Flame Tree, CIC Group emerge top gainers at Nairobi bourse

In the month of September, the Nairobi Securities Exchange witnessed some interesting movement in the stock market. Flame Tree Group and CIC Group emerged as the biggest gainers by share price, outperforming companies such as East African Portland Cement and Standard Group, which faced losses. Additionally, Unga Group, a flour-milling company, reported an 18% drop in net profit for the full year ending June 2016. Discussing these market changes and more, Duncan Lumwamu, a Senior Investment Analyst at Cytonn Investments, joined CNBC Africa for a detailed analysis. Lumwamu shed light on the reasons behind the success of Flame Tree and CIC amidst the current market dynamics. He highlighted the significance of investors exploring 'penny stocks' like CIC and Flame Tree amid turbulence in the banking sector. Lumwamu emphasized CIC's impressive performance, especially in premium collection and cost-cutting measures, positioning it as a top-performing stock in the insurance sector. Regarding the overall market situation, Lumwamu acknowledged the challenges posed by a bearish trend since Q2 of the previous year, exacerbated by interest rate caps. However, he expressed optimism about a potential market recovery, particularly in the banking sector, with banks like Equity Bank and KCB showing resilience and upward momentum. Lumwamu attributed the market's subdued performance in September to the aftereffects of the interest rate caps but anticipated a more vibrant market in the last quarter as investors adjust their positions. Shifting the focus to Unga Group, Lumwamu delved into the company's financials, highlighting operational costs related to new silos while noting a positive cash flow from operating activities. Despite a reported 18% drop in net profit, Lumwamu clarified that factoring out one-off items revealed a 17% growth in the company's performance. He attributed this growth to revenue expansion and significant cost savings, particularly in foreign exchange losses, signaling organic growth and a promising outlook for Unga Group. Regarding Unga Group's strategic decision to sell its stake in Bo Park Limited, Lumwamu viewed it as a positive move to realign the company's focus on its core business of food production. By divesting non-core assets like packaging units, Unga Group aims to streamline its operations and enhance its competitiveness in the market. In conclusion, despite the market challenges and fluctuations, Lumwamu's analysis conveyed a sense of cautious optimism for the future. With a potential market recovery on the horizon and companies like CIC and Flame Tree demonstrating resilience and growth, the Nairobi Securities Exchange continues to be an arena of opportunity and strategic maneuvering for investors seeking value and performance.