The Kenyan Market in Focus: Review of the Week

The Kenyan Market activity at the bourse ended the week on a low when compared to its performance last week. The NSE 20 Share index gained 20.38 points during the five days of trading to close the week at 3208.25 points while the NASI declined marginally to end the week at 131.49 points from 134.06 points previously.

The NSE 25 Share index lost 40.91 points in the same period to settle at 3444.51 points from 3485.42 points last Friday. Market capitalization dropped from KES 1,930.575 billion before to KES 1893.382 billion this week, whilst equity turnover declined to KES 4.2 billion from KES 6.7 billion due to a reduction in the volume of shares traded to 170 million shares from 358 million shares.

The returns on government securities have come down by up to a percentage point in two weeks with increased subscription by banks after a new bill capping lending rates was signed into law.

Just two weeks ago, bank holdings of the State securities had fallen but two days after the new law came into effect, the institutions increased their share relative to all other categories of investors ahead of lower lending margins.

Read:

• Banks Top Losers at the NSE on Thursday
• Listed Banks Bounce Back at the NSE

According to the September 2 weekly bulletin of the Central Bank of Kenya, commercial banks held 54.4 per cent of all government securities, up from 54.1 per cent in the previous week. Insurers and pension funds fell to 7.3 and 27.0 per cent from 7.4 and 27.2 per cent respectively in the preceding week.

Currencies

The Kenyan shilling was steady against the dollar on Friday with inflows from the horticulture industry matching subsiding dollar demand from importers.

The Sterling and the Euro lost ground albeit slightly against the shilling owing to the recent UK manufacturing and production data which highlighted the problems that the British economy is facing since the vote to leave the European Union.

The problems for Sterling continued on Wednesday when the NIESR released its latest GDP estimate for the last three months which showed a fall to 0.3%.

Market updates

Liberty Holdings (NSE: CFCI) announced their HY16 results recording a 15.3% dip in Profit after Tax (PAT) to KES 355.4Mn, down from KES 419.8Mn. The drop in profit was as a result of a 41.5% increase in claims from policyholders to KES 2.3 billion. Operating expenses for the period also grew by 14.2% to KES 1.5 billion. Gross premiums increased 11.6% to KES 4.7Bn while income from investment activities grew 56% to KES 1.4Bn. The insurer expects the second half of 2016 to be influenced by an increasingly competitive market place and muted growth prospects. Liberty Holdings Ltd share price lost ground by 21.89% to close at KES 13.20.

Centum Investment Company Ltd (NSE: ICDC), pending shareholder approval in its upcoming Annual General Meeting scheduled for the 29th of September, proposes repurchase of its own shares from public investors. The share repurchase proposal, if approved, would be a major boost to its share price bringing it closer to its Net Asset Value of KES 59.08 (up 23.01% from KES 48.03) recorded in the FY2015/16 period. The stock trading KES 38.50 on Wednesday, the day the annual results were published on the website, has since jumped 13.63% to end the week to perch at KES 43.75. Going forward, we expect renewed accumulation activities around the stock in the run-up to the Annual General Meeting.

Eveready E.A Ltd (NSE: EVRD) issued a profit warning alert as the company anticipates its earnings for the period ended 30th September 2016, to be at least 25% below the profit reported in a similar period last year. The company attributes the profit warning alert to the decrease in revenues caused by a prolonged stock out during the year. Eveready E.A reported a KES 77.7 million net loss in the year ended September 2015.  Additionally, the company is seeking to sell off a piece of land in Nakuru. The stock was on a downward trajectory, plummeting by 4.65% to close at KES 2.05 during the 36th week trading session.

The Kenya Institute for Public Policy Research and Analysis (Kippra) requested the Energy Regulatory Commission (ERC) to review the formula it uses to set petroleum prices at the pump, stating that some cost components are unfairly burdening consumers. The government-backed policy body faults the regulator over failure to remove a cost item associated with Kenya’s only refinery despite its closure in September 2013.  On the other hand, ERC, maintained to have cut the costs to zero but still maintained the formulae.

Kenya Airways Ltd (NSE: KQ) is set to face shareholders in its upcoming Annual General Meeting scheduled for the 29th of September, with  a detailed plan on how they intend to resolve their negative capital position. The airline has already set a new record in wiping out shareholders equity, with the company the company’s net worth receding to a negative KES 35.6 billion from the previous year’s negative KES 5.9 billion. The airline stated that it’s focusing on revenue growth, cutting costs and restructuring its capital base including through asset sales, debt renegotiation and possible capital-raising from shareholders. Going forward, we expect to see speculative trading on the stock as investors continually build up confidence which is currently dependant on the management’s strategies.