The KenGen Ksh15bn bond beneficiaries

Going by the debate so far, the 12% bonds seems to have tickled the interest of retail investors who usually stay away from bonds given the return is far lower than current or expected interest. Ther reasons for this change are many but a major one would be changing perceptions about the NSE. How will the different players benefit from this bond?

• Retail investors:- despite a drop in inflation, its unlikely that it'll go below double figures before 2012. That means that in real terms, a retail investor will be making a loss from investing a Ksh100k of his in the bond. Although its unusual in Kenya, you may not be able to get the full principal in the first 2 years. It'll be 2017 before you double your money.
• High net worthy: If you have Ksh5m and the risk-aversion of a typical elderly investor, then the 12% is sound return. However, NSe shares pay over 10% in dividend alone.
• Money market fund managers: will love this bond because it make them very competitive against savings accounts.
• KenGen shareholders: interest payment of just over a Ksh1bn will hit the P&L every year. In the first few years, there will be no concomitant revenue from the project to offset this. Something to ponder?
• Electricity consumers: should hopefully see fewer rationing episodes.

The bond offer closes tomorrow.

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.

Happy 2009: some predictions

Investments
If you were to go from the Lenana peak at the top of Kirinyaga Mountain and walk across to the top of the Aberdare Ranges, that would give you perfect feel for how most stockmarkets will move to 2010. Assuming Q2 2007 to be the Lenana peak, I expect:
NSE- will not go beyond 4,500 weighed down by economy morass and newish listings (KPC, KenGen, NSE, Nakumatt, DPL Festive)
Access Kenya, Safaricom, Equity in that order will be top performing NSE shares in 2009
FX: $/Ksh will close below Ksh70; £/Ksh will close at Ksh115-20 both driven to the floor by arbitrage
LUSE: Has lost almost 30% this yr primairily driven by foreigners exiting but will stablise in 2009
FTSE: Will not go beyond 5,000 as unemployment, company defaults, housing depression continue to depress

Economy

Inflation: Will be re-calculated but reality is that it'll remain very high unless rains are very good
Economy: 4.5% growth will be recorded for 2009 i.e broadly similar to this yr, the result of lower international receipts, inflation espicially fuel an electricity.
KRA: will miss it target for yr.
BoE rate: will close at 1%
UK unemployment will rise to 3m

Politics
Different yr, same BS

• The local tribunal will get bogged down from the start. The investigations will clear most of the "10" for lack of sufficient evidence.
• Constitution review will get stuck on the same two issues namely parliamentary/presidential system (excellent explaination of the diffs) and devolution (or is it ujimbo/ugatuzi/ukabila/upuzi?)

And finally, Liverpool FC will win the Premier League in May.

NSE Catch up: Pre CO-OP Listing

If you bought:
Centum on Monday-you'd have made 15%
Sasini (12%)
But
Rea Vipingo would have lost you 12%

Does this mean NSE recovery is underway? Well, maybe-ish (I know, i couldn't get more ambiguous than this). I have noticed a recent trend in IPOs that just before they are listed to trade, the NSE always goes up. Some of this upward trend might be circular trading which is meant to generate cash to allow investors to buy into the newly listed share. Fundamentals are also looking a bit more stable but only if we assume that recent gova moves of reducing banks cash reserve ratio and to contain inflation by lowering the cost of feeding on ugali and also lowering electricity costs will work meaning that investors can be a little bit more positive about 2009 earnings. Volumes remain patchy illustrating the fragile confidence of majority of investors.

Sasini posted very "good" numbers. Until you took a closer look and notice the biological assets pick-me-up. One of the reasons that many financials were/are against IAS39 is because by forcing them to mark to market various assets, your P&L goes up and down like yo-yo especially in the transition year from boom to bust as 2008 has done for Sasini. IAS41 which governs agriculture companies has a similar effect. The best solution would be to do the mark to market but put the appreciation in their revaluation account which has the same impact on capital anyway. Something in your financials has to reflect what you did for a given period and an asset revaluation doesn't.

Isn't it time KenGen stopped its annual whining about its ksh75m AGM costs and just emailed investors the annual reports?

Still don't understand why the Mpesa audit and court is happening now?

Co-op: Lands on Monday. Recalling Everready pre-Xmas IPO two years ago, I don't expect violent movements either way though sellers may try to force the issue. The interesting play will be when class B shareholders can immobilise their shares and start profit-taking in earnest...

Joint venture opportunity: I am looking for somebody with knowledge or working experience of doing credit ratings or credit scoring to work with on a joint venture. And you are currently based in East Africa.

Economy in the midst of headwinds

After the clashes earlier this year, some of us our confident that because of the resilience of our private sector, the economy would get back on its feet very quickly. 6 months later:

1. Inflation in the 20s: Has meant less disposable income as families have to spend more on the basics or most likely, reducing their consumption of these basics.. This means less can be invested or saved. If there is less being saved/invested, you effectively have less capital for new projects as it now costs more to get the funds. 2ndly, reduced consumption means companies earn less or pay more to get higher turnover. Lower margins mean lower profits. Inflation can be reduced by aiming at the cause. In this case, we have reduced supplies of goods to supermarkets, grocers and so forth due to the destruction of the North Rift. Crops will take a while to grow and maybe disrupted by patchy rainfall. Hence GoK importing things like maize. 2ndly, GoK can increase interest rates, but so far I think the inclination is not to do so.
2. Safaricom IPO-induced liquidity crunch: Out of the Ksh236bn raised on the IPO, I'd conservatively say that 30% was done via loans which would have meant taking out a lot of liquidity from normal lending activity. Another 50% would have been a mixture of savings and investments and the remainder from shares. With quite a portion of this still stuck in the banks, the economy is experiencing some liquidity crunch. This is forcing banks to pay more on the interbank lending. Several have already raised interest rates on loans. For now, refunds will need to be speeded up but going forward, IPOs must be done differently.
3. Electricity: Last year, at the height of the annual tariff squabbles between Kengen and KPLC, coldtusker and myself argued that the solution was for GoK to go ahead and allow KPLC to charge consumers more straightaway. Electricity generation is too important to be left to GoK and KenGen should be allowed to earn so it can re-invest. However, political expedience (i.e. suicide) came in and GoK agreed to pay KenGen instead so that voters didn't runaway. So this year, what should have been done last year has been introduced at the worst possible time. If the increase to individuals is anything to go by, some foreign companies will definitely eb reconsidering their location in Kenya. A doubling of electricity costs is nothing to be sniffed at, What should be done? Well, its a good decision but the timing is all wrong and I think GoK should consider continuing the subsidy for this year at least so that the economy gets back on its feet faster.

NSE Update

KenGen continues to disappoint. 2 years after its listing ushered a new era at the NSE, the company looks like its at a standstill. Note that even if you take off the depreciation hit it took for interim 2007/8, you'd end up with flat y-o-y growth. And I don't it has much by way of pipeline projects that will increase power output.

Merali companies, of which there are 3 at the NSE are notoriuos for under-delivering. As Everready heads to Ksh1, Sameer also has issues. Its blaming likely lower profit on events in Jan-Feb. Does that mean 1 quarter makes up its whole year? Sassini also saw lower interim profits despite only a small fall in turnover. I guess there goes Merali's plan to list one company per year...

When the CFC-Stanbic merger was announced yester-yr, there were some including me who were very excited. Over the last yr however, I've been re-examining the group and can see it has issues. The CFC Life business is seriuos drag on the it and the bank is not excitely firing on all cylinders. For Q1, group saw a 10% fall in PAT, due I suspect the fact that CFC Life continues to get hit by over-reliance on the NSE. The bank with a 10% rise, also underpeformed relative to peers.

Is it to take another look at StanChart? Notice FY saw 32% rise in PAT, comfortably above peer BBK and almost on a similar level to KCB. Then Q1 saw another jaunty 25% rise primarily driven by FX fee growth. But is it sustainable? I reckon I might just get some shares so I can find out at close quarters... After all, most other banks have seen furiuos balance sheet growth over the last yr and if the economy comes off the track, NPLs won't be far behind.
DTB is ofcourse a favourite bank share, 28% growth in Q1 is respectable.

A short history of Kenyan IPOs: Lessons and reminiscences

KCB: Listing price Ksh20 in 1988. Suffice to say that if you were shareholder in 1988,you most likely would have lost your hair but made good evenutally as the stock is KSh24 (after many rights, additional divestures and spilts). Was the 1st GoK privatisation.
NBK: Listing price Ksh10 in 1994. Even with a 2nd GoK divesture in 1996, has posted 400% returns for IPO investors despite its dismal perfomance profits-wise. Thanks Jimnah.
Kenya Airways: Listing price Ksh11.25 in 1996. Its IPO was the Safaricom of its day and has salutary lessons for us all. Its listing in 1996 saw 110,000 new investors (was a huge number in those days) and was the first by an African Airline. Within no time and helped by Goldenberg, drought and moi-economics, the economy was in ICU. KQ's shares went down to KSh6 andwere stuck there for a spell. Investors slashed their wrists and vowed never again until KenGen IPO came along.
KenGen: Listing price Ksh11.90 in 2006. This IPO ushered the new era of NSE complete with CDSC accounts, investors increasing to 500k+ and was the first IPO I took part in. Perhaps due to the absence of IPOs for along-time, lessons were learned by all
                
                  *Don't make IPO a free-for-all, you'll end up high investor expenses from annual reports, AGMs and                     the like
                   *Share price will stagnate due to liquidity glut
                  * Do price it low
                  *Every investor will see profits and jump, cue oversubscriptions and interest-rate earning for brokers

ScanGroup: Listing price Ksh10.45  in 2006. With lessons learned, guys jumped and made a mint (some 300%). The share still has way too many investors. I have cashed out after getting frustrated about the stagnant price.
Everready: Listing price Ksh9.50 in 2006. A lemon among the recent IPOs. And most knowledgeable investors new it before it listed and thus went in for speculative purposes. Its high lasted a month before plummeting below IPO price where it has refused to come away from. I sold at around KSh18 for one my cdsc account and was flat on another due to lax broker nonsense.
Access Kenya: Listing price Ksh10 in 2007. Although I've made more money from others, this one I am enjoying because it has something of a schedenfraude about it. Firstly, many trashed it on the basis of the forthcoming fibre optic and Telkom's takeover by French Telecom. Secondly, the upside is so huge that I won't be surprised if it reaches mid 30s by next year. Beyond that, it's all about how well it adapts to increased competition, but I am sure it will.
Kenya Re: Listing price Ksh9.50 in 2007. Companies were now wise to the ways of retail investors and restricted their participation. This has ensured that the upside seen in the share has stayed as institutional investors are long-term. But will that last if KRe doesn't change its pre-IPO ways and given this Jan/Feb claims? I am still holding a small portion though I may dispose once I get a dividend for 2007.
Safaricom: Listing price Ksh5.00 in 2008. I hope many can see a pattern emerging in all the preceding IPOs. So judge Safcom as you'd any other share. That way, you'll invest on the basis of its fundamentals which will either look strong or weak. If you think it's strong, why buy for speculative purposes only to go for it later when it might have doubled in value? If you think its weak, then you better review your exit strategy once you know the allocations and especially for the QII and foreign investors. As well as the cabinet composition. If either or both has  massively oversubscribed and cabinet is kosher, you are in the money . And out of the money if v.v.

Politics save Northern Rock; Lehman delivers na KenGen?

At the rate savers were withdrawing funds (£1.5bn a day), you can see that NRock with £24bn was due to run out of the stuff soon. And no politician likes to be associated with such public failure. Least of all one who has just become PM and wants to hold election soon like Gordon Brown. The decision to cover all deposits introduces moral hazard of the kind not seen before because bankers are being told to take risk without bila worry. Fractional reserve lending strictly allows a bank to lend £8.8 out every £10 you deposit with it. Lakini now a bank will be able to lend even their branch because there is govt coverage.

Lehman Brothers took a 47% hit on its Fixed Income (that's where its CDS and ABS income was put) and still managed to only miss breakeven by 3%. Fixed Income used to be 50% of its earnings, so you can imagine the fear they had. As I always say, Investment Banking is the only business where you make money as the market is going up and everyone is buying stocks, commercial paper and derivatives and when the market is going down because they are all selling their stocks and looking to unwind hedged positions.
Bear Stearns is next. They are even more into CDS and ABS than Lehman.

Anybody else see KenGen's nasty surprise coming? And to make it worse, after increasing their dividend from last year when they are on their investing cycle, they are thinking of increasing their borrowing. This is might now be a very long-long term stock for some.
After this factual commentary on Equity' performance, I suppose they will be accusing Rina Karina @ Faida of being on Equity's pay. Sometimes, Equity reminds me of Professor Wangari Maathai, unappreciated in Kenya, radical and innovative in some ways, eccentric in others. But showered with accolades internationally.

NSE-Slow climb; KenGen bad & Mumias good

Despite forthcoming elections and uncertainties thereof and the rumbling train of Safaricom, investors continue to pour into shares. Most of this is driven by the on-going results season and should peter beyond that.

KenGen, announced disappointing numbers. Whether the impact of the tax is one-off or is on-going (they have a deferred tax charge of Ksh5.6bn which will have to be released back into the P&L over time. Given their heavy investment programme, I think its bit irresponsible of them to increase their dividend payout. I guess GoK needs the doh. The fall in its share price will probably reflect this
City Trust announced excellent full year followed by a sweetener dividend Ksh3.75) and predictably a 1 for 4 bonus issue. For my money, this stock has had more insider-dealing than any other this year.
Good news for holders of the Mumias (dudes when you going to have a website?). The COMESA waiver has been extended another 4 years!
EA Portland also released FY and saw flat PAT and PBT with sales not really improving from prior year. I guess shareholders at least have the likely merger to look forward to.
Safaricon still has that whiff of controversy everyway you look. Now Vodafone are threatening to delay the IPO unless GoK signs some agreement. My view is it shouldn't happen until we know who is Mobilete aand there is some agreement as to how Mobiltelea will compensate Kenya for its shareholding-corruption was involved so that is that for me. If the IPO does go ahead, lets have all 25% being NSE-listed. The argument about foreign exposure is neither here not there.

Payment on Delivery for IPOs

For the Kenya Re IPO, GoK/NSE has further favoured institutional investors by allowing them to pay only when their share allocation is confirmed something not offered to retail investors. This in addition to allocation them a portion of shares for which only they can apply for. Retail investors are complaining seeing this as further unfair practice on the part of the NSE /GoK elite. However, there seems to be several reasons to suggest that this may be a very wise move on the NSE's part.

1. Stability: Many investors (retailers as well as institutionals) have in past IPOs tended to liquidate some of their holdings and use the receipts for IPOs. This adversely impacts many counters causing the NSE index to fall. By giving this special dispensation to QII, it will allow them to in effect give some stability to NSE index during the IPO period. What about those counters with little institutional support? There are probably weak on fundamentals anyway...


2. Speculation: IPOs have been dominated by speculators who chasing the immediate post-IPO uplift in the price will withdraw savings, borrow and sell everything including their priced bulls to participate in IPOs. This has negative impact on the wider financial system and is compounded by effect of delayed refunds. Most of the immediate post-IPO uplift has come from QII and others going into the secondary to pick up shares. By apportioning an amount of the IPO shares to QII, the secondary market will become thinner thus lowering the immediate uplift from IPOs. This will act to discourage speculators.


3. Shareholder expense: Thanks to the free-for-all IPO system, KenGen held its last AGM at Kasarani Stadium and spent ksh80m on the various costs involved (printing and sending annual reports, dividend checks etc). This is not clever business. Moreover, having too many retail investors will accentuate any periods of volatility.

Finally, (and I am not in NSE's pay), MPs like journalists often refuse to let a good story get in the way of facts. Such is the case with yesterday's question time. James Mwangi (Equity's CEO) has never denied he worked for Trade Bank (its in Equity's annual report); unless he owns shares through his fellow directors, its not possible for him to hold 30% in Equity; Trade Bank was mentioned in relation to Goldenberg, as was Barclays, Stan Chart and others. As to people around Jimnah Mbaru owning 90% of the NSE, even a perusal on Hasinet's excellent company info will show you this is unlikely.

Stocks View

Accumulate/Buy:
Equity: Has now become a byword for perennial overachiever. Both income streams (NII and Commissions and Fees) looked strong from Q1 07. More than ever, the bank is eyeing the saccos market share and engaging it intelligently. One may get queasy about resultant non performing loans, but that depends on term over which you will hold onto the share and 2ndly, Equity has a more conservative definition of non-performing loans than required thus is able to pick up problem loans earlier-in theory. P/E may look too rich at around 32, but would only be around 20 if one was extrapolate the Q1 results to the full year. Downsides: How many of its principal shareholders will divest some of their holding come next July/Aug when the 2-year holding period ends?
NMG: Is now an East African media house in all but name tetchy govts notwithstanding. The Business Daily has been received far better than initial scepticism suggested. In saying that, I still think that it’s missing a vital constituency-namely, the NSE investors. Why not for example do monthly profiles of each of the 51/2 listed companies; interviews of key players in our economy-this is the only reason I read the Financial Post and I am sure there are others who would want to know more? NMG has a fat DPS; note that its P/E is far more sensible than that of Standard and one can feel a bonus share issue coming from next year. Downside: M7 is not Kibaki and will willingly crackdown on any perceived negativism, ditto TZ.
TPS: Yes another Aga Khan company. Tourism boom is now on and TPS are recapitalising, going regional and refreshing the brand and their hotels in earnest. Downside: usual terrorism/security advices are the main one.
Hold or Upgrade to Accumulate/Buy…
CFC: The universal banking concept means that it will continue to do well as a standalone entity albeit in need of rejig-a bank with no online proposition today needs searching questions about age and strategic aims of its management. As a standalone entity, one can hold onto its shares for the mid-long-term. However, with Stanbic on board, I believe the new entity will be the corporate bank of choice for East Africa and as such investors need to get on board.
KCB: The bad times should be behind it…Q1 was solid if unexciting though it’s getting higher fees now from increased lending. It’s another one expanding its reach beyond Kenya and successfully at that. The hold is to wait for the demobilisation of the share spilt. Downsides: Is GoK non-interference behind us (i.e. this is a politically sensitive stock in mind and thus 2007 elections represent t some uncertainty)?

Underweight/Sell:
KenGen: Once you get GoK 's incompetence being played out publicly as some kind of experiment, you know you shouldn't touch that share until govt stake is reduced. You can't commit legally to something that you can't or shouldn't do and then seek to dress as some kind of intelligent and well thought-out rescue from fiasco.

KPLC: Whole host of problems:

1. Bad debts,
2. Probably too wide a remit (I think rural electrification needs to go a smaller company with none of KPLC’s history);
3. Leakages-25% of its electricity wasted this way
4. A large unionised workforce (apparently some are paid more than their line managers)…
5. and finally the ropey margins.

Upsides: Demand for electricity will get insatiable in at current or higher economic growth rates.
Mumias: Please see previous post and comments…nothing has/will change

Of IPOs, OFDs, HFCK & Bears

Kimunya confirmed NSE's worst kept secret, Kenya Re won't happen in March but May and KenGen's 19% offload is being brought forward to next month. Kenya Re will most likely be the equivalent of the grocer who hides rotten oranges at the bottom (why are they taking on KNAC's assets at this stage of the game?), but at 60m shares will still be oversubscribed. KenGen's offload is a few months late or 1 year too early i.e. the timing is wrong. Reason-the tariff fiasco with the govt having realised too late that it had created a rod for its own back by committing on a prospectus to pay KenGen their real cost of production. So far, Treasury is covering the gap between what KPLC can profitably pay to KenGen and the amount KenGen needs to profitably continue to produce electricity. Govt is in such a mess that they paid a consultant to tell them that yes, you'll have to ask consumers to pay for the real and higher cost of producing electricity-many could have told the govt that without charging them! Without some confirmation of this, investors should stay away from the offload and buy the shares at k10-15 in the secondary market later this year.
HFCK announced their FY06 results, PBT was up 56% primarily on lower staff costs (does that mean its not growing any more?) and lower loan loss provisions (good-HFCK nearly went bankrupt from carrying too much of the stuff). So not driven by revenue growth (1% up on FY05) and there was no dividend. There is still confusion over strategy. HFCK now wants to fund construction of properties. So it will be carrying two types of risks in its books-property not sold and then when its sold, it'll obviously have the more conventional lending risks. This is a market that KCB seems to be way ahead in so this investor doesn't see how HFCK will survive as a standalone entity to see out Frank Ireri's 5yr strategy. The strategy will require financing of around k13bn which I am not sure the proposed rights issue will bridge-perhaps a better idea would be to float a 25 year bond.
The current correction/bearish sentiment at the NSE is a perfect opportunity for the long-term stock investors most who will say its a necessary rite of passage that imparts important lessons for one to be successful. There is sympathy for those that were hoping to use the NSE bull run to raise short-term funds which there is quite a few in the current investor population, but not for the get-rich-quick crowd. For the rest, use this period to accumulate in stocks you believe will grow your capital in the medium to long-term.
Kenya Bankers Association revealed that Ksh20bn of the bad debts in the banking system is held by 100 defaulters-shouldn't they be letting all financial institutions know who they are?

KenGen/KPLC saga

The way forward on the ongoing saga between KenGen and KPLC with the former selling power to the latter at an enhanced tariff of Sh2.36, whilst KPLC and the Government want it to sell at Sh1.76 may finally be resovled tomorrow with the expected performance update to the investors.

The announcement is likely to move either company shares up or down depending on who is favored.

Overhaul of the power sector

If I was to be asked which economic sector is really in need of overhauling in Kenya over the next 3 years (apart from banking, stockbroking, insurance, agriculture, car, transport to name but a few), i'd say the power sector is. And it would probably be the easiest to do. So what are some of my suggestions:

Short-term

KPLC needs to be better at collecting debts especially those owed by the government.
The pricing issue with KenGen needs to be passed onto the customer-the customer who is also a taxpayer is already paying for this thru the govt covering the shortfall between what KPLC is paying and what it should be paying KenGen. At the moment we are trying to hide the fact that power costs alot to produce in Kenya. This is the reality, so lets pay KenGen in a timely manner so they can continue to reinvest and find cheaper ways of producing more power.

Medium-term

We should introduce another distributor into the market-either serving certain areas of Kenya or in direct competition with KPLC. We should let KPLC be a private entity-so gove divesture to KQ's level. Of the two, its more important that we have some government conttrol over power generation.

Long-term

We must redouble efforts to utilise the most natural of our resources-the sun- to generate enough power. We should go further and require that all buildings-old and new-have the capability to easily hold the solar panels used.

2007 UPCOMING GREAT INVESTMENT OPPORTUNITIES

Kenya RE IPO
Dyer and Blair is the Lead Transaction advisor in the privatization of the Kenya RE Corporation. The Government of Kenya owns 100% of Kenya Re and intends to sell 40% of its shares. Kenya RE is undergoing a re-organization to reduce costs, improve processes and diversify its income stream. It made a profit of Kes: 461M in 2005 as compared to Kes: 452M previously. The IPO is slated for March 2007.

SAFARICOM: Kenya's most Profitable Company.
Having made a profit of over Sh. 12 billion last year, Safaricom is one of the fastest growing companies in Kenya and it’s riding higher. Safaricom valued at over Kshs: 200 Billion will offload at least 25% of its shareholding probably mid 2007.

Telcom Kenya
The government intend to sell about 34 per cent of its shares through an IPO around Sept 2007.


East African Portland Cement:
Lafarge and the Government to offload more shares to the public to reduce their holdings, and increase the total number of shares traded to the 25% required by CMA for listed companies.Lafarge holds 41.7% in EA Portland and 73% in Bamburi Cement. likely IPO is about end of the year.

Kengen:
The government plans to offload a further 19% to the public in June 2007. Around 400 Million shares reducing its stake to 51%.

FAMILY FINANCE BUILDING SOCIETY (BANK)
Soon to be Family Bank is one of the leading microfinance institutions in Kenya and is now offering 15,000,000 Million Share at Kes:60.00 per share (minimum of 500 shares). The share offer is by private placement and a subsequently IPO or like EQUITY BANK did. One need to be an account holder with family finance to be able to purchase the shares.

SAROVA GROUP
Owns a portifolio of profit making hotels chain in Eastern Africa.

Co-op Bank
Already selling their shares through private placement @100 per share
Profit making and available in many parts of the country.

(Other romoured IPO's include):

Sadolin paint-

Adopt-a-light-biggest outdoor advertiser in kenya, involved in road signing too.

Orion EA-sells agricultral chemicals in East Africa.

Triple A Capital-

More information will be provided about the above.