Kenya | NSE

SCBK FY’21 net earnings edged up 66.23% to KES 9.04Bn which was above our expectation of KES 7.29Bn, while the EPS also grew by 62.76% to KES 23.49. The impressive numbers in the bottom line were mainly powered by growth in operating income (+6.41% y/y to KES 29.16Bn) and a decline in Total Operating Expenses (-17.21% y/y to KES 16.57Bn). Balance sheet expansion remained muted with the loan book (+3.66% y/y to KES 125.97Bn) growing faster than customer deposits (+3.50% y/y to KES 265.47Bn).

Escalating tensions in Eastern Europe culminated in Russia's invasion of Ukraine. The crisis has hurt global equity markets and commodity prices. Crude oil prices including Brent and Murban crude surpassed the $100 per barrel mark. Locally, pump prices remained unchanged cushioned by the fuel subsidy programme which will likely remain under immense pressure due to the rising prices of crude oil. During the month, British American Tobacco (BAT) released its FY'21 results with the net income surging 38.74% to KES 7.62Bn. The impressive results were mainly driven by growth in the domestic market and reduced operating expenses. BAT's board proposed a final dividend of KES 50.00 per share (Total dividend of KES 53.50). Safaricom (SCOM) announced an attractive special dividend of KES 0.64 per share. We remain confident in the company's strong fundamentals and maintain a positive outlook as it embarks on setting up operations in Ethiopia in the coming month.

Stanbic Holdings FY'21 PAT edged up 38.82% y/y to KES 7.21Bn driven by a 48.24% y/y decrease in Loan impairment provisioning. Customer deposits reduced 2.07% (+13.17% y/y expectations) to KES 254.59Bn while the loan book grew 16.82% to KES 229.32Bn (+22.73% y/y expectations). The board of directors proposed a final dividend of KES 7.30 taking the total FY'21 dividend to KES 9.00. As such, we maintain our BUY recommendation representing a total return of 17.50%, inclusive of dividends, on the current share price of KES 95.25 as at 2nd March 2022.

Kenyan power sector stocks have left investors reciting Socrates, " It is always darkest before dawn", waiting for a spark to ignite the rallying fire for both KENGEN and KPLC. Yet the pandemic environment was not the best to juggle falling knives – reduced power demand, expensive PPAs, pressure to reduce power tariffs and KENGEN's underachieving sibling who does not pay their debts. Both counters have recently received almost similar investors' sentiments with a YTD loss of 5.01% (KENGEN) and 9.71% (KPLC). KPLC is currently trading at a PE of 2.1x below the current market valuation of 11.4x while KENGEN is trading in high waters of 21.5x. Our fillers in the market can sense investors prayers' for KPLC to do well. However, the company has to exorcise the demons of underachievement and welcome the angels of commercial viability. We hope that the sweeping reforms recommended by the PPA task force will facilitate a turn around for both companies and subsequently lead to their share prices discovering their true north.

BAT announced a minimal 3.10% y/y increase in Revenues to KES 40.05Bn lower than our projected 5.0% y/y increase driven by export sales (-2% y/y) declines after regulatory challenges in Uganda and Somalia outweighing muted growth in domestic sales (+1% y/y). However, EPS beat our expectations by growing 17.50% to KES 64.83 on the back of declines in operating expenses (-9.53% y/y) and finance costs (-52.65% y/y). The board of directors proposed a final dividend of KES 50.00 taking the total FY'21 dividend to KES 53.50. As such we revise our target price to KES 521.15 representing an 11.43% upside and total return of 22.79%, inclusive of dividends, on the current share price of KES 468.00 as at 17th February 2022.

During the month, Sasini released its FY21 results with the net income surging to KES 573Mn compared to KES 12Mn that was recorded the previous year. The increase was mainly driven by higher sales especially for coffee, reduced cost and a weaker shilling which boosted the margins of their exports. Additionally, EABL released its HY22 results indicating a significantly improved performance with the profit after tax up by 130.43% y/y to KES 54.9Bn.The positive results were attributed to reopening of the economy and lifting of the gathering restrictions that contributed to increased alcohol consumption. Additionally, we observed an equal momentum growth across all markets led by mainstream spirits.