Nairobi Stock Exchange

Our markets have been unpredictable for the last couple of months and many analysts have fallen over themselves trying to determine which direction it will take. Many have tried to call its bottom-line and failed miserably because apparently, our market is like a pendulum, swinging daily in different directions at the behest of various market dynamics such as supply, demand, investor sentiment, grand coalition government woes and company key fundamentals.

An analysis by Hidalgo Investments picks these companies as the top ten stocks to watch in the next quarter (and especially the next one month):

1. Kenya Airways

Low P/E – Upcoming poor results already factored in to the price. Will recover from effects of post-election violence for now and grapple with the current economic downturn which has made traveling only essential, thus cutting its passengers by 17 percent. Fuel prices are cheaper now, and hedges which they had gotten themselves into must have run out direct flights from JKIA. This will mean more connecting flights from Eastern/Central Africa. The worst of the financial crises is however over thus making KQ a good buy for the long term.

2. Centum

Low P/E – Upcoming bad results already factored in to the price. Their big loss will be a one off; will not affect next financial period, and their rebranding seems to be paying off.

Their application to buy into carbacid shares will be a definite boost since it will be an opportunity to unlock millions in investment options held by the company. Their holdings will appreciate starting April (except RVR), but hoping that RVR does get a strategic partner in South America, Brazil. Solid company, good management, have learnt their lesson through the rebranding issues.

3. AccessKenya

High P/E – AccessKenya has its own network of fibre optic cable, something no other ICT company, save for Safaricom through sea cables has. It also bought a stake in the undersea cable and currently has the largest satellite download. They could look at leasing out some of their bandwidth in the future, something which competitors Kenya Data Networks (KDN) until recently had a monopoly on. Key difference in their internet offering with Safaricom is that theirs is guaranteed speed, while Safaricom’s go by how many users are logged on and targets the mass market. AccessKenya targets mainly high net worth individuals and corporate. I think the high P/E is more reflective of the growth potential on this company. From a price perspective, the stock is also quite stable technically on pricing.

4. 4. Sasini

Low P/E – Low price; can rise 50 percent without breaking a sweat; diversification into the hospitality business with its brand name, ‘Savannah”. The re-strategy of its core business to factor with the global crisis thus keeping it ahead of its peers in the same industry. Tea output has suffered in Kenya, so it will be interesting to figure out if its farms have suffered the same. On the plus side, the Shilling has lost value against the dollar and tea prices globally are high (on account of reduced supply); it is also not clear if its diversification initiatives have borne any fruit thus far – that is, Savannah’s contribution to the bottom line. Speculative buy for me based on low price.

5. Equity

Low P/E – They are opening 500ac’s/day in Uganda. The best bank in terms growth and client acquisition; regional expansion working for them; incredible marketing strategies to stay ahead of the rest; impressive results and prudent management. The three year lock in period for majority foreign shareholders did elapse. The split is their best ever strategy to make the share more affordable to the local retailer and increase its supply at the market. World Bank and IMF support.

The aforementioned are companies that deserve a second and third look when investing and the short notes below each company represent the issues of sentiment, fundamental and fact about each company that one needs to consider. As an analyst, I stand to be corrected especially in a market like ours.

Steve Wafula C.E.O of Soko Directory

The stock market price decline of 2008 was a wake up call for many investors at the Nairobi Stock Exchange. The unprecedented sudden and steep decline in prices shocked many investors as they watched the value of their portfolios drop significantly in just a few weeks.

However not all is lost here are some of the New Years tips for Investing in Stocks.

Shareholders of Unilever Tea Kenya Limited (UTKL) have passed a special resolution to de-list the company from the Nairobi Stock Exchange (NSE). The move follows success of an offer by Unilever Plc through its subsidiary Brooke Bond Group Ltd (Brooke Bond), to acquire the 11.8 percent shares held by minority shareholders in the tea company.

The offer was conditional on Brooke Bond receiving acceptances which, when combined with the existing Unilever Tea shares held by Brooke Bond (88.2 percent), resulted in Brooke Bond holding not less that 90 percent of the issued share capital of Unilever Tea.

UTKL Managing Director Mr Richard Fairburn said in a statement that the shareholders’ decision of delisting had been communicated to the Capital Markets Authority (CMA). ‘’We are waiting for instructions from CMA to NSE to de-list the company from the bourse,” he said.

Minority shareholders holding 4,602,329 shares representing 80 percent of the 5.75 million shares in their hands accepted the offer and Brooke Bond now holds 97.65 percent or 47,727,329 shares in Unilever Tea. Shareholders who accepted the offer have received payment at the offer price of Kshs62 per share, according to the instructions provided in the acceptance forms.

The move by Brooke Bond to acquire the third party shareholding in Unilever Tea is consistent with Unilever’s strategy to achieve a preferred wholly owned structure within East and Southern Africa, he manager said. The significant inward investment to purchase the third party shareholding in Unilever Tea is further evidence of Unilever’s commitment to Kenya.

Here are some guidelines to follow:

• But with this pain comes the opportunity to become a more astute investor in the future. Here’s a summary of important lessons to be learned from the recent market meltdown.
• Stocks do not go up for ever. Stock prices fluctuate minute-by-minute as well as decade to decade. Losing money with stocks is a fact of life.
• Stock market is like any other investment. You might open a duka today and get many customers, and tomorrow no one wants to shop from you. The key thing is to be vigilant and identify opportunities.
• Learn how to invest. The era of buying a stock and disappearing is long gone. Today you must know the why and how of investing.
• Price bubbles always burst, no matter what kind of asset (i.e., stocks, bonds, real estate, oil, copper, gold, silver, coins, stamps, artwork, grains).
• If you own a stock and its price chart confirms that it’s at or near bubble prices, sell it. On a simpler matter, if you feel a stock has reached its peak…sell…sell. Ask those who had Equity when it was costing Kshs320 and did not sell.
• Wait until a stock stabilizes and then buy it on the price upside. You might miss buying at the lowest price, but you’ll increase you chance of making money if you buy when prices are on an uptrend.
• Don’t base any investment decision on hearsay.
• Eliminate emotion, particularly anger and fear, from your investment decision making. You can’t control the movement of stock prices, but you can control your reaction to extreme volatility that causes the value of your portfolio to fluctuate.
• Be diversified. Don’t load up on one of two stocks or similar stocks from one sector. If you’re wrong, you can get killed, particularly if you own volatile stocks.
• Keep an ample supply of cash on hand. Cash doesn’t offer great returns, but it won’t disappear overnight like some stocks. And you’ll have cash available to buy stocks at bargain prices when they head to the upside.

Happy investing and remember the lessons come next year.

Contributed by Perminus Wainaina who is the CEO of Concept Advisory Services Limited and SmartBizAfrica Financial Analysts.