Introduction
I have recently started buying a few shares of listed companies on The Nairobi Securities Exchange. I am doing this for experimentation and learning purposes but also to diversify my investment portfolio.
The Nairobi Securities Exchange (NSE) is the main stock exchange in Kenya. Founded in 1954, it’s one of the largest securities exchanges in Africa. The NSE is based in Nairobi, Kenya’s capital, and provides a platform for buying and selling shares, bonds, Real Estate Investment Trusts (REITs), and other financial instruments. The NSE operates under the regulatory oversight of the Capital Markets Authority of Kenya (CMA).
Detailed guide
Buying shares on the Nairobi Securities Exchange (NSE) involves a few key steps. Here’s a detailed guide:
1. Find a Licensed Stockbroker: You’ll need to open an account with a stockbroker or an investment bank that’s licensed to operate on the NSE. I personally uses AIB-AXYS AFRICA to transact on the NSE. They have an online platform and a mobile app you can use to trade.
2. Open a CDS Account: A Central Depository System (CDS) account will hold your shares electronically. Your broker will guide you through the account setup process. You’ll need identification and other documents to complete the setup.
3. Do Your Research: Before you invest, research the companies listed on the NSE. Look at their performance, dividends, market position, and future outlook. This is where your analytical skills will pay off.
4. Funding: Deposit money into your brokerage account. The amount will depend on what shares you wish to buy and the minimum investment required. I have used EFTs to transfer money to their accounts, but you can also use MPesa.
5. Place an Order: Once your account is funded, you can place an order for shares. You can either specify a price (limit order) or buy at the current market price (market order).
6. Settlement: The NSE follows a T+3 settlement period (Transaction date plus 3 days). This is the time it takes for your shares to be transferred to your CDS account and for payment to be finalized.
7. Keep Records: Ensure you keep all transaction receipts and communications for future reference.
8. Start Small: If you’re new, consider starting with companies you understand or ETFs that track the entire index. The minimum lot size is typically 100 shares.
9. Dollar-Cost Averaging: Invest a fixed amount regularly regardless of the share price. This strategy reduces the impact of market volatility.
Potentially undervalued stocks on the NSE
The following stocks are potentially undervalued:
- ABSA Bank Kenya (ABSA). Currently trading at KES 11.85, Absa Bank Kenya PLC, together with its subsidiaries, provides various banking products and services to private customers, corporates, financial institutions, and government clients in Kenya.
- Co-operative Bank (COOP). Trading at KES 11.85, The Co-operative Bank of Kenya Limited, together with its subsidiaries, provides corporate and retail banking, and investment and asset management services in Kenya, Juba, and South Sudan. The company was founded in 1968 and has about 4,864 employees.
- Equity Group (EQT). Currently trading at KES 35.95; Equity Group Holdings Plc provides financial products and services to individuals, small and medium sized enterprises, and large enterprises. It operates in Kenya, the Democratic Republic of Congo, Rwanda, Uganda, Tanzania, and South Sudan, as well as Ethiopia. The company was formerly known as Equity Bank Limited and changed its name to Equity Group Holdings Limited in December 2014. Equity Group Holdings Plc was founded in 1984 and is based in Nairobi, Kenya. The company has over 13,000 employees.
- KCB Group (KCB). Currently trading at KES 20.90, KCB Group PLC, together with its subsidiaries, provides corporate, investment, and retail banking services in Kenya, Tanzania, South Sudan, Rwanda, Uganda, Burundi, and the Democratic Republic of Congo.
- East African Breweries Limited (EABL). Currently trading at KES 129.25; East African Breweries Limited engages in the brewery, production, marketing, distribution, and sale of beer, spirits, adult non-alcoholic drinks, and malt and barley products in Kenya, Uganda, and Tanzania. Its brands primarily include Tusker, Balozi, Bell, Serengeti, Chrome, Gilbey’s, Kenya Cane, Uganda Waragi, Guinness, WhiteCap, Johnnie Walker, The Singleton, Gordon’s and Smirnoff. The company also exports its products to South Sudan, Rwanda, Burundi, and the Great Lakes region. The company was founded in 1922 and has about 1,408 employees. East African Breweries Limited was incorporated in 1922 and is based in Nairobi, Kenya. East African Breweries Limited is a subsidiary of Diageo Kenya Limited.
- Safaricom Plc (SCOM). Trading at KES 14.60; Safaricom PLC provides telecommunication services in Kenya. The company offers voice, messaging, mobile data, and M-PESA payment, as well as home fiber services; and internet of things, and cloud and hosting services. It also offers DigiFarm; Lipa Na M-PESA that enables merchants to collect payments from customers; and KCB M-PESA, a savings and loan services, as well as operates Masoko, an e-commerce portal.
- Bamburi Cement (BAMB). Currently trading at KES 25.1; Bamburi Cement Plc, together with its subsidiaries, manufactures and sells cement and related products in Kenya and Uganda. It offers cement products under the FUNDI, Tembo, Nguvu, Powermax, Duracem, Powerplus, and Powercrete names, as well as tile adhesive under the SETI 300 name; and pre-cast concrete paving blocks under the BamburiBlox brand.
Conclusion
There are several opportunities to own good quality businesses in Kenya at the moment. The Kenyan economy is struggling and most of the share prices have significantly dropped. It is like people losing interest in a valuable piece of land and the prices drop. This presents a great opportunity for the enterprising investor. Investing in shares can be very rewarding in the long term and the wealthiest people are all shareholders of successful businesses. However, please consult with a qualified financial advisor to guide you on this journey.
Unlock your true potential 