Morning Market Brief 7th December 2018
NIC Group Plc (NIC) has announced a possible merger with Commercial Bank of Africa Ltd (CBA). NIC recently released 3Q18 financial results reporting a 4.1% y/y decline EPS to KES 4.56, with key concerns on efficiency (weakening of CTI), the deterioration in the loan book (Gross NPL ratio at 13.3%), and profitability (NIM down to 5.8%, ROAE declined to 12.0%). A merger, would make the lender the third largest in the country, with an asset base of KES 444.4Bn, and is expected to lead to the realisation of synergy, and consequently, improved efficiency levels. CBA will bring on board a significant asset base, coupled with a broad network (M-Shwari). The appeal of the merger for NIC shareholders will be pegged on the details of the transaction, which are yet to be finalized. At this moment, we maintain our BUY recommendation on NIC Group Plc at a target price of KES 34.89 and a P/B of 0.5x. This represents an upside potential of 54.0% from the current market price of KES 22.65.
As the week comes to a close, we still expect trading to remain on the key index counters; Safaricom, Equity, KCB and EABL. Demand still exists on EABL with foreign investor exiting the other key traded counters. We anticipate to see prices of most counters closing unchanged in price in the session.