Genghis Capital - KCB Group Ltd (KCB) ... KCB acquires NBK: Same Old?

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Genghis Capital

Patrick Mumu

KCB acquires NBK: Same Old?

KCB Group Plc (NSE: KCB) announced the intention to acquire 100.0% of National Bank of Kenya (NSE: NBK) on Thursday, 18^th April. Upon analysing the combined entity, our post-acquisition Target Price of KCB Group stands at KES 59.80. Despite it being 4.4% lower than our initial Target Price of KES 62.52 (see our published on 24^th April), we still recommend a BUY on KCB Group as this price presents a 33.2% potential upside from the current market price. We note that NBK shares are trading at a premium to KCB shares in the market, given the 10:1 share swap, and that an arbitrage opportunity exists, albeit with low volume on NBK. Further, we expect the dividend of KES 3.50 to be maintained going forward as capital ratios of the combined entity remain above the statutory requirements post-acquisition. However, an increase in the dividend in FY19 is unlikely as the total capital to risk weighted assets buffer is marginal (15.7% vs minimum requirement of 14.5%).

26/04/2019 1 EN

Underlyings

KCB Group Ltd

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KE0000000315 Nairobi Securities Exchange Kenya

National Bank of Kenya

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KE0000000398 Nairobi Securities Exchange Kenya

Provider

Genghis Capital

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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Analysts

Patrick Mumu

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KCB acquires NBK: Same Old?

Kenya Banks: Sector Q3 21 PBT jumps 68% yoy, and outlook for Q4 is positive too

Kenya banks: Lucrative SME potential undercut by low yields and asset quality

Kenya Commercial Bank: 9M 21 – impressive results and management's 2023 strategy is now within reach

Genghis Cross-Asset Weekly Strategy - 8th February 2021

East African Breweries Ltd (NSE: EABL) 1H21 Earnings Note

KenGen Company Plc (NSE: KEGN) FY20 Earnings Note

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