NSE weekly: crucial next pt is post Q2 close, Olympia...

NSE was up almost 10% for the week on strong foreign buying. Top climbers were penny stocks such as Co-op (up 32% pre-dividend close) and MSC (up 19%, despite 73% fall in H1 profits). I think alot of investors are geting overexcited about co-generation which won't start revenue generation until 2010. ARM was up 24% being the pick construction stock. I am really waiting to say how its going to throw out the great Bamburi from its house with this being a first step. From all points of view, it doesn't make sense to have the kind of share-ownership that Bamburi has in its two main rivals. What happened in the 90s is history. One stock that has flown silently and fast under the radar is Crown Berger. I really like stocks with small amount of total shares and it is one (23m with only 6m floated). It has gone from Ksh10 in end February to close at Ksh29.50 jana. All well, I've now got it on my radar.

Next two weeks will be pivotal in signaling whether this is a bull with steady legs or an upside correction that will leave us swaying between 3-3,500. Next Friday should see fund managers exit to close books for half year. From there, it will increasingly become clear which shares are being ramped up and which are strong fundamentally. In addition to two of the above shares, I expect Equity to see some forward momentum in early part fo the week.

News, announcements and rumours:

Safcom continues to tidy up its broadband offering with jv/alliance with Jamii which will in effect save Safcom from having to cable up the city.

Rumours abound about the state of shambolic Olympic (once its was a furniture distributor with regional aspirations; next it became an investment firm; forever raising cash; etc) may be under some stress. Apparently,a single sourced SK-rumour suggests that Plush and Natwood, its businesses in SA have closed shop. Last time I got access to Olympia's website, Plush accounted for 50% of its turnover. I believe its full year results will have to be announced by close of play in June.

CMA rules announced over a year ago will now hopefully become law as they've been included in the recent budget.

Other markets-FTSE:

Some yo-yoing though at last data is out there showing we are over the absymmal era and now just in the bad. Banking stocks are not being helped by rating agencies being behind the curve as usual and issuing negative credit watch for a whole swathe of sector. Remains all-good though.

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 Update: CEO musical chairs

NSE continues the gentle journey south. There is nothing to suggest any upward movement until Co-op is listed and its volumes settle down. And of course, the usual upswing prior to full year results in March.

Centum saw PAT down 17% for its half year to September vs.. prior year, not too bad given NSE was down. If CEO was still the same, it might have been worth buying at around ksh12, but now its worth waiting to see where it goes. Notice the very negative cash position. It bought Longhorn, but also made some disposals. Still, I now understand why the dividend was postponed to January. James Mworia who takes over in two weeks time clearly has his work cut out especially given Mwangi left due to strategic disagreements and we are stuck into sub-4000 levels for 2009 at least.Its a buy for me if below ksh10, though there are probably better prospects in the medium term.
KRA came up tramps to make Total look good ahead of its expected purchase of Caltex .
Chris Mwebesa was appointed CFC FS CEO (I wondered why the share has been tanking-apart from the interesting 9 month results which I haven't seen). Bamburi's CEO has also left . Looks like its that time of the yr.
Macro-view: Water rates go up in the new year, maize (our staple food) prices seems to have broken the gate and are on an upward stampede and oil prices remain sticky. So looks like the only way inflation will go below 20% in the first half of 2009 is if its revised (I sense it already has) and some items are removed from the basket. We are walking into economic problems with our eyes wide open. 4 key words for 2009. Food policy. Policy dynamism.

Food Policy: There is a great opportunity to start on a new blank canvas. Just copy and paste the polciy on milk.
Policy dynamism: We nrks are often accused of westernism, but if gova could just react a bit quicker for example on the budget deficit (rather than stealth rise in interest rates) or inflation (was already high last yr), we won't be in this tight situation.

B&B surprise for H1 2008

After growing by a paltry 7% in the first quarter, Barclays Kenya turned this around with 24% growth for the whole of the first half. BBK says it made Ksh1.7bn in Q2 alone. So I was curious to see how it had done this. Income was slightly higher perhaps driven by more business days in Q2. The main driver was actually lower other operating expenses in Q2.


Bamburi also had a super half coming in 21% higher than the same half last year. These are very good numbers for two reasons. External factors were at their for sometime in this half. Fuel prices rose dangerously and ofcourse the Janaury political clashes would have cut-off the supply lines to customers. Hima, its subsidiary in Ug, also suffered from power rationing. Secondly, its bitter rival Athi only grew by a disappointing 24% from a lower base. This despite the fact that ARM has a more balanced income generating portfolio of products.

RIP Bernie Mac.

More Interims

NMG's numbers are strong and bode well for the 2nd half when it should see an election uplift. Interestingly, its EAst African paper is doing very well too. Scangroup a fellow competitor for advertising had a solid first half. Scangroup tend to perform very strongly in the 2nd half as many companies will be advertising for the Xmas season and the coming year. Cash flow went into negative due to higher dividend payout and acquisition of RedSky. One thing I am not sure about is how well they are able to merge all these new companies they've been acquiring as well as grow regionally and into West Africa. The other concern is how well they will be able to keep the the account managers from RedSky.
Bamburi had a flat first half compare to last year. I am still not convinced they'll benefit (apart from scale) from their proposed merger with Portland. Construction industry will continue to be a growth industry, but they lack the agility and hunger for business that ARM have.
Express's PAT almost doubled in size and it looks as if their recovery is sustainable. The elephant in the room where they are concerned must be a rejuvenated Kenya Railway (RVR) which will be competing with them for the freight business from Mombasa to the rest of the country and to especially to UG. Jubilee had a fairly disappointing half. and i suspect that their reliance on investment income will continue to haunt them unless they can start focusing on the bread and butter insurance business. On the contrary, their rival PanAfrica had a strong half with all its insurance lines seeing strong growth, but had investment losses from associate wipe out all the gains. Perhaps they may benefit by hiving off this business?