NSE touches 3,000 next stop is 3,500

NSE is up 30% from the March lows and now has in-built momentum to at least go up another 20% by September or year end depending on when GoK starts selling t-bills.

Fundamentally, the picture is still the same, with firms and especially manufacturers looking at a grim 2009 in which they'll struggle to match 2008 perfomance. Most banks are looking at 40% tops yoy growth with significant loan loss provisioning to be done. BBK especially I suspect has either hidden talent for creedit scoring customers while hawking loans on the streets or this will be a grim yr.

Telecom sector (basically Safcom and AK), will almost certainly recover previous share pricepeaks (at least in the case of AK), on the back of expectations about how fibre optic will help revenue growth. Don't forget however that internet providing will rapidly become volume business.

The main driver for the NSE rise is that risk apetite is back. Many investors who got burned from around October have probably been able to pick up some liquidity and are now back in the market. I also expect to see focused attention from Western funds back into the NSE thus the rising boats effect on every share.

Which are the good buys? CT has a fairly good list. I'd add TPS, NMG and DTB from Aga Khan stable. And if you are feeling aggressive, pick up Centum given its portfolio will recover in line with the NSE.

NSE Banks: Q1 2009 Results

General comment: Across the board, banks have reduced lending from prior quarter. They are basically wanting to avoid additional defaults. YoY quarter profit growth is slim. Peer analysis should mainly focus on outliers:

Good outliers:

• Net interest margin- thanks to the GoK bond, NBK is enjoying healthy interest income without sweat. It'll be on-going for a while yet.
• Cost Income ratio- this is good because it basically translates to a higher return on capital the more you can get from each shillingi you spend. StanChart despite anaemic income growth, has managed (via use of technology) to maintain leadership here.
• Return on capital- both UK banks standout. No real surprise because this is something that tends to be return as a personal development goal for CEOs/FDs of many UK banks.
• Insider loans as prop of loans: Equity stands out for low prop. Insider loans are notorious source of loan book instability for Kenyan banks.
• Excess liquidity ratio: It bears pointing out that Lehman was brought down by lack of liquidity. Stanchart looks really strong. A bit strange given recent report about all banks but Equity struggling for the stuff.
• Capital/RWA ratio: Equity is standout. This ratio can make or break business. It signifies a bank's ability to grow, but also to absorb nasty stuff like loan loss provisions aka bad debt write-offs.

Bad Outliers:

1. NIM- NIC and DTB must be paying over the odds for deposits. I understand this is what prompted NIC to be among the first to loan rates last year.
2. Cost income ratio-KCB's burden. Equity says it is in its investment phase hence the massive increase in staff costs. Keep an eye out.
3. YoY PAT growth- Whats up KCB?
4. Fwd P/E- Given the lowered growth rate for the year, the fwd multiple for 2009 looks too rich for Equity. Ksh10 looks more comfortable until we see what Q3/4 brings in.
5. NPLs as a prop of loans- Equity (perhaps unsurprisingly given target class and seeing K-Rep), is out here. Several pts of note. Several yrs back, I remember a blogger mentioning that Equity recognises NPLs much earlier than other banks. I'll confirm this in another blog. 2ndly, because of its capital capacity, it can still absorb the whole of its NPL fairly comfortably.

Q1 results for NSE Banks

Q1 results will shortly be upon us. In bullish times, you tend to get pretty much every MIMS listed firm releasing some form of quarterly update. However, the opposite applies during these times of the bear. With the exception of banks which have to do so due to their mandate, I expect to see very few quarterly updates. In any case, for the banks, I am predicting near flat results of several banks with the usual exceptions. Loan defaults will be a feature of every earnings release this year from any bank and one should expect nasty surprises on the P&L depending on how well the particular bank has provided for npls so far.

Equity up 40% on Q1 2008 just because it has a bigger loan book compared to last year. I think its Waterloo moment will be Q2 when I can’t see it going higher than its Safaricom quarter of last year. Will start benefit of push in Ug by Q3 and beyond
KCB up 20% though I am expecting it to surprise in a positive way given its larger book vs q1 2008.
NIC, DTB 20% and 40% up respectively.
CFC down on Q1 due to the insurance business. Think link to NSE via its broker as well insurance arm.
BBK and Stanchart-I am expecting one of these to be down on Q1. Only, slightly but down nevertheless.

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.

NSE catch up: Co-op lands makes a splutter

A mild short week at the bourse with all eyes now on Feb/March results season. It was thus a good time for Co-op to list. Funny games as always. The stock was under-subscribed and the minute it lands, you have investors buying Ksh11, 10 i.e. above the Ksh9.50 price. Does it make sense? As mentioned last week, real price will be discovered in the next two months as the immobilised (exchanged from certificates) shares find their way into the market. Most were bought or valued at the equivalent of Ksh1.10 earlier this year...

In other news, NIC is going into TZ. It has put in a bid to acquire 51% of Savings & Finance, a medium sized bank in TZ. A word about TZ banks. Most tend to belong either to community groups or certain locales. They therefore rarely have the extensive branch network that one will see with Kenyan banks (only three have more than 10 branches). S&F only has 3 branches but these are in the main towns. NIC becomes the 3rd Kenyan bank to step into TZ after DTB and KCB.

The battle for the Mutomo coal deposits continues. Why do investments such as these which will provide much-needed employment take so long to get off the ground?

And finally: Xmas away from Kenya tends to be a fairly downbeat affair especially when as I did I spoke to relas back home who were just finishing some mutura. So its just as well that Mr & Mrs Muiru have made sure Kenyans can at least get some of their favourite foodstuffs locally via their Wahu Foods shop. Wishing them much success...

NSE Update- technical hitch gives way to bounce

The NSE was a one way bet, until the "technical hitch" on Thursday. Even the papers had the quotation marks around the technical hitch. Equity for example had 1 share in demand for every 8 suppplied on Wednesday. On Thursday after the " ", the ratio was the almost the same but opposite. For Equity, this sounds okay given it had just announced very good results, but AK, KCB, EABL and others didn't announce their results on Thursday. 2ndly yesterday was a surprise, because although Equity announced its results on Thursday morning, the 10% rule was lifted yesterday. In any case, my take is the two days rise was aimed at Co-op IPO and investors (as opposed to speculators/traders), should eiether step in slowly or wait for a full week of solid volume rises.

Results announced in the last week:
KCB- up 69% yoy driven by strong F&C and strong jaw effect between costs and income. Flat vs. Q2.
DTK-up but can't locate its results
KQ-down 63% yoy, but a commendable perfomance in respect of growing revenue in the first half despite everything. It must get its customer service and hedging right to recover. Really needs a new CEO.
ARM-up 15% yoy on similar turnover growth. Cash flow a bit stronger after loan.
Equity- up 277% yoy for the 9 months driven by Safcom IPO and Ksh0.2m higher than my forecasted fall from Q2.
HFCK-up 36%, Equity has a 20% stake and is in my view, unlikely to take a bigger chunk of HFCK for the time being.

Elsewhere, EA Cables appointed James Mworia, a young guy from TC as its new CEO (apparently).

NSE shares I am looking to buy

A general comment. The NSE may fall a bit more, but I don't think the trend will last another month. Unless Co-op comes in and inflation stays flat at 27.6% or goes higher. Its therefore time to start looking at what are the good shares in the market:

1. KCB-Its annualised P/E for 2008 is around 15. The bank will start benefiting from its regional growth from 2009 and beyond. The only spoiler (which will impact the sector anyway), would be if the economy turned negative because of inflation thus increasing non performing loans.
2. AK- Fibre optic cable will be with us in 2009 in one shape or form. AK is an established player in the market already and in the first lane to take advantage of the faster, cheaper internet network. If it can't, somebody will buy a stake in a similar vein to ScanGroup.
3. Equity- The share has been good to me and remains my favourite despite the taking a turn since that announcement. Its annualised P/E still looks high but the bank has 3 more years of 60%+ growth to come all at a lower tax point and it would be churlish to ignore the opportunity.
4. DTB- Has some of the KCB ingredients (strong and aggressive regional franchise) though not the same balance sheet or branch network. Its slowly standing out in the mid-tier because its able to source funds in different ways from say NIC which doesn't have the branch network or the international connections.
5. TPS- Having logged out, I might be tempted to get back in should the price go below ksh58 (which would be its lowest for this year). Great hotel business and a bellweather company for its industry.
6. EABL/NMG- These two are back ups in case the NSE confounds my expectations and continues to go downhill beyond 4,000.
7. Industrial- Not touching especially those with a high energy cost component (whether fuel or electricity). Electricity price rises will burn margins.

Kenya Listed Banks: First Half 2008

Update from this and this. I've removed CFC Stnabic because their numbers don't make sense i.e. no restatements as required.

Some stocks are very cheap. Notice KCB's PE is half that of Equity and then think where both will be at the end of 2009...Supply, number and calibre of investors who hold either stocks may have played a role, but fundamentals have also influenced.

Although I normally invest on fundamentals, this article reflects some of the thinking around some of the stuff I've done so far in this 2nd half of 2008. The world of investing is changing...

Classic Dilemna: Diamond Trust or NIC?

Both mid-tier banks with niche markets, but are now gearing up to generate revenue from areas they previously didn’t do. DTB from East Africa coverage, NIC from brokerage.
Both with almost matching P/Es and dividend yields.
Both medium-level performers i.e. neither bullet-train performers like Equity nor duds like BBBK.

Bottom-line: it’ll come down to:

1. First quarter (2008) performances-i.e. survival rate against significant external environment “ishoos”: NIC 31% YoY; DTB 60%
2. My expectations of rest of year: NIC will book significant upside from Safaricom IPO and NSE consequent volatility in stock-trading; DTB will reap from is expansion into EA.
3. My expectations for the duration of the presidential cycle: NIC- I like the online banking venture (yes it’s limited by internet penetration, but think post-fibre optic). Also, possible close association with ICEA. DTB-I like the expansion into Burundi, proceeding TZ (where DTB is majority shareholder of subsidiary); Ug (holds 27%). Both are expanding branch network so as to increase deposits.
   I normally prefer investing the capital in the stock with bigger prospects, but on these two, I may just have to spilt the capital.

Hmmm. Interesting minister we have for National Heritage

Banks Results for 2007

In the context of 2007, every bank should have seen at least 10% growth owing to an economic growth rate of 7%. And that is to stand still. BBK and KCB show the advantages and disadavantages of being huge. Being huge, you can lend big, but then in Kenya you need to lend small in order to generate the volumes that we'll give above average profit growth. The other issue is that it takes a revoluntary leap for you to see the profit growth that 
would make shareholders flock to your shares.  BBK is a worry in this respect. A 24% increase in net interest income from higher lending was wiped by the costs required to get it that growth. Could that be KCB several yrs down the road? It has to grow aggressively outside Kenya.

Apart from Equity, the other stand out banks in the above list are CFC and NIC and DTK. CFC is of course presently the only universal bank in Kenya, but seems to be suffering from because its banking division was actually profitable in 2007 but it made a loss on group basis because of its life business. Both DTK and NIC are building themselves niches and doing so profitably. The  branch expansion to increase customers and geographic reach will mean that they can both continue to 
see profit growth over the coming years.

Investment Strategy- Go Regional

One of my earliest posts was about an investment strategy for a 5 year investor at the NSE. This post updates those themes with one extra caveat, regional expansion.
If Kibz, RO and other politicians can change the habits of a lifetime, Kenya will be an African economic powerhouse by 2011. The upside of this is that the NSE will outdo its 2002-6 performance, as foreigners start chasing the frontier markets in earnest. The downside is that firms are now getting competitive and in every industry, listed companies will feel the heat.
If your chosen firm doesn't have any plans for East Africa to start with, then it'll struggle
to grow beyond being able to handle compe in Kenya. The 2nd important reason is to reduce the Kenyan political risk on your chosen stock which will be there in 2012 (if there are no elections in 2010 which I hope). You need stocks that can effortlessly grow come funny politics or not.
Both TZ and Ug are growing are at roughly similar rate of around 5% per year.
Ug is probably the easiest market to access grew at an estimated of 7% for and has opportunities in construction; banking; large infrastructure projects and the clincher, possible oil wealth.
TZ remains largely untapped and possibly hostile to Kenya but the EAC economic zone will overcome the latter.
Further on we have Rwanda and Burundi. Rwanda is working furiously hard to become an investment haven despite the smallsize of its  market and language barriers, is seen as having huge growth potential. If Kabila can breakaway from his father’s habits, there is not enough space to write about Congo's potential especially in commodities. Ethiopia with the 2nd largest population in Africa and an economy averaging 9% presents opportunities in agriculture; huge hydroelectricity potential; potash deposits and of course historic tourist sites.
In terms of stocks already expanding regionally, EA Cables; NMG; EABL; KCB ; Kenol; TPS and DTB are at the forefront of this trend.

More Q3 results

Athi River recorded 85% growth in PAT, aided by with T/O growing at 55%. Note that ARM is now benefiting from increased cement capacity its new plant. Secondly that it also generates  significant chunk of its revenue from building-related materials rather than cement. Its cash flow has improved immensely from prior yr when it was financing its new Clinker and servicing borrowing. Adding to this momentum is the deal in Kitui for coal and limestone. A good growth 
outside of the banking sector.

BBK saw 12% yoy growth for 9 months of 2007 with income growth being matched by expenses.. Hopefully at some point we'll start seeing the impact of its loan hawking activities on its P&L (an worryingly, on its loan loss provisioning). A nice defensive stock if bought under Ksh75.

NIC (one of my four long-term bets in banking sector), saw 44% growth. int Its income breakdown between interest income andF&C remains a puzzle to me. Compared to its half year results, where its income was primarily derived from NII, the 9 month numbers would almost suggest that it made a loss on interest income. I guess there must a lot of latitude on income claissifcation in Kenya. 18% income growth of was strongly supported by flat expenses. With funds in the bank (I expect the rights to have been massively oversubscribed because of the 2:1 bonus issue) and revenue augmenting moves, NIC is a must buy.

DTK, (my other bet for long-term in the banking sector) saw 67% growth with 71% growth in loans and advances generating 57% interest income growth. DTK was in the market again to raise funds (will just about get full subscription because of compe from NIC) as it looks to expand. Another bank that is shedding its traditional image in its hunt for customers and growth.

Banking Sector Marches On

CFC Stanbic is now a reality. Watch out BBK and Stanchart, these guys will soon be competing for corporate clients with a very portent offering of banking, insurance and investment products.

NIC are in the midst of their right issue-priced at very good Ksh70 with an additional bonus share to come once they are through with the rights issue. NIC are an innovative bank who potentially have a very bright future ahead but need a partner , not necessarily another bank but another financial institution, on whom they can leverage distribution.

DTK are also shortly starting their rights issue again at a discounted Ksh70. This is not as attractive as the NIC and DTB's future lies in two things happening. One, the finance minister doing away with these you stick- to- insurance and you-to-banking kind of divisions so that a bank can
 offer insurance and investment products across the counter. And secondly, their being able to integrate successfully with Jubilee and Habib Bank.
In other news, Equity continue their expansion (how are they doing it?) with opening of branches in Kisumu and likely partnerships as far as Zimbabwe. And as a clincher, have now 
been allowed to take a bite of HFCK heralding the much anticipated Equity-HFCK-Britak
financial institution (possibly buying into some of the smaller brokers?).

And to read any blog you'd think Kenyans ate and slept politics!

Banks H1 -Updated

Update of this post. DTK either has very high quality loans or more plausibly, needs to increase its loan loss provisioning. CFC has the highest proportion of its income from Fees & Commission (perhaps from CFC Financial Services?), and the 2nd highest insider loan proportion after the govt-owned KCB.

Week 36 @ the NSE

NSE went up 200pts in the week driven apparently by peeps who got their refunds and decided to splash out on the rest of the counters including KRe-that was clever move to announce the results just after listing. Some of the counters are now showing signs of the exuberance that was there about this time last yr. Exuberance can be another word for manipulation or good tidings being expected. The following have puzzled and made sense:

NIC-had already gone up by almost 70% from the price on July 25th confirmed plans to do rights followed by a bonus. What I don't understand is why if they are going to be selling the rights shares@Ksh70, peeps are running around trying to get some at Ksh180. Why not just wait post-bonus. Not complaining though...
DTK-in contrast, guys haven't really chased its shares despite it being a better prospect in my humble opinion
EABL-This tends to be a fairly dull share, capital gain-wise but this week has moved up after announcing a bonus issue and a tasty dividend. With the amount shares it trades, watch it go back to its customary 2 pts up 2 pts down post this little excitement
AK-one can appreciate the excitement about its recently acquisitions (Today Online and Open View), one should however also prepare to exit as soon as Telkom announces its strategic partner and or the cabling projects start giving firm dates of arrival on our shores.
KPLC-no comment, except look at preference shares (debt), transmission losses, GoK vote-buying tactics et al. If GoK wants the share to be more tradeable for wananchi, let it offload its equity so two birds in one go because it will remove the political risk attached to KPLC's share performance.

Thursday's Budget & the NSE

As always, Kimunya's presentation was Raila-like, populist but please read the detail. Some of the bits that will likely impact the NSE in the coming year/s are: Govt direct participation in the NSE per paragraph 38. Following its failed OFD for 19% of KenGen and the fiasco that was Mumias (for the shareholders at least), GoK wants to be able to sell its stakes in various NSE listed shares in small blocks as opposed to doing a large block at a go. Sounds good in theory, but in an illiquid market like NSE, this will only be doable if its targeted i.e. the block is partially offered to institutional investors. The issue that is causing concern is where GoK may try to shore up a share price. Opinion here is that the first is ok with safeguards, but the 2nd is a no no. Repayment of NBK's npls owed by parastatals over the next 20 years. No doubt, this will increase its liquidity and allow it to lend more. The question here is the interest repayments. NBK has been accounting for interest on npl in its P&L, in which case any subsequent repayments would not go through the P&L, but this is only if it has done this for all its npls. Another ksh13bn remains to be cleared. GoK also announced that it will be selling more its stake in NBK. Increased recapitalisation requirements for financial institutions over the next 3 years: There are currently several banks that fall under the ksh1bn that will be required. CFC-but they are already in advanced merger talks with Stanbic-for 6 months? DTK-despite doing a rights issue in December, they may need to complete their merger with Habib Bank HFCK-they are in the midst of a rights issue to sort this out NIC- they announced a rights issue on Friday Within the unlisted banking sector, there is quite a few that again will most likely merge or seek help from their shareholders. More importantly, the insurance sector is also being required to recapitalise. Sin taxes were in effect again, but one suspects that the demand inelasticity for these products is such that only a big rise in the duty would dent the profitability of EABL and BAT. Construction-related stocks will benefit from allowances on low cost housing. Finally, happy papa's day to all the fathers out there!

Results Catch-up

KCB: saw 38% rise in Q1 after tax profits helped by strong loan growth (ksh16bn year on year (44%)) which drove 22% rise in interest income and 24% growth in Fees and commissions. Gratingly for those who like to see banks doing their intermediary role, KCB is driving loan growth forward without concomitant rise in loan loss provisions. KCB’s current momentum (it plans to open 10 new branches every year and expand regionally to Sudan, TZ and Ug in that order), explain the recent share spilt.
Equity: A doubling of income (both interest income and fees) led to a massive 226% rise in PAT from prior yr’s Q1 and led to questions about sustainability. The bank has now acquired a ksh6.9bn loan to help further expansion as it looks to enter the mortgage sector.
NBK: Saw Q1 PAT fall by ksh7m to ksh152m on falling net income. NBK has finally had ksh20bn of its Ksh33bn NPLs written-off by GoK. Though there will be no immediate impact, earnings will improve in the long-term as a cleaner balance sheet allows it to lend more. This will and is atracting speculators in the short-term.
KQ’s 15% drop in PAT for FY was a surprise when it shouldn't have been i.e. CEO Titus had flagged this earlier in the yr. The surprise was in the reasons for the fall (weaker dollar and fuel costs). The dollar is weaker compared to prior yr, but was only below the average rate of 72 for around 2 months of KQ's financial year. Fuel costs can be hedged to a large extent.
DTK: After tax profits doubled from year earlier with strong income on a growing loan book supported by only a slight increase in expenses . DTK is issuing a rights issue for its TZ business.
Its AKD stable mate, Jubilee also announced FY which grew by 51% on growth across all income streams. For its shareholders, there is a final dividend of ksh3.25 and 1 for 4 shares held bonus share issue to look forward to.
Finally, NIC Bank's strategy of niching the market seems to have paid-off in FY06 with PAT growing by 59%. NIC continues to innovate and its contrary strategy means it will make money at times when others may not. As with other growing medium-sized banks, NIC will need to recapitalise at some pt (possibly via a long-term loan or rights issue) as affirmed by Fitch ratings agency.

DTK profits up on 2005, share price down?

Diamond Trust announced improved retained profits for 2006 on the back of a growing balance sheet. PBT was up 65% and from my pt of view the most pleasing aspect of this is that it was mainly from higher interest income on lending while NPA charge fell. Going fwd, DTK plans to open more branches and I believe a merger with Habib Bank is already in the cards if not effected already. This will make it the 9th largest bank-based on Bankele's latest banking review with a substantial market share within the Asian retail and business community. DTK is also expanding its reach to the rest of EA region.
Now to the share price, this fell yesterday when the results were announced to the market as have done all other shares-except funnily enough the loss-making Sameer Africa which rallied after the initial shock fall. There are two theories why this is happening. Speculators who piled into any share without checking the fundamentals on the "this shareprice will do well because of ...fill free to fill-in" train. The prices then went off the scale with silly P/E ratios being generated. Once the results came in, the speculators discovered they had been suckered and are now selling off. The second theory is simply guys profit-taking and cashing out for 2007 while they wait for the election year to run its course.

More stock picks for 2007

EA Cables: since the takeover by the G-29, the company has taken over a TZ company to given an additional leg in its ambitions to be an east African entity again; saw dizzy price heights before stock spilt and continues to return credibly good financials. All these factors will continue over the next few years because the common denominator-majority ownership by TransCentury will want to stay for several few more years.The cons is probably the same, the G-29 involvement means that should they want to exit or become stretched by involvement in other projects the company will suffer.
NMG and DTK:both majority owned by the progressive Aga Khan. NMG will become the dominant media house in East Africa over the next few years. As with the recent bonus share issue for Diamond Trust, I believe NMG will have a share spilt at some point this year to increase the liquidity of its shares and as a capital-raising exercise for future expansions. For NMG the only issues will be barriers to its expansion namely political interference as happened in ’06 when several of its staff and journalists were denied workings permits by TZ and had to leave. DTK will be expanding operations to the region.
ICDC:formed in 1967, ICDI has acted as an investor in various businesses. It has some features of a private equity fund and those of a mutual fund. The company is currently benefiting from NSE resurgence but also owns various profitable unlisted companies that could be listed in the NSE over the coming years.
KCB:Terry Davidson’s turn-round plans are well on target. The bank is now competitive in the Kenyan market, should start operating profitably in TZ and is expanding into South Sudan. I expect further government divesture in the next few years as well a share spilt. The downside is that the bank still has a significant NPL problem of the political variety i.e. politicians and their business who owe it money. This will require political will not yet seen in the current government.
Equity: the CEO is one most visionary and able mangers in Kenya’s private sector today. He is also one of the bank’s largest shareholders. The next 18 months should see the bank’s share price rocket reflecting its performance. Post this, employees will be allowed to offload their shares and hence may see lower share price. The chinks in its armour are probably to do with its fast growth i.e. non performing loans. 2ndly its success in spreading banking to village has not gone unnoticed by its bigger rivals-Barclays has now done an about-turn and will be re-opening some of the branches it closed in the late 90s. Thus there will be increased competition for Equity.
CMC:as the middle class base in Kenya expands more and more will be buying new cars rather mitumbas. And CMC are in a prime position to benefit from this.
For stable dividend policy and share growth, one should also look-out for EABL, Standard Chartered. For speculative purposes try Sameer and Scangroup.
PS: Since my post on 22nd on NSE opportunities for 2007, Barclays has since risen by 30% as investors recognise the opportunity its price presented. Those who moved in mid to late Dec will probably see the price double in the next 12-15 months.