Saturday, February 28, 2009
Full Year Results:
KCB was prudent on loan loss provisioning. And it seems like it’s been prudent about Triton and may have taken Ksh1bn (my assumption is that its Ksh1bn and not Ksh2.2bn originally mentioned) into the P&L. Viewed in this light, I have even a stronger supposition that BBK has not been prudent with its LLPs. KCB showed its strength by the fact that it still managed 40% on 2007. Other good things of note is the flat staff costs meaning that cost income ratio (if you remove Triton from the equation) remains on a downward path. KCB’s DPS is Ksh1. Equity>DTB>KCB>NIC>Stanchart>Co-op>BBK remains my bank share preference order at the NSE.
Bamburi- PAT down 11% due to a one-off hit for an insurance claim of Ksh1bn. Otherwise, gross profit was up 10% on a 24% turnover growth. Numbers are steady and as per expected and Bamburi also has supportive cash flows. DPS of 2.80 will be paid in July for those in books on 27th March.
East Africa Portland made a Ksh400m loss due to the Japanese loan (turnover was up 8%). Probably one of the worst run listed firms-it has had this loan since 2004 with attendant volatility in P&L and nobody has figured out how to deal with it…
BAT-PAT up 23% and the final Ksh12.50 DPS will be paid in April. Tempting but no tobacco for me.
KenGen had a torrid 1st half of the year and now trades below IPO another crucial pointer to where we are at. Revenue was up 40% but was undermined by fuel costs going up 3times to Ksh4.7bn (oil prices were lower but it required more due to low water levels). PAT was down 33% therefore not a recoverable position.
KPLC-Excellent 53% growth in PAT supported by strong revnues (though Ksh1bn is fuel recoveries i.e opposite of KenGen). DPS will remain small however because of the preferred shares. Looks good for FY.
Carbacid also reported 31% growth in profits on strong sales. The share remains suspended which is a nonsense really.
Barclays had upward momentum after HSBC's exploratory announcement of a rights issue, but then came back down (thankfully for me), once Lloyds TSB confirmed the bad numbers at HBOS and that it still hadn't agreed to pay a fee for gova to take its toxic.
In 1963, Kenya had a population 8.9million. Today it’s circa 40m; by 2030 it’ll probably be around 60million. And we still lack urgency?
Last word: To Obama, verily I say unto you, the bitterest medicine is the most portent. We are all socialists now. Americans need to join the party. Sharpish.
Thursday, February 26, 2009
This my friends is how our country will be sold for a song by some idiot who won't be here when you need to get out of the skewed deals.
Monday, February 23, 2009
Firms tend to offer either or both the two types of pensions schemes:
Defined benefit: Employer pays into a pension scheme that pays the employee a pre-stated benefits package with the most generous giving a 2/3 of salary as lump-sum payment plus a fraction of your salary for the rest of your life. Generally seen as very generous.
Defined contribution: As per the cover, the employer pays a pre-stated % of your salary (the most generous is 15%) into a money purchase scheme that is managed by pension fund manager who is selected by the employer. There does tend to be certain variations in that some employers only match what the employee puts in and so forth. Otherwise known as 401k in the US.
A combination of events has reduced employers' appetite for funding defined benefit pension schemes. Market volatility, older population, shorter employee durations have removed the case for supporting such schemes. The first time firms started announcing that they were closing defined benefit schemes, employees and especially the unionised type protested greatly. However the introduction of DC schemes that allow the employee to choose the investments is changing this mindset.
Placing the onus on employees to make the correct investment decisions for your pension is I think one invention I've really appreciated. Your employer tells you that they will invest a % of your salary. Its then upto you to choose what you want to invest the funds in. Yani make 20year decisions today. The typical way is to try and align your investment with your risk appetite which is what investment/financial planners will tell you to do. However, your thinking should rather be about what your goals are i.e. when do you want retire, what do you want to do when you retire, what sort of lifestyle do you want to enjoy when you retire and so forth. In all cases, one has to remember that at a retirement age of 55yrs, you are looking to finance your life for anything upto the next 45yrs. Pension decisions should also be done within the context of other investment decisions. After all, the pension will tend to be allowed 15% of your salary.
PS: In either DB and 401k, you generally don't get anything if you leave within the first 2 years. Apart from your own additional contributions which you can do to either. Over above this period, you can either carry the same to your next employer (preferred choice) or keep it with the old employer.
PPS: A pension scheme is no more than a unit trust fund.
Self employed and the unemployed:
If you are self-employed or unemployed, you can set a personal pension plan into which you invest when you are able to do so. The important thing is to set such a plan. Its sometimes possible to carry your plan into future 401k plans.
The world's best companies are creations of distinctive advantage. Many search and find the distinctive advantage and then use that to produce products, train their people and market themselves. Relentlessly. Such that when one utters a company’s name, you know their products. Equity, Safcom, Microsoft, Virgin, Apple etc. To a certain extent, this is also true for most of the developed nations.
You hear people saying that we are all different and that is exactly what distinctive advantage is. Distinctive advantage will be that unique talent, skill, characteristic that sets you apart. For some, it might simply be their name.
We Kenyans seem to suffer from chronic copytitis disease. You open a kiosk, your neighbour, his neighbour open the same with the same products and then you all sit chatting as you would normally back at your compounds. You get a new phone, new car etc and etc and the same copying kicks in.
And yet, you'll never achieve the heights until you identify that distinctive advantage and propel yourself forward. For some, this may not be easy owing to the environment, but being the same as others is the not the answer...
Sunday, February 22, 2009
Saturday, February 21, 2009
Why would you do a stock spilt at the start or middle of a bear market? Despite strong numbers, strong momentum going forward, Equity’s announcement of a stock spilt has had the opposite of the intended effect. Its arguably the 2nd faux pax after the about doing a 2nd ipo for the principal shareholders. Apparently BDA was told or thought the idea was to make Equity less expensive. Jeez, are we NSE investors that stoopid? 142 is just a number just like 1. It only gets a meaning when you put an EPS or DPS against it. I think we are seeing the first signal that NSE has drained all the speculative retail investors leaving battle-hardened experienced investors who ignore noise.
BBK released FY08. As did NIC. Excellent results given its constrained deposit gathering capacity. PAT was up 39% on 2007 driven by 56% rise in F&C. It will give a 1 for 10 bonus share for shareholders in its books on 19th March. I would have been interested to see how the various parts did and especially NIC Capital, but I guess that will wait until annual report is on its website. NIC is a steady 30-40% growth bank doing things quietly (bought into TZ's Savings & Finance and obviously got the broker licence in ’08). Won’t surprise me if it comes in with similar growth for 2009. In terms of its peers, I'd now pick DTB, NIC and CFC in that order only because NIC still lacks NSE visibility.
Sameer Africa also released. It sells tyres. Therefore ceteris paribus, if car population goes up, tyre demand will go up. But it has to import most of its tyres so fx comes into play. It still managed to increase EPS by 5% due to “other operating income”. More at coldtusker. EABL released interims. DPS is Ksh2.50 equating to 4% yield.
Cheserem for CMA chair? I won’t say much, but this dude destroyed the best chance of ever catching Pattni & Goldenberg…
Kibz came in when NSE was circa 1,000. Will he leave it there when he goes in 2012 given that’s he seems determined to do that with everything else? Waiting is a virtual…
Thursday, February 19, 2009
In Kenya, when we have a major problem, GoK responds in the following order;
- Delaying tactic-hence all the commissions of enquiry
- Diversionary tactic-don’t know who leaked the terror story, but you can see what I mean
- Wrong option-mass grave for Molo victims
- Right option-finally...
The crisis of confidence at the NSE is about the economy, brokers with sticky fingers, global credit crunched economy in that order. The number one solution is not Stella and CMA board, though it’s been led by a/an ….. (fill in as appropriate) in Ntalami. Waruinge wasn’t any better as Chair and allowed regulatory capture to happen far too easily.
The solution is not CDSC though there is some culpability.
The real underlying/overlying solution is dealing with the brokers and their thieving ways. Its the NSE brokers and their conflict of interests; political connections; lack of transparency (who knows how much any of the brokers made for 2007 never mind 2008?); front-running; circular trading and other oddities. Unless you create the institutional framework that supports a vibrant, transparent, integrity conscious, liquid NSE and the conducive macro economy environment, all the rest is pissing in the wind. Reconstituting/firing CMA board which already includes AG, PS at Treasury, CBK governor is the minimalist and wrong approach. Does that mean UK is proposing firing his PS, Ndung’u (please) and smiler? Is he going to force the NSE (a private entity) to allow more brokers?The clincher is that there is no timing on any of this...
The right options would have been:
- Yesterday-adopt the CMA rule on disclosure. All brokers to publish their accounts for 2007 and 2008 within the next month.
- Today-compensate Nyaga investors
- By end of June- adopt the remainder of those CMA rules into law and then if CMA can’t deliver with a stronger mandate, get rid off it altogether and create a financial sector regulator in its place to oversee not just brokers, but bankers and insurers. However, note that you can’t at the end of the day regulate anybody that doesn’t think regulation is good for them. But you can close them down.
In a related development, D&B’s CEO has resigned. The guy has been involved in all the IPOs since 2006 so to a certain extent can be applauded for a giving NSE some increased volumes and be blamed for introduction of the matatu syndrome into the NSE. One is not going to speculate about his reasons for departure. Timing is interesting though. I am sure you won’t want to be the guy who presided over a sinking ship now would you?
So it’s a big deal.
In most places, the no bonus announcements were made the day or week before employees were to find out their pot. Lakini this time, it’s a bit of a perfect storm because there is no golden hallos to move to.
But at least it’s better than the consulting industry where one of the big 4 has actually offered its staff a stark choice between redundancy or 4 day working week and 10-25% pay cut.
PS: The bonfus culture is so-called. Because there is no "F" in bonus. You have to say it quickly.
PPS: As mentioned by somebody previously, the effect of this credit crunch is being felt intensely by minorities. We really must shape up our economies.
Wednesday, February 18, 2009
- Too good to be true: I.e. doesn't fit the pattern for the economy or sector. This used to be an accusation levelled at the annually doubling Equity, until BBK proved that you could grow your balance sheet at such a rate. From the released results (who does scanning at NSE?), BBK almost certainly understated its loan loss provision. In any case, this is getting harder to get away with at the NSE.
- It can do what none else can: mmhh
- Only a few people overseeing everything: All the brokers?
- Few incentives for whistleblowers: Fits just about any firm at the NSE.
Tuesday, February 17, 2009
How do u plan? Start simply. Do you know that by law every piece of land in Kenya has to be adjacent to a road or path? So if you wanted to plan, you’d pass a law saying that every piece of land and or building must have a number attached to it. There is nothing original about the idea. UK, US, Canada and most of Europe operate this way. Even the billion full China does it this way.
Given the pin was more complex and was implemented fairly seamlessly, this should be a dodo but with greater economic benefits. Having a number on each property will be a step change in planning. You can easily say 1-250 on Ngong Road don't have piped water or electricity. Number 5, 15 on Runda Grove are apartments. Number such as and such on Othaya Road have reported attempted break ins and then plan how many cops you need to be walking around the area.
Right now, you hear GoK saying there 10m people who are hungry. In which districts, divisions? The 8 lane Thika road is a good idea, but when do they plan to do Ngong Road, Mombasa Road or even Lang’ata Road all which may need the same numbers lanes? But who knows given nobody has any idea of the number of cars going thru any of these roads?
How about the step-change in the distribution system especially in the big towns where population thresholds allow for profitable distribution systems for newspapers, post, milk and other products with short shelf-life.
It may not seem as life changing, but if we can't the big stuff, we can start small...
- integrity in transactions
- dynamism in reacting and adapting to changing technology
- customer service
- liquid bourse
- strong institutions either controlling or regulating the bourse
- no conflicts of interest
- no political-business affliations
- a decent economic thermometer...
- leading to strong brokers, investment banks
- informed investors
- and a viable saving and investment vehicle
Saturday, February 14, 2009
Another low week (2,848 close), but I think Equity has brought a little cheer back into the bourse and will spar some little upward momentum for a few weeks. BBK announces on Tuesday and EABL announces interim numbers on Friday and KCB possibly the Friday after. On the negative side of the account, the Nyaga saga has really exposed us to what many of us feared was going on and from now onwards, no conspiracy will sound too outlandish. Some very practical steps for safeguarding your NSE pocket. No more calling broker dealers to place your orders, it was always there but its become a convenient way for dealers to eat your funds. Like JM's comment too.
Thursday, February 12, 2009
DPS was higher at Ksh3, which I don't get unless its to keep Helios happy (shareprice is only Ksh20 higher than their buying price in Dec 2007). The 10 for 1 shafre spilt I am definitely unhappy about. Clearly, Kenyans have not learned the value scarcity plays in capitalism. The other worry is that principals tend to lighten their holdings during stock spilts. Hope we won't go Safcom's way.
Capital ratios have gone down compared to 2007, which is why the higher DPS is even more of a puzzle.
Though Mwangi is very bullish, my prediction for FY profit for 2009 remains unchanged at Ksh6.2bn.
Wednesday, February 11, 2009
The so-called masters of the universe have spent two days apologising, grovelling and pledging to do all they can to restore their businesses' reputation. Vikram @ Citi has basically said he wants a $ per year until Citi is making money. No matter he has been getting a mean pay packet in the past.
On the other corner, are dudes who have basically grown up in New Stanley picking prices of shares et al. And couldn't care for any changes. The Chairman of the NSE basically dismissed what seems to me to be a fairly complete piece of audit as BS. No word about poor investors still waiting for their bucks almost 15 months later. So isn't the difference between Wall Street and NSE just the attitude rather than poverty etc?
How does a broker that basically buys and sells shares making commission at source have liquidity problems? CMA has a broker rule against executing without the cash cover from the client so why would Nyaga or any broker (as opposed to an IB) need overnight lending facility?
- Auction website market for land, property, cars, and the like. Also an auction market for housebuilding and other small projects.
- Recommend: you want hire somebody, hire somebody who has been recommended e.g. a garage, programmers can market themselves etc.
- Financial super market: Comparator table for various tyupes of financial products and allowing the viewer to be able to actually apply for the preferred product from the table. Would require agreement with banks and other providers so they pay a fee for each opened account. Could also use the same as introduction to customers to various products.
- Tour guide and booking site: Most peeps in the West have a misconception of what it'd be like to visit Kenya or even Africa. One of my colleagues asked me if we have hotels (I am not kidding and its somebody born and bred in London). Virtual online tours of hotels; lodges and game parks and other places of interest would work a treat. You'd have agreements with the hotels and others to get some commission for every package booked through your website.
- Virtual real estate site: sign up all the estate agents so you host and advertise all their properties. Similar to tour guide but this time it'll be a virtual property tour so that potential buyers can see the house, see the plot and location rather than having to travel thru 3 hours of traffic jams on Thika/Ngong/Mombasa road.
- Farmers website: Where they can sell their produce, get farming advice and tips, vetinary service hire
- Entertainment supermarket: vcds', cds, digitized tapes, you pay to burn on to your system
- Law courts auctions: One of the ways of getting goods and property cheaply. You can't do it unless you are in Kenya though. Why not work with the courts to get this done online complete with pictures or short-films.
- Virtual help desks: Q&A for specific IT issues for Kenyans
- Online library: Hosting professional tution and notes, university papers, thesis, past exam papers, useful school text books and especially those used in primary and secondary sschools. Parents pay a small monthly or annual subscription
- Ebank: As far as I know, the high net worthy customers of BBK, Stanchart, KCB don't enjoy ebanking. Why not set up an online bank to do just that? Mbanking is also an option though I know some guys have it in beta form.
- Networking club: To host professionals, common interests e.g. paragliding, bungee-jumping, fishing etc
- Map Kenya and sell the software
There are many other ideas, but fibre optic needs to hit and have the expected penetration...
Once these monsters get to Parliament, eating is the order of the day, so we get;
- Grand Regency being given (sorry, sold) to Libyans without any bidding.
- Oil being given to Triton which then drinks it so we have a shortage in which leads to higher inflation. Which leads to out of court settlements of around Ksh1bn that could have been used to buy food relief. Oil prices are so high that Kenyans can't resist collecting free stuff that has poured on the roads. Leading to 110 deaths.
- Kenyans hacked and chased away from their farms leave their unharvested maize. Leading to a shortfall in Kenya's staple food. Drought then exacerbates the situation.
- Maize is sold to brokers who make a mint as part of their payment for good work done durng the General Election. Kenyans are now dying from hunger...
- City council is paid to look the other way. While fire, health and safety regulations are infringed. A fire breaks out in a busy downtown supermarket packed with gas cylinders and customers in close proximity. Customers are unable to flee via blocked fire exits. And die horribly.
And still we have peeps who celebrate the likes of Kiraitu, Ruto, Kibz, Pattni to name but a few?
Tuesday, February 10, 2009
Audit report received in November but still to be dealt with. Cleary Stella didn't lose any money.
- Ntalami knew of the Nyaga issues since 2003, but was either (a) illiterate i.e. couldn't read (b) paid to look away (c) incompetent. This shows the folly of appointing somebody because they are well-known to you and or have some knowledge of the industry. Ntalami has history of straight dealings at the NSE. Not...Peterson Mwangi was appointed under the same system.
- Senior NSE manager used Nyaga to trade illictly. Conflict of interests anyone?
- Several banks helped Nyaga cash client cheques. Again it explains how a significant proportion of customers only ever get their cash when the broker decides its time to do so.
- CDSC employees helped Nyaga trade with clients accounts. I've long feared that this was missing jigsaw in the puzzle of how broker employees have been able to trade with client's accounts. Many a time I've had to get sales or purchases reversed because they were done without my say so.
- Finally, SIB's chairman talking about its precarious financials said “Right now business is so low that we are forced to eat into our own funds,”.
Monday, February 09, 2009
If you study all the stock market greats, one common theme is that they always take/took positions early and then wait for the rest of us to see the position go in and then they exit.
That is why it’s common to hear investor peeps saying that once you hear western media has done a feature on a particular stock market i.e. mainstream has noticed the returns, its time to vacate. If you substitute western media with any Kenyan media, you can pretty much see what I mean. I expect to see article about other African stock markets in a couple of years.
In the meantime, based on the above philosophy, when is the best time to top positions or re-enter the NSE...?
Anyway, that is my stock market philosophy.
Excellent Q&A session with the prophet of doom. Another thing, you can be too bullish or too bearish. Either will lose you money. Just ask John Duffied or Chuck Prince...
Barclays announced a great set of results. Will probably hold for this year and exit as the dividend is announced same time next year.
Kibor is also known for other interesting activities and utterances.
Ruto needs to be sent to his Sugor home, but then so should Kiraitu. Sadly both heads lack the balls to do this. For Kibz, you have to force him into a corner before he can agree to sending Kiraitu to Meru again. RAO has already started the fight back. Interestingly, this memo courtsey of Kenyanpundit shows readiness to use such diversionary tactics.
This is why some of us are so opposed to getting foreign aid under any circumstances. It means that accountability will never take hold in Kenya. If everytime a corrupt politician eats thus messing it up for Kenyans and his idiot head shortly afterwards go on TV to beg for aid, we'll never be able to own our problems and resolve them. Buy Dead Aid by Dambaso Moyo for more...
Saturday, February 07, 2009
BAT Ksh138 up 1.5%- I think this is dividend chasers (its DPS is the highest)
Kakuzi Ksh22.25 up 1.1%
Rea Vipingo Ksh9.95 down 23.5% investors punishing the share for the fallen DPS and flat results.
KQ Ksh23 down 17.1% cack-handled profit warning. However, in the context of the global aviation industry, KQ is a star
The Merali stable of Sasini and Sameer
Mumias down 15% to close at Ksh4.25.
· We’ve been here before i.e. when the market defied global orthodoxy in early 2007. Then as now, the market movement was due to Kenya specific issues.
· The NSE as with other markets is driven by key themes. In Dec 2002, Kenyans were the happiest and most optimistic peeps in the world. We were free (or so we thought) of the m-o-1 tyranny. 2003-6 saw a bullish NSE- these were years of economic recovery; focus went from search for political to economic freedom; the global economic environment was benign and investors moved from emerging to frontier stockmarkets. 2007 saw Kenyans take a pause and ominously re-focus on politics. 2008 things went paragacha and the NSE pause became something else.
· In 2009, I believe we’re suffering from possibly the most dysfunctional government in the continent (with apologies to the Somalis). 42 cabinet ministers with two heads. One head is barely there (Google stroke symptoms) and other who having seen the prize will not offend anybody that would prevent him from getting his hands on the prize. Ordinarily, 42 ministers would not function. Yani, think a 42 member executive board. And then you’ve a selection of vultures from the m-o-1 era mixed with present ones. The irony of it all was seeing m-0-1 at that silly forum this week. Its utterly ridiculous and IMHO, our economy won’t grow as long as we have such governance. In such circumstances, this first half could see new lows.
· Finally, the volumes are low, so don’t discount short-selling with an eye on temporally speculative gains in the coming weeks.
Late Addition: Is Centum going to write-off its Ksh200m+ investment in RVR?
Is down 12.75% on ytd, but still one of the markets I follow religiously. Think copper, think China.
We'll see a u-curve, but there is some very good current pickings and after taking a bath on RBS (40% down), Barclays is doing good things so far-30% up so far. Btw, I think somebody caught wind of the rating downgrade because no one seemed to blink when it was announced earlier in the week.
Thursday, February 05, 2009
- Chairman: to steer policy, public dissemination and generally be a strong voice for the sector in and out of Kenya. We could start with a current CEO of one of the large banks to give the correct take-off.
- Clear regulation framework and underpining policy that is easily understandable to the financial sector and key stakeholders (investors, business and GoK). This would spell out among others, capital adequacy and liquidity requirements over an economic cycle; reporting requirements; how the firms will be supervised; expactations around management structure and corporate governance; risk management and measurement tools.
- Clearly spelt out targets on consumer education rather than nice sounding words especially around charges; consumer rights and complaints procedures.
- Oversight from the Parliament Committee for Finance
Wednesday, February 04, 2009
- Sell statehouses/lodges: I know that baba jimmy only uses two of those. I can't recall him at Nakuru and rarely at the Kakamega and Sagana ones. Why not sell them? Alternatively free up this prime land in Nakuru and the other 2 for some of the IDPs. As for Momba's state house. Kibz already has a house in Nyali. The statehouse is on prime coast land which some hotel mogul would want to buy.
- Reduce the motorcades: The oldman travels in a motorcade of like 40 cars. Stupid because it holds up traffic for 30+ minutes (wasted economy production). Sell and leave a realistic and common sense 10 car motorcade. The sale (30*1m per car) will at Ksh35k per household, build homes for like a 1,000 IDP households. Add a similar trim on each of the ministers and hey presto, we have IDPs resettled.
- Fire Saitoti, Makwere and outsource their ministries to some of the idle ministers-what Dalmas do all day?
The above excludes all the other obvious ideas that if this was a listening government, would easily go thru. Reducing the cabinent to a managable 20 is a no-brainer. Taxing MPs is a no-brainer.
Monday, February 02, 2009
As soon as you opened the door in the morning and put your first foot on the snow, you knew it would be that kind of day. Fresh snow all the way to your ankles. And more still falling. Not your typical London day. It was obvious trains won't run- they usually breakdown due to silly excuses like wrong kind of sunshine, leaves on the track etc. So I walked (very gingerly) towards the bustop. Wapi? No buses. So I trudge to the train station with a slither of hope that err, they've changed the habits of a lifetime. Not today.
Getting back (I know how the NMG guys felt going up Kirinyaga) to the house, log in and none of the usual London transport websites are working. This in a country where broadband access is as cheap as chips (£7 per month for speeds of up to 8mb). Clearly because nobody could get to their offices, websites were not functioning. And neither for that matter were business continuity plans. Even Heathrow was shut... All because of 2 inches of snow.
Most of the full year results will be released within this month and next. With this in mind, I'll be looking at for following in addition to the usual yoy growth in PBT, cash flow, debt.
- Growth in other income: As long as CBK is determined to keep interest rates low and interest margins remain under pressure, banks need to diversify their income. Equity, KCB, StanChart and to some extent, NIC should see a very good year given entry into custody business by Equity and fx volatility for the other 3.
- Loan loss provision-most banks grew loans hugely in 2007 compared to 2006. Then the economy ground to a halt in 2008 and has since not really resurrected. My expectation is that loan loss provision which in ordinary times accounts for an average of 1% of the listed banks total loans will account for around 3% of the additional loans that were given in 2007 vs 2006.
- Risk management- given CBK's intentions on Basel 2and the world we are in now, this one will be of particular interest to me. Banks need to be clear about the risks they face and the contingency plans in place.
- About time HFCK showed some positive momentum.