Monday, June 15, 2009
Aga Khan Firms - Invest for the future
Friday, June 12, 2009
Kenya's winners after the tough times
Sunday, April 12, 2009
Somali pirates killed - Good riddance!
Wednesday, March 11, 2009
African Banks - Internationalisation?
Tuesday, February 24, 2009
ColdTusker applies for the Greatest Job in the World
Job opening - the Greatest Job in Kenya
Would you like to lead the beautiful country of Kenya, where your followers will all be tribal voters, your friends are sycophants, your team an army of highly effective corrupt and evil criminals (all trained at the school of Mwalimu Moi). You will preside over the collapse of an economy and oversee a transformation of a once proud people to a state of beggars.
Kenya
We are a bankrupt country looking for a suitable candidate to rule the nation of some 39 million poor Africans. The ideal candidate should have no scruples, no guilt complexes, and a willingness to break the law (he or she will never be investigated). The candidate should be willing to protect corruption, impunity, illegal forces, and police brutality, willing to turn a blind eye to extrajudicial killings, famine, disease and extreme poverty. He or she should have a crazy spouse whose antics can be used as a diversion or smokescreen when necessary. He or she will accept and protect all wrong doers. He or she may need to devise crafty fund raising schemes to liquidate state assets for purposes of buying elections or lining ones own and friends or relatives, pockets. He or she is required to befriend and work with wanted criminals. He or she must be deaf, blind and mute in order to effectively ignore the rapid decline in state. He can use police force to quell any dissent from the population. He is not expected to know the people, indeed the less he knows the better.
Presidency – the job of the president is to amass personal wealth and to protect criminal politicians, family and friends. This job will be starting January 2012.
Job description –ignoring state policies and regulations in order to protect corrupt and criminal politicians and amass wealth.
Performance standards: This is a challenging position and a successful president will be measured by his ability to rig successive elections. He will also exceed the crimes of the previous president past five years within his first term.
Minimum Qualifications – a previous criminal record, ability to steal with impunity, ability to creatively protect corrupt friends. Excellent acting skills especially feigning sickness and ignorance. A network of the worlds most wanted criminals. Colourful wives and friends an advantage. Only blind, deaf mute candidates need apply, alcoholics or other drug dependency preferred.
Special duties – attend state parties, cutting ribbons, drinking at golf competitions, extensive travel to Dubai, China and other shopping havens.
Work schedule and station– one hour per year, timing flexible.
Budget - none, the country is bankrupt
Remuneration – the president can take whatever he desires for himself, family and friends, including cash and properties which can be grabbed as required
Perks – astronomical allowances, access to any land or assets required, Great family benefits, contracts for children. You will never be investigated,
Accountability – none.
Contract terms renewable every 4 years (you can change this and declare presidency for life).
Your team
Prime Minister – Your closest asset. Responsible for for maintaining a state of fear, coordinating mass killings, rape and looting. In charge of overseeing a parallel corruption system, ensures protection of criminals, and undermining your government. Responsible for keeping quiet.
Vice president – protects your back and helps orchestrate the illegal acquisition of funds for your next election. The Vice president is responsible for maintaining silence on national scandals.
Cabinet Ministers – People you select for their contribution to your election kitty. Responsible for vomiting on the shoes of donors. These people will serve you faithfully in degazetting forests, stealing grain, stealing pensions etc etc.
Official Spokesperson – Responsible for ensuring you don’t have to appear in person to respond to any uncomfortable scandals like raids on media houses, missing grain, Armenian brothers, police brutality, extrajudicial killings, or arms to Sudan. Responsible for carrying your cross.
First Lady – Your court jester. Fashion oblivious, extreme temper, slap happy. Responsible for national entertainment and creating a diversion when journalists get too close to scandals.
Other wives, mistresses and sycophants – Your silent loyal army from the mountains that does most of your work. Responsible for setting fashion standards, organizing deals, being proxies on fishy contracts, representing you incognito, and are the real center of power in the country.
Members of parliament – a bunch of bickering elected folk who need to pay off their votes. Responsible for setting their own salaries and perks.
Apply now to Applications@ThegreatestjobinKenya.con
Full credit to http://wildaboutafrica.wordpress.com
Kenya Airways - Oversold?
I will discuss the prospects of various listed firms as businesses with a discussion of the share prices as well. As many of you know I am a huge Warren Buffet fan so I hope I do him justice.
Pick # 1 (BTW, WB does not believe in investing in airlines... I know, I know...)
Kenya Airways (KQ) - Price on 24-02-2009 is 20/-
KQ has faced a tough 3 years with the plane crash in May 2007 - this was at the peak for KQ - and then the hits started;
- elections in late 2007
- post-election violence in 2008
- record high oil/fuel prices
- global financial turmoil in late 2008 & continuing
So the question is whither KQ as a business?
Let's do a SWOT Analysis (I will update it as I get comments)
Strengths
- KQ is among Africa's largest & strongest airlines. Dominant in E & C Africa.
- Strong Balance Sheet (Sep 30 2008) shows Kes 10bn in cash/liquid assets. Approx 20/- per share.
- National airline thus an advantage in getting airport slots in bilateral agreements.
- Privatized for over a decade. GoK owns 23%. KLM 26%. Better management vs government controlled firms.
- KQ can survive 2 years of losses while smaller airlines will collapse.
- Majority of the revenue is in US$, GBP & Euros.
- Aircraft have high fixed costs but deployment is flexible.
- Single hub (JKIA) thus exposure to local politics - see effect on KQ during Nov 08-Mar 09 election period.
- Inefficient hub (JKIA is controlled by the GoK) leading to inefficiencies.
- Reliance on government controlled entities for Jet A1 fuel. KQ faces problems sourcing fuel in various countries including Kenya, Ghana, DRC, Zambia, etc.
- Over-reliance on Europe for tourists. Credit crunch in Europe will hurt KQ.
- Inflexible (high fixed-cost) aircraft. Only 3 Embraers (E-190). The rest are Boeing jets.
- Higher cost airline with large(r), unionized & inflexible contingent of staff.
Opportunities
- Africa, especially Sub-Saharan Africa (SSA), has the lowest airline penetration.
- Ineffecient government owned/controlled carriers (e.g. Air Tanzania, Air Zimbabwe, SAA) benefits KQ.
- Increasing African trade with the Mid-East, Far East, China & India will increase passenger & cargo numbers.
- Huge potential in tourism from the increasingly wealthier Chinese, Indians & Middle Easterners.
- KQ has become the 'local' or 'regional' airline for many SSA countries e.g. Lusaka-Lilongwe, Lagos-Abidjan-Monrovia, Accra-Freetown, etc.
- Global Financial Crisis will enable 787 deliveries to be made sooner than expected.
- Ethiopian Airlines has a stronger pan-African presence & better global reach vs KQ. And it keeps growing.
- Airlines privatizing - or recently privatized - all over Africa including Air Tanzania, Air Uganda, Air Malawi, etc.
- New & expanding Low-Cost Airlines (Jetlink, Fly540)
- Low purchasing power in SSA means air travel is a luxury for 99% of the population thus limited growth in the next 5 years.
- High & volatile oil (fuel) prices.
- Low barriers to entry. Anyone can buy a plane (see Fly540, Air Uganda). Both in Kenya & in SSA.
Financial Discussion
- KQ has almost 20/- (per Sep 30 2008 balance sheet) in cash or near-cash. The 1H 2008-9 period was barely profitable BUT most other airlines made losses.
- Oil prices were at their peak in 1H 2008-9 but they have dropped by 65% though KQ entered into unfavourable hedges which will continue into 2009. KQ will see benefits of lower prices in 2009-10.
- KQ has been aggressively expanding in 2008. KQ will continue expanding into Africa & globally in 2009:
- Dhaka (Bangladesh)
- Kisangani (DRC)
- Libreville
- Blantyre (Malawi)
- Malabo (Equatorial Guinea)
So the business is OK. Sustainable. And growing 50% over the next 3-5 years.
Earnings: KQ barely managed 1.59 for 1H 2008-9. I expect a better 2H thus at least 3.50 for FY 2008-9 which leads me to say BUY.
PE = 6x which is great. Cash flow will be lower as KQ spends to expand.
PB = 0.5 (Kes depreciation has boosted value of aircraft/assets but note an offset for US$ loans/liabilities)
Monday, February 23, 2009
Buy Kenyan, Build Kenya
Buy Kenyan
It is as simple as that.
Let me state from the outset. Kenyan manufacturers need to be price & quality competitive. This is not a choice for them. They need to give Kenyans value.
For those who cry 'protectionism', I am NOT advocating tariff barriers or quotas or subsidies. I do encourage additional (non-monetary i.e. subsidies) incentives for Kenyan firms like better roads/infrastructure, staff training, lower tax rates, etc.
Your local Nakumatt (or Tusky or Uchumi or grocer) stocks too many foreign goods esp foods. Kenya is an agricultural country. We need to become a major agro-processor as well.
Baked Beans (I like Baked Beans on Toast)
Kenylon (Kabazi Canners of Kenya) manufactures baked beans but it seems Heinz (imported from the UK via Dubai) seems to has a larger display. There are other local brands BUT the imported brands dominate.
So why does Kenya need to import baked beans?
If Nakumatt sells 100,000 cans of Heinz beans (89/-) per month, that would 'save' Kenya $1,200,000 (Kes 100,000,000) annually. 'Save' above means reduce the need for forex to fund imports. I am assuming retail margins of 10%
KShs 100 mn paid to Kabazi means a good portion goes to local farmers, factory workers, other local manufacturers & transporters. And this gets recycled into the local economy as these 'beneficiaries' buy other local goods.
Butter & Cheese
Why does Kenya import butter from New Zealand via Dubai?
KCC, Brookside, Daima, etc has great milk products. We export to the middle east, so why do we import these? We used to import milk products from China. Why?
Kenyan farmers will increase production IF we reduce imports thus boosting local demand.
Snacks/Chocolates/Prepared Foods
I am amazed that Kenya imports crisps, chocolates, biscuits, cereals, chevda (among other Indian snacks), etc
Kenyans produce great products so why the need to import???
Crisps - Krackles, Tropical Heat, etc
Chocolates - Cadburys, Out of Africa (though most ingredients are imported)
Biscuits - House of Manji (the best Digestives), Brittania
Cereals - Weetabix (local), Procter & Allan, etc
Indian snacks - Tropical Heat, Deeps, etc
Kenyan products in this category are generally cheaper than the imports yet we blow away forex & the creation of local jobs.
Why do Kenyans buy 'prepared foods' when we can hire or buy freshly prepared foods locally. As for convenience, there are local firms & SMEs in the market.
Juices/Squashes (fruit drink mixes)
Why don't Kenyans buy more locally produced juice or juice blends or even fruit drink mixes.
There are many local players in this market including:
Del Monte (locally grown pineapples)
Kenylon
Quencher (mainly fruit drink mixes)
And even when we import juices, why not just concentrates that can be re-constituted & packed in Kenya.
And why not drink FRESHLY SQUEEZED juices. Creates jobs for maids, hotel/restaurant workers, etc. Kenyan 'fruit juice' businesses need to lower prices for freshly squeezed juices. I miss the fresh fruit carts in Nairobi's CBD. I could get a juicy slice of pineapple for a mere 10/-.
Spirits/Beer/Wines/Alcohol
I know Kenyan spirts leave little to the imagination but there is hope. Let's by more EABL, Keroche & London Distiller products.
There are few local wines (Mara is imported from S.Africa). Locally produced wines should attract lower taxes. There are other fruit wines that can be produced from locally grown fruits including:
- Passion fruits (I recall passiflora but too dry for my tastes)
- Oranges
- Mango (Has anyone tried?)
- Pineapples (I used to brew a weak version)
- Sugarcane (Rum)
I buy the local Kenya Gold (instead of the imported Baileys) & the local Smirnoff (vs imported vodkas).
And the above is a small sample of the imports. We could 'save' at least $100,000,000 in forex annually if we looked inwards. Add the jobs Kenya could create & the Global Financial Crisis would look less daunting.
Friday, February 20, 2009
Family firms out-perform 'public' firms
Also brings to mind Chandaria Industries (Comcraft Group) of Kenya. The 3rd generation is at work. And it remains private.
Tuesday, February 17, 2009
Rwanda - The New Hope of Africa Part 2
When I spoke to folks doing business in Rwanda, they say corruption tends to be low-level but structures are in place to deal with serious corruption.
Paul Kagame wants to make Rwanda the Singapore of Africa. Paul is a 'benevolent dictator' on a similar plane as Lee Kuan Yew & he is reportedly as clean as it gets.
Paul - unlike most African rulers (thieves) gave up his ancestral land since he did not need it!!!
In Kenya, jomo kenyatta & dan moi were unabashed kleptocrats!
Wednesday, February 04, 2009
I want me a BarackBerry
The BlackBerry can't hold a candle to the Sectera Edge - not your father's Palm Treo - that BHO uses!
I wonder if one of the games on the Sectera is 'Nuke'em Iran?
Anyway, I want one... am I asking too much?
BTW, the Business Daily Africa claims BHO uses a BlackBerry but we know better!
Is South Africa really part of Sub-Saharan Africa?
In the meantime, the Kenyan government is hosting a 'Kenya We Want' conference. What bullshit. A little common sense would be much cheaper!
My Solutions:
kibaki should fire ALL his corrupt & inept ministers (incl saitoti, kimunya, etc) & a huge chunk of our problems would be solved.
kibaki should reveal WHY the libyans (among other groups) are being favoured. And STOP the favouritism & nepotism.
Kenyans want to know if the libyans contributed funds towards kibaki's re-election campaign in exchange for sweetheart deals. No more sweetheart deals.
If the GoK privatised KPC among other government institutions, then we would not need silly conferences.
Raila should drop his opposition to PRIVATE investments. This is not the communist Soviet republic. We need COMPETITION.
All MPs & ministers should pay taxes on their entire salaries & perks! And their pay should be linked to performance!
Common sense is not so common. Or is the conference simply another way to siphon government funds & provide PR?
Friday, January 30, 2009
KQ has very profitable 3Q 2008-9
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
Saturday, January 24, 2009
Rwanda - The New Hope of Africa
Tuesday, January 20, 2009
Congrats to Obama & what Africa can learn...
Thursday, January 08, 2009
Coldtusker is Twittering
Anyway you can fine me twittering on www.twitter.com/coldtusker
Wednesday, January 07, 2009
Novelty in the airline industry - airtime for flights!
Thursday, January 01, 2009
France's First Ladies...


Monday, December 29, 2008
Mauritius - A rare bird in the African Union
Thursday, October 30, 2008
KQ has profitable 1H 2008-9
Hats off that KQ managed to pull together a profitable (though subdued) 1H 2008-9. The prospects for 2H seem encouraging with a weaker KES (90% revenues are in forex) & lower fuel prices. Unfortunately for KQ, the fuel hedges they entered into will reduce the benefits of lower fuel prices.
2008 has seen the demise of many airlines though mostly in USA which is a very competitive market. KQ on the other hand saw increased competition in 2008 from Fly540, Virgin & Air Uganda.
*** There was a major glitch at the NSE. Trading was supposed to start at 12.30pm
Wednesday, October 29, 2008
NSE going to the dogs?
(All said and done I think many shares are a steal if you have a backbone of steel)
KCB at 16.85 which is a 2x PB and less than 8 PER.
Equity Bank has not seen 114/- for almost 2 years. The price is even LOWER than it was at the height of the violence in 1Q 2008.
Warren Buffett would have a blast in the market & buy up a lot of stuff. I think it might sense for some firms to go private at this point!!!
There is little LBO cash but the possibility of buying out minorities... and then taking the firm private is so tempting. Hey, Unilever Tea (Brooke Bond) did just that!
Look at KQ (29/-) which is trading at a substantial discount to NAV. If they were allowed to buy-back shares, they had KES 12,000,000,000 in cash (2Q 2008 - 31 March 2008), and could buy back 200,000,000 shares at 30/- (KES 6,000,000,000). Suddenly, you have eliminated 40% of the shares thus allowing the remaining shareholders to earn substantially more on their investments!
KCB is at 16.85 & can generate over 13% on the shares based on current earnings. A buy-back would allow an increase in ROE without the need to take on additional risk. Just raise Tier 2 capital when the capital markets improve.
And the list goes on. Finally, ABSA could make a bid for Barclays Kenya. It was too pricey earlier but at 43/-, the price is rather attractive.
If I were Vodafone, I would buy 11% of the shares that gives me effective control of Safaricom so I can consolidate their results. And I can buy them at a rock-bottom price of Kes 3.50!
Equity Bank is in a position to make a takeover bid for HFCK. Offer 20/- & the minority shareholders of HFCK will make a beeline to sell the shares!
Safaricom should make a all-cash (20/-) bid for Access Kenya & in one swoop could own Kenya's largest ISP for corporates as well as the most extensive wi-max network in Kenya. I expect almost everyone except the Somens might be running to sell their shares! Heck, maybe even the Somens!
The cash rich firms e.g. KQ, Safaricom, Equity Bank can do wonders if they deployed the cash they have!
EABL is also cash rich but who would they buy that is complementary to their existing business?
CFC-Stanbic should look at buying out NIC Bank. Or perhaps even NBK now that NBK bad debts are manageable.
How about Equity Bank swooping in for HFCK as mentioned above. Or KCB buying out HFCK in its entirety & roll-up S&L into it?
I do not know if Centum is cash-rich after the recent happenings... but it could buy out 1 or 2 listed firms... if they have the cash!
Of course, we have Williamson Tea & Kapchorua... why do they list as different firms? A combination would be ideal at this stage!