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September 19, 2018

Safaricom strong ahead of move to Sh32.00

Safaricom house. /Monicah Mwangi
Safaricom house. /Monicah Mwangi

The dollar rebounded; the Bank of Japan surely stepped in to sell the Yen.

The Nairobi All Share Index corrected a further -0.89 per cent to close at 171.21.

The All Share Index has corrected -1.302 per cent over 2 sessions and since closing at a 29 month high on August 28th.

The Nairobi NSE20 eased a marginal 3.22 points to close at 4038.86.

Equity turnover registered 620.554m.

The Equity market has responded very bullishly since August 8th and called this election early.

It is clear that there is no smoking gun and Fridays widely anticipated Supreme Court decision will be the catalyst for another upwards re-rating.

Safaricom was the most actively traded share at the Exchange and eased -1.86 per cent off a record closing high to close at 26.25 and traded 9.833m shares.

It remains in a long established bull channel which is expected to hold through year end and therefore corrections will remain shallow and corrective ahead of a move to 32.00.

Deacons East Africa PLC reported first half earnings where its 2017 first half year revenue expanded +5.029 per cent to 1.077695b, H1 Profit before taxation slumped -267.32 per cent to [257.746m] from. [70.168m] in 2016.

Its H1 Earnings per Share clocked -2.09 versus -57cents last time. Deacons scared a lot of granular detail in their commentary;

1. Drought - reduction in disposable income, coupled with lack of consumer credit had a direct impact on customer shopping trends.

2. Overall unit sales increased by 14 per cent and total number of transactions +9.00 per cent average unit price sold reduced by 13 per cent with a drop in per customer average spend by 17 per cent.

3. 190,341 square feet in 2017 versus 169,516 in 2016,8 additional stores. Marginal 5 per cent increase in revenue. Resultant cannibalisation led to a drop in traffic into all malls

4. Non-performance of major anchor tenants reduced traffic into all malls. With 98 per cent of our stores operating in malls whose anchor tenants are experiencing stocking challenges, data shows that footfall has decreased by over 60 per cent with customers choosing to visit other facilities.

Deacons slumped -8.15per cent to close at 3.95 and are -34.71 per cent in 2017.

Standard Group which had rallied an eye-popping +112.12 per cent through this morning, reported First Half Earnings where revenue clocked a +9.854 expansion to register 2.439529b.

H1 Profit before tax clocked a +15.894 per cent increase to reach 37.297m, but H1 2017 Profit attributable to shareholders was [27.570m] vs. 44.177m in 2016.

Essentially, the minority interest snaffled up to 61.86m. Radio revenue was a standout at +58 per cent, TV +33 per ent, with Print the laggard at -4.00 per cent.

Standard Group did not trade.

TPS Serena Hotels firmed +1.79 per cent to close at 28.50 and is +39.02 per ent in 2017. TPS Serena traded 330,700 shares and has further to go as the Tourism rebound gains traction.

Kenya Airways rallied +5.43 per cent to close at 4.85 and traded 326,500 shares.

Standard Chartered Bank reported a -34.432 per cent slide in H1 2017 profit after tax to clock 3.426768b vs. 5.226314b.

In line with its Peer Group, StanChart reported a +23.637 per cent uplift in its GOK Securities to 105.588b and a -1.072 per cent decrease in its net customer lending to 113.04b.

H1 EPS was 9.73 versus 14.97 in 2016 and StanChart is paying an Interim dividend of 4.50 a rare versus 6.00 last time.

Customer deposits increased by 17.6 per cent year on year to Sh224.5bn and StanChart has been a serious beneficiary of the deposit flight to quality and this is evidenced by the fact that they were able to hold the cost of customer deposits at an unchanged 3 per cent .

Operating expenses, inclusive of loan loss provisions increased by 20.7 per cent year on year to Sh8.5bn, largely on account of increased provisions.

Kestrel Research noted the following

‘’Of particular interest is the trend in loan loss provisions, which increased by 68.5 per cent year on year to Sh2.3bn from 1.4bn in 1H16.Gross NPLs stood at Sh16.9bn. As a result, the bank’s coverage ratio excluding interest expenses rose considerably to 40. Per cent from 33.3 per cent at the end of Q117. This is the highest level of coverage StanChart has reported since at least 2013.’’

StanChart’s loan to deposit ratio now stands at 50.4 per cent, one of the lowest across the banking sector, which informs me of the following; StanChart has plenty of dry powder and these very defensive results leave a lot of room for a material H2 improvement.

StanChart eased -1.26 per cent to close at 235.00 and traded 27,200 shares.

Shares are tightly held and I expect the share price to push on from here. StanChart is +34.92 per cent in 2017 on a Total Return Basis.

EABL traded 2nd at the Exchange and eased -0.38 per cent to close at 262.00 and traded 529,500 shares.

Aly-Khan is a financial analyst


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