Monthly Archives: June 2007

Kenya Re IPO

Better late than never, along comes the Kenya Re IPO shuffled to the top of the privatization deck . The ace card is still Safaricom, while Kenya Pipeline should be a joker in waiting.

It’s nice to venture back into the IPO game (after passing on the last two – Access Kenya, Eveready) and I should have my Kshs 19,000 ($288) ready to go after getting the prospectus(Minimum is 2,000 shares for individuals at 9.50 per share).

The IPO delay has not been explained, but the former managing director and financial controller of Kenya Re did not help matters by getting indicted for corruption related offenses just as the process was underway nor did a late attempt to absorb the run- down Kenya National Assurance (KNAC 2001) into Kenya Re.

Despite the 2,000 share minimum for individuals you can expect it to be over-subscribed going by the numbers who applied for Eveready and the amounts individuals applied for with Kengen. While recent IPO’s (Access Kenya, Eveready) have not performed as well as earlier ones (Kengen, Scangroup, that could all change now .

Foreign and institutional investors got burnt in Kengen (the first IPO in years) after they applied for millions of dollars worth of shares only to end up with $1,000 each. Subsequent IPO’s have defined specific allocation criteria – for individuals, employees, corporate investors, others and now even insurance companies. Corporates/institutions have also been given another incentive in that they unfairly won’t have to pay until they know how many Kenya Re shares have been allocated to them.

The market is still down , as I and am sure many others have traded less this year. Most activity had revolved around new share issues and recently split shares and the reduced trading has meant less income for the brokers.
Some say it is because of the falling prices or shares are still too expensive/overvalued, others says it is because of stockbroker misdeeds.

Dividend by EFT
In another move to curtail rising shareholder costs Scangroup has twice tried to entice investors to get their IPO refunds and now dividends by signing up direct bank transfers (EFT’s) to get money straight into their accounts. EFT’s offer faster payments, by pass risky cheques (can get lost in post office and investors have take about two weeks to get funds), but while EFT’s are free are most bank’s it’s also a sly way of passing on the cost of dealing with shareholders to shareholders themselves.

The most expensive round of beer you’ll ever buy

Archer has regaled us with some great bar tales of late. So here’s a nairumor to caution/silence all those big talkers and big spenders who take one tusker and suddenly become as generous as a politician tuning a stewardess by buying rounds of drinks and sharing their million shilling investment plans and income secrets.

It is said that someone with ulterior motives will cozy up to you to listen, and maybe get a free drink for listening. Usually such a person would be a sly thief eyeing one of the three fat nokia’s you’ve laid out on the table. Now there’s another fox that’ll befriend you and ask for your business card. That person could be tax agent who’ll Google (check up on) your records at the Kenya revenue Authority the next day to see how your big bar talk measures against the small income tax returns you filed at the KRA.

Convenient banking

making trades offs as convenient banking is not the same thing as cheap banking

Equity has been the fastest growing bank in the country over the last few years. It has won customers, now 1+ million, and has sent bigger banks banks back to the drawing board to woo & retain their customers.

However, while banking with them may not be cheap for a business, it is convenient, and offers finance and flexibility to an upcoming business. People coming from abroad complain about the cost of making mobile calls here – saying they are expensive. But compared to what? A taxi driver will make a 30 shilling mobile phone call to secure a 2,000 shilling job as his phone is his office.

Same with Equity their low entry minimums suit individuals and start ups. And while some of their charges are rather hefty (3% for ENC and 10% of amount for a temporary overdrafts), as a businesswoman told me today, their quick decision making and the fact that they are the only bank that can offer these facilities to her make them the optimal bank for now. Getting cheques cleared, guarantees, and payments to suppliers matter more to her now, than the cost of these services, and help her build a credit record for the future. Once she is more established,. she will look question the transaction costs and have other banks now wooing her business.

Other banking briefs

According to Africa confidential, Kenya is favored to be the new host country for the African development bank, with Botswana second in the ranking. However Ivory Coast is back in the running following the signing of a peace accord. More on homeless banks.

The CBR Bank rate was lowered from 10 to 8.5%

The Government has commissioned a study to look into the low uptake of youth enterprise fund and agriculture development funds. They are blaming banks for asking borrowers for collateral and 3 month bank statements – terms which were not spelt out in the funds. from an offline story from the East Africa:

CFC Stanbic bank pre –merger comparisons

Diamond Trust acquired a majority shareholding in Diamond Trust in the just concluded rights issue.

Equity Bank
– Looking to enter the money transfer business
– To buy Housing Finance bank – what do the bloggers say?

Family bank got admitted to the CBK bank clearing house earlier in June, just a few weeks after being licensed. Family took advantage and pressed for an exemption (on a two year waiting period), similar to that granted to Equity Bank when it also became a bank. from an offline story from the standard

National Bank is seeking to commit Ketan Somaia to civil jail over a 17 million debt

Pyramids schemes continue to
thrive despite numerous warnings. However, some schemes feeling a cash pinch are passing the blame to the central bank who are limiting the interest they can pay depositors to 10% p.a. – before they were paying over 10% per month.

Kutwa Tuesday – June 26

Uchumi revealed: Shedding some light on the Uchumi bond proposal, the receiver manager has stated that the problems that shut down Uchumi had more to do with management style than the market conditions. The newspaper says that the 650 million to be raised, 280 million will go to pay suppliers & creditors, 23 million interest on (bank) loans, 52m to pay terminal benefits of staff, 200m working capital as the company plans to open 3 new branches in Mombasa, Nairobi, and Kisumu.

The article adds that all suppliers have been paid for deliveries made in the last 12 months i.e. the company is profitable. The company had sales of Kshs. 1.3 billion in the first quarter of the year and had 2.8 million shoppers visit their stores. Sarit is their best store with April revenue of 90 million followed by Ngong Rd hyper with 68m (last was Eldoret with 8m) from an offline story in the financial standard.

Note: even if they re-list, won’t they be in the same boat as NBK and be unable to pay dividends for several years?

Rights Issue: Olympia’s rights issue was formally announced today with an offer for shareholders to buy 3 shares for each held.

Newspapers: New newspaper from the KISS team – called the Nairobi Star and billing itself as Kenya’s first full-color daily newspaper launches next week
– But what happened to the Kenya Times website frozen on June 8?

Trade not aid: According to an Oxfam report subsidies are responsible for poverty among African cotton farmers.

Political worm: Raila Odinga gets unfairly blamed for a lot of things, but he is not responsible for a malicious computer virus bearing his name that has caused IT admin’s some headaches this month

uh oh: Why is Obama’s campaign getting stuck?

uh oh 2: Sad to read that former track darling Marion Jones is
almost broke. Even though she wasn’t a big spender like Tyson or Jackson, legal bills fending off drug allegations have taken their toll on her finances.

Uh oh 3 & 4 : Zimbabwe to do a takeover of foreign businesses as Uganda parliamentarians have given Barclays, Sheraton, Kakira Sugar, and Uganda Telecom one year to float part of their share on the Uganda stock exchange.

War what is it good for? Is there a difference between Somalia, Darfur and Palestine?

CFC Stanbic Bank

CFC Stanbic Bank is the official name of the proposed new entity created by the merger of the CFC and Stanbic banks’ pending approval from among others shareholders, Capital Markets Authority, Central Bank of Kenya (Minister of Finance).

The merger makes sense in that the 9th and 10th largest banks (both around $350m in assets) can merge to become the 4th largest bank in the country (after Barclays, KCB, Stanchart)

Sticking points are that the deal is structured to include the creation of new shares (113 million) that will be transferred to Stanbic in addition to buying a majority of Gambit shares (currently the largest shareholder in CFC). Gambit will still remain as the 4th largest shareholder in the bank after the merger.

To sweeten the deal, CFC Stanbic Bank will remain listed on the NSE and Stanbic Kenya will be a wholly owned subsidiary. Also, the statement points out that their branch networks complement each other, so perhaps only Mombasa (where they, and most banks, have branches on Nkrumah street) and branches in Uchumi stores may need a workout.

When the story first broke last year (despite having a caution), it sent CFC’s share price up 10X (to about 900 shillings) and this notice also advises shareholders to exercise caution in dealing their CFC shares until further announcements are made. The announcement was released on Friday (but not yet up on NSE site), and published in the newspapers on Saturday to perhaps dampen the speculative mood/euphoria and allow careful analysis to set in before Monday.

(I don’t have CFC shares but they have been very good stockbrokers to me. Unrelated to this is, I have Stanbic Uganda shares)

National Bank AGM

National Bank of Kenya’s 38th annual general meeting was held on Friday June 22 2007 at KICC. The bank has been profitable for the last few years but has not been able to pay dividends to long suffering shareholders owing to an accumulated deficit from past losses.

some highlights

The debt and (no) dividend has dominated any discussion about NBK and following the government settlement of their debt via Kshs 20.3 billion in bonds, spread out over 15 years, there was some optimism that the shareholders would finally get their due. Their auditors (Deloitte) have raised this matter of emphasis for several years as NBK has continued to claim interest on these government initiated loans with the understanding that it was sovereign debt to be settled one day (which has now happened).

However in a long statement by the chairman (Mr. Muhindi), he mentioned that they were still not in a position to pay dividends and shareholders should not dwell on the matter. He mentioned that NBK’s share price had appreciated by over 30 shillings in the past year, and to any share trader, that was more than any Kenyan company paid in dividends last year.

Unfortunately the dividend issue came up and even the first three shareholders all asked about it among the many questions they posed. The Chairman mentioned that the banking act, companies act, and NBK articles all forbade payment as long as there was a deficit in the revenue account – and that the government bond would not wipe out the deficit, only profits can do that which may not take another four years

bad debts NBK collected 503 million shillings in bad debts which was up from 403m the year before. He said they have still not scratched the surface as many of their cases were still in court.

privatization of NBK was mentioned in the budget last week; however the board does not know more than what was in the media. I.e. that GoK and NSSF would sell their shares either to the public or a strategic partner. On merger possibilities the board would consider the right merger opportunity if it came up (but not for share capital reasons)

other shareholder Q’s

corporate social responsibility NBK assisted in the famine relief program last year, set up a ward at Kenyatta hospital, assisted schools for orphans in Mombasa and is building a kitchen for Mbagathi hospital.

directors why should directors get allowance when we have no divided and some directors don’t even attend meetings?

who got paid? a small amount of dividend (174,000 shillings) was paid in 2006 and shareholders wanted to know to who! Management stated that the correct term should be dividend collected – as some shareholders still have not claimed their dividends (last paid in 1997 and amount totaling 271 million)

what is statutory reserve it is a new rule for all banks in Kenya that even for performing portfolio, 3% must be set aside to provide for any eventual bad debts.

path to dividends: Responding to the umpteenth question on dividends, the MD (Mr. Marambii) stated that there were two ways to get NBK shareholders back on the path to dividends (i) one was to accumulate profits to pay off the deficit – which could take several years or (ii) was rot approve a reduction in the banks capital which would wipe out the deficit. Going forward any profits thereafter could be applied to dividends. He said that shareholders had rejected such a move a few years before but the board was leaning towards bring the option back to the table

goodies NBK tote bag only and lunch. Some shareholders not happy said that the company could have also given a t-shirt while another suggested that they could have saved the money spent on the bags, cold lunch, and printing the annual reports (mgmt: says they cost 60/= each) and paid dividend instead. I did not stick around for lunch which looked like it was going to be a chaotic buffet