Weekly Market Wrap-up (June 19 – 23)

Equity Markets

Activity slowed from last week (week ending 23 June 2017) with 170.5 million shares traded with a total turnover of Kshs. 4.7 billion. The NSE 20 edged up to 3623.83 (+2.33%), the broad NASI to 154.59 (+0.53%) which is currently at a 52 week high! The NSE 25 also continued its upward trend to 4089.81 (+0.55%), indicating the bull market is still not dead.

Telecommunications Sector

Safaricom Kshs. 23.50 (-1.06%) led the movers after trading 55.7 million good shares. It hit a low of Kshs. 22.50 within the week’s trading. The company rebranded with the ‘Twaweza’ (‘we can make it happen’) slogan, supposedly targeting the youth; fairly reminiscent of Obama’s campaign slogan of ‘Yes We Can’. It is due to launch a music app next month which will allow artists to sell their songs to the public, while pocketing royalties of 30% (up from the current 22% on Skiza tunes). Who needs Itunes when we have ‘Safaritunes’? Twaweza!

Banking Sector

In the banking sector Co-operative Bank Kshs. 17 (-1.16%) led the banking sector volumes, seeing 25.4 million shares exchange hands. It has seen a recent downward trend. Investors seem to be averaging out and the upcoming bonus issue will assist them even more. Enhanced liquidity is expected. This was followed by KCB Kshs. 37.75 (+2.03%) seeing barter of 16.1 million shares. It appears that the market interpreted CMA’s announcement of not receiving any regulatory filings from KCB on its proposed takeover of National Bank Kshs. 10.25 (+4.06%), as KCB’s lack of intention to make the acquisition. NBK moved 1.2 million shares as compared to the previous week’s 314,500, indicating some profit taking and highlighting the fact that it is now fully priced. However, a tremendous upside may still be possible if the KCB takeover goes through, as it is expected to.

Equity Bank Kshs. 37.50 (-3.85%) moved 10.78 million shares. NIC Kshs. 32 (-4.48%) and HFCK Kshs. 10 (-3.38%) retreated on mildly high volume. Barclays Bank of Kenya Kshs. 10 (+4.17%) continued soaring on fairly heavy volume.

Insurance Sector

Listed insurance companies experienced jaunty highs in the beginning of the week only to retreat towards the end. CIC Kshs. 4.15 (+7.79%) led the movers after 3.4 million shares exchanged hands. It achieved prices of Kshs. 4.50 during the week and touched lows of Kshs. 4.00 towards the end. The latter was caused by supply exceeding demand by 5 times on Friday. The company’s ambition into 2021 is “income growth 33B, investment income 3B, PBT 7B.” This is likely to allow long term investors to more than double their money. CIC Insurance Group Ltd. have already started giving indications of great half year results by tweeting, “The first 5 months of 2017 are promising with considerable YoY growth.”

Britam Kshs. 13.20 (+1.54%) moved 3.2 million shares, barely falling short of Kshs. 14 during the week. Kenya Re Kshs. 20.50 (-1.20%) and Liberty Kenya Holdings Ltd Kshs. 11.45 (+4.09%) saw a fairly large number of shares exchanged.

Commercial & Services

Kenya Airways Kshs. 5.55 (-2.63%) remained fairly stable during the week, after the previous week’s rout. It moved 2.6 million shares. Its level of supply outnumbered demand by far, suggesting further price drops, unless seller’s hold on as was reflected by its +1.83% rise to Kshs. 5.55 on Friday, despite the aforementioned demand conditions.

Uchumi Kshs. 2.15 (-2.27%) experienced 1.16 million shares exchange hands and is primed for its full year results for the financial year ending 30 June. Its cost cutting and revenue maximization strategies paid off as it nearly halved its half year net loss to Kshs. 547 Million from Kshs. 1.01 Billion in the previous period. The supermarket chain’s full year report for the year ended 30 June 2016 included the following extract: “This performance of the year ending 30th June 2016 was impacted by the closure of non-performing branches in Uganda, Tanzania and Kenya and supply chain challenges. The Group lost controls of the subsidiaries in Uganda and Tanzania in October 2015. The short term effect to June 2016 was the decline in revenues. Nevertheless due to Management interventions, the Group losses reduced by 17% from KES 3.4BN in 2015 to KE 2.8BN in 2016.” A strategic investor is also expected to change its negative equity position.

Construction & Allied

Cement companies took part in some good gains with Bamburi Cement Kshs. 180/= (+7.78%) emerging strong on very heavy volume. ARM Cement Kshs. 21.75 (+3.57%) pushed 691,700 shares. While the troubled cement maker is still verily in the loss-making territory (marginal improvement), disposal of the Mavuno Fertilisers division will help it free working capital and restore focus on its core business.

Energy and Petroleum

The energy and petroleum counters all saw heavy volume action with KPLC Kshs. 8.45 (+6.29%) moving 8.8 million shares, KENGEN Kshs. 8.70 (+1.16%)  moving 4 million shares and KenolKobil Kshs. 13.10 (+2.34%) moving 2.6 million shares.

Umeme Kshs. 13.75 (-1.79%) had seen its full year profit before tax dip by 5.85% to Ushs. 152 Billion in its results for the year ended 31 December 2016, released earlier this year. Final dividend per share also plunged by nearly 70% to Ushs. 7.8. However, its share price is only 7% higher than its 52-week low of Kshs. 12.85 implying potential to rebound in the medium term.

Investments

Centum Kshs. 42.25 (+2.42%) enabled 1.97 million shares to be passed around; cheap cum-dividend counter with a PE ratio of only 3.87! Undervalued.

The Nairobi Securities Exchange Kshs. 17.15 (+8.54%) moved 1.7 million shares; increasing volumes implying profit taking but still experiencing scarce supply. The previous week had seen only 111,300 shares traded. It is an expensive share with a PE ratio of 24.15, which the market has recently started respecting to the point of deifying it.

The East African Breweries counter Kshs. 264 (+3.13%) literally experienced a drunken fest with 3.16 million shares exchange hands. Anticipation of its Full Year results will see some high volumes moved over the coming weeks. Only time will tell if that cold tusker, post-results release, will be a celebration or a remedy.

Mumias fell to Kshs. 1.10 (-4.35%), after its recent rally. Announcement of its new CEO, Mr. Nashon Aseka was preceded by some serious price action, seeing the counter tick up to Kshs. 1.25 (+79%) from its recent all-time low of Kshs. 0.70. It has already issued a profit warning for the year ended 30 June 2017 and its loss is expected to be more than 25% worse than the previous period. Mumias Sugar Co. shares are a speculator’s prayer beads, offering more safety than Home Afrika Kshs. 0.85 (+6.25%) which also traded heavy volume, due to government ownership and continuous bailouts of the sugar miller.

Market Analysis by Mihr Thakar (@MihrThakar)

Market Watch; Nutcracker Analytics Portal