WEEKLY MARKET REPORT

The Week in Numbers

Generally, performance of the week increased by 1.9% using the NSE 20 Index as a benchmark. The market has gained a third straight week.

Heavy Trading Counters

Banking Stocks

Trading activities on the Banking counters were heavy compared to other sectors. These stocks accounted for 44.06% of the volume traded this week.

• •Equity bank moved 24m shares between KES 40.00 – KES 42.25 per share.
• •KCB closed at KES 41.50. It moved 16m shares.
• •Co-op Bank closed at 18.20. It moved 7m shares.

Telecommunication & Technology Stocks

Safaricom accounted for 32.41% of the week’s traded volume. Safaricom closed at a weekly high of KES 16.65 per share. Safaricom is almost reaching its 52 week high demonstrated in the YTD chart below.

Gainers

ARM Cement

ARM plans to raise USD 90m in a medium term note with a USD 15m green shoe option by way of a private placement (will not be listed on the Nairobi Securities Exchange). The offer period runs from 12 November 2015 to 2 December 2015 and settlement date set on 7 December 2015. The programme will have both fixed rate notes and floating rate notes (both USD and KES) with redemption at par. This will be done through private placement.

“The proceeds from the five-year bond will be used to replace existing short term borrowings. There is no increase in total debt only refinancing existing short-term debt,” Pradeep Paunrana, chief executive of ARM Cement.

ARM Cement posted a pretax loss of 645 million shillings ($6.32 million) for the nine months to September, blaming losses related to the depreciation in regional currencies against the dollar.

Williamson Tea Company

Half year ended 30 September 2015 Analysis

Revenue increased by 21.8% to KES 1.5 billion compared to the half year results in 2014. PBT was up by 126.2% to KES 543.8 million.

Earnings per share were up by KES 23.24 to KES 41.66 per share. No interim dividend was announced.

Increase in profits were attributed to higher sales volume, improved net realizations boosted by a weakening shilling against trading currencies and implementation of rigorous cost control measures.

Crop yields are expected to increase which will have a negative effect on the pricing.

The results are quite strong given the current state of the economy. Forecasted year ending March 2016 should be better than the year ended March 2015 on which Williamson Tea made a loss of KES 208.1 million.

Kapchorua Tea Company

Half year ended 30 September 2015 Analysis

Revenue declined slightly by KES 107,000, however, PBT was up by 110.5% compared to the previous similar period last year.

Earnings per share were up by 13.47 shillings to KES 25.67 per share. No interim dividend has been announced.

The increase in profits is attributed to the weakening of the shilling against trading currencies and strict cost control measures.

The short rains which are expected for the rest of the year are going to boost crop yields but will have a negative effect on the pricing.

Scan Group

WPP Scangroup affiliate, J.Walter Thompson Company (JWT), plans to launch Colloquial marketing content unit in Kenya (Africa headquarters) before extending the product to the continent. JWT launched Colloquial in the US in June 2015 and now targets Africa in response to changing trends. Colloquial is a content marketing unit that shows brands how to act like publishers and benefit from an always-on digital narrative, helping them build passionate and monetizable communities. The company does short articles, infographics and visual stories for brands.

Losers

Atlas Development

Atlas has signed an acquisition agreement to acquire East Africa Packaging Holdings Limited (EAPH), a company established to build a new state-of-the-art glass bottle manufacturing facility 45km north of Addis Ababa, Ethiopia. Under the terms of the Acquisition Agreement, the Company has agreed, subject to an increase in the Company’s headroom at the General Meeting on 1 December 2015, to take on third party funding liability of approximately USD 150k in respect of EAPH’s working capital investments incurred to date.

The share price has been on a free fall due to declining oil prices thus revenues have followed suit in their core services division.

The acquisition of EAPH is a move meant to diversify its business in order to be sustainable.

Atlas requires re-engineering of its business model.

Barclays Bank of Kenya

Barclays Bank Kenya reported a mere 3 percent jump in its Q3 earnings to Ksh 6.4 Billion compared to last year’s Q3 earnings of Ksh 6.4 Billion. The results are not impressive comparing to other lenders who reported better Q3 earnings.

• •Net interest income increased by 500 Million to Sh 15.2 Billion compared to last year’s  Ksh 14.7 Billion
• •Growth Contributed by its retail and SME segments.
• •Total operating income rose to Ksh 21.7 Billion.

“The last nine months have been characterized by turbulence at the macroeconomic level arising from fluctuation of the local currency and high interest rates. This has had an impact on the bank’s interest expense line and Mark to Market loss on the trading book.” (Company Commentary)

Fixed Income

Bonds worth KES 3.8 Billion were traded during the week, this was down by 56% from the previous week which traded bonds worth KES 8.6 Billion. This may be due to the drop in interest rates.