Results Catch Up- NSE FTSE half yr

TPS Serena is recovering nicely from a tough 2008 and going by the visa queues at the Kenya High Comm recently, things should continue to improve.

StanChart surprised didn't it with an atypical 38% increase from H1 2008? The bottomline was driven by circa 24% growth in both interest income (and surprisingly nothing to do with govt securities despite the Ksh9bn increase) and F&C as well as flat expenses. In other words strong cost/income ratio. Capital ratios look tight. Still not a buy for me unless for dividend purposes (Ksh2.50 DPS will be paid in early Oct). NBK (an okay 11% uptick) and KCB also released some flat as a pancake PAT. Some high quotient analysis was done on the latter here. BBK's Adan Mohamed had a party after 5% rise on 2008 H1, but a couple of sobering points. Flat costs and vastly reduced loan loss provisions means there should have been a higher rise. But nothing came from the income side of the P&L. Finally, parent bank showed up with 8% rise despite a very challenging environment and did better than its rival clearing banks Lloyds TSB, HSBC. RBS may do better though.

ARM continues to defy high production costs with a 32% yoy increase in profits pegged on turnover growth of 16% and reduction in production costs. It remains despite its small 10% cement market the stock to watch out of the 3 cement sellers and infact one of the good picks from the NSE industrial stocks.

Olympia finally decided to announce its FY 2008 numbers. As expected, it rolled up with a loss though not as high as many of us had forecasted (Ksh56m). I suspect the numbers don't fit. For example, if you strip Ksh1bn for Plush, you leave Olympia where it was before it bought it. Smart...

Barclays: drowning bank or misplaced fears?

When the banking industry was in the throes of its most turbulent period for a spell, banking analysts, watchers and investors fully expected Barclays, a big player in fixed income to be among the first to keel over. Barclays managed to fight itself out the corner by signing up foreign investors; revealing strong financials and generally talking positive almost daily. It even resolved to sell its ishare business (the largest provider of some of the more progressive investment products e.g. efts, in the market today I believe). As a final vote of confidence the FSA gave it a pass after due some tough stress tests. As a result, its price recovered from a historic 47p low to a high of £3.21 early this week.

Then Abu Dhabi decided that its long-term investment was short-term and it was cashing out at some hefty profit along with a v funny FT missive. Then it announced that Timasek had sold out at a massive loss in January and it was closing its final salary pension scheme. At of course its now looking to sell its whole BGI business. That business is almost risk-free and earns Barclays steady though not proportionately huge revenue. So why sell now when Barcap may see lower revenues due to more limited activities (and yes more opportunities)?

In the short run, I expect the price may touch a low of mine, but long-run the bank seems to be strong and remember it did go through a stress test by the regulator...

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-bottom found?

Another solid week at the bourse with the NSE index up marginally. Whether we have priced in all the bad news is something I remain sceptical about. I think NSE tends to price in with a lag and hasn't for example been taking into account the food and weather forecast for 2009.

Corporate Announcements and Actions:

NMG finally announced 2008 results. Was up 19% on 2007 driven primarily by strong cost control. Ksh4 DPS will be paid in May. I think this might be a tough year for it from the advertising point of view.

Co-op has bought 60% of Bob Matthews and is thus a stockbroker as well as its other businesses. The new broker will be the un/fortunately monikered Kingdom Securities. Imho, broking is a good easy business in Kenya. If your operational risk monitoring, prevention and detection is world class. Otherwise, there maybe cause to regret, moneterily and reputationally a few years down the road.

Hence Equity's well-known aversion to actually acquiring a broker licence. It held its AGM on Thursday to confirm the 3.9bn shares spilt-thingy, regional footprint/expansion and precious little on HFCK. I see HFCK as its potential achilles heel.

EA Portland has finally taken a hedge on its Ksh1.7bn loan from Japan. That took 5 years. And it still has Ksh3bn to go before paying off the loan...

USE:
Stanbic announced 48% rise in PAT from 2007 driven by 20% income growth agianst 5% cost growth. However, it also reduced DPS by 11% to be paid in June.

FTSE: Ended higher as Geithner's plan was being digested. MHO, I think the plan hinges on whether the banks will accept to sell toxic assets at throwaway prices. I prematurely exited Barclays after booking 100%gain only to see the UK gova give it a clean bill of health thus making price go up 24% yesterday! Waiting for end quarter profit taking.

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.

Kenya Listed Banks: Comparison of 2008 Results

• An almost positive correlation between low cost/income ratio and high EPS.
• Return on capital is a bit of a misnomer as it sometimes represents unspent capital e.g. Equity and thin capitalisation (StanChart and BBK).
• Tell me how BBK and Equity have similar proportions of NPL to loans and such a difference in terms of LLPs for 2008. Wonder what Co-op is upto- it actually reduced its loan loss porivision in 2008, yet it has the highest proprtion of bad loans. I am assuming some of this is historic...
• Some banks lent out a lot in 2008-a proportion of these loans may turn bad if economy doesn't recover in '09.
  
• Fwd P/E of 6.3 shows Equity has among the cheapest bank stocks at the NSE today. Will wait for it to drop once spilt is effected. And KCB and DKB are cheaper too.

The stock market is a legal pyramid scheme...

The stock market is a legal pyramid scheme in which a 1st mover advantage makes you money.

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.