Capital Markets

Citi places KCB, giant brewer on top-gainer list at Nairobi bourse

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The Nairobi Securities Exchange: The two companies are expected to attract increased foreign attention. FILE PHOTO | NMG

Shares of KCB Group #ticker:KCB and East African Breweries Ltd (EABL) #ticker:EABL could attract more foreign investors’ after Citigroup analysts issued a “buy” recommendation.

The shares are listed among 27 stocks in frontier markets that Citi has recommended to international investors for the next six months.

The bankers said the expected total return for the two stocks is at least 15 per cent, which includes not only price appreciation but also dividend earnings.

Other companies on the list of the 27 firms expected to be targeted by foreign investors are Nigeria Breweries and Vivo Energy, which recently listed on the London Stock Exchange but has operations in Kenya and Africa though it is not listed on the Nairobi Securities Exchange.

“We say, stick with frontier…Buy-rated FM [frontier market] stocks including Vivo Energy, EABL, KCB Group, Humansoft, Nigerian Breweries, Seplat, Banca Transilvania, MHP and Kernel,” said Citi.

“Earnings momentum has improved, with upgrades now outnumbering downgrades. Earnings growth forecasts for FM [frontier market] are now higher than EM [emerging markets] for each of the next three years,” said Citi.

The Kenyan stock market has seen considerably more foreign investor participation in recent times as local investors take a back seat.

READ: Investor wealth at NSE falls Sh10bn as foreigners cash out

Last week, for example, foreign investor participation stood at 70 per cent, slightly down from the previous week.

“Foreign investor participation stood at 70 per cent [in the week ending July 6] compared to 74.4 per cent last week,” said Standard Investment Bank.

But even as the two Kenyan stocks received positive forecast in terms of future pricing, Citi dropped the NSE as among the top three favoured destinations for foreign investors in the next six months.

In January, Citi had put Kenya together with Romania as among the most attractive portfolio investment destinations for the first half of the year.

Kenya was in March also classified by the same bankers as among the top performers, but Romania has consistently performed better than most others this year.

The bankers’ note that in general frontiers are likely to have a better second half of the year, noting that their performance is often associated with higher oil and bond yields.

This has been witnessed for several markets or countries, with higher sovereign bond yields for Kenya being among them.