At least 14 companies have issued profit warnings this year, with most blaming the economic fallout from the Covid-19 pandemic for their weaker earnings. FILE PHOTO | NMG
Summary
- Companies have not been spared the difficulties in the economy, with this reflected in deteriorating financial performance that has filtered through to their share price performance.
- Only 10 companies have recorded a share price gain in 2020.
- A total of 14 firms have issued profit warnings this year, up from nine in 2019.
- These have included banks, whose bottom line was hit by rising non-performing loans and the waiver of fees related to mobile transfers.
The Nairobi Business Ventures
(NBV) share is the biggest gainer this year at the Nairobi Securities Exchange, boosted by a big rally earlier this month following the Sh83 million takeover of the firm by Dubai-based Delta International FZE.
Media, manufacturing and banking stocks on the other hand have been the worst hit by the bear run that hit the market this year—exacerbated by the Covid pandemic—which has seen the NSE All share Index shed 10 percent and investor wealth fall by Sh238.5 billion.
NBV opened the year with a share price of Sh0.70, and barely traded before it was suspended in mid-October after the announcement of the Delta takeover.
Following the lifting of the suspension on completion of the deal last month, the price has now shot up six fold (537 percent) to Sh4.44 a share. This means that anyone who bought Sh1 million worth of NBV shares at the beginning of the year would now be worth Sh6.34 million.
This analysis is based on investors who buy shares at the start of the year and measure their returns at the end of the trading season—in a review that does not capture speculators who enter and exit stocks in short periods.
The other top gainers in the market this year are Kenya Airways
and Carbacid, with gains of 86.8 percent and 50.6 percent respectively to Sh3.83 and Sh12.05.
Mr Gerald Muriuki, an analyst at city based investment bank Genghis Capital, said the fact that that the three top gainers have been subject to significant corporate actions this year has attracted speculators to their stocks, driving up prices.
“It is mostly due to corporate actions, where in the case of NBV it’s the takeover by the Dubai firm, Carbacid making a bid to acquire fellow gas producer BOC Kenya
and for Kenya Airways, the proposed nationalisation by the government,” said Mr Muriuki.
“Overall, it is not unusual for small cap stocks to dominate the top and bottom of the market, given that they are more driven by the speculative activity.”
The Kenya Airways stock is however suspended from trading pending the resolution of its nationalisation plan.
On the other end, WPP ScanGroup
leads the market in share price erosion, going down by 65 percent to Sh6 a share, while another small cap stock Express Kenya(-56 percent) and cement firm Bamburi (-53 percent) were also leading losers.
The price erosions are emblematic of the tough times the services and manufacturing industries have suffered due to the Covid-19 outbreak, which has cost thousands of Kenyans their jobs and reduced the purchasing power of the economy.
Companies have not been spared the difficulties in the economy, with this reflected in deteriorating financial performance that has filtered through to their share price performance. Only 10 companies have recorded a share price gain in 2020.
A total of 14 firms have issued profit warnings this year, up from nine in 2019.
These have included banks, whose bottom line was hit by rising non-performing loans and the waiver of fees related to mobile transfers.
As a result, the 11 listed lenders have all shed value this year. The three largest listed lenders, Equity
, KCB and Cooperative Bank, have shed 35.3 percent, 31.7 percent and 27.5 percent respectively this year.
Safaricom
, the largest listed company which accounts for 59 percent of the whole markets capitalisation, has however bucked the negative trend of top stocks with a gain of 7.9 percent this year.
It is seen as a safe haven stock at the NSE for both retail and institutional investors.
“It is an outlier, and investors expect it to see faster recovery in the post Covid period compared to other firms, especially banks,” said Mr Muriuki.
Safaricom scored a significant win last week with the reinstatement of fees on mobile transfers of below Sh1,000, whose waiver from March had cost the firm an estimated Sh9 billion in the six months to June.
Mobile transfers between mobile wallets and bank accounts are still exempt from fee charges, however.
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