Category Archives: Nairobi Stock Exchange

Nairobi Stockbrokers Take a Bath

Last week saw the release of financial results of SBG Securities (formerly CFC Stanbic Financial Services/CSFS). They are the first stockbroker (they are actually licensed as an Investment Bank) to release their 2016 results and this was done along with the release of the results of Stanbic Bank and their common parent – Stanbic Holdings.

At SBG Securities, revenue dropped from Kshs 599 to Kshs 294 million. This was mainly due to stockbrokerage commissions which reduced from Kshs 399 to Kshs 223 million. Expenses were largely unchanged except for salaries that went down from Kshs 183 to 142 million.

SBG’s pre-tax profit for the year was Kshs 3 million, which was substantially down from Kshs 277 million in 2015. Their balance sheet also reduced down from Kshs 1 billion to 648 million. SBG is the number 3 stockbroker in Kenya with 13.8% share, and in
2015, SBG was second in brokerage commission behind Kestrel Capital.

In a notice sent to clients, they reported that turnover at the Nairobi Securities Exchange for the year was Kshs 294 billion compared to Kshs 419 billion in 2015. Also, that market weakness is expected to continue in 2017. But they added:

A new year always starts on a high with each of us drafting our investment/ financial resolutions. As the year progresses, so do our plans and at times they don’t necessarily materialize. 2017 can be the year that you fulfill your investment resolutions by investing in shares listed on the Nairobi Securities Exchange. Whilst the market has hit an 8-year low, we believe this is the time to invest.

Snooze and Lose Your Investments: Part II

Centum Investments, which recently announced a record profit, and the end of a seven-year deliberate dividend drought, has been running ads in the newspapers and online, asking shareholders to register their names & details via SMS to ensure that they get their payments on time.

At the same time, Centum has also published a list (PDF), on its website, of shareholders who have not claimed their dividends. The list has about 9,000 names, and that’s a shocking stat, considering that Centum  has about 37,000 shareholders.

No shareholder likes to lose out on a dividend or an investment. And regular shareholders who attend AGM’s have also been aware about resolutions at companies to comply with a legal requirement to  surrender unclaimed assets, including dividends, to the government.

Almost all large public companies, except those which listed recently, list & highlight their liability from unclaimed dividends (owed to shareholders) for many years in their annual reports. But if 25% of Centum shareholders, have not claimed their dividends, totaling Kshs 78 million after almost 8 years, it raises many questions about why this situation exists. But one reason could be that shareholders have been unable to receive their dividends because some companies and their registrars have made it very difficult for shareholders to prove, claim and receive their rightful dividends. lost shareholders

  • $1 = Kshs 100
  •  A  registrar is an institution,  responsible for keeping records of shareholders..and  when an issuer needs to make dividend payment to shareholders, the firm refers to the list of registered owners maintained by the registrar.
  • Centum ads say the registration is free, but normal SMS costs seem to apply.

NSE Goes Android

The Nairobi Stock Exchange now has a free Android app. Developed by Verviant, it is rather basic (download page), but show’s the the equity day’s prices changes, and summary of some announcements. Still, it’s a good start, and should be a work in process, and maybe investors will be able to track their portfolio’s (still empty) and drill down to read more comprehensive announcements, and bond prices too.

The Exchange probably needs to address the issue of large PDf statement that companies fax in their announcements and which the NSE scans to their site – and replace these with some basic documents that they can upload to the main and mobile site.

Another NSE geared app is the Rich app (from the Nokia Ovi Store), that is however designed for the Nokia E-7.

Rules for Kenya Internet Trading

Continuing with the pace of more regulations to strengthen the securities industry in Kenya, the capital markets authority (CMA) has availed at their website even more draft regulations for public discussion that cover internet trading, disciplinary actions, takeovers and licensing. In addition to those rules for public offers they have;

Internet trading
– Kenyan organizations or those which target Kenyan investors need CMA approval
– Source of platforms: they may own, gets from eth exchange (NSE) or use other platforms if CMA approves.
– Those who already have should re-apply – licenses are renewed annually, and are canceled automatically if one stops being stockbroker, network or exchange
– All platforms should Ensure confidentiality, safety of data (no manipulation, virus etc), back up plan, maintain audit trials Encryption and firewalls, Prevent duplication of orders
– Stockbrokers can sponsor chat rooms
– Traders to Report monthly on number of users, transaction averages, and system downtime

Disciplinary Processes
– Proposes creation of disciplinary committee that follows civil law e.g. sharing of evidence, call witnesses, cross-examination
– Committee can warn or censure firms or persons or can suspend or revoke licenses

Take-overs (intended to sort out carbacid-type deals)
– Board of company being targeted for take over must hire an independent financial adviser
– Offeror to make public announcement, if there’s unusual movement in target company share price
– No withdrawal of offers unless the CMA rejects it; also the target company has 3 weeks to decide
– If takeover fails, have to wait at least 12 months before making anther attempt – specifies format of takeover documents and reply documents to be filed with the authorities

Licensing (for securities exchanges, stockbrokers, investment advisors)
– Stockbrokers (share cap 50 million or~$670,000) to disclose their information technology, and comply with ration for overdrafts, borrowings
– Agents can only work with one stockbroker, and may not handle client funds
– Dealers (share cap 20 million or $267,000) to disclose their information technology, and comply with ratios for overdrafts, borrowings and investment portfolio liquidity
– Investment advisers (share cap 2.5 million or ~$33,000) their portfolio may not exceed Kshs 10 million ($133,000) otherwise may have to become fund manager to handle larger business
– Fund managers (share cap 10 million) and Investment banks (share cap 250 million) must also disclose their information technology, and comply with ration for overdrafts, borrowings

send comments to ceoffice@cma.or.ke

Salute to Kenyan Stockbrokers Part I

Salute to Kenyan stockbrokers, investment banks and fund managers, and the capital markets authority (CMA) for their moves to improve transparency at the NSE of late.

When the new rules were announced early this year, few doubted that licensees (especially stockbrokers would comply, but the early signs are good.
One of the milestones was for the publication of financial statements by Collective Investment Schemes, Stockbrokers, Dealers, Fund Managers and Investment Banks twice a year; and this they did, many baring their losses, some with dubious figures or cosmetic summations, and some omitted profit & loss, but which their auditors will hopefully be able to reconcile at the end of the year.

The compliance was notable in that the intermediaries were able to publish their June 2009 summarized financial accounts,

Investment Banks: 100% (missing was Juanco (now Equity IB?), while FCB Capital was only licensed in June 09)
– Stock Brokers: 100% (missing was Discount (collapsed), Bob matthew (is now KingdomSecurities), while African Alliance is now an investment bank)
– Authorized Security Depositories: 100% (all 12 are commercial banks)
– Collective Investment Schemes: 100% (all are fund managers)
– Fund Managers: 94% (missing was Aueros, while African Alliance reported as an investment bank, and amazingly CIC who were licensed in June 09 already complied)
– Investment advisories 10% they are not required by the law to report, but Dry Associates and Tsavo Securities did

The results were harsh (more on that later) as the downturn at the Nairobi Stock Exchange has had a shocking effect on these companies. But they have recognized that and started taking measure in the form of mergers, re-capitalization staff reductions. When the NSE improves, they will reap the dividends. The signs are good for frontier markets and African markets, but the Kenyan political scene is still a cause for concern for the recover of the NSE and its brokers.