Suffesa monthly review May issue (no 2) by Suffesa Strath

Editorial team note: Here we are once again with the second issue of the Monthly review highlighting some Key events that happened during the month as well as our index. We hope it lives up to expectations as well as draws more readerships. As usual, all our communication channels are open so please don’t hesitate to contact us…Till next time, Enjoy… Suffesa Editorial Team.

“Together we Achieve”

Contents The Ghosts of May .................................................... 2 What drives Africa’s Growth? .................................. 3 Safaricom.................................................................. 5 IFRS 69….. ................................................................. 7 Index Performance…. ............................................... 9 Stock of the Month................................................. 10

“There is no investment you can make which will pay you so well as the effort to scatter sunshine and good cheer through your establishment” – Orison Swett Marden

“Together we Achieve”

The Ghosts of May Economic highlights…

ay. A month where so much happens and yet we get left behind with the events that happen around us as we are deeply engrossed in our daily lives. The month of May has arguably been eventful as the economy has continued to enjoy a stable macroeconomic environment. Business is picking up, retailers that were once scarce with people are now busy with streams of people filing in every day and the bourse has been on a rally since year start returning 29% to investors. The Kenyan economy received a brace this month as the economic forecast for the country was revised upwards to 6% on the back of the peaceful elections that the country witnessed over the first few months of the year. A rebound in key sectors has seen the economy recover due to better than expected performance. The financial services sector and the manufacturing sectors are the leaders in this front. Cabinet secretary for the ministry of planning and devolution however pointed out that the performance of the other sectors in the economy is hinged on the performance of the financial sector. Growth in this sector should result in subsequent growth in the other sectors.

Strong performance of the agriculture and tourism sectors in the second half of the year are expected to boost the economy as tourist numbers pick up in the high season and good weather in the country allowing for good harvests.

Looking good or not…. Businesses have been experiencing a good month on the back of lower fuel prices which has eased the transport burden on them. In addition, cheaper energy prices have allowed both households and manufacturers cheaper goods thus more spending power to the consumer. Inflation on the other hand has been relatively stable around the 4% mark which has set a stable

macroeconomic environment heading into the second half of the year. However, the Eurozone, one of Kenya’s major trading partners is projected to register a decline in growth of (-0.1%) for 2013. This may have a slight impact on the Kenyan export sector though the government’s improved stance on intra Africa trade may reduce the exposure of Kenya to the Eurozone. But questions still linger as the government still lacks the internal mechanisms to achieve the projected growth. The economic survey is heavily banking on good weather and stable oil prices for the year which the government cannot control. Still, we are susceptible to shocks and may not achieve any definite results in the face of a crisis. All in all, the economy is projected to grow on primordial factors such as rainfall which shows that the country’s mode of production is still undeveloped and primitive.

“Together we Achieve”

What drives Africa’s Growth? The Kenyan shilling has come under pressure from importers and traders who have somewhat been in panic buying of the dollar in fear of a depreciating shilling. This has seen the shilling hit highs of 85.00; levels last seen in the beginning of April. Financial Markets On the stock market front, the improving economy has seen investors trooping back to the market. The turnover at the bourse was up in the month of May as foreigners channelled their funds into Kenya. The NSE 20 Index was up 3.8% to 4967.75 points showing good signs of strong uptrends into the year. The money markets have been trading at almost the same levels as last month with the 91 – day T-bill staying almost stagnant at 9.503%; the 182 – day Tbill 9.403% and the 364 day T-bill yield was at 10.108%. Suffesa Editorial Team.

"The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher

Rise of the African Consumer.

he world has its eyes on Africa, the heartland of our origin and the motherland that we fought so hard to drive away colonialists. Rivers flow through uncharted forests and bushes run wild in the continent’s land while wildlife runs freely exploring the land. But not in the urban shacks that have sprouted all over to replace the bushes and dwindling wildlife. Africa as a whole has captured the attention of the world. Could this perhaps be attributed to the hard work that the people of the continent toil so hard? No, I don’t think so. This could be attributed to the opportunities and potential for growth that the continent has as governments as well as people wake up to the reality that Africa could actually be a world leader; an opinion leader and a top investment destination. Africa’s economic pulse has quickened, infusing the continent with a new commercial vibrancy. Real GDP in the continent rose by 4.9% a year from 2000 – 2008. But all this is dependent on how Africa rises up to the challenge. Now more than ever, we are receiving more attention from the world than before. International News Channels are becoming bolder and are sending reporters deep into the heartland of Africa to tell Africa’s story. So many have indicated that so much is being done to Africa, for Africa but not by Africans. This being an indication that we need to do more for the motherland. I take my hat off for the President of the republic of Kenya for adopting a Pan Africanist policy in his government. Why call on foreign companies to invest in Kenya while there are those Kenyans who have made it out there and have considerable wealth to invest in their country back home. “Buy Kenyan, build Kenya” – a

slogan that may soon be on the lips of Kenyan business men. An interesting perspective therefore arises. What is it that the rest of the world sees about Africa that we cannot capitalize on these opportunities? Why is our continent the second fastest growing continent in the World and where were we all this time that it’s only now that we are hastening and waking up to realize that there are opportunities that we can capitalize on and lift ourselves out of abject poverty.

More than a resource boom.... Just to be clear, Africa’s 50 plus economies face serious challenges including poverty and diseases but yet the continents GDP collectively stood at $1.6 trillion in 2008. Whereas Africa’s increased economic momentum is widely recognized, its sources and likely staying in power are less understood. Soaring prices of oil, minerals and other commodities have lifted GDP since 2000. In addition to this, internal structural changes have spurred the broader domestic economy leading to increased trade and investment within the economy. Africa’s growth is definitely more than a resource boom, though the surge in commodity prices has boosted the continent’s GDP. Commodity contribution to GDP has dropped from around 60% in the 1960’s to 28% as of 2008. Oil has risen from below 20$ a barrel in 1999 to more than $1oo today. This has reaped handsome profits for the oil producing countries in the continent. On the other hand, there has been widespread growth across sectors in the continent. Key drivers of this growth have been government’s efforts to end conflicts and provide stable macro and micro economic environments for growth. For example, conflict in Rwanda ended in the 90’s paving way for economic growth for the country. In addition to this, African governments adopted Suffesa | ©2012

“Together we Achieve” policies to energize their economies. This was achieved through privatization of state owned enterprises, increased openness of trade, lower corporate taxes and strengthening of regulatory and legal systems. The end product... Increased economies of scale, increase investment and more competitive industries. This growth acceleration has started to improve conditions for Africa’s people with declining poverty rates being witnessed across the continent and increased income distribution. Other Services Utilities Tourism Real Estate &… Construction Public Administration Financial… Manufacturing Transport &… Agriculture Wholesale & Retail Resources

6 2 2 5 5 6 6 9 10 12 13

Sector GDP Change in % 24

*source: 2007 World Bank Data – Widespread growth in Africa.

African economies have grown healthier as governments have reduced inflation from an average of 22% in the 90’s to an average of 8% after 2000.

Sustained growth…. One question that lingers in the minds of investors is how sustainable is the growth in Africa? Today, Many African countries face short term risks ahead and could suffer many setbacks. E.g. Kenyan ICC cases trial. But the growth prospects are nothing short of Strong. Africa prides itself in its abundance of riches; 10% of world oil reserves, 40% of world gold and 80 – 90% of the chromium and Platinum group. It will therefore probably continue to profit from rising global demand for commodities such as Oil, food and other minerals such as platinum, chromium and the like. The Global Race for commodities has also given African governments better bargaining

power allowing them to get more value from their resources. Global economic ties – Although Africa has had long standing commercial ties with Europe, it now conducts half its trade with developing economic regions. From 1990 through to 2008, Asia’s share of African trade has doubled to 28% while Europe’s portion has shrunk to 28% from 51%. Rise of the African urban consumer – In 1980, just 28% of Africans lived in urban cities. Today, 40% of Africans live in urban cities. By 2030, it is estimated that this figure will be 50% and Africa’s cities will have a combined spending power of $1.3 trillion. Share of Population by region 31.3% 40.0%

By ATM – Abwoga Timothy Mukoma.

50.5% 73.0% 79.0% 82.0%

68.7% 60.0%

“Together we Achieve” Kenya is one of the leaders in this front, offering free education to its people so as to empower them and foster economic growth. Finally, many Africans are joining the ranks of world consumers. Many households are spending roughly half of their incomes on non-food items. Africa already has more middle – class (those with incomes of $20,000 or above) households than India. Africa’s rising consumption will create more demand for local products, sparking a cycle of increasing domestic growth. In the end, the green jungle that once thrived in savannah heartland is slowly being phased out to be replaced by an urban jungle littered with metal roofs that crackle in the sun and an increasingly intelligent population with more spending power.

Safaricom Urban

49.5% 27.0% 21.0% 18.0%

Rural

*Source: world Bank data

Urbanization is boosting productivity, demand and investment in many African countries with large numbers of people moving from agriculture to urban areas. This spurred the need for new roads, buildings and facilities to accommodate the increased population and thus increased investment. On the other hand, Africa’s working force is expanding with more than 500 million people of working age. If we can provide our young people with the education and skills they need, this workforce could become a source of global consumption and production. Suffesa | ©2012

A telecom powerhouse…

Search for the word “growth” on my Kenyan English dictionary and it very wittily suggests: “See Safaricom.” Rightly so...

In the 2012 financial year - the results released last week – the company posted a 16% increase in total revenues to close its books at KES 124.3 billion. While this 16% growth in revenues may sound moderate, it represents a KES 17.14 billion increase in its revenues in a year. Putting it in perspective, it means an extra KES 1.43 billion a month in revenues. That is, a lot. Of particular interest here is that non-voice revenue streams – short messaging services, data and the money-minting MPESA division- grew by 29% to KES 40.4 billion in the year, to represent almost a third of the company’s revenues, and clearly the next frontier for the firm in regard to its growth. Earnings before interest, tax, depreciation and amortization grew 31% to KES 49.2 billion and the net profit before tax figure stood at about KES 25.5 billion.

The company boasts of 19.4 million users, up from 19.1 million subscribers in the previous financial year end, the figure already adjusted for the 1.4 million customers who were disconnected for failing to register their sim cards as is required by the telecoms regulator, the Communications Commission of Kenya, CCK. Why? The company attributes its runaway success in the year to a general increase in all its services and more specifically increased average revenue per user across its services. This is obvious for its voice services, with the company having increased its call rates after sustaining them at competitors’ levels. Indeed the rise in price lead to a (slight) drop in volumes (of customers) but an increase in value (for the company that is). The mobile money service MPESA continues to grow at astronomical levels, proving the real gem in Safaricom’s arsenal and a key factor in the strong brand loyalty the company commands; The ultrapatriotic television advertiseme nts notwithstan ding. It is noteworthy that over the past few months and years, Safaricom and more so MPESA, has undergone a significant level of integration with other financial service providers such that you can pay utilities like electricity and water via your phone, you can pay for your shopping at outlets of the major supermarket companies, you can connect your bank account and send money back and forth between your MPESA account and your mobile phone. And these are just a few examples of the level of functionality Safaricom has Suffesa | ©2012

“Together we Achieve” added to MPESA. Note, this is not advertising or proMPESA advocacy, just a statement of facts. Safaricom does charge users for such transactions, the added services thus adding value to the firm’s bottom line. With such services available to subscribers, it is no wonder Safaricom claims about half of the Kenyan population is a subscriber of its network. The company further sites reduced financing costs and steady capital expenditures as other reasons for its remarkable performance in the year. MPESA, Kenya’s Biggest Bank? In the October 2012-March 2013 period, Safaricom claims over KES 400 billion was deposited into the system by MPESA agents, who do so on behalf of regular wananchi who deposit then 10s, 100s and 1000s at the MPESA agents, which number 65,547 as at the financial year end. KES 444 billion was deposited into MPESA, transactions worth KES 522 billion (almost half of the Kenyan 2013 national budget) were done by customers within then system and KES 390 billion was withdrawn from the system. Of course we must remember that the system works cynclically; I deposit KES 100 into my MPESA account at a registered agent. I then send KES 95 to my friend Muringo via MPESA. Muringo in turn sends KES 50 to Nyagah and withdraws KES 40 from a registered agent. Nyagah also withdraws from an MPESA agent. After all those transactions are done, we shall say KES 100 was deposited into MPESA; KES 145 was transacted between MPESA customers and; KES 90 was withdrawn from MPESA. Thus the logic of the above MPESA deposit, transaction and withdrawal figures may not make too much sense, the deposit figure of KES 444 seems the most credible of the three regarding the behemoth size of MPESA the bank. If the figure is merely even almost accurate, it is safe to say that MPESA is Kenya’s biggest bank by deposits, leaps and bounds ahead of the KCB-Equity-Etc. pack behind it.

Where Next? Safaricom is clearly doing very well. That there is no doubt. Non-voice services such as the short messaging service, data and MPESA are avenues for growth. That being said, it is highly unlikely that the average Kenyan Safaricom subscriber will increase his expenditure on Safaricom services by much in the next year. In fact, for many, if call prices increase, they may sacrifice non-essential Safaricom services like the pointless Skiza tunes and subscriptions to Horoscopes and what have you, to spend a few more shillings on calls because hey, it is quite unlikely that we will speak less. Safaricom must begin to face the reality that unless it chooses to appropriate even more from MPESA and thus emerge even more as a pseudo deposit taking macro-micro finance institution (with MShwari as its loan division), it must expand regionally in an attempt to increase its subscriber base, aiming at increased voice revenues. With either strategy it faces some immense challenges: if it focuses more on MPESA, it immerses itself squarely in the sights of KCB-Equity-Etc. banks, firms that are relentless in their quest for double-digit year on year growth. Opening a Pandora’s Box regarding its regulation (CBK, CCK or both) and attracting the picky hands on the tax man. If it ventures into regional expansion, “greenfield” strategies are likely to be of the too-little-too-late calibre given the markets are already well ordered, making mergers and acquisitions the likeliest of options. To be competitive, it is likely that they would have to undercut competitors, starting a price war it has no Suffesa | ©2012

“Together we Achieve” certainty of winning. Cache 22. What do you do? Whatever the decision, they must be cognisant of the fact that consumers of the services are ever adapting to new technologies. For instance, it is a matter of months before a section of Kenyans start agitating for the 4G (LTE) networks, an upgrade that would cost Safaricom billions. Until then, I am off to watch a show at the Michael Joseph Centre at Safaricom House. Right after I collect my KES 0.31 dividend per share for my Safaricom shares, via MPESA of course. By Brian Gachichio Karanja (BGK).

IFRS 69….. A perspective (This will probably appeal to those of us who have a working knowledge of International Financial Reporting Standards (IFRSs).) Objective:

he objective of IFRS 69 is to prescribe the accounting treatment for girlfriends. The principal issues are the timing of recognition of a female friend as a girlfriend, the number of days the relationship can be carried on and any write down in this romantic relationship. It also provides guidance on the methods to be employed to make girlfriends. Scope: IFRS 69 applies to all girlfriends except those whose fathers, brothers, ex-boyfriends or prospective boyfriends are working in police, army, intelligence agencies or political organizations or 6+ feet tall, have muscular bodies and know kung fu, judo or any other martial arts. Definitions: The following terms are used in this Standard with the meanings specified:

- LOVE is a serious mental disease, mostly found in old movies, soap opera, dramas and Urdu literature. - FLIRTING is the modern form of love; this disease came from Hollywood movies, new movies, internet, mobile phones, and English literature. - MARRIAGE is a long term liability as a result of PAST events that is expected to be settled by increasing the population, decreasing the health and money. -GIRLFRIEND is a current asset as a result of past efforts and events that is probable to generate future dates, physical contact and gifts. If not properly handled she may become long-term liability i.e. wife. -BOYFRIEND-SPECIFIC VALUE is the present value of the future dates that a boyfriend expects to realize from continuing use of the girlfriend over its useful life and from its disposal to his other friend at the end of the flirting term. -FLIRTING TERM is the higher of the following: -from your first conversation till the time the girlfriend father catches you. -from the time of your first date till your girlfriend get married with another person, in which case she will become your ex-girlfriend. -from the time of your first date till you get married with your girlfriend, afterward it will become a suffering term.

Recognition: A girl shall be recognized as a girlfriend if, and only if: (a) It is probable that future physical benefits associated with the girlfriend will flow to the boyfriend, (b) No possibility of girlfriend becoming a long term liability (wife) exists and (c) The expenditures to be incurred (e.g. in respect of gifts, cards etc.) can be measured reliably.

“Together we Achieve” Female Cousins, younger sisters, and other female friends associated with the girlfriend should not be recognized. However, beautiful and bold ones should be declared in the flirting statement if and only if it is probable that they are expected to result in prospective girlfriends.

Measurement of Useful Life of a Girlfriend: All the following factors shall be considered in determining the useful life of a girlfriend: (a) Expected “usage” of the girlfriend. (b) Expected “physical” wear and tear; which depends on “operational” factors such as the number of “shifts” the girlfriend is to be used. (c) Technical or commercial obsolescence arising from changes in fashion or “service output” of the girlfriend. (d) “Legal” or similar limits on the “use” of the girlfriend.

De-recognition: The Girlfriend shall be derecognized: 1. At the end of the useful life of girlfriend or flirting term whichever is earlier, 2. When no future physical benefits are expected from her or her disposal, or, 3. When the remote possibility of the girlfriend becoming long term liability occurs.

Disclosure: The flirting statement shall disclose, for each “class” of girlfriends: a) Total number of girlfriends with: -age of girlfriends -complexion, face cut

-the useful life of each girlfriends -email address, residential address and mobile number of each girlfriend

“Together we Achieve” moving in or out of the index. Index composition is displayed below. Index Allocation

Weights

Price Change

-any “special” benefits that may have been derived from the girlfriend

Centum Investment Co Ltd Ord 0.50

0.08%

CFC Stanbic of Kenya Holdings Ltd ord.5.00

27.08%

7.63%

1.43%

-0.88%

b) A reliable estimate of the boyfriend regarding number of expected girlfriends for each class of girlfriends.

E.A.Portland Cement Co. Ltd Ord 5.00

5.53%

6.54%

Eaagads Ltd Ord 1.25 AIMS

0.59%

3.70%

Housing Finance Co.Kenya Ltd Ord 5.00

6.42%

1.00%

Kenya Power & Lighting Co Ltd Ord 2.50

35.68%

-8.38%

c) A reliable estimate of the expenditures to be incurred (e.g. in respect of gifts, cards etc.) for each class of girlfriends.

Liberty Kenya Holdings Ltd Ord.1.00

6.95%

0.81%

TPS Eastern Africa Ltd Ord 1.00

10.51%

0.00%

Uchumi Supermarket Ltd Ord 5.00

5.73%

1.27%

100%

2.00%

Crown Paints Kenya Ltd Ord 5.00

8.33%

Source – Suffesa analysis

By Theuri Eric Chege. We expect the SSI Index to pick up in the next month given the stable macroeconomic environment characterized with a low Central Bank Rate (CBR) and a robust growing economy.

Index Performance…. Bullish markets Indicator Stock index Performance % Market Capitalization ( Kes . Bn ) P/E Ratio *Source – Suffesa analysis

Suffesa Stock Index Previous

Current 3,471.97 93,452.15 9.02

% change 3,664.06 5.53% 92,711.69 -0.79% 8.77 -2.81%

he Suffesa SSI Index beat the market this month gaining by 5.53% to close at 3,664.06 points as at 29th May 2013 while the NSE All Share Index and the NSE 20 Index increased by 5.34% and 3.44% to close at 126.47 and 4,987.16 points respectively. The main gain in the market was mainly attributed to large cap stocks such as EABL, Safaricom Ltd. and CFC Stanbic. The advance in the SSI index on the other hand was mainly on the back of Centum Investments (NSE: ICDC) and CFC Stanbic (NSE: CFC) whose share prices increased by 8.33% and 7.63% respectively over the past month. The SSI index was however dragged down by Kenya Power and Lighting Company (NSE: KPLC) which declined by 8.38% to close at Kes.16.95 as at 29th May 2013.The index remained the same with no stock Suffesa | ©2012

Firms such as CFC Stanbic (NSE: CFC) and Housing Finance Company Kenya (NSE: HFCK) are expected to benefit from the low interest rate regime while others such as Uchumi Supermarket (NSE: UCHM) and TPS Eastern Africa Ltd. (NSE: TPSE) are set to advance on the back of an economy that is estimated to grow at the highest rate of 6% this year on the back of the tourism sector and consumer spending.

SSI Vs NSE Benchmark Performance 105.00 103.00 101.00

Suffesa Stock Index - (SSI)

99.00

NSE 20 share Index

97.00

NASI

95.00 93.00 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8

Stock of the Month Anyone for a Beer?

ver wondered just how much your Friday night beer contributes to the earnings of its producer? A lot actually if the performance of East African Breweries Limited (NSE: EABL) is anything to go by.

“Together we Achieve” Kestrel capital show that the Tanzanian subsidiary is expected to grow by 15.1% for the next three years while the Kenyan and the Ugandan operations are expected to grow at 10.9% and 9.4% respectively. Furthermore, the company plans on capturing the entire East African region through expansion into South Sudan, Rwanda, Burundi and even venturing out of the EAC into the Democratic Republic of Congo. This is expected to further improve its performance in the medium to long term.

The firm takes the coveted position of stock of the month for May with its share price which has been on a general upward trend, marginally increasing in the past month as a result of high investor confidence especially by foreigners.

More activity is expected on this counter in preparation for the firm’s full year results which are to be released at the end of June. In addition, the fact that EABL is a blue chip stock is expected to attract long term investors seeking price stability.

EABL became the first listed firm to cross the Kes.300Bn market capitalization mark on the back of great demand by investors both local and foreign coupled with the scarcity of supply of the shares in the market.

The graph below shows EABL’s share price movement over the past month.

The firm’s half year profits dropped by 18% from Kes.4.8Bn in 2011 to Kes.3.9Bn. This drop was mainly attributed to increased finance costs from the acquisition of Serengeti Breweries in November 2010 and high operational costs in Uganda coupled with a shrinking consumer economy. EABL shares are also currently above their fair value whose target price as per several valuations lies between Kes.289-Kes.295. The stock has touched a mind-blowing high of Kes.425 in the past month and closed at Kes.377 as at Tuesday, May 28th 2013. Despite the drop in profits and its current overvaluation, the firm has recorded steady growth in the market and plans to grow even more through its Tanzanian and Ethiopian markets. The 51% equity stake acquired in Serengeti Breweries is expected to perform well as it catches up with the parent plant. Growth projections carried out by Suffesa | ©2012

Stock Highlights:

Current Price (29th May) YTD (%) Market Cap (Mn) Shares Outstanding 52 Week High 52 Week Low P/E Trailing EPS Trailing Dividend Yield

EABL KES % KES KES KES x x %

365.00 136.67 299,703.48 790,774,356 426.00 180.00 28.16 13.46 2.31

Stocks to Watch

“Together we Achieve”

Possible runners… Real Estate the Next Big Thing for Centum? Centum Investment is definitely a stock to watch as it continues to diversify its portfolio from the stock market. The firm is set to gain from its venture into the booming real estate market where it has already injected Kes.3.6Bn in mid-2012 and seeks to invest an additional Kes.3Bn in the next three years. The company recently invested $.22Mn into the initial stages of the construction of Pearl Marina, a luxury real estate project in Uganda. Moreover it seeks to invest Kes.2Bn in its Two Rivers Project in Nairobi. The project aims at creating a premium world class master planned urban address and is situated along Limuru Road. These investments into real estate have impacted positively on the firm’s share price as it became one of the top gainers on Wednesday, May 29th 2013 gaining 4.55% to close at Kes.23.00. In addition, with the company set to release its full year results mid next month, more activity is expected on the stock especially given investors high expectations on Centum’s earnings which have increased on a half year basis from Kes.793.2Mn to Kes.805.6Mn as of September 2012.

“Be greedy when others are fearful and fearful when others are greedy” – Warren Buffet.

Stock Highlights: Centum Investment Current Price (29th May) KES YTD(%) % Market Cap (Mn) KES Shares Outstanding 52 Week High KES 52 Week Low KES P/E Trailing x EPS Trailing x Dividend Yield %

22.75 112.67 14,473.36 665,441,775 23.50 11.05 12.15 1.79 0.00

Again, the stock market has been performing well this year amidst a stable macroeconomic environment hence we expect the bourse to perform well into the year’s end. Equity Beats KCB to Become Top Though currently an expensive stock, Equity bank stands as one of the top performers in the stock market. The bank recorded impressive Q1 results this year on the back of cheap deposits and lending income. Profits increased by 22% to Kes.3.21Bn from Kes.2.63Bn recorded in the first quarter of 2012. It is currently the most valuable banking stock overtaking KCB with a market valuation of Kes.131.45Bn as per the closing price on Tuesday May 28th 2013. The bank beats all other banks in Kenya in terms of agency banking with 6,892 agents as at end of March 2013. Furthermore, Equity introduced agency banking in Rwanda last year and seeks to further replicate this model in Tanzania.

“Together we Achieve” Focus on agency banking will help expand the firm’s assets at low costs thus leading to higher earnings in the future. In addition, the bank seeks to diversify its portfolio with strategic global and local partnerships coupled with regional expansion into the East African market. It is thus a stock to watch out for in the future. Stock Highlights: Equity Bank Current Price (29th May) KES YTD(%) % Market Cap (Mn) KES Shares Outstanding 52 Week High KES 52 Week Low KES P/E Trailing x EPS Trailing x Dividend Yield %

35.25 0.8718 131,448.58 3,702,777,020 36.50 19.50 10.89 3.26 3.52

By Hazel Ndiho. THE END!!

Note: Any Suggestions towards improvement of the Suffesa Monthly review is welcome. We look forward to your views and comments on our Facebook page and contacts alike. If you wish to become an inaugural part of the editorial team at Suffesa Monthly Review or contribute, don’t hesitate to contact the person below: Lilian - +254 719 339 906.

Report by: Strathmore University Finance and Financial Economics Student’s Assosciation – (SUFFESA) Email – e.sufesa@gmail.com Disclaimer: The content provided on this document is provided as general information and does not constitute advice or recommendation by SUFFESA and should not be relied upon for investment decisions or any other matter and that this document does not constitute a distribution recommending the purchase or sale of any security or portfolio. Please note that past performance is no indication of future results. The ideas expressed in the document are solely the opinions of the authors at the time of publication and are subject to change without notice. Although the author has made every effort to provide accurate information at the date of publication all information available in this report is provided without any express or implied warranty of any kind as to its correctness. You should consult your own independent financial adviser to obtain professional advice before exercising any decisions based on the information present in this document. Any action Suffesa | ©2012 that you take as a result of this information, analysis, or advertisement is ultimately your responsibility.

Strathmore University, Student Centre, Clubs office, Madaraka, Nairobi. Tel: +254 725 471260 (Club Official)

“Together we Achieve”