- The banking sector stocks registered an exemplary performance for the 1H21
- Income-oriented investors were not left out
- The rally will continue in the near term to 2Q21 levels
The tail end of August was flooded with earnings reports from a number of listed corporates.
The atmosphere was of improved performance with an optimistic outlook for the second half period. However, TPS Eastern Africa, Nairobi Securities Exchange, Kenya Orchards, WPP ScanGroup, and HF Group reported a drop in earnings.
The banking sector stocks registered an exemplary performance for the 1H21 period against the backdrop of a robust sector recovery from the COVID-19 fallout. Income-oriented investors were not left out as BOC Kenya, Jubilee Holdings, and Stanbic Holdings announced interim dividends of Kshs1.50, Kshs1.00 and Kshs1.70, respectively.
That said, management’s bulletins and outlook that chaperoned the earnings reports were of eminent profundity on the state of affairs for several counters. We highlight some of them in this article.
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Nation Media Group reported that 16.77Mn shares were bought back by the company as of 23rd August 2021. This is 19.1% shy of the 20.74Mn ceiling.
Notably, the company accounted for roughly 98% of the volumes transacted since the buyback program commenced. This displays a profound disposition effect by shareholders who likely purchased the counter at much higher prices than the buyback premium price of Kshs25.00. We are of the opinion that the implicit indication of this investor reaction is a dip in share price on the closure of the program.
Interesting market developments encircled WPP ScanGroup in this review period. The counter’s share price has been on a rally albeit a sharp decline in its bottom line (-1,191.1% y/y) in the just-released FY20 results.
The uptick – that comes after a sequential diminution – is on the back of the exoneration of the suspended senior management that boosted investor confidence given the fact that there was no adverse effect on the counter’s financial performance, position and/or operations linked to the aforementioned. We opine that the rally will continue in the near term to 2Q21 levels as investors accumulate on the earlier exited positions.
Nairobi Business Ventures communicated the payment for its acquisitions in cement manufacturing, aviation and automobile services will be through a share allocation to the shareholders of Air Direct, Delta Automobile, Delta Cement and Aviation Management Solutions Limited.
A key agenda for the AGM on the 22nd of September was the board authorization to implement the proposed transaction and to increase authorized share capital from Kshs500Mn to Kshs1Bn. We are of the view that the price action on the counter will be range-bound in the near term and it is projected to rally above its 52-week high level on completion of the second transaction phase.
In drawing to a close, the pivotal corporate announcement in the period under review was the NSE/Safaricom Bonga Points deal that enables Safaricom customers to invest in stocks using their accrued Bonga Points (Bonga Points is a loyalty scheme for all Safaricom users that enables subscribed users to earn one loyalty point for every Kshs10.00 spent).
The stipulated conversion rate stands at Kshs1.00 for every five Bonga Points translating to a maximum of Kshs3.2Bn to be unlocked from the 16Bn outstanding Bonga Points – assuming that ALL the outstanding Bonga Points are redeemed through this partnership.
On balance, we estimate that about Kshs195Mn will be unlocked from this innovative partnership as the target market is a shrunken one. In as much as innovation is commendable, we see this particular partnership as ‘evolutionary’ as opposed to ‘revolutionary’, in the sense that it’s an additional source of funds. Needless to say, we hope to be proven wrong (in a positive way.