We research widely to deliver unique insights.

Recent Topicals

Nairobi Satellite Towns Settlement Characteristics

Feb 14, 2016

The real estate sector continues to gain a lot of prominence in the economy contributing about 8% of the Kenyan GDP. In 2015, the real estate sector recorded an annual growth rate of 14%, the highest in the country. We have also seen a lot of global cement companies seeking to set shop in Kenya, with the most recent one being India based UltraTech Cement seeking to buy a stake in ARM. The growth in the sector can be attributed to increased demand for residential property with most realtors shifting focus to development of apartments, villas, maisonettes and bungalows in areas around Nairobi and other major town. The key drivers for real estate developments have been: Infrastructural developments in the country The growth in the middle class Population growth High rate of urbanizationAt an approximated average annual housing deficit of 200,000 units, Nairobi is an attractive market for residential developments. However, owing to the...

Probable direction of Equities in 2016

Feb 7, 2016

Given the weak start in Kenyan equities market in 2016, with NASI, NSE 20 and NSE 25 losing 6.1%, 6.6% and 6.1%, respectively, in January, the purpose of this Focus Note is to try and figure out the probable direction of the Kenya equity markets going forward. We use the Last 7-years market valuation chart below as the basis of our discussion.Since the February 2015 peak, the stock market valuation, as measured by price to earnings ratio (“PE”), has been on a decline for an entire 12-months – peaking at a 17.0x PE in February 2015 and declining steadily over the last 12-months to the current PE at 12.4x. The question then is, when and where is the valuation likely to trough and reach the bottom?To try and understand where valuations are likely to trough, we reviewed the last peak to trough cycle, which was the period from August 2010 to January 2012, duration of 17 months. As of August 2010, markets were valued at peak valuation of about 20x PE, then v...

Cytonn’s Q3’2015 Banking Sector Report

Dec 13, 2015

Following the release of the Q3’2015 results by banks, we carried out an analysis on Kenya’s banking sector to decipher any material changes from our H1’2015 banking report. In our analysis of the banking sector we seek to recommend to our investors which banks are the most attractive and stable for investment from a franchise value and from a future growth opportunity perspective.In Kenya there are a total of 42 commercial banks, 12 microfinance banks and 1 mortgage finance institution. The Central Bank of Kenya regulates all banks. The Capital Markets Authority has additional oversight over the listed banks, which currently stands at 11.Amongst the listed banks, we were able to categorize the banks into 4 main buckets based on their Q3’15 performance:Negative growth banks: CFC Stanbic and Standard ChartedAnemic growth banks, with below 10% growth: HF Group, NIC and BarclaysThe stable growth banks with 10% and above growth: Equity, KC...

What Kenya can learn from Singapore on corruption

Nov 29, 2015

Every week, we pick a trending topic and focus on it. This past week, several events brought corruption in Kenya to the forefront: The President effectively dropped 6 of his 19 cabinet team, meaning that 30% of the cabinet was dropped on corruption allegations The President, his November 23rd speech entitled, "We have opened a new chapter in the war against corruption declared corruption" a standing threat to our national security” The Pope, during his visit to Kenya noted concerns about corruption.Having encountered corrupt practices, this is a topic that Cytonn is very passionate about.The United Nations Development Programme (UNDP) defines corruption as “the misuse of public power, office or authority for private benefit through bribery, extortion, influence peddling, nepotism, fraud, speed mone...

Kenya’s Economic Growth

Nov 22, 2015

This week, we saw the Kenya National Treasury announce that they had revised their 2015 GDP growth forecast to 5.8%, from 6.9% at the beginning of the year. For our Focus of the Week, we highlight the events that are shaping the economy and the investment landscape in Kenya and the region. As such, this week we wish to cover Kenya’s economic growth path: the expectations with which we started the year, the journey so far, and finalizing with our outlook. Kenya presents to investors, developers, and entrepreneurial individuals a host of opportunities. Of the different Sub Sahara African regions, East Africa stands out due to the diversity and vibrancy of its economy; and in East Africa, Kenya stands out as the hub for innovation, technology, financial services and real estate development. At the beginning of 2015, the economic expectations in Kenya for growth were bullish, and pointed towards a stable macroeconomic environment, supportive of growth, through a...