This research report was prepared by the Research Department of Old Mutual Securities Limited. Old Mutual Securities Limited is a securities trading company licensed by the Capital Markets Authority (Kenya) for the purpose of facilitating trade on the Nairobi Securities Exchange.

Here are our views on the news making headlines today for Kenya:
Mortgage lender Housing Finance has raised Sh3.5 billion through a rights issue that saw its shareholders offer up to Sh9 billion to the company, representing 2.6 times what it had asked for. HF had priced the cash call at Sh30 per share, offering 116.6 million new shares at one for every two held. Shareholders applied for a total of 98.2 million shares worth Sh2.9 billion in the original allotment, representing an 84 per cent subscription rate as a section of shareholders failed to take up their rights.

Our View: Housing Finance continues to offer good opportunity for low and middle income Kenyans for turning their dreams into homes. The Company’s strategic shift to low and middle income earners continues to tie in with the company’s overall focus of delivering affordable housing units to the market place. We see great potential in the areas of property supply chain through their building society arm; Kenya Building Society, as the firm targets borrowers who have the ability to repay a home loan and do not have the deposit required as partial payment. This presented a favourable opportunity for the company to launch their “Ezesha product” (105% mortgage financing product) given that their average mortgage life is 13 years, shortening their investment recoupment period. The firm plans to use the proceeds to expand its lending capacity in the mortgage finance segment, where it is competing with other top lenders like KCB. HF also plans to grow its presence in the country, with an estimated KES 175 million earmarked to fund the opening of seven new branches this year.

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