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Daily Market Report – 7th July 2020


Faida Research - July 7, 2020 - 0 comments

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Market Commentary: 

  • The All Share index eased by 2.1% to close the day at 135.14. We attribute this to price declines in large cap counters, notably Safaricom (-3.4% to KES 28.10), EABL (-0.5% to KES 156.50), Equity (-0.2% to KES 32.85) and KCB (-0.1% to KES 34.60). This was on the back of foreign sell-side activity. The NSE 20 Index gained for the 2nd consecutive day this week (+0.3%) to 1,954.93. Equity turnover increased by 58.6% to KES 877.9 million as the number of shares traded increased by 42.2% to 31.7 million.
  • WPP ScanGroup was the top gainer of the day (+26.3% to KES 17.50) following the declaration of a special dividend (KES 8.00 for every ordinary share). Foreign investor activity in the market remains skewed towards the sell-side with today’s sales at 94.0% compared to purchases at 24.3%.

 

News Highlights:

WPP ScanGroup to pay KES 3.5 billion in Special Dividend

 ScanGroup is set to pay KES 3.5 billion special dividend (KES 8.00 per share) to shareholders in August 2020.
 Kantar TNS had been acquired by the group in 2018 in a bid to build better synergies in insights and data.
 In 2019 WPP PLC, ScanGroup’s majority shareholder, entered into an agreement to sell 60.0% of its shareholding in Kantar (its global research, consulting and analytics business) to Bain Capital Private
Equity.
 The move was driven by WPP’s new strategy to focus more on cost containment and less on geographical expansion.
 The KES 5.0 billion sale of Scangroup’s ownership in Kantar will reduce the company’s geographical diversification.

Commentary
 We caution against opportunistic buying (for the dividend) at the current prices. Investors who do not intend to hold the stock for the long term may end losing the exact amount of the dividend on exit once the company closes the books for the dividend.

 

Recommendations:

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

Hold- Safaricom

Sell- Stanchart, Bamburi, HF

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