Saturday, January 24, 2009

NSE weekly catch up: pause for thought

Volumes went a little higher this week but brokers won't see anything like the pre-Safcom volumes without the two key ingredients. Confidence. Economy.

Rea Vipingo announced PAT up 46% on one-off gain from acquisition gain for year ended Sept 08. Removing this one-off gain, shows PAT was flat vs last year. Turnover was 10% higher so its not exactly a growth story. DPS was reduced from Ksh0.80 to Ksh0.20. Investors have downloaded the share this week in disappointment.

So what to make of Safaricom's plan to issue a bond (I doubt if banks feel bold enough to do a syndicated loan)?NSE's initial reaction has been to punish the share with price nugging Ksh3.00. But an investor should explore the possible impacts so as to price the share correctly

a) If its a revenue generating e.g. to acquire bolt-on internet knowhow ahead of fibre optic or for network capacity or capability enhancement (I keep hearing Mpesa is getting teething network issues). This will be positive.

b) If its a defensive move e.g. to roll current debt; enhance cash flow or mere repair to network. Then its a negative because the jaw effect will be narrowed (revenue is under pressure).

Macro view: Uhuru Kenyatta's appointment probably wasn't what the NSE was looking for. Firstly you ask yourself what kind of finance minister would you expect as a minimum:

  1. Qualifications related to finance (accounting, banking, insurance, CFA)-political science graduate
  2. Experience of finance and or business- no finance experience but run's father mammoth businesses (?)
  3. Knowledge/familiarity/ appreciation of IT- nothing suggests he doesn’t have average IT competency
  4. Specifically for Kenya, strong anti-corruption and dynamic credentials- he is establishment thru and thru and only seems aware of Gatundu...

One hopes we can all agree that our economy performs better if:

  • Corruption is low/ered
  • Rainfall is average or above for the time of the year
  • And global economy environment is benign (tourism, FDI and remittances)

Those 3 are currently absent so you have to hope for a strong dynamic anti-corruption fin min. Mmmh…As for Muhinga, I said that if he was cleared, he should have his job back. He wasn't and that says it all.

FTSE: Bad economic data (unemployement just under 2m); recession confirmed has turned heat on the banks this week. Barclays was near 50p... Funny story about bad cost averaging by one of its directors.


coldtusker said...

1) Yep, RVP is in a funk but partly explained by the lower KShs realizations when KShs was 'strong'. Maybe sisal prices have also fallen from their highs. And high fuel prices hurts them immensely.

2a) Safcon. Safcon benefits either way. Lowers cost or increases revenue. They need to upgrade their 3G network i.e. increase capacity as the number of subscribers has ballooned. Internet users are high(er) spenders & low hanging fruit.

2b)Banks will lend to Safcon coz it is a private company & there are no products to steal!!! As is airtime is an intangible.

2c) Safcon can pay off the entire 20bn in 2 years just from operational cashflow if push came to shove.

2d) In Kenya public sector scams (as a % of BUSINESS activity) are much higher. Private sector corruption & theft is much lower. Why? Ultimately, the private shareholders will step in to protect their interests.

2d) Safcon will roll-over 6-10bn in debt. They have said so. So net borrowing is 10-14bn only. Safcon made 17bn in 2007-8.

uk: Managing his dad's stolen wealth? LOL... I bet he hires people to do that!

kimunya: Rumors that ndungu & kimunya were both implicated. Maybe not for stealing buy violating the ethical boundaries in the Public Officers Act.

coldtusker said...

MainaT: Even the FT screws up - maybe I should go easy on Kenyan journalists.

GBP 952,000 is about 10% of $1.3bn. FT screwed up n the exchange rate.

Ssembonge said...

I may be wrong but gone are yesteryear NSE speculators. I'm not sure how this will affect the market going forward.

coldtusker said...

Prices will stay low. And realistic.

MainaT said...

CT- Fuel prices have hurt every company so maybe remove that from the equation. On Safcon, I think its revenue is under competitive pressure anyway so juts maintaining the network will merely allow it to standstill rather than grow.
Re FT-you almso messed up and missed the FT's real mistake $=£952k is not €1.3bn its €1.3m. It happens to the best of us ama?

MainaT said...

Ssem- looking at the volumes on each deal it looks obvious that nibblers (speculators probably institutional ones) are dominating eaters (investors be they retail, institutionals).
CT-Prices will remain low. I said this in October. De-leveraging.