Morning Market Brief-08th November 2018

Corporate News:
KenolKobil Acquisition of Delta Petroleum Uganda and Rwanda
KenolKobil Plc (NSE: KENO) is set to acquire a total of 33 stations operated by Delta Petroleum in Uganda and Rwanda through its wholly owned subsidiaries Kobil Uganda Limited and Kobil Petroleum Rwanda Limited in Uganda and Rwanda, respectively. This will effectively bring its total number of stations to 433 with Kenya leading with a total of 200 stations while Uganda and Rwanda will have 56 and 61 stations, respectively. The move is in line with the firm’s 30 stations a year strategy as well as expansion in the region through acquisition of smaller OMCs. This is expected to grow the company’s revenue with Kenol citing better growth prospects in the two countries compared to Tanzania and Congo where it has since divested from.

KenolKobil; Update on the 88Mn ESOP Shares issued to the CEO  
KenolKobil has put into perspective the allocation of ESOP shares to the CEO, David Ohana. The firm indicates that out of the 149Mn outstanding shares under ESOP, Mr. Ohana has been awarded options to purchase 88Mn shares. However, under existing ESOP rules an executive can only purchase up to 25% of the outstanding ESOP shares which in Mr. Ohana’s case, amounts to 37.25Mn shares. In our view, we expect that the Board will amend these rules to accommodate the remaining 50.57Mn shares from the 88Mn shares awarded to Mr. Ohana. This will be beneficial to Rubis Energie which has proposed to acquire KenoKobil as it will have the CEO’s 88Mn shares under its irrevocable undertaking.
The counter trades at a premium of 12.7% to our Target price of KES 16.33 which represents a HOLD at the current market price of KES 18.40. At the offer price, we recommend shareholders to tender their shares or SELL to market at a price close to the offer price of KES 23.0 

See Company Memos here and here

Trading Expectation:
We expect turnover levels to continue to remain subdued in the day’s session. The top traded counters have supply pressure from the foreign desk with no demand to match hence we do not expect much change in price. As the month unfolds, banks are set to release their 3Q18 though we don’t expect much movement in the counters due to this.

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by Genghis Research