Tuesday, May 06, 2008

NSE catch up

There are many good reasons to still buy some NMG shares. There is an additional one with when one has a look at its investor briefing . Having young leadership should make its mark on a business and I hope I don’t speak too soon when I say that 18 months after his appointment that started off with nation-gate, Linus Gitahi is making his mark on NMG. It has a very clear vision “Media of Africa for Africa”. Clear leadership is also being seen at Business Daily. Yes it’s had its goofs, but even at Ksh50, I had to get a daily copy when I was home. Nation despite being the victim of usual anti-kikuyu BS, has on someday something like half the content as adverts. The job supplement looks like NMG goes picking anybody who wants to advertise. Over 3-4 years, one can’t go long on both capital (share appreciation growth) and income basis (one of the best DPS at the NSE). Placed alongside SGL and Scangroup as media-type stocks, NMG is still way ahead.

The fate of KQ should now become an issue of national concern to rank alongside the direction of KMC, KPA (IPO-please) and KPL. In retrospect, Titus Naikuni, KQ’s CEO joined KQ (Feb 2003) when the hardwork in terms of getting on it a profitability curve had already been done. since things started astray at KQ
, he has tried typical MBA-speak things i.e. sacking a manager here and there; closing off some business routes, dismissing big accidents and mishaps (135 for last year). Continually however, all I hear from any of its passengers is “never again”. Isn’t it time the buck stopped at the CEO’s desk?

It is entirely correct that questions have been asked about Equity share price and the extent of insider trading. It does happen at Equity, but its very widespread at the NSE and even the UK, National Bank’s share price went to 60 from 40 last June prior to Kimunya confirming GoK’s paying off Ksh20bn debt. Other classics are EA Cable, BBK to name but a few. The UK's FSA suspects that upto 30% of M&A deals have some insider-trading going on. The problem is far worse for Equity because some of this negative press overshadows what is a remarkable performance by a “made in Kenya for Kenyans” solution to banking. I was shocked to see that Equity is financing Access Kenya’s shareholder offer of home-internet. Equity offers a variety of loans to the one group even I fear lending to. Small-scale farmers. And so forth. The moral of the story is that investors must buy on fundamentals alone and do so for medium to long-term gains. When you have BBK on a P/E of 20.42 despite PAT growing at annual rate of 8%, then buying Equity at a forward P/E of 21 looks cheap even at current prices.

And whatever one can say, buying HFCK at anything over k35 (i.e. P/E of 54) is not fundamentals-based. Yet.

I like the look of Access-Kenya. Pre-2007, the group had less than 1,000 corporate clients (this is now just over 2,000). On the back of this, its doubled turnover and bought some interesting players into the group and having had the measure of the market (40,000 corporate clients in Kenya and only 12.5% have internet; something in the region of 325,000 households that can afford internet and only 5% have internet) are now set to take advantage by investing in fibre-optic at source and its delivery to end user households. Still, its website isn’t exactly the best even in Kenya is it?

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