Kenya General Elections 2017; The Weekly Market Update

Last week’s volume increased substantially with 210.6 million shares traded as compared to the previous week’s 151.9 million (+38.7%). Total turnover increased to Kshs. 5.08 billion from Kshs. 4.47 billion (+13.5%). However, all the main indices reacted to pre-election tensions. NSE 20 dipped to 3775.89 (-0.60%), the broad NASI to 158.17 (-1.87%) and the NSE 25 also came down to 4214.58 (-1.36%).

The week started with news of the murder and torture of the country’s independent electoral body’s Head of I.T, who went missing on Friday 28 July. He was a key part of the technological infrastructure that would ensure free and fair elections.

We look anxiously towards the election week as all the political campaigns come to the finish line. The most important and closely scrutinised of all the polls will be the presidential election. A lot of conflicting opinion polls indicate different public sentiments but portray no more than a very tight race. The following scenarios are likely:

  1. An opposition victory, which if accepted and actualised will see the market soar.
  2. An incumbent victory, which, under normal circumstances would be great for the market, however, it is sure to be tainted by allegations of rigging from the opposition as well as mass protests and similar disruptive activities.
  3. A run-off, which will not significantly alter market activity as it is almost identical to the pre-election period

A candidate shall be declared elected as President if the candidate receives–

(a) more than half of all the votes cast in the election; and
(b) at least twenty-five per cent of the votes cast in each of more than half of the counties.

If no candidate is elected, a fresh election shall be held within thirty days after the previous election and in that fresh election the only candidates shall be–

(a) the candidate, or the candidates, who received the greatest number of votes; and
(b) the candidate, or the candidates, who received the second greatest number of votes.

We don’t expect the ruling party to be a one-term government despite a united opposition and thus investors are advised to exercise caution.

Telecommunications Sector

Safaricom Kshs. 23.50 (-4.08%) took a dive on heavy volume action of 71,878,000 shares. The foreign dominated counter was bound to react to the above mentioned extra-judicial killing and the sentiment of foreigners is likely to have deteriorated from the same. The opposition have also alleged a police raid at their office over the weekend (which the government denies) and a bunch of deportations of foreign advisers. The counter closed at Kshs. 15.95 on March 8th 2017, during the peak of the Mpesa split saga and those who bought 1,000,000 shares at that level, would have made a gross profit of Kshs. 7,550,000 at market close. Therefore, an unhealthy election is unlikely to make foreign investors stay for the dividend books closure date of 1st September 2017.

Banking Sector

Co-operative Bank Kshs. 15.55 (+0.97%) moved 16,297,100 shares. KCB Kshs. 40.50 (-1.22%) experienced a minor dip after trading 10,514,600 shares. The largest lender in the country reported its half year results. Profit After Tax for the period was unchanged at Sh 10.3 Billion while Profit before tax fell by 1% from Sh 14.83 Billion to Sh 14.75 Billion. The bank also noted that 86% of its transactions were done outside the branches. As of June 2017, the bank had a network of 318 branches, 536 ATMs, 15 120 agents and 4915 Point of Sales/Merchants. The Banks Board of Directors approved payment of a surprise interim dividend of Sh 1.00 per share to be paid on or about, 31 October 2017, to shareholders registered at the close of business on 4 September 2017.

Equity Bank Kshs. 39.75 (-4.22%) saw the exchange of 10,151,700 shares. NIC Kshs. 32 (-7.91%) took the biggest beating; barter of 6,966,400 shares occurred during the week.

Commercial and Services

WPP Scangroup Kshs. 23.75 (+9.20%) traded 4,892,200 shares. It is +64% from its 52-week low of Kshs. 14.50. Kenya Airways Kshs. 4.20 (0.00%) remains unchanged. Heavy traffic of 2,639,600 shares occurred. The airline started the week troubled by a pilot’s go-slow which began last weekend, leading to many flights being delayed or cancelled altogether. It hit lows of Kshs. 3.90 during the week, in intra-day trade. Investors didn’t allow the counter to rest below Kshs. 4, implying a good entry point.

Nation Media Group Kshs. 108 (-4.42%) flipped through 778,300 shares. It reported fairly flat half year results with Profit before income tax at Kshs. 1.17b vs. 1.14b +2.6%. EPS was up 4.8% to Kshs. 4.37 vs. Kshs. 4.17 in a similar period. Interim dividend was retained at Kshs. 2.50. The full year results are bound to show growth as the election year is a good one for the media industry.

Uchumi Kshs. 3.45 (-9.21%) shaved some stock weight after a barter of 1,995,400 shares didn’t go in the favour of speculators.

Energy and Petroleum

Kenolkobil Kshs. 15.30 (+1.32%) was a heavy mover of 35,705,500 shares. The oil marketer’s half year results, which appeared during the week, reiterated the suggestion of most brokers that it is one of the best stock picks in 2017. Profit after tax rose by 20% to Ksh 1.422 Billion despite taking an impairment provision of Ksh 300 Million. In the period under review, Kenol Kobil recorded a forex loss of Sh 25.6 Million versus a forex gain of Sh 39.3 Million in the first half of 2017. The company said the forex hit was due to a depreciation of local currencies in Kenya and Burundi markets. The company declared an interim dividend of Sh 0.30 per share, an increase of 100% from the last year’s Sh 0.15 per share. The dividend will be paid on or around 1st October while books close on 25th August 2017.

Kengen Kshs. 8.35 (+2.45%) traded 15,087,800 shares while KPLC Kshs. 8.40 (-1.18%) experienced some low voltage on transmission of 4,994,600 shares.

Insurance

CIC Insurance Kshs. 4.95 (+2.06%) led the sector volumes. The ticker is up 60% from its 52-week low of Kshs. 3.10 set early in February this year. If you would have bought 10,000,000 shares at those levels, you would have made a gross profit of Kshs. 18,500,000 on an investment of just Kshs. 31,000,000! An affirmation of the belief that a momentary setback experienced by a good company is a great chance to opt in with all your strength. The country’s leading micro-insurer reported some really bad FY2016 results; net profits were down by 83.4% to stand at Ksh 188 million vs a net profit of Ksh 1.1 Billion in 2015.

Kenya-Re Kshs. 21.50 (-1.54%) saw the barter of 1,349,900 shares. Its half-year results surfaced during the week. The re-insurer announced a half year pre-tax profit of Kshs. 2.29 billion up 3.6% from the Kshs. 2.21 billion posted in the previous period. These were relatively flat earnings and the market reacted accordingly.