Troubled Kenya Airways #ticker:KQ leads a group of loss-making companies to emerge with the best stocks from a period when the country imposed tight coronavirus restrictions and the market shed Sh18 billion.
Bamburi Cement #ticker:BAMB ranks worst.
The KQ share gained 127 percent since March 13, when the first case was confirmed, and closed trading at Sh3.83 on July 3 when it was suspended from trading on the Nairobi Securities Exchange (NSE) #ticker:NSE.
This means an investor who put Sh1 million in the stock on March 13 has gained Sh1, 270,000.
In contrast, investors who bought Bamburi shares worth Sh1 million suffered a loss of Sh480,000 given the share has shed 48 per cent since Kenya reported its first case of coronavirus to stand at Sh26.10 at the close of trading Thursday.
This analysis is based on investors who bought shares in mid-March and measures their return at the end of the trading yesterday.
The review does not capture speculators who enter and exit stocks in short periods.
The market data shows that among actively traded stocks, 27 or 47 per cent of the companies registered gains while 30 or 53 per cent posted losses.
While the Covid-19 pandemic has been blamed for the overall market decline that has seen the benchmark NSE-20 Index drop to levels last seen in 2003, the performance of individual stocks has been driven by speculators with little link to a firm’s business indicators.
Williamson Tea #ticker:WTK is the only profitable firm among the top five best-performing stocks that includes Sameer Africa #ticker:FIRE, East Africa Cables #ticker:CABL and struggling Uchumi Supermarket #ticker:UCHM.
Hotel operator TPS Eastern Africa #ticker:TPSE, for instance, dropped by a marginal 0.4 per cent to Sh13.45 despite being among the victims of the ban on international travel. Cigarette maker BAT Kenya also dropped 22.8 per cent to Sh310 despite improved profitability that was partly caused by lower taxes.
The jump in KQ shares was driven by investors accumulating the airline’s stock in anticipation of being bought out later at a premium by the government, which plans to nationalise the company.
The expectation led investors to ignore the firm’s losses and negative equity which stood at Sh12.9 billion and Sh17.8 billion respectively in the year ended December 2019.
Details of KQ’s nationalisation, including the price at which the minority investors will be bought out, are yet to be published.
Sameer followed with a 40 per cent gain to close at Sh3.85 on Wednesday, with the rally coming after the company closed its loss-making tyre distribution division and said it will return to profitability this year with a focus on its real estate business.
Sameer forecasts that it will make a profit of Sh185 million in the current financial year ending December, reversing a net loss of Sh1 billion in 2019.
Investors also shrugged the losses and debt woes at East African Cables after the counter gained 33.9 per cent.
The firm posted a loss of Sh568.38 million in 2018 and was this year spared liquidation by SBM Bank Kenya over a Sh285 million debt.
Williamson Tea Kenya’s share price rose 29.9 per cent to Sh145.5 after the agricultural firm declared a dividend of Sh20 per share for the year ended March, with the company dipping into its reserves to maintain the cash distribution at the previous year’s level.
Uchumi, which ranks among the favourite stocks for speculators, jumped 29.6 per cent to Sh0.35 with no meaningful change in its troubled stores, which delivered a loss of Sh1.68 billion in 2017 and shop closures.
Scangroup #ticker:SCAN rallied 28.1 per cent to Sh19.6 ahead of the July 28 book closure for its large dividend payout of Sh8 per share after netting Sh5 billion from a business sale. It is the sixth top performer at the NSE.
Bamburi led the pack at the bottom end in a list that includes Express Kenya #ticker:XPRS that has shed 36 per cent, NSE (31 per cent), DTB Bank #ticker:DTK (27 per cent), Equity Bank #ticker:EQTY (24 per cent) and BAT #ticker:BAT (23 per cent).
Bamburi Cement’s fall is a continuation of investors’ reaction to the company’s reduced profitability in recent years.
Besides cement price wars, the company has recently faced new challenges, including higher taxation and disrupted operations in Rwanda.
Express Kenya remains in losses and its business shift from logistics to real estate stalled due to a lack of funding.
Of the five blue-chip firms that account for about 75 per cent of the entire market capitalisation, only Safaricom posted a gain of 10.3 per cent to Sh26.85.
The company, whose earnings from the mobile money platform M-Pesa is projected to decline due to waiver of fees on transactions of below Sh1,000, is also benefiting from increased usage of telecommunications services by employees working from home.
East African Breweries Limited #ticker:EABL, whose sales have been hit by closure of bars, saw its stock fall 13 percent to Sh161.
Equity, KCB #ticker:KCB and Co-op Bank #ticker:COOP dropped 24.2, 19.7 and 11.3 percent respectively to settle at Sh31.75, Sh34.25 and Sh11.75 as the pandemic eats into their earnings and capital.
Rising defaults by businesses and households whose income has shrunk and restructuring of loans are the biggest challenges facing banks.