POWER CRAZE

The market closed 71.25 points higher riding on strong price leaps on a number of blue chip counters. Kenya Power stole the show as a surge in demand pushed the price to a Kshs. 262. Nation Media aced up Kshs. 16 to close Kshs. 3.00 shy of its Kshs. 258 12 month high. CMC Holdings hit a new 12 month high of Kshs 236, 12 shillings above Friday’s Kshs. 124 close. Sasini Tea, which has captured significant price appreciations with every trading day also hit a new 12 month high of Kshs. 87 while Bamburi edged Kshs 10 higher to hit the Kshs. 200 mark.

Losers were much fewer and lower, the highest being on Barclays Bank counter which shed Kshs 18 to close at Kshs 466 after hitting a new 12 month high of Kshs. 515. TPS shed 7 shillings to close at Kshs. 85 while Cables eased down a further Kshs. 5.50 to close at Kshs. 52.

SPLITS AND GAINS

The last two weeks have been relatively hectic as the bourse received news, releases and information left right and centre despite having hosted two holidays. ICDC unveiled plans for a 10 to 1 shares split barely 2 months after the dust on E.A. cables split settled. The company had just released their year end results reflecting an 86% appreciation in pre tax profits to Kshs. 696mn up from the previous years Kshs. 373 m. Performance was largely buoyed by the bull run on the bourse. The company's share price has since shot to a high of Kshs. 560.

E.A. Cables also released their results for the 9 months ended 30th September 2006 which reflected a 96% appreciation in profits to kshs. 344 mn. up from Kshs. 175 mn. realized over a similar period over the previous year. Directors attributed this growth to a boom in the construction industry and the company’s expansion to regional markets.

Carbacid Investments realized a Kshs. 126mn profit, 11.5% above the previous year’s Khs. 113 mn. This however could not be captured on the company’s share price as the company is still suspended on the bourse following the unresolved BOC accusation negotiations.

Mumias Sugar which currently has a concentration in the western Kenya sugar belt is set on further expansion through the establishment of a factory in Tana River district bound to increase the total sugar output by 210,000 tonnes.

Family Finance Building Society uncovered its plan to sell its shares to the public through a private placement. The directors plan to convert the building society to a fully fledged commercial bank by the end of the year, and have further plans of having the company publicly listed on therr bourse.

MARKET REVIEW

ICDC Investments, currently trading cs/cd, continued its downward spiral, down Kshs. 46 to close at Kshs. 453 while Barclays Bank shot up Kshs 38 to close at Kshs. 427. TPS EA was up Kshs. 5.00 to close at Kshs. 89.50 while Sasini Tea has maintained a gradual appreciation to hit a new 12 month high of Kshs. 67.50, Kshs. 4.00 above Monday’s Kshs. 64.50 close. Nation Media and Equity Bank were also both up Kshs. 4.00 to close at Kshs. 234 and 130 respectively.

Other counters on the loosing side included Kenya Power which shed Kshs. 9.00 to close at Kshs 241, Pan Africa Insurance which was down Kshs. 5 to close at Kshs. 81 and E.A. Cables which slid down Kshs. 3.50 to close at Kshs. 62.

MARKET WRAP – 13/10/06

A generally losing week on the bourse evidenced by the large number of declines. 47% of the active counters adjusted back while 29% appreciated. Kenya Oil captured the largest slide, down Kshs. 13 to close the week at Kshs. 107. Kenya Power shed Kshs. 12 to close at Kshs 259 while ICDC and NMG both closed the week Kshs. 9.00 below the previous week’s close at Kshs. 335 and 230 respectively.

Appreciating counters all yoyoed between price ranges already captured with no new high being hit over the week. Bamburi Cement was up Kshs. 13 to clos eat Kshs. 190 after having shed to a low of Kshs. 177 in the previous week. TPS bounced back to Kshs. 94over the week while a usually quiet Olympia holdings was up Kshs. 7.75 to close the week at Kshs 23.75. EABL also edged higher to close the week at Kshs. 159.

On the news front, Kenya Re continued gearing itself for the much awaited IPO. Financial bids for the Lead Broker to be commissioned with the task of selling shares on behalf of the company are to be opened on Monday. A consortium led by Dyer and Blair Investment Bank had earlier clinched the transaction advisor deal. The bourse is bound to experience further price dips on the run-up to and during the offer period as investors prepare to take positions.

With the year 2008 expiry of the Comesa importation lifeline drawing closer, the government has set aside over Kshs. 1.1 bn. To restructure the sugar industry. The lifeline has shielded the local industry from competition by limiting sugar imports to 200,000 tonnes, and its expiry will expose the local industry to fatal competition considering the high production costs on local producers relative to other competing countries. With the governments Vision 2030: Transforming National Development strategy targeted at an annual growth rate of 10% for the next 25 years, the government can not afford to expose any of the sectors and need to put in every possible effort to ensure sustainable growth and strength in unavoidable competiton.

MARKET WRAP – 06/10/06

Another week over with the bourse having captured strong gainers but more loosers. Liquidity is still quite high in the market as investors wait for slight slips and quickly take positions while those that already have positions are holding on and not letting go with the anticipation of further price appreciations.

Kenya Oil, which had nosedived to a Kshs. 100 low bounced back to close the week at Kshs. 120. ICDC Broke the Kshs. 300 level to hit a Kshs. 344 high while Kenya Power, currently trading cum-dividend, had slid down to a Kshs. 222 low over the week rallied to a Kshs. 271 close. EABL stirred up from its Kshs. 140 slump to close the week at Kshs. 153, while Kenya Airways has settled at the Kaha.130-133 range.

Housing Fiance had the highest slips over the week, down 15% and 11% respectively to wrap the week at Kshs. 47.25 and 16 in that order.

The bourse received one more good release over the week as Sasini unveiled an improved performance over the 9 months to 30th June 2006. The company captured a turnaround to Kshs. 29 mn pre-tax profit and attributed this to an increased productivity and improved prices at the auction. Diamond Trust also unveiled its rights issue plans subject to approval from shareholders and the CMA.

The money market side seems to be putting efforts towards pulling the funds to their end as KCB announced the slicing of their lending rates on a number of their products and this may see other banks cave in to pressure from their clients to follow suit. Treasury bill rates have also maintained an upward trend with this Thursday’s auction having pushed the 91 day bill rate to 6.69% and the 182 day to 8.246%.

ANALYZING COMPANY PERFORMANCE

A number of market players feel that the bourse does not follow company fundamentals and instead is driven largely by speculation. While this may be the case during bull runs, investing in fundamentals always comes through when the bear takes control.

Company fundamentals are reported through ratios calculated from a company’s income statement and balance sheet. The ratios mainly capture the company’s profitability, liquidity, Operating efficiency, risk profile and growth potential. Most of this information can thus be picked out from the company’s financial reports. Other information however will be determined by other socio economic factors that affect the company’s performance.

Profitability

This usually captures the company’s profits, what makes up the profits and how this relates to the income statement. Profits for the reporting period should be compared to profits of the previous reporting period in order to capture the growth for the period. It should also be compared to a series of other similar periods over time in order to capture the trend. Another comparison should be between other similar sized companies in the industry in order to pick out the company’s standing within the industry, and also against the industry average..

Liquidity

This is used to determine the company’s ability meet its short term obligations as they come through. This also should be analyzed as the profitability by comparing the previous period’s performance, performance over a series of periods, and against other similar sized companies in the industry as well as against the industry average.

Operating performance

This helps in determining management’s efficiency and effectiveness in utilizing what the company has ie the assets and capital to generate revenue and profits. Similar comparisons are done as those on profitability and liquidity.

Risk profile

This looks at both Financial Risk exposure which analyses a company’s use of debt against its equity, the firm’s ability to repay its debt obligation and the debt structure, as well as Business Risk exposure which captures the company’s operating income uncertainty resulting from variability of sales and production costs.

Growth Potential

Company growth is a function of a large number of factors both controllable by the company, and some outside the control of the company. The company’s dividend policy, the economic environment, political arena, interest rate environment and even the weather pattern all have an impact on companies’ growth prospects. It thus becomes quite difficult to determine, and analysts usually use the information that can be determined such as the dividend policy, and information projections such as economic growth and interest rate environment to determine the growth potential.

MARKET REVIEW

The bourse is still treading uphill as evidenced by the continued price appreciations across the board. On yesterday’s trading, only 21% of the counters recorded declines as 51% edged higher with the magnitude of appreciation being much higher than the declines.

Nation media was the day’s highest climber, up Kshs. 16 to close at Kshs. 236. ICD Topped up Kshs. 8 to close at an average of Kshs. 315 after having hit a high of Kshs. 320. Bamburi seems to have turned around its loosing trend and was up Kshs. 6 to close at Kshs. 179.

The finance counters on the other hand seem to be succumbing to profit taking. Jubilee had the largest slip down Kshs. 8 to close at Kshs. 182 while KCB shed Kshs. 4 to close at Kshs. 193. Barclays Bank closed Kshs. 2 lower at Kshs. 324.