Executive Summary

• Fixed Income: Yields on government securities were on an upward trend during the month. Kenya?s inflation rate for the month of July came in at 6.4%, from 5.8% recorded in June and the Central Bank of Kenya?s Monetary Policy Committee (MPC) maintained the Central Bank Rate (CBR) at 10.5%;
• Equities: The equities market registered mixed trends with NSE 20 and NSE 25 declining by 4.2% and 0.5%, respectively, while NASI edged up by 1.3%, taking YTD performances to declines of 13.7%, 6.2% and 2.3% for the NSE 20, NSE 25, and NASI, respectively;
• Private Equity: Energy, technology and financial services sectors continued to witness increased private equity activity in Africa during the month, driven by high fundraising activities, competition and the continent?s expanding middle class;
• Real Estate: Improved infrastructure continues to support developments leading to an increase in house and land prices. Developers continue to focus on provision of alternative financing to home buyers in a bid to increase uptake and increase exit.

Company Updates

• Cytonn Real Estate, the development affiliate of Cytonn Investments, has partnered with one of the leading contractors in the region, Landmark Holdings Limited, on a Kshs 5.5 Billion development project, Situ Village, an exclusive gated community in Ololua, Karen (situvillage.com).
• Cytonn Real Estate, our development affiliate will be breaking ground on one of its signature developments, ?Situ Village?, in Ololua Karen. Situ Village is an integrated masterplan development comprising of 50 villas, 15 cottages, a commercial centre, a state-of-the-art clubhouse and multiple luxury facilities. To invest in this development contact clientservices@cytonn.com or sales@cytonn.com .
• Cytonn Investment Co-operative membership recruitment drive is still on. For more information, please see the link:Cytonn Cooperative. The Cytonn Co-operative is registered under The Co-operative Societies Act of Kenya, 2004. The co-operative allows the ordinary investor to access above average market returns that have previously been accessible only to our private wealth investors. To join, please contact us at coop@cytonn.com or download the forms from the website on this link: Cytonn co-operative forms.
• To invest in any of our current or upcoming real estate projects, please visit Cytonn Real Estate. We continue to see very strong interest in our products, particularly The Alma, which is now 50% sold and has delivered an annualized return for 55% p.a. for investors who bought off-plan. We have 12 investment ready projects, offering attractive development returns and buyer's returns of a minimum of 25% p.a. See further details here: Summary of investment ready projects
• Given the rapid growth of Cytonn Investments that we have seen over the last 2 years, we are recruiting a Chief Operating Officer to oversees ongoing business operations within the company. We also continue to beef up the team with several ongoing hires: Careers at Cytonn.

Fixed Income

Treasury bills subscriptions declined during the month of July, with overall subscriptions coming in at 95.5% compared to 119.5% in June. Yields on T-bills Increased by 130 bps, 110 bps and 70 bps for the 91-day, 182-day, and 364-day T-bills, respectively, closing the month at 8.3%, 10.5% and 11.4%, from 7.0%, 9.4% and 10.7%, respectively, at the end of June 2016. Yields have increased on account of Government borrowing given the new fiscal year and tight liquidity levels in the money market which saw interbank rates increase to 4.8% from 3.9% as at the end of June.

The 91-day T-bill is currently trading below its 5-year average of 10.0%, having witnessed a downward trend in the previous three months towards the close of the last financial year. The downward trend for the 91-day paper has since reversed and we are witnessing an upward pressure on rates due to Government borrowing given the new fiscal year, which has been characterized by an uptick in inflation rates and tight liquidity in the money market.

In the primary bond market, the government issued two bonds; the 5-year (FXD 2/2016/5) and the reopened 20-year (FXD 1/2008/20) with 11.9 years to maturity, accepting Kshs 33.5 bn compared to the target amount of Kshs 30.0 bn, for budgetary support. Yields on these bonds came in at 14.1% and 14.8% as investors demanded a premium of 0.5% and 0.1% above the market rate of 13.6% and 14.7% for the 5 and 20-year bonds, respectively. This was due to expectations of upward pressure on interest rates owing to (i) pressure on Government to finance the 2016/2017 budget, and (ii) relatively low liquidity in the money market. In the secondary bond market, bond turnover declined by 59.3% to Kshs. 20.5 tn from Kshs 50.4 tn in June. This can be attributed to the tight liquidity levels in the money market which saw interbank rates increase to 4.8% from 3.9% as at the end of June.

During the month the money market witnessed tight liquidity which saw the interbank rate increase to 4.8% from 3.9% in June. This was despite a net liquidity injection of Kshs. 4.7 bn which was as a result of government payments of Kshs. 102.2 bn. The increase was as a result of the Central Bank mopping up liquidity from the money market through repos worth Kshs. 52.9 bn which resulted to low liquidity among banks. We noted in our Cytonn Weekly #28 that the interbank rate is often determined by the liquidity distributions within the banking sector as opposed to the net amount and it further indicates that all banks do not trade freely with each other in the money market. Key to note is that the amount of T-bill/T-bond rediscounting increased by 328.4% to Kshs 28.7 bn from Kshs 6.7 bn in June 2016 This is an indication that the liquidity levels deteriorated during the month of July given that T-bill/T-bond rediscounting is a punitive source of liquidity since it is done at 3% above the prevailing rates.

Below is a summary of the money market activity during the month:

According to Bloomberg, yields for the 5-year and 10-year Eurobonds issued in 2014 decreased month on month by 0.4% to 5.6% and 7.7% from 6.0% and 8.1% last month, respectively. Since the mid ? January 2016 peak, yields on Kenyan Eurobond have declined by 1.9% and 3.2% on account of improving macro-economic conditions and the recent cooling of political temperatures since the political class agreed to dialogue on the issues around electoral reforms, causing the opposition coalition to cease street protests.

The Kenya Shilling depreciated against the dollar by 0.3% this month, to close at 101.4, compared to 101.1 the previous month. This was mainly driven by dollar demand from importers but was however supported by the Central Bank intervention in the foreign exchange market through the sale of dollars resulting in a drop in dollar reserves to USD 7.8 bn from USD 7.9 bn at the beginning of July. We expect the shilling to remain stable for the remainder of the year supported by (i) the high levels of foreign exchange reserves equivalent to 5.1 months of import cover, and (ii) improved diaspora remittances, with cumulative 12 months? diaspora inflows to June 2016 increasing by 11.0% to USD 1.7 bn from USD 1.5 bn in the year to June 2015.

In line with our recommendation according to Cytonn Weekly #29, inflation for the month of July came in at 6.4%, up from 5.8% recorded in June 2016. This increase was driven by a 1.1% increase in both food and non-alcoholic beverage prices and transport prices. This was mainly as a result of the government introducing a Kshs 6.0 Road Maintenance Levy in the prices of super petrol and diesel, leading to a sharp increase in the pump prices during the month of July, 2016. Going forward, we expect upward inflationary pressure to persist in the medium term as the levy imposed on petroleum products trickles down to the transport  and other sectors, leading to a persistent rise in food prices.

For the first time the Kenya Revenue Authority hit their revenue collection target of Kshs. 1.2 tn for the 2015/2016 fiscal year, representing a 13.2% increase from Kshs. 1.0 tn collected during 2014/2015 fiscal year. This can be attributed to the reforms carried out in the excise and customs department which boosted the revenue collections. This is a positive indicator as the Government has always missed revenue collection targets, therefore making them borrow heavily from both local and offshore markets to fund the budget. Moving forward, we expect the government to improve on the revenue collections following the passing of the Tax Procedural Bill and reforms in the Kenya Revenue Authority to eradicate corruption. Positive macro- economic environment is also expected to support corporate earnings growth which will further improve revenue collections and hence government funding structure. The revenue target for this fiscal year is Kshs. 1.4 tn, a 16.7% increase from the 2015/2016 fiscal year target.

The Monetary Policy Committee met on 25^th July 2016 to review the economic developments while monitoring the effects of their previous policy decisions with a view on the outlook of both the domestic and global markets. In line with our expectations according to Cytonn weekly #29, the MPC decided to retain the Central Bank Rate at 10.5% noting (i) the recent increase in fuel tax will lead to upward pressure on inflation but expect it to remain within the Government target range of 2.5% - 7.5% in the short term, (ii) the stability of the foreign exchange market, supported further by CBK?s closer monitoring of the market before and after the Brexit, and (iii) the continued progress in stabilising the banking sector with improved liquidity and close oversight. The MPC also reviewed the Kenya Banks? Reference Rate (KBRR) to 8.9% from 9.9% in line with the stipulated framework.

Following the MPC meeting, the Parliament met on 27^th July 2016 and passed a Bill seeking to control bank lending and deposit rates. The bill states that (i) banks? lending rates should be within 4.0% above the Central Bank Rate, and (ii) banks? deposit rates should be within 70.0% below the Central Bank Rate (CBR). Currently, if this bill was to get the presidential approval, the maximum lending rate will be at 14.5% and the minimum deposit rate will be at 7.4%. The motive behind this move is commendable as the lending rates being offered by commercial banks are too high, however, there needs to be a thought process with a view on how this will affect the economy in the long run. We are of the view that this move will bring about rigidity in the banking system and lock out borrowers from accessing funding from commercial banks as the banks would prefer to place money with the government which is risk free. For a more detailed analysis on the pros and cons of capping interest rates, see note on The Impact of Capping Interest Rates on the Kenyan Economy.

The government is behind with its domestic borrowing for this fiscal year having borrowed Kshs 15.9 bn for the current fiscal against a target of Kshs 18.8 bn (assuming a pro-rated borrowing throughout the financial year of Kshs 229.6 bn budgeted for the full financial year). Interest rates have bottomed out and we are currently witnessing upward pressure on interest rates given government borrowing for the new fiscal year. It is due to this that we advise investors to be biased towards short to medium-term papers.

Equities

During the month of July, the equities market registered mixed trends with NSE 20 and NSE 25 declining by 4.2% and 0.5%, respectively, while NASI edged up by 1.3%, taking their YTD performances to declines of 13.7%, 6.2% and 2.3%, for the NSE 20, NSE 25, and NASI, respectively. The monthly equities market performance was driven by gains and losses in large caps led by Standard Chartered, Safaricom and Barclays which gained 7.2%, 7.0% and 4.7% respectively while Co-operative Bank, Diamond Trust Bank and KCB Group lost 10.5%, 5.5%, and 5.3%, respectively.

During the week, the market also registered mixed performance with NASI and NSE 25 gaining by 2.8% and 2.5%, respectively, while NSE 20 shed 1.0%. The top movers for the week were Safaricom and Equity Group accounting for 50.9% of the market turnover. Since the February 2015 peak, the market has been down 36.6% and 19.8% for the NSE 20 and NASI, respectively. Key to note, Safaricom touched an all-time high of Kshs 19.20 during the month after announcing a special dividend of Kshs 0.68 for the FY?2017.

Equities turnover fell by 37.1% during the month to USD 156.0 mn from USD 248.2 mn in June 2016. Foreign investors were net buyers for this month with net inflows of USD 11.5 mn, compared to net outflows of USD 11.7 mn witnessed in June 2016, taking advantage of the relatively lower prices, with the market trading at 12.6x versus 13.8x average on a price to earnings basis. We expect earnings growth to improve in 2016, with an expectation of 12.5% growth supported by a favorable macroeconomic environment. Long-term investors should gradually be taking positions in the market due to the attractive valuations.

The market is currently trading at a price to earnings ratio of 12.6x, versus a historical average of 13.8x, with a dividend yield of 4.7% versus a historical average of 3.4%. The charts below indicate the historical PE and dividend yields of the market.

During the week, Safaricom announced a Kshs 0.68 per shilling special interim dividend, totalling to Kshs 27.5 bn to its shareholders for the FY?2016/17, translating to a dividend yield of 3.6%. Safaricom currently operates a debt free capital structure with positive cash-flows, having closed FY2015/16 with a cash position of Kshs 8.5 bn, despite an annual capital expenditure of Kshs 33.3 bn. This highlights that Safaricom remains grounded in the market by remaining profitable despite the competitive pressure from Airtel and increased regulations in the telecommunications sector. The dividend payout levels are approaching that of BAT and EABL, which are at 92.4% and 66.5%, respectively, with the last 2-year EPS growth for the firm at 28.9%.

As indicated in our Cytonn Weekly Report #29, Kenya Airways (KQ) released their FY?2016 results having recorded an after tax loss of Kshs 26.2 bn as a result of a surge in costs, despite growth in revenue, and their lay-off of 80 employees in a bid to cut payroll costs by Kshs 2.0 bn annually. This has been the fourth consecutive year that the airline has recorded losses after its financial and managerial challenges culminated into financial constraints in 2013. KQ recently received Kshs 10.0 bn bridging loan, which the Kenyan Treasury secured from Afrexim Bank aimed at easing cash-flow constraints. We maintain our view that KQ needs to (i) quicken its recovery plans with focus on reducing operational cost, (ii) reduce the costs spent on hedging for fuel, and (iii) true value in the firm lies in privatisation, which will strip away all non-performing areas of the airline and restore value to shareholders.

KCB Group scrip issue was undersubscribed at 54.0% due to the conversion price on the final day of exercising the option being 8.6% higher than the market price, while Deacons announced plans to list on the Nairobi Securities Exchange (NSE) by floating 123.6 mn shares at Kshs 15.0 per share as indicated in our Cytonn Weekly Report #29.

The month of July also saw the NSE obtain recognition from the Capital Markets Authority (CMA) as a Self-Regulatory Organization (SRO) with the mandate to list new offers and the benefit of having resources and expertise available from market players to be used in regulating markets as detailed in our Cytonn Weekly Report #28.

WPP Scangroup released their HY?2016 results, with the key being:

1. 7% growth in core earnings per share to Kshs 0.66 from Kshs 0.49 in HY?2015, driven by an 11.0% growth in revenue to Kshs 2.6 bn in HY?2016 from Kshs 2.3 bn HY?2015 and a 22.7% rise in net interest income to Kshs 237.9 mn from Kshs 193.8 mn. This was despite a 6.1% growth in operating and administrative expenses to Kshs 2.4 bn from Kshs 2.3 bn.
2. The growth in revenue is attributed to WPP Scangroup?s exploration of new markets in Sub-Saharan Africa which include Gabon, Nigeria, Uganda and Zambia, that accounted for approximately 40.0% of the group?s revenue up from 34.0% recorded in HY?2015. The huge cash position of Kshs 3.8 bn supported the earnings growth, with the company leveraging on the high interest rate environment to deliver the 22.7% rise in net interest income,
3. Profit before tax stood at Kshs 395.1 mn from Kshs 285.4 mn in HY?2015, a 38.4% rise, with profit after tax coming in at Kshs 249.7 mn from Kshs 185.3 mn in H1?2015, a 34.7% growth.
4. Total assets grew by 12.6% to Kshs 14.0 bn from Kshs 12.5 bn in HY?2015, supported by a 32.5% rise in receivables, while total liabilities rose by 38.9% driven by a 36.5% growth in payables, in line with the general growth in business.
5. Shareholders? funds stood at Kshs 8.7 bn, up from Kshs 8.6 bn in HY?2015.

East Africa Breweries Limited (EABL) has released their FY?2016 results, with the key being:

1. 9% decline in core EPS to Kshs 9.4 per share from Kshs 11.3 per share in FY?2015, driven by 0.2% decline in revenue to Kshs 64.3 bn, from Kshs 64.4 bn and 13.9% rise in administrative expenses to Kshs 9.0 bn from Kshs 7.9 bn in FY?2015,
2. Gross profit grew by 0.6% to Kshs 32.2 bn from Kshs 32.0 bn in FY?2015, while profit before tax declined by 3.9% to Kshs 13.6 bn from Kshs 14.2 bn in FY?2015. This was as a result of the 10.0% excise duty on alcoholic beverages that was introduced bringing the effective tax to 41.1% from 32.6% in FY?2015.
3. The company recorded a one-off gain of Kshs 2.2 bn from the sale of Central Glass, and consequently announced a one-off special dividend of Kshs 4.5 per share. The directors have recommended a final dividend of Kshs 5.5 per share, adding to the Kshs 2.0 per share interim dividend paid earlier in the year, bringing the total dividend per share to Kshs 12.0, a dividend yield of 4.2%. We are currently finalizing on our valuation of EABL and shall publish our recommendation in the next Cytonn Weekly.

British American Tobacco (BAT) Kenya released HY?2016 results recording a 10.7% growth in core earnings per share to Kshs 21.5 from Kshs 19.4 in HY?2015 driven by a faster decline in expenses by 4.3% compared to a marginal 1.0% decline in net revenue. We also added BAT to our Equity Recommendation, obtaining a fair value price of Kshs 970.6. For further details, see our valuation note: BAT Kenya Valuation Note.

This week we publish our recommendation on the cement industry in Kenya, particularly ARM Cement Limited and Bamburi Cement Limited. We recommend a Buy on ARM with a fair value price of Kshs 39.7, a 25.2% upside from the current price of Kshs 32.0 with a dividend yield of 1.2%. Our recommendation is based on;

• Improved Capacity - New Clinker Plant in Tanga will reduce costs associated with importation of raw material (Clinker)
• New Investment by CDC Group - USD 140 mn investment by CDC Group will go into capacity improvement and retirement of dollar debt which led to ARM recording Kshs 3.7 bn in foreign exchange losses in 2015.

We recommend a Buy on Bamburi with a fair value price of Kshs 232.0, a 47.9% upside from the current price of Kshs 166.0 with a forward dividend yield of 8.1%. Our recommendation is based on;

• Large cash book ? Bamburi has a large cash book of Kshs. 8 bn at their disposal of which they can use for expansion
• Large Parent - Their parent Lafarge Holcim is a global player in the Cement industry so Bamburi can leverage on this expertise
• Superior Products - Has superior quality products compared to its competitors

Both companies being in the same industry face similar risks as indicated below;

• Increased Competition - Competition from regional players and Dangote cement which is looking to enter the Kenyan space
• Cheap Imports - Risk of being priced out by cheaper imports

For details on the valuation, see our valuation note on: ARM and Bamburi Cement Valuation Summary.

Below is our equities recommendation table. Key changes for the month include:

• Barclays has moved from a ?Buy? to an ?Accumulate? with an upside of 18.5% following a 4.7% m/m rise in stock price
• Pan Africa has moved from a ?Hold? to a ?Sell? with a downside of 3.7% following a 9.5% m/m rise in stock price
• We have included Bamburi Cement and ARM in our universe of coverage with a ?Buy? recommendation for both having upsides of 47.9% and 24.1%, respectively

We are neutral with a bias to positive on Equities given the higher earnings growth prospects, supported by a favorable macroeconomic environment.

Private Equity

The month of July witnessed a number of transactions in energy, financial services, technology and education. Key deals to note were:

In the energy sector, Helios Investment Partners (Helios) and The Vitol Group (Vitol), an energy and commodities company based in the U.S., bought a 49% controlling stake valued at USD 210mn in Oando PLC (Oando), effectively valuing the company at USD 428.6 mn. Oando is Nigeria?s leading indigenous energy group with net assets of 162.0 bn Naira, listed on both the Nigerian and Johannesburg Stock Exchange, through a joint venture agreement, HV Investments II (HVII). With the increased demand for energy in Africa backed by a growing population and rapid development of new satellite towns, the energy sector has continued to attract large private equity investment, with a key example being the partnership by Denham Capital and GreenWish Partners to develop, build and finance a portfolio of 600 MW of renewable energy assets across Sub-Saharan Africa worth USD 1 bn.

In the technology and e-commerce sector, CDC, a UK development finance institution, injected USD 55.5 mn in Africa Internet Group (AIG), a parent group of Jumia, Easy Taxi, Hellofood, Jovago, Lamudi and Kamyu. The funding from CDC will enhance AIG?s presence in Africa, and allow AIG through its chain of fast growing companies expand its operations thus (i) creating jobs across the continent, and (ii) expanding market base for small businesses. The purpose of AIG?s fund is to increase availability of products through mobile and web access and given the rapid urbanisation in Africa, adoption of technology is inevitable and we are poised to witness more investments in the technology sector.

In financial services, German Investment and Development Corporation (DEG) acquired an additional 5.4% stake in Zep-Re for Kshs 1.4 bn, increasing its total stake to 14.9%, valuing the re-insurance firm at Kshs 25.9 bn. The capital acquired will be used in (i) expanding its business and realizing growth through enhancement of its operations in a bid to attain a stronger international rating as a re-insurer, and (ii) widening its agenda for development across COMESA member states other than the 5 in which it currently operates.

International Finance Corporation (IFC) acquired a 2.5% equity stake in ADvTECH valued at USD 13.0 mn, effectively valuing the company at USD 520 mn. This transaction resulted to an increase IFC?S total holdings in ADvTECH to 4.1% after an earlier acquisition of 1.6%. The new capital will be used to facilitate ADvTECH?s expansion strategy in Sub-Saharan Africa that entails: (i) increasing its schools and tertiary education programs, (ii) increase quality education or vocational training access for at least 30,000 additional students and (iii) provide new learning options for students leaving high school. Sub-Saharan Africa is witnessing increased investment in the education sector and given that most governments have failed to provide adequate and quality education, we expect further investments into this sector.

The energy sector has been in the fore front of private equity activity for the month of July driven by consumers and businesses ongoing evolution in energy needs, shaped by waves of economic growth and advances in technology. At the same time, both supply and demand forces have come into play as a wide range of government policies, seek to expand access to modern energy and those that aim to reduce the risks of global climate change by supporting the use of renewable energy.

Real Estate

In a bid to increase uptake of property, developers have increased focus on financing options available for the end-buyers of property. This month, Stima Sacco, announced plans to issue a corporate bond aiming to raise Kshs 5.0 bn to diversify into the mortgage business. It aims to issue loans for periods of 10-15 years at a fixed rate and on a reducing balance. Borrowers will however have to be members of the Sacco where they will raise a 20% deposit with the Sacco financing the rest of their mortgage costs based on their contribution to the sacco. Given that a 10-year Treasury bond is currently yielding 14.0%, working with a 200 bps premium above the 10-year Treasury bond, Stima Sacco is likely to raise funds to finance these mortgages for at least 16.0%. Therefore, Stima Sacco could lend out the mortgages at 18.0%, considering a 200 bps administration cost. For more information, see our Cytonn weekly #27

On the same note, Commercial Bank of Africa (CBA) also announced a partnership with Bamburi Cement to finance mortgage borrowers in the lower middle income class. CBA plan to partner with Bamburi cement to issue mortgages for houses whose prices range between Kshs 0.5 mn to Kshs 4.5 mn. Assuming an 18% interest rate and a period of 25 years, this translates to Kshs 7,600 and Kshs 68,300 monthly payments, respectively. The houses are to be constructed using EPS technology and are expected to take 30-45 days to complete. This initiative among developers and stakeholders are likely to increase the mortgage uptake, which stands at approximately 2.5% of the GDP and provide ease of exit to developers as well as increase home ownership in Kenya, which is largely a renter?s market. The mortgage initiatives will however only work if the interest rates on mortgages are reduced as high interest rates such as 18%, is likely to result in high levels of non-performing mortgages.

As per the Q2? Property Report released by Hass Consult, growth in house prices outpaced the growth in rental rates. House prices increased by 3.6% q/q, while rents grew by 2.5% over the same period. Key points to note from the report are:

1. Karen and Langata recorded the highest increase in house prices of 5.5% and 17.6% over the last quarter and year, respectively, with Kilimani recording a 5.4% decline in house prices y/y. The decline in prices in Kilimani can be attributed to the oversupply of apartments in the area. Karen?s price increment is attributable to its high end feel, as a result of strict zoning regulations, allowing only for detached houses hence attractive to buyers and renters seeking privacy and exclusivity
2. On the rental front, Karen and Langata were also the best performing markets recording rise in rents of 9.8% and 10.0% over the last quarter and year, respectively, with Kileleshwa and Westlands recording 1.4% and 3.4% decline in asking rents over the last quarter and year, respectively. The poor performance of Kileleshwa can be attributed to relaxation of zoning regulations in the area leading to mushrooming of apartments thereby making the areas lose its high end appeal.
3. Detached houses outperformed apartments and semi-detached houses in both prices and rents recording price increases of 5.2% against a 3.6% increment in apartments and 0.7% in semidetached houses. Rental rates also moved in tandem with price with detached houses recording the highest increases in rental rates of 2.2% q/q with apartments recording a 1.4% increments while semi-detached houses did not record any growth in rental prices.
4. Land in Satellite Towns buoyed by the improvement in infrastructure, outpaced land in the city growing by 8.1% against the former?s 2.5% in the last quarter. In the City, Muthaiga recorded highest quarterly increase in land prices of 13.1%, with Eastleigh recording the largest decline of 2.5% q/q. In Satellite Towns, Ruiru had the highest price increment of 19.8% over the last quarter with Mlolongo recording a 10% decline over the same period. Other satellite Towns such as Limuru, Juja and Ruaka also recorded high increase in land price 14.5%, 13.6% and 11.3% increases respectively over the last quarter. The price increases in these areas are as a result of infrastructural developments such as the Western and Northern Bypass in Ruaka and increase in development activity in these regions.

During the week, the council of the Law Society of Kenya paid a courtesy call to the Cabinet Secretary  for Ministry of lands and physical planning. They deliberated on matters affecting land and conveyancing transactions in the country. The following were key take outs:

• On disruption of activities in 13 land registries ? it is only the central registry that is affected and not a complete shut down as had been earlier speculated. The registries will remain open throughout the two months? period to enable registrars deal with backlog,
• On Land Control Boards - The CS confirmed that 21 boards had already been reconstituted and the process will be finalised soon. The delay was occasioned by county commissioners who did not comply with the appointment process stipulated by the ministry,
• On Practise Issues ? A working committee chaired by the Chief Lands Registrar whose members will be members of the LSK Environment Land and Conveyancing Committee and ministry of lands officials will be set up within a week. The committee will be tasked with identifying difficulties encountered during the period of digitization, lobby for more registrars to attend to consumers of the services of the Ministry of Lands and come up with a criterion of identifying emergency situations
• The Ministry will set up a one stop centre at the various registries where members of the Law Society of Kenya will be able to access fast and speedy services
• The Ministry will in the future engage the Council of LSK before making operational decisions likely to affect service delivery

Mara Delta, A Pan Africa real estate investment fund has announced plans to invest USD 110 mn in the acquisition of four properties in the Maputo, Mozambique. Mara Delta is in negotiations with banks for a 7 to 10-year debt package to refinance and facilitate the acquisition of the four buildings and the second phase of the development of its signature Anadarko building in Maputo. The company first entered Mozambique in 2014 and has a portfolio of buildings in Maputo worth USD 160 mn. The Company sites long term growth prospects in the country as the reason behind its increased investments in Mozambique despite the tough economic environment characterised by currency volatility. Real Estate opportunities in emerging markets and Sub Saharan Africa in particular, remain attractive to investors due to their relatively high returns. In Mozambique for instance, rental yields range from 7% in residential property to 13% in industrial with retail and office rental yields averaging at 10% each.

Fusion Capital has registered an undersubscription on the Kshs 2.3bn D- REITs hence has extended the closing date twice. Initially it was to close on 15^th July, but it was pushed to 26th July 2016 and now to 4^th August 2016. The low subscription rates can be attributed to poor investor education as most of the participants in the capital market are yet to understand and embrace REITs as an investible asset class.  Fusion Capital?s extension of the dates is aimed at giving investors more time to apply for the D-REITS. The listing date for the D-REIT is still on 10th August 2016. For more information, please see Cytonn Weekly #27.

Real estate as an asset class continues to attract investments both in the counties and in Nairobi across all the sectors. This is a trend that is likely to continue as people remain bullish about this asset class, driven by improving infrastructure and increased access to finances by both buyers and developers are also boosting investment on the sector.

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Disclaimer: The views expressed in this publication, are those of the writers where particulars are not warranted- as the facts may change from time to time. This publication is meant for general information only, and is not a warranty, representation or solicitation for any product that may be on offer. Readers are thereby advised in all circumstances, to seek the advice of an independent financial advisor to advise them of the suitability of any financial product for their investment purposes.