Why This Matters
Fundamental analysis (análise fundamental) is the art and science of determining an investment’s intrinsic value — what it is truly worth based on underlying business and economic realities, rather than what the market prices it at today. If the intrinsic value exceeds the market price, the investment may be undervalued and worth buying. This is the approach used by the world’s most successful long-term investors.
Top-Down vs. Bottom-Up
There are two complementary approaches to fundamental analysis:
Top-down (De cima para baixo): Start with the macroeconomy, then narrow to sectors, then to individual companies.
- Global economy → Oil prices → Angola economy → Banking sector → BAI specifically
Bottom-up (De baixo para cima): Start with the company’s financials and work outward.
- BAI’s financial statements → BAI’s competitive position → Banking sector dynamics → Angola macro environment
The best analysts use both. Understanding that Angola’s economy is growing at 3.5% (top-down) and that BAI’s loan book is expanding at 22% (bottom-up) gives you a more complete picture than either alone.
Macroeconomic Analysis for Angola
Before investing in any Angolan asset, assess the macro environment:
GDP Growth: Is the economy expanding or contracting? Angola’s non-oil GDP growth (the more relevant measure for most companies) indicates underlying economic health. Higher growth = more business activity = better corporate profits.
Inflation Trajectory: Is inflation rising or falling? A declining inflation trend is positive for both bonds (real yields improve) and stocks (consumer purchasing power stabilizes). The BNA’s target is to bring inflation to single digits by 2027.
Oil Prices: At $70-80/barrel, Angola’s fiscal situation is manageable. Below $50, stress appears. Above $90, surpluses emerge. Track Brent crude prices as a leading indicator for Angola’s economic outlook.
Exchange Rate Stability: A stable Kwanza reduces uncertainty for all domestic investments. Sharp depreciation events trigger inflation spikes and disrupt business planning.
BNA Policy Direction: Is the central bank tightening (raising rates) or easing (cutting rates)? Tightening typically benefits bonds (higher yields on new issues) but pressures stocks. Easing benefits stocks but reduces new bond yields.
Company-Level Analysis
For BODIVA-listed companies, focus on these fundamental factors:
Profitability
- ROE above 15% indicates efficient use of shareholder capital
- Net profit margin should be stable or improving
- Revenue growth should exceed inflation (15.7%) in nominal terms to represent real growth
Balance Sheet Strength
- Capital adequacy (for banks): BNA requires minimum ratios. Higher is safer.
- Non-performing loans (NPLs): Below 5% is healthy for Angolan banks. Rising NPLs signal credit quality deterioration.
- Liquidity ratios: Can the company meet short-term obligations? For banks, the loan-to-deposit ratio should be below 80%.
Valuation
- P/E ratio compared to peers and historical averages. Angola stocks trade at 3-8x, well below African peers (10-15x) and global averages (15-20x).
- Price-to-book below 1.0x means you buy assets for less than their accounting value.
- Dividend yield above 8% provides strong income while you wait for capital appreciation.
Competitive Position
- Market share: BAI has the largest branch network and deposit base in Angola.
- Regulatory advantages: Banking licenses are a barrier to entry. Listed companies have reputational advantages.
- Growth potential: Is the company expanding into new services, provinces, or customer segments?
Worked Example: Fundamental Analysis of BFA
Macro check:
- Angola GDP growing ~3.5% — supportive
- Inflation 15.7% but trending down — moderately positive
- Oil at $75 — adequate for fiscal stability
- BNA rate at 17.5% — high but stable
Company fundamentals:
- Revenue growth: +20% YoY (above inflation)
- ROE: 18% (strong)
- NPL ratio: 4.2% (healthy)
- Cost-to-income: 48% (efficient)
- Capital adequacy: 22% (well above BNA minimum)
Valuation:
- Share price: Kz 2,800
- EPS: Kz 520
- P/E: 5.4x (cheap vs. African banking peers at 8-12x)
- Book value per share: Kz 3,200
- P/B: 0.88x (below book value)
- Dividend yield: 8.5%
Assessment: BFA is a profitable, well-capitalized bank growing above inflation, trading at a significant discount to peers and below book value. The 8.5% dividend provides income while the below-book valuation offers capital gain potential if the market re-rates toward regional norms. Key risks: sovereign credit risk, currency risk, concentration in financial sector.
Decision framework: For a moderate-risk portfolio, BFA merits a 10-15% allocation within the equity sleeve. The combination of income, growth, and value characteristics aligns well with long-term objectives.
Key Takeaways
- Fundamental analysis determines intrinsic value — buy when market price is below intrinsic value
- Use both top-down (macro) and bottom-up (company) approaches
- Angola macro factors: GDP growth, inflation, oil prices, exchange rate, BNA policy
- Company factors: profitability (ROE, margins), balance sheet (capital, NPLs), valuation (P/E, P/B), competitive position
- Angolan stocks trade at deep discounts to global and regional peers — reflecting country risk and market immaturity
- Fundamental analysis is a continuous process — reassess as new data becomes available
Common Mistakes
Anchoring to a single metric — A low P/E does not automatically mean “buy.” A stock can be cheap for good reasons (deteriorating fundamentals, regulatory risk).
Ignoring macro context — A great company in a collapsing economy can still be a bad investment. Always assess the environment.
Analysis paralysis — Waiting for perfect information before investing means never investing. Make decisions on sufficient information, not perfect information.
What’s Next
With fundamental analysis frameworks in place, the next lesson applies these specifically to Angola’s equity market — how to analyze the five listed companies and identify the best opportunities.
Next Lesson: Equity Analysis — Deep Dive into BODIVA Stocks
Review company data on BODIVA Equities and track macroeconomic trends on the Economy Dashboard.