Kenya Power Ltd., the country’s sole electricity distributor, Housing Finance Ltd., the only publicly traded mortgage lender, and NIC Bank Ltd. are among 11 stock picks selected by Old Mutual Securities Ltd.
Other companies in the 2013 list include Equity Bank Ltd., Diamond Trust Bank Ltd., Kenya Reinsurance Corp., Bamburi Cement Co., TransCentury Ltd., Safaricom Ltd., Mumias Sugar Co. and Uchumi Supermarkets Ltd., the Nairobi-based brokerage said today in an e-mailed report.
This year’s picks include six of last year’s, Old Mutual said, including Kenya Power. While the country is expected to benefit from low interest rates, a peaceful election will be the key determinant of market performance, according to the brokerage. Kenya is holding elections in March, the first since a disputed vote in 2007 triggered violence that left more than 1,100 dead.
“What foreign investors are looking at is who are the key leaders in the next government,” Eric Munywoki, a research analyst at the brokerage, said by phone. “If the Jubilee Alliance wins, there are fears that external financiers like the World Bank and the International Monetary Fund may freeze funding” because its leaders are facing war crimes at the International Criminal Court, he said.
Kenyan Deputy Prime Minister Uhuru Kenyatta, 51, is campaigning for the presidency even as he prepares to face charges of crimes against humanity, as is his running mate William Ruto.
Kenya Power is attractive because of the “vast opportunity in the power sector as a result of low penetration rate” and increased revenue from its rural electrification program, Old Mutual said. Housing Finance will benefit from a growing interest in Kenyans to become home-owners, boosting the country’s low mortgage penetration, the brokerage said, while NIC has a low cost of funding after completing a rights offer last year.
Last year’s stock picks would have returned 45 percent in an evenly distributed portfolio, Old Mutual said, outperforming the 29 percent advance for the Nairobi Securities Exchange 20-Share Index.