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September 18, 2018

KQ shares surge by 9.38% on the Nairobi bourse

Passengers on-board KQ plane at Moi International airport Mombasa/Photo Elkana Jacob
Passengers on-board KQ plane at Moi International airport Mombasa/Photo Elkana Jacob

The FED raised US interest rates a quarter point on Wednesday.

The price of crude oil tumbled to a seven-month low.

Global currency markets whiplashed bigly before the dollar found its footing and then began to strengthen.

The Nairobi All Share rallied +0.585% to close at 152.94 a fresh 23 month high.

The Nairobi NSE20 Index +0.45% to close at a fresh 11 month high of 3522.79.

We are seeing better breadth in the market but one suspects the rebound is now maturing especially ahead of the August elections and heightened and adversarial politics.

The stumble lower in Kenya Airways shares was triggered by a Genghis Capital report which spoke of the local banks ending up with about 33% of the equity and an exponential dilution of existing shareholders. It is egregious and inconceivable that banks who lent to Kenya Airways with their eyes wide open and at commensurate interest rates should end up with the lion’s share of the equity in the new company.

It is also a perfect example of self-harm to dilute long suffering shareholders by such a crazy amount and speaks to the fact that minority shareholders [79,000] had no representation at the negotiations whilst the banks were surely well represented.

The banks now have a GOK guarantee and that should be it. The GOK has to revisit the ratio structure. Kenya Airways which had stumbled -30.93% in June through yesterday morning rebounded by the daily maximum of +9.38% to close at 5.25 with 384,700 shares traded and unserviced buy side demand of just shy of two million shares. The raison d’être for this rebound was investors began to factor in that the current proposal will not fly.

Safaricom was the most actively traded share at the Exchange and firmed +1.09% to close at 23.25 and traded 16.061m shares worth 377.093m. I expect a continued re-rating higher in the share price and my target is 28.00. Safaricom is +21.4% in 2017 and underpins the bull market here in Nairobi.

Standard Group firmed +1.39% to close at 36.50 and is + a mouth-watering +121.21% in 2017 and the best performing counter at the NSE in 2017

National Bank has been on a tear this week [since the news broke that KCB was looking at an all share deal acquisition]. National Bank rallied a further +10% to close at 9.35 and that caps a +38.15% rally this month.

Equity Bank firmed +0.62% to close at 40.00 and score a 2017 closing high. Equity traded 5.419m shares worth 217.035m and is +33.33% in 2017.

KCB Group eased -0.65% to close at 37.75 and traded 2.216m shares. KCB has corrected -5.625% since the National Bank story leaked.

Centum bounced +2.58% to close at 39.75 on strong volume action of 1.106m shares. On a PE of less than 4.00, this share has upside head room.

EABL rallied +1.63% to close at 249.00 the highest closing price in 2017. EABL has lagged the market rally and is playing catch up.

Mumias Sugar rallied +4.76% to close at 1.10 and as rallied +46.66% in June and this late cycle rally speaks to the maturity of the bull market rally.

KenGen closed unchanged at 8.50 a 2017 closing high and sits pretty at +46.55% in 2017.

Aly-Khan is a financial analyst

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