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Market Report – 1st April 2021


Faida Research - April 2, 2021 - 0 comments

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Market Commentary:

  • The All Share Index and NSE 20 Share Index eased by 3.5% and 2.0% w/w to close the week at 160.68 and 1,864.44 respectively characterized by an increase in both market turnover(31.9% to KES 3.2 billion) and volume of shares traded (3.9% to 85.7 million). We attribute the decline in the indices to increased selling pressure on the back of the new COVID-19 containment measures.
  • Banking counters were among the most impacted given their sensitivity to the performance of the economy; HF (-17.5% to KES 3.78), Coop (-12.1% to KES 11.95), Equity (-4.8% to KES 39.05). I&M however registered a price increase (+13.6% w/w to KES 49.00) following the announcement of a final divided (KES 2.25) and a bonus issue of 1:1. Safaricom eased by -4.4% w/w to close at KES 37.05.
  • We expect improvement in demand on some of the counters such as Equity Bank, EABL, Coop and Safaricom. However, we expect minimal upward price movements as investors remain cautious of the economic outlook.

 

News Highlights:

 CBK Invites Bids for 18-Year Infrastructure Bond (IFB1/2021/18)

  • The Central Bank of Kenya (CBK) has invited bids for an 18-Year infrastructure bond – IFB1/2021/18, with the aim of raising KES 60.0 billion for funding of infrastructure projects contained in the FY 2020/2021 budget estimates. The 18-Year bond’s coupon rate will be market determined. The features of the bond are as shown below:
  IFB1/2021/18
Issuer Republic of Kenya
Amount KES 60.0 billion
Purpose Funding of infrastructure projects
Tenor 18 years
Coupon rate Market determined
Taxation Tax free
Period of sale 26/03/2021 to 06/04/2021
Redemption date 21/03/2039
  • We expect an oversubscription as the IFB is tax free. We opine that there is some headroom for aggressive bidding given the government’s need for cash. As a result, we expect rates to increase by 20 to 30 bps above the current yields. We therefore recommend bidding as follows:
    1. 12.30% to 12.60% for non – aggressive bids
    2. 12.70% to 12.90% for aggressive bids

 

Equity Group Posts a 10.9% y/y decline in After Tax Profits for FY2020 

Equity Group recorded a 10.9% y/y decline in after tax profits to KES 20.1 billion (-11.8% y/y EPS to 5.24) mainly attributed to a surge in loan loss provisions and cushioned by deferred tax asset of KES 8.2 billion. ROE dipped to 15.3% from 21.8% in FY2019. The group’s board of directors did not declare a dividend payment. Read more on our thoughts of the FY2020 and our recommendation here:

 

Recommendations:

EABL – Long-term Buy

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