Here is a critical look at three stocks key stocks at the Nairobi Securities Exchange (NSE).
HOLD KCB
This stock is recommended as a hold with a target price of Ksh65.22 per share. According to ABC Capital, the stock has an 8% upside potential. “We remain optimistic about KCB given that the bank is a consolidation of its businesses in the region and is also leveraging on technology to offer banking services to the populous while minimising the unit cost of delivery,” said ABC in a market report.
This recommendation comes hot on heels of KCB’s first quarter results, which the bank posted a 12% net profit increase to Ksh4.3 billion. The results saw the bank edge out Equity Bank in the profitability race. Equity Bank has posted a Ksh4.2 billion net profit for the period under review. The bank’s net interest income shot upwards by 11% to Ksh9.3 billion from Ksh8.3 billion.
According to ABC Capital, KCB remains strong on all prudential ratios. “KCB is also gearing itself to deliver balance sheet growth and shareholder wealth in the short- to medium-term by leveraging on technology and partnerships with telecommunication companies to launch innovative products.”
BUY SAFARICOM
According to Genghis Capital, Safaricom stock is a buy. Two weeks ago, the telco posted record Ksh32 billion profit for the financial year ended March. The firm also revealed that the tenure of current CEO Bob Collymore had been extended by two years. According to Mr Kevin Tuitoek, a research analyst at Genghis Capital, this will work well for the telco.
“The extension is a positive indication of business continuity,” he says, adding that the stock has a strong upside potential due to Safaricom’s innovation in a bid to remain dynamic. This is going to be the key drive that will prop up Safaricom to strong position in the market.
“The company’s prospects of attracting higher revenues from data are high with the roll out of 4G network and expansion of its 3G network in rural Kenya,” says Mr Tuitoek.
The company expects to roll out 4G network by end of this year. Safaricom shareholders are set to take home the biggest dividend payout in Kenya’s history amounting to Ksh25.64 billion. Retail shareholders will pocket Ksh0.64 dividend per share up from Ksh0.47 they received in 2014. The stock is trading at Ksh17.15 apiece.
EXIT KENYA AIRWAYS
The stock is trading at Ksh7.10. Over the past one year, KQ has touched a low of Ksh6.70 apiece and a high of Ksh13. According to Ndindi Nyoro, the head of Investax Capital Limited, the national carrier is expected to suffer a loss of between Ksh14 billion and Ksh20 billion for the financial 2014.
Genghis Capital advices investors to sell this stock. “Over the short-term, we project a sell. The company’s earnings are going to dip,” says Mr Tuitoek. He is nonetheless quick to note that the Dreamliners leasing deal is positive news for the ailing carrier.
“With the swapping of the Dreamliner purchases for a leasing programme, the financial restructuring programme is positive indication of good financial fundamentals,” he says. “The deal should mitigate accelerated accumulation of debt, acting as a win-win whereby it allows the company to continue its expansion programme whilst easing balance sheet pressures.”
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