President-Elect Declared
IEBC declares William Ruto the President-Elect
๐ Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.This week, we cover what the incoming President faces, I&M, StanChart, and Stanbic's H1 2022 results, and Allianz's acquisition of Jubileeโs Mauritius subsidiary.First off, enjoy our weekly business news in memes brought to you by Mwango Capital:
IEBC Declares Ruto President-Elect
Scoop: On Monday, the Chairperson of the Independent and Electoral Boundaries Commission (IEBC), Wafula Chebukati, declared Dr. William Samoei Ruto as the President-Elect in the just-concluded General Elections. The Kenya Kwanza leader garnered 7,161,141 votes (50.49%). His main rival, Azimioโs Raila Odinga, bagged 6,942,930 votes (48.85%).
Market Reaction: At the Nairobi Securities Exchange, all indices edged up on Tuesday, with the NSE 20 Share Index, NASI, and NSE 25 Share Index gaining 8.92, 0.18, and 12.46 points to close at 1785.26, 147.21, and 3439.21 points respectively.
Political Reaction: The Azimio la Umoja coalition has rejected the Presidential results and is mulling its next action steps. The deadline for presenting a petition challenging the results to the Supreme Court is Monday, August 22.
What the Incoming President Faces:
Pending Bills: The incoming government is set to tackle KES 505B in obligations to suppliers of Ministries, Departments, and Agencies. This figure has risen by 40.39% from KES 359.5B as of June 30, 2021. Most of the suppliers are small enterprises that will be looking forward to the new governmentโs approach to the matter. Last month, the Association of Public Sector General Suppliers announced plans to file a class action suit as recourse.
Debt: Latest data from the Central Bank of Kenya places Kenyaโs total debt at KES 8.6T as of the end of the 2021/22 fiscal year, an increase of 11.5% year-on-year. In June, the Senate approved the Treasuryโs request to increase the debt ceiling to KES 10T. The current debt load to GDP stands at over 60%. In his campaign track, the President-Elect ruled out debt restructuring.
โI am not going anywhere near or even having a discussion on restructuring debt. We must pay our debt. We have the capacity to pay our debt.โ
President-Elect, William Samoei Ruto
The impact of the weakening shilling could be close to KES 500B on Kenyaโs external public debt. The local unit has lost over 9% of its value in the 2021/22 financial year and is currently down 5.79% Year-to-Date.
Inflation: In July 2022, inflation surged to 8.3%, increasing by over 300 basis points since January. Supply chain shocks are the main catalysts of the increased cost of living, and Kenyans will be looking to see how the President-Elect tackles the problem.
Kenya Banks H1 2022 Results
I & Mโs Elevated Costs: Net Interest and Non-Interest Income grew by 18.68% and 28.25% to KES 10.52B and KES 5.058B, respectively. Net Income grew 15.9% to KES 4.93B, with a net profit margin of 31.6%. The bank also realized KES 5.56B losses from fair value changes in financial assets at FVOCI, bringing the total comprehensive income for the year to KES -135.245M.
Costs were the underbelly of the results, with total operating expenses increasing 19.3% year-on-year to KES 8.596B. The cost-to-income ratio dropped to 55.2 in H1 2022 from 56.3 in H1 2021. The last time the ratio was sub-50% was in 2017 when it stood at 40.3%.
Find our analysis of the results here.
StanChart H1 2022: Revenue grew by 10.2% to KES 15.56B year-on-year, with Net Interest Income contributing 64.5% and non-interest income contributing 35.5%. Loan loss provisions fell by 83.1% year on year to KES 108M, but overall, operating expenses rose by 9.18% to KES 7.99B. The bankโs net profit was KES 5.41B, an increase of 10.9%.
Stanbic H1 2O22: Total assets rose marginally by 3.7% to KES 341.58B, with the loan book expanding by 17.5% to KES 244B. Non-Interest Income grew by 25.1% year-on-year to KES 6.86B, outpacing net interest income growth, which was up 20.9%.
Earnings RoundUp
NMG Financial Results:
Net Income Down 13%: Nation Media Group reported a 0.6% fall in turnover to KES 3.7B in the 6 months to June 2022. The cost of sales increased by 31.26% year-on-year to KES 683.2M. Gross revenue fell in tandem by 5.8% to KES 3B.
No Interim Dividend: Net earnings for the operating period were down 13.1% to KES 247.8Mwith NMGโs cash position growing 6% year-on-year to KES 3.81B. NMG will not pay an interim dividend for the period [2021: Nil]. In the first half of 2022, NMG stock was down 13.67% to KES 17.05. The firm closed trading last week at KES 19.05.
Good to Know: NMGโs share repurchase program closed on September 24, 2021, with an uptake of 82.45% or 17.1M shares locked at KES 25 per unit. The shares were booked as treasury shares, representing 8.25% of NMGโs total shareholding as of December 31, 2021.ย
Sameer Financial Results: In the 6 months to June 2022, Sameerโs topline reduced by 2.97% year-on-year to KES 323.1M, while the cost of sales was up by 160.93% to KES 109.85M. Operating profit fell by 37.7% to KES 140.9M, bringing the Net Profit for the year to KES 113.6M, a 56.2% decrease. In H1 2022, Sameer was the best performing stock at the Nairobi Securities Exchange posting a 45.3% appreciation.
WPP ScanGroup Sinks into Loss: For the period ended June 30, 2022, gross profit fell by 6.1% to KES 1.04B. The firm has cited a tough economic environment that has dampened marketing expenditure amidst ongoing pandemic-recovery efforts. Pre-tax profit was down by 88.3% to KES 9.6M with the firm booking a KES 47.1M loss during the trading period. WPP stock was down 24.9% in the first half of the year.
Debt Markets
T-bills: In the short-term debt markets, yields for the 91-day, 182-day, and 364-day gilts were 8.669%, 9.492%, and 9.909%, respectively. The yields are up by an average of 5 basis points from the last auction. The 91-day paper had the highest acceptance rate, with the CBK accepting KES 11.9B out of the KES 4B on offer. Overall, the CBK accepted KES 17.31B out of a KES 24B target.
T-bonds: The aggregate performance rate for the reopened instruments FXD1/2022/03, FXD2/2019/10, and FXD1/2021/20 stood at 98.25% with received bids standing at KES 49.127B and accepted bids at KES 38.525B. The total amount on offer was KES 50B.
Eurobond Market: Below are a few notes from IC Asset Managers Economist Churchill Ogutu on last weekโs market action:
KENINTs bucked the weekly positive momentum of the previous four consecutive weeks, with the yields trending higher by an average of 133.75bps (or bond price declining by an average of 5.4% week-on-week).
KENINT 24 was the most volatile in the KENINT universe, with yields edging higher by 311bps to close the week at 14.765%. Put differently, the bond price for KENINT fell from a 2-month high of 92.2 (last week's close) to close at 87.675.
Investors reacted negatively before the IEBC announcement, with KENINT 2024 galloping 350bps to 15.4% in Monday's session, before paring the losses in subsequent sessions. KENINT 2024 is yet out of the woods, with the expected petition at the Supreme Court by the Azimio faction, which will add another layer of uncertainty to investors in the coming fortnight.
Mergers, Deals, and Acquisitions
Kakuzi to Export Blueberries: The firm last week announced a collaborative partnership with leading berries marketing firm Driscollโs to grow local and export volumes. Driscollโs is evaluating the possibility of importing premium Kakuzi blueberries to the European, Middle, and Far East markets and further developing regional sales.
โDriscollโs is proud to be associated with Kakuzi, and we hope that the current production volumes will be significantly scaled up as this is an opportunity to grow the volume of blueberries produced in Kenya and to grow the regional demand for this superfood. Kakuziโs recent entry into China with its avocados is also very encouraging.โย
Driscollโs Vice President of Global Blueberry Leadership, Garland Reiter.
Allianz Acquires Jubileeโs Mauritius Subsidiary: Allianz SE is set to acquire a 54.15% stake in Jubilee Holdingsโ Mauritius subsidiary at a consideration of KES 270M. Allianz will also acquire an additional 11.85% stake from Jubileeโs Mauritius subsidiary from the Aga Khan Fund for Economic Development SA (AKFED) as part of the deal, bringing Allianzโs total shareholding to 66%.
What Else Happened This Week
โฝ Pump Prices Unchanged: In its review, the Energy and Petroleum Regulatory Authority has kept pump prices unchanged from August 13 to September 14. Prices for Super Petrol, Diesel, and Kerosene will remain at KES 159.12, KES 140.0, and KES 127.94, with the subsidy covering KES 54.91, KES 66.17, and KES 74.17, respectively. On an aggregate basis, the government will pay Oil Marketing Companies KES 24B for the subsidy. Currently, the government owes oil marketing companies KES 65B.
๐ Lending Rates Rise: Commercial banks increased their lending rates to individuals and businesses in the yearโs second quarter. The CBK has approved risk-based pricing models allowing banks to price consumers according to their risk, contributing to the rise in credit costs. Rising inflation has also added to the cost of debt across the board. The projected rise in net interest income will help to mitigate rising operating costs in the industry.
๐ธ KRA Collects KES 130B: In the first month of the 2022/23 fiscal year, the Kenya Revenue Collected KES 130B in taxes, 6.3% of KES 2.071T of 2022/23โs total tax revenue estimate. In the same month in the last financial year, KRA collected KES 121.9B in taxes, translating to an increase of 6% year-on-year.
๐งพ Rising Flour Prices: The winding up of the Agriculture Ministryโs flour subsidy program that kept the price of a 2kg packet of maize flour at KES 100 now threatens to lead to higher prices of the commodity to consumers. Without the subsidy, maize flour could retail in the region of KES 200 a packet.
โ Betting Firms Get Greenlight: The Kenya Revenue Authority has cleared 105 betting firms for the issuance of their operating licenses in the financial year ending June 2023. The firms were cleared between July and August 5, setting the stage for the renewal of their licenses by the Betting Control and Licensing Board.
๐ฐ Horticulture Earnings Dip: Data for H1 2022 by the Horticulture Directorate shows that horticulture earnings dropped by KES 32B or 40% in H2 2022 to KES 48.4B from KES 80.7B in H1 2021 on the back of reduced returns from flowers, vegetables, and fruits.
๐ฅ Insurers Bid for TSC Medical Cover: A consortium of underwriters including Britam, Jubilee, and CIC has bid to offer comprehensive medical insurance for the 341,837-strong teachersโ body. At a cost of KES 14B, the new scheme has increased the scope of coverage and will run for three years. The current service provider is AON Minet.
๐ข Firms Flock the DRC: AEA Ltd., a subsidiary of TransCentury, has entered into a Memorandum of Understanding with Symbion Architect in a KES 29.8B housing project that will see housing units for a quality assurance body built. In other news, Visa, the global payments tech firm, has announced plans to establish local business operations in the DRC as it seeks to expand its digital payments products.
Interest Rate Watch
๐ฌ๐ญ Ghana: The Bank of Ghana increased its benchmark interest rate by 3 percentage points to 22% to curb inflation that surged to 31.7% in July 2022. The measure has also been pursued to tame a decline in the Ghana cedi, which has lost 40% of its value this year and is currently the second worst-performing currency globally after the Sri Lankan Rupee.
Chart of the Week
