Wednesday, March 09, 2011

A Random Walk on Kimathi Street

Wow! What a year so far... [Say it like Jeff Koinange: Whaaat a year... Whaaat a ride... We have seem NOTHING like it... Only on this blog. Only from COOOOLDTUSKER...]

I enjoy Financial Analysis [I crunch numbers for a living] but I need to brush up on my 'psychology' knowledge. I trust my number crunching skills are [immodestly] better than most but not Behavioral Psychology! [I completely misjudged the aftermath - or mood of folks - of 2007 elections]

2010 was a decent (economic) year for Kenya which also translated into a decent year for many Kenyan firms.
2011 is proving to be tougher, just 3 months in, with the myriad problems facing Kenya. Let's see:
- Politics. As Kenyans we can ignore politicians. The problem is the MPigs & cronies control the purse strings. Most Kenyan politicians are unethical, corrupt & shameless. Period.
- The constant & annoying political wars! kibaki-raila; PNU-ODM; KKK-'others'; you name it, we have go it... These 'wars' affect Kenyans' psyche as well as portray Kenyans as savages to investors... Before anyone gets on his high horse just reflect back to 2008...
- Revolutions in [oil-rich] Africa. Protests in [oil-rich] Middle East. Kenya as a net oil importers pays 25%+ more vs 1Q 2010.
- Drought. Well, this is a problem not necessarily the making of Kenya's inept & corrupt government or the feckless voters who elect the same or similar turds over & over. Nevertheless, we have failed to reclaim the Mau or other water catchment areas...

I will not include the scams. The latest is the NOCK scam. More on that in a post later on.

Anyway, all said & done, I do not expect an Annus Horribilis for most firms... A tough year? Yes. Disaster? No.

Yet the prices of many listed firms has dropped to crazy levels. Great for investors with resolve, cashflow & a thick skin...

KenolKobil [FY 2010 was 1 Jan - 31 Dec] Price: 9.70
Kenya's oil industry is loaded with scams [The latest is the 100% GoK owned NOCK scam] but KK is a tough cookie. They fought both KPRL & KPC [who had the support of the perenially inept or corrupt Ministry of Energy] though I would not say it was an unequivocal win.

The 1H was quite good with strong support from the subsidiaries but the Kenya profits will suffer in 2H because of the KPC & KPRL fight nevertheless I expect a decent 2H.

Price: 9.70
EPS 2010 (Est): 1.15
EPS 2011 (Forecast): 1.25
PER 2011: 8
P/B: 1.2

KQ [FY 2010-11 is 1 Apr - 31 Mar] Price: 35
It is going to be tough for KQ in 2011. In 2008, tourists disappeared. In 2009, the high oil prices hit KQ as well as the Global Financial Crisis. In 2010, it was rebuilding but the delayed 787s hurt KQ. In 2011, KQ have problems with lack of sufficient aircraft, pathetic Nairobi Airport, high fuel prices, lousy politics... Sounds bad? Sure, except most of the doom & gloom has been priced in already! And then some...

KQ continues expanding into [profitable] Africa including N'djamena & Ouagadougou. Jeddah also on the list for 2011. 2012 & beyond includes Kuala Lumpur & Sao Paolo. All these are trade destinations not just (volatile) touristy destinations.

The weak KES does [sorta] help KQ since 90% of the revenues are in hard currencies [primarily US$] which outweighs the forex expenses. For now.

Price: 35
EPS 2010 (Est): 4 [There is much more to EPS after taking into account various hedges]
EPS 2011 (Forecast): No idea!
PER 2010: 8.5
P/B: 0.81

Williamson [FY 2010-11 is 1 Apr - 31 Mar] Price: 180
It is a mixed bag for Williamson Tea. Tea prices are at high [vs 5-yr averages] but the drought will negatively affect 2011 production unless it rains. Seems India & sri Lanka are also facing supply problems. I doubt the prices will rise much more but increased production would help.

Price: 180
EPS 2010 (Est): 80 [includes non-cash profits of 40]
EPS 2011 (Forecast): No idea!
PER 2010: 2.5 [4.5 cash]
P/B: 0.4

The above is just basic information & folks need to dig much deeper!
For a long, unleveraged investor I see very little downside [expect for a repeat of 2008] for the above [& other] stocks at these prices.

Friday, March 04, 2011

PesaPoint has a Point - Open Access ATMs


Blogging is tough! Takes loads of time so I will try short posts for now.

Click on the Title for the Link to the Article/Source>

Seems Kenya is slowly but surely sliding back to Price Controls aka Command & Control:

Price Caps - Consumers & GoK force Price Caps on Oil Marketers. Not fair since it might kill off competition & the pricing formula places too much power into the hands of GoK/Ministry of Energy mandarins. No 3rd party oversight like South Africa.

Price Floors - Safaricom & Telkom want to protect their margins by 'lobbying' GoK to force Airtel to charge a minimum. Though GoK/CCK has not agreed to it, Airtel may be bludgeoned into accepting implied Price Floors through subtle threats.

Other potential Price Controls or throttling competition [including an untested law on competition]:
- Airtel, Yu & Orange want in on Safaricom's M-Pesa phenomenon. Nonsense. Build your networks EXCEPT for 'fair' clearing house fees.
- Banks must have leaned on CBK Governor to make Forex Bureaus less competitive. Wrong. Wrong. Wrong. Increase the oversight on the Forex Bureaus with heft penalties for abuse. Forcing us to go to banks who nickle & dime us? Unfair!
- Mastermind convinced GoK to amend the tax rules for cigs [in favor of MM]. BAT fights back by adjusting prices DOWNWARDS. MM complains.

What I prefer is open access [with fair interconnection fees] to all players who agree to minimum quality requirements.
What galls me is the lack of ATMs everywhere. Yes, we have great competitors/alternates in M-Pesa, Airtel Zap & Orange Money & YuCash. Yet, sometimes I want cash at odd hours. Anonymously. I am NOT comfortable going to a M-Money agent for a large sum [40,000/- or $500] then walking out. Who knows who he knows?

The chap has my mobile number. He has my ID number. He knows how much I withdrew. Or deposited. I like ATMs coz I figure HAL is still a benign chap. For now.

So back to my the crux of the matter. Instead of pushing price caps for M-Money, let's encourage Open Access between the players including Banks, PesaPoint, PesaPal, Telcoms, etc

ATMs - In 3 years from 1,078 (2007) to 2,052 (2010) is pathetic. Not even 100% while bank profits, loans & deposits have grown at least 100% for most banks since 2007. Check www.bankelele.blogspot.com for Bank Ratings.

Just my 2 cents!

Tuesday, March 01, 2011

Sale? Savings? What Savings? Oil & Bananas

I have been goaded into blogging again... Yes, Twitter has (almost) decimated the blogging trend!

Anyway, a short tale:

I was out shopping for fruits & veggies & I saw a sign "One dozen bananas for 40/- Stall #57" in huge letters on the other side of the market. It was crowded so I went to the nearest stall & asked for 12 bananas. The saleslady (Mama Mboga/Matunda/Ndizi) wraps them up & asks for 70/-...

Me: GASP! What??? They are only 40/- at Stall#57... You are ripping me off!!! Huff! Puff!

[Calm] Saleslady: I also sell one dozen bananas for 40/-. When I don't have any.

So I go go over to Stall #57... Lo & behold... there are NO bananas for sale! So I return to the original banana stand & quietly fork over 70/-
[George Bluth Sr: There's always money in the Banana Stand]

So what was the above tale about?
Well... National Oil Company of Kenya (NOCK) claims to be a saviour for Kenyans.

NOCK: "...would have seen the diesel reach Mombasa at $13.44 per tonne above prevailing crude prices..."

Note the 'would have' because lo & behold, NOCK will NOT fill the tender they won & crowed about!

NOCK: Delays are normal. Kwani? The delivery date of 19 Feb 2011 was merely a suggested date. We are a proud Kenyan firm that believes 100% in Kenya Standard Time.

Bottomline: Kenyans will pay $34/tonne for delivery. 3 weeks late. When crude is priced at $120 vs $98/bbl. Yep, we got snookered. Again. At least 22%