Browsing: Genghis Capital

Earnings season in earnest

Countries

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

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News announcements drive activity in the bourse

Opinion

The review period has been salient with fresh 52-week low levels hit by some of the listed counters. Centum’s profit–warning announcement (expecting a dip in profit in its earnings by more than 25% on a yearly comparison) at the tail end of 1Q21 triggered a negative momentum on the counter in the subsequent two–month period.

This resulted in the counter touching a fresh low of KES14.40. Standard Group touched a new low of KES15.55 in early May, attributed to the negative knock from its FY20 earnings release. The media company had reported a KES301.6Mn loss during the last calendar year. Limuru Tea also fell to a new low of KES340. That said, activity on this agriculture stock has been thin with only 100 shares (minimum) trading in the review period.  

Bamburi Cement recorded a higher-than-expected FY20 EPS (Earnings per Share) of KES2.89. This partly enabled …

Green shoots of equity rebound

Money Deals

Kenyan equities market reversed the negative trend in the first two weeks of September, with the indices NSE All Share Index (NASI) and NSE-20 Share Index ticking up 9.0% and 8.2%, respectively, on a month-on-month comparison. This could be attributed to the improving business prospects issuing from the second quarter’s deep economic and business strain arising from the containment measures for the Covid-19 pandemic. On a year-to-date (YTD) basis, the NSE-20 and NASI have posted negative returns of 29.3% and 15.4%, respectively.  

Across the market, there have been outstanding performers that bucked the general trend. Absa NewGold ETF (a security whose price is derived from gold commodity price) is up 38.3%. Kenya Airways, currently suspended, edged up 86.8% on a buy-out fueled rally while Eaagads Ltd is up 23.8%. The key index counters are all in negative territory with the key banks – KCB, Equity and Co-operative – sharply lower, …

Making Africa’s informal sector a new normal 

Entrepreneurship

The second half period of 2020 has been marked with persistent bearish sentiment exacerbated by the financial performance amidst uncertainty in economic and business recovery in the pandemic era. On a year to date (YTD) basis, the NSE-20 and NASI have posted negative returns 34.2% and 22.2%, respectively. However, there have been outstanding performers that bucked the general market trend. Absa NewGold ETF (a security whose value is pegged on the value of global price of gold) is up 39.5%; Kenya Airways (+86.8%) on a buy-out fueled price rally; and Olympia Capital (+21.9%). The key index counters are all negative with the key banks (Equity, KCB and COOP) sharply lower, on average by 41% YTD while Safaricom and EABL have retreated 12.1% and 22.4% YTD, respectively.  

Also Read: Understanding Stock Market Liquidity in African Exchanges

The bearish market coupled with uncertainty around resolution of the Covid-19 pandemic, has shifted investors’

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Third quarter Equity Investment Strategy

Regional Markets

Risk asset prices rebounded globally with the benchmark MSCI (Morgan Stanley Composite Index) World trimming first quarter losses to -6.6% at the end of the first half of the year. The steady state in the global financial markets has been anchored on the accommodative policies in the developed economies and easing of containment measures in some pockets across the globe.

Some equity markets such as in the emerging world have recouped back the first quarter losses while frontier markets are trailing 18.1% from the start of the year levels. US Dow Jones Industrial Average benchmark that tracks the 30 largest listed companies, posted its hitherto best quarterly performance in 33 years with a return of 17.8% in the quarter ending June 2020.

Also Read: New rebirth for Kenyan retail sector as foreign capital flows in

Closer home, revised estimates have struck a bearish tone as per our second quarter outlook.…

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