CRDB’s Bull run: Time to buy or brake?

DAR ES SALAAM: AS CRDB shares soar to an all-time high of 680/- per share, many investors find themselves at a crossroads, wondering if it’s still a good time to buy.

This year alone, CRDB has seen an impressive 48 per cent increase in its stock price.

Such milestones often ignite a mix of excitement and caution among investors, prompting a deeper analysis of whether to buy more, hold steady or cash in on the gains.

The surge in CRDB’s stock price is particularly intriguing given its current valuation metrics. With a net asset value (NAV) per share of 745/- and a price-to-book (P/B) ratio of 0.81x, the numbers suggest that CRDB is trading below its book value.

Additionally, a closer examination of the company’s performance reveals a notable upward trajectory since 2021. Specifically, CRDB recorded its highest earnings per share (EPS) of 56/- in the most recent quarter, ending on June 30, 2024.

Moreover, The Compound Annual Growth Rate (CAGR) of the earnings per share (EPS) for CRDB from Q1 2021 to Q2 2024 is approximately 45.92 per cent.

Deciding whether to buy more shares or take a different action when a stock hits a new high involves more than just following market trends. It requires a blend of understanding CRDB’s fundamentals, assessing the overall market mood and aligning these factors with your personal financial goals.

Financial health is a cornerstone. If CRDB continues to perform well financially with strong earnings, robust revenue growth and solid profitability, it might justify the recent price increase and potentially signal more room to grow.

Investors evaluating CRDB should not only assess its current financial health but also consider its potential for future growth. The company has recently made significant strides in expanding its operations.

Notably, CRDB has launched new operations in the Democratic Republic of Congo (DRC), a market still largely untapped and with a substantial population. The promise of this market is further highlighted by the performance of similar enterprises, such as Equity DRC, which contributed 28 per cent to the overall profits of the Equity Bank Group in 2023.

In addition to its geographic expansion, CRDB has also branched out into the insurance sector, launching a subsidiary to tap into this burgeoning market. The significance of this move is highlighted by recent data from Tanzania Insurance Regulatory Authority’s (TIRA) Annual Insurance Market Performance review for 2022.

This report shows that while insurance penetration among businesses served only by commercial insurers stood at a modest 0.68 per cent, the inclusion of public insurers like NHIF, NSSF, WCF and iCHF boosts the overall insurance penetration relative to GDP to a much more substantial 1.99 per cent.

The broader financial and insurance sectors are also showing promising signs of vigorous growth.

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According to the most recent GDP report for the first quarter of 2024, these sectors have recorded a notable growth rate of 17.1 per cent. This rapid growth indicates a vibrant sector environment and highlights the potential for CRDB’s recent expansions to contribute positively to its financial performance.

Market conditions significantly influence individual stock performance and understanding the broader economic landscape is essential.

The Tanzania Share Index, for instance, has risen by 13.57 per cent year to date, which suggests a generally bullish market. In such an environment, a rising tide often lifts all boats, potentially benefiting stocks like CRDB.

However, a bearish turn can quickly turn gains into losses, making it essential to stay informed about broader economic indicators and market sentiment.

Valuation is another critical aspect. CRDB’s low price-to-book ratio suggests that the stock might still be undervalued, providing a potentially attractive opportunity for investors who believe in the bank’s value proposition.

Lastly, your investment horizon and risk tolerance are decisive factors. If you’re investing for the long haul and the fundamentals look promising, holding your shares or even increasing your stake could be wise.

Conversely, if immediate gains are more tempting and align with your financial strategy, taking profits might be the right move.

orbit@orbit.co.tz, ammi.mwamunyi@orbit.co.tz

Ammi Julian Mwamunyi

Portfolio Manager and Head of Research & Investments