Buy Total, Kenya Power; bourse open

Mr. Arthur Karanja who is an investor at the Nairobi Securities Exchange (NSE) at the exchange office on August 1, 2014. The Nairobi Securities Exchange has been on a bull run with Safaricom touching high of Sh15.30 per share, giving the telco a valuation of Sh607 billion by market capitalisation on Thursday last week. PHOTO|FILE

What you need to know:

  • Capital Markets Authority noted that brokers had no authority to suspend trading.
  • Last week, analysts in this column recommended a BUY for Kenya Power. By then, the stock was trading at Sh15.70 a piece. According to analysts, Kenya Power was to be approached as a medium to long-term counter.
  • Among the key reasons offered were the company’s profits-to-earnings ratio, which was seen as impressive given the then price of Sh15.70-16 per share.

NSE:

The Nairobi Securities Exchange has been on a bull run with Safaricom touching high of Sh15.30 per share, giving the telco a valuation of Sh607 billion by market capitalisation on Thursday last week.

Similarly, the NSE 20 Share Index is almost at 5,500 points having closed at 5,473.8 points on Thursday, the same day the bourse was rattled when stockbrokers threatened to suspend trading pending the outcome of a court case on whether brokers should or shouldn’t collect capital gains tax on behalf of the taxman.

Their decision put in jeopardy the daily average turnover of about Sh1.2 billion at the bourse.

However, the Capital Markets Authority noted that brokers had no authority to suspend trading.

A spot check by Money revealed that trading opened on Friday with KenGen, Mumias Sugar, KCB, Safaricom and Housing Finance moving over two million shares between them by 11am.

Mr Ndindi Nyoro, Investax Capital boss confirmed that trading was going-on, sentiments that were also shared by Mr Eric Munywoki, an investment analyst at Old Mutual. “It may be that the stockbrokers association had not consulted widely and hence the flop in suspension,” adds Mr Nyoro.

 

KENYA POWER:

Last week, analysts in this column recommended a BUY for Kenya Power. By then, the stock was trading at Sh15.70 a piece. According to analysts, Kenya Power was to be approached as a medium to long-term counter.

Among the key reasons offered were the company’s profits-to-earnings ratio, which was seen as impressive given the then price of Sh15.70-16 per share.

Well, shortly thereafter, Kenya Power released half-year results, seeing the company record a 53 per cent jump in its net half-year profits for the period ending December 31, 2014. This was Sh1.1 billion profit increase from Sh3 billion recorded in 2013.

Its shareholders would be getting an interim dividend of Sh0.2 per share.

Well, in less than a week, Kenya Power surged, trading at Sh18 per share.

This implies that if you invested Sh1 million in Kenya Power according to the BUY recommendation and offloaded at Sh18, you earned Sh147,000 profit. On Friday, Kenya Power opened trading at Sh17.60 per share.

The counter has been on a gradual decline since the Sh18 high. “If the counter slides any further, it may provide a second chance entry position for medium to long-term investors. The company is very strongly founded,” said Mr Nyoro..

 TOTAL:

Total: This is a medium to long-term BUY.

According to Mr Nyoro, falling global oil prices could trickle benefits to retailers such as Total. “Total will be the highest gainer both in terms of turnover and margins, especially that it in the downstream segment of oil in Kenya. Similarly, its profits-to-earnings ratio is actually half of its listed competitor,” he says.

Currently, total is Kenya’s biggest oil marketer with a 21.2 per cent share followed closely by Shell at 19.1 per cent. Last year, Total won a lucrative deal to supply the Police Service with fuel.

According to Mr Nyoro, this is expected to broaden its market reach, given the police’s fleet size.

On Friday, Total opened at Sh28 per share. The counter has traded between Sh20 and Sh32 in the last one year.

In its half-year period ended June last year, its gross sales grew by 37.4 per cent to Sh90.4 billion, raising its net profit to a billion shillings. The increase is expected to be reflected in the upcoming full year results.