By Research Team, Apr 21, 2024
During the week, T-bills were oversubscribed, with the overall oversubscription rate coming in at 108.7%, lower than the oversubscription rate of 192.8% recorded the previous week. Investors’ preference for the shorter 91-day paper persisted, with the paper receiving bids worth Kshs 6.0 bn against the offered Kshs 4.0 bn, translating to an oversubscription rate of 150.1%, significantly lower than the oversubscription rate of 410.4% recorded the previous week. The subscription rates for the 182-day paper and 364-day paper decreased to 78.1% and 122.7% respectively from 105.6% and 192.9% respectively recorded the previous week. The government accepted a total of Kshs 26.0 bn worth of bids out of Kshs 26.1 bn of bids received, translating to an acceptance rate of 99.6%. The yields on the government papers recorded mixed performances, with the yield on the 91-day paper increasing by 7.0 bps to 15.80% from the 15.73% recorded the previous week, while the yields on the 364-day and 182-day papers decreased by 2.3 bps and 40.2 bps to 16.51% and 16.47% from 16.53% and 16.87% respectively recorded the previous week;
During the week, The Central Bank of Kenya released the auction results for the reopened bond FXD1/2023/02 with a tenor to maturity of 2.0 years. The bond was oversubscribed with the overall subscription rate coming in at 118.0%, receiving bids worth Kshs 47.2 bn against the offered Kshs 40.0 bn. The government accepted bids worth Kshs 34.8 bn, translating to an acceptance rate of 73.7%. The weighted average yield of accepted bids came in at 16.99% which was within our expected range of 16.55%-17.00% and a decline of 74.4 bps from the 17.74% yield of the previous similar tenor reopened FXD1/2023/02 bond issued in October 2023. While the coupon rate for the bond was fixed at 16.97%, similar to the previous issue’s rate. With the Inflation rate at 5.7% as of March 2024, the real return of the bonds is 11.3%;
During the week, the Energy and Petroleum Regulatory Authority (EPRA) released their monthly statement on the maximum retail fuel prices in Kenya, effective from 15th April 2024 to 14th May 2024. Notably, the maximum allowed price for Super Petrol, Diesel and Kerosene decreased by Kshs 5.3, Kshs 10.0, and Kshs 18.7 each respectively, and will retail at Kshs 193.8, Kshs 180.4, and Kshs 170.0 per litre respectively from the March 2024 prices of Kshs 199.2, Kshs 190.4 and Kshs 188.7 respectively;
During the week, the National Treasury gazetted the revenue and net expenditures for the ninth month of FY’2023/2024, ending 28th March 2024, highlighting that the total revenue collected as at the end of March 2024 amounted to Kshs 1,589.7 bn, equivalent to 61.7% of the revised estimates of Kshs 2,576.8 bn for FY’2023/2024 and is 82.3% of the prorated estimates of Kshs 1,932.6 bn.
During the week, the equities market was on a downward trajectory, with NSE 25 declining the most by 3.8%, while NASI, NSE 10, and NSE 20 declined by 3.6%, 3.5%, and 2.1% respectively, taking the YTD performance to gains of 20.9%, 18.2%, 15.9% and 12.0% for NSE 10, NSE 25, NASI and NSE 20 respectively. The equities market performance was driven by losses recorded by large-cap stocks such as Equity Group, KCB, and Safaricom of 9.4%, 7.0%, and 5.6% respectively. The performance was, however, supported by gains recorded by large-cap stocks such as EABL and BAT of 11.2% and 0.9% respectively;
During the week, Bamburi Cement Plc released their FY’2023 results, reporting a loss for the year of Kshs 0.4 bn, a significant 321.7% decline from the Kshs 0.2 bn profit after tax recorded in FY’2022. Profit from continued operations, however, increased by 160.7% to Kshs 0.7 bn from Kshs 0.3 bn recorded in FY’2022. Turnover increased by 6.3% to Kshs 22.0 bn from Kshs 20.7 bn in FY’2022, while total operating costs increased by 3.9% to Kshs 20.8 bn from Kshs 20.1 bn recorded in FY’2022;
Also, during the week, Liberty Kenya Holdings released their FY’2023 results, having fully implemented the new IFRS 17 reporting system. Liberty Kenya Holdings’ Profit After Tax (PAT) increased by 151.0% to Kshs 0.7 bn, from Kshs 0.3 bn recorded in FY’2022, mainly driven by a 148.6% increase in Net insurance income to Kshs 0.9 bn, from Kshs 0.4 bn in FY’2022, and supported by a 41.6% decrease in Net insurance expenses to Kshs 0.3 bn, from Kshs 0.6 bn in FY’2022;
During the week, The Affordable Housing Regulations, 2024 were published for public participation by the State Department for Housing and Urban Development under the framework of the Affordable Housing Act, 2024 outlining crucial guidelines for the development, allocation, and management of affordable housing units;
During the week, Hass Consult, a Kenyan Real Estate consulting and development firm, released its House Price Index Q1’2024 Report which highlighted that quarter-on-quarter (q/q) selling prices for all the properties registered a 2.7% increase in Q1’2024, compared to 0.02% increase in Q1’2023. Additionally, Hass Consult released its Land Price Index Q1’2024 Report which highlighted that the average q/q selling prices for land in the Nairobi suburbs grew by 1.3%, compared to a 0.3% increase recorded in Q1’2023;
During the week, NCBA Bank Kenya disclosed that it extended an additional Kshs 1.6 bn (USD 12 mn) in lending to Grit Services Limited, a Mauritius-based Real Estate firm, during the first half of the fiscal year ending December 2023. This brought the total dollar-denominated credit facilities provided by NCBA to Grit Services to Kshs 3.9 bn (USD 29.5 mn) by December 2023, up from Kshs 2.3 bn (USD 17.5 mn) in June 2023;
On the Unquoted Securities Platform, Acorn D-REIT and I-REIT traded at Kshs 24.4 and Kshs 21.7 per unit, respectively, as of 22nd March 2024. The performance represented a 22.0% and 8.3% gain for the D-REIT and I-REIT, respectively, from the Kshs 20.0 inception price;
Following the release of the FY’2023 results by Kenyan banks, the Cytonn Financial Services Research Team undertook an analysis on the financial performance of the listed banks and identified the key factors that shaped the performance of the sector;
Investment Updates:
Real Estate Updates:
Hospitality Updates:
Money Markets, T-Bills Primary Auction:
During the week, T-bills were oversubscribed, with the overall oversubscription rate coming in at 108.7%, lower than the oversubscription rate of 192.8% recorded the previous week. Investors’ preference for the shorter 91-day paper persisted, with the paper receiving bids worth Kshs 6.0 bn against the offered Kshs 4.0 bn, translating to an oversubscription rate of 150.1%, significantly lower than the oversubscription rate of 410.4% recorded the previous week. The subscription rates for the 182-day paper and 364-day paper decreased to 78.1% and 122.7% respectively from 105.6% and 192.9% respectively recorded the previous week. The government accepted a total of Kshs 26.0 bn worth of bids out of Kshs 26.1 bn of bids received, translating to an acceptance rate of 99.6%. The yields on the government papers recorded mixed performances, with the yield on the 91-day paper increasing by 7.0 bps to 15.80% from the 15.73% recorded the previous week, while the yields on the 364-day and 182-day papers decreased by 2.3 bps and 40.2 bps to 16.51% and 16.47% from 16.53% and 16.87% respectively recorded the previous week. The chart below shows the yield growth rate for the 91-day paper over the period:
The chart below compares the overall average T-bill subscription rates obtained in 2018, 2022, 2023, and 2024 Year-to-date (YTD):
During the week, The Central Bank of Kenya released the auction results for the reopened bond FXD1/2023/02 with a tenor to maturity of 2.0 years. The bond was oversubscribed with the overall subscription rate coming in at 118.0%, receiving bids worth Kshs 47.2 bn against the offered Kshs 40.0 bn. The government accepted bids worth Kshs 34.8 bn, translating to an acceptance rate of 73.7%. The weighted average yield of accepted bids came in at 16.99% which was within our expected range of 16.55%-17.00% and a decline of 74.4 bps from the 17.74% yield of the previous similar tenor reopened FXD1/2023/02 bond issued in October 2023. The coupon rate for the bond was fixed at 16.97%, similar to the previous issue’s rate. With the Inflation rate at 5.7% as of March 2024, the real return of the bonds is 11.3%;
Money Market Performance:
In the money markets, 3-month bank placements ended the week at 13.5% (based on what we have been offered by various banks), and the yields on the 364-day and 91-day papers recorded mixed performances, with the yield on the 91-day paper increasing by 7.0 bps to 15.8% from the 15.7% recorded the previous week while the yield on the 364-day paper decreased by 2.3 bps to 16.5%. The yields of the Cytonn Money Market Fund increased marginally by 6.0 bps to remain relatively unchanged from the 17.1 recorded the previous week, while the average yields on the Top 5 Money Market Funds increased marginally by 0.4 bps to remain unchanged at 17.4% recorded the previous week.
The table below shows the Money Market Fund Yields for Kenyan Fund Managers as published on 19th April 2024:
Cytonn Report: Money Market Fund Yield for Fund Managers as published on 19th April 2024 |
||
Rank |
Fund Manager |
Effective Annual Rate |
1 |
Lofty-Corban Money Market Fund |
18.3% |
2 |
Etica Money Market Fund |
18.3% |
3 |
Cytonn Money Market Fund (Dial *809# or download the Cytonn app) |
17.1% |
4 |
GenAfrica Money Market Fund |
16.9% |
5 |
Nabo Africa Money Market Fund |
16.5% |
6 |
Kuza Money Market fund |
16.4% |
7 |
Enwealth Money Market Fund |
16.2% |
8 |
Apollo Money Market Fund |
15.9% |
9 |
KCB Money Market Fund |
15.7% |
10 |
Madison Money Market Fund |
15.6% |
11 |
Jubilee Money Market Fund |
15.4% |
12 |
Co-op Money Market Fund |
15.3% |
13 |
Absa Shilling Money Market Fund |
15.2% |
14 |
Mali Money Market Fund |
15.2% |
15 |
Sanlam Money Market Fund |
15.1% |
16 |
AA Kenya Shillings Fund |
15.1% |
17 |
Mayfair Money Market Fund |
14.9% |
18 |
GenCap Hela Imara Money Market Fund |
14.8% |
19 |
Equity Money Market Fund |
14.6% |
20 |
Dry Associates Money Market Fund |
13.7% |
21 |
Old Mutual Money Market Fund |
13.6% |
22 |
Orient Kasha Money Market Fund |
13.5% |
23 |
CIC Money Market Fund |
13.2% |
24 |
ICEA Lion Money Market Fund |
12.4% |
25 |
British-American Money Market Fund |
9.9% |
Source: Business Daily
Liquidity:
During the week, liquidity in the money markets tightened, with the average interbank rate increasing by 33.6 bps, to 13.7%, from 13.4% recorded the previous week, partly attributable to tax remittances that offset government payments. The average interbank volumes traded decreased by 14.0% to Kshs 21.1 bn from Kshs 24.6 bn recorded the previous week. The chart below shows the interbank rates in the market over the years:
Kenya Eurobonds:
During the week, the yields on Eurobonds were on an upward trajectory, with the yields on the 7-year Eurobond issued in 2019 increasing the most by 15.7 bps to 9.0% from 8.8% recorded the previous week. The table below shows the summary of the performance of the Kenyan Eurobonds as of 19th April 2024;
Cytonn Report: Kenya Eurobonds Performance |
||||||
|
2018 |
2019 |
2021 |
2024 |
||
Tenor |
10-year issue |
30-year issue |
7-year issue |
12-year issue |
13-year issue |
6-year issue |
Amount Issued (USD) |
1.0 bn |
1.0 bn |
0.9 bn |
1.2 bn |
1.0 bn |
1.5 bn |
Years to Maturity |
3.9 |
23.9 |
3.1 |
8.1 |
10.2 |
6.8 |
Yields at Issue |
7.3% |
8.3% |
7.0% |
7.9% |
6.2% |
10.4% |
01-Jan-24 |
9.8% |
10.2% |
10.1% |
9.9% |
9.5% |
|
01-Apr-24 |
8.7% |
9.8% |
8.4% |
9.3% |
9.3% |
9.2% |
11-Apr-24 |
9.0% |
9.9% |
8.8% |
9.5% |
9.6% |
9.5% |
12-Apr-24 |
9.0% |
9.9% |
8.7% |
9.5% |
9.6% |
9.5% |
15-Apr-24 |
9.0% |
10.0% |
8.8% |
9.6% |
9.7% |
9.6% |
16-Apr-24 |
9.2% |
10.2% |
9.2% |
9.9% |
9.9% |
9.9% |
17-Apr-24 |
9.1% |
10.1% |
9.0% |
9.7% |
9.8% |
9.7% |
18-Apr-24 |
9.0% |
10.1% |
9.0% |
9.7% |
9.7% |
9.6% |
Weekly Change |
0.0% |
0.1% |
0.2% |
0.1% |
0.1% |
0.1% |
MTD Change |
0.3% |
0.3% |
0.5% |
0.4% |
0.4% |
0.4% |
YTD Change |
(0.8%) |
(0.1%) |
(1.1%) |
(0.2%) |
0.2% |
9.6% |
Source: Central Bank of Kenya (CBK) and National Treasury
Kenya Shilling:
During the week, the Kenya Shilling depreciated against the US Dollar by 0.8% to close at Kshs 131.4, from Kshs 130.4 recorded the previous week. On a year-to-date basis, the shilling has appreciated by 16.3% against the dollar, in contrast to the 26.8% depreciation in 2023. We expect the shilling to remain under pressure in 2023 as a result of:
The shilling is however expected to be supported by:
Key to note, Kenya’s forex reserves declined by 0.9% during the week to USD 7.2 bn from USD 7.3 bn recorded the previous week, equivalent to 3.8 months of import cover same as the previous week, and remained below the statutory requirement of maintaining at least 4.0-months of import cover.
The chart below summarizes the evolution of Kenya's months of import cover over the years:
Weekly Highlights
During the week, the Energy and Petroleum Regulatory Authority (EPRA) released their monthly statement on the maximum retail fuel prices in Kenya, effective from 15th April 2024 to 14th May 2024. Notably, the maximum allowed price for Super Petrol, Diesel and Kerosene decreased by Kshs 5.3, Kshs 10.0, and Kshs 18.7 each respectively, and will retail at Kshs 193.8, Kshs 180.4, and Kshs 170.0 per litre respectively from the March 2024 prices of Kshs 199.2, Kshs 190.4 and Kshs 188.7 respectively.
Other key take-outs from the performance include;
We note that fuel prices in the country have decreased, largely attributable to the government's efforts to stabilize pump prices through the petroleum pump price stabilization mechanism which has so far expended Kshs 9.9 bn in the FY’2023/24 to cushion the increases applied to the petroleum pump prices, coupled with the ongoing appreciation of the Kenyan Shilling against the dollar and other major currencies. Nevertheless, fuel prices in the country still remain under pressure from the high taxation of petroleum products as provided in the Finance Act 2023. We expect that fuel prices will drop in the coming months as a result of the government's efforts to mitigate the cost of petroleum through the pump price stabilization mechanism, strengthening of the Kenyan Shilling against the United States Dollar, having gained by 16.3% against the dollar on a year-to-date basis, coupled with a reduction in international fuel prices. As such, we expect the business environment in the country to improve as fuel is a major input cost, as well as further ease in inflationary pressures, with the inflation rate expected to move further towards the CBK’s preferred target of 5.0%.
During the week, the National Treasury gazetted the revenue and net expenditures for the ninth month of FY’2023/2024, ending 28th March 2024, highlighting that the total revenue collected as at the end of March 2024 amounted to Kshs 1,589.7 bn, equivalent to 61.7% of the revised estimates of Kshs 2,576.8 bn for FY’2023/2024 and is 82.3% of the prorated estimates of Kshs 1,932.6 bn.
The National Treasury gazetted the revenue and net expenditures for the ninth month of FY’2023/2024, ending 28th March 2024. Below is a summary of the performance:
FY'2023/2024 Budget Outturn - As at 28th March 2024 |
||||||
Amounts in Kshs billions unless stated otherwise |
||||||
Item |
12-months Original Estimates |
Revised Estimates |
Actual Receipts/Release |
Percentage Achieved of the Revised Estimates |
Prorated |
% achieved of the Prorated |
Opening Balance |
|
|
2.6 |
|
|
|
Tax Revenue |
2,495.8 |
2,495.8 |
1,535.1 |
61.5% |
1,871.9 |
82.0% |
Non-Tax Revenue |
75.3 |
80.9 |
52.0 |
64.3% |
60.7 |
85.7% |
Total Revenue |
2,571.2 |
2,576.8 |
1,589.7 |
61.7% |
1,932.6 |
82.3% |
External Loans & Grants |
870.2 |
849.8 |
506.9 |
59.7% |
637.3 |
79.5% |
Domestic Borrowings |
688.2 |
851.9 |
603.8 |
70.9% |
638.9 |
94.5% |
Other Domestic Financing |
3.2 |
3.2 |
3.5 |
111.1% |
2.4 |
148.1% |
Total Financing |
1,561.6 |
1,704.9 |
1,114.3 |
65.4% |
1,278.6 |
87.1% |
Recurrent Exchequer issues |
1,302.8 |
1,360.1 |
905.8 |
66.6% |
1,020.1 |
88.8% |
CFS Exchequer Issues |
1,963.7 |
2,078.8 |
1,364.6 |
65.6% |
1,559.1 |
87.5% |
Development Expenditure & Net Lending |
480.8 |
457.2 |
207.5 |
45.4% |
342.9 |
60.5% |
County Governments + Contingencies |
385.4 |
385.4 |
223.5 |
58.0% |
289.1 |
77.3% |
Total Expenditure |
4,132.7 |
4,281.6 |
2,701.5 |
63.1% |
3,211.2 |
84.1% |
Fiscal Deficit excluding Grants |
1,561.6 |
1,704.9 |
1,111.8 |
65.2% |
1,278.6 |
86.9% |
Total Borrowing |
1,558.4 |
1,701.7 |
1,110.7 |
65.3% |
1,276.2 |
87.0% |
Amounts in Kshs bns unless stated otherwise
The Key take-outs from the release include;
The government has been unable to meet its prorated revenue targets for the nine months of the FY’2023/2024, attaining 82.3% of the revenue targets in March 2024, mainly on the back of the tough economic situation exacerbated by the elevated inflationary pressures that despite decreasing by 0.6% points in March to 5.7% from the 6.3% recorded in February, still remains on the upper bound of the CBK target of within a range of 2.5% -7.5%. Additionally, the revenue collection continues to be impeded by the high cost of living, evidenced by the deterioration in the business environment with the PMI coming in at 49.7 in March from the 51.8 recorded in February 2024. In light of this, the government is yet to fully benefit from the strategies put in place to improve revenue collection such as expanding the revenue base and sealing tax leakages, and suspension of tax relief payments. The coming months' revenue collection performance will largely depend on how quickly the country's business climate stabilizes. This stabilization is expected to be aided by the ongoing appreciation of the Shilling, which gained by 8.2% against the dollar in the month of March, and a further ease in inflationary pressures in the country.
Rates in the Fixed Income market have been on an upward trend given the continued high demand for cash by the government and the occasional liquidity tightness in the money market. The government is 20.1% ahead of its prorated net domestic borrowing target of Kshs 383.3 bn, having a net borrowing position of Kshs 460.4 bn out of the domestic net borrowing target of Kshs 471.4 bn for the FY’2023/2024. However, we expect a downward readjustment of the yield curve in the short and medium term, with the government looking to increase its external borrowing to maintain the fiscal surplus, hence alleviating pressure in the domestic market. As such, we expect the yield curve to normalize in the medium to long-term and hence investors are expected to shift towards the long-term papers to lock in the high returns.
Market Performance:
During the week, the equities market was on a downward trajectory, with NSE 25 declining the most by 3.8%, while NASI, NSE 10, and NSE 20 declined by 3.6%, 3.5%, and 2.1% respectively, taking the YTD performance to gains of 20.9%, 18.2%, 15.9% and 12.0% for NSE 10, NSE 25, NASI and NSE 20 respectively. The equities market performance was driven by losses recorded by large-cap stocks such as Equity Group, KCB, and Safaricom of 9.4%, 7.0%, and 5.6% respectively. The performance was, however, supported by gains recorded by large-cap stocks such as EABL and BAT of 11.2% and 0.9% respectively.
During the week, equities turnover increased by 15.7% to USD 12.2 mn from USD 10.6 mn recorded the previous week, taking the YTD total turnover to USD 171.4 mn. Foreign investors remained net buyers for the second time in three weeks with a net buying position of USD 0.2 mn, from a net buying position of USD 2.4 mn recorded the previous week, taking the YTD foreign net selling position to USD 14.9 mn.
The market is currently trading at a price-to-earnings ratio (P/E) of 5.4x, 55.1% below the historical average of 12.0x. The dividend yield stands at 8.2%, 3.7% points above the historical average of 4.5%. Key to note, NASI’s PEG ratio currently stands at 0.7x, an indication that the market is undervalued relative to its future growth. A PEG ratio greater than 1.0x indicates the market is overvalued while a PEG ratio less than 1.0x indicates that the market is undervalued. The charts below indicate the historical P/E and dividend yields of the market;
Universe of coverage:
Cytonn Report: Equities Universe of Coverage |
|||||||||
Company |
Price as at 12/04/2024 |
Price as at 19/04/2024 |
w/w change |
YTD Change |
Target Price* |
Dividend Yield |
Upside/ Downside** |
P/TBv Multiple |
Recommendation |
Sanlam |
6.9 |
6.0 |
(12.8%) |
0.0% |
10.3 |
0.0% |
71.5% |
1.7x |
Buy |
Co-op Bank*** |
14.2 |
13.6 |
(4.6%) |
19.4% |
19.2 |
11.1% |
52.8% |
0.6x |
Buy |
Equity Group*** |
46.5 |
42.1 |
(9.4%) |
23.1% |
60.2 |
9.5% |
52.5% |
0.8x |
Buy |
I&M Group*** |
21.7 |
19.1 |
(12.2%) |
9.2% |
25.6 |
13.4% |
47.8% |
0.4x |
Buy |
ABSA Bank*** |
13.6 |
12.8 |
(5.5%) |
10.8% |
17.3 |
12.1% |
47.3% |
1.0x |
Buy |
Stanbic Holdings |
117.8 |
112.5 |
(4.5%) |
6.1% |
145.3 |
13.6% |
42.8% |
0.8x |
Buy |
Jubilee Holdings |
198.8 |
191.0 |
(3.9%) |
3.2% |
260.7 |
6.3% |
42.7% |
0.3x |
Buy |
Diamond Trust Bank*** |
50.3 |
50.0 |
(0.5%) |
11.7% |
65.2 |
10.0% |
40.4% |
0.2x |
Buy |
Kenya Reinsurance |
2.1 |
1.9 |
(8.1%) |
4.9% |
2.5 |
10.3% |
39.7% |
0.2x |
Buy |
NCBA*** |
44.5 |
44.9 |
0.9% |
15.6% |
55.2 |
10.6% |
33.5% |
0.8x |
Buy |
KCB Group*** |
30.1 |
28.0 |
(7.0%) |
27.3% |
37.2 |
0.0% |
33.1% |
0.4x |
Buy |
Standard Chartered*** |
199.3 |
195.3 |
(2.0%) |
21.8% |
225.2 |
14.9% |
30.2% |
1.3x |
Buy |
Liberty Holdings |
5.1 |
5.0 |
(2.5%) |
29.3% |
6.1 |
7.5% |
29.7% |
0.4x |
Buy |
HF Group |
3.8 |
4.0 |
4.4% |
16.2% |
4.6 |
0.0% |
15.4% |
0.2x |
Accumulate |
Britam |
5.8 |
5.7 |
(0.7%) |
11.3% |
6.5 |
0.0% |
13.6% |
0.8x |
Accumulate |
CIC Group |
2.3 |
2.3 |
1.3% |
2.2% |
2.5 |
5.6% |
12.4% |
0.7x |
Accumulate |
Weekly Highlights:
During the week, Bamburi Cement Plc released their FY’2023 results, reporting a loss for the year of Kshs 0.4 bn, a significant 321.7% decline from the Kshs 0.2 bn profit after tax recorded in FY’2022. Profit from continued operations, however, increased by 160.7% to Kshs 0.7 bn from Kshs 0.3 bn recorded in FY’2022. Turnover increased by 6.3% to Kshs 22.0 bn from Kshs 20.7 bn in FY’2022, while total operating costs increased by 3.9% to Kshs 20.8 bn from Kshs 20.1 bn recorded in FY’2022.
Bamburi Cement Plc’s FY’2023 Results:
Cytonn Report: Bamburi Cement Plc FY'2023 Income Statement |
|||
Income Statement |
FY'2022 Kshs (bn) |
FY'2023 Kshs (bn) |
% Change |
Turnover |
20.7 |
22.0 |
6.3% |
Total Operating costs |
(20.1) |
(20.8) |
3.9% |
Operating Profit |
0.7 |
1.0 |
48.5% |
Finance Income & costs (Net) |
(0.03) |
0.04 |
(226.7%) |
Profit/(Loss) Before Tax |
0.7 |
1.1 |
61.1% |
Income Tax |
(0.4) |
(0.4) |
(2.7%) |
Profit(loss) from continuing operations |
0.3 |
0.7 |
160.7% |
Loss from discontinued operations |
(0.1) |
(1.1) |
1288.3% |
Profit/(Loss) After Tax |
0.2 |
(0.4) |
(321.7%) |
Earnings Per Share (EPS) |
0.6 |
0.2 |
(62.5%) |
Dividend Per Share |
0.8 |
5.5 |
629.3% |
Dividend Yield |
2.7% |
11.7% |
9.1% |
Cytonn Report: Bamburi Cement Plc FY'2023 Balance Sheet |
|||
Balance Sheet |
FY'2022 Kshs (bn) |
FY'2023 Kshs (bn) |
% Change |
Non-Current Assets |
41.2 |
23.6 |
(42.6%) |
Current Assets |
5.1 |
21.0 |
313.3% |
Total Assets |
46.3 |
44.6 |
(3.5%) |
Non-Current Liabilities |
2.7 |
4.9 |
81.5% |
Current Liabilities |
9.5 |
3.5 |
(63.1%) |
Total Liabilities |
12.2 |
8.4 |
(31.1%) |
Total Equity |
34.0 |
36.2 |
6.5% |
Key take outs from the results:
Other highlights from the release include:
Going forward, the factors that would drive the company’s growth would be:
During the week, Liberty Kenya Holdings released their FY’2023 results, having fully implemented the new IFRS 17 reporting system. Liberty Kenya Holdings’ Profit After Tax (PAT) increased by 154.7% to Kshs 0.7 bn, from Kshs 0.3 bn recorded in FY’2022, mainly driven by a 148.6% increase in Net insurance income to Kshs 0.9 bn, from Kshs 0.4 bn in FY’2022, and supported by a 41.6% decrease in Net insurance expenses to Kshs 0.3 bn, from Kshs 0.6 bn in FY’2022.
Liberty Kenya Holdings Plc’s FY’2023 Results:
Cytonn Report: Liberty Kenya Holdings Income Statement |
|||
Item (All figures in Bns) |
FY'2022 |
FY'2023 |
y/y change |
Insurance revenue |
12.3 |
13.8 |
12.5% |
Insurance service expense |
(9.9) |
(12.5) |
27.1% |
Net expense from reinsurance contracts held |
(2.1) |
(0.4) |
(81.6%) |
Net Insurance Income |
0.4 |
0.9 |
148.6% |
Net Investment Income |
1.4 |
1.6 |
8.9% |
Net Insurance and Finance expenses |
(0.6) |
(0.3) |
(41.6%) |
Other Income |
0.1 |
0.1 |
16.0% |
Other operating expenses |
(0.9) |
(1.2) |
37.1% |
Profit Before Tax |
0.5 |
1.1 |
118.8% |
Profit After Tax |
0.3 |
0.7 |
151.0% |
Cytonn Report: Liberty Kenya Holdings Balance Sheet |
|||
Item (All figures in Bns) |
FY'2022 |
FY'2023 |
y/y change |
Intangible assets |
1.4 |
1.5 |
4.7% |
Financial Investments |
23.1 |
20.3 |
(11.9%) |
Other assets |
16.3 |
21.9 |
34.8% |
Total Assets |
40.1 |
43.8 |
9.1% |
Insurance Contract Liabilities |
21.7 |
23.9 |
10.2% |
Provisions & other payables |
2.2 |
1.8 |
(17.1%) |
Other Liabilities |
8.2 |
8.5 |
4.1% |
Total liabilities |
31.2 |
34.2 |
7.7% |
Shareholder funds |
8.5 |
9.2 |
7.6% |
Minority Interest |
0.4 |
0.4 |
5.0% |
Total Equity |
8.9 |
9.6 |
7.7% |
Key take outs from the results:
Other highlights from the release include:
Going forward, the factors that would drive the company’s growth would be:
Valuation Summary:
We are “Neutral” on the Equities markets in the short term due to the current tough operating environment and huge foreign investor outflows, and, “Bullish” in the long term due to current cheap valuations and expected global and local economic recovery. With the market currently being undervalued for its future growth (PEG Ratio at 0.7x), we believe that investors should reposition towards value stocks with strong earnings growth and that are trading at discounts to their intrinsic value. We expect the current high foreign investors’ sell-offs to continue weighing down the equities outlook in the short term.
During the week, The Affordable Housing Regulations, 2024 were published for public participation by the State Department for Housing and Urban Development under the framework of the Affordable Housing Act, 2024 outlining crucial guidelines for the development, allocation, and management of affordable housing units. These regulations aim to provide guidance and establish procedures for the implementation of affordable housing initiatives in Kenya.
Key highlights from the regulations include:
During the week, Hass Consult, a Kenyan Real Estate consulting and development firm, released its House Price Index Q1’2024 Report, focusing on the residential Real Estate sector's performance in the Nairobi Metropolitan Area (NMA). The following are the main findings of the report;
The findings of the report are in line with our Cytonn Markets Review – Q1’2024, highlighting that selling prices of residential properties in the Nairobi Metropolitan Area (NMA) recorded a 0.6% appreciation in Q1’2024. The performance was supported by 0.6% price appreciation realized by apartments and detached and semi-detached units each during the period under review.
Additionally, Hass Consult released their Land Price Index Q1’2024 Report which highlights the performance of the Real Estate land sector in the Nairobi Metropolitan Area (NMA). The following were the key take outs from the report;
The findings of the report are also in line with our Cytonn Markets Review – Q1’2024 which highlighted that the overall average selling prices for land in the NMA appreciated by 4.3% to record an average price per acre of Kshs 133.7 mn per acre in Q1’2024. This was mainly attributed to; i) positive demographics driving demand for land facilitated by high population and urbanization growth rates of 1.9% and 3.7%, above the global averages of 0.9% and 1.6% respectively, ii) improved development of infrastructure such as roads, railways, water and sewer lines which has improved and opened up areas for investment, ultimately increasing property prices, iii) growth in popularity of satellite towns by investors and buyers which provide affordable land options in comparison to the suburbs and key commercial zones, iv) Increased construction activities particularly in the residential sector driven by the government’s affordable housing agenda thus boosting demand for land, v) limited supply of land especially in urban areas which has contributed to rising land prices, vi) rising middle-income class population with more disposable income to invest, and, vii) land is the most preferred choice of investment among a majority of people which further drives up demand for land.
During the week, NCBA Bank Kenya disclosed that it extended an additional Kshs 1.6 bn (USD 12 mn) in lending to Grit Services Limited, a Mauritius-based Real Estate firm, during the first half of the fiscal year ending December 2023. This brought the total dollar-denominated credit facilities provided by NCBA to Grit Services to Kshs 3.9 bn (USD 29.5 mn) by December 2023, up from Kshs 2.3 bn (USD 17.5 mn) in June 2023. Consequently, NCBA's share of Grit's parent company's total borrowings has increased from 3.8% to 7.1% during the period under review.
Grit's parent company, Grit Real Estate Income Group, has been expanding its investments in Kenya and other regional property markets. Grit Services Limited, a key subsidiary of the multinational, holds assets in Kenya such as Buffalo Mall in Naivasha, the US embassy's gated estate in Nairobi, Imperial Warehouse, and Orbit Africa's manufacturing facilities. The firm benefits from a revolving credit facility with NCBA, enabling it to borrow, repay, and borrow again on an ongoing basis.
The increased funding provided by NCBA to Grit Services Limited is set to have a profound effect, not just on the company's growth strategy, but also on Kenya's industrial sector as a whole. This injection of capital is expected to bolster Grit's ongoing investments, particularly through its subsidiary Bora Africa, which functions as a specialized vehicle for industrial Real Estate endeavors. Additionally, Grit is in the process of transferring a 99.9% stake in Bora Africa to its Real Estate development arm, Gateway Real Estate Africa Ltd (GREA). This strategic move aims to raise funds to finance Grit's share of a USD 100.0 mn shareholder cash call initiated by GREA, with the latter aiming to maintain a majority stake in Bora Africa.
With Bora Africa focusing on industrial Real Estate and consolidating Grit's owned assets such as Imperial, Bollore, and Orbit, among others, the increased funding from NCBA will likely facilitate the expansion of Bora Africa's project pipeline. This expansion not only strengthens Grit's presence in the industrial Real Estate market but also contributes to economic growth and job creation in Kenya. Furthermore, the confidence shown by financial institutions like NCBA in supporting large-scale Real Estate developments, particularly in the industrial sector, signals positive prospects for Kenya's Real Estate landscape.
On the Unquoted Securities Platform, as per the last trading data recorded on 22nd March 2024, Acorn D-REIT and I-REIT traded at Kshs 24.4 and Kshs 21.7 per unit, respectively. The performance represented a 22.0% and 8.3% gain for the D-REIT and I-REIT, respectively, from the Kshs 20.0 inception price. The volumes traded for the D-REIT and I-REIT came in at 12.3 mn and 30.7 mn shares, respectively, with a turnover of Kshs 257.5 mn and Kshs 633.8 mn, respectively, since inception in February 2021.
REITs provide various benefits like tax exemptions, diversified portfolios, and stable long-term profits. However, the continuous deterioration in the performance of Kenyan REITs and the restructuring of their business portfolios is hampering major investments that had previously been made. The other general challenges include; i) inadequate comprehension of the investment instrument among investors, ii) prolonged approval processes for REIT creation, iii) high minimum capital requirements of Kshs 100.0 mn for trustees, and, iv) minimum investment amounts set at Kshs 5.0 mn, continue to limit the performance of the Kenyan REITs market.
We expect the performance of Kenya’s Real Estate sector will be supported by; i) increased initiations and development of affordable housing projects expected to boost the residential sector, ii) relatively positive demographics in the country necessitating the demand for housing and Real Estate, iii) continued infrastructural improvements opening up new areas for investments, and, iv) expansion activities in the industrial sector. However, factors such as rising costs of construction, limited investor knowledge in REITs, and, existing oversupply in select Real Estate sectors will continue to hinder the optimal performance of the sector by limiting developments and investments.
Following the release of the FY’2023 results by Kenyan banks, the Cytonn Financial Services Research Team undertook an analysis on the financial performance of the listed banks and identified the key factors that shaped the performance of the sector. For the earnings notes of the various banks, click the links below:
The core earnings per share (EPS) for the listed banks recorded a weighted growth of 11.4% in FY’2023, compared to a weighted growth of 26.6% recorded in FY’2022, an indication of sustained performance despite the tough operating environment occasioned by elevated inflationary pressures experienced during the period, with the inflation rate in FY’2023 averaging 7.7%, marginally higher than the 7.6% average in FY’2022, and a depreciating Shilling, with the Kenyan Shilling having depreciated by 26.8% against the USD in 2023. The performance in FY’2023 was supported by a 20.6% growth in net interest income coupled with a 16.4% growth in non-funded income. The growth in NFI was partly driven by the increase in foreign exchange income recorded by the banks during the period as a result of increased dollar demand in the country. However, the asset quality of listed banks deteriorated, with the weighted average Gross Non-Performing Loan ratio (NPL) increasing by 0.9% points to 12.6%, from 11.7% recorded in FY’2022. The performance remained 1.7% points above the ten-year average of 10.8%.
The report is themed “Steady Profitability Amidst Economic Headwinds”, and examines the primary elements that shaped the banking sector’s performance in FY’2023. It highlights the prevailing trends, the obstacles encountered by banks, and the areas that will be vital for the sector’s future growth and stability. Consequently, we will discuss the following:
Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor.