Banking Sector-A completely transformed environment: On periods like these when the global financial system is dealing with credit crunches, it becomes extremely difficult to continue relying on the traditional valuation metrics like the historic correlation between interest rates and earnings yields. The financial marketplace is now more connected than ever and even more susceptible to global shocks. Based on our time series analysis of recent global financial crashes – the US financial system collapse (2007-2008) and the ongoing Greek-Led eurozone[...Read more]

We initiate our coverage of KenolKobil with a BUY recommendation and advise investors to increase their exposure to this stock based on our 12-month price target of 15.92, a 53.08% upside from the current price levels. At a price-to-book value (PBV) of 1.39x, we hold the view that the stock’s price discovery process has consistently stagnated with the market’s ‘imperfect’ valuation paradigm often failing to price in the underlying strong earnings potential. KenolKobil, in its pursuit for value, has continually[...Read more]

We are underweight on Kenya Airways “KQ” and advise investors to reduce their exposure to this stock based on our base case 12-month target price of Kshs.32.99. This represents a 4.38% downside from the current price levels. Our view is further informed by the fact that the global Airline industry is heavily leveraged and airlines have never returned the cost of capital. KQ’s FY2011 leverage retreated to 94.20% down from 114.72% as at FY2010 and the airline’s net margins has[...Read more]