NSE Market Capitalization increased 13.36% in July . The increase was an indicator of a better market performance despite foreign investors remining as net sellers as the flight to safety continues. Foreign exits have been fuelled by rising yields in developed markets following benchmark rate hikes with the US Fed hiking the benchmark rate by 75bps in the July meeting. The NSE 20 and the NASI recorded upward m/m trends of 5.48% and 13.29%.
Earnings Releases – During the month we had earnings releases from BAT, ILAM I-REIT, Centum and EABL . BAT HY’22 net earnings improved 8.41% to KES 2.93Bn driven by pricing benefit in both the domestic market and growth in export markets. ILAM I-REIT HY’22 results were a 104.12% increase in PAT to KES 86.16Mn after new tenants at Greenspan Mall. Centum FY’22 loss after tax reduced 2.05% to KES 1.34Mn while EABL’s HY’22 earnings improved 123.70% to KES 15.57Bn .
Safaricom (SCOM ) - Safaricom Telecommunications announced a phased commercial launch in Ethiopia will commence from August 2022. The switching of network and services is expected to start in Dire Dawa. With a target of April 2023, the Telco looks to reach 25 cities. We view the start of operations as a positive to the share price given the impact the Ethiopian entry news had in the share price in 2021.
Limuru Tea (LIMT) - Ekaterra Kenya (formerly Unilever Tea Kenya ) submitted a notice of intention of a cash offer to acquire up to a 100% ordinary shares of Limuru Tea Plc. As at FY'21, Ekaterra Kenya owned 52% of the issued shares of Limuru Tea. The offer was extended to the remaining Shareholders who would like to sell their stake. Additionally, some Shareholders have already moved to court and registered complaints with the CMA trying to stop the takeover.
Inflation rate for July 2022 was 8.03% compared to 7.90% recorded in June 2022 despite the fuel and maize flour subsidies. Major indices increased y/y; Food and Non-Alcoholic Beverages Index (15.30%); Transport index (7.00%) and Household Utilities index (5.60%).
Kenya shilling continued to depreciate against the USD, loosing 1.33% on m/m basis. On a YTD basis, the shilling has depreciated 5.00% against the USD compared to 3.64% in 2021. This is mainly attributable to; strengthening of the dollar, increased dollar demand on the back of elevated global oil prices, high demand for imports, reduced earnings from agriculture and horticulture, and reduced foreign participation in the tourism sector.
What does August hold ?
General Elections – The country goes to the polls on August 9th, 2022. We foresee a largely peaceful election with expectation that we might see uncontested round one victory and subsequent swearing in of a new government by mid-September.
Banking Sector HY’22 Results – We expect players in the banking sector to released their HY’22 earnings in the month of August. With the upcoming elections and other economic challenges not withstanding we believe the sector will record an even better performance as compared to HY’21.
