Thursday, January 31, 2008

Results update, NSE update

Haven't done a results update in a while. Many companies will or are reporting their FY results now. I expect the banks to start doing sometime early next month with trusty Equity out with its Ksh2bn PBT.

Is it time to start buying in the NSE? Maybe not while our politicians are still having tea/orange juice rather than taking the hard choices Kofi has asked them to. Can you imagine how difficult that will be for Kibz who is famously indecisive? The other elephant in the bourse is Safarciom OFs which I think the GoK is itching to bring to the market. The first will lead to continued uncertainty for investors. Uncertainty=falling prices in this situation. Safcom OFS will also see a slight dip in prices. Whether you go into the market within the next few weeks should depend on:

  1. Your risk appetite. This is a time for those who have cojones.
  2. Your risk-free funds i.e. those funds that you can afford to lose without losing your house/car/plot in the process.
  3. Your investment time horizon. The economy will probably take two years to get back to were we were on Dec 21st i.e. when guys were still going to work. So invest if you intend to harvest in 18 months or more.
  4. Whether you think a lasting political solution will be found- I am 60% certain they'll find one.
  5. Your believe about how long it'll take for them to find a solution
  6. Whether the solution will be sufficient to allow normal ecnomic activity e.g. farming, transport
  7. Those who speculate will still have opportunities to do so:
    Ø Earnings period such as now
    Ø Safcom IPO when you maybe able to buy at discounted price

One more thing: I have noticed that they are idiot Kenyans who want our economy to go down the toilet as long Kibaki is president. Why? Don't you have families in Kenya? And the "I blame Raila, I blame Kibaki" game is just tired. If you see your house on fire, I don't think you
run around looking for somebody to admit guilt while your house burns. Be part of the solution.

Wednesday, January 30, 2008

Kenya: A work in progress

One of the things that makes me an optimist about our country is the realization that we are a work in progress. Looking at it in just a selection of ways:

  1. Democratization process over the world, some places (e.g. UK), it took 1,000+ yrs for them to have universal suffrage (i.e. right to vote); others only permitted certain groups to vote in the last 40 years (US) some of the emerging economic giants were ruled by military juntas even up to late 80s. Some like China have not yet gone through the birth pangs of democracy, but will. We’ve been a nation for 45 years and have experimented with pseudo-dictatorship, coup d’etat, and sadly even lately we’ve civil war in all but name. We are thus poised for better wiser choices.
  2. Economy: Most western economies would be happy to get 5% annual growth. Most won’t e.g. UK which even at its booming period had 3.5% annual growth rate. Similarly US had a growth rate of 5% at peak over the last 10 years. We on the other hand scorn 5%, think we can get 10% within the next two/three years and higher if we care for it
  3. Education: Many countries have experimented with many education systems some are still doing this. In some, you had your own color of schools even as late as the 60s. Free schooling is not actually a goal in many countries. In Kenya, I am convinced that even university will be free by 2020.
  4. Technology: While many have gone through various stages of technological evolution, we more or less get ready-made technology. We manage world-class research breakthroughs despite not having the capital. Think what we can do if we had the supporting economic growth…
  5. Sport: Need I say more?

Bottomline: We are a work in progress. The best of Kenya is on its way...

Monday, January 28, 2008

Leadership & who is a Kenyan?

Leadership is seen by some as a calling and indeed in the old days, one would be prepared from an early age to assume such a mantle. In Christian terms, one is seen as a shepherd, an intercessor and someone to whom wisdom is assumed to be higher than his followers. In modern times, a leader is somebody who can transcend the present be it the situation, environment or even time. So in this respect, I'll believe we have a leader in Kenya when we can get someone who can transcend the tribal, the poverty of original thinking, the deep-seated need for change. It'll be a while though judging by the current crop...

Who is a Kenyan?

Sunday, January 27, 2008

Some music

When I go back home,I normally to try to pick up stuff I have heard or seen when I'm here. I also take a shot at new music. Solomon Ng'ang'a the singer of this song was a 2007 Kisima Award nominee with another song from the same album. The song means "guardian of Israel".

Dolo Kabarry is a traditional singer in the best sense. His are phenomena story-telling songs like this one that charts his journey with a gal and they are long so you know you are getting value for money.

De'Mathew is a staple as githeri in rural kikuyuland. though he has previously concetrated on kairitu songs, this one is a contempous shot at our head-in-the-sand politicians.

Saturday, January 26, 2008

God is ABLE

The last few days have even be very worrying/harrowing. Lakini nobody can solve Kenya's problems but us Kenyans with God's help.

Thursday, January 24, 2008

Tuesday, January 22, 2008

The global markets catch up

Today's 0.75% Fed rate cut tells us three things:
  1. The Fed despite having access to the brightest economics minds, econometricians and quants in the world has little or no idea whats going on in the US economy or will happen next.
  2. Bernanke may be very bright, but he is no Greenspan
  3. Things are thick. When you look at some of the economic data e.g. new jobs for Dec were only 18,000 compared to 200,000 in Dec 2006; gas prices at historic highs; negative equity in housing a relaity for some, then you things are not good. Furthermore, a cut like this will only have an impact if it feeds through to credit card spending; lower variable payments on borrowing (but bear in mind most mortgages are fixed)
As far as the current stock bath, these are the likely impacts should it continue for a while:
  • US: Continued negative sentiment will increase likelihood of reception from 60% to 90%
  • Japan: A virtual shadow of the US these days. When I was doing CAMELBCOM for banks a few years ago, a Nikkei level of 12,000 was a trigger for panic over the Japanese banking system given the level of cross-shareholding between Japanese banks and the rest of the economy.
  • Continental Europe: Unlike US, the level of equity participation by general population is low. Nevertheless, a slowdown in US, Japan and other markets will mean fewer exports.
  • NSE: Has zero correlation with the US/UK/Europe markets and shouldn't see any effects from their woes. Ours will only be our own if we want them.
  • Emerging markets: Of late, there has been talk of decoupling by this sector from the US economy. Not so, China/India felt the chill-factor with BSE being suspended this morning and Bank of China having to declare substantial subprime writedowns. I however expect fundamentals to do the talking for these economies.

Friday, January 18, 2008

Credit crunch: the end is nigh

This week and the next few will see most of the big investment bank players empty their closets and show the world how much they really messed on their bets vs. the credit market.
So far, Citigroup & Merrill have announced losses the size of a medium-economy, and gratefully accepted help from oil and communist dollars to shore up their capital. UBS will also take a similar hit (it’s already gone to east with a begging bowl) when it announces its FY and is already abandoning investment banking to concentrate on providing a save haven for dinero from African dictators. Bearn Stearns will also make huge losses. The funniest thing is that two yrs ago, many investment banks prided themselves on how much of stake they had managed to acquire in a Chinese bank and how far their expansion plans in Middle East had gone. How times have changed…

JP Morgan & Deutsche are probably the only two that had mild hits. Goldman Sachs actually made money out of the fiasco by getting out early in 2006 and betting against the market.

Gillian Tett puts it all down to how tribal the different banking cultures are-more tribal, more messy.

Recession is now pretty much expected in the US. In the UK, there will be a downturn, but one expects the Bank of England to cut interest rates a couple of times this yr to stop a recession. That will be good news for fixed rate mortgage holders (including your truly) due to roll this yr.

Youth unemployment & underemployment-ideas

Youth unemployment and underemployment are in my opinion Kenya's most urgent problem today and for the medium. The Youth minister should hit the ground running on the issue and look to have viable policy on the issue with the first 6 months.
Reason: Like the saying "the devil makes work for idle minds", youths with no prospects have become cannon fodder for politicians, criminal militias (mungiki, taliban), demagogues (religious as well as political), illicit activities such as dawa za kulevya, kumi kumi, "professional services" etc.
The underlying causes are our weak economy that has not so far started creating employment in large enough numbers; cost of higher education; lack of extra-circular activities such as organised sports and voluntary work.
one of the best ways to assess the problem and thus provide ideas would be to look at the different stages of education. From last yr's exams, 70% of the pupils will be going 
to 2ndary school leaving out another 200,000. This intake rate is higher than prior yrs but using this as a proxy, 
one can see that over 5 yrs, 1m pupils wouldn't have progressed beyond standard 8. They are also the most vulnerable
 of the youth with negligible grasp of issues; lacking advanced English (business language) or Swahili and will mainly interact 
with their own tribal members. this is the group most vulnerable to small inducements (such the Ksh500 mentioned for burning a house down). Some ideas:
  1. Implement the free secondary school and make it compulsory for pupils to stay on in school until they are 18.
  2. Introduce two non-fee paying tertiary colleges per province
  3. Encourage constituencies via the CDF to set colleges that cater the local economies' needs for example teaching them animal husbandry skills
  4. Creating apprentice opportunities in partnership with local or national businesses
Of those who go on to do to secondary, some drop out. Of those who sit say 250,000, only 25% get admitted to universities in Kenya (both public and private). The other 200,000 find their way impended
by having to compete for jobs against graduates. For these students, several ideas need to be implemented or evaluated:
  • having as a goal, that by 2012, each province will have two or more public universities and at least one private university
  • immediately convert polytechnics into universities
  • give tax incentives to those setting up private universities
  • rethink the 8-4-4 system and most importantly, bring back A-levels, to align us with for example, our EA partners
  • as per above, have more tertiary colleges
  • use students as supply teachers especially within their localities-so can be paid by CDF
  • again, as per above, work with local businesses to create apprentice opportunities
University graduates tarmacking used to be such a common feature and still is to some extent. However, there are many ways that the situation can be improved:
  1. courses catering for particular sectors of the economy e.g. road building;
  2. NGOs and other foreign companies must employ at least 90% Kenyans
  3. some of the emerging countries are crying out for labour
  4. the ANZAC countries have a partner agreement with the UK that gives anybody under the age of 30, a 2yr visa to come and work in the UK. Can we do the same with some of our other so-called developed partners such as Canada and the Scandinavians countries for example? In our case it would be graduates.
Finally, wasn't ironic seeing Najib Balala run into his top of the range Range Rover leaving protesters to partake of teargas?

Monday, January 14, 2008

Earnings Update

I know neither this govt nor any other has been known for their transparency, but one of the first tasks of a new CMA CEO should be to issue new guidelines on company reporting and relatedly-insider trading. After the credit crunch starting biting last yr, most investment banks and then more conventional banks did an earnings update that confirmed the impact the credit crunch was likely to have on their earnings. This is because it’s a requirement that any material change in earnings must be publicly flagged by all listed companies. Similarly, after a Xmas period that saw weak retail sales, many of the stocks in that sector have done earnings update where their figures will be different from those previously projected.

Post general-election violence and continued nonsensical rallies will affect many sectors. So far only Unilever and CMC have formally announced likely adverse impacts on their earnings. The absence of news from the rest has given way to rumors about the possible adverse impacts within TPS Serena seeing almost 10% shaved off its share price, while others maybe seeing erroneous rises. Some of the falls will be because there is insider knowledge about say the number of bookings that have been cancelled; number of loans defaulting etc.

On the contrary, being transparent about adverse impacts, means investors actually price this in early enough such that the eventual recovery in price will be much earlier than where they until the results are formally announced.

Kenya Airways: Troubles of its own making?

I've been unable to find a right entry price for KQ over the last 12 months because every time I considered doing so, there was an issue that meant the price fell.
  1. Virgin's entry
  2. The corporate email that was leaked
  3. The clash in Cameroon
  4. Disappointing final results for FY 2006
  5. Likely disappointing results for first half of 2007/2008 financial yr.
Having travelled home with them, I can attest that most of the problems look to be internal and may require a new CEO to turn things around. On the outbound journey, we had one hour delay in boarding and an additional half hour to fuel the plane. We only got told about the "fueling". We then got onto the runaway, but couldn't take off because there was a problem with the starter. That took an another one and half hours to fix. We eventually took off 3 and half hours late. KQ would have incurred a fee for being late in taking off and presumably another for landing late at JKIA. Coming back we were an hour late boarding. For lunch, you could have any meal as long as it was beef. So repeat business will be hard for it to get especially on its most important routes revenue-wise.
On the issue of losses due to the weaker dollar, what not trade in more than one currency? Oil prices are harder to deal unless you hedge well.
Bottomline: Change CEO or some of the other managers; reduce routes if unable to run all them profitably or things could go Uchumi-way.

Thursday, January 10, 2008

Thursday shorts

Investors hate uncertainty in the economy, the NSE (when Francis Thuo et al are not doing manipulations) is a good mirror of this. Right now the compe is between fundamentalist (long-term investors, buy-to-hold and appreciate economy) vs. analysts (speculators, focus on short performance). Analysts are winning on TPS Serena (its type of customers are not going to evaporate overnight) and losing out on other stocks (banking for example).

With our economy now starting to grow (as destructive as last week was to the economy, its not taken us back to the 2002 situation where we had so many holes in our economy, I am convinced the economy is strong enough to bounce), I am worried about the performance of two firms, KQ and Kenya Ports Authority. More about KQ later… but KPA seems to have a capacity problem which has been compounded by a more efficient KRA. Should it consider outsourcing some of its work?

The current political farrago has made politicians out of many a blogger. Many have subsequently engaged their hearts in an arena that requires a good dollop of brainpower. Many are also posting bar-talk in their blogs. The output is out there for all to see. There are exceptions however. Such as one by the name Silaha.
Uniquely in blogworld, this guy is the only one who the got the election result correct (apart from Mutahi Ngunyi and some prophet Thomas Mason). His latest post on Kibaki’s move on Tuesday makes a lot of sense. Additionally, I think Kibaki is on his 2nd and last term and probably feels freer to exercise the sort of strong-man nonsense many Kenyans were crying out for in his first term.

Kenya has been dominated by two kinds of leaders (in the loosest sense of the word). Politicians and technocrats/businessmen. Kenyatta, Moi and Raila are all politicians the type who pull crowds talk nonsense mainly but have a sharp political brain. Mwai Kibaki, Michuki are all technocrats who are good at the doing, but are very poor communicators and rarely have sharp political brains. But is the old man about to show his political skills?

Obesity is a big issue in the UK. On public transport for example, seats that were designed to sit two adults comfortably can only sit one adult and a child. A very small child.

Americans invented opinion polls, but how bad were their predictions of how well Obama would do in New Hampshire?

Monday, January 07, 2008

Uplifting stories

In the west, no news is good news. Slowly and surely, Kenya being moved from the headline/front-page news and I thank God for that.
Its nice to see that Nairobians can now slowly go back to whining about their looong traffic jams and potential looters in Momba (maybe in 2o12?) will have some to consider halbadiri being invoked on them.

Meanwhile, at the NSE most stocks today saw "bid" quantities heavily outweighing "ask" quantities as big investors rushed in to take advantage of small investors nervousness about current situation. Don't forget that results season will soon be upon us and thus in a traditional sense we should be seeing rising prices leading up to the Feb/Mar period.

Beyond that, investors will start getting a feel for which companies have been heavily impacted by current looting/destruction in the name of democracy. I mean, how stupid do people get, you burn your local supermarket/shops/petrol stations; trucks that transport local milk and yet you'll be whining in a yr about your region being neglected.

Some websites for 2008

In the course of my trawl I've been impressed by the following sites:
This is my new source of the NSE live feed now that stockskenya and mystocks seem to have gone kaput.
These guys designed Nelly data's logo and background. I'll plug them in the hope that they'll do some pro-bono work for KCIG...
A neat source of laws in EA and Africa...
They will do some marketing for ya...

Friday, January 04, 2008

Economic Paralysis & the NSE

Most sectors of our economy are dependant on roads. Part of the plan it seems, is to paralysis the economy until some peeps get their way. Thus the current road blocks will impact them as per follows with impacts getting larger the longer the crisis goes on:
  1. Agriculture: Especially horticulture will see lower sales as they deal with perishable goods. Most of the produce to supermarkets will not get to them thus lower sales. Milk may also not be collected. However, most of the listed companies in this sector deal in dry goods (tea leaves and coffee).
  2. Banking sector: Many are reliant on transaction volumes (generate commission) and of course lending. Lower transactions will be felt as their distribution networks for moving cash are not working. Lending will be a medium-term effect as companies assess the political situation
  3. Insurance companies: Will see higher than normal claims this yr and will probably be more affected than other sectors especially relating to buildings and contents and injuries. Jubilee and PanAfric are in the frame here.
  4. Oil sector: Loss of revenue due to lower sales will be the main impact. A limited number will also suffer re-building costs.
  5. Tourism: Will start feeling the effects if this goes into another week. As it is, UK holiday companies have suspended holiday bookings for two days.
  6. Industrial: Will be impacted by the inability to get necessary raw materials or distribute their products. A long-running crisis will see lower sales and concurrent higher costs (of maintaining machines). For the cement companies especially, they'll dread any adverse impact on consumers who may put off building plans. Mumias ought to be relatively unscathed apart from supplies to its wholesalers.
  7. Media: Should be doing well in present circumstances as Kenyans seek news, but their distribution networks across the nation will be impacted thus leading to lower sales. A longer crisis will impact advertising.

Suggestions vs impasse

  1. Kibz to step down-but what about his 4m voters (even the pro-ODM Standard confirmed he got that many)?Voter recount- was viable on Monday/Tuesday, now it would just be a replay of last Saturday
  2. Power-sharing i.e. Kibz doe the 2.5 yrs and Ro the remaining 2.5yrs (i nicked this from BDA)
  3. Govt of national unity-been here before in 2003 and this didn't work, what makes you think it'll now?
  4. Govt of national unity excluding Kibz and RO
  5. Publish the findings of the audit jointly done by 18 presidential agents and the ECK last Saturday night
  6. Ban political rallies in Nai for 6 months and elsewhere for 3 months with jail terms for lawbreakers. These rallies are the genesis of this current situation and have been going since 2003. Kenyans need less (far less) politicking-a throwback to M-o-1 days
  7. Redo the presidential elections with internationally constituted commission-an ok idea as long as no political campaigns of any kind including media
  8. Open parliament immediately which will facilitate a vote of no confidence in Kibz (remember ODM has the numbers to do this).
Any more?

Wednesday, January 02, 2008

An appeal to fellow Kenyans

Firstly, an appeal to fellow diasporians who are now busy inciting tribal hatred and general war-mongering.
Many of you enjoy comfortable, peaceful and productive lives abroad. Presently, many at home would
be grateful for one these benefits.
Many of you have travelled which is meant to broaden the mind and thus you should know better.
Many of you have access to TVs and the internet and thus don't need to be told about Rwanda. Many of you didn't even bother to go home and vote.
Many of you are grown-ups.
Is it too much to ask you to exerrcise control over your brains? If you don't have anything but tribal bigotry to spew on the internet or thru phone calls, try and pray for the country, send funds to help with the relief effort or do some work...

Many of us love Kenya, have loved ones living there and fully understand that good or bad, its our nation.

Rumours: One thing I noticed when I was home, is that we thrive on rumours and even act on them. A good example, on Saturday at around 930am when tensions were just building, I was just planning to drive to Nai when reports came thru that there were riots in Nai. The rumours were that the whole place was under riots and nobody was to go into Nai. All mathrees that ply the particular route to Nai refused to run. But I had to go because I had an appointment. 1.5hrs later, I was by the Globe and to my pleasure, noticed there was not the usual traffic jam. I proceeded to Hilton then onto Yaya with no problems and with best amount of traffic for the whole time I was in Nai. Let’s avoid rumours as these are being used to feed a volatile situation.

My believe, prayer and hope is that if tomorrow's rally can be cancelled, things will have calmed down by the weekend as peeps realize that there are politicians who live in leafy suburbs and get a very well-fed and irrigated and then there is the common mwananchi who has just torched his local grocery store or supermarket and will probably go hungry unless he can control his idiocy and allow life to go on.

On the elections

Parliamentary Outcomes:

New faces: Nemesys Warugiongo-slayed the corrupt giant who goes by the name Murungaru. Murangaru withdrew something like Ksh25m in the last week to target certain Kieni locations to no avail. Warugongo is known as Warungu wa Sufuria due to his work with women groups and the like.

Monda beating Nyachae who had always said he would leave the Bunge in a coffin.

Youthful faces
Its good to see Cecily Mbarire finally get a seat. I don't understand why Njoki hasn't done the same.

Comical Battles:
George Thuo vs William Kabogo
According to a friend in Juja, whereas Kabogo's shilling buried his opponents in the 2002 elections (I recall Stephen Ndicho, one of his opponents became a pastor not long after this). This time every Ksh1,000 he dropped was matched by the same from the CitiHoppa's MD. This, Michuki and "scientific manipulations" sent him home.
Evangelist Margret Wanjiru vs Maina Kamanda
This one started very early and roped in a certain Kamangu who wanted the reinstatement of his conjugal rights. Margaret lost her beau, but gained Starehe for Jesus. Maina Kamanda has seen off many in the past including Jimnah Mbaru, Kiruhi Kimondo, but just as he
had amassed the resources to fight, along came somebody even richer than him. Juja road was full of
Margaret's posters.

Njenga Karume vs Stanley Githunguri:
While many opted for younge or at least new faces, in Kiambaa they recycled their MPs bringing back Githunguri. In a bid to shave off 70yrs from his age, Githunguri nicknamed himself "Stano" and this seems to have worked.

Unfortunate outcomes:
Nderitu Gahachagua lose in Mathira: His CDF was rated the 2nd best in the country, he excellently articulated issues to his constituents, but it was not enough to overcome the KSh1,000 given to many households by Ephraim Maina of the "Cowboy Contractors" fame. Engineer Ephraim as he calls himself, even had the audacity to have his agents bribing voters as they queued to vote.
Westlands & Kamukunji fiasco: Gumo robbed in daylight, again. In one polling station as an example, Betty Tett had 224 votes but only 17 were recorded and on it went. In Kamukunji, I am fairly sure Simon Mbugua took the seat because the Muslim vote was spilt between Ibrahim Ahmed and the ODM-K guy. The rest was details which unfortunately were obscured when they started counting the Presidential.

Kalembe of TIP is no-more, which is a loss to the comedy wing of Bunge.

The presidential Outcome:
As of Friday night, I was confident the 1m gap between Kibz and RO would be closed because around 600k votes from Central hadn't come in. I sensed problems when I saw the Westlands numbers. For parliament, Gumo had 35k, Betty 24k and the other guys around 5k. However for the presidential votes, RO had 45k, Kibz 35k and Kalonzo 5k. Several others showed the same discrepancies between the parliamentary and presidential tallies. After a tiresome day on Saturday dealing with ODM and PNU domos, ECK's Jack Tumwa (he should have been chair), announced that they (alongside 2 agents for each of the 9 candidates) would retire for the evening and audit all 210 results. This should be the starting pt of any subsequent enquiries. A recount will be difficult to do given the irregularities in RO/Kibz strongholds and subsequent likely ballot paper manipulations. I believe ODM can wait for Bunge to open and do a vote of no confidence.

Some suggestions for future elections are:
  1. Civil elections not be done alongside the other two
  2. ECK not to read out results in press conferences, just put them on a presentation
  3. Only ECK results to be announced in the media (unless the media have noted a different set of results being announced in the polling stations). There were 5 TV stations each with a different set of results.
  4. Its an election not war