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COOP Group posted a 7.59% y/y climb in net earnings (PAT) to KES 18.39Bn by close of Q3’23. The Group’s earnings per share (EPS), on the other hand, rose 8.25% y/y to KES 3.15. Performance was supported by a moderate 2.46% y/y growth in net interest income and a 2.05% y/y increase in non-interest income. Trailing ROaE marginally declined 14bps y/y to 22.33% while trailing ROaA marginally increased y/y to 3.64% in Q3’23. The net profit margin accelerated 169bps y/y to 34.44%.

Safaricom PLC HY’24 PAT declined 10.06% y/y to KES 27.19Bn driven by a 21.89% increase in operating expenses and a 142.86% jump in finance costs resulting from the continued depreciation of the Kenyan shilling.

October 2023 Review

• FY’23 Earnings Season - During the month, we had FY’23 earnings release from KPLC, Carbacid and KenGen. KPLC reported a 197.85% decline in PAT to a loss of KES 3.19Bn. Carbacid reported a 15.31% increase in PAT to KES 816.01Mn and a final dividend of KES 1.70 was declared. KenGen reported a 48.34% increase in PAT to KES 5.02Bn and a final dividend of KES 0.30 was declared.
• Safaricom Acquisition of Mpesa Holding from Vodafone - During the month, Safaricom announced the successful completion of acquisition of 100% shareholding of Mpesa Holding Ltd from Vodafone. We view this as a positive step towards aligning the telco’s strategy with long-term growth centered on the mobile money business.
• ILAM Fahari Redemption Offer Results - During the month, ILAM Fahari announced the results of their redemption offer following the closing on 6th October 2023. The subscription rate of the offer was 113.08% representing 41,371,604 units.
• October MPC Meeting - Central Bank’s MPC held the sixth meeting of 2023 where the Central Bank Rate was maintained at 10.50% to allow for effects of the previous hike to be transmitted across the economy. The committee also noted the banking sectors non-performing loans increased to 15.00% in August ’23 from 14.50% in June’23.

What does November '2023 Hold ?

• Q3’23 Earnings Season - We expect the release of Q3’23 net earning results from the banking sector where we anticipate strong performance to be driven by an increase in interest income and non-funded income.
• HY’24 Earnings Results - We expect Safaricom Plc to announce their HY’24 results during the month where we expect revenue growth to be driven by data revenue and Mpesa revenue.
• Listed Companies EGM - In the month of November, KPLC and ILAM Fahari will be holding their EGMs via virtual meetings.

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During Q3’23 the ongoing economic recovery faced persistent challenges exacerbated by spill-over effects from 2022 which led to slower global growth and increasing domestic interest rates. Globally, inflation in advanced economies continued to ease during the year driven by a decline in commodity prices and easing supply chain costs. The continued strengthening of the dollar and reduced dollar inflows have contributed to further weakening of the shilling against the dollar creating a challenging business environment. We anticipate local economic growth will remain hampered by elevated interest rates, inflationary pressures and continued depreciation of the shilling.

During the month of September, the indicative indices recorded a downward trend with the NASI declining by 4.04% and NSE-20 declining 2.04%. Foreigners changed to net sellers taking the selling position to KES 1.19Bn taking the YTD net selling position to KES 10.13Bn. If the same trend continues, the total foreign selling position for 2023 is likely to close below the KES 24.04Bn recorded in 2022.

In August’23, our model portfolio (-3.43%) continued to outperform the NASI index (-5.93%) while falling below the NSE-20 (-2.35%). However, our model portfolio has outperformed the NASI index on a YTD basis. On a YTD, the NSE-20 lost 8.11% while NASI index lost 22.15% compared to our model portfolio which has lost 10.61%