5

Daily Market Note

20 September 2012
th

Bloomberg: GNCP <GO>

www.genghis-capital.com

Equities Is It Just a Blip? There was immense pressure on the bourses performance as investors turned to distribution activties taking advantage of recently hit highs on several counters. This resulted in the NSE 20 Share Index losing 24.58 points to 3934.52. The performance was echoed in the NASI marginally down 0.58 points. The FTSE 15 and 25 indices reflected the dominant performances closing 0.50% and 0.47% lower respectively. Foreign investors dominated the trading session accounting for 69% though adopting a short position on several counters resulting in a net outflow of Kes.18Mn. On a positive note the market recorded improved turnover of Kes.720Mn; 130% greater than yesterdays performance. Market Capitalisation was marginally depressed to Kes.1.14Tn. "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely." - Warren Buffett The highlights of the days trading activity are listed below:
Table 1: NSE Performance Table 2: NSE Indices

Top Traders Equity Safaricom Ltd Mumias Sugar Company Ltd Equity Bank Ltd Kenya Power & Lighting Co. Ltd East African Breweries Ltd Volume 3,764,500 2,469,400 2,420,000 1,962,900 1,618,900

Market Indices Summary

Index NASI NSE 20 Share FTSE NSE 15 FTSE NSE 25 Source: NSE

Previous 86.95 3959.10 115.72 118.11

Today 86.37 3934.52 115.14 117.56

% change -0.67% -0.62% -0.50% -0.47%

Gaining Stocks Equity Standard Group Ltd Sasini Ltd British American Inv. Jubilee Holdings Ltd BAT Kenya Ltd Price (KES) 24.00 11.65 6.45 168.00 420.00 % Change 3.23 2.64 1.57 1.20 1.20

The Advance/Decline ratio at the close of todays trading session stood at 15/17 with 15 stocks advancing in price and 17 shedding prices. Foreign investor participation marginally increased to 69% in todays trading compared to 41% at the close of yesterdays session. Todays session resulted in a net outflow of Kes.18.35Mn compared to a net inflow of Kes.10.60Mn at the close of the previous trading session. The highest foreign investor turnover was recorded on East African Breweries Ltd (NSE: EABL)Kes.353.87Mn and Bamburi Cement Ltd (NSE: BAMB)Kes.69.1Mn. The 2 counters accounted for 55.7% and 80.9% of the total NSE and total foreign activity respectively. British American Tobacco Ltd (NSE: BAT) recorded the highest net inflow of Kes.20.2Mn. The highest net outflow was recorded on Bamburi Cement Ltd (NSE: BAMB) at Kes64.8Mn.

Losing Stocks Equity Standard Chartered Bank E.A Portland Cement Kenya Airways Ltd Pan Africa Holdings Ltd Trans-century Ltd Price (KES) 198.00 51.00 12.20 37.00 21.50 % Change -8.76 -7.27 -4.31 -3.90 -3.37

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Table 3: NSE Summary

19th Sept 2012 Market Cap. (Kes.Bn) Equity T/O: (Kes.Mn) Local/Foreign Equity T/O: (%) Advance:Decline Ratio Bond T/O: (Kes.Mn) 1150.06 314.68 58.60/41.40 23:10 3913.85

20th Sept 2012 1142.43 720.80 31.03/68.97 15:17 4712.35 150.00 3.18%

% Change -0.66% 129.06% N/A N/A 20.40% N/A N/A

Sell/Buy Back Transactions T/O: 400.00 (Mn) Sell/Buy Back Transactions (% of 10.22% Total Bond T/O) Source: NSE & Genghis Capital Estimates

Table 4: Foreign Equity Turnover

Foreign Investor Equity Turnover 19th September 2012 Buys (Kes) 70,449,715.00 Net Inflow/(Outflow) Position Sales (Kes) 59,880,105.00 10,569,610.00 20th September 2012 Buys (Kes) 252,320,807.50 Net Inflow/(Outflow) Position Sales (Kes) 270,675,362.50 18,354,555.00

Source: NSE & Genghis Capital Dealers

The Telecommunication & Technology and Agriculture sectors were up 0.52% to occupy the top spot, buoyed by the performances of Access Kenya Ltd (NSE: ACCS) +1.04% to VWAP 4.85 and Sasini Limited (NSE: SASN) +2.64% to VWAP 11.65. The total index performance was down 0.34% on the back of heavy pressure in five segments. The Construction & Allied sector occupied the bottom spot losing 1.54% dragged down by E.A Portland Cement Co. Ltd (NSE: PORT) which shed 7.27% to close at a VWAP of Kes.51.
Table 5: Daily Segmental Price Performance Analysis

Sector Telecommunication & Technology Agricultural Energy & Petroleum Manufacturing & Allied Automobiles & Accessories Commercial & Services Insurance Investment Banking Construction & Allied Total Index Source: NSE & Genghis Capital

Constituents 2 7 4 9 4 9 6 4 10 5 60

Price Performance (% Change) 0.52 0.52 0.30 0.13 0.00 -0.37 -0.44 -1.05 -1.47 -1.54 -0.34

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Trading Ideas:
The table below shows the performance of selected stocks that Genghis Capital recommended in the year.
Table 6: Equity Picks (Fig in KES)

Company Centum Investments Ltd Equity Bank Limited KenolKobil Limited NIC Bank Limited EA Cables Ltd Athi River Mining Ltd Diamond Trust Bank Ltd KCB Group Ltd Uchumi Supermarkets Ltd Kenya Power & Lighting Co. Nation Media Group Ltd British American Investments Bamburi Cement Limited Cooperative Bank Limited Kenya Reinsurance Corp. KenGen Ltd Jubilee Holdings Ltd Scangroup Ltd Portfolio Return Source: Genghis Capital Ltd

Price at Recommendation 14.55 15.80 9.80 26.50 11.80 156.00 88.50 18.50 7.20 15.85 153.00 4.00 168.00 11.55 10.05 8.30 163.00 49.25

Target Price Current Price 19.55 19.90 16.90 45.50 14.55 198.50 123.40 27.10 17.25 22.00 197.70 6.25 201.00 18.50 15.35 16.25 186.00 59.60 11.80 23.50 15.50 34.00 10.45 214.00 105.00 27.50 17.00 17.50 209.00 6.45 170.00 12.30 12.20 8.35 168.00 58.50

Upside Potential 39.64% -18.09% 8.28% 25.27% 28.18% -7.81% 14.91% -1.48% 1.45% 20.45% -5.72% -3.20% 15.42% 33.51% 20.52% 48.62% 9.68% 1.85%

Return to Date -18.90% 48.73% 58.16% 28.30% -11.44% 37.18% 18.64% 48.65% 136.11% 10.41% 36.60% 61.25% 1.19% 6.49% 21.39% 0.60% 3.07% 18.78% 28.07%

Recommendation

BUY SELL HOLD BUY BUY HOLD BUY HOLD HOLD BUY HOLD HOLD HOLD BUY BUY BUY HOLD HOLD

Fixed Income: Budget Deficit Drives Yields Money Markets: The CBK was active in todays session to mop up Kes.1Bn in excess liquidity through repurchase agreements and TADs as the interbank rate was up to 6.7%. Primary Markets: The 91-Day T-Bill was auctioned today as the regulator received bids worth Kes.4.95Bn against a target of Kes.4Bn representing a bid to cover ratio of 1.24. This resulted in an uptick in yields jumping 13.2 bps to 7.647%. The recent uptick in yields is due to the Treasurys cash need to cover budget deficits. Secondary Markets: An improved performance in the Bond market up 20% to Kes4.71Bn driven by Infrastructure Bonds transacting Kes.1.58Bn; 34% of the total Bond Turnover.
Table 7: Short -Term Interest Rates, Treasury Notes & CDs

Tenor 91 Day 182 Day 1 Year 2 Year 5 Year 10 Year

Kenya 7.65% 9.63% 10.34% 11.11% 11.86% 12.71%

Uganda 10.02% 12.43% 12.01% 14.84% 15.39% 15.28%

Tanzania 12.08% 12.83% 13.11% 13.81% 14.49% 14.99%

U.S 0.10% 0.11% 0.18% 0.27% 0.68% 1.68%

LIBOR (USD) 0.41% 0.70% 1.03% ----

Source: CBK, BOU, BOT, US Treasury, BBA, Genghis Capital

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Currency: Tea Inflows Boost KES Performance: The KES received further support from CBK as well as inflows from Tea exports to strengthen against all currency pairs listed in Table 8. The largest gain was recorded in the ZARKES at 1.93%. The ZAR came under pressure after a deal was reached to end the Lonmins Marikana mine strike. This prompted workers from other mine companies to demand a similar pay hike. The Reserve Bank met today with analysts and economists alike employing a hold consensus on the 40-year low of 5% on the rate.
Table 8: Currency Rate

Currency Pair USD/KES GBP/KES EUR/KES ZAR/KES KES/UGX KES/TZS INR/KES Source: Bloomberg 4.00pm E.A.T, Genghis Est.

19th Sept 2012 84.88 138.01 110.97 10.36 29.56 18.51 1.57 27thJan 2012

20th Sept 2012 84.83 137.38 110.19 10.16 29.73 18.57 1.56 30thJan 2012

Technical Analysis and Outlook: The chart below shows the Bollinger Bands for the USDKES currency pair over the past year. The regulator has ensured little volatility in this currency Estimatespair through mopping up excess liquidity or selling USD directly in the open market.

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Genghis Index:

Table 9: Genghis Index Performance

Large-Cap Index

The index slipped 0.89% as Market Capitalisation declined to Kes.928Bn. The best performing counter in this segment was British American Tobacco Kenya Ltd (NSE: BAT) up 1.20%. Losing by the biggest margin in this segment was Standard Chartered Bank Ltd (NSE: SCBK) shedding 8.76%.
Mid-Cap Index

The Index shed 0.48% over yesterdays close as Market Capitalisation was relatively flat at Kes.147Bn. This sections best performer was Standard Group Ltd (NSE: SGL) up 3.23%. Losing by the biggest margin was E.A Portland Cement Company Ltd (NSE: PORT) down 7.27%.
Source: Genghis Capital Small-Cap Index

Price performance marginally declined 0.05% with market capitalization stable at Kes.13Bn. Gaining by the biggest margin was Eaagads Ltd (NSE: EGAD) up 0.98%. Losing by the biggest margin was Express Kenya Ltd (NSE: XPRS) shedding 2.56%.

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Contacts Report By: Moses Waireri,Research Analyst | Tel:+254 20 2774781 | Email: mwaireri@genghis-capital.com Report By: Evelyne Wanjiku, Research Analyst | Tel:+254 20 2774781 | Email: ewanjiku@genghis-capital.com Anthony Kimani, Research Analyst | Tel:+254 20 2774781 | Email: akimani@genghis-capital.com Report By: Kelvin Nyabando, Research Analyst | Tel:+25420 2774781 | Email: knyabando@genghis-capital.com George Guy,Fixed Income Dealer | Tel:+254 20 2774756| Mob: +254 727 142231 | Email: gguy@genghis-capital.com Nyawira Waithaka, Equity Dealer | Tel:+254 20 2774777 | Mob: +254 723 693481 | Email: nwaithaka@genghis-capital.com Andrew Maina, Senior Equity Dealer | Tel:+254 20 2774789 | Mob: +254 722 667936 | Email: amaina@genghis-capital.com
Disclaimer: The content provided on this document is provided as general information and does not constitute advice or recommendation by Genghis Capital Ltd and should not be relied upon for investment decisions or any other matter and that this document does not constitute a distribution recommending the purchase or sale of any security or portfolio. Please note that past performance is no indication of future results. The ideas expressed in the document are solely the opinions of the author at the time of publication and are subject to change without notice. Although the author has made every effort to provide accurate information at the date of publication all information available in this report is provided without any express or implied warranty of any kind as to its correctness. You should consult your own independent financial adviser to obtain professional advice before exercising any decisions based on the information present in this document. Any action that you take as a result of this information, analysis, or advertisement is ultimately your responsibility.

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