs were oversubscribed five or six times what was offered. Internationally as well, the roadshows that the market did in New York, London, and Dubai to make our market known were of great help. We cannot say that the market is not well-known at this point; more so, because the MSCI included a handful of stocks from the BRVM into its Frontier Markets Index.

What is your view on liquidity in the Stock Exchange?

The liquidity is still low if we compare to an emerging market. Nine stocks made the MSCI Frontier Markets Index. The liquidity has increased from 700,000 USD in 2013 to 2 million USD today. It fluctuates between 1.7 to 2 million USD each day being exchanged on the market. The market liquidity is not as it used to be. Now, it is improving because companies are splitting their shares and making it more affordable to private investors, and also because we have new offers. We have companies being IPOed on the Exchange. This year, we had two new IPOs and two new listings on the BRVM. We are expecting to see another two next year.

Which companies aim to appear next year?

NSCI Bank and another privatization company from the State of Côte d’Ivoire are planning to appear.

Ivory Coast is displaying a growth of 8.8 percent each year, which is an amazing feat and makes the country very attractive. It is the largest growth rate found worldwide. Is this development reflected on the stock market?

We see that the companies that are listed on the Stock Exchange are the largest in Ivory Coast and the region, for example Sonatel which is one of the largest Senegalese companies. Those companies have great fundamentals and for some of them, they are linked directly to the economy. The results we see from the banks, agroindustrial companies, and even the telecom companies are directly linked to the purchasing power of the population of the country they operate in. They have great days in front of them because of the GDP growth that we see at the macroeconomic level. When we look at the economy, we see that things are moving on the micro level as well. At Hudson, for example, we have hired four people last year and look to hire four more in 2017. Business is increasing and we are deepening our operations in investment banking, brokerage, and asset management. This 8.8 percent growth rate is accurate, but it needs to come without inflation. It is difficult to say whether this is the case, currently.

The company provides advisory services, corporate investment banking, and asset management services. What are some of the reasons why you are different compared to other companies in the sector?

For the past 20 years, Hudson has been providing services to regional clients, but more so to international clients. Internally, we made our services up to international standards. We are able to attract investors that would like to invest into the region and Ivory Coast by offering services up to their standards. Now, we are doing the reverse. We are offering those services and expertise that we developed to regional and local investors. We are a private company. We are not linked to any network. We have a partnership system with our co-workers that helps us to bring the best service we can, and everybody is working towards the same direction for greater service for our clients.

You currently have a partnership in Togo. What is the state of that relationship? Is it still something interesting that you mean to carry on doing? How do you view partnership in the company?

We have a very long history with partnerships. Our first partnership was signed in 1998 with Auerbach Grayson, a broker based in New York. The partnership in Togo was signed in 2008. The way we see partnerships is really the truth of the word. This means, we have ups and downs, but we are partners so we continue working together until we achieve the goals we have set for ourselves. We want to continue building this type of partnership with other people in the region because we are based in Abidjan and we do not have headquarters in the other seven countries. Our goal will be to find some entity that has the same thought as the partnership that we have, and build that relationship to be able to expand our services outside of Togo and Ivory Coast, whether in Senegal, Mali, or beyond.

You have a research department that produces many research reports. What are the qualities of what you produce in terms of work?

Our research department was built at the beginning of the activity of Hudson. We put great attention into the analysts we recruit. We want them to be independent and to have their own opinions. All we do is make sure they have the right training, technical training and open-mindedness. We make sure they are able to be on the ground, speak with the management, and really look at the companies. They must be aware of everything that is happening locally and regionally, as well as at the international level because that directly impacts the operation of the companies that export in Ivory Coast and worldwide. This enables them to give great research on the knowledge of the company they analyze and the economics of Ivory Coast and Senegal. We also send them to work in Burkina Faso and other countries so they have on the ground knowledge.

One of the biggest challenges is always the human resource factor. What kind of opportunities do you offer here? What kind of recruits are you looking for?

We are looking for people that have regional knowledge. They are in the WAEMU region, but we are also looking for international experience. Because most of our clients based in countries such as South Africa or the US speak English, we need bilingual people. It is complex because in Ivory Coast, people speak French. We do speak English and we have learned it in school, but it is quite difficult to find fluent, bilingual people that are born and raised and have gone to school in Ivory Coast. So, we need to look at people from abroad that went to the US or the UK to be able to find those that are bilingual to the level that we are looking for. Recently, we have been putting a special emphasis on technical education and we require CFA for our analysts, and even our economists because we are looking for chief economists. We are also looking for great traders. These are the three areas where we will be hiring those four people.

Where do your clients come from? What kind of clients do you have?

We have multinational clients. We have funds based in South Africa, USA, UK, Singapore, Botswana, and Kenya. We also have clients in Burkina Faso, Mali, and all the countries of the WAEMU region.

How do you interact with these clients? What services do you bring to them?

The client is usually referred to us by word of mouth from other clients. We go through a due diligence and then offer them research. This is the first contact they have with Hudson. They need to learn the market, and learn about the countries they will be invested into, and they have their own due diligence to perform. We work with them through the due diligence that they have to do to understand that the country is investable. Once we have done that, we offer them brokerage so they can begin investing. Sometimes, we also help them with setting up the custody for the investment that they will make. We take them from the beginning through execution to help them invest on the BRVM.

What are the major events that you are doing next year or that you have been doing?

We organized the Regional Exchange Conference, which is an investors conference where we invite all our clients from abroad and the region to come and meet with the companies and the management of the listed companies on the BRVM. We have been organizing this event for the past two years now, and the third addition will be in March 2017. This event has been a great success from the start because before, we did not have such an event in the region, locally. For Hudson, we had been organizing research trips for our clients for quite a long time. So, we have decided to gather all these clients and companies together on one date and in one spot in Abidjan to bring them the bulk of everything that they could grasp on the BRVM over three days. We have SOLIBRA being represented, the BOA, banks, and BNP set to come this year. It is a great event.

Do you expect there will be more investors coming next year?

The first year we had 20 investors, then the second year 25 investors. We expect the attendance will be the same or a bit higher this year and are hoping for at least 30 investors to come. We hope Sonatel will be able to attend this year, as they were unavailable the last two years due to scheduling conflicts. They are the largest capitalization on the BRVM, so it will be a great incentive for other investors to attend. These are Frontier Markets investors, so they also come for the small capitalization. Sonatel is a well-covered stock, so investors can find information on the website or from other analysts. The unique aspect of this event is that you will find companies that do not speak as much to investors, but they are still present. So, it is a good opportunity to meet these small capitalization and hard to find or hard to speak to companies.

What is your forecast for the development of Hudson in the medium term of two to three years’ time? What would you like to have achieved?

There is one thing that Hudson will put together that we have been postponing for too long, now. Our goal in two years’ time will be to have our collective investment scheme company in place. One area where Hudson is not present is retail investors. We target high net worth individuals and institutions, but we need to have a product to cater to private retail investors as well. Putting together a mutual fund will be a great help. As we are an independent company, we need to find a solution to distribution and this is what we are working on currently.

What is your projection for the development of the market in the future?

Ivory Coast has a great future ahead because of the diversification of our economy. We have agriculture, we are looking for oil, we have all the great people here. The growth that we have seen is here to stay. We are ready and willing and working towards the same goal. We want to see this country become the greatest it can be, and this is what people are coming here to find.