The focus over this period, undoubtedly, is on a number of listed corporates reporting their earnings. Taking a step back, Centum, BAT Kenya and East African Breweries Limited (EABL) started this round of earnings’ campaign with release in July.
Centum reported financials for the year ending 31st March 2021 a drastic decline in its earnings per share to a loss of KES0.90 per share. The company’s profit after tax improved albeit in the negative territory while operating profits declined 75% y/y to KES 245Mn on a 59% y/y drop in investment income to KES1.5Bn. The company’s comprehensive income declined 10% y/y to KES4.8Bn on account of a 334% y/y rise in unrealized gains from the sale of rental units that are only recognized upon registering and transfer of ownership to the respective buyers.
The bulk of the Group’s KES2.3Bn loss was driven by the full consolidation of the Two Rivers Development Limited in line with the IFRS requirements though Centum only holds 58% stake in the joint venture. The board of directors has recommended a first and final dividend of KES0.33 per share. The book closure and payment dates will be communicated to the market after the proposed dividend is approved in the coming AGM.
EABL reported a 6.6% y/y growth in EPS to KES5.51. Net Revenues and Costs of Sales grew 14.6% y/y and 15.6% y/y, respectively to KES86Bn and KES48.5Bn, respectively. The rebound in Net Revenues was on the back of improved performance in Kenya (+10% y/y) and Uganda (+33% y/y) and the sustained growth in Tanzania (+15% y/y). The counter registered a 12.9% y/y growth in its balance sheet to KES100Bn. Our outlook on the business in Tanzania is of sustained growth in the near and long term against the backdrop of the new spirit line in Moshi. Also, the additional 30% stake in Serengeti Breweries Limited places EABL at a better vantage point of realizing more revenue from this promising market. We remain cautiously optimistic on the gradual easing of containment measures in the Kenyan market that will be a major boost to on-trade consumables.
The final tranche for the Medium-Term Green Note (MTN) by Acorn Holdings Limited closed on 16th July reporting a 148% performance rate. The issuer sought to raise KES 1.438Bn (an aggregate of KES0.738Bn balance from the first tranche plus an additional KES0.7Bn) and ended up raising KES2.096Bn. The proceeds from the MTN are channeled towards purpose-built student accommodation properties in Nairobi with a total bed capacity of 7,349. So far, we have seen Acorn listing two REITs – a development REIT with an issue of 211Mn units and an income REIT with an issue of 215Mn units – in the unquoted securities platform.
We are of the view that the price action in the remaining quarter will be dictated by the earnings’ yet to be released. Notably, investors will keep an eye on the banking stocks’ 1H21 performance to see the extent to which the sector has recovered from the COVID-19 fallout.
Research Team | Genghis Capital Ltd