Blog Archive

Saturday, September 30, 2006

Githongo implicated kibaki... Economic fallout expected

Sigh... I have tried to keep my blog focused on Kenyan financial matters including listed firms e.g. (KQ & EAPCC) as well as macro-economic trends.

I think the current political issues & scandals will negatively affect Kenyans' economic well-being.
Of all the personalities named/involved in the Anglo-Fleecing scandal - among others - IMHO John Githongo seems to have little or no reason to "hide" any of the incriminating evidence since he is neither a politician nor benefitted or benefitting from any of the "proceeds" from the numerous scandals.

The current government did try to blackmail John Githongo through "exposing" an alleged loan made by pereira (an arms dealer & crook) to JG's father. This was unsuccessful. JG stuck to his guns. I can see why he is in exile because I also fear for his safety.

The news that kibaki knew of the extent of rot within his government will definitely affect the economic outlook for Kenya as more Kenyans & foreign investors get disgusted with the status quo. This news also brings to the fore further agitation that will affect multiple businesses & lead to an acrimonius election.

Was evidence gathered by The Standard the reason why their offices were raided?
None of the so-called "treasonable evidence" has been released nor has the government taken The Standard to court over this "treasonable evidence"...

Thankfully, there is a strong private sector that can resist the shenanigans of the government & politicians. The recent privatisation & divestitures of entities like Mumias, KCB & soon KenRe will increase the resilience of Kenya's economy.

I hope other institutions like KenGen, EAPCC & KPLC can escape the government yoke thus do their best for the people of Kenya not the politicians & their cronies.

Friday, September 29, 2006

KQ to add Comoros as a destination

The reason I have KQ as one of my Sep 2006 Raves is their dynamism. After announcing flights to Paris in Oct 2006, they will add French-speaking Comoros in Nov 2006.

The JKIA expansion has finally taken off, 3 years late, but welcomed by KQ since JKIA is their main hub for their rapid growth as a regional airline.

What does Kibaki mean by "ultra-modern facilities" in Wajir & Isiolo? Is this another Eldoret?

Why don't they extend the runway at Eldoret Airport to ease congestion at JKIA?
There are many tourists who care not to see Nairobi but would rather fly to Eldoret then to the Game Reserves & National Parks!

Uganda to issue more UShs 5 coins!

Absurd economics...

1US$ = UShs 1866
Lowest US coin is USc 1 = UShs 18.66
UShs 5 = USc 0.268 (US$ 0.00268)

KShs 1 = UShs 26
UShs 5 = KShs 0.1937

Why would the CBU (even after Museveni's edict) do something so stupid as issue such valueless coins? Even Kenyans have moved to the KShs 1 coin & forgotten about the 50 cent coin!

I think I should go acquire a furnace, ship it to Uganda, accumulate Ugandan coins & smelt them down... then export the metal to China... who will turn them into goods to re-import into Uganda!

Central Bank of Kenya Website is down & out!

Wow... and we want to be a "developed" country but the Central Bank's website has been down for a week!

Didn't CBK Bank pay its ISP?
Did CBK run out of cash?
Is CBK's internet access through PCK (another entity which was cut off from internet access)?

Why can't I get to the homepage but this link allows me to view Andrew Mullei's biography even though he has been fired or suspended as CBK governor?

Thursday, September 28, 2006

KPLC announces 2005-6 Results

KPLC reported a higher profits for 2005-6 (y-o-y):

Year End: 30 June 2006

Sales (Net): KES 22.5 Billion (+3%)

PBT: KES 2.5 Billion (+25%)

PAT:KES 1.64 Billion (+29%)

Taxation: KES 48 Million (+20%)

EPS: KES 20.78 (+29%)

Dividend: KES 1.50 per share

Units sold were 3% y-o-y but that is lower than GDP (+5.8) growth which indicates there may have been "transmission" constraints while prices were higher than 2004-5. KPLC passes through all fuel-cost recoveries but lower fuel costs in 2006-7 (hoping the current lower oil prices remain, well, low) will be beneficial as more customers hook up to KPLC's network.

Future prospects seem good if the economy continues on its current growth, fuel prices remain steady (or drop) & increased efficiencies in transmission. There is a new management team in place from Manitoba Hydro International.

A major issue/challenge remains the rate hike that KenGen wants but will impact KPLC unless it can recoup the increase from its customers. This is unpopular since Kenya has among the highest electricity costs among major African countries.

Wednesday, September 27, 2006

Rants, Raves & Reviews! Sep 2006

  • BARS - Slow immobilisation of shares still plagues the process
  • CFC Bank - No online banking! Cutback on Saturday hours. Main page has a market report dated 25 Sep 2005 (this is Sep 2006)!
  • Francis Drummond - Nice staff/folks but the service could be much better!
  • NSE - Index errors as well as misplaced hubris. Lousy website with outdated info!
  • CMA - Do they even care about the retail investor? Website is an embarassment!
  • Kenyan Politicians
  • Kestrel Capital - The best brokers in Kenya. Period.
  • Invest in Africa - Great newsletter, well researched & worth every cent!
  • KQ - My airline of choice for African destinations.
  • NIC Bank - Emerging as the Retail Bank of Choice. Citibank refers all their retail business to NIC.
  • I&M Bank - Great bank for mid-sized businesses. Classy offices/branches.
  • Bankelele - Blog (Financial & Social)
  • Thinker's Room - Blog (Social & Political commentary)
  • Nairobist - Nice website for all things Kenyan
  • KACC - An expensive to maintain but toothless bulldog.
  • GOK - More efficient but needs much more work
  • NARC - Dead
  • NARC-K (NARK) - The "real" incumbent party
  • ODM-K - The "real" opposition
  • KANU - The razor blade has almost felled this once mighty Mugumo tree!

Tuesday, September 26, 2006

KenGen makes Kshs 3.8 Billion PAT 2005-6

KenGen reported a spectacular rise in profits in 2005-6 over 2004-5.

Year End: 30 June 2006

Sales: KES 14.3 Billion (+30%)

PBT: KES 3.7 Billion (+42%)

PAT:KES 3.8 Billion (+115%)

Taxation: KES 48 Million (-106%) - Apparently, there were huge "tax benefits" that accrued from the listing (tax rate will drop to 25% from 30% in 2006-7) & subsequently the PAT is higher than PBT in 2005-6!

EPS: KES 1.71 (+115%)

Dividend: KES 0.55/share

"These results represent a solid performance from the company. Earnings in 2006 were favourably impacted on by an increase in units sold as well as improvement in operational efficiency," said a statement by managing director Edward Njoroge.

KenGen sold 4,538 kilowatt hours compared to 4,280 last year.(+6%)

"As a newly listed company on the Nairobi Stock Exchange with 30% private shareholding our Corporation tax will reduce from 30 to 25 per cent with effect from the next financial year. This new rate has impacted on the deferred tax liability computation in compliance with International Financial Reporting Standards resulting in very low tax levels this year." per the announcement.

The growth in the economy (+5.8%) seems to be a major contributor to the increased sales (+6%). The rains also benefitted KenGen since hydroelectric production is much cheaper than thermal production.

KenGen indicated it would invest in an additional capacity of 500 megawatts over the next five years to meet rising demand.

KenGen plans their maiden AGM at the Kasarani Gymnasium - I wonder how many shareholders will attend - on November 30 2006.

The Government may sell more shares to the public but there is no timetable but it will probably be AFTER Mumias, KenRe & Telkom/Safaricom.


Don't go gaga over KenGen's profits, yet, until the Annual Report is released. There may be various "non-recurring" items included in the profit.

Nevertheless, there is a strong possibility of ample growth if KPLC can increase its customer base by 500,000 users over the next 5 years. KenGen plans to spend KES 70 Billion over the next 5 years to increase their capacity by 500MW.

  • How will they finance the expansion?
  • Will KPLC be able to market & sell the additional production?
  • The profits will have to rise substantially to enable debt service of an additional 70 Billion!
  • The tax effect will be substantial in 2006-7
  • Will the 60 cent rate hike be effected in 2006-7?

Links to access/download Olympia Capital Holdings Info

I do not have a website or hosting capabilities therefore I have requested the following webmasters/websites to allow those interested to download/access information on Olympia Capital Holdings Ltd (Kenya).

If you are interested in the 1H 2006 Results (announced/released about 2 months ago) please link through to the following sites.... It may take a day or two before it is posted online...

Invest In Africa

OCHL is listed on the NSE (Industrial & Allied) & was 15/- (26 Sep 2006) with a few small trades over the past month. I use myStocks to track the prices & volumes...

Investing In Africa

Dear Readers,

I recently came across an excellent newsletter that promotes Investing in Africa epononymously called Investing in Africa. I say investing because the publisher understands & emphasises to his subscribers the RISKS inherent in most African Stock Exchanges viz. illiquidity, currency restrictions & the politics! Yet, there is immense potential in the continent.

The newsletter is reasonably priced at US$39 per year, well researched, provides stockbroker contacts & reviews & is a delight to read!
The first pick recommended (Letshego of Botswana) would have paid off for a lifetime's worth of subscriptions had I subscribed earlier!
$3.25 per month does not buy a latte at Strabucks but could provide the opportunity/mean to buy an interest in a coffee farm, if not the whole farm!

They provide a sample report & I think the quality of the subsequent reports are just as good!

For you sceptics out there - I do not get a referral fee! - but I think we should support someone who encourages investments in Africa when there is scant interest & knowledge among most investors. There is always news on "new" funds that look to invest in Asia (esp China & India) but not in Nigeria, Kenya or Zambia!

So take this opportunity to Learn & Earn!

Monday, September 25, 2006

NSE dahlings are down... or are they?

Finally some share prices are finally falling considering the speculative rise seen for over 2 weeks... The NSE index tumbled 50 points (1.1%) today...

Some folks have pooped on the party but the drop in prices is uneven. Some counters e.g. NBK & KQ have fallen further (see earlier blog entry) but their underlying fundamentals are very different. Logic has little to with it but market psychology drives the market. Any other thoughts?

I believe share prices on the NSE (no market makers, generally illiquid & no shorting allowed) to be sticky i.e. share prices tend to rise faster than they fall since the Sellers are holding out for a better price while prices rise while they are unwilling to sell immediately prices drop.
Therefore, impatient Buyers who can't wait support the price while it gradually drops. The patient/disciplined Buyers will wait until either the Sellers get desperate or the price hits their target Buy price.

IMHO, in Kenya, the retail investors chases shares when prices are rising but the market bottoms are anchored by the institutions moving in...

I think the current mood is moderately bearish & unless spectacular results are announced soon, there will be little to spur the NSE. The current political situation does not help. The market will wander aimlessly but it is INDIVIDUAL shares that need watching!

Do your own research! My opinions are just that, my opinions! I believe successful investing means that one has to be ready to hold for the long-term (at least 3 years) but take advantage of short-term pricing mismatches! Further, monitor your investments i.e. make sure the reasons why you purchased the stock still exist. Don't expect eye-popping prices unless you find a firm that others have missed! Inspired by Ryan S-H...
  • KPLC - The 2005-6 Final results are due anytime now since their year-end is June 30 2006. I expect good results BUT the issue of KenGen's "reprieve" will remain as a cloud over KPLC's results. Tough call but certainly buy on price weakness.
  • KQ - 1H 2006-7 results expected Oct/Nov 2006. One of the lowest P/Es (12x 2005-6 results) thus rated a BUY by NSE standards. Only 164,000 shares traded thus the current price (124/-) will have to give i.e. it will drop to the 120/- level or rise above the 130/- level by 27 September 2006.
  • Sasini - Year ends 30 Sep 2006. I expect the current price (41/-) to fall slowly since Coffee's 2nd marketing window's benefits will not accrue till 2006-7. The "Sasini" branding move will negatively affect Sasini's profits in 2005-6 but expect growth in the next few years from this line of products. The earnings are extremely volatile earnings. Wait for the share price to drop. Then check the following; the rain forecast for 2006-7, Kenyan tea prices, India & Sri Lanka's estimated production & finally the trade/political situation with Pakistan & Egypt. If all looks good, go through the process again!
  • BAT - 7% dividend. Steady growth. The downside is limited even with the "tobacco regulations" since smoking remains a growing habit BUT haphazard implementation of these regulations (as Ngilu demonstrated) can affect BAT in the short-term. BUY for steady not explosive growth.
  • NBK - Unless the government "bails" out NBK by issuing a bond to "absorb" the bad debts, there is no justifiable reason for the current price! SELL.

The NSE is inefficient even with the ATS system since clients can't see current prices thus it prevents "quick" decisions. The major beneficiaries are the brokers who trade in their own accounts since they can sense the market's direction while the rest of the shmucks are generally late to the party!

Sunday, September 24, 2006

Celtel - The new Africa superbrand?

Well, it was started by Mohamed Ibrahim (Sudanese origin) but he sold it to MTC of Kuwait...

Anyway, it has been growing in leaps & bounds & recently attained control of V-Mobile (Nigeria) thus entering Africa's largest market.

Celtel is known is Kenya as the successor to the moribund KenCell. CelTel bought out Vivendi's 60% ownership in KenCell. Even more "celebrated" was the KES 2.0 Billion that Sameer Group (Naushad Merali's Holding Company) made on the flip. Merali used his pre-emptive Right to buy out Vivendi & flipped the 60% to Celtel. Celtel committed to investing additional funds into the Kenyan operations.

Following up on an earlier entry, Kenya needs to provide the base for a East African Internet Network by co-opting a major international player to develop Kenya's stranglehold on the region's need for speed.

How do we do that?

Pricey Broadband

Thursday, September 21, 2006

Best Option for Kenya's Interconnectivity Dream

Kenya should stop mucking around with the S.Africans on EaSSy & find an alternative.

I propose Kenya links up to the network established by Reliance Communications of India. They have become the 800-pound gorilla of Telecom connectivity in the local Indian market & a major regional player in the Indian Ocean region. In any event, who can beat the Indians at cost-effective IT?

Reliance purchased assets for pennies on the dollar from various failed players & own their own network that connects them from USA to Europe to India. In addition they have expanded regionally to the Middle East & are looking towards Africa.

By using their network, Kenya can have a gateway to most of the Mid-East countries (including Qatar & UAE) as well as UK, Germany, China & USA. The benefits are enormous since ALL our largest trading partners will be connected through the Reliance network much sooner than EaSSy (or not so eassy).

Leveraging Indian BPO expertise, Kenya should strive to become the provider of choice for various call-centers since the time difference from the UK is only 2 hours. The USA might be harder to crack but the potential remains. Kenya is a major tourist destination for the Brits & Germans so what better way than have a Kenyan "operator" provide the necessary info to a potential tourist!

Kenya needs to establish a major program to teach German - I bet the German embassy would be happy to assist! - & whose grads could be employed by firms targetting the German BPO market!

Party Pooper....

In an earlier entry I asked when the party will end & well, it seems, the festivities have taken a breather (no, I was not responsible) after the relentless rise for the past 2 weeks...

The NSE index dropped over 106 points today but it doesn't reflect the entire market but there are some prime movers:
  • NBK was down 9.63% to 61/- & I expect a further drop since there are few fundamentals underlying the price. There is speculation as to the "Bad Debt Bond" which will be used to clean out the NPLs on NBK's books.
  • KQ was down 8% to 134/- which is where it stood on Sep 19. Someone made some good money! I expect volatility since their 1H 2006-7 results are due in Oct.
  • KPLC was down 8% to 250/-. This was 22/-! Well, there was an amazing rise in the price as the Final 2005-6 results are awaited. They will probably be released by Sep 30 (90 days after the year end is standard).
  • EA Portland Cement was down 8% to 130/-. Their poor results for 2005-6 were to blame. The 2H period was very poor. EAPCC had fired its dynamic CEO (Ole Mapelu) earlier in the year. I wonder if the 2H loss would be attributable to his sacking.
Some price Laggards have shown some surprising resilience including Marshalls (+10%), Scangroup (+5%) & Sameer (+4.6%). Apart from Scangroup, the other two are relatively quiet esp Marshalls!

So where from here... well, I hazard a guess... the "overpriced" stocks will continue falling while the institutions will return to the party for the "strong" firms at reasonable prices...

We will see a Dead Cat Bounce" before a breakout either up or down...

For those who can't access certain blogs... here is a log...

Friday, September 15, 2006

Sad sad story of Zimbabwe

kenyanentrepreneur: Zimbabwe's Stock Exchange Thriving....

NSE party will end... when?

I expect this party to start experiencing major hiccups!

  • E.A. Cables (post-split) has dropped to 77/- (15 Sep 2006) from a high of 105/-
  • Valuations are out of whack e.g. P/Es are routinely over 15 even if there is minimal expected growth
  • Speculation seems to be the name of the game. The brokers' offices are packed with folks who don't know or care what they are buying! The "tips" are from inexperienced clerks who can't even read a balance sheet let alone analyse one!
  • The economy, though growing, can't seem to hit the "magic" annual +8% GDP growth
  • The KRA is cracking down on tax defaulters who will have to pay taxes thus leave less for "other" ventures & investments
Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well. - WB
Many are buying stocks coz its fashionable not coz it makes investment sense!

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years - WB
Well, many current buyers can't wait to sell. They want an instant increase so they can "churn" the funds! 10 years is a lifetime to them!

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. - WB

My favourite quote! Others are getting very greedy so I think I need to be fearful!

WB = Warren Buffett (My mentor - he just doesn't know it yet!)

Saturday, September 09, 2006

Africa in Bloom

This is an article on some amazing stuff done in Uganda. This can be replicated in Kenya & Tanzania if the politicians' grubby fingers can be cut off!

Imagine what a revamped Kenya Railways can mean for Kenya & Uganda with the potential exports of cassava & rice to China!

Infrastructure is key & all EAC countries can benefit from reduced costs for all exports making them competitive in the face of subsidies.

The governments should FIGHT the subsidies in ALL markets esp cotton, sugar & rice....

Thursday, September 07, 2006

Safaricom: IPO Mania... Coming soon to the NSE

Safaricom's IPO will be the "Mother of IPOs" when it happens!

The government (thru Telkom) owns 60% while Vodaphone owns 40%. The current CEO is a Vodaphone nominee/appointee.

  • Vodaphone had offered $100 Million for 11% of Safaricom in 2005 thus valuing Safaricom at $900 Million (KShs 68 Billion)
  • PKF valued Telkom's 60% of Safaricom between KShs 34-57 Billion thus valuing the entire shareholding of Safaricom at KShs 57-95 Billion range.
The government wants to raise KShs 27 Billion before the elections by selling 9% of Safaricom to Vodaphone (at a price Vodaphone accepts to give up their "right of first refusal") then floating about 26% of the firm on the NSE, leaving Telkom with 25%.

Opinion in Blue
The listing could be achieved as an "Offer for Sale" or "IPO".

The IPO is a better way to go since it will raise cash for Safaricom to reinvest in Kenya & within the EAC while keeping the cash out of the government's hands so close to election time.
Nevertheless, the need for cash to settle Telkom's debts, facilitate restructuring & for those on the government's gravy train, it is likely there will be an "Offer for Sale".

Based on the hype & profitability of Safaricom, the IPO will be a blockbuster if fairly priced. I expect strong interest from Kenyans from all walks of life, Kenyan diaspora, EA citizens, EA institutions & foreign fund managers.

Mumias 2005-6 Results are, well, Sweet...

Mumias Sugar Announces 2005/6 Results

I was unable to find their website. The Standard

Details from Mumias Press Release

Gross Turnover: KShs 14 Billion +14%
Net Turnover: KShs 11.6 Billion +14%
Operating Profit: KShs 2.1 Billion + 14.5%
Profit Before Tax: KShs 2.2 Billion +20%
Profit After Tax: KShs 1.53 Billion +18%
Earnings Per Share: KShs 2.99 +18%
Dividend Per Share: KShs 1.75 +17%

Management is cautiously optimistic about 2006/7 & beyond given:
  • Lower world sugar prices compared to 2004-5
  • Stiffer local competition
  • New venture - electricity co-generation for sale
  • New venture - Alcohol production
  • Higher efficiencies through better management of operations
  • Capacity enhancement (Expansion & Modernisation)
  • Increased local demand to 1.2 Million tonnes by 2010
  • Sugar levy (on farmers) which makes imports a larger threat
The government is expected to dispose of 91,999,220 shares (18.04%) by Dec 31 2006. This is a huge PLUS since it decreases government interference.

2006-7 will be much better given the recent rains starting in April 2006 which will enable higher & better quality cane production thus higher extraction rates.

2007 might see a world sugar deficit since Brazil has upped its ethanol production, Europe is reducing its production of sugar beets & China has become a net importer of sugar. This would lead to higher prices thus reducing competition from imports into Kenya.

Mumias' price (60/- on 8 Sep 2006) is NOT cheap! Current P/E is 20x which is higher than other well run firms e.g. BBK, KQ, etc.

Reduction in government ownsership os a huge PLUS since it decreases government interference. I hope the govt uses the funds to improve the INFRASTRUCTURE in Mumias' sugarcane growing regions!

I expect the shares to be sold at 50/- (approx 20% discount) to the prevailing price.

EADB support Importers over Local Assemblers

I am disappointed that the Local Assemblers are getting the short end of the stick!

Instead of incentives to Local Assemblers;
  • Improved infrastructure - roads, reliable electric supplies
  • Export-friendly procedures e.g. prompt VAT & customs refunds
  • Increased security
  • Zero-tax on local assembled cars
  • Training credits for employees
the government is supporting thru the EADB, a facility that will flood the local market with imported cars, many which are ill-suited to our roads!

The Local Assembly plants provide jobs to more Kenyans that an importer esp in the ancillary industries e.g. radiator, shocks, etc manufacturers.