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Recent Topicals

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What Real Estate Bubble?

Dec 24, 2017

We first wrote about the commonly discussed topic of a Kenyan real estate bubble in our Focus dated March 2017, and titled ‘Is there a Real Estate Bubble in Kenya?’ It touched on characteristics and conditions precedent for a bubble, and also reviewed the United States and Ireland as case studies, concluding that the Kenyan market is not experiencing a bubble but the normal real estate cycles of rising demand, peaking market, falling market then bottoming out, and the rapid price increments witnessed were a result of low supply and high demand. We revisit the matter this week as we come close to the end of 2017, to evaluate the metrics, consider additional case studies, and review if our previously arrived at conclusion still holds. We start by defining a bubble and look at previous examples of major real estate bubbles globally, in the Baltic States, United States and Spain, focusing on the causes and how t...

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Safaricom’s 44% of NSE Market Capitalization and Portfolio Construction

Dec 18, 2017

Due to the unusual dominance of one counter in the NSE, this week we seek to examine the evolution of Safaricom’s share price and market capitalisation, its effect on the performance of the NSE, its performance in comparison to other listed Telcos in Sub Saharan Africa, how it is likely to affect portfolio construction decisions and conclude by drawing the key takeouts. The Nairobi Securities Exchange (NSE), with 62 listed companies, has a total market capitalisation of USD 23.4 bn (Kshs 2.4 tn). The 62 listed companies are classified into various sectors with the Telecommunication and Technology sector being the largest by market capitalisation, and Safaricom Limited being the only listed company in the sector. The table below indicates the number of companies in each sector and their corresponding market capitalisation.   No.

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Sub Saharan Africa Financial Services Report

Nov 19, 2017

Having established a strong research team and delivery framework in Kenya, we have now launched a Sub Saharan Africa (SSA) research coverage initiative. The initial coverage will be limited to Financial Services, which is one of our strongest research sectors, alongside real estate research. SSA has long been viewed as the next global growth frontier buoyed by improving macro-economic stability, compelling demographic trends, improved governance and ease of doing business across the continent. However, following a decline in commodity prices and slowing demand from China, the region fell behind the world economy in output, growing at 1.4% in 2016, slower than the aggregate global growth of 3.2%. The slowdown was not evenly distributed amongst countries in SSA, being mainly concentrated in commodity exporters, while more diversified economies sustained robust economic growth, with countries in East Africa including Djibouti, Ethiopia, Kenya, Rwanda and Tanzania, all recordi...

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Nairobi Luxury Apartments Market

Nov 13, 2017

Kenya’s real estate and construction market has grown over the last 7-years, with its contribution to GDP increasing from 12.6% in 2010 to 13.6% in 2016.The growth has been fuelled primarily by (i) demand as a result of growing population at 2.7% per annum compared to the global average of 1.2%, (ii) a high rate of urbanization at 4.4%, compared to the global average of 2.1%, (iii) infrastructural development in various parts of the country, which has opened up areas for development, (iv) entrance of multi-national firms such as Wrigleys, who demand institutional grade commercial and residential real estate, (v) and Nairobi’s status as the regional hub for East Africa. The residential real estate market has seen development of housing to meet demand from the high-end, upper middle, lower-middle and the low income market segments. In this sense, opportunities exist for either investment or home-ownership purposes, whichever the user deems fit. Notably, residential units have become o...

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Structured High Yield Investment Products

Oct 29, 2017

We first wrote about structured high yield investments products in the Cytonn Weekly Report #19 on 17th May, 2015. We revisit the topic in depth this week following social media enquiries in the public domain where we continued to get questions as to how one of our structured products, High Yield Solutions (Cytonn HYS), is able to deliver an 18% per annum return to investors. Please note that this Focus Note is meant for general information only and has been prompted by the need to provide more information about structured products and respond to questions we are getting from the general public; it 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. In this Focus Note, we deal with a couple of key issues about structured high yield products: What is a Struc...

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