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Market Report – 12th March 2021


Faida Research - March 15, 2021 - 0 comments

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Market Commentary:

  • The All Share Index (NASI) edged up by 0.3% w/w to close the week at 162.08. This was characterized by an increase in both trading volumes (+41.3% w/w to 95.7 million shares) and turnover (+51.3% w/w to KES 3.2 billion). The NSE 20 Share Index however declined by 0.9% w/w to 1,923.04 due to price declines on majority of the constituent counters. Safaricom eased by 0.5% w/w to close the week at KES 37.10. In the banking sector, KCB and Equity bank gained by 4.6% w/w and 5.1% w/w to close at KES 39.95 and KES 40.00 respectively as demand on the two counters outstripped supply. EABL gained 3.7% w/w to close at 175.25.
  • We attribute the price gains in the banking counters and EABL to both speculative activity (esp. on the banking counters ahead of the FY2020 results) and re-alignments towards sectors (e.g. financial services) that are likely to benefit from the economic recovery. NMG witnessed significant selling pressure (particularly in the first four trading days) which we attribute to profit taking activity following the recent rally. However, the counter recouped some gains in today’s trading session (+8.8% d/d) to close at KES 19.55 but was still down -22.9% w/w. In the coming week, we expect activity to remain relatively high

 

News Highlights:

Equity Group Obtains USD 100.0 million loan for MSME Lending

  • Equity Group has obtained a USD 100.0 million for micro, small and medium-sized (MSME) lending from leading European development banks – Germany’s DEG, Netherland’s FMO and Britain’s CDC Group.
  • The Group had recently received a USD 125.0 million loan from the European Investment Bank (EIB) and the European Commission.
  • According to FMO, the facility will enable MSMEs access capital to keep their businesses running.

Commentary

  • We expect Equity to benefit from lenient terms on the loan facility such as lower interest rates and a longer loan term. Under concessional terms, the group will be able grow its longer tenure portion of the loan book.
  • We note that lending to SMEs sector carries risk due to the adverse effects of the COVID-19 pandemic. The sector had an NPL ratio of 12.4% as at 3Q2020. We therefore expect cautious lending by the bank to the less risky segments.

 

Recommendations:

Kenya Re – Hold

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