It is clear that the planned ‘swearing-in’ of the Opposition leader had been discounted by many as inconsequential in law; this is because the wording used by the Opposition was very carefully evasive of legal upshot. The title ‘President of the People’s Assembly’ was intended to imply inauguration as figurehead of a societal organisation, club or NGO. However, Chapter VII of Cap 63: Penal Code defines a Kenyan person as having committed treason (punishable by death) if he:
Compasses, imagines, invents, devises or intends the deposing by unlawful means of the President and expresses, utters or declares any such compassings, imaginations, inventions, devices or intentions by publishing any printing or writing or by any overt act or deed.
The same Act goes on to elucidate the wrongdoing of a person who administers an unlawful oath:
Any person who administers an oath, or engagement in the nature of an oath, purporting to bind the person who takes it to commit any offence, punishable with death, is guilty of a felony and shall be sentenced to death.
There is also an inclusion on unlawful oaths to commit other offences as follows:
Any person who administers, or is present at and consents to the administering of, any oath or engagement in the nature of an oath, purporting to bind the person who takes it to act in any of the ways following, that is to say (among several):
- to disturb the public peace;
- to be of any association, society or confederacy, formed for the purpose of doing any such act as aforesaid (referring to any mutinous or seditious enterprise)
is guilty of a felony and is liable to imprisonment for ten years.
There are clearly grounds to charge the Opposition leader and several of his associates with some kind of crime but the involvement of millions of supporters is a key anticatalyst to hasty resolutions by the State. Calling off the ‘inauguration’ of the ‘People’s President’ was a wise move but may not sit well with the Coalition’s supporters.
On Sunday evening, Raila Odinga later held a press briefing announcing that they had postponed the swearing in to later date; NASA said this followed internal consultation and a new date would be announced.
Economics
The World Bank has cut Kenya’s GDP growth forecast for 2017 to 4.9%, against an earlier estimate of 5.5%. This is blamed on drought (25% of Kenya’s GDP is dependent on the agricultural sector), slowing credit access and the obvious saga that we have all just witnessed. The average GDP growth from 2011 to 2016 is 5.6%, the highest being in 2011 at 6.1% and the lowest being in 2012 at 4.6%. In 2016, GDP growth was diarised as 5.8%.
Inflation eased to 4.73% in November. Going forward, rising oil prices are a significant threat to a benevolent percentage.
Market Snapshot
The inauguration of the President has failed to calm the nerves of stock market investors and thus the bulls are still restrained, despite good volumes. If the Opposition outfit would have acquiesced then we would be sitting on lots of green right now. Volume recorded 125,478,500 shares and turnover came in at Kshs. 3,370,328,980. A total of 6,268 deals took place during the week.
The main indices presented mixed performance. The NSE 20 closed at 3750.53 (-1.71%), the broad NASI edged up to 175.27 (+1.27%) and the NSE 25 slipped slightly to 4373 (-0.55%)
Telecommunications
Safaricom Kshs. 27.75 (+0.91%) experienced the transmission of 63,816,500 shares. The share has retreated only slightly after closing at a record high of Kshs. 28 on 22nd November 2017. M-Shwari, Kenya’s first mobile lending and saving solution has marked five years of robust operations. According to data from Capital Business, the innovative partnership with CBA has achieved the following in numbers:
- It provides financial services to over 21 million Kenyans
- More than Kshs. 30b has been disbursed in loans since its inception
- Average loan per customer is Kshs. 3,300
- Savings by customers currently stand at over Kshs. 12.6b
The gargantuan telecommunications corporation is expanding at a very encouraging pace. On 30th November 2017, the company announced the launch of five new Safaricom Shops that aim to cater for rising demand across the country.
“Kenyans are embracing an increasingly digital enabled lifestyle driven by growing smartphone uptake, advanced 3G and 4G networks, and smart, connected homes. Our investment in these new Safaricom Shops will go a long way in meeting these emerging customer needs within a fast-evolving technology landscape,” said Joseph Ogutu, Director – Strategy, Safaricom. The new outlets will grow Safaricom Shop’s footprint to 48 across the country, with more than 10,000 customers visiting a Safaricom outlet every day.
Masoko, the new ecommerce offering by the listed top performer is now latest in its line of new products, by far the biggest novelty poised to be the ‘next Mpesa’. Kenya’s internet usage is estimated at 90% of the population. About 80% of the population is below 35 years of age, which is the ‘expanded youth bracket’ commonly referred to in the country. With more and more people looking past employment to earn their sustenance, Masoko is just the right thing to sell one’s products online, powered by Safaricom’s heavy customer base (‘automatic advertisement’). The ecommerce platform is also planning to sign up international vendors in 2018, as early as the first quarter of the post-election year!
Banking
Equity Bank Kshs. 41 (-2.96%) moved 12,829,600 shares. A number of significant milestones in regard to exploiting information technology were reached leading up to the tier one lender’s Q3 2017 results:
- 91% of all transactions moving from the fixed cost delivery channels of brick and mortar of bank branches and ATMs to variable cost delivery channels of mobile, internet, mobile App, Agency and merchant banking
- Of the total 341.3 million monetary transactions, only 30.3 million transactions passed through the branches and ATMs with the rest, 311 million transactions passing through the third-party channels.
- This shift in delivery channels resulted in a reduction of 11% in staff costs while registering a modest increase of 2% in total costs maintaining a cost income ratio of 51.6% at the Group level
- Equitel recorded 197 million transactions by September 2017 compared to 150 million transactions during the same period in 2016.
- Equitel recorded a 41% growth from Ksh 250.8 billion to Ksh353.6 billion, Internet Banking 1,696% from Ksh5.4 billion to Ksh96.9 billion, Agency Banking 18% from Ksh331.6 billion to Ksh391.3 billion and Merchants growing by 16% from Ksh34.8 billion to Ksh40.3 billion in transaction value.
- Despite branches recording a decline in number of transactions by 6% from 15.7 million to 14.7 million, there has been a 3% increase in the value of transactions from Ksh1,071B to Ksh1,106B.
KCB Kshs. 42.25 (+3.68%) traded 6,090,400 shares. Kenya’s largest bank revealed a number of key technological achievements accompanying its Q3 2017 results:
- KCB Group’s non-interest income currently accounts for 32.9% of the total operating income (due to innovative use of technology)
- Acquired over 10 million customers on its mobile platform either directly or through partnerships over the past 5 years.
- Currently, non-branch channel systems—Mbenki, KCB M-PESA, Mobi and payments— account for 85% of total transactions.
- Since inception of the flagship KCB M-Pesa platform in March 2015, the Bank has disbursed over KShs.20.3 billion in loans to over 8 million customers on their mobile phones.
Co-operative Bank Kshs. 16 (-1.84%) saw 2,702,300 shares exchange hands. Several factors point towards the lender’s healthy leveraging of technology and alternative delivery channels as well as indications of continuing growth as reflected in the release of its Q3 2017 results:
- 86% of transactions are now on alternative channels
- 560 FOSA’s to serve Sacco customers
- Number of account holders as at 30th September 2017 were 6.8m, in comparison to 6.1m in a similar period in 2016 (+11.5%)
- Non-funded income to total income came in at 32.8% and is expected to be 35% for the full year
Its levitation towards Kshs. 18 should be catalysed by a free market interest rate policy and ‘flat’ rather than ‘chipped’ earnings.
Barclays Kshs. 9.80 (-0.51%) experienced new buyers served 2,177,500 shares. Dividend per share on this counter is Kshs. 1 which represents 10.2% of the current share price. It is therefore assumed that the share price will retain stability with a maintained pay-out.
NIC Kshs. 36 (-3.36%) continues to be range-bound and underperforming due to lack of significant volatility to exploit. Investors witnessed 1,043,400 shares trucked. The Group reported stable Q3 2017 earnings with significant highlights as follows:
- Total interest income arrived at Kshs. 13.5b in comparison to a healthier Kshs. 14.7b in a similar period (-8.2%)
- Total non-interest income was fairly flat at Kshs. 3.2b v. Kshs. 3.1B (+3.2%)
- Total non-interest income to total operating income was 28.6% as compared to 24.8% in the period ended 30th September 2016 – that’s a tad bit encouraging like me missus’ bosom after a mighty long day toiling in the coal mine
- With rosy cheeks I hereby declare total operating expenses also decreased 11.7% to Kshs. 6.8b
- Profit before tax and exceptional items recorded Kshs. 4.4b v. Kshs. 4.7b in a comparable period (-6.4%)
- EPS took an encouraging glow with Kshs. 5.19 being served to shareholders v. Kshs. 5.26 in a comparable period; a marginal drop of 1.3% mainly propped up due to advantages in regard to deferred tax and exchange differences on translation of foreign operations
- Net loans and advances to customers stood at Kshs. 118.6b v. Kshs. 110.5b (+7.3%)
- Customer deposits reached Kshs. 131.4b for the period ended 30th September 2017, an increase of 21% from a similar period
- Gross NPLs were quite flat at Kshs. 14.7 in comparison to Kshs. 14.3b (+2.8%) while net NPLS actually dropped 11.6% to Kshs. 7.6b
- The liquidity ratio improved to 44.62% from 34.03% as a result of careful lending
Commercial and Services
Kenya Airways Kshs. 17.50 (+40.56%) experienced 1,990,200 shares flying through the market. After a reverse share split of 1:4 that felt like being conned for many retail investors (I suspect this feeling is also shared by the ‘long-term investors’ who are members of the KQ Lenders Co. Ltd.), the ticker opened to extreme volatility on Wednesday 29th November 2017, with a very bizarre intraday range of Kshs. 2.10 – Kshs. 15, only to close at Kshs. 10.35. The share price then rose up to the daily maximum every day until Friday 8th December 2017, when profit taking prevented a meaningful rise for the day. The price adjusted for the reverse share split is not more than Kshs. 4.50.
The national carrier has been barred by the courts from sacking over 130 technical staff who went on an illegal strike despite several warnings. The courts inferred that agitating for better pay is every employee’s right and not sufficient grounds for dismissal. It is quite an unfair decision allowing collusion between employees to manipulate corporations into pay rises they cannot afford. The case will be heard on December 18th 2017.
Uchumi Kshs. 3.40 (-15.00%) saw the barter of 869,800 shares. After hitting Kshs. 4.50 on December 5th 2017, the share tanked the next day upon exposure to news that the CEO of the troubled retailer Julius Kipng’etich resigned abruptly after two years on the job. While the recondite departure is indeed worrisome at a time when the supermarket chain is undergoing a troublesome phase and crucial revival efforts, positive thinkers and speculators are betting on a more positive force to propel the company forward.
Nairobi Business Ventures Kshs. 2.70 (-14.29%) moved 89,300 shares. The speculative counter has been on a downward trajectory after reporting a loss per share of Kshs. 0.63 for the half year ended 30th September 2017, from a profit of Kshs. 0.04 in an identical period aft. Revenue plunged 77% to Kshs. 8m.
Construction and Allied
ARM Cement Kshs. 12.50 (-7.75%) traded 286,800 shares with further downside risk on the horizon. The profit warning laden Bamburi Cement Kshs. 178 (-3.26%) saw 322,500 shares exchange hands. A full year dividend of Kshs. 12, which would have been a yield of a cool 6.74% is also likely to be affected as the interim dividend maintained for the past few years was also slashed to Kshs. 2.50 from Kshs. 6 as a red chilli accompanying the cold dish of its disappointing half year 2017 earnings.
Energy and Petroleum
Kengen Kshs. 8.50 (-3.41%) experienced a surge on volume as seller’s capitulated. 9,964,400 shares zipped through the bourse. KPLC Kshs. 9.55 (-4.02%) saw the teleportation of 668,100 shares. KenolKobil Kshs. 14.50 (-3.01%) dipped a dot with the flow of 8,185,300 shares occurring.
Insurance
CIC Kshs. 5.55 (-6.72%) saw new buyers lay claim over 1,062,100 shares. The micro insurer is owned 26% by Co-operative Bank and has operations indirectly in Uganda, South Sudan and Malawi. It is planning to expand revenue streams by targeting mining, oil and gas industry players, while also preventing revenue leakage by actions such as signing a partnership with Kenya Motor Repairs Association, creating a structured programme to reduce and, where possible, eliminate losses in the sector. CIC’s loss ratio, which is the difference between the ratios of premiums paid to the company and the claims settled by the company came in at 53.9% for the half year ended 30th June 2017, in comparison to 50.8% in a similar period.
Britam Kshs. 14.85 (-1.98%) saw 604,800 shares go to new CDSC accounts.
Investment and Investment Services
Centum Kshs. 44 (0.57%) traded 486,800 shares. Its half year results for the period ended 30th September 2017 were tepid with a number of key points to look at:
- Banking subsidiary Sidian Bank recorded a 25% decrease in total income to Kshs. 322 million despite interest expenses sinking 31% to Kshs. 405 million – overall an operating loss of Kshs. 111m was arrived at from financial services subsidiaries as compared to a profit of Kshs. 571m from the half year ended 30th September 2017 (-120%)
- Trading subsidiaries yielded a profit of Kshs. 549m from Kshs. 502m in a similar period (+9%).
- Profit before tax for the Group was Kshs. 2.167b as compared to Kshs. 2.760b (-22%), dented by higher expenses and lending costs in addition to the above-mentioned drop
- EPS Kshs. 2.07 v Kshs. 2.57 (-19.5%)
- 72% of the Gross Lettable Area (GLA) of Two Rivers Mall is let with 9% under negotiation – target is to close December 2017 at 85% let
NSE Kshs. 21.50 (+2.38%) moved 2,492,500 shares. The PE ratio of 30.28 makes this stock expensive despite the FY16 dividend being Kshs. 0.27.
Sources of Research: Kenya Law, NSE, Business Daily, @CBKKenya, @WorldBankKenya, Trading Economics, myStocks, Capital FM, Safaricom, Standard Digital, Daily Nation, Kenyanwallstreet, Equity Bank, KCB, Cooperative Bank, NIC, Independent (Uganda), Investopedia, Rich Management, @Centum_Inv
