The good, the bad and the ugly results

Results have started trickling into the bourse and impacting on price movements. Mumias for instance saw its price slump to Kshs. 36 after the half-year results reflected a declined performance to a profit of Kshs. 184 mn, 53% below the Kshs. 391 mn. realized over a similar period over the previous year. This was attributed to a myriad of problems raging from “acts of God”, to sugar prices, and to factory breakdowns. It was such a disappointment to Kenyans who had braced the heat and queues to pick the shares at Kshs. 49.50 in the secondary offer in support of company (and of course with the hope of making a quick buck).

Bamburi’s was a happy story with performance having improved, turnover up by 10% and profits higher by 30%, and shareholders looking forward to Kshs. 3.50 dividend per share, Kshs. 1.50 being the final dividend for year 2006 and 2.00 being an interim dividend for year 2007. Its industry counterpart E.A. Portland also shared the result joys as the company captured a 23% increase in profits to Kshs. 728 mn. over the six months to December 31st 2006. Investors will also benefit from a Kshs. 1.30 Interim dividend.

Equity Bank however was the show stopper with pre-tax profits hitting an all time high of Kshs. 1.1 bn., 120% above the previous year’s Kshs. 501 mn. Disappointment still set in as hopes of a rumored split were dashed and instead a consolation 2 for 1 bonus issue was declared much to investors chagrin.

E.A. Cables embraced another celebrating year as turnover hit a Kshs. 2 bn all time high, having hit the 1 bn. mark over the previous year. Profits went up by 34%, and a Kshs. 0.50 dividend declared.

There were no smiles at Sameer Africa as the company unveiled its dismal performance for the year ended 31st December 2007. Profits moved from a Kshs. 205 mn profit in year 2005 to a Kshs. 22.3 mn. Loss. The company has so much to contend with, it’s a wonder they still survive. Cut throat competition, cheap imports, high raw material prices, and the list goes on and on and on.

Now we await the upcoming results, among them being Barclays Bank which is expected to release the group results tomorrow, and whose profits my forecast places at a possible Kshs. 5.2 bn.

OF MARKET ORDERS AND SLEEPLESS NIGHTS

Some investor placed a purchase order at a ‘best market’ price. The order went to the market, and was executed at a price of Kshs. 900, for a share that, at the close of the previous day, was at Kshs. 168. The share-price closed at Kshs. 368 on that day, remained dormant for a few days, and has edged downwards since then.

In this era of ATS (Automated Trading System), a market order can be catastrophic. Brokers carry their orders on a flash disk which they then feed to the system at the trading floor. The system just searches for any marching orders and passes any such order as executed.

After material information is received on the market, the 10% boundary is off, and the initial price after release of the information is determined through an auction till a match is found. The price can thus escalate or plummet to whatever price that finds the match.

In the “open Outcry” system, such an outrageous match would not have been captured since the dealers would have covered the buyer. A machine however goes by rules and has no way of telling whether a match is extreem.

Of course this particular transactions was nullified, but the one for City Trust was not. The buyer got stuck with City Trust at Kshs. 500, and they are currently doing Kshs. 80 levels.

With the set up being somewhat devoid of human touch, it becomes much safer to put a cap on any order placed. It doesn’t take receipt of material information to have your orders executed at a disadvantaged price. Even on a normal day, with prices oscillating at 10% boundaries, you could still get your purchase orders executed at price way above the day’s average or sold at prices way below the average sale price.

Kenya Airways or example, having closed at Kshs. 120 on the previous day can trade at between Kshs. 100 and 132 on the next day’s trading. Should you then place a sale order at “best market”;

- Our market does not cater for the “best” part of a “best market” order (in fact I wonder whether we have any that does.
- Your share will probably go at the lowest price of the day since it is almost guaranteed that there will be a buyer placing their order at Kshs. 100.
- The same goes for the buy side.

Of course the downside of placing cap would be, should the price go slightly beyond the cup (for a buy order) or below the cap (for a sale order), then your order would not be executable. The idea is to place the cap at slightly above the previous day’s closing price.

Out of the woods???

Might the gods have found favor in us and be smiling down at us again?? If am not wrong, I see a picking market. Index up for the last two days, prices picking albeit gradually, might we be out of the woods or is it too early to celebrate?? Out of 44 active counters, 27 were up and only 12 declined, while 5 were unchanged. Boy! Does it feel good to be writing about more gaining counters that loosers.

Equity shot up the highest, having commenced the appreciation on yesterdays trading. It closed Kshs. 9.00 higher at Kshs. 228. KCB also aced Kshs. 9.00 to close at Kshs. 239. Jubilee edged up Kshs. 6.00 to close at Kshs. 309. I still see equity going much higher with the anticipated profits for year 2006 expected to hit the Kshs. 1 bn. Point. The heat is bound to be concentrated on financials as investors anticipate the results expected to start trickling in this month.

There is however one financial counter pulling the pack behind, and thats CFC. Commercials also braved a loosing day with Marshalls, Car & General and Nation shedding Kshs. 3.00, 2.50 and 2.00 respectively to close at 34, 55.5 and 293 in that order.

I guess as we celebrate the possible market turnaround, there are still some counters that just won't play to the music!!!

GOING DOOOOWN

The bottom has really give way!!!! Just when I think prices can’t go any lower, Surprise Surprise!!!! They shed another few points. Just today, out of 43 active counters, only 11 realized advances, while 28 edging downwards.

Kenya Airways which had hit a low of 100 on Friday aced up Kshs. 2 to close at 102, while Housing Finance which has recently brought to public attention its plans to raise funds through a rights issue edged up a paltry 25 cents to close at Kshs. 38. Keya Oil which on had on Friday slid below the Kshs. 100 mark to close at Kshs. 96 bounced back to close 50 cents shy of Kshs. 100.

CFC Bank which shot to a crazy Kshs. 900 after a cautionary announcement of negotiation talks between CFC and Stanbic, was the days largest looser, down 33 shillings to close at 299. It is rather apparent that a certain dealer is pushing it gradually down using 100 shares with every trade otherwise, the share would have remained quasi-suspended with no one ready to buy it at the Kshs. 368 close last week. CMC holdings which is currently trading cum split was dropped Kshs. 14 to close at 159, while Standard group, also having a corporate action riding on it, shed Kshs. 6.00 to close at Kshs. 62 cum bonus.

So some of us are waiting for the prices to hit the lowest possible prices before taking position while the wise ones are probably commencing their purchases gradually in order to be well positioned at the turnaround point