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Market Report – 24th December 2020


Faida Research - December 28, 2020 - 0 comments

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Market Commentary:

  • The All Share and NSE 20 Indices gained by 1.4% and 2.4% w-o-w (4 day trading week) to close the week at 150.18 and 1,839.51 respectively. Market turnover declined by 33.7% to KES 1.3 billion while the volume of shares traded declined by 47.1% to 44.5 million.
  • The week’s activity was dominated by the banking sector (49.5% of the week’s traded value) and Safaricom (29.7% of the week’s traded value). Safaricom reached an all-time high of KES 34.10, retreating to close the week at KES 34.00 (w-o-w gain of 1.3%). EABL gained 3.8% w-o-w to close at KES 156.00 on foreign investor demand. We expect continued stability to the overall market index (NASI) in the upcoming week.

 

News Highlights:

 ABSA Kenya Issues Profit Warning for FY2020

  • Absa Kenya has announced a profit warning for FY2020, expecting after tax profits for FY2020 to contract compared to FY2019. This implies that after tax profits for FY2020 will not exceed KES 7.5 billion.
  • The profit warning was mainly attributed to the impact of the Covid-19 pandemic (which saw increased provisioning) as well as rebranding costs incurred as the bank shifted from Barclays to Absa.
  • According to the bank, trends and forecasts showed that the rate of impairment was increasing due to the delayed loans repayments and potential additional stress due to the Covid-19 after effects.

Commentary

  • We note that the difficult operating environment owing to the pandemic has not impacted Absa alone, with other banks such as KCB, HF, Standard Chartered and I&M have also issuing profit warnings for FY2020 . In 3Q2020, the sector recorded higher provisioning and depressed earnings. As at November 2020, banks had restructured a total of KES 1.4 trillion. We anticipate reduced earnings across the banking sector for FY2020.

 

Recommendation:

LONG TERM BUY – KENGEN

HOLD – KENYA RE

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