Stocks prices have been going down over the last three months since the onset of wár in Eastern Europe, which has halted supply of energy, metals, and agricultural supplies globally. Rising inflations globally has also necessitated central banks to hike interest rates, resulting in a ripple and sentimental effect on equities investment prices both locally and globally as bond yields soar up.
Price performance has resisted despite the strong performance projected by the banking industry and telecommunication giant Safaricom figures. It’s in the wake of this that Kingdom Securities issues the following recommendations.
Safaricom – Long-Term Buy
Currently trading at Ksh26.40, the telecom counter has shed 35.0% Y/Y (year on year), 30.9% YTD (year to date) and 28.7% in the last six months. Recording a low of Ksh26.00 in the last 12 months, the telcom giant has signaled signs of price recovery to its current price while repelling any further decline.
Fundamentally, Safaricom remained strong, recording a 22.2% growth on its profits before tax for the year ending March 2022. This was boosted by a 45.8% increase in M-Pesa revenue from Ksh35.89 billion to Ksh45.80 billion after return of transaction charges on reopened and improved economy. In line with this and as we expect return of foreigners to rally prices upwards, reinforced by the counter’s dividend policy of 80% payout, we recommend a BUY on the counter for long-term investors.
Co-op Bank Group – Long-Term BUY
The conservative bank remained least affected on its price compared to its peers on effect of capital exit from the market by foreigners. Immediately after its dividend book closure of Ksh1.00 on 30th May, the counter dropped to record a low of Ksh 10.80 on Thursday, 2nd June. Later, on signs of recovery, the counter reverted to the current price of Ksh11.10 as at the closure of Monday, 6th June.
Co-op Bank Group lost 8.6% Y/Y, 14.6% YTD and 7.5% and 14.3% in the last six and three months respectively. The Bank reported a 56.3% spike in profits before tax (PBT) from Ksh4.98Bn to Ksh7.79Bn in Q1-2022 supported by strong growths in non-funded income and interest income at 41.7% and 19.5% Y/Y respectively.
With the expected price recovery on the growing revenues and as we foresee a steady dividend payment we retain a BUY on the group’s shares to gain both on capital gains and dividends.
East African Breweries (EABL) – Buy
Trading at Ksh140, a 26.4% Y/Y and 15.6% YTD drops in comparison to that of above Khs160.00 of the period before Rùssia-Ukráine war. EABL recorded a lowest price of Ksh139.00 on 6th May and has stabilized at an average of Ksh140.75 in the last one month on a price recovery mode to its current price of Ksh139.75.
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We anticipate a better financial performance for FY-2022 as evidenced by a 120.7% y/y jump in PBT for H1-2022 from Ksh5.36Bn to Ksh12.88Bn largely on improved economic environment. Factoring in the expected final dividend payment in addition to the KES 3.75 interim dividend for H1-2022, we forecast a further rise on its price and therefore issue a BUY recommendation.
KCB Group – Long-term Buy
Trading at Ksh38.65, the counter has lost 8.4% Y/Y, 15.0% YTD and 13.8% in the last three months while recording a low of Ksh35.00 on 18th May 2022. On signs of recovery, the Group has in the last two weeks recovered 10.6% from Ksh35.00 to the current price of Ksh38.79. Its highest price stood at Ksh 49.90 in the last 12-months. The lender remains resilient and expansionary both locally and regionally to report a 53.9% Y/Y rise in its PBT from Ksh9.12Bn to Ksh14.03Bn in Q1-2022. This was supported a 26.0% rise in total income.
We expect returns on investment to investors to improve as we forecast a Ksh3.0 dividend payment for long-term investors. In addition, we anticipate a further price recovery upon return of foreigners and therefore issue a BUY recommendation to both short-term and long-term investors.
KenGen – Short-Term Buy
Currently trading at Ksh3.49 after striking a high of Ksh4.98 on 10th September 2021 and a low of Ksh3.42 on 19th May 2022, the counter has lost 11.8% Y/Y and 16.5% YTD. In the last six and three months the electric generating company has lost 16.9% and 8.4% and further reduced its losses to 2.5% M/M on what seems to be price recovery from its bottom price. The energy listed counter’s last 3, 6 and 12-months averages are Ksh3.52, Ksh3.77, and Ksh4.15 respectively. In comparison to 2021 and 2020, the company’s 12-month average were Ksh4.47 and Ksh5.17 respectively.
