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Genghis Weekly Strategy - 27th January 2020

In this week's edition of the Weekly Strategy Report, we give a recap of the equities and fixed income 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 was ahead of all the benchmark indices including the Nairobi All Share Index (NASI).

Genghis Trading Ideas for the week…

Equities
Last week, we released our Genghis Playbook 2020 with key recommendations both short term strategies and longer term stock picks. We maintain our outlook on majority of the short-term strategies in 1H20 (short KCB, Equity and Safaricom) and long our undervalued stocks (EABL, KenGen & Kenya Re). EABL has rallied 8.3% YTD on the back of active foreign investor purchase especially over the last two weeks with the impending announcement of its half year (1H20) earnings on 31st January. We expect the brewer to report solid performance on the back of the usual boost from the December festivities and new volumes of Senator Keg from the Kisumu brewery that started production in 1H20. We estimate net sales growth of 11.2% into 2020 and EPS of KES 7.50 from KES 6.52 in 1H19. Additionally, we expect an interim dividend per share of KES 3.00 compared to last year’s KES 2.50 backed by the expected sturdy growth in the bottom-line. Following the price rally, EABL has fallen into our HOLD threshold with an expected upside of 13.9% against a fair value estimate of KES 245.70.

Fixed Income
SELL IFB 1/2019/16 at the 11.50% level, locking in 90 bps on the issue that recorded a yield of 12.39% in the primary auction late last year as heavy demand exists on the paper. As per the Genghis Playbook 2020, the yield curve is expected to remain steady, but with an upward bias, and to exhibit an upward slope in the short-end to the belly of the curve.