Saturday, January 31, 2009

NSE weekly catch up: Jan'09 report card gives it E

E is for empty on which NSE has been running on this past month. Apart from the global deliveraging which has had an indirect impact; inflation; school fees; directionless governance (think Titanic without a captain); winds buffeting the economy and broker scandals (SIB is now in the frame), have left investors in a contemplative passive rather than active mood.

Highest Gainers- Jan'09
EA Portland Ksh85 6%; Jubilee Ksh130 5%; BAT Ksh136 4%; StanChart Ksh161 1%
Biggest losers
Unga Ksh9 (51%) Mumias Ksh5 (35%) Centum Ksh14.55 (29%) Co-op Ksh8.55 (24%)

February and March will defintely be better months though with the profitable bankers announcing their results.
As expected, Equity has confirmed that it has acquired an investment bank licence from Juanco Investment. Funnily enough, Juanco used to be one of its shareholders and has never as far as I know participated at the NSE as an IB (its not a must I know, but its difficult to see what else you be doing in Kenya as of now)-in fact I wonder what criteria CMA used to guarantee it an IB licence. In any case, most brokers may as well close shop given Equity's distribution network and superior delivery mechanism. Equity on its part will need to sigficanctly gear up its risk management. Brokerage fraud is now a recurring theme as shown by the arrest warrant for SIB's officials.

Results announcement:
As with CMC, Car and General had a very good year (to Sept'08) with PAT up 23% supported by turnover which was up 62%. Gross margin at 24% was lower than prior year perhaps reflecting the weaker shilling's adverse impact on its import costs. Mumias on the other hand released horrendous interim numbers to December with PAT down to Ksh162m from Ksh564 in prior year. Kidero is blaming heavy rains; higher import costs; higher cost of cane among other reasons. Note cash flow went negative despite a Ksh2.4bn loan from abroad (I don't think anybody has learned from EA Portland). Investor hopes are now pegged on the power generation revenue. KQ announced improved numbers for Q3. Read CT's commentary.

Last week's summary missed out on Waruinge's resignation as chair of CMA (must be the little effect he had). It turns out he was driven to distraction by brokers who resent higher standards he was apparently trying to set. My view is that we'll have to have fewer but stronger independent brokers in the next 2 years if the bourse is to grow as it should and we can either get their via collapse of more brokers or an orderly merger or consolidation as envisaged by the higher capital requirements.

Other Markets:
I like Soros piece in the FT.


Empower Kenya said...

Did you know that Chege Waruinge is the VC of Gretsa University?
He probably got tired dealing with these stockbroker MDs and decided to concentrate more on the school.
I understand the school has been expanding rapidly.
I have opted to forget about my portfolio for the 1st qtr.

Who among the Kenyans who-is-who do you think can take the CMA chairmanship and implement the regulations without worrying about the cartel?

MainaT said...

EmpowerK- I did know.
As for your question. Firstly I have to say that I think the current regulation model in Kenya doesn't work and we need to move to an independent overseer of financial services.
But as of now, CMA needs an strong independent minded and intelligent head. With international exposure (i.e. understanding of financial instruments). And for Kenya, financial experience. Choose from Jacinta Mwatela; Wanjiku Mugane; Richard Etemesi; David Ndi.