Weekly Market Commentary


The EU EOM Final Report on the General Elections 2017 was released on 10th January 2018. It was like my school report card which, despite having good grades, often included those ‘parent-irritating’ lines like “he is boisterous and needs to control his mouth” or “he must stop using bad language and should learn to be punctual”. Key government officials did not open a few bottles of champagne supplied via inflated tenders since the Election Observation Mission raised a number of causes for concern as quoted/explained below:

  1. “…the electoral process was damaged by political leaders attacking independent institutions and by a lack of dialogue between the two sides, with escalating disputes and violence.”
  2. “…persistent lack of trust in the IEBC by the opposition and other stakeholders, demonstrating the need for greater independence and accountability as well as for sustained communication and more meaningful stakeholder consultation.”
  3. “There was improved use of technology, but insufficient capacity or security testing.”
  4. During the campaign period, there was “misuse of state resources at national and local levels.”
  5. They raised concerns on the blatant use of force by security officials, gang and tribal violence, political intimidation of the judiciary, civil society organisations and election officials as well as “Jubilee’s unilateral amendments to electoral legislation during the fresh election.”

However, the report acknowledged the end of the election season for investors by making a fairly conclusive statement:

“The fresh presidential election in October was generally well conducted, with full results data and forms made available promptly. Following NASA’s boycott, there was a severely reduced turnout and a landslide victory for Jubilee.”

The EU EOM report suggested the need for widespread reforms and gave a number of recommendations and mentioned the inadequacy of the “winnertakes-all” system of government.

The plans for ‘swearing-in’ the Opposition leader are still underway with the critical date of January 30th eyed by the Montonero like strategists. All elected officials from the powerful coalition will ferry in supporters and loyalists will gather from the proximities of the critical location for the critical event. Unequivocal support of the County Governments that have passed the controversial People’s Assembly motion will be required to give efficacy and legitimacy to the bizarre exercise, which will be overseen by the National People’s Assembly, an organ designed to mimic the Parliament or perhaps a Council of Advisers to the Monarch.

In the past, high level treason cases in the country have often involved mobilisation of insurgent ideas in the armed forces. It will be interesting to see how this is applied to utilisation of the county governments as a means to the end. If the critical event comes about, which is doubtful, widespread bloodshed is likely as well as high level arrests. Alternatively, a wise weasel government may consider allowing the children to build Lego castles while the executive sits in his impenetrable fortress with a moat full of state security organs.


A weaker Kenya Shilling is likely to see a stronger stock market as both are inversely correlated. Rising oil prices, a hawkish Fed and a voracious and ballooning appetite for foreign currency denominated debt are key risks to the Kenya Shilling.

Fourth quarter year on year overall producer inflation was 3.18 per cent in December 2017 compared to negative 0.47 per cent recorded in December 2016. Producer Price Index measures the gross changes in the trading price of products on the domestic and non-domestic markets, at all stages of processing. The price changes are measured from the perspective of the producer.

The Market in 2017

Total share volume came in at 7.05 billion compared to 5.81 billion in 2016 (+21%). Total turnover was diarised as Kshs. 171.4 billion from Kshs. 147.2 billion (+16%). However, the number of deals went down due to higher prices of equities. They decreased by 5.7% to 283,258. Total market capitalisation increased to Kshs. 2,521.768 billion (2.5 trillion) from Kshs. 1,931.607 billion (1.9 trillion) – a 30.6% increase. The main market PE (price to earnings ratio) more than doubled to 32.32 from 13.74. All the main indices delivered stellar gains with NSE 20 serving 16.50%, the NASI delivering an awe inspiring 28.39% and NSE 25 following similarly with a mouth-watering 21.34% gain.

Market Snapshot Week 1 2018

The year began with light volume. 62,463,200 shares were traded in the first week of 2018, with turnover logging Kshs. 1,822,644,181. 4,075 deals took place.

NSE 20 edged up to 3713.41 (+0.04%); the broad NASI gained some incline to rest at 174.17 (+1.73%) and NSE 25 hopped up to 4346.50 (+1.47%).

Market Snapshot Week 2 2018

Volume picked up as movement of 113,413,500 shares took place in comparison to the previous week’s 62,463,200 shares (+81.6%). Turnover struck Kshs. 3,259,752,690, up 78.8% from the antecedent week’s weak Kshs. 1,822,644,181. A total of 5,681 deals were concluded during the week (+39%).

NSE 20 lagged a tad bit to 3708.75 (-0.13%), the wider NASI rested at 176.07 (+1.09%) while NSE 25 chipped resistance very slightly, closing the week at 4386.97 (+0.93%).


The telecommunications gem, a sector in itself returned 39.69% in 2017, assuming a no brainer buy at the onset. This would be more than a 78% return for those who bought during times of panic when the share fell below Kshs. 16 in March and sold during the recent periods of euphoria at Kshs. 28.50.

The counter traded 54,259,800 shares, closing at Kshs. 28.25 (+0.89%). It has further room to go with the all-time high retaining its inherent fragility as is the norm for this gargantuan shareholder value creation tool. There is a chance of a major share price dislodgement event before the next leg higher. Last year it was the M-Pesa break-up saga. It is the nature of the markets to test bulls before rewarding them (hopefully not castrating them!).

In the period July-September 2017, total mobile penetration improved to 90.4% (41.028m subscriptions) from 88.7% (40.259m subscriptions) in the quarter April-June 2017 (+1.9%). Safaricom Limited lost 0.7 percentage points to record a market share of 71.9 per cent in mobile subscriptions during the period under review from 72.6 per cent registered during a similar period. Airtel Networks Limited market share stood at 14.9 per cent during the period under review down from the comparable quarter’s 15.3 per cent. Telkom Kenya Limited market share rose by 1.2 percentage points to stand at 8.4 per cent from 7.2 per cent recorded in the base quarter. However, Safaricom Limited’s total mobile subscriptions stood at 29.4 million during the period under review up from 29.2 million recorded in a comparable quarter, indicating an expanding market and not a contracting number of subscribers.

Total value of mobile money transactions – sending and withdrawal – increased from Kshs. 1.218 trillion to Kshs. 1.659 trillion (+36.2%). M-Pesa services posted a market share of 80.8 per cent during the quarter under review.

Banking Sector

Equity Kshs. 41.50 (+3.11%) moved 6,893,900 shares. In 2017, the counter served handsome returns of 32.5%. The PE ratio is 9.47 against a sector PE of 7.62. The dividend yield is 4.82%. The previous financial year (2016) had an EPS of 4.38.

KCB Kshs. 44.25 (+3.51%) saw new investors served 5,086,800 shares. The tier one bank intends to close three more branches in the first half of 2018, continuing the trend it started in April 2017 after sending home hundreds of workers in a bid to save atleast Kshs. 2 billion in staff costs annually. The share boasts of a 48.70% return in 2017. With a PE ratio of 6.85 and a dividend yield of 6.78%, it is one of the most attractively priced banking counters. EPS for the full year ended 2017 is estimated at Kshs. 6.75 from Kshs. 6.46 (+4.3%). A price target of Kshs. 47 is therefore not irrational.

NIC Kshs. 35.25 (-3.42%) saw the transfer of 2,238,400 shares. Bucking the trend, it intends to open four new branches in the coast region to target the tourism sector for provision of services ranging from corporate and SME banking to asset finance. The strategy of focusing on key sectors with specialised staff or task force teams to oversee expansion in individual sectors is a clever strategy, taking the ‘know your customer’ requirement beyond regulatory scepticism to genuine interest in an industry and the customer’s needs thereof.  The PE ratio of the share is 5.45 while EPS is almost identical to KCB. A small dip may occur in the metric for the financial year 2017, however, a stable dividend pay-out of Kshs. 1.25, representing a yield of 3.55% will help in encouraging investors. However, raising the dividend and taking the path KCB Group’s Joshua Oigara took to appease shareholders will lead to very healthy sentiment. In 2017, a return of 29.81% was booked on the tier two counter. My target is Kshs. 39.75.

Co-operative Bank Kshs. 16.50 (+1.23%) experienced 1,412,700 shares exchange hands. The 1:5 bonus issue will dilute the full year earnings and dividend (yield) and is thus expensive; nonetheless, I remain positive of my price target of Kshs. 18 since a lot of shares have moved hands at current levels and sellers will require a major ‘heart sinking feeling’ to capitulate at lower levels. Including the 1:5 bonus issue, a monstrous return of 45.5% was booked in 2017 (obviously excluding dividend) as illustrated by an example:

Nasa Coalition Holding Company Ltd. held 5,000,000 shares in 2017, purchased at Kshs. 13.20 on the first day of trading in the year, valued at Kshs. 66,000,000. At the end of the year, the company holds 6,000,000 shares priced at Kshs. 16 on the last trading day of the year, valued at Kshs. 96,000,000 (+45.5%).

DTB was the best sector value creation tool in the foregoing year; a 62.71% return is not something you can consider mild.

Commercial and Services

Kenya Airways Kshs. 17.30 (+10.90%) took to the air on moderate volume of 602,600 shares. A negative return of about 25% was suffered by investors in 2017, despite the post reverse share split price rally. The share price plunged almost 18% over a number of days after the CEO, Sebastian Mikosz announced that he expects a “big impact on revenue” due to the political impasse that the country witnessed in 2017, whereby there were “several weeks of uneasiness”. With an upcoming rights issue which will cause further dilution, this is an extremely risky counter. If the new shares are issued at a ‘shocking’ price of say Kshs. 2, the stock will tank. Week 2 of 2018 has seen the stock surge due to the announcement of direct flights to the United States from late October this year. 2019 revenue is expected to be padded by about 10% from this pioneering venture. The US travel advisory to Kenya is currently at Level 2: Exercise increased caution; citing the risk of violent crime and terrorism, two things Americans are already too familiar with.

Longhorn Publishers Kshs. 5.35 (-6.14%) witnessed the barter of 159,100 shares. A target of Kshs. 6.50 is in the books. The return in 2017 was 12.5% (+ total FY dividend of Kshs. 0.38), compared to average bank interest rates on fixed deposits of 8% p.a (less 15% withholding tax).

Energy and Petroleum

Kengen Kshs. 8.35 (+2.45%) experienced the teleportation of 12,694,000 shares. The ticker will find it hard to rest at Kshs. 8 with an institutional investor always ready to pick up shares when they lose upward momentum. The counter generated a 47.41% return in 2017. The power generator’s proposed 45MW solar power plant in Embu has run into some headwinds. Its construction would block about 50,000 residents from directly accessing important water bodies in the area and the area MP has demanded that prior arrangements for running water be made. He vowed to block the project if his constituents were to suffer. However, clarity on the environmental and socioeconomic impact of the project will easily dissipate antagonism.    

Kenya Power Kshs. 9.20 (+1.10%) saw the transmission of 3,944,700 shares. During his inauguration as President of the Republic of Kenya, His Excellency President Uhuru Kenyatta announced that manufacturers would be billed at 50% of the normal tariff between 10pm and 6.00am. This would have led to large losses for Kenya Power and thus the stock remained depressed despite an evident end to economically risky politics. Later, the Energy Regulatory Commission (ERC) quickly stepped in to ensure clarification. The reduced rate will only apply for any additional unit consumed over and above the six-month average consumption of the customer with a 6% growth factor adjustment applied to the same. The fact that the government is shielding the monopoly corporation from loss is bullish for the share price and the next few years may still yield handsome capital returns. A long-term target of Kshs. 18 is fairly viable as the company’s monopoly cannot come to an end without an adequate regulatory framework for potential entrants into the market.

Kenya Power had factored Kshs. 10.1 billion unrecovered fuel costs in its financial statements for the full year ended 30th June 2017. Of this, only Kshs. 2 billion was recovered. The Courts have temporarily barred the government controlled electricity distributor from recovering the remainder of Kshs. 8.1 billion. The case will be decided on January 30th 2018. Non-recovery of the same will prove extremely parasitic on its bottom line.

KenolKobil Kshs. 14.65 (+1.03%) experienced the flow of 1,523,600 shares. Last year the counter delivered negative returns of -6.04%.


CIC Insurance Kshs. 5.55 (-2.63%) saw new buyers lay claim over 786,200 shares while Britam Kshs. 13.00 (-5.11%) traded 640,300 shares. In 2017, investors holding the shares yielded handsome returns of 47.37% and 33.50% respectively.  Britam has issued a profit warning for the full year ended 31st December 2017.

Investment and Investment Services

Centum Kshs. 44 (0.00%) experienced investors holding the counter let go of 278,500 shares. The holding company is seriously being considered as a potential partner in the multi-county Kshs. 25 billion revamping of the Nairobi-Nanyuki Railway line. No official position has yet been established.

NSE Kshs. 20 (-1.23%) moved 64,000 shares. A capital gain of 34.47% was penned to paper in the Year of the Crypto Craze.


Sources: European External Action Service, The Star, Standard Digital, NSE, Citizen Digital, myStocks, Reuters, Business Daily, Travel.State.Gov, KNBS, Rich Management, @Kenyafinomics, Daily Nation