Nairobi and Accra: Week ended August 27, 2010

Global and local market conditions

The S&P 500 (US) and Nikkei (Japan) indexes dropped for a straight third week as investors digested a number of disappointing economic reports: GDP, jobs, manufacturing and housing data reports all pointed to a weak economic recovery in the USA. The Sensex (India), the Bovespa (Brazil) and the SSE Composite indexes fell by 2.19%, 1.64% and 1.19% respectively.

The Ghana All Share index rose by 1.72% while Nairobi Stock Exchange 20 share and the Nigerian All Share indexes fell by 1.90% and 3.26% respectively. The Nigerian Stock Exchange continues to be battered by corporate governance issues: this week the Exchange sacked 32% of its workforce.

Price movements of select commodities

Tea +0.67%, White Sugar 0.33%, Coffee (Arabica) -2.48%, Crude Oil 1.23%, Gold +0.68%, Cocoa -3.88%, Palm Oil +0.55%

Tea prices at the Mombasa auction hit an all time high of USD 3 per kilo but the volumes sold dropped by 28% compared to the previous week.

(Sources: African Tea Brokers, Financial Times)
NSE Movers

Top gainers

Olympia +15.71%, Scangroup +15.38%, Crown Berger +5.30%

Top losers

Kapchorua Tea -13.79%, Safaricom -10.19%, Diamond Trust Bank -6.36%

Scangroup

Scangroup leaped on the expectation that its plans to acquire 51% of Ogilvy’s business in Sub-Saharan Africa ex-South Africa will obtain regulatory approval. The share-swap transaction was approved in an Extra Ordinary general meeting on the 17th of August 2010. The deal will give Scangroup a market share of about 70% in Kenya and access to several African countries’ advertising markets. The share rally has had more to do with the “feel good” factor about this transaction rather than fundamental valuation.

Crown Berger

Crown Berger reported half year results showing an increase in profit before tax of 17.7%, Kshs 70 Million compared to Kshs 59.5 Million generated in the half year to June 2009. These results are good considering that the 2009 full year results had leaped by 80% compared to the 2008 performance. With the ongoing construction boom Crown Berger should post even better results in future. With an annualized PE of just 9.79 (based on the June 30, 2010 half year results) the shares are inexpensive.

GSE Movers

Gainer

HFC Bank Limited +1.92%

Top losers

SG-SSB -25.00%, Anglogold Ashanti Limited -11.11%, CAL Bank -7.41%,

SG-SSB Limited

While there has been no specific negative news to explain the huge drop in SG-SSB’s share price the share is relatively expensive compared to its banking stock peers. Even after the heavy price drop SB-SSB trades at a PE of 12 (based on June 30, 2010 half year results) compared to 7 for ETI and 9 for HFC bank.

Quote of the Week:

Mwenye pupa hadiriki kula tamu. “A hasty person misses the sweet things (because he cannot wait for the fruit to ripen)”. Swahili Proverb