LONG TERM BUY
We recommend a LONG TERM BUY on KCB Group. The counter is currently trading at a P/B of 1.08x (at a price of KES 40.10) against an industry average of 0.82x as at 23rd August 2019. We believe the group’s strategic partnerships and digital transformation will continue to deliver growth. However, we note with concern on the sluggish growth of operating income, as we opine that the group’s cost minimization efforts can’t be solely relied on to support bottom-line growth.
Equity Group Holdings
We recommend a LONG TERM BUY on Equity Group Holdings. Currently, Equity is trading at a P/B of 1.58x (at a price of KES 39.80) compared to the average banking sector P/B of 0.82x as at 23rd August 2019.The current business model is hinged on technology, innovation and business diversification, and affirms the group’s competitive advantage. We believe the group’s business model will support growth in the long-term.
We revise our LONG-TERM BUY (essentially a BUY and HOLD) recommendation on KenGen to a TRADING one. As at the end of FY2018, the counter had a market share of 69.0% with an installed capacity of 1,631 MW distributed amongst various power sources. The company is currently trading at a P/E of 4.62x, (at a price of KES 5.54) as at 23rd August 2019, lower than the industry average of 5.37x (excluding Umeme).
We recommend a *LONG-TERM BUY on Jubilee Holdings. The company, through its subsidiaries, provides all classes of insurance and has a strong market presence in East Africa. Jubilee is currently trading at a P/B of 1.02 (at a price of KES 370.00) against an industry average of 0.88x as at 23rd August 2019 – higher due to its attractive fundamentals.
*The stock is relatively illiquid which means that the buyer may take a discount when exiting. Therefore, we recommend holding it for the long-term to allow for substantial capital appreciation. This will allow the investor to make a meaningful return even with the discount. Additionally, holding it for the long-term allows for the growth of the company’s new business (fund management).