Genghis Cross-Asset Weekly Strategy - 30th November 2020
In this week's edition of the Weekly Cross-Asset Strategy Report, we give a recap of the equities, fixed income, currencies and derivatives markets' performance over the past week and our trading ideas for the coming week.
Our Momentum, Income and Value equities portfolios continue to outperform the benchmark NSE 20 index. Performance of the Momentum and Income portfolios is ahead of all the benchmark indices including the Nairobi All Share Index (NASI) and Zamara Index.
Genghis Trading Ideas for the week…
Equities
ACCUMULATE KENGEN on recent price weakness (LONG-TERM)
Market price has weakened closer to 52-week low (on concerns of cash flow constraints due to KPLC) despite recent highlighted 2020 financial results (unaudited) indicating record-level net profit of KES 10.5Bn (partly due to KES 1.9Bn tax credit). Normalized, this is growth of 7.5% - decent for a year most companies are reporting losses/decline in PAT.
Fixed Income
BUY FXD2/2013/15 at 11.00% - 11.10% levels
The recently re-opened paper has gradually bounced back to pre-auction levels. We still see entry opportunities on the paper due to its liquidity and as the market awaits the announcement of December’s primary bond issue.
Corporate News Summary
Diamond Trust Bank 3Q20 Earnings Summary
- Profit After Tax declines 27.9% y/y to KES 4.3Bn
- Provisions increase 232% y/y to KES 2.9Bn
- Net interest income rises 0.9% y/y to KES 13.9Bn
- Non Interest revenue rose 15.3% y/y to KES 5.0Bn
- Pressure on NIM (5.5%, -14bps q/q), steady NPLs q/q at 8.42%
M&A activity at NSE
KCB Acquisition of 62% of BPR Rwanda and 100% of ABC Tanzania
- BPR is being acquired at 1.1x P/B, a premium for a bank that has average ROE of c.10% in the past 2 years. KCB current P/B is 0.9x.
- Consolidated, it is 4.2% of Group asset base and c.3.2% of 1H20 PAT. This places KCB second to Bank of Kigali in Rwanda
- This is a strategic move to gain market share in the much acclaimed fast growing Rwanda economy
- Both banks were part of Equity Group-Atlas Mara transaction that failed in July 2020
Carbacid offer to BOC Gases
- Offered price (KES 63.50) is lower than then closing market price (KES 66.00), with risk of some shareholders demanding better price. High chance of completion (75%) with pledge by BOC Plc UK.
- BOC Holdings Plc UK (65% parent of BOC Kenya) is set to exit some African operations (recently offered for sale BOC Nigeria)
Genghis Capital is an innovative and customer focused Investment Bank licensed by the Capital Markets Authority (CMA). Founded in 2008, Genghis is one of the leading investment banks in Kenya. Since its establishment, Genghis has achieved tremendous growth to offer a well-diversified portfolio of financial services that includes:
- i. Securities(Equity/Debt) Trading
- ii. Research
- iii. Wealth Management services
- iv. Investment Advisory & Management via the GenCap Unit Trusts
- v. Corporate Finance & Transaction Advisory services
The Kenyan Capital Markets continue to develop in size, scope and sophistication. With this is an increasing demand for more specialized and personalized brokerage service and we at Genghis Capital are glad to be able to offer you this service. Our strength lies in ensuring our clients are up to speed with developments at the stock market and the economy. Research and technology remains our competitive and comparative advantage hence Experience, Expertise and Professionalism are some of the qualities you can expect from our team.
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