The Stock market in Kenya - The NSE analysis and other related issues

Foreign investors participation in the Nairobi Stock Exchange

2009-06-24T18:37:00.004Z

Most analysts attribute the recent upward trend in volumes at the NSE as a result of foregin investor activity. Here is a summary of the foreign investors participation in Kenya shillings from 22nd June to 24th June;

SALES
Period Total; 24-Jun-09; 23-Jun-09; 22-Jun-09;
EABL 40,617,600; 000; 30,117,600; 10,500,000;
EQUITY 9,221,930; 1,600,000; 6,124,600; 1,497,330;
KENOL 7,931,000; 721,600; 7,209,400; 000;
OTHERS 6,859,290; 2,974,725; 3,565,395; 319,170;
BBK 2,750,050; 000; 000; 2,750,050;
CMC 1,606,250; 1,606,250; 000; 000;
KENGEN 412,950; 000; 000; 412,950;
TOTALS 69,399,070; 6,902,575; 47,016,995; 15,479,500;

BUYS
Period Total; 24-Jun-09; 23-Jun-09; 22-Jun-09;
OTHERS 41,976,015; 3,801,550; 36,330,400; 1,844,065;
EQUITY 41,395,505; 25,379,005; 16,016,500; 000;
BBK 25,490,400; 8,532,900; 14,229,500; 2,728,000;
EABL 20,976,900; 000; 7,968,900; 13,008,000;
SAFCOM 11,838,180; 8,778,880; 000; 3,059,300;
KCB 1,150,000; 000; 000; 1,150,000;
TOTALS 142,827,000; 46,492,335; 74,545,300; 21,789,365;

GRAND TOTAL 212,226,070; 53,394,910; 121,562,295; 37,268,865;

Observations;
Most souggt after stock - hot cake; Equity (41m), BBK (25m), EABL (21m)

Stocks under censure - Hot potato; EABL (40m), Equity (m), KENOL (8m)

Tithing

2009-06-24T18:17:00.002Z

An controversial subject.
According to Wikipedia
A tithe (from Old English teogoþa "tenth") is a one-tenth part of something, paid as a (usually) voluntary contribution or as a tax or levy, usually to support a Christian religious organization. Today, tithes (or tithing) are normally voluntary and paid in cash, cheques, or stocks, whereas historically tithes could be paid in kind, such as agricultural products. Several European countries operate a formal process linked to the tax system allowing some churches to assess tithes.

<strong>Tithing in the new testament
According to Catholics, as those who serve at the altar should live by the altar (1 Cor 9:13), it became necessary for provision of some kind to be made for the sacred ministers.
Some claim[citation needed] that as tithing was an ingrained Jewish custom by the time of Jesus, no specific command to tithe per se is found in the New Testament. References to tithing in the New Testament can be found in Matthew, Luke, and the book of Hebrews.
For Catholics, the payment of tithes was adopted from the Old Law, and early writers speak of it as a divine ordinance and an obligation of conscience, rather than any direct command by Jesus Christ.
Some Protestant denominations cite Matthew 23:23 as support for tithing.
Away with you, you pettifogging Pharisee lawyers! You give to God a tenth of herbs, like mint, dill, and cumin, but the important duties of the Law — judgement, mercy, honesty — you have neglected. Yet these you ought to have performed, without neglecting the others.
(Albright & Mann, Matthew, Anchor Bible, Vol. 26 (1971))
and its parallel Luke 11:42
Woe to you, Pharisees! You tithe mint and rue and every edible herb but disregard justice and the love of God. These were rather the things one should practice, without neglecting the others.
(Fitzmyer, Luke, Anchor Bible, Vol. l, 28A (1985))
Most New Testament discussion promotes giving and does not mention tithing. 2 Corinthians 9:7 talks about giving cheerfully; 2 Corinthians 8:3 encourages giving what you can afford; 1 Corinthians 16:2 discusses giving weekly; 1 Timothy 5:18 exhorts supporting the financial needs of Christian workers; Acts 11:29 promotes feeding the hungry wherever they may be; and James 1:27 states that pure religion is to help widows and orphans.

My first tithe
I have never ‘tithed’ in my life. I also never believed that a significant number of Christians actually tithe till last year, when I learnt the following;

Tithing opinions• A female colleague who once gave all her savings to tithe, and soon lost her job. She later got another job and appears to be doing well
• A kenyan man whom I met in Uganda while on some international assignment. I came to regard him as the most corrupt person I have ever met; going by the way he ran a patronage system of kickbacks in procurement against behind his employer’s back. I later learned that, despite his shady deals, he was indeed a very committed Christian and gave his 10% to Church without fail every month.
• Tithe need not necessarily be 10% every month but should be a consistent amount committed every month
Now am about to tithe for the first time, end of this month….and I honestly believe this will improve my relation with God

NSE shares take a great leap

2009-06-18T10:10:00.004Z

Without notice, shares at the Nairobi Stock Exchange gained substantially today. Some of the counters with the gretest gain as at 1 pm today;
Athi River Mining up 10% to 99.9
Safaricom up 9% to 3.60
Coop Bank up 9% to 8.90
KCB up 7% to 22.75
CMC up 7% to 13.10
more gains expected going forward

Smali pirates nowp up property in Mombasa town

2009-06-17T07:18:00.005Z

Spent some time in Mombasa last week. Other than the unusually cold weather, one cannot fail to notice the changing skylines of Majengo and Membe tyari areas. These areas were formerly marked by old mud walled houses despite their proximity to the CBD. But that will soon be a thing of the past, thanksto the infamous somali pirates.

Awash with dollars, the pirates have been snapping up the properties and quickly putting up marble finished storey houses in their place. One year ago, a 1/8 of an acre plot in these places was going for Kshs. 2,000,000 (us$ 20,000). Now the pirates are willing to pay as much as Kshs. 8,000,000 (us$ 100,000) with an additional plot away from the island thrown in. Which land owner would refuse such an offer.

Even more interesting, the pirates all have kenyan Identity Cards,making the transfer process much easier. These developments add a further twist to the pirates story; are they harmful or beneficial to kenya? Ask the residents of majengo!

V-tel Consortium: kirinyaga construction wont pay up

2007-01-04T10:00:00.000Z

There is a story about kirinyaga construction being unable to pay up their part of the 12bn required for the second national operator (v-tel consortium). Aparently, they want the dubai company to loan them their share of the license fee, despite being awash with cash. (see the eastafrican this weeek)
The same thing hapened to the kenya national federation of cooperatives in the econet consortium. In a metter still in court, the federation was unable to raise its share of the license fee for the third mobile operator. Are kenya companies so corrupt that they apply for a stake in a consortium knowing ab inition that they wont pay up?
They all make transcentury appear like in a class of their own. Trancesntury acted as a saviour to the rift valley consortium when gridlock of south africa pulled out last minute

Investment Seminar

2006-11-18T12:41:00.000Z

Today, I attended an investor’s seminar at nse, organized by sterling securities lTD.

Charges
1000/= payable at the entrance

Attendance
About 30 people. Evenl;y distributed between laldies and men. All people who have invested in the past and mostly laymen (in stocks trading terms)

Issues of Interest
Agents
Lots of stock agents acting for brokers have set up SHOP of late. Some cases of lost cash Eere reported at the seminaR. Aparently, the brokers are responsible for an agent's 'fuck ups'. a broker should refund cash stolen/misappropriated by his by their agent.

Nominee accounts
Its illegal for brokers to use nominee accounts for normal trading or application for IPOs. However, some brokers are using them big time.

Private transfer of shares
One can privately transfer shares without going though the nse sale procedures.

Investment banks vs brokers
Investment banks are allowed to trade in shares in their name, brokers are not. However, brokers still do trade.

Raising campaign cash from nse
There were fears that the upcoming privitisation (see safcom, kenya -re, mumias, kengen) could be used for politics and not govt deficit financing

Share splits
Look out for nay shares selling @ 200+. all these are candidates for splits in the next 12 months

Investment clubs
Most clubs are unabel to agree on how to split profits arising from contributions, where people contribute differently. A guy has come up with a software to value members' worth.

Eveready IPO
The company is not doing well. Generating negative cash flows, sales declining, compe from counterfeits etc. However, a massive oversubscription expected.

Kenya Railways deal; the winners, losers

2006-11-04T06:50:00.000Z

The govts of Kenya & Uganda finallyput pen to paper to allow a consortium led by Sheltam a south African company to run the Msa.- Kampala rail network for 25yrs. This is a deal with potential for serious consequences on various sectors of the economy.

Road Transport
It will be cheaper, faster and safer to move containers from msa to kampala and upcountry via rail than road. companies like excel logistics, express kenya (nse listed) etc will suffer serious decline in revenues. Unless they reengineer their business model these companies may collapse in 24 months.

Manufacturing
Movement of good to and from msa will be faster and cheaper. lead times are likely be cut by as much as 200%. Kenya will more competitive... a ball for investors.

Matatu sector
If Rift Valley railways establishes efficient rail passenger transport from mtaas like githurai, eastlands, kibera to town. then matatu's in those areas are in for declien especialy at peak times. Investors will be forced to pull out or improve the services. a + for consumers.

Govt divestiture program
If sucessful, the concessioning will serve as a model for other struggling public sector enterprises. we are likely to see more and bold moves like KPA privatisation, KAA etc..... a plus for the economy

Road maintenance
Fewer overloaded trucks on our roads means longer lifefor roads and less accidents

i think its up up up from here

Healthy or unenthical competition

2006-08-26T11:02:00.000Z

This post is motivated by an interaction i had 2 days ago with executives of an agro-based processing co., a clear market leader in their field in East Africa. Since my interaction with them is professional, I will censure their identity.

On enquiry about how they have managed to maintain 95% of the market share while their dozen or so competitors shared 5%, the MD, an Englishman was blunt. Whenever a new entrant or an existing player tries to capture market share in a certain location, a high level meeting is held to discuss their 'conduct'. Such meetings have only two possible resolutions:-
(i)the player is too small to worry about
(ii) launch a blittering war

In the secon option, the 'intruder' has no chance for survival. The dominant player is normally willing to sell at prices lower than the production costs in that locality for as long as the competitor remains afloat. This is supported of course by good returns from the rest of the region where they're a virtual monopoly. Up to 100 upstarts have been crushed in this manner in the last 24 months, i was told.

This reminds of of similar scenerios recently

EABL Vs Castle Brewing
Possibly the biggest corporate war in Kenya recently. Ended in a deal highly skewed in favour of the former. This has driven the earnings of EABL to unprecedented heights while confirming them as a defacto monopoly. EABL is said to have colluded with the then KANU govt to make sure castle did not acess malt in kenya, a product EABL controlled.

Uchumi VS Nakumatt
First round ended on 31st May 2006 when Uchumi's board closed down the retail chain and admitted bankruptcy, and going into receivership. With the govt. appearing serious about reviving uchumi, there will be a repeat battle in the near future. There has been allegations of unfair trade pratices including tax evasion on the part of Nakumatt. The investigation is on-going.

Coke VS Softa
'In the fist 100 days of softa launch, Coke bought the drinks in huge quantities and disposed of it' This made Kuguru overestimate the demand and engage in meaningless production and investment. Apparenly, coke had hope to run kuguru's working capital dry and leave them for the dead. This war is not over yet coz Kuguru targetted the lower end of the market and slashed prices. Lately they have launched 'mecacola' to target the muslim population who shun coke, a symbol of american finacial domination. Reports are that kuguru are slowly catching up. Their branded coolers are now in the market.

Coke VS Ansper
Kuguru were not the only firm to attract coke's wrath. Ansper beverages entered their soft carbonated soft drinks market in the 90's. They targetted coke's market directly (restaurants and pubs). The rest is history. In 2005, coke fianaly migrated to the 'ultra modern' factory in Embakasi where Ansper once operated from. All along there were allegations of faul play.

KQ VS Air Kenya
There was a fierce war in the mid 90s for control of domestic routes (read kisumu & msa) pitting these two. KQ established Flamingo Airlines, specifically to cut Air Kenya and the other small players to size. Air Kenya collapsed. Travellors have virtually been dealing with a monopoly since then. Only now are we begginining to see a semblance of compe from Easr Africa Air.

Others are
Safaricom VS Celtel
Celtel survived only after MTN of Kuweit bought them. MTN has revitalised Celtel with their deeper pockets and better stategy.

Are the bigger and better companies in kenya simply doing business the right way or are they involved in serious faul play to stiffle competition which they are afraid of?

Unga Group: a smart investment today?

2006-08-15T15:46:00.000Z

Unga group has been trading at between 14 - 20 for 12 months now. The low share price is a reflection of the financial situation; the company has been undergoing some restructuring since 2001. Last year, they posted 73m in profits after several years of loss making. However, they suffered a blow this year when they put up a profit warning in March. Apparently, they expected their current year earnings to be hit but as much as 35m largely because of the collapse of uchumi and the draught in the 3rd quarter of the year ending 30th June.

Uchumi having been revived and the honored part of the debt, Unga should be firmly on the recovery path started in 2005. Thier earnings are expected not be much affected by the Uchumi saga as al the debt will be recovered in cash or uchumi preference shares. the share price is likely to apreaciate from the current 15 to 22-25 once the results are out in a feew weeks time.

I considere this to be a good stock for short term capital gain. putting my money where my mouth is!!

Equity Bank's business model: An inovation or a risk

2006-08-02T17:02:00.000Z

Some of the more controversial business models of equity bank:
Clearing cheques:
If you a deposit a cheque today, it takes four working days before it clears for you to access the cash. At Equity, you can deposit a cheque today, and collect the cash but pay 3% of the amount as fees.

Overdrfats:
You can take an overdraft on your account, you pay flat fee of 5%. It doesnt matter if its for a month or 2 days. Eg. On 100k you pay 5000 for a day or for a month.

Approval of loans, cheques clearance and overdrafts
In other banks, there are clear and rigid requirements to get a loan. viz proof of employment, 6 months bank statements etc. At Equity no need. Just present yourself to the bank manager and he looks at your account and tells you if you qualify, the amount possible for lending and the terms.

Decision on Interest rates chargable
On most banks, the rates are fixed at the head office for each category of clients. At Equity, its decided per loanee by the bank manager!!

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Block offers for HFCK and CMC today: a takeover?

2006-07-24T15:07:00.000Z

There were block offers today as follows
HCFK 1,600,000 shares @ 35/= representing 1.4% of the company's shares
CMC 1,000,000 shares @ 85/= representing 2% of the ompany's shares

Both offers represent are at a premium from the price prevailing at the market. (ie HFCK 17%, CMC 13%).

Could someone be working to build a sizeable stake in the two firms? HFCK is particularly intersting as it comes months after collapse of talks between Trancentury and CDC regarding the former's interest in buying CDC'S 24% stake.

Scangroup IPO: Are these Rumours True

2006-07-21T13:28:00.000Z

The on-going Scangroup IPO has been trailed by several rumours which are doing rounds in tao. A few of them below:

That the promoters of this IPO knew that the same would be undersubscribed hence they sought underwriting from the sponsoring investment banks(CFC, Standard and Suntra)....this is the firt IPO in kenya to be underwriten..up to 43%.
That the reason why a clear allotment criteria was not set is that Scangroup favors few large shareholders rather than many small shareholders. As such they 'tricked' the CMA to get away with a vague allotment criteria ie. 55% retail and 45% institutions. This way they can be able to allot as they wish without breaking any rules. Eg. In the event of oversubscription, they could allot pro-rata according to the volume of shares applied for without a minimum or maximum allocation. This would crowd out most of the small investors and favour the big applications. You will recall that Kengen had a minimum allocation of 500 shares then the rest prorata to a ceiling of about 6500 shares.
The Esther Passari's Adopt a light is the suitor targeted for take over by Bahrat Thakrar and duly mentioned in the prospectus. That is why we no longer hear of the Adopt a light IPO. That the cash raised form this IPO will go to Passaris towards this take over. Then she will be offered shares in one of the flagship subsidiaries of Scangroup.
Have you noticed that the brokers are dilly dalying about this IPO. The application forms are not easily forthcoming and very little info is in the public domain as compared to KENGEN. Also, the advertising budget has been kept to a minimum. In the big 4 brokers, forms are only allowed to those applying for 10000+ shares. These manouvres are designed to intentionally crowd out the small investor (read 500, 1000, 2000........9000 shares)

Equity Bank Listing: the facts

2006-07-20T08:33:00.000Z

The announcement by Equity Bank that their shares will trade on the NSE beginning 7th August has surprised many, mostly because they have refused to sell new shares to an expecting public. The bank may have been motivated to take this path for several reasons:-
Fear to Dilute the stake of anchor shareholders
The bank's ownership structure now stands as: IFC & AFRICAP 18%, BRITAK 12% OTHERS 75%. If the bank was to float new shares, they would have to reduce the stakes of these three. This must have been a scaring prospect for these shareholders as they would like to maintain the control they now have over the bank
CMA , NSE & brokers' fees
By avoiding to list new shares, the bank have deftly avoided a subtantial chunk of the fees payable to these institutions while at the same getting to trade at the NSE. They have also managed to escpe to pay fees to a myriad of market operatives including brokers, lawyers, agents (read banks). In the Scanad IPO which is much smaller, this is a hefty 70m Kshs. Equity's would have hit nearly 200m in fees alone.

EQuity's Future
The bank appears to be on a positive growth momentum in the short term. In the year ended 2005, they surpursed the phsycological 500m mark in profits. This ensures they join the league of the top 6 big banks by way of profits. They were crowned the third best bank in kenya on the MI finacial sector survey 2006.

Unique Market Niche
The bank has carved out a distinct and unique market for itself in micofinance. No other institution other than the fast expanding Family Finance has been able to duplicate their business model. Most important is thier unconvetional way of assessing risk. Instead of using, the famous land, assets and collateral method, equity simply uses a client's account history or group credit. This has proved to be hugely sucessful. They have also attracted the trust of small depositors in the urban and rural areas thereby bringing in much needed chep deposits for onward lending.

Support from Wordbank
The world bank is the largest shareholder with a stake of 18% throgh their private investment arm, IFC and AFRICAP. This investment appears to have been motivated by the desire to support microfinace in the developing world. In return this has given Equity the legitimacy and 'credit worthiness' to attract attention and investments from other institutions and high net worth individuals.

However, there are many risks which may dampen investors appetite forEquity shares.
Lack of capacity to serve all customers adequatly
Equity has over 500,000 active customers (source, equity annual report 2005). With all these coming in for basic services like deposits and withdrawals every now and then, they risk being unable to service them fast and efficiently. The solution perhaps lies in what Equity CEO, James Mwangi is trying to do; install and IT platform to handle basic services. Already, the bank has invested over Kshs. 600m in an IT system from Infosys of India together with more than 50 ATMs now installed in many towns. However, this appears not to be working as there are still vey long ques at the bank as late as today, many months after the installation of the ATMs. Looking at these ques, one sees many customers lining up to do basic functions including cash deposits and withdrawals, instead of going to the ATMS. Perhaps the bank may consider launching a customer education drive to go hand in hand with their roll out of ATMs. If this is not sorted out, theese customers may run to other upcoming institutions like family finance and Co-op bank.

Provisions for Bad Debts
Many analysts believe that Equity's formula for bad debts provision is inadequate. Loans that would have been classified as 'bad' in other major banks are still 'performing' in equity's book. This raises a dark cloud over the future of the bank. Central bank's initial delay in issuing Equity with a formal banking license till 2004 is seen in this light. Cosidering Kenya's history of bad debts, this is the biggest risk facing investors

OPPORTUNITIES FOR INVESTORS
Capital growth and dividends
Equity's shares are in huge demand. This is best illustrated by most investors who are visinting brokers and agents now. they have been heard to say that they prefer Equity shares to Scangroup, not knowing that the former is not issuing new shares to the public. With this demand, and the ongoing growth across the board, the shares are likly to continue gaining at the NSE upon lisiting thus creating value to shareholders. In addition, the bank has maintained a generous dividend payout history which they're expected to maintain.

Need for additional capital
The bank has a capital base of Kshs. 1.8bn. Under the CBK Rules, this allows them to take deposits of up to Kshs. 23bn . Their deposits are growing at 30% p.a. If they maintain this kind of growth, then they will have to raise additional capital in 2009 so as to meet the CBK requirements. The deposits with then have hit Kshs. 25bn. This will be an opportunity for investors to participate i a rights issue to raise the funds.

Take
In the foregoing i consider these shares a good buy

Scangroup IPO,to buy or not to buy!

2006-07-13T16:15:00.000Z

The latest IPO on the block has not attracted as much media and public interest as did the recent Kengen IPO. Many friends have asked me skeptically whether to buy or not.

For Scangroup
Going through their prospectus, one sees a company that has experinced consistent and rapid growth over the last five years. This growth in such a market where they already control over 50% can only be maintained by acquisitions.

Against Scangroup
This business is dangerously dependent on the input of one man: Bharat Thakrar. Even though he has signed an agreement to stay in the company for at least five years, this remains a major risk.

The business of advetising is one that its difficult to predict. In kengen , we knew electricity consumption is growing by 7% p.a. Such prediction cannot be said of advertising and PR.

PROBABLE
However, the cash that kenyans fetched from kengen will work for Scangroup. This offer is liekly to be oversubscribed. As such it would be prudent to BUY..

KEEP?
In view of the shortcomings above, it would also be prudent to dispose and take the profit immediately it comes to the market

When will uchumi shares resume trading at the NSE

2006-06-29T15:57:00.000Z

The government, through the minister of trade had promised to re-open some of Uchumi's stores this week. However, the PS came out yesterday saying the action would be delayed pending consent from the board of PTA bank and the recruitmnent of new managers. This will take some weeks.

This is good news to invesors as it means they will ultimately be able to recoup their cash. I have received queries from some investors as to when they will be able to trade their shares on the market again. This will take time.................actually years. There are several conditionsythat have to be fulfiled before Uchumi can be allowed to trade again.

The business has to get out of insolvency:
This is a tall order which means the company has to trade back to ptofits to the tune of after tax profits exceeding Kshs. 1.3bn. This is the deficit in their books as per the last financial statements. Alternatively, shareholders will have to inject additional capital to close this gap.
The secured creditors (PTA & KCB banks) will have to be paid .
The Business will have to firmly come back to the black to the extent that the CMA is satisfied that the company cannot slide back to insolvency.

Considering the performance of Uchumi before they got in the red and also of their competitors, all being well, its my opinion that at least three years are required before uchumi can be allowed to trade again. This is also on condition that on repopening, kenyans agree to shop at Uchumi.

Equity Bank's refusal to take in fresh capital a major disapointment

2006-06-27T14:32:00.000Z

Save for the effect of an aggressive advertisement campeign even the just concluded Kengen IPO would not have raised as much public iterest and investor excitement as Equity Bank's IPO. Kengen's IPO attracted 240,000 investors (individuals and corporates). Equity bank is home to more than 170,000 account holders most of them jua kali operatives and peasant farmers. All these would have willingly raised the approximate Kshs. 5000 required to purchase minimum shares at the IPO (using kengen's listing price)

It therefore came as a major surprise when then bank announced that they will not be seeking new capital when they list shortly. This means investors will not benefit fromthe rapid price appreciation as happened with Kengen. The employees and existing shareholders of the bank are likely to be major beneficiaries of the expected price jump.

Why is equity bank not ready to take in more capital?
the bank has a somewhat interesting capital structure. No individual shareholder commands more than 20% of the shareholding. The two largest shareholders are IFC with 16% and Britak Investment (read British American Insurance) with 12%. This gives them a combined total of 28%. Were they to take in more capital, this would mean dilution f the anchor shreholders stake ,which appears to be pricisely what the bank is avoiding.

This is a smar way of rewarding the minority shareholders without diluting the stake of anchor shareholders. More family run businesses in Kenya should emulate them.

Why NSE investors love Mumias Shares and will continue to

2006-06-20T07:54:00.000Z

One of the welcome new in Mr. Kimunya's budget speach was the statement that the goverment will be offloading more Mumias shares to the market. Since he came to office, the minister has demonstrated an unsual determination to follow up his actions. remeber the banks rates issue. Because of this, his intentions for Mumias are likely to be carried through. Besides, he needs to raise Kshs. 18bn from the sale of public companies at the nse. This money has alreandy been budgeted for hence the necessity to raise it.

Why is this good news investors?
Already Mumias is a popular stock having returned to profitability in 2003 and showing strong growth since then. Investors were alerady expecting good returns and growth in capital due to among others:
Expansion of electricity generation to be sold to the national grid to 30mwt from 3gmgt. This should see revenues increase consideralby besides cushioning the earnings from risks associated with sugar price fluctuations.
Bonus Shares
Investors have indeed stuck with the company throgh the bad days that saw poor earnings in the late nineties and early twenties when the company posted losses. Its expected that the company may soon give a bonus issue to reward these investors. Since 2003, the company has accumulated reserves enough to underwrite such a bonus.
Exit of government
Should the goverment further dilute its stake as expected or exit altogether, thenthe investors will have even more confidence on the manageemnt of the sugar giant. This will see institutions coming to buy bulk stakes to fill in the vacuum left by goverment. this can only be good for investors as the share price is expected to appreciate.

Unga: Is it safe to hold shares of the troubled group?

2006-06-20T06:48:00.000Z

Last week, Unga Group made a surprise announcement of price warning for the period ended June 2006. The gist of the message is that the profit the the period is likely to be less than the projected by as much as Kshs. 30m.

The first section did not come as a surprise as it involved the recognition of the loss likely to be incured following the collapse of uchumi supermarkets. This was indeed a prudent action to take.
However, the other factors mentioned as having contributed to the the failure to hit earnings target are unconvincing. the reasons are as follows:

the avian flu scare which has affected the paultry feed business
the power unreliability in uganda and the appreciation of the kenya shilling against the uganda unit.
the shortage of animal feeds raw material due to draught which led to increase in production costs. apparently, this increment could not be passed on to consumers.

These are all issues that the management should have picked out by the time they released the half year results for the period up to Dec 2005. It there fore looks like Unga's recovery is being adversely affected by factors other than they are wiling to admit. Its important to note that Unga, Like Uchumi is faced with very inovative competition from other millleers. Despite the consolidation, unga still carries with it an expensive cost structure from its days as a monopoly. The competition on the other side are small, family owned outfits that are able to operate with minimal costs in niche markets and regions. they are able to effectively undercut the ailing giant. These to me are the main reasons why Unga is slipping on its expectations.

Is it therefore wise to hold on to this investment?

The price of Unga has since fallen by a hefty Khs. 3 or 15%. There may be additional fall in the price as investors are likely to be more cautionus in short term after the Uchmi saga. Again most investors have stuck with thier lot for more than 8 years without dividends and they rightly felt that it's their turn to be rewarded. These disapointed investors will most likely offload thier holdings and take on companies with better returns such as Mumias. For me, it makes sense to offload the holding s now at 17/=. if the price comes doown to as low as 12/=, then one can buy their stake back again and anticipate the inevitable up climb.

Buying cheap....

When the stocks hits kshs., it will a advisable to buy as it may not remain subdued for long. earnings for the first half the next financial year should be strong enough to necessitate a rebound. investors who will have taken advantage of the slide in share price will thus benefit.

Uchumi sale finally with us

2006-06-12T09:47:00.000Z

The worst has now been confirmed. Uchumi assets will be sold, not as a going concern but on as is basis. This is according to ab advertisement appearing in the Daily Nation today. Its not clear what became of the court injuction reportedly sought by the suppliers last week. Probably they will go to court this week to stop the sale. But the law allows secured creditors (KCB and PTA banks).

Uchumi investigation: IS NSE UP TO TASK

2006-06-08T05:57:00.000Z

The NSE is being severely tested following the news ofUchumi collapse last week. Trading for the past threedays (2, 5,6th June) has been subdued and almost allcounters have taken huge knocks on the share price. Itappears like investors have lost some amount ofconfidence in the market even after the NSE chairmanJimnah Mbaru spoke to reasssure them. This wasexpected.Uchumi was not any other listed company. Forstarters, it was a household name with the brandhaving penetrated the minds of most kenyans. Inaddition, it was no secret that Uchumi usually stockedlocally manufactured products therefore giving thelocal manufacturing sector an outlet. However, themost worrying factor is that its only eight months agowhen Uchumi issued a sucessful rights issue thatraised Kshs. 1.3 b, promising to return to the blackin two years. To come back eight months down the lineto tell the same audience that the company is indeedisolvent, was a major shock. who was paid with the1.3b. Were the directors intentionally withholdingcrucial information from investors while marketing therights?The NSE has rightly started a probe into the affairsof uchumi. Everyone is watching with keen eyes howthis will be handled.
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Uchumi: What is the role of External Auditors

2006-06-02T06:29:00.000Z

In the last Uchumi AGM, there was a heated discussion with some minority shareholders on one side and the board on the other regarding the continuation of Pricewaterhousecoopers as external auditors of the company. The shareholders argued that that PWC did not raise a red flag when Uchumi was going under. This issue was not clearly resolved with the board promising to take the views of the shareholders into consideration.

This question cannot be more relevant than today. The CMA should consult widely and seek to enact a law to define the roles of auditors and other parties on matters of corporate governance.

In the US, Arthur Anderson the former largest accounting firm is no longer in business after being convicted of obstructing justice in the Enron case

Uchumi: class action suit for kirubi, pwc necessary

2006-06-02T06:09:00.000Z

I watched a frustrated John Masterten Smith read a statement announcing Uchumi's closure on 1st June 2006. Lots of investors were taken to the cleaners in one feel swoop. Its notetworthy that some major shreholders who really are responsible for the failed expansion notably Chris Kirubi and ICDCI had long exited the chain. Am convinced that these guys intentionally took the chain to the cleaners so as to buy it later in an 'auction'. they should not be left alone to play around with investors money otherwise people will lose confidence in our financial markets.

Unfortunately, we do not have sufficient laws dealing with this kind of securtities fraud or insider trading as have other developed markets. The only option left now is for shareholders to come together and launch a class action suit against the auditors who have kept mum all the years and the likes of Kirubi. This has been sucessfully done in countries like the US where a tobbaco giant was sued by sick smokers and pharmaceuitcals were sued for side effects of their drugs.

Recently in the US there has been a battery of activity on such cases where executives of energy giant, Enron (Jeff Skilling and Ken Ray) and Technology firm, Worldcom (Bernie Ebbers) were all convicted of fraud or misleading ionvestors. Martha Stewart recently completed her prison term after being convicted for insider trading. http://money.cnn.com/news/specials/enron/
http://money.cnn.com/2002/06/25/news/worldcom/index.htm

Why is KPLC Up like this, Hell Not Again!!!!!

2006-05-31T13:49:00.000Z

am not happy that KPLC is going up by the day. i had wanted it remain depressed till i can raise funds to buy substantial volume!!

Is KPLC the next big thing at NSE?

2006-05-29T13:20:00.000Z

Is KPLC the next big thing at NSE?
I got this feeling that KPLC is the next big thin at the bourse: its likely to double money for investors in 12 months. My reasons are simple.
First, there is a dire shortage of counters on which one can now put their money. Bank stocks are generally to be avoided and so are Merali associated companies for reasons discussed recently on banakelele's blog. As such the high liquidity in the market after the kengen refund will find its way to the counter.
Second, the appoinment of a canadian firm to run the company will bring in professionalism the entity and bring down system loses which eat up almost 20% of the production.
Third, the growth in the economy has compounded the demand for power across all sectors, with better management, the copmany is likely to grow revenues by over 10% annually in the medium term.
Fourth, KPLC paid dividends last year surprising many anyalysts who expected them to conserve cash for internal use. by so doing they set a dividend trend which they must keep this year. thios will work well towards price appreciation since this is a largely dividend driven market.

Kengen share Price drops

2006-05-25T15:09:00.000Z

Todays drop in the share price of kengen from kshs. 40 to 36 is perhaps the begining of a tur bulent trading experince for this counter. Retail investors are known to react in a huff when the price of a stock drops on the NSE. They are likely to start selling in droves. This will be compounded by the fact that most of the shares issued on the IPO were picked up by these small investors.....

the retail investors are driving it nuts

2006-05-24T10:00:00.000Z

the last few days have witnesed madness in the market. the irrational exuberance witnessed on the kengen counter on the market is clearly not supported by fundamentals. how do you explain this: this company made 2bil in profits in the last finacial year. the number of shares now issued is approx 23mil. In the last financial yr. kengen paid 300mil to govt in dividends. if the company maintains the same dividend policy, then each share is likely to get 15cents to 30 cents p.a. in the next three years as the turnover and earnings are xpected to grow by 10% pa. this rate of return on equity if far less than most of the other listed companies. the rush to buy this stock at these prices therefore does not make sense.

the markekt on 8th May 2005

2006-05-09T10:47:00.000Z

The upward movement of the market yesterday was beyond my wildest imagination. The Nse share index climbed more than 40 points aided by price increases in many counters. My favourite Express Kenya moved 1.25 shs. up. I expect this stock to continue on its upward mobility buoyed by their intention to issue bonus shares at a meetinng scheduled for July. In addition, this business is now effectively on a turn around after a rights issue and divestment from the loss making travel division. There was a justified Kshs. 5 jump for KCB which reported very good results for the first quarter. Mumias also appears to be on que, recording a rise in share price a to new high of 64. Their plans to move into production of the electricity for sale to the national grid and that of ethanol should provide a new impetus for revenue growth even with the uncertainaties surrounding the importation of duty free sugar from the COMESA region. However, the upward mobility on the part of Athi RiverMining appers to me to be exxergerated largely because thier earnings growth does not appear to be sustainable in the short to medium term. However, i was disapointed with the slow upward mobility of uchumi supermarkets where i have a sizable stake. I expected to see the price go up by at least 50% this week not because of the fundamentals, but as a result of retail investors who have been scrumbling to buy into uchumi and sell for short term capital growth. This did not materialise yesterday. Should the stock fail to hit Kshs. 19 by Friday 12th May, then i shall liquidate my stake in readiness to buy Kengen on its first day of secondary trading, 17th May 2006. If the goverment finaly delivers on paying off billions of loans owed by parastatals to NBK, then the upward movement of that stock to a new high of 41 would be more than jsutified. In addition, there has been talk of goverment divestiture from the bank. this would be additional good news. However, my worst disapontment is associated with premier mortgage provider, HFCK. Having hit a new high of 32, i expect the stock to lose at least shs. 4 today after news that the expected takeover by a consortium led by trancentury has aborted. The talks are said to have been called off on Friday last week after the Commonwealth Development Corporation demanded a renegotiation of price for their 24% stake in the firm. the approval was granted by CBK on April 20, 2006.