June'23 Review
• CMA Tribunal Appointment - The month of June saw the appointments to the CMA tribunal to meet quorum which is expected to pave the way for resolution of stalled acquisitions/takeovers. We expect these appointments will resolve the long-awaited acquisition of BOC by Carbacid and settle the wrangles surrounding Ekaterra tender offer.
• Nation Media Share Buyback - The month of June saw the approval of proposed buyback of 10% of ordinary issued shares totaling 19.03Mn ordinary shares at KES 20.00 per share. The buyback opened on 3rd July 2023 and will close on 2nd July 2024.
• TransCentury Receivership Wrangles - During the month, Equity Group to placed TransCentury and its subsidiary East African Cables under receivership owing to unpaid debt. Both companies proceeded to obtain an injunction from the court barring the lender from proceeding with the receivership. We observed this news negatively impacting the TCL and CABL counters share price as investor sentiment wanned.
• FY’23 Earnings Season - During the month, we had FY’23 earnings release from Williamson Tea, Kapchorua Tea and Olympia Capital Holdings. Williamson reported a 4.45% increase in PAT to KES 564.35Mn and a final dividend of KES 30.00 per share. Kapchorua Tea reported a 46.96% increase in PAT to KES 314.51Mn and a final dividend of KES 25.00 per share while Olympia Capital holdings reported a 101.84% increase in PAT to KES 35.31Mn.
• Local Pump Prices Increase with Higher VAT - EPRA announced the increment of local pump prices following the doubling of VAT on petroleum products to 16.00%. Petrol will retail at KES 195.53/litre, diesel at KES 179.67/litre and kerosene at KES 173.44/litre. We expect a continued legal tussle as petitioners challenge the Finance Act.
• Inflation Decreased Marginally - The headline inflation for the month of June decreased marginally to 7.90% from 8.00% in May on the back of increased food commodities prices. Food inflation increased to 10.30% from 10.20% in May and housing utilities and transport decreased marginally to 9.40% and 9.40% y/y respectively. Non-Food-Non-Fuel (Core Inflation) decreased to 4.10% from 4.30% in May. The CPI increased 80bps to 134.01 from 133.01 in May 2023. We expect headline inflation to remain under pressure and above the CBK’s upper target at least until the end of Q2’23.
• Shilling Continued Losing Streak Against USD - Kenya shilling continued to depreciate further against the USD to close at KES 140.52 versus KES 138.41 at the end of May. We observed a slower decline in the month of June (- 1.52%) compared to May (-1.90%). We expect the shilling to remain under pressure due to the increased dollar demand from importers on the back of prevailing high global commodity prices, reduced dollar inflows and dollar strength against frontier currencies.
• June MPC Meeting - Central Bank’s MPC held the fourth meeting of 2023 where the Central Bank Rate (CBR) was hiked by 100bps to 10.50% (a 7-year high) from 9.50% contrary to our expectations. The committee also noted the banking sector non-performing loans increased to 14.90 in May 2023 while private sector credit growth maintained at 13.20% in May 2023 similar to April 2023. Exports grew by 5.50% with imports growing at a slower pace of 2.30%.
What does July hold ?
• July MPC Meeting - The next meeting of the Monetary Policy Committee (MPC) will be held in July 2023. We foresee two scenarios; (i) Another 50bps increase as a preemptive measure to counter any inflationary pressure following the implementation of Finance Act 2023, (ii) CBR rate maintaining at 10.50% with the committee considering the impact of the previous hike as well as the prevailing macro factors.
• FY’23 Earnings Season - In the month of July, we await the release of FY’23 results for EABL, Centum and HY results for BAT Kenya. We expect positive results driven by improved performance which will likely be weighed down by increased cost of inputs and higher operating expenses.
