Loss-making tyre distributor Sameer Africa #ticker:FIRE emerged as the best stock in 2019 at the Nairobi Securities Exchange (NSE) with Kenya Airways #ticker:KQ ranked as the worst in a year when the bourse is in line to make a 16.6 percent return.
Sameer Africa’s share has gained 81 percent since the start of the year and closed trading at Sh3.35 Thursday, meaning an investor who invested Sh1 million in the stock on January 2 has gained Sh810, 000.
In contrast, investors who bought Kenya Airways shares worth Sh1 million, suffered a loss of Sh773,000 given the share has shed 77.3 percent since the start of the year to stand at Sh2.02 at close of trading Thursday.
This analysis is based on investors who buy shares at the start of the year and measures their return at the end of the trading season in a review that does not capture speculators who enter and exit stocks in short periods.
Sameer, whose a half-year losses widened to Sh182.8 million, offered better returns than Safaricom and top banks like Equity and KCB—which have recently emerged ass the jewel stocks for investors seeking returns.
“These small cap stocks like Sameer see price shifts based on thin volumes, hence the big story in the market this year has been the removal of the rate cap in the fourth quarter, which alongside the NIC-CBA merger has given the large bank stocks a shot in the arm,” said Standard Investment Bank analyst Martin Kirimi.
“This combined with Safaricom performance has uplifted the whole market.” The market has gained Sh348 billion so far with all shares valued at Sh2.45 trillion, a reversal from last year when it shed Sh400 billion.
The Safaricom share movement has a huge bearing on the overall market performance given that it accounts for 49 percent of the NSE market value, which grows to 79.8 percent when banking stocks are included.
Safaricom and four banks—Equity #ticker:EQTY, KCB #ticker:KCB, NCBA #ticker:NIC and Barclays #ticker:BBK-- are appearing on the top 10 list of firms that have delivered higher returns.
Equity was the second top gainer with a share appreciation of 53.5 percent to close trading at Sh53.50, followed by KCB (41.5 percent), Safaricom #ticker:SCOM (39.2 percent), Express Kenya #ticker:XPRS (36 percent) and Longhorn #ticker:LKL (30.6 percent).
NCBA, which is the product of a merger between CBA Group and NIC, was ranked seventh with a return of 23 percent, boosting the fortunes of the Kenyatta family and that of former Central Bank of Kenya governor Philip Ndegwa.
The Kenyattas have a 13.2 percent stake in NCBA Group with the Ndegwas ownership at 12 percent. Barclays stock gained 19.3 percent, placing it at position nine on the return’s ranking.
Four companies that have issued profit warnings—Kenya Power #ticker:KPLC, CIC Insurance #ticker:CIC, NSE #ticker:NSE and Kenya Airways-- are in the bottom 10 of the returns ranking.
Loss-making Uchumi Supermarkets #ticker:UCHM, which has delayed issuing its financial results since June 2018, was ranked the second worst stock with a negative return of 56.3 percent.
Others at the bottom end are Nairobi Business Ventures #ticker:NBV that has shed 41.7 percent, followed by Bamburi Cement #ticker:UCHM (39.6 percent), BAT #ticker:BAT (36.4 percent) and DTB #ticker:DTK (30.7 percent).
Kenya Power, CIC Insurance and NSE have lost 31.2 percent, 25.6 percent and 24.1 percent respectively, a pointer that investors punished firms that will either post weak results and have dimmed potential. For smaller stocks on the top gainers list like Sameer, Express Kenya and Longhorn, gains have been built on thin traded volumes.
Sameer and Express are in loss-making territory while Longhorn’s earnings have remained flat. Investors eyeing Sameer are thought to target the company’s prime land holdings, whose value could be unlocked in future to the gain of shareholders.
It has strategically located land parcels whose market value are estimated at over Sh7.8 billion.
Kenyan bank shares have rallied on following the removal of a legal cap on commercial interest rates, which curbed lenders profits. Investors have rushed to buy the lenders’ stocks at the Nairobi bourse on anticipation of increased gains in coming days as others eye long-term gains in the form of dividends.
The biggest beneficiaries of the banking stocks rally include pension funds, wealthy individuals and foreign institutional investors who hold stakes worth billions of shillings.
Safaricom also rallied to hit highs of Sh30.9 yesterday, up from Sh22.20 each at the start of the year.
Analysts said investors were buying into Safaricom on the back of its recent financial report and outlook. The telecoms operator posted a 14.4 percent jump in the half-year net profit to Sh35.65 billion on strong M-Pesa and mobile data revenue growth. The results were released last Friday.
“The upside potential of the share is at about Sh33 so there is more room. The strong performance in M-Pesa and prospects of entering Ethiopia offer a bright outlook. The cost efficiencies are also strong,” said AIB Capital head of research Sarah Wanga.
Bamburi Cement and BAT Kenya, two key stocks in the NSE 20-share index of blue chips, have been affected negatively by the slowdown in the real estate sector and tougher regulations respectively, which has seen their share prices fall by 41.3 and 34 percent respectively to Sh77.75 and Sh480.