Kenya's winners after the tough times

Just a quick overview

Equity Bank - Acquisitions + Organic growth will propel it to the #2 Kenyan bank by 2012. Plenty of cash for NBK and/or HFCK acquisitions.

KCB Bank - Organic regional growth but need to raise cash in 2010. Huge bet on housing in E. Africa will propel lending.

EABL - The classic tortoise expansion strategy into regional markets. Dominates Kenya but strong challenger (SABMiller) elsewhere but Tanzania is no-go for EABL. Ethiopia is the Holy Grail for EABL.

Cash is a-plenty plus Diageo is always there if needed.

KQ - Huge hedging 'paper' loss in 2008-9 which will translate 'cash' loss of cash by Dec 2010 but KQ generates plenty cash from operations. Cash-flow + cash hoard ($100 million)allows for route & fleet expansion. Dominates many African markets but Ethiopian Airlines is tough African rival. Other competitors expanding but Africa is littered with dead airlines.

KenolKobil - Expansion is afoot & the cash is available. Borrowings mostly short-term to finance inventory. Kenya is the largest & toughest market but KK hints acquisitions in Central & Southern Africa. Smart, lean, responsive & voracious management.

AccessKenya - Huge capex in laying cable in Nairobi. Other metros will follow. Push for SoHo customers. Remains a juicy acquisition target. I expect Access to enter Tanzania & Uganda after SEACOM goes live in 4Q 2009.

KQ announces profit warning

I screwed up - in my defense, I tried my darnedest to find the ACTUAL announcement but was stymied by lack of information from KQ or the NSE.

Anyway, DN posted this article that claimed KQ's profits made a HUGE jump. I was unable to confirm the real story until much later... and it turned out that the story was not as rosy! In fact, it was not rosy at all!

KQ's 3Q 2008-9 ASKs were up 7% but DN claimed it was their PBT that was up 7% over 3Q 2007-8.

I have voiced my intense displeasure at the poor business reporting by Kenya's media houses BUT unless companies provide this information directly to us through posting it on their websites, how will we ever know or compare or verify?

To my readers, sorry for the faux pas. To KQ (among other listed firms), please post this information on your websites simulatneouly with the release to the media or NSE.

KQ has very profitable 3Q 2008-9

KQ's 9-month 2008-9 PBT was +7% vs PY... BUT the real story is that...

KQ made 2x in 3Q (Kes 3.035bn PBT) compared to entire 1H (Kes 1.05 PBT)...
Due to the post-election violence, KQ's pax numbers were very low in 1Q (Apr-Jun 2008). The 2Q (May-Sep 2008) was merely catch-up but the after-effects still lingered.

Then came 3Q with (much) lower oil prices as well as the strong US$... but since KQ prices most tix in US$, the overall effect has been a surge in Kes profits...

KQ faces challenges in 4Q coz of the GFC but the most profitable business remains the African business... they should continue expanding in Africa even if it the destinations make losses at first... KQ should start agrressively targetting S. African markets & beat up SAA while they are down!

Oil prices should be lower than 2008 though we have seen jet fuel shortages in Kenya coz of the thieves at KPC.

BOTTOMLINE: I expect EPS of 7.50 for 2008-9. By my estimates the NAV is over 62/- So its trading at P/B of 0.4 and forward PER of 3.5... this is a steal!

And there is the Obama business... perhaps time expedite the expansion of the Kisumu airport... Obama is a-coming at some point!

Prior posts on KQ or related subjects...

http://coldtusker.blogspot.com/2008/10/kq-has-profitable-1h-2008-9.html
http://coldtusker.blogspot.com/2008/11/jkia-is-dump.html
http://coldtusker.blogspot.com/2008/11/how-kenyan-government-sabotages-success.html

Rwanda - The New Hope of Africa

Rwanda has introduced ELECTRONIC DRIVING PERMITS.

Ok, I think they meant driving permits with an electronic chip... anyway, Kenya has these UGLY red easily forged paper/cloth driving licenses...

Paul Kagame & Ian Khama (Botswana) are the type of leaders we want. They are young, educated, smart & clean... not corrupt.

BTW, I request we look into Paul Kagame's roots coz I think he is also a son of Kenya... therefore, eligible to run for presidential office in 2012 or sooner if you know what happens to you know who...