NSE; Week 26 Market Commentary

By @MihrThakar

Last week saw a plunge in activity with only 95,397,400 shares traded as compared to the previous week’s 170.5 Million shares (-44%). Total turnover was Kshs. 2.3 Billion as compared to the previous stream’s Kshs. 4.7 Billion (-51%).

The NSE 20 dipped to 3607.18 (-0.46%), the broad NASI to 152.92 (-1.08%) and the NSE 25 also moved down to 4072.33 (-0.43%).

Safaricom

Safaricom Kshs 22.75 (-2.15%) led the movers after seeing 28,255,800 shares traded. It took its crouched position on Friday after news of an Mpesa upgrade surfaced. This upgrade will be most disruptive on Saturday, 15th July 2017 from 10.00pm to Sunday 16th July 2017 9.00am. All Mpesa services will not be available during the period. This is painfully reminiscent of the April 24th 2017 Black Monday outage when the telecom’s subscribers were unable to make calls, SMS or access Mpesa services for two or more hours from the early hours of the working day. Unavailability of MPESA services, even when a planned and structured exercise like the expected one, always bring light on the company’s market dominance, subscriber’s dependence on Mpesa services and negative effect on the economy. However, the telco has scheduled the update to minimise disruptive effects.

Banking Sector

Equity Bank Kshs. 37.75 (+0.67%) led the banking sector volumes after moving 12,162,000 shares. It has sustained a lot of foreign interest, partly due to Equitel. Equitel is a new revolutionary platform that provides tools and features that enable subscribers to perform all their financial transactions as well as make calls, send SMS and browse the internet. It is a formidable Mpesa (and Safaricom) competitor. The bank has embraced technology to the convenience of customers, with offerings such as Eazzy Pay.

KCB Kshs. 37.75 (0.00%) was listed as among the toppers, in terms of corporate governance best practices, by the Cytonn Corporate Governance Index Report 2017, released earlier in the week. It also links best corporate governance practices to better returns for investors. It traded 3,049,200 shares. Investors have not forgotten the recent Kshs. 3/= per share dividend that it bestowed upon them.

Co-op Kshs. 16.95/= (-0.29%) saw 4,433,200 shares bartered in anticipation of the bonus share issue (books closure 30th June 2017). Bonus shares reflect a company’s confidence in its capabilities and strengths while improving liquidity. A 1 for 5 bonus will probably see its price drop to Kshs. 14 or lower but a rebound is expected.

Overall, tier 1 banking counters have been fairly stable over the past few weeks.

Housing Finance Kshs. 10.45/= (+4.50%) traded 1,196,000 shares. Its share has been among the worst performers at the bourse, currently half of its 52-week high of Kshs. 20.75/. The fall has been a result of a disgruntled employee’s allegations of insider lending and cooking of books, and more recently a massive Q1 profit drop. HF Group posted first-quarter profit before tax of Kshs.129 million during the quarter to March 31, 2017, a 73% drop compared to Kshs. 470 million over a similar period in 2016. The Group’s specialised engagement in the mortgage, housing and construction development markets give it an advantage over other banks and a post-election housing and construction boom will probably see shareholder’s gleefully smiling again.

DTB Kshs. 160 (+2.56%) moved only 15,600 shares, indicating demand has reached saturation point at these levels.

Commercial and Services

Kenya Airways Kshs. 5.05/= (-9.01%) took a drubbing, flying 1,201,200 shares via the market. Its 52-week low is Kshs. 3.30/=.

WPP Scangroup Kshs. 20.25 (+9.76%) traded nearly 4.5 million shares. After being hit with a malware attack, it issued the following statement, “A number of WPP companies were affected by this week’s global malware attack. While the attack did not affect the entire Group, and many of our companies are fully functional, some continue to be disrupted. …Everything is being done to resume normal service as soon as possible, and further updates will follow.” Investors have gauged that the attack did not have a very profound effect on the group’s operations and are more excited for the half year results. It had posted a 38% growth spurt in profit to Kshs. 395,070,000 for the half year ended 30th June 2016. History may repeat itself.

Uchumi Kshs. 2.15/= (0.00%) saw a barter of 1,051,500 shares. Its change of auditor from Ernst and Young to KPMG and other criteria caused it to be named the most improved company in the Cytonn Corporate Governance Index Report 2017. It has a 52-week high of Kshs. 4.40/=.

Construction and Allied

A slow week for this sector. Crown Paints Kshs. 72.50 (+10.69%) continued its general upward trend after news of its intentions to buy back some of its shares hit the market like a sanctioned and desired pregnancy announcement; it is still ululating in joy but the nature of the paint manufacturer’s intentions is unknown because of the following factors:

  1. Share buy-backs normally occur when shares are undervalued. However, it closed with a PE ratio of 39, indicating the contrary
  2. They may intend to trade the shares on the exchange. Prices may be pushed higher by scarcity in demand

On Friday, 30th June, its share price dropped by 4.6% from the previous day’s closing price of Kshs. 76/=.

Energy and Petroleum

Kenolkobil Kshs. 14/= (+6.87%) traded a hefty 14,868,100 shares. Its main competitor is Vivo Energy; a very formidable threat. KPLC Kshs. 7.95/= (-5.92%) and Kengen Kshs. 7.95/= (-8.62%) both took a black eye each, on moderate and heavy volume, respectively. Both the counters are highly interrelated so wish well for your comrades holding Kengen while you’re betting on KPLC.

Insurance Sector

CIC Kshs. 4.10/= (-1.20%) and Britam Kshs. 12.65/= (-4.17%) both retreated on heavy volume.

Kenya Re Kshs. 20.75/= (+1.22%) moved 1.58 Million shares. Last traded price Kshs. 21.50/=. 52-week low Kshs. 17.50/=. 52-week high Kshs. 24.50/=. It reported a FY16 PBT of Kshs. 4.22Billion vs Kshs. 4.51Billion (-6.43%)

Investment and Investment Services

Home Afrika Kshs. 0.95/= (+11.76%) was a big gainer, with 2,352,500 shares exchanging hands. Wily and astute investors can earn regular income from detached, speculative trading of the counter. NSE Kshs. 16.70/= (-2.62%) has finally started retreating, although on thin volume.

By Kenyan Wall Street Analyst Mihr Thakar, follow him on Twitter @MihrThakar