Mid-Morning Market Brief 26th November 2018

Corporate News: 
Kapchorua Tea Kenya Plc  and Williamson Tea Kenya Plc  results
Kapchorua Tea Kenya Plc (NSE: KAPC) and Williamson Tea Kenya Plc (NSE: WTK) results for the period ended September 2018, recorded Loss per share of KES 9.77 and KES 4.38 from KES -1.86 and KES 2.93, respectively. The poor performance is despite 28.6% y/y and 13.4% y/y uptick in turnover for the two agricultural firms attributable to favourable weather conditions that positively impacted tea production. However, the increased volumes of tea available for sale caused prices to plummet with prices at the Mombasa auction falling 15%-20% year-on-year. Additionally, the firms saw an uptick in finance costs and decrease in fair value of biological assets which greatly impacted the firms’ profits. We note that operating costs for the firms are high ranging between 98% and >100% of turnover. If  the cost remains at those levels, coupled with a relatively higher wage bill expected from current wage negotiations, we see the losses persisting into the second half of the year. WTK is trading at KES 163, gaining 2.52% year-to-date while KAPC is trading at KES 75, a 14.50% gain year-to-date. The directors did not recommend payment of dividends.

Centum Investments Plc 1H18 results
Centum Investments Plc (NSE: ICDC) announced half year results to September 2018 with an PAT growth of 27.5% y/y to KES 3.40. The growth in bottom-line was mainly due to investment income which grew 85.8% y/y boosted by sale of 73.5% stake in GenAfrica Asset Managers which realized a gain of KES 1.2Bn. Across business segments, the trading business (mainly Almasi) recorded a 29% decline in profit from 17% decline in volumes and financials segment (mainly Sidian Bank) narrowed its losses by circa KES 20Mn to KES 91Mn with management reporting a stronger post-balance sheet performance and expected to turn profit in next financial year. Under the new Centum 4.0 strategy, the business is focusing on reducing debt levels at the parent company level, increase dividends, cut down on new greenfield investments (focus on mature cash generative businesses) and increase its marketable securities portfolio to around 20% from the current 9.4%. ICDC currently trades closer to its 52-Week low, a discounted price to book value of 0.35x.

Trading Expectation:
As we begin a new week, we expect subdued trading to persist from the previous week with trades on the key index counters; Safaricom, Equity and KCB. There seems to be some foreign demand on EABL which might move the price slightly upwards in the session.

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by Genghis Research