Stock Picks

KCB Group
We recommend a LONG TERM BUY on KCB. The counter is currently trading at a P/B of 1.48x (at a price of KES 51.00) against an industry average of 1.11x as at 10th August 2018.  Whilst we expect the rebound in interest income to continue in the short-term (given the improvement in the operating environment), we remain concerned over the Group’s deteriorating asset quality. However, we believe the group’s strategic partnerships and digital transformation will continue to deliver growth in the long-term.

Please note 1H2018 results will be released on Friday, 16th August 2018.

Equity Group Holdings
We recommend a LONG TERM BUY on Equity Group Holdings with a one-year target price of KES 54.11. Currently, Equity is trading at a P/B of 2.09x compared to the average banking sector P/B of 1.11x as at 10th August 2018. The current business model is hinged on technology, innovation and business diversification, and affirms the group’s competitive advantage. We believe the group’s business model will support growth in the long-term.

Cooperative Bank
We issue a BUY recommendation on Cooperative Bank with the counter trading at a P/B of 1.44x (at a price of KES 17.20) against an industry average of 1.11x as at 10th August 2018. The counter has a high ROaE of 17.4%, which is above the industry average of 13.4% and a dividend yield of 4.7% – commensurate with the industry average. We expect the bank to improve its efficiency through its Soaring Eagle transformational agenda which is aimed at digital transformation.

Jubilee Holdings
We recommend a BUY on Jubilee Holdings. The company, through its subsidiaries, provides all classes of insurance and has a strong market presence in East Africa. Jubilee is currently trading at a P/B of 1.45x (at a price of KES 504.00) against an industry average of 1.10x as at 10th August 2018 – higher due to its attractive fundamentals.

Kenol Kobil
We place a BUY recommendation on Kenol Kobil. The stock is trading at a PE of 10.72x with a dividend yield of 3.4% at a price of KES 17.90 as at 10th August 2018. We expect the company to continue to focus on enhancing brand equity (through strategic partnerships with food chain brands and pharmacies) and upgrading their retail network. We also expect revenue growth to be positively impacted by rising global oil prices.

KenGen
We issue a BUY recommendation on KenGen. The counter has a market share of 69.0% with an installed capacity of 1,631 MW. The company is currently trading at a P/E of 4.78x, (at a price of KES 6.55) as at 10th August 2018, lower than the industry average of 6.03x (excluding Umeme). The company plans to increase installed capacity by an additional 721 MW by 2020 through a geothermal led strategy. We expect these additions to enhance revenues in the long-term.

Britam Holdings
We recommend a BUY on Britam. The counter trading at a P/B ratio of 1.35x (at a price of KES 14.10) against an industry average of 1.10x as at 10th August 2018. The company recently completed the sale of 360.8 million new shares worth KES 5.7 billion to private equity fund AfricInvest. These funds will be used to ramp up property development, increase investment in its subsidiaries and improve its digital delivery channels.