Monthly Archives: February 2009

Nairobi Stock Exchange Fiddles

While investors burn or run

Fresh off the appointment of a new chairman of the Capital Markets Authority, the owners of the Nairobi Stock Exchange welcomed him with another pledge to:

-Cap broker ownership of the stock exchange (NSE) at 40%
– Reinforce compliance and supervision through implementation of a risk based supervisory approach yada yada yada…..
– Deal with the findings of the PWC Forensic Report on Nyaga Stockbrokers once the report is received from the CMA i.e. they officially haven’t seen it!

So they throw the ball back to the Government (to fast track the demutualization process – and what this entails) and the CMA (new Chairman to act on the report) while investors rush back and forth like headless chicken changing brokers in search of the one honest broker left in Nairobi, while also yearning to return to the good old days when share certificates were kept in bank vaults or under mattresses.

Crunch time for supermarket

Over the weekend, the Receiver/Manager team of Uchumi Supermarkets (under receivership) published their six-month accounts for the ½ year to December 2008

– P&L: Sales Kshs. 4.43 billion ($55 million – up 30%), gross profit 845 million (up 20%), operating expenses 676m (up 24%), financial 99m (unchanged), pre tax profit 69 million (up 10% from 63m in December 07)
– Balance sheet: fixed asset 706 million (down 7%), current assets 1,123 million (up 20%), current liabilities 1,742 million (up 57%), net current assets (-619 million), total assets 87 million (down 85% from 589m in December 07).
Liabilities: capital 900 million, reserves -1,835 million, loans 1,021 million (down 36%), total liabilities 86 million

The attached notes state that cash & equivalents were 130 million, debenture holders were paid 23m, and principal banks have received 346m to date (including 16m in the last 6 months).

However, despite increased sales, basket size, customer numbers and product ranges, the statement notes the urgent need to address the technical solvency challenges in the balance sheet through
– restructuring of some secured obligations (bank loans)
– increased equity from shareholders,
– or failure to that, (imminent) invitation to third parties (search for a strategic investor is ongoing ).

The ultimate objective of Uchumi receivership plan (URP) is re-listing at the Nairobi Stock Exchange (NSE)

Property Expo

The Property & Home Living Expo 2009 was held at Sarit Center this weekend. It was rather subdued (fewer banks and exhibitors) compared to the last homes expo held in October 2008. The only banks in attendance were perennial mortgage lenders Housing Finance and (KCB) – Savings & Loan

Most of the exhibitors were property agents including:
– Knight Frank Vipingo Ridge golf villa for Kshs. 19 million, rents at Riverside Park and the (under-construction) Sameer business park
– Villa Care
– Regent (also the Hacienda eco-city Africa’s first eco-city, 2,3,4 flats & bungalows in Mwakirunge – north coast and (under construction) Green House a huge shop /office complex next to Adams Arcade)
– Others were Sedco and Vidmerck

Other exhibitors included a Dubai property company, the Kenya Power & Lighting Company (KPLC) who now have a stima loan for new customers to get loans through Equity Bank to pay for electricity installation/connection charges, Climacento green tech (info@climacento.co.ke) who advertise 50% savings on electricity bill through their solar water heater and Mekan Mattress experts (found at Nakumatt)


Barclays and the NIC-ex

A few days after Equity led with their 2008 results next comes Barclays Bank Kenya and NIC Bank.

Barclays Kenya have shrugged off a difficult year to report a slight growth in profits while also admitting a slowdown in lending and shift in plans to consolidate after an expansion period that saw the bank go on an expansion splurge in the last two years. Barclays Kenya 2008 profits (PDF)
– Growth of in assets of 3% every quarter of 2008, except Q4 which had a reduction of 2% to end the year. Overall asset growth in 2008 was 7%, while in 2007 it had been was 34%. Assets at December 31 were Kshs. 168.8 billion ($2.1 billion) compared to 172.3 billion at September 2008
– Deposits grew by 12%, 5%, 3% in first three quarters, followed by a decline 5% in Q4 – and overall up 16% for the year – same as in 2007
– Loans were up 3% from 2007
– Income up 25% compared to 24% in 2007
– Expenses up 33% compare to 37% in 2006
– NPA up 22%
– Despite modest growth, edged past Equity as most the capitalized bank

NIC was spun off from Barclays as an asset finance specialist, a business it still dominates while competing against Barclays itself now. The Bank is still in expansion mode with a rebranding under the 1 bank banner as a one stop shop for all their customers business needs. NIC Bank 2008 profits (PDF)

– In 2008, growth in assets was 36%, including 18% in Q1 (while the country was fighting?) and 8% in q4
– Deposits were 42% up from a year ago, again with 17% in Q1 and 10% in Q4
– Loans were up 35% in 2008, with 9% in Q2 and 14% increase in Q3, followed by just 2% in Q4 the lowest (went big on Q3 and decided to slow down in Q4?). NPA’s still just 4% of loans
– Despite re-branding, income was up 33% with expenses up 25% in 2008
– Profit was up 41% in 2008, compared to 55% in 2007.

KCB overtook the overtook Barclays as the number one bank, a position it should hold, despite the hit it will take from the link with Triton Oil , the collapsed, scandal ridden oil company. Results should be out in a few days.

Conflicting signals – crunch or not?

KCB’s housing subsidiary Savings & Loan (S&L) extended financing to real estate developers this week, increasing lending limits to Kshs. 250 million ($3.12 million) and willingness to finance of 85% of the construction costs of property developments. Some already wonder if they are contributing to a real estate bubble in Kenya.

Meanwhile there was an offline story in the Standard this week where the MD of listed paint maker, Crown Berger, lamented that banks are behaving strangely, reluctant to lend money, and he was now looking to launch a bond to raise working capital funds for the firm.

Kenya Infrastructure Bond

The government of Kenya infrastructure bond closes on Wednesday and looks to be a successful fully subscribed offer that will raise Kshs. 18.5 billion (~$231 million).

It will have proved irresistible to funds and institutional investors who have been looking for investment outlets as the Nairobi Stock Exchange slump persists, and the sure 12.5% annual return from the Government of Kenya over the next 12 years is a sure bet. The 12.5% interest payments will be paid semi annually with principal repaid in 2015, 2017 and 2021. Bonds from Mabati and Barclays were fully subscribed in 2008

Through the minimum investment is just Kshs. 100,000 (~$1,250) it looks like there’s little interest from retail investors, with many smarting from the free-falling NSE and more concerned with protecting their existing investments (read these great tips) from rogue stockbrokers to sign up for bond which, the fire-fighting Capital Markets Authority (CMA) has not gotten round to providing much investor education. The short window (about 3 weeks from Jan 28 to Feb. 18) may also not have favored retail investors.

The success of the bond which is earmarked for road, geothermal and water projects comes despite some reservations (little infrastructure spending identified, limited oversight, may affect Kenya’s credit rating). The bond was first set out in the 2008 budget by the Minister of Finance.

Read more bond perspectives from the Kenya Capital Investment Group blog

Opportunities

Start your own collection agency from Collection Africa

– Join embattled Suntra investment bank as a manager – investment banking & fund management or manager – stockbroking.