Monthly Archives: February 2013

Shares Portfolio February 2013

Comparing the portfolio to three months and about five years back which was just before the last Kenyan general election.
The Stable
Barclays ↑
Bralirwa (Rwanda) ↑
Diamond Trust Bank ↑
East African Breweries (EABL) ↑
Equity Bank ↑
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↓
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↑
Unga ↑

What’s changed?
In: None
Out: Kenya Airways
Increase: EABL, Equity, KCB
Decrease: None
Dividends: None yet 
Best performer: Bralirwa’s (up 31% in 3 months) then Stanbic (UG) and KCB
Worst Performer: Kenol down 5% 
Unexpected gains/losses: Sold Kenya Airways, which despite troubles at rivals [Jetlink (suspended flights in November) and Fly540/FastJet (shareholder wrangles)], still has major clouds ahead with uncertainties over the delayed Boeing 787, hedging, staff, and serving routes in Europe and Asia. 
Performance Summary: The NSE 20 share index is up 10% in the last three months, while this portfolio is up 11%. But, at 4,500, the NSE 20 Index is below what it was in November 2007 (~5,100) before the election. 
Other Developments: 
Mining Sector: A media session took place this week with a goal to demystify the mining sector. The announcement in 2012 that oil had been found in Kenya raised some unrealistic expectations about sudden wealth that will be available to Kenyan communities including a recent notice by the Minister for Environment requiring that mining ventures should have 35% local ownership and another this week by the Kenya Revenue Authority on payment of withholding tax on the transfer of oil and mining assets (10% from payments to locals, and 20% for foreigners).
Kwale Mineral Sands
Discoveries this week at the session included: 
  
(1) A Kenyan investor can buy shares in the Kwale Mineral Sands project as Base Resources (who are developing it and who will build a local processing plant) are listed at the Australian and London (AIM) Exchanges.  
(2) Mining companies are always on the lookout for local partners & investors who are sophisticated and wealthy enough to understand the risks of mining.
(3) The sector comprises prospectors, explorers, and large mining companies each of who invest increasing amounts of capital from $50 000 at the prospecting stage to $1 million at the exploration stage to over $100 million at the mining stage and all assume varying degrees of capital, risk, and longer payback periods. Typical mining investors are interested in bullish markets, and stable countries with established policies on mining while conflicts over land use vs. mining rights remain perennial challenges (also affected this particular project).

Also see Can Kenya Avoid the Resource Curse?
GEMS:  The Nairobi Securities Exchange launched a Growth Enterprise Market Segment (GEMS) a few weeks ago to promote the listing of small and medium enterprises. The  basic criteria for a company to qualify include being in operation for at least one year, have audited accounts of at least one year (but no profit requirement),  have sound management and board consisting of at least 5 directors, commit to have at least 25 (non-employee) shareholders own at least 15% of the shares within 3 months of listing, and appoint an NSE-nominated advisor to help them with governance. 
At the launch, the NSE Chairman noted that GEMS provides an opportunity for firms participating in Kenya’s natural resources and mining sector to raise capital and also comply with the 35% local equity component. 
Online Commerce:  In the last week, South African-based Private Property Holdings and Kenyan-based Cheki Africa Media merged their businesses to form One Africa Media, possibly Africa’s largest classifieds portal‏, even as Naspers shut down Mocality in Kenya and Nigeria.

Lamu Moment

Change is coming to Lamu slowly. Long-term  plans for this part of the Kenya coast call for a new seaport, oil pipeline and highway all to centre on this small set of islands – and link them to Isiolo, Ethiopia, South Sudan, and further in Africa.
For now, it’s a prized holiday destination where  you don’t get hassled on the beach (as happens every 10 metres in Mombasa), you have to take a boat to get around to most places, (quite an expensive proposal for locals), Yamaha engines are the Toyota’s of the water, and Betty Tett wants to be MP.
What will Lamu, Manda, Shela and other places in the area look like in 10 years?

DSTV Rewards

and peculiar Kenyans
This week, Multichoice Kenya launched a promotion called #DSTVrewards in which their active subscribers are eligible to win Kshs. 600,000 (~$7,000) in prizes per week for the next few months. In addition, other subscribers can win 10% discounts for paying on time or win a year’s subscription by spotting a box while watching TV (and sensing an SMS to the company)
 The competition’s launch showed some aspects of peculiar Kenyans including:
  • The love of free stuff (not an exclusively Kenyan habit, but freebies are necessities in many promotions)
  • How people operate under any name, and feel ok – as many services are pay as you go – and with DSTV, loyalty programs, subscriptions, utilities people are okay with paying and getting service, regardless of whose name in registered (landlords/relatives/previous occupants/no names) at the service providers (some of who are also  not strict about account names as long as payments keep coming in). This may change soon with the government recently undertaking a mandatory registration of all phone lines after and also other benefits that accrue to properly registered customers – and with the rewards program, the first drawn name, who was called in the presence of officials from the Betting & License Control Board (BCLB) was not the registered owner – and was thus rejected. 
    • DSTV Rewards
  • A theory of @whiteafrican was again proved as the first confirmed winner of the prize (Dr. Chris Mugambi) showed a lot of skepticism, not excitement, when told that he had won  $7,000 merely for confirming his DSTV account details over the phone. This comes  the many local stories of hoaxes,  other people are told they’ve won prizes – only to be duped of money, radio stations that make prank calls to ‘shame cheating spouses etc. As a result, some people only accept calls from people who they have in their phonebook. 
Other takeaways from the launch:
  • It’s easier for Kenyans to get ‘digital TV’ by buying a Kshs 3,000 (~$35) decoder to use with an analog TV (which 99% of Kenyans already have) than buying a new ‘digital TV’ screen that costs about a Kshs 70,000 (~$823)
  • Via @NjeriWangari @DSTV_Kenya has bought out #FilmStudios as part of a focus to generate local content and producers can take show ideas to them for discussions about developments.
  • Separately, an independent financial report,  showed that Multichoice Kenya has 100,000 subscribers representing  6% of DSTV’s Africa’s audience.


@Subway to Kenya

Now that the novelty of having KFC in Kenya has somewhat faded, it’s time to welcome another global restaurant giant. This time it’s Subway who have sub-Saharan African operations in South Africa, Tanzania, and Zambia, and are now seeking new restaurant locations in the downtown Nairobi (CBD),  Westlands, Kilimani, Gigiri and Upper Hill.

Somewhat related, December also saw the opening of a Naked Pizza restaurant in Westlands.