Corporate announcements were relatively muted in with market participation widely driven by speculation and portfolio recalibrations.
Foreign investors maintained a bearish stance in the period with outsized exits on key stocks across the telco and banking sectors. In this article, we discuss activities that have been salient in the bourse during the period under review and give our outlook on the forthcoming events.
East African Breweries Plc is seeking to raise KSh11Bn shortly after they retired their KSh6Bn Medium Term Note (MTN) on the 28th of June. (The early redemption was averred as part of their balance sheet and costs of funds optimization).
Read: East Africa holds its ground as Africa’s fastest-growing region
The five-year tenure – with an interest rate of 12.25 per cent p.a. – was in line with our projection of a near term corporate bond issue. The rationale behind this was the contemporary high costs attached to the alternative sources of income against the backdrop of the pandemic impact on the macroeconomic environment. That said, towards the tail-end of September, the brewer disclosed a KSh22Bn plan geared towards generating about 11.7 megawatts from solar power. The company targets to delink from KPLC ahead of 2030 through the green energy initiative which also encompasses the production of biofuels. This is projected to slash the counter’s carbon emissions by c.95 per cent.
Nation Media Group’s share buyback programme closed on 24th September 2021. The group reported an 82.5 per cent success rate on the back of 17.1Mn repurchased ordinary shares. Looking back, the group accounts for c.96 per cent of the volumes traded during the buyback period. From our standpoint, this reflects a disposition effect by shareholders who bought at high double digits or even triple digits.
Read: How EABL sustained profitability despite devastating pandemic
The prevailing price levels, therefore, were viewed as depressed for an exit. That said, now that the single buyer demand that has seen the price range bound (KSh26.10 – KSh24.75) is out of the market, the price has shed c.11 per cent (as of 8th October) from the programme’s closure date. We believe that this is a near-term adjustment to the buyer-seller dynamics.
WPP ScanGroup reported a profit warning for the current financial year in their 1H21 results. The profit warning projects net consolidated earnings to fall by at least 25 per cent as an adjustment to last year’s one-off gains from discontinued operations in Research and Marketing Group Investment Ltd and the Millward Brown businesses.
On the corporate calendar, we have Safaricom first-half results scheduled for the 10th of November. We project a strong performance by M-Pesa revenues on the back of strong growth in 30-day active M-Pesa users coupled with the lapse of zero-rated transactions. In line with this, the recently launched M-Pesa super app is expected to revamp M-Pesa usage on the back of solid growth in active 4G devices in FY21 that is expected to rise in the current financial year. We anticipate some more colour on the Ethiopian Venture to chaperone the results. Suffice to say, the consortium is projected to profit heavily from the untapped mobile money business in Ethiopia on the regulators greenlight.
In drawing to a close, we expect banks to release their 3Q21 results in November. This, in our opinion, will be a key driver as market participants adjust their positions as the market prices in the results.
