The ongoing RussÃa-Ukraine wár has sparked high volatility in the equities market especially in European and Asian markets, which has had a ripple effect in the emerging markets. This has however, posed some investment opportunities on some stocks at the Nairobi Securities Exchange (NSE) as market indicators remain positive for long-term investing alternative.
Analysts at Kingdom Securities Ltd, a subsidiary of Co-operative Bank Limited, take a look at three banking stocks that investors should buy for they promise long-term gains.
Safaricom – Long-Term Buy
The counter shed 5.6% on the RussÃa-Ukraine invásion news on Thursday 24th last week, from Ksh36.60 to Ksh34.55 while remaining steady on Monday the 28th February at Ksh35.95 from a price of Ksh35.65 on Friday 25th. Globally, technology counters performed much better compared to consumer stocks just like in the intense Covid-19 period.
Safaricom declared an interim dividend of Ksh0.64 whose book closure and payment are on 17th and 31st March respectively. Kingdom Securities analysts forecast the counter to pay a final dividend for the year ending 31st March, and issue a BUY recommendation on the counter.
Co-op Bank Group – Long-Term BUY
Currently at Ksh12.90, a 1.9% drop from a rising momentum that had propelled the price to Ksh13.15 as of Wednesday last week, curtailed by the RussÃa-Ukraine war. Kingdom Securities experts value Co-op Bank’s price at Ksh17.21, a 33.4% uptick from the current of Ksh12.89 as they expect the bank to maintain a growth trajectory and dividend payment tradition, projected at Ksh1. This will give a dividend yield of 9.2% and a total return of 41.2% and, therefore, place a BUY recommendation on the counter.
The Co-operative Bank of Kenya has retained its position as the third largest bank in assets, loan book and profitability without regional expansion or major local acquisition. The lender has grown its personal consumer loan book while banking on its customers to grow its e-credit. In 2020, the Group’s strategy on loan provisions managed to contain the large swings faced by the tier one banks leaving the expense line more stable.
This affected the upside on the profitability a factor that will sit well with profit movement in 2022. We give the bank a BUY recommendation at a value of KES 17.21, a 32.4% upside on KES 13.15 seen on February 24th, 2022. We expect the board to maintain the tradition of dividend payment as we forecast a KES 1.00 dps in FY-21. This will have a dividend yield 0f 7.6% for a total valuation return of 40.1%.
ABSA GROUP – Long-Term BUY
The group’s price remained from Ksh9.80 in August last year to Kes. 12.20 on Wednesday last week. On Thursday the price lessened to Kes. 12.10 and later to Kes. 11.90 on Monday 28th on foreign exits which we foresee to turn around on the long-term as the lender regains its market share in the Kenyan market after a successful transition. retain our valuation of Kes. 13.55, a 13.9% upsurge and therefore retain our BUY recommendation on the counter as we forecast the bank to revert to dividend payment after recording a 249.9% growth in Q3-2021 PBT from KES 3.39Bn to KES 11. 86Bn.
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