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November 17, 2018

KQ shares rebound on debt guarantee

Kenya Airways Boeing 787 dreamliner at KQ headquarters in Nairobi on April 26,2017. PHOTO/ENOS TECHE.
Kenya Airways Boeing 787 dreamliner at KQ headquarters in Nairobi on April 26,2017. PHOTO/ENOS TECHE.

The International markets are transfixed by a trifecta of events tomorrow ‘’Super Thursday’’. That trifecta includes the general election in the UK [where Jeremy Corbyn has made up some ground], the Comey Testimony in the US and the ECB meeting.

Gold has been firm as you look and was last at 1290.00 +7.00% year to date and is a geopolitical proxy. Many folks believe the epicentre of geopolitical risk is actually Washington.

BITCOIN is more than +200% since the beginning of the year. 

The Blockade of Qatar by its erstwhile GCC allies is also another noteworthy occurrence. Qatar markets have taken a fearful beating.

The Nairobi All Share rebounded +0.7% to close at 149.29. The All Share is in a fully fledged bull market and is +11.96% in 2017 and -0.52% below a 22 high reached on  June 2. The Nairobi NSE20 rallied +0.45% to close at 3472.96 a fresh 10 month closing High.Equity turnover clocked 863.642m which verified yesterday’s bullish drive higher. 

Safaricom bounced +1.13% to close at 22.25 and traded 15,209m shares and will set a fresh record high as early as next week.

The Government  will offer $750 million in guarantees to Kenya Airways’ existing creditors to help the heavily-indebted carrier secure financing from other sources to complete its recovery, a cabinet document showed on Tuesday. The government will also convert its existing loans to the carrier into equity, it said.  The key issue for shareholders is around the GOK and any conversion of debt into Equity which will obviously be dilutive. Kenya Airways was if I am not mistaken the first IPO, shareholders have been plenty diluted. Therefore, I think it behooves the Government to skip any debt to equity conversion completely. FY results confirmed there is light at the end of tunnel and what’s certain is that if we really are serious about being a hub/transit state in the region, it was a sine qua non that we had to have a functioning and successful airline. This was a national interest issue. Kenya Airways rebounded +3.00% to close at 6.85 and traded 323,800 shares and I suspect the bounce was on the basis that the GOK dilution will be designed to be de minimis. 

Standard Group corrected -2.79% off a 2017 high to close at 34.75. Standard Group is the best performing share at the Securities Exchange and remains +110.6% in 2017. 

Barclays Bank firmed +1.05% to close at 9.60 a fresh 2017 closing high. The certainty around the Barclays Africa divestment by Barclays PLC with PIC SA taking up an anchor shareholder position has lent strength to Barclays Bank’s share price which is +20.00% over 4 weeks. 

Co-op Bank was heavily traded and closed at 17.50 [+32.57% YTD] and 6.811m shares were traded. 

NIC Bank firmed +0.75% to close at a 2017 high of 33.25 and traded 1.035m shares. NIC Bank is +32.98% in 2017.

KenGen firmed +0.63% to close at a 2017 High of 7.90 and is now +36.20% in 2017. PIC SA has emerged as the Number two shareholder after GOK and underpins the price.  EABL has badly lagged the market rebound and today played catch up bouncing +2.14% higher to close at 238.00 and traded 337,000 shares. 

Mumias Sugar was uplifted +6.25% to close at 0.85 but remains a penny stock and is -34.61% in 2017. 

 

Aly-Khan is a financial analyst


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