The Market in Focus: Review of the Week

Equities…

The bourse closed on a positive state, as depicted by all the market indicators which closed in the green territory this week. The NSE 20 Share index advanced by 0.38% to close at 3462.56 points while the NSE 25 Share Index gained 0.60% to perch at 3949.14 points. Market capitalization expanded by 2.01% to KES 2.114 trillion from KES 2.072 trillion registered last week. Equity turnover was on an upward trend, advancing by 114.30% to close at KES 3.81 Billion.

Weekly Wrap Up…

• Longhorn Publishers Ltd (NSE:LKL) 45.08% full year profit after tax growth to KES 10.4.06Mn was attributable to a more enhanced product diversification strategy that has seen the company offer newer income streams. The turnover grew from KES 848 Mn to KES 1,503Mn mainly attributed to good uptake of reference products. Operating expenses were up by 59.79% to KES 594.41Mn from KES 371.99Mn the previous year. Gross profit was down 37.17% to KES 474.65Mn from KES 755.43Mn the previous year as a result of the cost of sales which edged up 100.17% to KES -748.08Mn. The Board of Directors declared a first and final dividend of KES 0.35 per share with the books closure slated on 30th September 2016. Going forward, product diversification will assist the company in meeting product demand.
• BOC Kenya Ltd (NSE: BOC) released HY2015 results with a 3.18% increase in profits before tax from KES 93.25Mn in HY2015 to KES 96.22Mn in HY2015. Revenues for the six month period, was down 2.99% from KES 556.53Mn to KES 539.88Mn due to revenue reduction occasioned by increasing supplies of cheap imported welding products, accessories and counterfeiting of the company’s gases through illegal filling. Net income increased by 4.5% due to better cost and working capital management as well as a decrease in electricity prices.  The Board of Directors declared an interim dividend of KES 2.20 per share with the books closure slated on 14th September 2016.
• Standard Chartered Bank of Kenya Limited (NSE: SCBK) released their 2Q16 results, recording a 35% growth in profit after tax (PAT) to KES 5.2Bn. The bottom line was boosted by a 14% growth in net interest income to KES 9.9Bn from KES 8.7Bn in 2Q15 as well as the non-interest income which grew 32% to KES 4.5Bn from 3.4 Billion KES in 2Q15. The upswing in the non-funded income was attributable to an 11% increase in other fees and commission and a 49% upsurge in forex income.  Total interest income went up by 21% to KES 13 Billion compared to KES 10.8 Billion in 2015. Interest Income was triggered by an 8% increase in loans and advances to KES 7.7 Billion, a 49% increase in interest from Government Securities to KES 4.7 Billion and a 140% increase in other interest income to KES 193 Million. Total operating expenses were up by 6% to KES 7 Billion compared to KES 6.6 Billion in 2Q2015. The Board of Directors declared a total dividend of KES 2.1 Billion amounting to KES 6.00 per share with the books closure slated on 31st August 2016.
• The Cooperative Bank of Kenya Limited (NSE: COOP) released their 2Q16 results, recording an 18.7% growth in profit after tax (PAT) to KES 7.41Bn from KES 6.24Bn in 2Q15. This was as a result of an increase in net interest income which was up 22.8% to KES 14.46Bn from KES 11.77Bn in 2Q15 as well as the non-interest income which grew 14.7% to KES 6.85Bn from 5.97 Billion KES in 2Q15. The upswing in the non-funded income was attributable to a 6.2% increase in other fees and commission, a 288.1% upsurge in other income. Interest expense was up by 42.8% to KES 7.01Bn from KES 4.91Bn. Operating expenses went up 21.0% y-o-y to KES 10.96Bn as provisions in loans increased by 96.4% to KES 1.31Bn. Loan and advances were up 8.0% to KES 221.29Bn while customer deposits went up 12% to KES 278.25Bn.
• Uchumi Supermarkets Ltd (NSE: UCHM) is set to receive KES 1.2 Billion from the government. They will use the cash injection to repay debts owed to suppliers and stock its stores with goods. The listed retailer in the East African nation, sank into turmoil in June last year. The newly constituted board and management decided to seek the emergency loan from the government which has a 15% stake in the company.  We anticipate that the capital injection would tighten the nuts on high finance costs and stock-out problems with suppliers.
• Following receipt of all regulatory approvals I& M Holdings (NSE: I&M) has concluded the acquisition of 34,477 ordinary shares of Burbidge Capital. This represents a 65% stake in the advisory firm estimated at KES 63.7 Million, in cash and shares. I&M acquisitions is meant to broaden its range of financial services and acquire more clients through Burbidge which is licensed as an investment advisor by the Capital Markets Authority and a nominated advisor to firms listed on the Growth Enterprise Market Segment of the NSE.

Currencies:

Trading in the currency market garnered activity, in comparison to the previous; with market sentiment being dominated by monetary policy committee minutes and significant economic data. The shilling rallied against all but two of its international and regional peers, to pull the currency further from the red. For majority of the week the dollar remained around it 7-week trough, as negative economic data continued to weigh heavy on the currency. This adverse effect was further exacerbated by minutes that showed policymaker’s bias against raising interest rates, in July’s meeting; with members’ citing that a slowdown in the pace of hiring should delay the hike, despite being upbeat about the economy’s outlook. The USDKES rallied by 0.10% to close trading at 101.37. The Kenyan shilling weakened against the Sterling Pound by 1.27%, eating into gains realised after the BoE’s rate cut. The pound rallied amidst positive economic data, most notably retail sales; which emphasise a recovery in the economy. The Euro shed against the shilling, by 1.33% to close trading at 114.33. The former gained traction through a plethora of negative data – most notably CPI – and European Central Bank minutes. The Euro did cut losses however after an indexed economic outlook, from 350 German institutional investors and analysts, recorded 4.6: with a level above zero indicating optimism.