Portolio- 6month retrospective

This was me in Dec, I am here today:

Kenya:

Equity-remains unchanged. In any case I've now got many due to the spilt. Didn't really take advantage of the low of Ksh93, but would if it came around again. I like the focus on on augmenting regional income to 40% of total in the next 3-5 years.

Access Kenya- added some at Ksh20 and some at IPO price (was just great to see at that price). My average is now a healthy Ksh16 ffrom almost Ksh25 at one time. Will hold for a couple of years in the hope it get s bought.

Cash- still keeping some for any really attractively priced share.

Overall NSE view:

For anybody that was trading, the first half has been fabolous hunting ground on the NSE as I will show in a later post. My gut feel is that there isn't much momentum for the 2nd half of the year due to the bonds, possible IPOs (Consolidated, NSE are both slated for this year as is the bread maker) and I get a feeling that El Nina might be on the way.

Uganda:

Interested, in expanding portfolio from just Clay.

TZ:

DCB is a hold for a few years. In any case,I'll have to go to TZ to liquidate.

Zambia:

Sold Pamodzi Hotel at an fx loss of around 25%. Very illiquid share that I had bought with the thought of getting some kind of share spilt. Wapi.

FTSE:

Opened share trading account in earnest. Hoping to stay there until results season in 2010.

March and April were the wow months. Got via Barclays in mid-March doubled up in a couple of weeks, got out; got in again made another 50%. Jumped to RBS made similar.

May was the ouch month. Lost half my gains while pretending to be a day trader, full-time busy office worker, parent et al.

June was mostly boring until the last week. Up 5% down 5%. Very tedious especially when you are trying to get back to buy and hold.

Have learnt a similar amount to what I learned in 5/6 years at the NSE. A bird in hand is better than two in the bush; stock markets are legal pyramid schemes; get in when no one is interested; ignore broker recommendations; be fearless in buying and ignorant of past sell decisions.

Looking forward: have been tempted by China, oil, efts and will bite one of them. Plenty of other investment opportunities though the window is closing rapidly. Great business ideas but to need create time for them.

NSE Weekly catch up

NSE stayed flat this week as other markets motored forward. Mainly I suspect that Kenyans are not feeling the bourse like prior years. Cash I think is there, but we all need to see a more convincing political and economic forecast. Stock investment is about hope.

FY Results:

Eagads a coffee and tea grower, saw a vast improvement in turnover but also benefited from Ksh20m gain from revaluation to record profit for the year. The cash flow statement looks peculiar to say the least with cash from operations somehow going down by Ksh12m. No dps.

Kenya Orchards, reported a Ksh7m loss for '08 on the back of a Ksh10m operating loss whose detail is not given and 26% decline in turnover. Cash from operations was massively in the red presumably relating to the operating loss issue but overall cash was positive. No dps for the year.

Q1 Results:

KCB opened the Q1 show with a 3% PAT growth on prior yr. I have switched my remaining stake in KCB to AK on the back of results which were a puzzle. Like the fact that annual reports will be emailed to shareholders in future though.

Finally, HFCK is showing the potential one suspected it had. PAT grew by 1.5 times on prior year driven by massive growth in loans. I suspect Kenyans are switching from NSE to real estate in a big way and HFCK has really aligned itself to take advantage of this. Still not sure how Equity intends to help HFCK leverage on its brand and network but this has to be the way forward. HFCK has been very innovative in terms of products and distribution. One of the products out there is its Makao project management which I'd recommend to NRKs.

Rumours:

AK is a takeover target.

Macro:

Its either the supplementary budget got in the way of UK's serious imbibing time or the fruit never falls too far from the tree. Excellent work by MARS though.

FTSE & other markets:

Turned green for the first time this yr yesterday. Risk appetite is back. Dudes are unhappy gettting 1-2% savings rate. Plus depression, swine flu et al have all been overhyped so that when reality hits, there is relief. And this is the result.

Great leakage work by Tim Geithner on the stress tests. The numbers were no different from those reported by FT almost two weeks ago.

NSE weekly catchup

Bourse was up 2.6% on last Friday's close with Kenol recovering its price and post-spilt Equity continuing northward movement. Some prices are still very good so those that think we are well placed for the long-term need to take positions.

Results and announcements:

Konzolo CEO and owner of Unreliable Securities was aligned in court of stealing and resigned from political position ass head of the Broker Association. So that is another broker taken care of.

Everready announced (surprise surprise), 95% drop in half yr profits from an year earlier. I am not sure, but I hope it has a new product strategy because clearly batteries are not its future.

Centum will attempt to raise Ksh4bn (staggered over 5yrs) presumably to cover cash flow shortfalls in the near term. As well as invest.

Maina Mwangi, formerly CEO of RenCAP, will head Equity's IB business which is very good addition to its team.

Macro:

KRA missed its targets for the year. There was already a deficit of Ksh25bn. So is the deficit bigger?

The politics is and will mess up any serious headway towards 7%+ growth rates. As I've mentioned before, a 42 minister cabinet is not going to grow the economy. A grand coalition added on top of that mix makes for a good headache.. RAO has made one mistake time and time again in his dealings with Kibz. He thinks he is dealing with a gentleman. He is not. For Kibz, he is not astute enough to realise that if you undermine or build mistrust, you'll be paid with the same coinage soon enough. 2ndly, he is not observant enough to notice the talker no action PM in front of him and just give him this head of HBC role. Look at the unga fiasco, Mau forest and even RVR. So far, the 2nd term is going as per the 1st except this time there is no economic or stockmarket growth.

FTSE:

Volatile this week. Plays on Barclays are now limited to taking the odd 10% gain every other day. Some other shares are looking playable though.

NSE weekly catch up

Market slowed down this week as the bear rally came and went. Is averaging down a investment strategy that is hugely propounded on our bourse an emotional feelgood strategy or investment nonsense?

Results:

AK came in 65% higher than 2007 with increased corporate clientelle and also expansion into the residential market. 2009 will the blockbuster year for this listed ICT firm. Once fibre optic lands, the game will change because revenue per client will come under challenge from compe and the firm will thus need to significantly increase its client base. Ksh0.4 DPS awaits the lucky shareholder in the books as at June 18th. IMHO, this will be one of the shareprice performers of 2009.

Pan African Insurance was driven to distraction and Ksh100m loss by its associate investment company. Significant challenges ahead though its trying to diversify into property.

Standard Group, the mother and father of distinguished gems such as KTN, Standard newspaper et al clocked 19% PAT growth driven by 8% turnover growth. Cashflow remains negative therefore no DPS. Going forward, the group is targetting the launch of a radio station in Q3.

Macroview: UN has increased its food aid plea for Kenya. We are well into March and the anticipated heavy rainfall season remains patchy at best.

Other markets:

Excellent week at the FTSE. We have our first black CEO in the FTSE 100! Tidjane Thiam, a former Ivorian Coast cabinet minister will head PRU, one the largest insurers in the world. And Barclays is up on last week :-)

Have you invested in LUSE? Do so to take advantage of future higher copper prices.

Will Geithner last? Because the way I see it, its either he shapes or goes or Obama will be a first-term goner. The global economy doesn't like a rabbit in the headlights Secretary of Treasury...

The Gartman Letter has been whipping WB black and blue this week. Not happy with the credit rating downgrade and reckons Berkshire Hathaway is an overvalued stock. That is on a 5yr low. Still, I think WB has proven himself.

NSE weekly catch up: bear rally?

NSE closed up almost 10% from its Monday opening with demand unmatched by supply on some stocks. Some of this seems to be being driven by the rising water effect i.e. Western markets rising and picking up everything else globally. Some might be illusionary however and nimbling rather than chunky bites of share-buying is advisable. Reason being nothing has fundamnetally changed from last week or the week before. Still, fortune favors the brave and the pickup might extend to one or two weeks before reality sinks in. From my point of view, I may exit one of my bigger positions because gains made from fx rates alone mean I can walk away and come back later once things come back to earth.

Results:

DTB announced 48% rise on prior year and with a regional footprint, looks set to compete with the likes of KCB and Equity for the fastest growing banks in EA. As I mentioned previously, I remain a big fan of this bank and especially because of its AKD connection. Would prefer it to KCB ( higher EPS (therefore lower fwd P/E); much much lower NPLs and a broader footprint regionally). DPS is ksh1.40 payable in June.

NBK grew by 10% from 2007! And deposits actually fell by 1% which does limit its ability to grow the loanbook going forward. I don't know how NBK shareholders can optimistically look forward to a dividend in 2010. And there is the prospect of the OFS later in the year.

Macroview: UK got trashed by this blogger when he was appointed FM, but made two positive announcements this week. The freeze on expenditure is way overdue, and the only disappointment is that it didn't go further and sink to be used as arguement for rationalising governance. Still, I think implementing will be much harder. Some cash should definitely be set aside for his PS to travel to Iceland, Mexico, Argentina among others to learn than yes GoK can get broke. The 2nd positive announcement was to manage expectations downwards on economic growth. 3.5% is doable where anything above 4% would have been a stretch.

Other markets:

I'm gonna make a call. FTSE has priced in most of the bad news and has either bottomed or will in the next few weeks. The only remaining pieces are Yanqui sorting their banking industry and the UK treasury's decision on how it'll treat Barclays' request for inusurance vs its toxic stuff. At close of business jana, Barclays the parent was trading at Ksh75 while BBK was trading at Ksh39. Go figure. Tullow Oil announced another oil find in Ghana and 80% growth in profits. Time for me to exit though...

Another IPO coming at DSE. Fuller details later.

Finally:

Jack Welch has apparently changed his mind about the place of shareholders in a listed firm's priority list. And Babcock & Brown, an IB that was being considered for a role in RVR collapsed jana.

NSE weekly catch up: the next bull run

So, you've done your SWOT analysis, looked at recent share performance and finally you want to know how the share will perform i.e. when the NSE will have another bull run? Have a look at this 18 year chart for some clues. I believe without a shadow of a doubt that the NSE will only have another sustained bull run, if we have political changes that capture Kenyans' aspirations and imagination. Of a similar nature to the coming of the multiparty era of early 1990s and the Rainbow coalition of 2002. Why? Stock markets are about psychology (positive national mood has a positive effect on the stock market performance and vice versa). These changes also extend to the economy. Finally, those foreign investors who like to have some exposures emerging and frontier bourses will pick up on such changes and bring in their funds.
Bottomline: rather than averaging down and other bear tactics, why not invest some of that cash to change Kenya for the better? If 5% of the ksh690bn of the NSE turnover was invested in changing our politics for the better, we'd be far. And create the next NSE bull run.

Results:

Stanchart showed that you can be too cautious and it will hurt as PAT fell by 4% from '07. Its explanations about effeciency investments ring hollow unless there is a targetted revenue generation stream. Btw, it still remains the best share, dividend-wise (another Ksh5 will be paid). But also in terms of RoC.

Co-op: became the only bank so far that reduced its loan loss provision for 2008 (apart from HFCK). Many know that it has had previous history with bad loans so expect this move to bite it on the backside in 2009 or 2010. DPS of a whole Ksh0.10 was also thrown in for good measure.

HFCK's PAT was up 86%. Equity midas touch rubbing off on it perhaps?

Kakuzi also pulled a shocker with profit growth of 47%. And not only attributable to revaluation of tea leaves. DPS of Ksh1 to be paid in May.

FTSE: Finally got my second lot of Barclays's shares at a decent price. Otherwise very choppy waters as investors are fatigued by the bad news' stories. Mainly from across the pond.

NSE weekly catchup: some good news

The good news is that stocks are getting cheap at the NSE. Better news is they may yet get much cheaper-Nigerian banks P/Es are half for those of Kenyan banks. Sadly, the brokers just don't know what time of the day it is. How does this answer the fears of investors who know brokers are broke (but how broke?), and if they could eat when commissions were rolling in will not spare any investors’ cash? Saying you are going to do what you had said you were going to do in 2007 doesn't constitute change. If somebody knows you are likely to partake in what is not yours, it requires changes to this particular habit for them to be convinced into dealing with you...That or you move away. Bob Matthews now in the frame . NK next week? One of the more …suggestions I’ve heard is for GoK to do a bail-out of the NSE. Please, we have IDPs sleeping rough, 10m starving. So how do us investors (who can spare some cash to invest), get in front of the queue?

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.

Interims:
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.


FTSE:
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.

Macroview:
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.

NSE weekly catch up: Equity, EA Cables release FY

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.

EA Cables announced full year PAT of Ksh462m, 12% higher than prior year. Its a good result given the challenges rote by high copper and aluminium prices, high utility (elecritricity and fuel) costs and and a very competitive market in a generally lacklustre economic year. Its strategy to spread into the rest of EA actually held it in good stead. For 2009, with much lower commodity prices, I'd expect to 20%+ year on year growth. DPS will be Ksh1, 10% higher than prior year.

Equity's FY is analysed here. It bears repeating. Non-shareholders might be happy at a chance to get the stock at very low prices, but for us existing shareholders, it leaves us cold because it adds risk that wasn't really necessary. The history of spilts at the NSE is almost exclusively a bearish one.

Unga saw 33% turnover growth apparently wiped out by fx and will miss FY by 25%. Very strange especially as one would assume scarcity in maize would equate to better gross margins.

Other Markets:

Gold is fast approaching $1,000 as investors survey other instruments' waastelands. FTSE is in a bit of a lull at the moment. I think many were hoping for greater detail around the Obama plan which as yet seems as muddled as Hank Poulson's botch-up last year. Lloyds TSB is now caught in the short-sellers' sights following HBOS' update.

NSE weekly catch up: signs of maturing bourse

NSE eased down towards the latter part of the week and continues hoevering at 3,400 level ahead of the results season which should kick off in earnest in the first week of Feb. We might have a small rally towards 4,000 before easing back in April.

CMC released its results for its financial year which closed in September (btw, I always thought that the NSE/CMA vigorously enforce the 3 month window for results announcement). Kenyans are still buying cars. PAT was up 50% helped by a strong jaw effect (revenue-27% growing much faster than costs-6.2%). CMC has 18% of the mwananchi car market, so I am assuming it derives most of its revenue from higher market share in buses and tractors. I don't see it having as strong a year in 2009 given macroevents. DPS went up to Ksh0.45 equating to a 3% dividend yield at close of play on Friday-okay for a growth company. Books for the dividend close end of Jan.. .

KCB's share price seems to have gotten away with just small scratches despite its debacle with Triton. However, Africa Alliance downgraded its earnings outlook for 2009 by 36%! About the maturing NSE, this was first time in a while that live news transmitted to instant price changes so transaprently.

Macro: Kenyan analyst confirmed the lower growth expectations for 2009. We are sending a huge delegation to watch tv in the US while appealing for food aid.

LUSE remains weak and subdued.

FTSE: Short selling is back as of yesterday and banks took a terrible pasting as short sellers flooded in in earnest. The other reason is that credit crunch is now on mainstreet with job losses feeding into bad debs. And Bank of America has this week discovered that it bought the wrong bank.