Uchumi Reopens but will it be re-listed?

Uchumi will have a tough time getting re-listed UNLESS the CMA bends the rules & regulations.

Nevertheless, the CMA can redeem its image by thinking out of the box by allowing Uchumi on the NSE as an AIMS (Alternative Investment Market) listing but WARNING to ALL that there are risks involved & the exceptional circumstances for the re-listing.

For the relisting, either Uchumi will have to either come out of receivership OR the shares will trade even though it remains under receivership. In the latter, the ordinary shareholders will have no say (i.e. voting rights) since the receiver has the "control".

It is not a crime to be STUPID so those who buy into Uchumi should be made aware of the risks.

Uchumi might become another NBK story i.e. just as NBK will take at least another 2 years to pay dividends (unless the government "rescues" it), Uchumi will be in the same spot. It will be a slow but necessary part of Uchumi becoming a firm capable of moving to the Main Board of the NSE.

Good news: Uchumi will not have to pay income taxes on its profits for many years & that means it gets to keep more of the cash! Nakumatt will be forced to pay income taxes considering it is profitable & under greater scrutiny. A strategic investor could shield profits by doing a Reverse takeover.

Ironically, Nakumatt will probably list in 2009 which is in line with the earliest Uchumi will be profitable. I wonder which will cause more excitement in the market?

A better option is to start shopping Uchumi to the highest bidder asap i.e. while in receivership, it is easier to negotiate the sale of a huge chunk to a strategic investor.... that could be Sameer, local outfit like Tesco (which had franchised some stores but not in kituyi's good books), foreign chain...

This would re-energize the brand while providing a "real" lifeline that puts real cash behind the name thus ensuring suppliers will fully be on board. Other "large" suppliers including Mumias, EABL, Unilever, Bidco, etc should be allowed to take up either preference shares or ordinary shares to lend the "cash" support OR convert debt into equity.

Yes, I am recommending a recapitalisation via another RIGHTS issue but restricted to corporates to keep costs low but raise the maximum asap. They could be issued a different class of shares that have preference over current shares thus encouraging the investment.

Uchumi should be allowed to float Commercial Paper esp to pay its suppliers. The suppliers earn interest while Uchumi buys time with increased cash flow. The government should do its part accept Uchumi's CP in lieu of taxes for 2 years!

Without the tough BOLD moves, Uchumi will die a slow death again...

ScanGroup IPO - July 2006

ScanGroup has posted the prospectus online on July 12 which is 5 days ahead of schedule.

Salient Points - My observations (read at your own risk & do your own research!) in Blue:

• KShs 10.45 per share. Priced to sell i.e. the price will attract many investors like the "cheap" shares solely on account of price & not fundamentals!
  
• 9 Million "new" shares will be sold to raise KShs 74 Million for ScanGroup. These funds will go to reduce debt, increase working capital & for acquisitions.
  
• 60 Million shares will be sold by the "Vendor" (Bharat Thakrar - CEO & founder) for KShs 584 Million. He is cashing out a good chunk of his shares. Plus he will still own an additional 45 Million shares after the IPO thus effectively he is a Billionaire! Our first (public) media BILLIONAIRE! Not a bad deal... This listing will open the eyes & doors for other private businesses to go public as a way to cash out.
• NAV of KShs 1.58 (Price = 6.61 x NAV) High ratio for listed Kenyan firms & there will be little left for ordinary shareholders if ScanGroup goes under! Nevertheless, in this business it is the earnings/creative talent that counts. How do you value creativity & ideas?
  
• EPS 2005 = 0.96 thus P/E of 10.88 Not cheap but in line with many other listed firms on the NSE. Was it "boosted" for the IPO?
  
• EPS 2006 (estimate) = 1.05 thus P/E of 9.95 Not cheap but in line with many other listed firms on the NSE. An estimate is just that... an estimate!
  
• AJL White (Creative Director) is not selling his shares but has "contributed" 3 Million to Bora Services (an ESOP-like structure). The shares will vest after 5 years for the benefit of Key Management. Hopefully, this will keep the Key management on board for at least 5 years. Thakrar contributed 12 Million shares towards Bora. Venkataraman contributed 3 Million shares to Bora - though he is sole beneficiary in 5 years.
  
• High dividend payout since this is not a capital intensive business. A bad year can mean reduced dividends thus the shares could be volatile.
• Management team is relatively young. Bodes well or new ideas but ScanGroup will experience poaching by other firms (thus the Bora incentive!)
• Most MDs & GMs of the subsidiaries are not Kenyan e.g. A.J.L White, S. Ambegaonkar, S. Venkataraman, M. Shah, S. Sundaram, P. Sham, etc. Why aren't there more Kenyans? Anyway, the incentive to stay on in Kenya is not as strong for expats as for Kenyan managers thus reduces the expats' loyalty to ScanGroup.
• Executive compensation (2005: KShs 25 Million) will increase substantially as the management feels they were underpaid as "owners". How much more? This also disincentivises management since lower profits does not necessarily reduce their income.
  
• Shares in the IPO: 5% reserved for employees, 45% reserved for corporate buyers & 50% for individual investors. I would have preferred all investors (corporate & individual) be treated as equals thus "spreading" the wealth. To reduce costs for ScanGroup & BT the minimum application should have been for a minimum of 1,000 shares.
  

Pros

• Promoters (Thakrar & White) will not be able to sell (except with "permission" from the Company (ScanGroup) any shares for 3 years. Even then only 25% of their shares. They can dispose of all their shares after 5 years. Note that BT+AJLW control ScanGroup so it might be "easy" to get permission from themselves!
• Key Management has incentive for prices to rise in the long-term since the value is locked in the shares' value in 5 years. Basically the higher the price in 5 years the more the Management makes! This is a HUGE incentive for the longer-term. But we do not have access to the documents thus they may be clauses that allow opt-outs.
  
• The economy is geared for growth for the next 2 years leading up to the elections. Whereas there are always chances of pre-election violence, I don't think Kenya will see it on a large-scale. Spending on ads will increase as we see American-style electioneering e.g. DSTV carried Raila's ads. The savviest firms will be used by all politicians to make themselves look good. The ads will cut across all mediums!
  
• Increased viewership on TV means slicker ads thus increased profits. The big guns can afford the fancy equipment for these ads. BTW, the smaller shops will become very competitive with falling technology prices & greater computing power. This is a very real threat to the "Production" department of ScanGroup.
  
• Regional expansion esp by multi-nationals who prefers one firm doing all the PR & marketing instead of finding new partners in each market/country. Potential is huge for ScanGroup as incomes rise in the greater E.African region e.g. Uganda, Rwanda, Congo, etc.
  

Cons

• The salaries are going to be pretty high (i.e. direct costs will increase regardless of profitability). The promoters have taken a pay rise but the new salaries are not revealed in the prospectus.
  
• Section 6.4 (ii) seems to ALLOW for INDSIDER TRADING! I would appreciate someone reading the section & providing their interpretation!

Bottomline
Buy - at least for the short-term since there is a dearth of IPOs. Expect lots of speculation but support from the underwriters.

Uchumi Supermarkets Limited (in Receivership) appoints new MD

The ball has started rolling on Uchumi's re-opening on Friday July 14 2006.

I hope that the government & parliament has learnt the need for "Restructuring" rather than Receivership & will update the Company's Act to ensure that businesses need not shut down just because they run into financial turbulence.

Back to the new MD...

Who is this Jonathan Ciano?

• was the Manager - Strategy & Restructuring at KPLC
  

What are his qualifications?
Does he have any experience in the retail sector?
Which firms has he restructured?
How are they doing after the restructuring?
Does he have any experience in FMCG?
Has he ever been a CEO?
What did he accomplish at KPLC?

Bottomline: Does he have what it takes to run Uchumi?

I expected the stakeholders (or whoever picked the MD) to have picked a seasoned retail executive like Titus Mugo (ex-USL MD) or Ajay/Vijay Shah (ex-Nakumatt MD) but I hope they have the right man for the job! After all the government (aka the tax payers) has KShs 600 Million at stake! Unfortunately, MPs don't count as taxpayers so they have little to lose!

I wonder if the major stakeholders had input into Ciano's selection coz Uchumi needs a hardworking, honest & selfless individual to regain lost marketshare. The MD should be able to get into the trenches just like Suresh Shah did in Uchumi's heydays since that is the best venue for genuine feedback from customers, employees & suppliers.

I hope Kenyans (esp customers & suppliers) support Uchumi when it reopens & in the critical months ahead otherwise the bailout will all be to naught! Kenyans' words are often louder than actions! Many Kenyans lamented Uchumi's demise while they shopped everywhere else BUT Uchumi!

Kenyans should take pride in shopping at Uchumi which has traditionally supported Kenyan suppliers & manufacturers.

I am curious.... where does kituyi shop after his rant against Nakumatt?

Finally, I wish Ciano the best!

Uchumi Supermarkets Limited (under Chapter 11 Restructuring)
Kenyan Company Laws (a throwback to colonial days) are antiquated & do not allow for an American style Chapter 11 bankruptcy/restructuring process therefore this is simply wishful thinking on my part.

Uchumi Supermarkets Limited (USL) enters into the Ch.11 bankruptcy overseen by a court to keep off unsavoury elements but being Kenya the judge could be just as unsavoury as the crooks! In addition, the judge/courts should be advised by businessmen/experts as to the suitability of any actions.

Anyway, the court initially drives the process with assistance from the current management & major creditors. The judge appoints a "team" to look into each party's claim including secured & unsecured creditors. Precedence is given to secured & larger creditors but the smaller unsecured cerditors are also given a voice. Each creditor can't have a representative but they can collectively choose someone to represent them.

Essentially a new Board of Directors is appointed with the directors being appointed by the judge though nominated as mentioned above. A CEO is chosen to head the management team.

Operational Stability - An agreement is reached as follows:

• Mastersen-Smith is retained as CEO since he is most familiar with the firm & its problems. If need be he can be replaced later on.
• Appoint new directors with retail experience e.g. a past CEO like Suresh Shah would be very useful
  
• The stores remain open & employees are retained though there may be redundancies if needed to preserve cash
• The banks agree not to foreclose on the properties. Suspend Interest
  
• Landlords agree not to evict USL. Rent abatement for 6 months
  
• Suppliers agree to continue supplying USL with generous credit terms in exchange for constant payments
  
• Suppliers who continue supplying USL get a bigger say in the running of the "new" USL
• Government (KRA & Treasury) agree to suspend collection of past due funds incl VAT, PAYE, etc with an eventual view to write these off. This is similar to a tax amnesty.
  

The above efforts will ensure USL has cashflow thus it can get back on its feet.

Financial Restructuring:

• The entities & persons who are owed funds by USL can convert them to equity even though the real value will be written-down.
• The government (KRA+Treasury) would allow these write-downs as tax write-offs.
• The uncollected VAT would be refunded asap by the KRA to the suppliers thus ensuring the suppliers don't face cashflow problems thus pushing them into bankruptcy as well
• Existing shareholders would lose value since the additional shares would considerably dilute their holdings
• Anyone willing to lend to USL should be allowed to do so as long as they are aware of the risks
  

Strategic Partner/Divestiture:

• Start a search for a strategic partner who buys out existing shareholders OR
• Find a strategic partner who will inject cash OR
  
• Sell the chain/brand
  
• Renegotiate leases & terms with the suppliers, landlords & creditors giving preference to those who helped USL survive through the tough times
• Offer a Rights Issue while CLEARLY stating that there is a high probability of failure & with specific time frames as to the estimated period before profitability is achievable. No guarantees to be issued
  
• Offer new shares restricted to the "sophisticated" investors e.g. pension funds, wealthy individuals, etc who are able to bear the risk of USL failing again
  

Uchumi Supermarkets Limited in Receivership

An employee foreshadows the fate of Uchumi?
Letter to the editor of Kenya Times 24 July 2004

Uchumi Supermarkets has had turbulent years but here is some recent information (recent to older news):

Albert Ruturi was appointed chairman snubbing naushad merali of Sameer Group. Akif Butt (SG's FD) resigns his seat on USL's board & SG dumps its stake in USL pushing the prices to a low of 12/- (post Rights Issue).

Talk on the street (aka rumours) was that the government through KWAL refused to sell its stake to Sameer Group thus thwarting SG's plans to be the anchor shareholder.

Sameer Group had purchased a 10% stake in USL (early 2006) hoping to eventually buy out 25% & take control of the chain. ICDCIC (the listed entity controlled by chris kirubi) sold its stake to Sameer Group through the NSE board. The price rises to a post-Rights high of 22/-

USL had a successful Rights Issue in 2005 where they raised almost KShs 1.2 Billion.

USL appoint new MD, John Mastersen-Smith, formerly of Spar (SA).

Thairu is fired & replaced by an acting MD, Kipn'getich Bett.

Vendors stop supplying USL as it faces a cash crunch. Loss of retail traffic as shelves remain empty.

USL burns through the accumulated cash that Suresh Shah had carefully built up on an ill-conceived expansion plan that used short-term funds to fund long-term expansion. Various suspect leases for new premises were entered into that were done with "related" parties. Haco Indutries (kirubi-controlled) becomes a major USL supplier.

East African article about a "lost Uchumi"

Titus Mugo is fired in Nov 2000 & replaced by Kennedy Thairu (a kirubi appointee) as MD in 2001. Article justifying Shah's & Mugo's ouster from Market (Un)Intelligence.

chris kirubi takes effective control of USL through shareholdings held by himself, ICDCIC (kirubi-controlled) & other kirubi-controlled firms.

kirubi - supplier, vendor & buyer - did he eat his cake & have it too?

Titus Mugo (long serving deputy MD under Suresh Shah) becomes MD upon SS's "retirement".

Interview/Article in East African Dec 4 2000

Suresh Shah retires/resigns as MD of Uchumi in 1999 after an extremely successful run from its loss-making days as a government owned institution (through shares owned by ICDC, ICDCIC & KWAL) to its IPO & subsequent success. It has a 14 year run of making profits under Shah. Rumours have it that he was forced to resign to enable "politically correct" individuals control the cash-rich (over KShs 500 Million) & cash-generating behemoth. These "pc" individuals entities would also then become suppliers to Uchumi.

Suresh Shah's interview with Nation on his pending "retirement".

USL issues a bonus of 1:2 i.e. 1 share for every 2 held. Price hits a high of 60/-.

Kenya enters into an inflationary period & Uchumi's cash hoard increases Uchumi's interest income substantially. Uchumi undertakes a careful expansion concentrating on Nairobi. The logic as explained by the MD was expansion undertaken with a view to "logistical distribution" i.e. Can enough goods be supplied to new stores from a central point at a reasonable cost. This was pre-barcodes & ERPs thus control of shrinkage was paramount in the retail business.

USL goes public through an IPO at 16.50 which was oversubscribed. Suresh Shah remains MD & price goes up to 20/-.

Suresh Shah becomes General Manager then Managing Director of Uchumi (1980 to 1999).

Uchumi Supermarkets is established in 1975.

Aga Khan controlled Firms vs Merali controlled Firms on the NSE

Aga Khan Firms

Professionally run firms that draw on the resources of the Aga Khan network.

Diamond Trust - It is one of Kenya's largest banks & has done very well for its minority shareholders over the past 10 years. It has issued numerous bonuses.

TPSEA ("Serena") - Started out as TPS Holdings which was "absorbed" into TPS East Africa by giving 1.35 TPSEA for each TPSH share. The share price has risen over 100% since Jan 2005. Note that TPS Holdings (not TPSEA) was the listed entity on Jan 1 2005 therefore the current price for TPSEA should be multiplied by 1.35 to compare apples to apples.

Jubilee Insurance - A solid steady performer that has issued bonuses in the past & is at all-time high

Nation Media - Very successful media house that has expanded regionally despite the EA governments' attempts to muzzle it. Witness the misguided threats by Kenyan ministers like michuki, Tanzania's idiotic deportation of Kenyan newsmen/journalists/editors & Uganda's attempts to muzzle the Monitor as well as Nation's radio stations. There must be something in L. Victoria's water that make the EA governments act nicompoopy. Anyway, great profit growth with decent dividends & bonuses since it went public.

Merali Firms

Politically connected during the moi era thus the "meteoric" rise was a front.

Sameer Africa - Formerly Firestone EA & named after his son Sameer. It went public at KES 35.50 & it is still a mystery who bought the shares at the IPO which was horrendously overpriced. The price went up for the briefest of moments during initial trading. The price has NEVER reached the IPO levels since then!

The original shares purchased by merali belonged to icdc & were purchased at 5/- per share then sold at 35.50. Apparently NSSF was one of the largest buyers at the IPO netting merali 30/- per share. In essence ICDC (a controlled gov't entity) sold to NSSF (a gov't controlled entity) shares in Firestone with a "commission" accruing to merali of 30/- per share!

Sasini - It has a public company for a long time & pre-dates merali who took majority control. The highest price was 120/- (diluted) during the early-mid 90s. Sasini had given a 3:1 bonus which "boosted" the price to 300/- but fell to 100/- to 120/- range post bonus. Shareholders who bought at 100/- have been crying in their tea cup since then!

Bottomline:

Buy Aga Khan firms esp at IPOs but avoid Merali IPOs!
EVERY listed Aga Khan firm has made money (better than average returns) for its minority shareholders.

Abbreviations & Acronyms Used In My Posts

Thanks to an excellents suggestion by a reader...

To ease the strain on my fingers as well as keep track with my thoughts I will continue using acronyms but I hope this helps the uninitiated!

I will often use abbreviations/acronyms for NSE (see below) firms e.g. HFCK is Housing Finance Company of Kenya.

Some of these are unique to my blog!

1H - First Half e.g. 1H 2005 means First Half of 2005
1Q - First Quarter e.g. 1Q 2005 means First Quarter of 2005

BBK - Barclays Bank of Kenya
BSE - Botswana Stock Exchange
BTW - By The Way

CDC - Commonwelath Development Corporation (now Actis)
CFC - CFC Bank (formerly Credit Finance Corporation)
CFCFS - CFC Financial Services
CMA - Capital Markets Authority
CT - City Trust

FD - Francis Drummond & Co

HFCK - Housing Finance Company of Kenya

ICDC - Investment & Commercial Development Company (Govt owned)
ICDCI - ICDC Investment Company (Private & listed - don't confuse with ICDC)
I&M - I&M Bank (previously Investments & Mortgages Ltd)

KCB - Kenya Commercial Bank
KQ - Kenya Airways (KQ is the "call sign" since KA was already taken!)

NBK - National Bank of Kenya
NSE - Nairobi Stock Exchange

OCC - Olympia Capital Corporation (a OCH subsidiary listed on the BSE)
OCH - Olympia Capital Holdings

PAT - Profit After Tax
PBT - Profit Before Tax



Q - Quarter (Q is also one of my favourite Star Trek characters!)

Rea - see RVP
RVP - Rea Vipingo Plantations (aka Rea)

STC - Sasini Tea & Coffee

UTL - Unilever Tea Ltd (formerly Brooke Bond)

ZSE - Zimbabwe Stock Exchange

Development Bank of Kenya Announces Third Quarter 2005 Results

DBK's results were substantially better than 2004 but disappointing when compared against other Kenyan banks.

This is a government controlled bank through ICDC (not ICDCI). It was in the news when a merger with HFCK was contemplated. The then CEO (Peter Lewis Jones) of HFCK was removed from office as CDC's influence waned in the running of HFCK.

Assets increased to KShs 2.50 Billion
PBT was KShs KShs 110 Million
PAT was KShs 77 Million
Shareholders' Equity is KShs 1.017 Billion
Customer deposits are a mere KShs 655 Million

3Q PAT vs. 2Q PAT was + KShs 9 Million only! Therefore a bank with KShs 1 Billion in Equity made a mere 0.3% per month!

So what do I make of it? Well... my thoughts are in BLUE...

The ROE is amongst the lowest in the sector.

Bank --- 2004 Equity -- 3Q Earnings -- ROE
--------------------------------Annualised-- Annualised
DBKL ---- 973,828 ----- 102,976 ---------------- 10.57%
KCB ---- 2,643,842 ------ 284,300 -------------- 10.75%
I&M ---- 1,850,730 ------ 335,256 -------------- 18.11%
Diamond -- 1,437,072 ----- 249,148 ------------ 17.34%
NIC ---- 2,643,842 ------ 284,300 ------------10.75%


Caveat: There are many smaller private banks not included in the list. I tried to match up similar sized banks that have a stronger presence in the business sector. KCB was included as a "former" government controlled bank. National Bank of Kenya has substantial preferred capital thus is not a good comparison.

DBKL should;

• be sold to another financial institution which wants entry into the Kenyan market e.g. State Bank of India bought a majority stake in Giro bank.
• buy other stable banks that have weaker balance sheets but growth potential e.g. Consolidated Bank of Kenya
• merge with other stable banks that have weaker balance sheets but growth potential e.g. HFCK

When 5-year T-bonds are yielding 12.5% for a post-tax 10.625% (after a 15% withholding tax), any bank that can't achieve/match that return needs to rethink their business strategy.

NIC & Diamond are increasing their footprint & lowering costs through automation. KCB is growing in Kenya with a regional focus. I&M has shown strong growth in the SME sector.

What is DBKL doing to (prudently) grow & maintain its presence in the sector?

KQ Announces Interim 2005-6 Results

KQ announced better than expected results for the period from Apr 1 - Sep 30 2005. Comparisons are H1 2005-6 vs H1 2004-5.

• Turnover/Revenue +29% to KShs 25.4 Billion
• PBT +36% to KShs 3.2 Billion
• PAT +48% to KShs 2.2 Billion
• EPS +48% to KShs 4.83

So what do I make of it? Well... my thoughts are in BLUE...

The effective tax rate reduced by 6% thus the higher PAT vs PBT. I think the "depreciation tax shield" accounts for the difference. The depreciation benefit will continue as they have 3 new 777s of which 2 were delivered in H1 2005-6.

KQ has expanded its reach especially to the East with 3 Chinese destinations (Hong Kong, Shanghai & Guangzhou). In view of their current expansion I expect Singapore & Japan will be added to their list of destinations in 2007.

Further expansion to African destinations continues with new routes e.g. Bamako & Dakar as well as expansion of existing sectors e.g. Lagos. Virgin Atlantic has taken a majority stake in Nigerian Arlines & created Virgin Nigeria & they will be a significant threat to KQ.

KQ announced that they will commence direct MBA-LHR flights in Dec 2005 to cater to an important tourist market. KQ is probably trying to counter the various charter operations that fly direct to Mombasa.

KQ plans to fly to Paris (France) & Freetown (Sierra Leone) by March 2006.

• I see a move to expand the West African market for onward flights east to China.
• Paris will open up a HUGE market for safari travellers esp from the French, German, Italian & East European markets.
• The Italian market is primarily served by charter flights but KQ provides an opportunity for scheduled services. Air France & Alitalia can provide seamless domestic feeders to KQ.
• There will be 4 European hubs for KQ London, Amsterdam, Paris & Instanbul. Istanbul provides a getway for East European travellers e.g. Ukraine.
• Additional European hubs also provide greater opportunities for N. American travellers to connect thru to Kenya using Northwest, KLM & Air France as feeders. Northwest flies daily from Detroit to Amsterdam. Air France flies from New York to Paris.

Passenger growth for the Mid-East & Asia +15% but turnover was -1%. This doesn't bode well for the Mid-East market since margins are under pressure from Emirates (Dubai), Etihad (Abu Dhabi) & Qatar Airways. The Mid-East airlines are well financed & provide a hub to European & Asian destinations. Emirates has expanded its reach to West Africa thus providing an alternate route to East Asia & India.

Passenger growth for Kenya +34% & turnover was +48%. Collapse of local carriers e.g. Regional Air & EASA decreased competition. KQ plans to introduce 767 flights (NBO-MBA) to increase capacity during peak early morning & evening flights that cater to business travellers.

Passenger growth for Europe +27% & turnover was +34%. New 777s with larger capacities & collapse of EASA led to tremendous growth. Average seat occupancy also increased - in spite of increased seats. London must have done very well with 90%+ levels. Increased European tourism due to a favorable Euro rate vs KShs. Istanbul was an additional destination during H1 2005-6 vs 2004-5.

Opportunities

1. Huge & wealthier Asian markets esp Hong Kong, China & Japan have not been fully exploited.
2. Economies in sub-Saharan Africa have started growing as well as stabilized governments.
3. Regional airlines have been decimated thus little regional competition (see Challenges on SAA & ET).
4. Kenya's economy shows strong signs of growth fueled by liberalization.

Challenges

1. Mid-East carriers who are very well financed & have the implicit backing of their governments e.g. Emirates is owned by the City of Dubai.
2. Resurgent S.Africa Airways & Ethiopian Airlines will provide competition for KQ in the core regional markets
3. Fuel prices. Even though (Nov 8 2005) they have dipped below $60/barrel, they could rise. Kenya lacks sufficient refining capacity thus KQ can be held hostage by a shortage.
4. Terrorism still lurks in the background. Whether directed at KQ or other airlines a 9/11 style attack can cripple the industry.
5. Avian flu can cripple tourism esp from the new Chinese destinations. In addition, East Africa is at risk from migratory birds thus an outbreak can devastate Kenyan tourism.
6. Unstable African nations is still a threat to KQ. The incident in Ivory Coast last year shows how KQ's fleet & crew can be stranded.

Bottomline

Financially strong airline with excellent management & partners e.g. KLM. Nevertheless, at best, it will have limited international reach but a strong regional focus on East, Central & South Africa. Definitely needs to be added to the portfolio at today's (Nov 8 2005) price of 76/- for gains over a 3-year period till growth levels off.

CFC Bank to Issue Rights - Announced on Oct 7 2005

CFC Bank Limited is a holding company for various entities including Heritage AII. They recently acquired ALICO's life insurance business in Kenya.

I wonder what they will price the 12,000,000 Rights at since the the price, on Oct 7 2005, of 70/- is not "cheap" by any means. They have traded between 56/- & 70/- thus are at the higher end!

The Q3 2005 results haven't been released but it will be interesting to see what the resultant P/E ratio will be vis-a-vis other banks especially mid-tier banks like NIC Bank & Diamond Trust Bank.

It should be noted that these 3 banks generally have a higher P/E ratio than the most banks on the NSE.

CFC Bank is run by smart folks who have made it into a financial powerhouse & the "local" bank label & powerful connections provides intangible benefits denied Barclays or StanChart.

Nevertheless, their are many prominent shareholders who are associated with the KANU & NARC governments. Names (including proxies) include Charles Njonjo, Jeremiah Kiereini, Mwai Kibaki & P Jani among others.

The insurance industry is difficult to "price" out & details provided by CFC Bank on this business do not meet international (USA, UK & Netherlands) standards of disclosure.

Bottomline:
Depends on the price of the Rights but definitely a good buy if priced at 60/- or lower.