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Recent Topicals

Lessons for the Kenyan Retail Sector

Feb 12, 2018

According to the Kenya National Bureau of Statistics (KNBS), wholesale and retail trade is the 5th largest contributor to Kenya’s GDP and the 3rd largest contributor to private sector employment. In 2016, wholesale and retail trade employed 238,500 Kenyans and accounted for 8.4% of Kenya’s GDP. Moreover, according to Nielsen, a leading global information and measurement company, shifting consumer trends has driven growth in formal retail, with 30.0% of the Kenyan population now shopping in formal retail establishments compared to 4.0% in Ghana and 2.0% in Cameroon and Nigeria. This is the second highest in Sub-Saharan Africa after South Africa, which has a formal retail penetration of 60.0%. Given the recent challenges faced by two local players, this week’s Focus Note examines what led to their current distress and then draws lessons learnt, by looking at the following areas: Overview of Kenya’s Retail Industry, Analyzing th...

Cytonn Annual Market Outlook - 2018

Feb 4, 2018

In 2017, the Kenyan economy remained resilient, despite a challenging operating environment, expanding by an average of 4.7% for the first three quarters of 2017, compared to an average of 5.7% in a similar period in 2016. The Kenya National Treasury, World Bank and IMF cut their 2017 GDP growth projections to 5.5%, 4.9% and 5.0% from 6.0%, 6.0% and 5.7%, respectively, at the beginning of the year, citing (i) slower growth of the agriculture sector, which grew by an average of 1.9% in the first three quarters of 2017 compared to an average of 5.0% in a similar period in 2016, following the prolonged 2016/17 drought, (ii) the interest rate cap, which led to a reduction in corporate earnings for commercial banks with EPS growth for Q3’2017 at negative 8.2%, compared to positive 15.1% in Q3’2016, (iii) political uncertainty during the year, and (iv) low private sector credit growth, which has averaged 2.4% in the first 10-months to October 2017 compared to a 5-year average of 14.4%. De...

Why Stock Indices Performance Differ; A Case Study of NASI vs NSE 20

Jan 29, 2018

During the year 2017, the Kenyan equities market recorded strong performance with NASI, NSE 25 and NSE 20 gaining by 28.4%, 21.3% and 16.5%, respectively. This performance was driven by gains in large caps such as DTB, KCB Group, Safaricom, Equity Group and Co-operative Bank, which gained 62.7%, 48.7%, 39.7%, 32.5% and 21.2%, respectively. Looking at these indices an investor then wonders which among them is the right measure of the market performance. In this write-up, we seek to lay out what causes the discrepancies in returns and then conclude by pointing out what really is the best benchmark for investors to use when measuring performance. Introduction: An index is a statistical indicator or a measure of performance. According to FTSE Russell, a stock index is a group of securities chosen to track a particular investment scheme such as a market, asset class, sector, industry, or even a strategy. The collection of securities that make up the index are known as the ...

Nyeri Real Estate Investment Opportunity

Jan 21, 2018

Over the last few years, we have been investing in the Nairobi metropolitan area. We however continuously do research in the other regions to see in what places we can undertake investments and developments on behalf of our investors. Our Real Estate Research & Deal Origination (RDO) team spends time in the target market, collecting and analyzing data to make the best investment recommendation both for our own proprietary use and to inform the investors of the trends in the markets. As such, and in line with our regional expansion strategy, we have been carrying out research on various markets across the Kenyan Counties. Currently we have covered 13 Counties, among them being Laikipia, Meru, Mombasa, Kisumu and Uasin Gishu. We have chosen Nyeri County to serve as the Mt. Kenya Regional Office due to its centrality in the region. We also target to open offices in other Counties such as Kisumu, Mombasa, Nakuru and Uasin Gishu as they remain attractive from a macroeconomic perspect...

The Total Cost of Credit Post Rate Cap.

Jan 15, 2018

Following the recent headline on the Business Daily on the total cost of credit at 19% compared to the legislated cap at 14%, we: revisit the topic on interest rate caps by a general overview, have a look at initiatives put in place to make credit cheaper and more accessible, assess the impact on private sector credit growth, and, analyse the true cost of credit and what more can be done (see here for the Business Daily article). Section I: Revisiting the Topic on Interest Rate Caps by a General Overview We have already done four previous focus notes on the topic, namely, Interest Rate Cap is Kenya’s Brexit - Popular But...