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Analysts predict Equity Bank’s stock gain on Congo acquisition, Equitel

By Kenneth Kwama | June 8th 2015

Analysts have predicted heavy demand for Equity Bank’s shares in the coming weeks following the collapse of one of the two cases seeking to stop the rollout of the bank’s new mobile money platform, Equitel and recent acquisition of majority stake in ProCredit Bank of DRC-Congo.

Standard Investment Bank and respected research firm, Stratlink Africa, in their short-term and long-term projections for the Nairobi Securities Exchange (NSE) market, have predicted a share price surge for Equity Bank stock based on the two recent fundamentals. In its June Africa markets update, research firm Stratlink Africa said Equity’s share is likely to start reaping the benefit of its expansion into new markets such as Congo DRC.

“We assess that investors are adjusting positions in select counters which have registered a rise in price in the recent past,” said Stratlink. “Investors are, however, likely to be bullish about Equity Bank (and Safaricom) in the coming months in view of their on-going developments.”

The ruling by High Court Judge Isaac Lenaola in which he dismissed a case that was seeking to stall the rollout of the bank’s mobile money platform, Equitel, is expected to increase the appetite for the banks shares as analysts predict a scramble pitting local and foreign investors for the shares whose price have averaged Sh49.90 in the past three months.

The judge ruled that since the Communications Authority and Central Bank of Kenya had approved the roll-out, the court had no reason to interfere “with the merit of a decision clearly falling within the relevant statutory agency without allegations of any irregularities on its part.”

In his judgment, Judge Lenaola said he was convinced the ThinSim innovation, which the bank plans to use in the platform, will enhance competition in the provision of services and would be beneficial to those who subscribe to it.

Mobile money

Equitel is expected to pose stiff challenge to Safaricom’s M-Pesa and could even take on a life of its own given it offers subscribers a mobile money platform to transact in addition to other telecommunication services.

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George Gopal, an independent analyst and investor at the bourse said that Equity bank’s acquisition of ProCredit bank in the DRC was “as viable as it is lucrative, especially given the large number of unbanked populations in the DRC and the innovative nature of Equity Holdings.”“These ambitious prospects perhaps present an opportunity especially for local investors to position themselves and acquire stakes into Equity Group Holdings shares at the NSE as it may as well be likely that the share price will double by end of the year from an average price of Sh47.25 as at the close of business at the NSE last Friday,” said Gopal. The bank currently operates in Kenya, Uganda, Tanzania, Rwanda and South Sudan with Uganda being the only market it did not start from scratch. All the subsidiaries recorded profits in the past year, the first time in the last five years.

Equity Group Holdings, the parent company of Equity Bank, posted a Sh17 billion profit in the year ended December 2014, making Equity the most profitable bank in Kenya.

Last week, the bank’s Chief Executive James Mwangi said the bank was considering an initial public offering in Johannesburg or London. “We already have 800,000 accounts and I’m optimistic we’ll have five million SIM cards issued by year end,” said Mwangi in an interview at the World Economic Forum on Africa in Cape Town. “For Africa, this is a bold step to converge financial services and telecoms along with payment services through American Express and MasterCard for tap and go,” he told South Africa’s Mail & Guardian.

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