Nairobi and Accra: Week ended September 17, 2010

Global and local market conditions

Most markets around the world, with the exception of the Chinese stock market continued rallying from the previous week. The S&P 500 was up 1.45%, rising for a third consecutive week. The Nikkei rose by 2.93% ; the Sensex of India jumped by a huge 4.23%. South Africa’s all share JSE Index rose by 1.16%.

In frontier Africa, the Nairobi’s NSE-20 share index rose by 1.42%, and the Ghana All Share 0.43%. The Nigerian Stock Market continued to lag with the NGSE-All Share index down 3.57%, dragged down by plummeting banking stocks.

NSE Movers

Top gainers

Carbacid +11.18%, Barclays Bank +9.68%, East African Breweries 8.38%

Top losers

Olympia Capital Holdings -7.33%, Rea Vipingo Plantations -6.78%, Sameer Africa Limited -4.57%

Carbacid

Carbacid reported a 41% rise in profits for the six months ended January 31, 2010. Carbacid has a 95% share in the Kenyan Carbon Dioxide market and a growing presence in the East African region. This strong position was behind BOC Gases failed attempt to acquire the company. The share rally in the recent days could be as a result of demand building up in the counter in expectation of strong full year results: a highly probable outcome given the good half year results and the benign trading environment in the year to date. Even after the good run in the year (the share is up 33.33% since June 1 2010), the current PE is just 14.60, which is not too challenging. Going forward the company will face stiffer competition from BOC Gases who are now planning to install Carbon Dioxide generation facilities.

Barclays Bank

The share price run this week has culminated in a market capitalization for BBK this week of Kshs 92 Billion, just 1 Billion shy of the market cap king Equity Bank‘s Kshs 93 Billion. BBK is still the most profitable bank in Kenya even after being surpassed by KCB in total assets. BBK is the second most efficient bank in Kenya (after StanChart) with an impressive 27% return on equity based on the June 2010 half year results. BBK’s strong profit generation over the years has enabled the bank to grow its capital through retentions negating the need to raise funds through rights issues. Long term shareholders have been rewarded with generous dividends and ownership of a business that has grown in value. The Kshs 68 Friday closing price translates into a PE of 12.43, which compares favorably with 15.53 for Equity Bank and 12.01 for StanChart.

GSE Movers

Top gainers

AngloGold Ashanti +5%, Golden Star Resources Ltd +4.97%

Top losers

Mechanical Lloyd -11.76%, Ghana Oil -3.57%

AngloGold Ashanti

The rise in the share price is in tandem with the jump in global gold prices this week. The spot price for gold hit an all time high this week as investors continue loading up on the metal on expectation of a jump in inflation due to the quantitative easing policies pursued by Central Banks around the world. The prices of gold miners rose across most markets: the share price for Canada based Barrick Gold rose 3% in the week. Gold prices have climbed by 26.9% over the past year (Financial Times), and will rise even further if the Federal Reserve and other Central banks maintain the current expansionary monetary policy.

Quote of the Week:

"Value investing is at its core the marriage of a contrarian streak and a calculator." - Seth Klarman