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Daily Market Report – 11th August 2020


Faida Research - August 11, 2020 - 0 comments

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Market Commentary:

The All Share and NSE 20 Indices retreated by 0.7% and 1.6% to close the day at 129.24 and 1733.14 respectively. Market turnover declined by 26.3% to KES 355.1 million as the number of shares traded declined by 24.2% to 14.0 million. Fahari I-Reit (+9.9% to KES 5.98), Uchumi (+6.7% to KES 0.32) and Kakuzi (+5.9% to KES 397) emerged as the top 3 gainers while Scangroup (-9.3% to KES 8.22), Sameer (-9.2% to KES 2.95) and TPS (-9.0% to KES 13.10) emerged as the top 3 losers. Overall, trading activity was relatively more balanced in today’s trading session with foreign and local investor participation at 49.0% and 51.0% respectively.

 

News Highlights:

CIC Group Posts an After Tax Loss of KES 335.5 million for 1H2020

 CIC Group posted an after tax loss of KES 335.5 million from an after tax profit of KES of 20.9 million in 1H2019.
 The significant decline in profitability was primarily due to a 4.9% y/y decrease in total income to KES 8.3 billion, a 7.6% y/y increase in net claims to KES 5.4 billion and a 3.2% y/y dip in gross written premiums to KES 9.3 billion.
 Total income fell by 4.9% y/y to KES 8.3 billion, as net earned premiums remained flat at KES 7.1 billion and investment and other income declined by 26.0% y/y to KES 1.2 billion.
 Net claims and policy holders’ benefits grew by 7.6% y/y to KES 5.4 billion. The group’s loss ratio grew to 76.4% (1H2019: 70.9%). However, operating and other expenses declined 10.7% y/y to KES 2.9 billion (1H2019: KES 3.2 billion). As a result, total expenditures ratio grew marginally by 0.5% y/y to KES 8.3 billion. As a result, the combined ratio only grew slightly to 116.7% from 116.1% in 1H2019.
 Finance costs reduced by 10.2% y/y to KES 302.1 million from KES 336.2 million in 1H2019.
 Share of result of associate fell by 24.1% y/y to KES 2.2 million (1H2019: KES 2.9 million).

Commentary
 Looking ahead, we expect slight dip in premiums and collection difficulties as households and businesses operate under tighter budgets.
 We also anticipate pressure on investment income as the equities and fixed income markets continues to face declining returns.

 The group has witnessed a rise in claims the past 2 years, with a rise in long-term business claims in FY2018 followed by an uptick in medical claims in FY2019, further impacting the bottom line.
 We expect the group to continue implementing cost cutting initiatives to mitigate bottom line risk.

 

Recommendations:

Long Term Buy- KCB, Equity, Absa, Stanbic, NCBA

Hold- Safaricom

Sell- Stanchart, Bamburi, HF

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