When AccessKenya Group went public two years ago, a number of things set the Initial Public Offer (IPO) aside from many others before it. While it was a classic example of a private company (as opposed to a state owned entity) diversifying its shareholder base, it was also the first IPO of an Information and Communication Technology (ICT) company.

Now two years since the Internet Service Provider (ISP) listed and started trading at the NSE, the share’s performance compared to the NSE 20 index, has risen by about 100 percent. Its listing price was KShs10 per share. The index has fallen by about 50 percent, meaning that 10 Shillings invested in AccessKenya in June 2007 is now worth about KShs20; while if it had been invested in a basket of shares encompassing the NSE 20 index it would be worth KShs5.

A number of things have driven this share price increase – corporate leased line customers have more than doubled from the 1,250 at the end of 2006 (the year end pre IPO) to over 2,800 today. Revenues grew from KShs578m in 2006 to over KShs1.5 billion in 2008 and profits from KShs50 million in 2006 to over KShs200 million in 2008. But equally as importantly, the business now owns one of the largest and most advanced networks in Kenya for data services. AccessKenya Group has the largest Motorola Canopy wireless network in Africa, the largest Wi Max network in Kenya and is close to completion of one of the two largest metro fibre networks in Kenya – connecting a large number of the major buildings in Nairobi.

“We are fortunate that we are participating in the tremendous upsurge of usage of ICT in Kenya today, and are therefore able to deliver higher levels of growth than many other players who are in slow growing or already saturated markets,” says Mr Jonathan Somen the Group Managing Director. “This large and fast growing market, coupled with our aggressive sales and marketing team, and the value for money we offer our customers, have all contributed to a real increase in shareholder value in the past two years.”

With the impending arrival of the international fibre, it will be essential for serious companies to be able to deliver high quality, high speed services across the local loop; failure to which they will find themselves with a glut of international bandwidth but insufficient capacity to deliver high speeds locally. AccessKenya is currently pursuing three networks – Fibre, Wimax and Canopy – which Mr Somen expects will help it deliver high speeds and expand its market for data services.

“As our business continues to grow, we remain committed to balancing the benefits to all our key stakeholders,” he said. On top of its core data services for corporate and residential customers, the Group plans to expand its IT services division further. It has purchased 2.5 Gb of bandwidth as a founder shareholder in the TEAMS project in addition to taking up a share in Seacom – and has expanded to Kisumu, Eldoret and Nakuru, and along the Mombasa coastline.

AccessKenya has benefited from the stability of having a large number of institutions as part of its shareholder base, but also has about 30,000 individual shareholders. The balance between the two has been positive for the company as institutional investors buy into a stock based on its fundamentals. The counter is one of the most stable in the market. Now AccessKenya is targeting a minimum turnover of KShs2 billion in 2009 – well over double the turnover in 2007.

Our markets have been unpredictable for the last couple of months and many analysts have fallen over themselves trying to determine which direction it will take. Many have tried to call its bottom-line and failed miserably because apparently, our market is like a pendulum, swinging daily in different directions at the behest of various market dynamics such as supply, demand, investor sentiment, grand coalition government woes and company key fundamentals.

An analysis by Hidalgo Investments picks these companies as the top ten stocks to watch in the next quarter (and especially the next one month):

1. Kenya Airways

Low P/E – Upcoming poor results already factored in to the price. Will recover from effects of post-election violence for now and grapple with the current economic downturn which has made traveling only essential, thus cutting its passengers by 17 percent. Fuel prices are cheaper now, and hedges which they had gotten themselves into must have run out direct flights from JKIA. This will mean more connecting flights from Eastern/Central Africa. The worst of the financial crises is however over thus making KQ a good buy for the long term.

2. Centum

Low P/E – Upcoming bad results already factored in to the price. Their big loss will be a one off; will not affect next financial period, and their rebranding seems to be paying off.

Their application to buy into carbacid shares will be a definite boost since it will be an opportunity to unlock millions in investment options held by the company. Their holdings will appreciate starting April (except RVR), but hoping that RVR does get a strategic partner in South America, Brazil. Solid company, good management, have learnt their lesson through the rebranding issues.

3. AccessKenya

High P/E – AccessKenya has its own network of fibre optic cable, something no other ICT company, save for Safaricom through sea cables has. It also bought a stake in the undersea cable and currently has the largest satellite download. They could look at leasing out some of their bandwidth in the future, something which competitors Kenya Data Networks (KDN) until recently had a monopoly on. Key difference in their internet offering with Safaricom is that theirs is guaranteed speed, while Safaricom’s go by how many users are logged on and targets the mass market.  AccessKenya targets mainly high net worth individuals and corporate. I think the high P/E is more reflective of the growth potential on this company. From a price perspective, the stock is also quite stable technically on pricing.

4.     4.  Sasini

Low P/E – Low price; can rise 50 percent without breaking a sweat; diversification into the hospitality business with its brand name, ‘Savannah”.  The re-strategy of its core business to factor with the global crisis thus keeping it ahead of its peers in the same industry.  Tea output has suffered in Kenya, so it will be interesting to figure out if its farms have suffered the same. On the plus side, the Shilling has lost value against the dollar and tea prices globally are high (on account of reduced supply); it is also not clear if its diversification initiatives have borne any fruit thus far – that is, Savannah's contribution to the bottom line. Speculative buy for me based on low price.

5. Equity

Low P/E – They are opening 500ac's/day in Uganda. The best bank in terms growth and client acquisition; regional expansion working for them; incredible marketing strategies to stay ahead of the rest; impressive results and prudent management. The three year lock in period for majority foreign shareholders did elapse. The split is their best ever strategy to make the share more affordable to the local retailer and increase its supply at the market. World Bank and IMF support.

The aforementioned are companies that deserve a second and third look when investing and the short notes below each company represent the issues of sentiment, fundamental and fact about each company that one needs to consider. As an analyst, I stand to be corrected especially in a market like ours.

To be continued next week...