Centum is expected to release its FY21 results. Banks, on the other hand, are also to release their half-year financial results this month which could give a clearer picture of the recovery in the sector.
In 2021, the economy is expected to gradually recover. Credit growth to the private sector is likely to increase while the improving business conditions should lead to a decrease in the sector's non-performing loan ratio. The stock prices of listed banks declined in 2020, as investors remained concerned about deteriorating asset quality, increased provisions, and reduced profitability. In 2021, profitability is likely to increase as economic conditions improve.
The month saw a rally in Safaricom on investor excitement on the award of an operating license in Ethiopia. The rally saw Safaricom hit an all time high of KES 43.45.
Safaricom announced its FY21 results, reporting a 6.8% decrease in profit after tax from KES 73.66Bn to KES 68.68 Bn. This was below our expectations. The uncertainty during the Covid-19 pandemic disrupted businesses and reduced economic activity (especially at the on-set of the pandemic) thus the Telco’s earnings were lower in 1H21 but recovered in 2H21. The reduced profitability was mainly on account of lower service revenue which was negatively affected by reduced transaction cost on M-PESA services.
In the month of March, our portfolio improved 1.5% M/M and was up 2.5% YTD on the back of an uptick in Safaricom, EABL and NSE. With its detrimental performance in FY20, after announcement of a KES 9.1B loss and an expectation of a rise in staff costs on account of the current restructure program, we have dropped Britam in our quarterly review and instead absorbed Jubilee Holdings to our portfolio. On a relative basis our portfolio has continued to perform better than the NSE-20 YTD while lagging the NASI.
The COVID-19 pandemic has claimed over 3 million lives and in 2020, it is estimated to have cost USD 28 trillion in economic losses. The vaccine rollout has faced some challenges and a third wave of the COVID-19 pandemic has resulted in lockdowns in some countries. In Kenya, economic activity may be affected by delays in the vaccine rollout as India’s ban on exports (to cater to their domestic demand) has led to a shortage of vaccines.
