Portfolio Recommendations - 01 April 2011

PORTFOLIO RECOMMENDATIONS: 01 April 2011 – 31 April 2011
Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

SPECULATIVE
Company VWAP Performance Markets Information
01 Apr
2011
EQUITY BANK 25.25 FY2010: The Bank delivered a 71.5% jump in its pre-tax profits from KShs. 5.2 billion to • The Bank remains the largest Kenyan Bank by market capitalisation,
KShs. 8.9 billion for the full year ended December 2010. and its shares are frequently among the most heavily traded at the
NSE. In 2011, the management expects their transaction model to
• The growth in the pre-tax profits was largely attributed to a 32.0% rise in customer
High: 30.25 benefit from the anticipated 5.7% economic growth in Kenya.
numbers to 5.9 million, a 49.5% jump in customer deposits to KShs. 104.4 billion
Low: 15.00 shillings and a 27.6% rise in total interest income to KShs. 13.8 billion. • Going forward, Equity Bank plans on focusing on SME and Agency
Banking in 2011. SME business should bolster its revenues in 2011 as
• The bank’s loan portfolio grew by 23.6% to KShs 78.3 billion during the period up
the bank also looks to enhance its mortgage business to make up 15%
from KShs. 63.4 billion.
P/E: 13.08 of its assets by year end.
• The bank, which also has operations in Uganda and South Sudan, said its Ugandan
EPS: 1.93 • On Agency Banking, the bank has 1,200 agents and has so far
unit, had broken even, while Sudan had contributed KShs. 349 million in profit.
mobilized KShs. 800.0 million in deposits and KShs. 300.0 million in
YE End: 31st Dec
• Its earnings per share rose to 1.93 shillings from 1.14 shillings a year earlier and it withdrawals. The agency focus will be twofold: deposit mobilization
proposed a total dividend of 3 billion shillings from 1.5 billion shillings a year earlier. and transactional revenue generation. Management sees the SME and
Analysts said the results exceeded their expectations. They attributed some of the Agency Banking as the drivers for the bank’s growth in 2011E.
gains to a fall in interest rates last year.
• The Bank plans to expand its operations into Rwanda and Tanzania
• Interest income increased 27.6% from KShs. 10.8 billion to KShs. 13.8 billion while this year. In Rwanda, the Bank plans to set up 2 branches in Kigali
non interest income was up by 60.4% from KShs. 6.5 billion to KShs 10.4 billion which and 3 branches outside Kigali. In Tanzania, they are yet to get the
indicates that the bank’s transaction oriented model is paying off handsomely. license and the commencement date may be later in Q2 2011.
• Equity bank also lends heavily to SME and lower income segment with most loans • The Bank is lobbying the regulators in both markets to adopt Agency
being below KShs. 100,000 and therefore attracting higher loan processing fees than Banking as a viable option to enhancing financial access. The response
its peers. from the regulators is so far positive but ground work is yet to be
done for the agency model to operate in Tanzania and Rwanda.
• The Bank's cost to income ratio fell from 66.7% to 59.6% in the period. The bank
however stated that the long-term aim would be to lower it 48.0%. • The management also expects Uganda to turns profitable in 2011 as
opposed to eating into the Kenyan business profits which has been
• The staff costs as a percentage of total operating expenses declined marginally from
the case. Similarly the Bank continues to strongly advocating for
41.1% to 39.7% during the period while total operating expenses were up by 26% for
Agency Banking in the market.
the FY ended 31st Dec 2010.
• The management remains optimistic that 2011 will deliver increased
• Following from the above, earnings per share rose to KShs. 1.93 from KShs. 1.14
revenues, driven by the mobile phone banking, regional expansion in
posted the previous year. The management proposed a KShs. 2.9 billion dividend
Rwanda and Tanzania and the momentum of the customer
payout, double the amount paid last year bringing the annual dividend per share to
recruitment.
KShs. 0.80 from KShs. 0.40 reported in FYE 2009.
Email: orders@nic-securities.com, SALES TEAM: PRISCILLA ROTICH. TEL: +254 20 2888 434, STEVEN MBUGUA. TEL: +254 20 2888 438, WILSON MAKAU. TEL: +254 20 2888 437, TIMOTHY GICHARU. TEL: +254 20 2888 468. SUSAN RIGITHA. TEL: +254 20 2888 671, RUTH
WAIYAKI. TEL: +254 20 2888 672, PURITY MIRITI. TEL: +254 041 222 1743 (MOMBASA).
The information contained herein has been obtained from sources that are believed to be reliable and is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Redistribution is
prohibited without express permission of the management of NIC Securities.

KENOLKOBIL 9.75 FY2010: KenolKobil has reported a 39.5% Increase in Full Year Pre-tax Profits from • The oil marketer has operations in seven African countries including
KShs. 1.9 billion to KShs. 2.7 billion for the period ended December 2010. newly registered company in Mozambique established to scout for
opportunities in both Mozambique and Zimbabwe
• Turnover for the oil marketer increased by 5.2% to KShs. 101.8 billion from KShs.
High: 11.50
96.7 billion posted a year earlier while cost of sales went up 3.8% to KShs. 94.1 • The company commissioned two Liquid Petroleum Gas (LPG) filling
Low: 8.90 billion. plants in Uganda in Rwanda, to support the strong growth of its LPG
brand K-gas in the two markets.
• Finance costs almost doubled rising a whopping 90.6% to KShs. 1.1 billion due to
exchange losses of KShs. 438.0 million following the weakened local currencies in • Performance of the oil marketer has seen it ascended to join the list of
P/E: 8.13
almost all countries of operation. the 20 blue chip companies that constitute the NSE 20 Index.
EPS: 1.20
• Despite this, profit after tax increased by 37.2% from KShs. 1.3 billion to KShs. 1.8 • The oil marketer KenolKobil seeks to establish itself as the dominant
YE End: 31st Dec billion for the period. player in the region. To this end they company acquired all the assets
of Uganda Petroleum Ltd to raise its capacity in Uganda and
• The management attributed the growth to its wide footprint in seven African
strengthen its position in the country.
markets from Zambia to Ethiopia, as well as on its niches in liquefied petroleum gas
and fuel oil, and forecast it would grow profits by double digits in its half year to • In its latest acquisition, the oil marketer has in the course of 2010 and
June. early this year acquired a total of 14 service stations and a sizeable
depot complex comprising of a fuels terminal, a dry goods warehouse
• Following from the above, the basic earnings per share rose to KShs. 1.21 from KShs.
and an office block in Burundi.
0.88 shillings helped by rising gross margins.
• With the new acquisition, Kobil Burundi will now have a platform to
• Going forward the management stated that they intend to continue their focus on
develop an LPG storage and filling plant in the country.
positioning the group strongly in downstream and midstream in all markets it
operates in and in the new markets through organic growth and acquisitions. • The company owns a 4 acre (17,000) sq meters) prime piece of land in
the heart of Addis Ababa, which houses the Head Office and Storage
• The firm which has been rapidly expanding its operations through acquisitions in
facilities. Because of its location in the city centre, KenolKobil is
Uganda, Burundi, and Mozambique continues to pursue its market presence in the
considering using the land for other economic activities in line with its
region. It is also keen on expanding its presence in southern Africa.
non-fuel business development strategy.
• The company proposed a first and final dividend of KShs. 0.52 per share, up from
• The oil markets also plans to build an LPG plant in Dar es Salaam,
KShs. 0.32 per share that was paid in 2009. The share register will be closed on 29
with an installed capacity exceeding 1,000 metric tones which will
April 2011.
receive LPG from vessels off the coast of Tanzania for distribution to
• markets in Rwanda, Burundi, Uganda, Malawi and parts of Kenya
• In Mozambique, the oil marketer has secured 21,000 cubic meters

storage arrangement which it intends to use for storage of imported
fuel products for Inland Trading to markets in the region including
Zimbabwe, Northern part of South Africa, Zambia, D.R Congo and
Malawi.
• The Company is also strengthening their paraffin business in

Tanzania to address an increase in the demand of the product.

KENYA 32.00 FY2010: The Airline reported a 66.9% increase in pre-tax profits for their half year • The airline has announced plans to raise additional capital in the next
AIRWAYS ending September 2010. few months to finance its growth and expansion plans.
• The airline’s profit before tax increased from KShs. 1.2 billion to KShs. 2.0 billion, • We see this move as a way for the company to gain a competitive
while the after tax profits rose by 66.9% from KShs. 860.0 million to KShs. 1.4 billion. advantage as well recapitalize and meet growing operating costs.
High: 66.00
• In the period Kenya Airways carried more passengers at improved yields to post • Shares in the company, one of the leading carriers in Africa, have
Low: 32.00
higher revenues. taken a beating lately due to persistent labour issues and rising oil
prices coupled with an aggressive expansion strategy.
• Capacity measured in Available Seat Kilometre (ASK) increased by 3.0% largely as a
P/E: 7.27 result of full operations into new destinations launched last year and earlier, • Kenya Airways remains in a tight spot as the effect of fuel price
fluctuations and the company’s huge wage bill and recurrent union
EPS: 4.40 • Passenger traffic measured in Revenue Passenger Kilometre (RPK) grew 9.3% due to
actions weigh down the stock.
improved economic climate.
YE End: 31st Mar
• On the up side the Company has begun to reap from recent route and
• As a result, passenger revenue grew by 22.3% from KShs. 30.0 billion to KShs. 36.7
fleet expansion.
billion and overall revenue rose to KShs. 41.2 billion during the period from KShs.
33.5 billion for the same period last year. • We however expect the price to stabilize and even to rally once the
full details of the restructuring plans become clear.
• Overheads for the airline rose 20.9% from KShs. 6.8 billion to KShs. 8.3 billon on the
back of increased employee costs which have risen by KShs. 1.5 billion. These costs
have continued to increase over the past five years and management is keen to
contain these costs in order to secure profitability in the future.
• The airline also saw its fuel costs rising by 29.1% over the period mainly due to higher
jet fuel prices. Nonetheless, the company managed to decrease its fuel hedging costs
for the period by amending its hedging policy through reducing the tenure of hedges
to a maximum of 2 years and hedging only 50% of its fuel costs.
MUMIAS 7.30 H1 2010: The Sugar manufacturer has reported a 22% drop in First-half profits for the Mumias is the leading sugar producer in the country with a 45.2%
SUGAR period ending December 2010. The biggest maker of the sweetener saw its half year pre- market share (and plans to increase via acquisition) as at end of 2009
tax profits drop 22.3% from KShs. 1.5 billion to KShs. 1.2 billion. and has a countrywide distribution network.
• Post-tax profits also declined by 21.2% to KShs 816.3 million from KShs. 1.0 billion • Despite the dismal HY 10 performance, the management of Mumias is
High: 15.50
reported for the same period last year resulting in Earning per Share (EPS) slipping optimistic that the second half will be significantly better and full-year
Low: 7.00 20.6% from KShs. 0.68 to KShs. 0.54. earnings will be better than those achieved a year earlier as the world
sugar prices are still bullish and sugar prices have been favourable; a
P/E: 7.09 • The management attributed this drop in profits to adverse weather experienced
condition they expect to be sustained for the remainder of the
during the period from August to October 2010, where heavy rainfall hampered cane
EPS: 1.03 financial year.
deliveries and depressed sugar production.
• The company has started construction of an ethanol distillery that will
• Net Revenue dropped 4.7% to KShs. 7.3 billion from KShs. 7.7 billion reported for the
have capacity to produce 22 million liters of ethanol annually. The
YE End: 30th same period the previous year.
plant is expected to be commissioned by January 2012.
June

• Revenue from the co-generation plant also dropped 7.0% from KShs. 173 million • A water-bottling plant is also under construction and will be
realised in 2009 to KShs. 161 million. commissioned in September 2011.
• Production of crushed sugarcane fell 4.3% to 1.1 million metric tons while sugar • Due to the co-generation plant, we expect to see increased efficiency of
produced declined 7.8% from 123,183 tons to 113,521 tons. As a result the company the sugar plant through better quality steam and power supply as
sold 108,110 tons of sugar, 7.7% lower than the 117,081 achieved for the period well as an increment in the revenues in the coming years.
ending December 2009.
• We expect the company to generate more revenue in the coming years
• Accordingly Earnings per Share fell 20.6% to KShs. 0.54 in the period as compared to as they increase their power generating capacity.
KShs. 0.68 reported for the same period in 2009.
• With the impending introduction of the Carbon Credits Exchange in
• Despite the dismal performance, the management remains optimistic that the second Kenya, we expect Mumias to diversify its income streams by selling its
half will be significantly better and full-year earnings will be better than those carbon credits,
achieved a year earlier if the world sugar prices remain bullish and sugar prices
• Fundamentally Mumias remains one of the strongest stocks but the
continue to be favourable.
retail investor holdings seem to drag it down.
• The directors did not recommend payment of an interim dividend.
• We however expect that as investors get more sophisticated the stocks
pricing mechanism will get more efficient
NATIONAL 37.75 FY2010: The Bank became the last Bank to announce its year end results for the period • The Bank is paying a dividend for the first time in 12 years this year,
BANK ending December 2010. In what was widely anticipated to be the best results, the Bank signaling that they are now in profit making.
only managed to achieve a growth of 24.9% for FY2010.
• Though not a large amount, the payout signals that the Bank is out of
• In the period the Bank reported a 24.9% rise in pre-tax profits from KShs. 2.2 billion the doldrums and can now afford to cover its liabilities as well as
High: 60.00
to KShs. 2.7 billion while profit after tax rose by 38.2% from KShs. 1.5 billion to KShs. reward its shareholders.
Low: 30.00 2.0 billion for the period.
• As the Bank continues to claw its way back and expand across the
• Interest income in the period grew by 21.1% to KShs. 5.4 billion, while non-interest region, we expect future dividend payments to be higher.
P/E: 9.03 income rose by 13.7% to KShs. 2.7 billion.
• To achieve higher customer numbers, the Bank plans to open 20 new
EPS: 4.18 • In line with its expansion strategy, The Bank managed to grow its customer deposits branches in 2011 as it ramps up expansion into new locations within
by 13.8% to KShs. 41.9 billion. Consequently the loan book rose by 58.4% to KShs. the country riding on the built up reserves currently standing at KShs.
20.8 billion while interest income earned from these loans rose by 42.0% to KShs. 2.3 2.0 billion.
YE End: 31st Dec
billion.
• To fund this expansion the Bank is going to use approximately KShs.
• However the Loans to Total deposits which grew to 43.6% is still currently below the 600 million. The plan includes launching one in any of the 46 counties
average industry levels of 70%-80%, implying the Bank has to aggressively grow its where it is currently not operating.
loan book to catch up with other players. • To raise the credibility of the Bank, the Government which still
• Loan loss provisions rose a whopping 152.7% from KShs. 143.5 million to KShs. 362.7 controls 22.50% and another 48.05% through NSSF, has been in talks
million signaling the management is adopting a cautious approach and learning from to reduce their interest in the Bank in line with their divesture

yester years which saw the Bank plummeted into massive losses due to bad debts. strategy. We expect that once this is achieved, the Bank will
streamline its operational activities, diversify its product offering,
• Following from the above, the Earnings per share climbed to KShs. 4.18 from KShs.
thereby making it more attractive not only to investors but to
4.00 reported for the previous year.
potential customers.
• The Bank which is seen to be slowly coming out of the losses made in the late 90s and
• NBK continues to trade at a low P/E ratio compared to its peers and
early 2000s due in large to bad debts associated with the former political regime of
the Bank’s expansion into Central Kenya should raise investor
President Daniel Moi, has for the first time in 12 years declared a dividend payment
interest in the medium term.
of KShs. 0.60 per share.
SAFARICOM 3.85 FY2010: The Company reported a 15.1% growth in Net Profits from KShs. 6.6 billion in • The company is the biggest mobile-network operator and largest
September 2009 to KShs. 7.6 billion for the half year ending September 2010. company by market value.
• Revenues rose 15.9% to KShs. 47.1 billion with data services contributing KShs. 4.0 • The Company has put in place restructuring measures to comprise
High: 6.15
billion to the increase; three units, namely financial services, consumer business and
Low: 3.60 enterprise services. These measures are expected to save as much as
• EBITDA grew by 13.8% from KShs. 16.5 billion to KShs. 18.8 billion; Total non voice
KShs. 1.0 billion in the coming financial year.
revenues increased by 60.5% to KShs. 14.6 billion of which M-Pesa, grew 63.9% to
KShs. 5.3 billion. • The Company continues to operate in an increasingly competitive
P/E: 10.13
environment worsened by the development of the number portability
• As a result, Data made up 23.8% of total revenue compared to 17.7% in September
EPS: 0.38 infrastructure. Effective 01 April 2011, mobile owners will be able to
last year.
transfer their number to any of the mobile providers in the market. It
YE End: 31st
• Active Customers grew by (2.2 million) 15.2% to KShs. 16.7 million is forseen, that this development will see Safaricom loose a grip of its
March
market share.
• Operating costs rose 14.6% y-o-y from KShs. 18.9 billion a year ago to KShs. 21.6
billion; • As at September 2010, Safaricom subscribers stood at 16.71 million
customers. Of these customers 13.5 million are subscribed to the M-
• Average Revenue per User (ARPU) from mobile services slipped to KShs. 456.6 from
Pesa service, representing 80.8% customers in their fold.
KShs. 466.5 while the APRU for voice dropped to KShs. 321.7 from KShs. 370.8.
• With the popularity and convenience of M-Pesa over other money
• Growth in the number of customers and the recently reduced voice tariffs is expected
transfer services, we do not expect a huge number of customers to
to result in further decline in voice ARPU. However, the continued growth in data is
port to other networks. At the very most, only about 3.0 million
anticipated to partially alleviate the declining voice ARPU.
customers (those who are not subscribed to M-Pesa) would need to
• Capital expenditure in the period increased by 17.2% from KShs. 8.5 billion a year ago port, notwithstanding the cost of porting (KShs. 200.0)
to KShs. 10.0 billion for the third quarter ending September 2010 due to investment in
• We believe the firm’s voice revenues in respect will decline
network upgrades and building infrastructure to support its data business.
significantly given the current environment. We however expect the
firm to continue generating increased data revenues.
MEDIUM TERM
01 Apr
2011
CO-OPERATIVE 16.55 FY2010: The Bank reported a 54.5% Jump in Pre-tax Profits from KShs. 3.7 billion Co-op Bank has raised its stake in Co-operative Insurance Company
BANK to KShs. 5.8 billion for the full year ended December 2010. (CIC) to 21.0% from 5.54%, to become the single largest shareholder.
• The Bank recorded positive results from all the units except from the • The move will allow Co-op Bank to expand its Banc-Assurance and
Cooperative Consultancy which reported a loss of KShs. 11.0 million. CIC, Insurance Financing business segments.
High: 21.50
Kingdom Securities and Co-op Trust Investments returned profits of KShs.
• Bank expected to announce positive full year earnings fueling
Low: 9.60 130.0 million, KShs. 37.0 million and KShs. 57.0 million respectively.
demand for the stock at the NSE.
• The Bank cited the active customer recruitment as the main drivers to their
• As the bank gears to open branches in Southern Sudan this year and
bottom line. In the period the Bank grew its customer base from 1.0 million
P/E: 12.63 other strategic partnerships in the wider East African market, we
customers to 1.6 million after an aggressive campaign that required all
expect to see increased demand coming in on this counter.
EPS: 1.31 members of staff to bring in new accounts.
• The Bank which has 86 branches in Kenya plans to open branches in
YE End: 31st Dec • As a result customer deposits rose 34.5% to KShs. 123.9 billion from KShs. 91.5
Southern Sudan in the second quarter of 2011 as well as other
billion. In tandem the loan book rose 39.1% to KShs. 86.6 billion and income
branches in Uganda, Rwanda and Tanzania.
generated from these loans rose 24.6% to KShs. 9.3 billion.
• The Bank is set to benefit the most from Agency banking as all
• Net Interest income grew 35.7% for the year from KShs. 6.8 billion to KShs. 9.1
SACCOS will soon be allowed to operate as agents.
billion buoyed primarily by a 67.8% growth in interest income from
government securities and 24.6% growth in interest from loans and advances. • Additionally, the Bank will benefit from matatu owner who will be
required by law to form or join Co-operatives. We expect that the
• Non-interest income also recorded growth of 31.0% with Forex dealing and fees
SACCOS they join will open accounts with Co-op Bank due to
and commissions recording the highest growth at 65.3% and 42.0% respectively
preferential treatment offered to SACCOS. This will in turn increase
• On average, the bank’s operating expenses seem to have grown at a slower the customer base and deposits available to the Bank and future
pace than income at 25.6% as the bank reported that staff costs were the main revenue.
focus during the period due to the expansion program.
• The banks management opted to deploy existing staff to new branches where
possible as a way to reign in staff costs which grew at 16.9% during the period
reported. As a result staff costs contribution to total expenses declined to 44.8%
and overall cost to Income declined to 64.0% from 68.1%.
• Following from the above, the Bank announced a dividend of KShs. 0.40 per
share to shareholders in the register by 03 June 2011

CARBACID 135.00 FY2010: Profit After Tax increased from KShs. 256.4 million in the year ended 31 • The Carbacid share price outperformed the NSE20 market index in
July 2009 to KShs. 307.4 million for the year ended 31 July 2010 presenting a Net 2010 by 11.5%
Income margin of 50%.
• Due to its high cash reserves, Carbacid has consistently been placed in
High: 185.00
• Turnover increased from KShs. 552.1 million in the year ended July 2009 to the top quartile of high dividend payers listed at the NSE.
Low: 99.50 KShs. 620.1 million for the year ended July 2010 representing a growth of close
• The stock is relatively illiquid due to investor’s reluctance to part with
to 12%.
the high dividend yielding stock.
• Operating Profit grew to KES 285.36 from KES 265.14 over the same period
P/E: 14.92 • Carbacid is the leading player in the beverage quality carbon dioxide
with operating profit margins of 46% in 2010.
market in the East African region supplying both the Alcoholic
EPS: 9.05
• Other income predominantly interest income and fair value gains in equity beverage and non-Alcoholic carbonated soft drink market.
YE End: 31st July investments grew to KES 152.68 million from KES 101.89 million in July 2009.
• Carbacid currently has a market share of more than 95.0% in the
• Dividend payout in July 2010 totaled to KES 181.23 million up from KES regional carbon dioxide market.
113.267 million paid in 2009.
• The emergence of regional trading blocs including the E. African
Community and COMESA present sources of increased demand.
TPS SERENA 66.50 FY2010: TPS Eastern Africa announced a 33.3% rise in Pre-tax Profits for the full • TPS Serena is set to return to the capital markets this year for
year ended December 2010. The leisure company saw its full year pre-tax profits additional expansion cash to tap new demand, in a move that will
rise from KShs. 519.7 million to KShs. 692.9 million as the tourism sector intensify competition in Kenya’s hospitality industry.
High: 72.00 recovered.
• The hotel chain is looking to expand its reach in the region and
Low: 43.00 • The Kenyan holding company for the Serena chain of hotels, said full-year revamp its current luxury lodges and hotels, targeting the soaring
profit jumped 39.6% as revenue climbed. tourist arrivals arising from the recovery of the global economy and
aggressive marketing of Kenya as a destination.
• TPS which operates a chain of luxury hotels, lodges and tented camps
P/E: 15.15
throughout the east African region under its Serena brand, saw its turnover in • The firm hopes to get a larger foothold of the Ugandan, Rwanda and
EPS: 4.39 the period increase by 14.7% to KShs. 4.5 billion. Tanzanian market as its races to reduce its heavy dependence on the
Kenyan market, which generates 66.0% of its revenues.
YE End: 31st Dec • Net income increased to KShs. 531.1 million in the 12 months through
December2010 from KShs. 380.4 million a year earlier. • In Kenya, it will be keen to grow and defend its market share in an
increasingly competitive business environment that has seen a
• In the period the company took a hit on its foreign currency loans with the
growing number of luxury hotels increase their presence in an effort
exchange loss rising from KShs. 5.6 million to KShs. 22.3 million.
to capture the new demand.
• Following from the above, the Company's earning per share rose to KShs. 4.39
• The fund raising plans comes just months after the company raised
per share from KShs. 3.59.
KShs. 1.2 billion in September last year through a Rights issue, the
• The firm maintained the dividend payout at KShs. 1.25 per share to proceeds of which are to be utilised to upgrade and increase capacity
shareholders in the register by close of trading on 31 May 2011. of Nairobi Serena over the next three years and acquire a majority
stake in Upekee Lodges and Mbuzi Mawe Tented Camp in Tanzania.
LONG TERM
01 Apr
2011
BARCLAYS 58.50 FY2010: Barclays Bank became the first Bank to announce its year end results • The bank remains focused on key activities such as revamping their
BANK with pre-tax profits surging 50.5% from KShs. 9.0 billion to KShs. 13.6 billion for mortgage product, strengthening the SME proposition and introducing
the year ending December 2010. linkages to M-Pesa services.
• Of this profit, KShs. 2.8 billion was attributed to the sale of the Custodial • Recent 200 management level job cuts expected to reduce the Bank’s
High: 72.00
Business to Standard Chartered, implying the organic pre-tax profit grew by overall costs and consequently improve the bottom line.
Low: 47.50 19.7% to KShs. 10.8 billion.
• Though Barclays initially joined the fray in the aggressive branch
• The Bank’s conservative approach has in recent past led to the closure of a expansion campaign by reversing the closure of most of their branches
number of branches and instead shifted the focus towards fixed income countrywide in the 90’s and early 00’s the bank reverted to their
P/E: 7.50
interest bearing investments that have lower underlying risk. conservative strategy in the aftermath of the credit crunch crisis by
EPS: 7.80 shifting focus towards fixed income interest bearing investments that
• As a result, customer deposits went down by 1.6% to KShs. 123.8 billion
have lower underlying risk.
YE End: 31st Dec causing the loans and advances to decline by 6.8% from KShs. 93.5 billion to
KShs. 87.1 billion, and the interest earned from these loans also remained flat • Going forward the management expects their top line growth to be
at KShs. 13.6 billion. driven by investment in technology, mobile banking and internet
• It is interesting to note however that the loan loss provisions of the Bank went banking. Additionally the bank anticipates that the introduction of
up 134.0% to KShs. 1.2 billion from KShs. 512.6 million despite declining loans credit reference bureaus (CRB’s) will help reduce spreads and lending
and advances. costs while the prospects for agency banking though positive were not
highlighted as a priority since Barclays primary focus remains on
• On the other hand, the restructuring which saw Barclays announce impending premier banking and mass affluent clients.
layoffs and also adopt cost cutting measures seems to have paid off and
helped create value for investors causing a 74.0% increment in, the profit after • The bank seems positive that the introduction of credit reference
tax to KShs. 10.6 billion and in the earnings per share to KShs. 7.81. bureaus will help Barclays entry into mobile banking and installation
of upgraded software will also boost efficiency and ultimately
• The Bank announced a final dividend of KShs. 4.70 per share bringing the total shareholders wealth.
annual dividend to KShs. 5.45. The management indicated that they will also
propose a share split in the ratio of 4:1 in the next few months.

BAT 270.00 FY2010: The cigarette maker announced a 29.1% increase in pre-tax profits from • Regionally diversified -Contract manufacturing ensures the firm only
KShs. 2.1 billion to KShs. 2.7 billion for the year ended December 2010. . depends on roughly 50% of its earnings on Kenya.
High: 300.00
• Turnover for the cigarette manufacturer rose 22.0% from KShs. 11.1 billion to • Strong profitability as seen in a strong return earned on equity. Stable
Low:166.00
KShs. 13.5 billion for the period. revenues, and historically generous with dividends due to their 100%
dividend payout policy.
• Accordingly total domestic and export volumes grew 3.0% reflecting an
P/E: 15.28 improved domestic business environment partially offset by a marginal • Government maintenance of excise tax rates likely to curb the threat of
reduction in contract manufacture volumes in some of their export markets. illicit trade of cigarettes which remains the biggest threat to the
EPS: 17.67
Company’s revenues.
• The management attributed the growth in domestic volumes coupled with
YE End: 31st Dec
overhead cost control measures to the increase in revenues and profits. Profits • The Company however continues to face the challenge introduced by
after tax reported surged 19.6% from KShs. 1.5 billion to KShs. 1.8 billion for the 2010 Finance Bill amendment that seeks to make the Retail Selling
the period. Price as the primary basis for excise on cigarettes. This move may see
the cigarette maker paying more taxes to the Government while
• Earnings per share as a result rose 19.4% to KShs. 17.67 from KShs. 14.78.
diminishing shareholder value.
• Following the performance, the management recommended a final dividend
of KShs. 14.50 per share bringing the annual total dividend payout to KShs.
17.50 per share.
DIAMOND 138.00 FY2010: Diamond Trust Bank became the latest bank to benefit from vibrant • The Bank has joined the foray of mobile banking and now M-Pesa
TRUST BANK economic growth in the region, increased lending and margins as it reported a clients can withdraw from any outlet following a partnership with
79.5% jump in full-year profit. Safaricom and Pesa point.
• The Bank, which also operates in Burundi, Tanzania and Uganda, reported a • The Bank has an extensive network of over 46 branches in East Africa
High: 150.00
79.4% rise in pre-tax Profits from KShs. 1.9 billion to KShs. 3.5 billion in the and plans are underway to extend the network to 100 branches in the
Low: 70.00 year ended 31 December 2010. next three years.
• The bank recorded a particularly strong growth in its non-funded income

portfolio with total non-interest income surging 86.1% to KShs.2.9 billion
P/E: 11.82
compared to KShs.1.6 billion posted in 2009.
EPS: 11.68
• Basic earnings per share rose 82.7% to KShs. 14.01 while the diluted EPS rose
YE End: 31st Dec 82.8% to KShs. 11.68 from KShs. 6.39 reported in FY 2009.
• Diamond Trust said it would pay a bonus share issue of one new ordinary
share for every five held.
• Following from the impressive results, the Bank recommended a dividend

payout of KShs. 1.60 per share, a 3.2% increase from the previous KShs. 1.55.
The Bank also proposed the issuance of bonus shares in the ratio of one new
share for every five held.

EABL 182.00 FY2010: The beer manufacturer posted a 3.2% increase in half-year pre-tax profit • One of the most coveted stocks by foreigners. It has a good dividend
from KShs. 5.9 billion to KShs. 6.2 billion for the period ending December 2010. stock and the company has low leverage and high return on equity.
• Turnover for the period also rose by 9.9% from KShs. 18.6 billion to KShs. • Share is liquid, strong management team and products are strong and
High: 230.00
20.5 billion largely driven by the additional sales achieved in spirits one of the most recognized brands in Guinness and Tusker in East
Low: 150.00 following the tax relief received on the brand. Africa.
• The reversal of the punitive tax levy on spirits as well as the probable • Recent acquisition of Serengeti Breweries Ltd is a positive development
preference for stronger dinks as a result of the alcohol laws may be the for EABL as it offers the company a strong foothold in the key
cause of the sharp increase in consumption of spirits during the half year Tanzanian market.
P/E: 20.02 period.
• The brewer has engaged DHL as their supply chain logistics partners
EPS: 9.09 • Operating profit of the company grew by 14.5% from KShs. 5.3 billion to which will enhance their international supply logistics management
KShs. 6.1 billion due to improved cost management largely driven by systems. There are however costs associated with this deal which will
YE End: 30th June
favourable utility costs, stable cereal costs and improved production only be ascertained when the company announced their audited FY
controls. 2010 results.
• Despite the top line growth, the Company reported a 1.7% drop in post-tax • Going forward the Company hope to realize more returns by using
profits from KShs. 4.2 billion to KShs. 4.1 billion. cheaper starch from sorghum as a substitute for barley and by
implementing aggressive cost restructuring
• As the Company did not account for the profit in its associate, Tanzania
Breweries (TBL), the pre-tax profits were not as high as expected. In the
previous period the brewer posted a profit of KShs. 489 million from TBL.
However in HY 10, the brewer posted nil profit since they are required by
the regulator in Tanzania to dispose its stake in TBL following the recent
acquisition of 51% stake in Serengeti Breweries Ltd.
• The management however expects the earnings for the full year to reflect
the profits from the associate as well as the one-off proceeds from the sale of
its 20% stake in TBL.
• As a result of the slow growth, the earnings per share declined 8.6% from
KShs. 4.41 to KShs. 4.03. The Company nonetheless maintained the
dividend payout at KShs. 2.50 per share for the interim period, for
shareholders in the register by close of trading on 23 March 2011.
KCB 24.25 FY2010: KCB Bank Group reported KShs. 9.8bn in Pre-tax profits up 55.5% from • Good organic growth opportunities due to strong presence in markets
KShs. 6.3 billion in 2009 to 9.8 billion. outside Kenya.
• Total Operating income for the group increased by 29.0% standing at KShs. • Massive lending to support growth in assets and strategies on cost
High: 24.75
30.7 billion surpassing total operating expenses which grew by 19.5% which efficiencies to improve the net margins. Additional capital raised
Low: 17.30 indicates better efficiency is finally being attained at KCB. through recently concluded Rights Issue to be deployed for regional

expansion.
• The bank announced that Net Interest income grew 35.8% from 14.5 billion to
KShs.19.6 billion. • Presence in South Sudan where the Bank is heavily invested likely to
P/E: 7.13
increase the Bank’s revenue if peace in the country prevails following
• Ranked the largest bank in Kenya by assets, the bank managed to grow its
EPS: 3.40 the Referendum vote.
customer base to approximately 1.5 million. As a result customer deposits
YE End: 31st Dec grew by 20.8% from KShs. 163.0 billion to KShs. 196.9 billion • Bank also plans to carry out a massive job restructuring laying off a
number of staff in cost review.
• Other components that registered growth included foreign exchange earnings
which grew by 68.4% from KShs. 1.6 billion posted in December 2009 to KShs. • This move is set to slash operating costs by about 20%, approximately
2.8 billion. KShs. 3.0 billion over the next two years and consequently the cost to
income ratio which has remained the highest in the industry.
• Due to the effective business drive and growth of the customer base, the Bank
managed to increase the loans and advances to customers by 20.8% to KShs. • Profits will therefore increase in tandem.
148.1 billion resulting in interest income from these loans increasing 22.0% to
KShs. 17.7 billion.
• The management attributed the increase in total assets to result of growth in

loans and advances, investments in Government securities and an increase in
balances with other institutions.
• The Bank however reported a 19.5% increment in operating costs to KShs. 20.9
billion of which staff costs represented the highest proportion at KShs. 9.4
billion, a 31.3% rise from the previous year.
• In response to this ballooning wage bill, the Bank has engaged consultants
Mckinsey and Company to look into how it can cut costs and raise revenues
amid growing competition. Already the Bank has announced plans to layoff
staff in a bid to reduce costs.
• The Bank recommended a total dividend payout of KShs. 3.7 billion, a 66.3%
increment from the previous payout of KShs. 2.2 billion. This translates into
KShs. 1.25 per share given the additional 732.4 million shares introduced
through the August 2010 Rights Issue that raised KShs. 12.5 billion.
NATION MEDIA 175.00 FY2010: Profit Before Tax increased by 51.6% to KShs. 8.9 billion. The media house is cross listed in the Uganda Securities Exchange (USE)
GROUP and the Rwanda Over the Counter (ROTC) market. Plans are also
• Net Profits jumped 53.1% from KShs. 364.5 million to KShs. 558.1 million for
underway to cross-list in the Tanzanian market.
the half year ending June 2010 attributed to growth in revenue and market
share, favourable global newsprint prices coupled with prudent cost • The increased liquidity of the stock is expected to spur activity in the
High: 179.00
management. markets across the region.
Low: 117.00
• Gross Turnover increased by 17.3% to KShs. 4.5 billion due to rising • Additionally, the four regional economies including Kenya are
advertising and circulation revenues. expected to register stronger growth in 2011 and advertising

expenditure likely to increase.
P/E: 17.86 • Management declared an interim dividend of KShs. 1.50.
EPS: 9.80
YE End: 31st Dec
NIC BANK 46.75 FY2010: NIC Bank Group delivered a 70.8% growth in its pre-tax profits, to • Going forward the Company hope to realize more returns by
KShs. 2.6 billion in 2010 compared to KShs. 1.5 billion reported in 2009. expanding regionally into new markets by riding on its strong balance
sheet.
• The management attributed the growth to bond trading gains, a turnaround
High: 54.00
in its Tanzania operation and growth in the lending portfolio albeit under • NIC remains focused on diversification, aimed at minimising the
Low: 32.50 declining lending rates. Group’s exposure to risk by over reliance on the Bank’s performance.
• The Group’s loan book recorded a 25.4% growth from KShs. 32.5 billion to • The bank intends to implement a new core banking system which is
KShs. 40.8 billion supported by its stronghold in asset finance. Despite this estimated to cost about KShs. 400 million.
P/E: 9.70
growth, the Bank managed to reduce its loan loss provision by 31.7% from
• Also part of the service improvement strategy, the bank will focus on
EPS: 4.82 KShs. 463.5 million to KShs. 316.6 million.
cost containment which was seen in FY2010.
YE End: 31st Dec • To fund this growth in advances, the Group’s deposit base grew by 22.7%
• The management remains focused and positive about their plans, citing
from KShs. 39.5 billion to stand at KShs 48.5 billion as at December 2010
long-term benefits of their operations.
• The Group’s subsidiaries also registered significant improvement in
performance, with all subsidiaries reporting profits in 2010. In particular, NIC
Bank Tanzania recorded a significant turnaround in performance after a loss
in the previous year.
• The Bank reported impressive growth in total operating income of 35.9% to

KShs 5.3 billion as compared to KShs. 3.9 billion reported for the previous
period.
• Despite the mid year reduction in the base lending rate and the increase in the
deposit base by KShs 9.0 billion, Net Interest income increased by 40.8% to
KShs 3.4 billion from KShs. 2.4 billion.
• Non-funded income grew by 27.9% to KShs. 1.9 billion from KShs. 1.5 billion,
an indication that the Bank’s diversified business model is bearing fruit.
• Following from the above, the Bank reported earnings per share of KShs. 5.06,
an impressive 68.1% increase from the previously reported KShs. 3.01. As a
result the Bank maintained the dividend at KShs. 0.50 per share (KShs. 0.25
interim and KShs. 0.25 final).
• The Bank also proposed a bonus issue in the ratio of 1 new share for every 10
shares held to shareholders in the register by close of trading on 07 April 2011.

KPLC 20.75 FY2010: The power distributor posted a 7.5% rise in pre-tax profits in the six • The Company which restructured its balance sheet in December 2010
months to December 2010 from KShs. 2.9 billion to KShs. 3.1 billion primarily and raised KShs. 9.8 billion via a Rights Issue intends to utilize the
driven by increased unit sales. additional capital to finance expansion and refurbish the electricity
High: 33.25 supply system.
• Non Fuel power purchase costs also played a role in the growth as the
Low: 20.00 company cited the partial withdrawal of emergency power generation plants. • Additionally, the sole power distributor is expected to record
accelerating profit growth in the second half of their financial year due
• Revenues from electricity sales rose to KShs. 20.6 billion from KShs. 19.1
to the increasing unit consumption driven by rural electrification and
billion reported for the same period in 2009. Total Revenue however dipped
P/E: 9.70 the elimination of the fixed dividend burden from the Government
163.95 to KShs. 31.1 billion due to a 45.6% dip in fuel cost recoveries.
preferential capital.
EPS: 2.14
• Profits after Tax increased by 18.6% from KShs. 1.9 billion to KShs. 2.2 billion
• There is however a risk that KPLC may revert to fuel generated power
largely due to an 18.9% dip in operating costs from KShs. 34.3 billion to KShs.
thus push up fuel costs if the current drought conditions persist.
27.8 billion.
YE End: 30th June
• The successful Rights Issue has strengthened the Company’s balance
• As a result the basic earnings per share jumped 11.7% to KShs. 2.20 from
sheet and will now allow them to make future borrowings as the need
KShs. 1.97. However the diluted earnings per share slipped 48.2% to KShs.
arises.
1.02 due to the dilutive effect of the 488.6 million new shares introduced
through the December 2010 rights Issues. • Demand for power is expected to increase from the current 3.3% y/y
growth to about 7.0% in the next three years.
• The Company announced an interim dividend of KShs. 0.35 per share to
shareholders in the register by close of trading on 31 March 2011. Again the • We also expect the Company to have a more stable dividend policy
interim dividend per share declined 7.9% due to the Rights Issue dilutive going forward after the Capital restructure.
effect.
• KPLC offers strong Medium to long term opportunity as the company’s
electrification projects mature.
STANDARD 265.00 FY2010: The Bank posted a 13.6% rise in pre-tax profits from KShs. 6.7 billion to • The Bank has a consistent strategy of investing for growth and the
CHARTERED KShs. 7.7 billion for the year ended 31 December 2010. disciplined management of capital, liquidity, costs and risks.
BANK
• The Bank, among the top five by assets in east Africa's biggest economy, • The successfully concluded September KShs. 2.5 billion Rights Issue
recorded a 13.6% increase in pretax profit for 2010 and said it would focus on allowed the Bank to acquire Barclays Bank Plc’s Africa Custody
high-end customers by expanding its Priority Banking service. Business.
High: 320.00
• As compared to other Banks which posted growth rates ranging between • We expect to see increased Revenues for this financial year as the
Low:172.00
51.0% and 71.0% percent for the past year, Standard Chartered has posted Custody Business goes into full swing.
much slower full-year pretax profit growth.
P/E: 14.26 • The Bank managed to grow its customer deposits by 15.8% from KShs. 86.8
billion to KShs. 100.5 billion in the period. Due to this slow growth, the Bank
EPS:18.58
managed to grow its Loan book by a marginal 6.4% to KShs. 60.3 billion.
YE End: 31st Dec
• As a results interest income only rose 3.1% to KShs. 9.9 billion. However non
interest income grew by 22.4% from KShs. 4.7 billion to KShs. 5.8 billion.

• Profit after tax rose 13.6% to KShs. 5.4 billion resulting in earnings per share
of KShs. 18.58 as compared to the previous KShs. 16.45, a 12.9% increment.
• The Bank which bought Barclays Bank Kenya's custodial business as part of
an Africa-wide deal between their parent companies stated that they expect
revenue from the custodial business to grow 30% over the next two years.
• The Bank proposed a final dividend payout of KShs. 8.00 bringing the total
dividend payout to KShs. 13.50.
TOTAL KENYA 25.25 FY2010: The Oil marketer posted an 89.2% jump in pre-tax profits from KShs. • The biggest threat to the operations of the oil marker however remains
733.7 million to KShs. 1.4 billion for the year ended December 2010 following the the environment that is becoming increasingly regulated due to
acquisition of Chevron Kenya a year earlier. The firm, part increased its retail Government involvement in determining consumer prices coupled
High: 33.00 network last year after a merger with Chevron's Kenyan unit in 2009. with the extension of competitive advantages to certain players in the
industry.
Low:25.00 • Sales volume went up by 365 KMT, 60% increase as compared to the same
period in 2009 mainly due to increased sales volumes in Network, Aviation, • In spite of the challenges, the management remains optimistic of the
LPG, and General Trade channels due to the merger of the two companies. future earnings given the predicted economic growth
P/E: 8.28
• Turnover in the period went up 91.7% to KShs. 79.2 billion due to the increase • We expect the upbeat performance to continue for the remainder of the
EPS: 3.05 in sales volumes coupled with increase in international oil prices. year provided that the product flow to upcountry locations increases
and the international oil prices remain stable.
YE End: 31st Dec • Operating profit went up 79.1% to KShs. 2.3 billion due to increase in sales,
improved margins, controlled operating expenses & increase in other income.
• Other Income rose 100.4% from KShs. 283.3 million to KShs. 567.7 million due
to the disposal of certain assets in accordance with conditions set by the
Government before the merger. The disposed assets generated a net gain of
KShs. 255 million.
• Finance Costs however jumped 81.2% to KShs. 953.6 million occasioned by an

increase in the finance needs due to the acquisition of Chevron Kenya.
• The Directors recommended a dividend of KShs. 1.05 per share.

Portfolio Recommendations - 01 April 2011

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Portfolio Recommendations - 01 April 2011

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PORTFOLIO RECOMMENDATIONS: 01 April 2011 – 31 April 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

• In Mozambique, the oil marketer has secured 21,000 cubic meters

• The Company is also strengthening their paraffin business in

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

• The bank recorded a particularly strong growth in its non-funded income

• Following from the impressive results, the Bank recommended a dividend

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

• The management attributed the increase in total assets to result of growth in

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

YE End: 31st Dec

• The Bank reported impressive growth in total operating income of 35.9% to

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

Weekly Portfolio Recommendations: 28th February 2011 to 04th February 2011

• Finance Costs however jumped 81.2% to KShs. 953.6 million occasioned by an

• The Directors recommended a dividend of KShs. 1.05 per share.

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