In Summary
  • A market report on real estate investments stocks in Kenya by Cytonn Investments indicates that Reits have produced a disastrous track record on the local bourse.

NSE Indices: The NSE indices are not yet out of the woodworks. Last week, they stretched their streak of poor market performance, with many stocks barely improving.

By the end of trading on Friday, the blue-chip index which benchmarks the market, NSE 20 Share Index closed the week at 3,462.56 points. The 25 Share Index ended the week at 3,949.14 points while the NSE All Share Index ended the week at 146.75 points.

Fahari: Stanlib’s Real Estate Investment Trust (REIT) last week announced its financial results for the seven months to June 2016. The first income REIT to be listed on the NSE declared that it had posted a return of 6.5 per cent.

This came as the I-Reit posted a net profit of Sh53 million. According to Mr Robert Ochieng’, a financial markets analyst, Fahari I-Reit further disclosed that it had earnings per share of 2.9 and headline earnings per unit of 0.23.

“The returns aren’t desirable right now and investors should not be too quick to throw their money on this counter,” he says.

Additionally, the Fahari I-Reit ended the seven-month period with revenues of Sh117.94 million. According to the financial statement from the firm, these revenues included rental income that was derived from three properties in Nairobi.

The firm announced that it had nearly completed the acquisition of three assets which include Bay Holdings, Highway House, and Greenspan Mall which is 94 per cent occupied.

Disastrous track record

Stanlib says at least 69 per cent of the Reit’s assets are properties while around 31 per cent of assets are in cash and near cash forms. A market report on real estate investments stocks in Kenya by Cytonn Investments indicates that Reits have produced a disastrous track record on the local bourse, with low subscriptions and significantly negative price performance.

Nonetheless, the report noted that the potential for growth was still highly significant compared to other markets. “The Reit market capitalisation to gross domestic product (GDP) in Kenya is currently 0.06 per cent compared 6.9 per cent in South Africa. This shows there’s room for growth real estate listings,” said the report.

The Reit is still young and in its first year on the NSE, having raised Sh3.6 billion in November last year out of the targeted Sh12.5 billion but exceeding the Sh2.6 billion minimum.

By the end of trading on Friday, Fahari I-Reit was the biggest loser after shedding 9.96 per cent to close at Sh11.30 per share from Thursday’s closing average price of Sh12.55 per share.

The I-Reit had a day’s turnover of 1.09 million. Prior to releasing its results, Fahari I-Reit was trading at Sh16.35, which was below its issuance price of Sh20 per unit by 18.25 per cent.

CFC Stanbic: CFC Stanbic has been recommended as an ‘accumulate’ by a market report by Cytonn Investments. Cytonn says this stock has an upside potential of 12 per cent, a dividend yield of 7.5 per cent, and a target price of over Sh83.6 per share.

This recommendation follows the half year performance by the bank which saw it record a 22.1 per cent growth in net profit to Sh2.3 billion from Sh1.9 billion recorded in the same period in 2015.

Additionally, according to a report by Cytonn Investments, earnings per share grew by 22.2 per cent to Sh6.1 compared to the 41.6 per cent growth of up to Sh5 recorded in the half year period in 2015.

The research report noted that the bank’s performance was largely fuelled by strong performance with both funded and non-funded income growth of 24.7 per cent and 18.8 per cent respectively.

Following its half-year performance, CFC raised its interim dividend pay for the period from 0.75 per share to Sh1.77 per share bringing the total payout for the period to Sh700 million. Only CFC investors who will be on the register by September 5 will get the payout.

On Friday last week, CFC closed the market at Sh80 per share after shedding 0.62 per cent from Sh80.50 per share average trading price recorded on Thursday.