Wednesday, February 28, 2007

NIC Bank Results for FY06

Had a good year like other banks, lower loan loss provisions, higher interest income. Announced final div of ksh 2.70. Saw falling share price.

Tuesday, February 27, 2007

KenGen/KPLC saga

The way forward on the ongoing saga between KenGen and KPLC with the former selling power to the latter at an enhanced tariff of Sh2.36, whilst KPLC and the Government want it to sell at Sh1.76 may finally be resovled tomorrow with the expected performance update to the investors.

The announcement is likely to move either company shares up or down depending on who is favored.


The links below provides some very disturbing reading about errant brokers squadering their clients money. This exemplifies some of the complaints/frustrations I have read and heard from many individual investors more so those from abroad, it appears that some of the brokers disregard small investors. Poignantly, it is clear that CMA arent doing enough and are too slow to act even where their credibility is under threat. However, i believe this should not put off those who have been investing in NSE instead it should be an eye opener of what can go wrong.

Although some of the solutions lies beyond individual control, coming together as an investment group similar to what KCIG have done and having a reputable account manager who we have direct contact with, can provide some of the safeguards.

Read the articles for yourself and do something to safeguard your hard-earned investments and 'pole' for those who may have experienced these problems.

DTK profits up on 2005, share price down?

Diamond Trust announced improved retained profits for 2006 on the back of a growing balance sheet. PBT was up 65% and from my pt of view the most pleasing aspect of this is that it was mainly from higher interest income on lending while NPA charge fell. Going fwd, DTK plans to open more branches and I believe a merger with Habib Bank is already in the cards if not effected already. This will make it the 9th largest bank-based on Bankele's latest banking review with a substantial market share within the Asian retail and business community. DTK is also expanding its reach to the rest of EA region.
Now to the share price, this fell yesterday when the results were announced to the market as have done all other shares-except funnily enough the loss-making Sameer Africa which rallied after the initial shock fall. There are two theories why this is happening. Speculators who piled into any share without checking the fundamentals on the "this shareprice will do well because of ...fill free to fill-in" train. The prices then went off the scale with silly P/E ratios being generated. Once the results came in, the speculators discovered they had been suckered and are now selling off. The second theory is simply guys profit-taking and cashing out for 2007 while they wait for the election year to run its course.

Saturday, February 24, 2007

Sasini's AGM

I find this story curious. The company only had its AGM yesterday to approve a share spilt-which already took place on the 14th of this month! I know the NSE has been desperate for business, but why can't they do things procedurally?
Other than that, I am encouraged that the tea and coffee companies are looking beyond growing and exporting tea and now thinking of doing value-adding. It has always seemed incredible that you get paid something like ksh9 per kilo of tea/coffee as a farmer, but a consumer in the West pays the equivalent of ksh300 for a cup of the same! Worse, the companies selling this cup of tea or coffee actually prefer to buy the raw beans or leaves straight from the farmer to keep the prices low; brand them so they can charge the premium and even go as far as taking legal action to stop the grower countries from branding their own product.

Friday, February 23, 2007

Another solid performance from EABL

Come rain come sunshine, people will have a beer , and EABL will continue to unsurprise. One thing I like about EABL is they not only perform like a company on top of their game, they also look like one. Check out their website; dividend policy is one of continued growth; they have their CSR sorted out; you know when their results will be coming out a year before the results are out; their response to competition is sure and rapid-the senator kegs are a good example of this.
In contrast, Barclays don't have a website to speak of, still prefer to buy t-bills than lending to corporate Kenya and are only responding to Equity's threat like 18 months later than they should have. They do a rights issue-ostensibly to fund their expansion into the unbanked market and then cut dividend for the same reason?

Thursday, February 22, 2007

Unilever Tea Kenya Ltd, Kakuzi and Rea Vipingo Plantations

Unilever Tea Kenya Ltd
Unilever Tea Kenya Ltd was formally Brooke Bond Kenya Ltd, until 2004. It’s a subsidiary of Unilever,and Anglo-Dutch conglomerate. It’s the largest producer of tea in Kenya. The company has a total land holdings of16,223 acres. It has 20 tea estates, 8 factories (including Mabroukie tea factory in Limuru), and produces 32 million Kgs of tea every year. It’s the largest private sector employer in Kenya, employing about 21,000 workers in the peak seasons. It owns Limuru Tea Company Ltd – it acts as the agent in growing, manufacturing, sales and marketing of Limuru Tea Company Ltd. Unilever Tea Kenya Ltd is involved in tea research, sustainable agriculture, and produces black, green and speciality tea. It has a market in Europe, US, Middle East, Australia, etc. It’s a major foreign exchange earner, netting about kshs5.5 billion.

Financial Performance
As of 21st February 2007, the company’s shares had an average market value of kshs91, and a dividend yield of 2.22%. The share market value has stagnated between kshs80 – kshs 90 for the last 3 years. Although the introduction of tea plucking machines in the tea industry should reduce overall production costs, thus increasing revenue, Unilever Tea Kenya Ltd is not keen to embrace the new technology (opting to remain labour intensive), and this might make it less competitive in the industry. It therefore seems like the market value of their shares will remain stagnant, or might be headed for a tumble. However, the recent increase in rainfall should result in high tea productivity.

Unilever Tea Kenya Ltd is competing against companies such as Finlay’s, another large tea manufacturing company. Unlike Unilever Tea, Finlay’s are more open-minded about the tea plucking machines, which should reduce their production costs.

Unilever Tea relies solely on tea production, unlike other companies like Kakuzi or Sasini, who have diversified their production to other crops. It might be considered a good idea to diversify, as it would appear that the world tea market is saturated – this might have an adverse effect on the company’s future share prices. Having said that, the company recently won a Global Award for fight against AIDs (on 8/2/07), from the Global Business Coalition, plus it’s very friendly with the worker’s trade union (supporting them in their fight against tea plucking machines) – would that have any bearing in their share prices?.

Kakuzi is involved in tea and horticultural plantations. 61% of its total revenue is from horticultural sales and 32% from tea sales. Kakuzi has 278 hectares of avocados, 850 hectares of pineapples (joint venture with Del Monte Kenya Ltd, running until May 2008)

Financial Performance
The present average market value of Kakuzi shares is kshs 42 (no dividend yield). In the 1st half of 2006, tea production suffered because of drought, and a strengthening Kenya shilling; tea sales decreased by 16%, but horticultural sales increased by 46%, thus saving the day. The company made losses from high operating and financing cost structure. Future revenue is dependent on the weather and volatility of the Kenya shilling. The recent increase in rainfall should result in high productivity of both tea and horticultural sub-sectors, despite the strong Kenya shilling.

Other companies producing tea in large scale e.g. Unilever Tea Kenya Ltd, Sasini, and others producing horticultural produce e.g. Del Monte.

Rea Vipingo Plantations Ltd
Rea Vipingo Plantations Ltd is the largest producer of sisal, domestically and regionally. The company has benefited from increase in sisal fibre price. It sells in bulk market and niche market. However sisal prices are unlikely to increase further, and so increase in future revenue can only be from increase in production.

Financial Performance
The present average market share price is Kshs24.50, and have a dividend yield of 3.27%. Revenue grew by Kshs1.10 billion in 2004/05, despite dry weather and a strengthening Kenya shilling. Operating profit increased by 7.7%, but net profit decreased due to increasing financing costs and a high tax bill. The main challenge of the company is ensuring that there’s enough water supply for the plantations. High rainfall in 2006 should serve to increase productivity – increase in rainfall and stabilization of the dollar will increase output and value of output, and therefore revenue should increase. Prospects of cutting down on plastic bag use would have a positive effect on the revenue of the company.

Other companies producing horticultural produce, e.g. Rea Vipingo Plantations and Del Monte Kenya Ltd.

BBK profits up 19% on FY05

The good bits for me are the lower non-performing loans compared to '05; the fact that the bank is now getting ready to take Equity on in the competition for the unbanked population by opening and reopening branches. The not soo good is that if you look at the their breakdown of income-fees were flat for the year as was interest income from loans and advances-their income growth was interest on treasury bills. This tells me that their lending is very conservative which is a shame given what must their fairly advanced credit-scoring systems. So my hope for the next year and beyond is to see a more aggressive bank in terms of its lending and also bringing on additional income streams- why for example aren't they involved in stockbroking? Why don't they have Internet banking?
Anyway, see for yourself courtesy of the much-improved NSE website.

BAT Profits down for FY06

Please find release. Final DPS was 12/=.

Tuesday, February 20, 2007

EA Cables-PBT 50% up on FY05

These are good numbers-they doubled turnover and have a virtual monopoly in East Africa. Its a pity many an investor got carried away with the over-inflated- some would say manipulated- shareprice rise in the second half of 2006. The DPS was 0.70, not exactly exciting, but this is a growth company that will continue to do well as Kenyans and East Africans become electrified. The shadow over their growth is probably their reliance on copper imports whose price can fluctuate.

Monday, February 19, 2007

Clamour for NSE Modernisation

Below link is an interesting read for change at NSE which though its occuring, it is at a snail pace.

Sameer FY 06 Results-Grim Reading

Is Meralli losing his so-called midas touch? A month after Everready announced lower profit than prior yr, his tyre business follows suit and announces that it made a loss.

Some tips on investing

I picked up this article from the Standard today-there is quite an interesting piece on "7 senses" for a stock investor near the bottom of the article.

Sunday, February 18, 2007

Williamson Tea & Kapchorua Tea

Williamson Tea are involved in growing, milling and sale of tea as well real estate management and sale of generators-for a fuller description of their activities please refer to this. Most of their tea is grown in the Kericho area through various subsidiaries and associates (the most prominent being Kapchorua which is NSE-listed in its own right). WTK and Kapchorua returned to profitability in the 1st half of their financial year 06 as did the whole tea industry. As per my earlier article, most of their shares are held by the Williamson family and the short supply of traded shares ensures that small amounts can move the price as shown by the price from November to January of this year.
Both will do well for the FY06 (year ends in March'07 so expect results in June or thereabouts). However, both companies' share prices have historically peaked in Jan/Feb of each year . Recommendation is to wait until June/July by when the prices should be at there lowest point. Additionally, both do pay generous dividends hence would be worth investing in at that time.

Saturday, February 17, 2007

City Trust, EAAGADS Ltd, Express Ltd

According to available information, City Trust Ltd are/were an investment holding company that own I&M Bank (Kenya's 11th largest bank by assets-; Kenstock Ltd-who as the name suggests deal in stocks and Nile Breweries Ltd, a Ugandan brewer-their stake in the latter is now much smaller as SABL holds a controlling interest. In terms of Financials, I've not been able to get hold of their latest numbers-a major drawback for now. However, based on their EPS on stockskenya, I believe they made 12m profit at the last reporting financial. On that, they paid a dividend of 2.75 per share, above average for the NSE. Their P/E ratio at 26 is comparable to that of ICDC, the other investment holding company that is NSE-listed. From looking at the history of traded shares, one can surmise that their shares are majority-held by one or two large shareholders making the traded portion and their share price very static. Given the information gaps, its not a share I would recommend investing in unless for the dividend.
EAAGADS Limited are involved in the growing and selling of coffee.The ultimate holding company is Compagnie International De Culturers, Intercultures, S.A. Its associated with SOCFINAF Co, a coffee marketing and miller company based in Ruiru which also has milling operations in Kigumo, Kiambu. As with other coffee and tea companies, EAAGADs made losses for the FY05, but similarly should have a good FY06 on the back of good rains.
Express Ltd are involved in clearing and forwarding by air, sea and land-they are linked electronically to customs; storage service and removals. Since takeover and turnaround by current management, they've gone from a loss of 60m in 2003 to a profit of 54m in 2005. Some of their major clients are EABL, CBK, Total Kenya to name but a few. According to the Financial Post, Express is now seeking to be listed on MIMS and will as such now become a more marketable stock. Express a leader in their market, but face stiff competition in the medium to longterm from Kenya Railways among others. The shareprice has remained static over the last 6 months and should be considered as a speculative stock.


You may have gathered, the possibilities that mobile technology presents pique my interest. With M-pesa slowly taking off in Kenya, what about M-commerce i.e. doing transactions via your mobile? Read on...
While online banking and e-commerce has not really taken off as envisaged in the West, its still at an early stage in our homeland chiefly due to lack of the requisite legal framework, hardware (PCs) and more simply, the occupiers of Stima House not doing their job in electrifying Kenyans. Kenyans are however using mobile phones in increasing numbers (now 8m according to Safaricom and Celtel subscriber numbers) and surely we should be able to exploit this most accessible of technologies?

Standard Group, Limuru Tea company, Kenya Orchards

Standard Group is Kenya's (and therefore East Africa's) 2nd largest media group. Apart from succesfully diversifying its portfolio to include KTN, Standard also runs a publishing and distribution arm PDS. The company was upgraded to the MIMS on Tuesday the 14th of Feb, making its share a more marketable one. Perfomance-wise, the FY06 saw profit before tax more than double due to higher revenue generation. Instead of offering dividend, Standard has offered shareholders a bonus share for every 8 held. The following article gives more informaion on the unaudited financials. For this FY, the group can expect to benefit from increased newspaper circulation and TV audience due to the elections. It should also be able to generate higher advertising revenue from the same. As an investment, it will be in play until the bonus issue is announced, but will long-term continue to suffer in the shadow of the much larger and expansive Nation Media Group.

Kenya Orchards- Are manufacturers of those popular fruit jams such as mermalaide, strawberry et al as well as juices. Shares in this company have been suspended since May'06.

Limuru Tea-Is 54%-owned by Unilever Tea who act as its mafucturer and sales agent. Was affected by the drought in 2005 as were other Tea companies. Their detailed trading history shows a sharp decrease in shares traded to date which makes it a non suitable company for our consideration for investment.

Friday, February 16, 2007


I have read many commentaries about the members only status, slow reforms, investors powerlessness and lack of influence on how NSE is managed and run. However, it appears this maybe a thing of the past with the recent announcement of NSE demutualization into a public owned company listed on the stockmarket. This is similar to what Jo,berg S E, LSE or NYSE have done.

The public listing is to happen before the end of the year and for those interested should be ready for it.

Wednesday, February 14, 2007

KENYA - A return to microeconomic stability

Hi All ...

I came across this report on Kenya - prepared by JP Morgan and think it will be useful to all who currently invest or would like to invest back home.

Tuesday, February 13, 2007

Equity Bank's 1bn PBT-120% higher than '05

For those of you who missed Equity's announcement of its annual results for 2006 yesterday, I attach the copy they sent to NSE http:// they will be attaching the fuller results on their website later on. Of note, is that the 2/= dividend will be paid to those who hold Equity shares as of 5th of April 2007. The 2 bonus shares for each share held could well be based on shareholders on or after this date.
Thankfully, there was no word on their much rumoured purchase of NBK.

Monday, February 12, 2007

NSE new site

It appears after being pestered for a long time to do something about their site NSE have taken some actions and come up with a new site (link below) albeit the site is slow and doesnt contain much information. I still believe they can do better and the pestering must continue.

Sunday, February 11, 2007


Attached is an update list of those firms authorised by CMA/NSE to undertake dealings on clients behalf.

Saturday, February 10, 2007

Some basics

Finally I have gotten round to doing it! I will make it look like a Q&A session...anything you don't understand.....ask!!! Am sure you guys know most of this stuff but I will start with the basics anyway.....more like a revision session, no?

What is a share?

A share is a unit of ownership in a corporation or a financial asset. This does not however give the holder of the shares direct control of the company's daily operations.

Companies issue shares because they want to raise money for one reason or the other; say to expand their operations or buy new machinery. They could very well get this money by borrowing from a bank but this would be costly to them as they would have to pay interest on the money as well as pay the money back. So the cheapest option……issue shares or rather sell a part of the company to the public. This is money that they will never have to pay back..... and, there is no interest to be paid later.

Shareholders buy these shares on the premise that the price will rise to a level higher than what they paid for them, they will sell them and make a profit. There is also the lure of dividends especially when a company makes good profits although, a company is under no obligation to pay out all or any if its profits as dividends.

The two main types of shares are common shares (ordinary shares i.e. what is traded on the NSE, LSE, NYSE etc) and preferential shares (debt to the company).

Ordinary shares represent ownership of the company but it does not give you the right to run it on a day to day basis. You do have one vote though which you can use to elect the board members who will run the company for you. Ordinary shares also entitle you to partake in the company’s profits in the form of dividends although as stated earlier, the company is under no obligation to pay out dividends. Unfortunately , even though this class offers the highest returns, is also the riskiest; in case the company goes bankrupt, you will not be paid anything until all the creditors, bond holders and preferential shareholders have been paid ( high risk, high return)
Preferential shares also represent ownership of the company but they differ with ordinary shares in terms of voting rights; depending on the company, they have no voting rights. Also, they are paid a fixed dividend (more like interest) which is guaranteed i.e. even if the company has not made a profit, these guys have to be paid! Another advantage of this share class is that if the company were to go into liquidation, they would be paid before the ordinary shareholders.

What is a stock market?

A market like any other only that people “meet” to buy financial securities (stocks, bonds etc). There are two types of markets (although there is no physical distinction really): a primary market and a secondary market.

A primary market is where new securities are created through an Initial Public Offering (IPO). A secondary market is where investors trade previously issued securities i.e. after an IPO the shares start being traded…this is the secondary market and it is what we talk about when we refer to the stock market.

We’ve all heard of the terms a “bull” market or a “bear” market being used to describe the stock market. These are terms that are used to describe stock market trends. A bull market can be described as a period when prices at the stock market are rising rapidly. A bear market is the opposite of this i.e. when prices at the stock market are declining rapidly. Bull markets are characterised by increasing investor confidence, investors buy in anticipation of further capital gains.

What is an Index?
A stock market index can be described as a figure that is used to measure the state of the stock market. It is based on the performance of a group of stocks which are chosen by the stock exchange body and which meet some set criteria, for example they trade in the same stock market, they have similar market capitalisation or they belong to the same industry. Indices are used to benchmark the performance of portfolios.
There are different ways of calculating an index each of which has its merits and demerits. The NSE 20 share index is the official index used at the Nairobi Stock Exchange. As the name suggests, it comprises of 20 key stocks ( which elude me just now but I will remember them in due course). The NSE 20 is a price weighted index i.e. its value is influenced by the prices of its constituent stocks. Thus, stocks with a higher price will be given more weight and, they will have a greater influence over the performance of the index. For example, say Jubilee Insurance ( price Ksh 303 as at Wed 7th Feb source: and Kenya Orchards ( price Ksh 5 as at Wed 7th Feb source: are both constituents of the index. Jubilee will have a higher weighting than Kenya Orchards due to its price and thus a movement in Jubilee share will cause a larger movement in the index than a movement in Kenya Orchards would.

Thursday, February 08, 2007

Who owns what at the NSE Although the article is talking about foreign ownership of NSE listed companies, I thought it useful for our records as it has a little bit of information on Sasini, Limuru Tea, Kapchorua Tea and Williamson Tea.

BBK to double branches and ATMs

According to its global CEO, BBK will double its branches and ATMs in the next 3 years and will also be offering portbale branches (they've copied that from Equity). Here is the article relevant lines are under the paragraph titled "Developing the Market".

Wednesday, February 07, 2007


Following ICDCI, EA Cables, BBK and Sasini share splits, CMC holding recently announced a 10:1 split of their shares to make them affordable.

Speculations are also on KPLC, Equity, NMG and Jubilee to do a share split as their shares are highly priced.

Blue-Chip, Growth & Speculative Stocks

In our meeting on Sunday, we struggled to identify which of the above categories some of the NSE companies fall into. As our investment strategy means we need to be able to be able to easily tell these categories, I thought I would try and kick off a debate as to a criteria that we can use to differentiate between the stocks:

Year on year profits: should be growing moderately for a blue-chip up to 10-30% but above all, there are profitable; more than 30% for a growth company while speculative will be tend to have irregular profit patterns.
Market share: Blue chip will be the dominant player with a growing and stable position in its sector/country. Growth companies will be showing an increased market share via organic growth or by acquiring other players in its sectors. Speculative will be in between but showing signs of focus on particular niches.
Shareholder structure: Blue-chip companies at the NSE will typically have very stable shareholding structure with a majority or controlling interest. Growth companies will have diverse stockholding or have experienced a recent change in shareholding.
Dividend policy: Blue-chips have reliable dividend policy with payout and broadly similar level or growing year on year regardless of performance. At the NSE, it’s a known fact that the best dividend payers are the foreign-owned ones. Growth companies will have a low dividend payout policy as they look to plough back most of their profits into growth.
Share price: The price movement of a blue-chip over a given period of say six months or an year will broadly mirror that of the total market index while that of a growth company will be higher. For a speculative stock, the price movement will be erratic and usually lower being impacted by company specific events.
Growth policy: A blue-chip will look to grow by improving efficiency, introducing new channels of distribution or new products. A growth company will grow fast organically via some competitive advantage and then by acquiring bolt-on businesses. A speculative business would typically not have a clear growth policy.

A very +ve Kenyan story featured in UK newspaper

I know this has been featured in stockskenya, but I just thought I'd share a good news story (that does not involve Athletics) from our motherland. The UK Guardian newspaper yesterday did a feature story on the NSE saying how its transforming Kenyans' investing options and comparing it to the Maggie Thatcher's economic revolution in the 1980s that transformed the London Stock Exchange to what it is today. Here it is,,2006594,00.html?gusrc=rss&feed=12.

ScanGroup's 50% stake in RedSky

Just for our records, I have copied and pasted this from Dyer & Blair's website.

Scangroup Limited has acquired a 50% stake in Redsky, a local advertising company. It has also entered into a further agreement to acquire a further 35% of Redsky subject to no regulatory approvals being required, according to the Chairman of the Board of Directors, Mr. David Hutchison.

The deal holds the following synergies for both groups:

For Scangroup:
Redsky’s client mix includes firms in sectors in which Scangroup has had no significant presence such as the telecommunication and automotive industries.
Redsky is the advertising agency for Safaricom. Mobile telephone operators in Kenya today have the largest advertising budgets. Indeed, Celtel and Safaricom have had a combined advertising exposure of over Kshs.1.3Bn in 2006 according to Steadman & Associates.

For Redsky: Redsky benefits from Scangroup’s regional presence, media buying and planning expertise across several African markets, allowing their clients to tap into public relations, event management & experiential marketing expertise from Scangroup.

Additional information: Redsky was formed in 2005 by Lynda Holt and handles advertising for: Safaricom, Beiersdorf, DT Dobie, Stanbic Bank and Sara Lee.

Scangroup Limited is the first marketing services company to be quoted on the NSE and is holding company for advertising agencies Lowe Scanad Kenya, Uganda & Tanzania, Thompson Kenya and Grey East Africa, McCann Kenya, FCB Tanzania, media planning and buying companies Media Initiative East Africa and Universal McCann, public relations company Scanad Public Relations and event management and experiential marketing company Draft Worldwide.

As part of the acquisition, Mr. Hutchison and Mr. Thakrar will be nominated to the Board of Redsky which Mr. Hutchison will chair. Other directors include Lynda Holt and Erik Van Vliet the Creative Director of Redsky."

Of note, is the fact that McCann is already part of ScanGroup, however as several of you mentioned, it will only be a good deal if ScanGroup can keep RedSky' staff happy so as to keep the client accounts.

Friday, February 02, 2007


Wananchi’s recent merger with ISPKenya has led it to seek a private placement to help it expand further. The merged company has a 38% market share and the deal has to be cleared with the Monopolies Commission (CHECK). Once the merger has been completed, the company will be seeking an IPO. Subject to a successful completion of the merger, the company will be looking for further acquisitions. In what areas? That would be telling.

Thursday, February 01, 2007

KCB CEO to step down

Terry Davidson will be stepping down in next few months with his role already being advertised The guy has done much to turn around KCB including:
-Refreshing its brand and branch network
-Continuing the balance sheet cleaning-up started by Gareth George including and especially that political loans that were never going to be repaid
-Spent extensively on upgrading its IT system
-Creating an expansive but cautious strategy for growth. KCB now has branches in TZ and Juba, Sudan
So it has come as a bit of shock! The timing seems weird with annual results due out in the next few weeks and the strategy that the CEO set a few years back only some of the way through. There is much to do in terms of setting the bank on par with BBK and StanChart.
As a shareholder, I’d sell and wait until I knew who the new CEO was and what direction he/she was going to take KCB.