Money Markets

Broker picks 12 stocks to be top gainers at NSE

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 Shoppers enter Uchumi, Aga Khan Walk branch, in Nairobi last November. Uchumi was trading at a price-to-earnings ratio of 18.54 times on Friday. Photo/File

Shoppers enter Uchumi, Aga Khan Walk branch, in Nairobi last November. Uchumi was trading at a price-to-earnings ratio of 18.54 times on Friday. Photo/File 

By David Mugwe

Posted  Monday, January 28  2013 at  20:46

In Summary

  • Old Mutual Securities predicts that Uchumi would record revenue growth in 2013 helped by its expansion strategy.
  • The stockbroker says Uchumi’s planned rights issue this year will allow investors to buy shares at a discount and increase its market float.

Old Mutual Securities has tipped Uchumi Supermarkets; last year’s best performing stock in terms of capital gain at the Nairobi Securities Exchange (NSE), to be among top gainers this year in a basket of 12 listed firms.

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In a research note sent to its clients on Monday, the stockbroker predicted that the supermarket chain would record revenue growth in 2013 helped by its expansion strategy.

Old Mutual also says Uchumi’s planned rights issue this year will allow investors to buy shares at a discount and increase its market float.

The stock is among 11 others that Old Mutual has singled out to be top gainers this year. The others are Kenya Power, Housing Finance, NIC Bank, Equity Bank, Diamond Trust Bank, Kenya Reinsurance, Bamburi Cement, TransCentury, Safaricom, and Mumias Sugar.

Uchumi’s share price appreciated by 148.05 per cent last year and closed at an average of Sh19.10 on the last trading day last year, compared to its opening price of Sh7.70 on the first trading day of the year.

However, the stock has not moved much this year and closed at Sh19.10 last Friday.

“With prevailing low interest rates and inflation under control, the country is poised for growth. However, a peaceful election and smooth transition though the dispensation of the new federal government under the new Constitution will be key determinants of the stock market’s and the economy’s performance at large,” said Old Mutual in a research note.

The stockbroker said that the rise of the middle income class in the East African region would increase consumer demand in the retail sector, and that cost management and business reorganisation would enhance profit margins although increased competition could depress profits.

Last Friday, Uchumi was trading at a price-to-earnings ratio of 18.54 times compared to the commercial and services sector of 9.78 times and the entire market ratio of 11.73 times, according to data from the NSE, indicating that the share could be overvalued.

Kenya Power, Mumias Sugar, and TransCentury were some of the worst performers last year having lost 2.56, 8.49, and 13.76 per cent respectively.

As at the close of trading last Friday, Kenya Power had lost 0.29 per cent of its value since 2013 began, Mumias Sugar had gained 3.09 per cent, while TransCentury had gained 11.7 per cent.

The best performing stock so far this year has been KenGen, whose price had risen by 29.55 per cent to Sh11.40 as at the close of trading last Friday.

dmugwe@ke.nationmedia.com