Consider buying NSE, sell Limuru Tea

NSE: The Nairobi Securities Exchange counter is a buy, says Genghis Capital Limited.

Mr Kevin Tuitoek, a research analyst at Genghis, says NSE is fast shaping up as a good stock for medium to long-term investors.

He singles out the company’s financial performance. In the year ended December 31, 2014, NSE posted a 22 per cent after-tax profit gain from Sh262 million in 2013 to Sh320 million.

The growth was propelled by a 39 per cent surge in equity turnover with fixed income trading rising by 11 per cent.

According to Mr Tuitoek, the fixed income segment has continued to witness a rise in corporate and government debt issues.

“This is expected to continue throughout the year.

The effect will be a balancing of the slow growth in foreign in-flows on equity turnover,” he says, adding that increased investor appetite is expected to flow into the local bourse once retail investors are allowed to purchase bonds with as low as Sh20,000.

“Additionally, the inception of the derivatives market through the introduction of single stock and index futures within this financial year shall fan the market,” he adds.

Mr Tuitoek notes that the debut dividend pay out of Sh0.98 was seen as appealing, noting the company’s position in the market so far.

On Friday, the counter opened 0.76 per cent in the red at Sh19.50 per share.

Over the past one year, the counter – which has 194.63 million issued shares – has traded at a low of Sh15 per share and a high of Sh28. 

Limuru Tea: This stock is recommended as a sell. According to Genghis Capital, the company recorded a Sh. 331 million profit decline to Sh. 28.5 million net profit in a market that is increasingly characterized by high global production.

“The Sh2.08 million net profit was coupled by declining turnover of up to 11.46 per cent to just Sh92.25 million.

This was its lowest earnings in over five years and the situation hasn’t changed much,” he says, adding that the first quarter of 2015 has not been good for production.

“Effects from this will certainly reflect on the company’s annual turnover.” According to Mr Tuitoek, diversification into new segments is the key to value addition that will see the ultimate revival of the company and the stock.

On Friday, the counter opened at Sh952 per share, the same average closing price it recorded on Thursday.

This was a Sh2 increase from Wednesday’s closing price of Sh950 with a low volume of 100 shares.

Over the past one year, the counter has traded at a low of Sh620 and a high of Sh1,185 apiece. 

Equity Bank: Last week was not fruitful for Equity Bank shareholders. The counter took a nose dive from the Sh48 per share range to lows last seen over eight months ago.

On Wednesday, the share touched a low of Sh45.50 having closed at Sh46 on Thursday. On Friday, the counter opened at Sh46.25 per share.

Over the past one month alone, the counter has dipped by 11.5 per cent. In the last one year, the stock has traded at a low of Sh32 per share and a high of Sh63.

And while the stock has been trading post dividend, the announcement by the bank that it will be venturing into 10 African countries may have triggered the drop in market value that is currently standing at Sh170 billion.

“The news may have caused the drop in share price, given that its current five subsidiaries contributed only 4.8 per cent of profit before tax in the financial year ended December 2014,” said a market note by Standard Investment Bank.

Nonetheless, the share remains a pick for strictly long-term investors.