Category Archives: NSE investor awareness

Coop Bank 2017 AGM

Cooperative Bank (Coop Bank) shareholders had their 2017 AGM in Nairobi where the directors proposed a Kshs 0.8 per share dividend as well as a bonus share for every five held.

At the AGM, their CEO, G. Muriuki, spoke of continuing the turnaround at the bank which had a Kshs 2.3 billion loss in 2001 when they had 100,000 customers – and on through 2016 when they had Kshs 353 billion of assets, Kshs 18 billion profits, 149 branches, and  6.2 million customers. The cooperative sector remains the heart and identity of the bank, and they will continue to provide services to the sector.  The cooperative movement also forms the anchor shareholding of Coop Bank with a 65% stake.

Most amazing, he said, was the digital transformation at the bank. Some years back, McKinsey had identified 60 services done at their branch that could be decentralized – and now, only 15% of transactions are done at the branch – with customers doing the bulk of transactions on mobile phones, at ATM’s, agents, and on the internet – and this had seen the Bank’s cost/income ratio reduce from 60% to 50%

At the AGM, there was also discussion on some challenges such as court cases & loan provisions, funds at held Chase Bank and hyperinflation in South Sudan which has resulted in losses. Some shareholders also asked if they could have the annual report mailed to them via post offices and also had other queries on issues like diaspora banking services, staff fraud, PesaLink, interim dividends, the bank’s share price, transport fare to attend the AGM, cyber crimes, and interest rate caps. In answering one question, the CEO said Cooperative Bank was not one of the bidders for Chase Bank as they had a presence similar to Chase and would focus on growing organically.

The  CEO also said this year marked the third bonus share issue since the bank had listed in 2008, and this was good for shareholders as the bank had grown its capital without asking shareholders to put in more money.  Coop Bank had a livestream of the AGM for any shareholders who were unable to attend the AGM, and more companies should do this for investors awareness

Kenya Airways 2017 Results

Kenya Airways (KQ) announced their full-year results in which they reported an operating profit of Kshs 900 million, an improvement from an operating loss of Kshs 4.1 billion the year before.

KQ flew 4.5 million passengers, an increase of 5%, to 53 destination, but had an 8% dip in revenue to Kshs 106 billion, due to the reduced fleet capacity including a change from anchor Boeing 777’s to 787’s

But more significant was that idle capacity, such as from the large Boeing 777’s, and been jettisoned, reducing fleet ownership costs by 47%, and this combined with Operation Pride initiatives, had seen the airline achieve the gross profit after all the direct costs, fleet ownership costs and overheads. However after finance costs were factored in, the airline still had an after-tax loss of Kshs 10 billion, a great improvement from the Kshs 26 billion in 2016.

These were the final results presented by CEO Mbuvi Ngunze who had announced his resignation and who is being replaced by Sebastian Mikosz from  June 1. The airline is next expected to extend the restructuring program to the other side of  their the balance sheet and address the negative capital position and high debt on the balance sheet.

During the year they added new flights between Entebbe and Bangui and two new routes  to Cape Town, via Victoria and via Livingstone. From October 2017, KQ will add 30 new flights to existing African destinations. On the cargo side, they are now flying flowers to new markets in Australia and China.

This month, their Jambojet subsidiary acquired a second Dash 8 Q400 as the airline also got Kenya government permission for international routes, which could include Kilimanjaro, Mwanza, Hargeisa, Mogadishu, Goma, and Kisangani.

Vodacom buys Vodafone Stake at Safaricom

Early this morning a surprising news story first appeared at Bloomberg about Vodacom buying shares at Safaricom. Early interpretations of the story had the Kenya government selling their entire 35% of their most valuable investment to Vodacom.

But later, the official statement from Vodafone (and Safaricom) confirmed that Vodafone was the one selling 35% of their shareholding to Vodacom. It includes a statement by Safaricom CEO, Bob Collymore that the deal “promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent.”

  • Safaricom had announced another record earnings year year, last week.
  • Will there be a rebrand to Vodacom? Safari com may be constrained by operating in Kenya. Vodacom just had an IPO in Tanzania whose outcome is pending and M-Pesa has had tremendous strides in Tanzania.
  •  Former Safaricom CEO Michael Joseph resigned from the Vodafone a month ago to concentrate on his role as Kenya Airways Chairman.
  • Vodafone will remain with 5% of Safaricom – down from 39.93%.

Safaricom Exceeds Earnings Expectations, Powered by M-Pesa and Data

At their Nairobi headquarters today, Kenya communications company, Safaricom announced another record year with the release of the Safaricom 2017 results, which CEO Bob Collymore credited to a focus on customers, innovative products and improving operations.

The company reported revenue of Kshs 204 billion (~$2 billion), an increase of 15% from the year before, and an astounding EBITDA of Kshs 103 billion ($1 billion), up from 83 billion in 2016. M-Pesa growth was 33% to Kshs 55 billion as the number of active M-Pesa customers increased to 19 million – who do an average of 10 transactions a month. The number of customers also went up 12% to 28.1 million.

Later, their CFO said the results came even as customers enjoyed lower costs of voice calls, SMS and money payments. Under “M-Pesa” Kadogo, the company waived M-Pesa tariffs for payments below Kshs 100 ($1) in a push to drive financial inclusion and this led to an 88% growth in transactions in that band.

Chairman Nicholas Nganga said that “Sustaining this growth is key to the Board” as he announced that the contract of Bob Collymore had been extended for an additional two years. Collymore, in turn, said that at a time when several Kenyan companies were announcing job losses, Safaricom had added 500 new jobs during the year and would be adding another 270 mainly in customer care.

Going forward, Safaricom will be changing their earning outlook from projecting EBITDA to projecting EBIT (earnings before interest & taxes) – and for 2018 they project EBIT to be between Kshs 71 to 75 billion after capital expenditure of between Kshs 35 and 38 billion that will be spent in 2017/18.

Following the release of the Safaricom 2017 results, their shareholders will get a dividend of Kshs 0.97 per share, equal to 80% of the profit, is an increase of 27% from 2016 – excluding the one-time bonus dividend paid out last year. The payment will total Kshs 38.8 billion, and 35% of that goes to the Kenya government as the second largest shareholder after Vodafone.

Bond Moment: M-Akiba, EABL and other NSE Bonds

Update on NSE Bonds or bonds listed at the Nairobi Securities Exchanges and other bonds, since the last bond moment in May 2015 http://bankelele.co.ke/2015/05/bond-moment-may-2015.html.

Globally, the bond market is bigger than equities one, and according to the latest CMA Kenya quarterly statistics (PDF),  bond market turnover in Kenya has been larger than the equities one since 2009 mainly due to government bonds. In 2016, equity market turnover was Kshs 147 billion (down from 209 billion) in 2015. Bond market turnover was Kshs 433 billion (~$4.2 billion) in 2016 (up from 305 billion in 2015). Turnover has been 99% due to government treasury bonds, while that of corporates is less than 1% of bond turnover in a year – except in the years 2010 and 2011.

If one doesn’t want to buy NSE bonds directly, there are CMA-approved bond funds for investors including the Apollo Bond Fund, Co-op Bond Fund, Diaspora Bond Fund, Dyer & Blair Bond Fund, ICEA Bond Fund, Madison Asset Bond Fund, and the Old Mutual Bond Fund. These fixed income /bond funds total Kshs 1.4 billion (or 2.5% of the 57 billion) of funds management by fund managers in Kenya.

Government Bonds

  • M-Akiba: Following the successful launch of M-Akiba, Kenya’s Kshs 150 million , 10%, tax-free, 3 year bonds that were entirely sold via mobile phone (the minimum investment was Kshs 3,000 (~$30))  another Kshs 4.85 billion (~$47 million) is to be floated in June 2017.
  • Following the launch of a green bonds program, banks, under the ambit of the Kenya Bankers Association (KBA), have partnered with Nairobi Securities Exchange (NSE) towards raising the country’s first bank-supported climate change-aligned corporate debt instruments in the next six to eight months. The capital flows from the green bonds in Kenya will go towards funding bank clients that require finance for clean and sustainable development projects in the priority areas of energy, agriculture, transport, infrastructure, building and urban planning, and water and waste management…so far, banks operating in South Africa and Morocco are already tapping the green finance opportunities in partnership with local municipalities and development finance institutions. projects. Also in South Africa, the World Bank’s International Finance Corp (IFC) successfully raised a 9-year, 1 billion Rand Green Bond via the Johannesburg Stock Exchange. More on the Kenya Bankers Association Sustainable Finance Initiative.
  • The Kenya Government finance bill 2017 will give Islamic finance bonds the same treatment as conventional bonds and also allow Islamic finance products in the cooperatives sub-sector.
  • The Rwanda government is about to issue a 10 billion Rwanda franc (~$12 million), 7-year Treasury bond. It will be issued on May 24 and the funds will be used for infrastructure project and capital markets development. The bonds will be listed at the Rwanda stock exchange and trade in multiple of 100,000 francs (~$120).
  • Nigeria has asked Goldman Sachs & Stanbic IBTC Bank to advise it on the sale of a debut “diaspora bond” targeted at Nigerians living abroad. – via @kenyanwalstreet

Corporate NSE Bonds:

  • Centum announced a Kshs 2 billion one year 14.5% note for the Two Rivers Development.
  • Cytonn is seeking advisors  for their medium term notes to raise Kshs 5 billion from the public towards the financing of Cytonn real estate’s (CRE) projects including Taraji Heights in Ruaka and The Ridge in Ridgeways.
  • On Monday EABL listed the Kshs 6 billion (~$58 million) of bonds at the Nairobi Securities Exchange (NSE) as the second and final tranche of its Kshs 11 billion shilling medium term note program that was launched in 2015. The tranche attracted bids worth Kshs 8.4 billion, representing a 41% over-subscription. The bonds maturing in March 2022 will pay an annual fixed interest of at least 14.17% and the raised funds will go towards optimising operations and restructuring the brewer’s balance sheet. “This is the first corporate bond to be listed on the bourse this year, and we are confident that its success, a subscription rate of 140.9% will open the doors for more listings in the course of this year.” said Nairobi Securities Exchange CEO Mr. Geoffrey Odundo. Citi upgraded EABL as a buy, due to its low price – seeing value even as the beer market was flat. The first half of FY17 (ended December 2016) showed decent volume growth for EABL (+5% YOY) but weak sales growth (-6%) as beer demand continued to shift from mainstream to value. EABL is doing well in spirits but struggling in beer, and Tanzania continues to present a challenge. – Citi report.
  • A South African credit-only micro-finance institution Real People Investment Holdings which issued a multi-billion bond in Kenya late 2015, has received a negative rating. Global Credit Ratings (GCR) said it had downgraded the primary and special servicer quality ratings assigned, with the outlook accorded as negative.
  • Transcentury bond holders lost 50% in a restructuring buyout deal.

Other Bonds

  • The African Development Bank had led the establishment of an African Domestic Bond Index and a $200 million African Domestic Bond Fund to deepen liquidity in local bond markets. It has also issued local currency bonds in 11 countries, including Kenya, South Africa, Egypt, Ghana, Nigeria, Botswana, and Uganda. leading the African Union in mobilizing domestic resources required to execute the Bank’s five developmental priorities dubbed the ‘High 5s’. – Light up and power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve the quality of life for the people of Africa.
  • The Africa Finance Corporation issued a US$500 million 7 year Eurobond. The senior, unsecured Eurobond which carries a coupon of 3.875% was priced to yield 4.000% and matures in April 2024. It attracted orders of US$2.4 billion, representing about 5 times over-subscription from 231 investors. The bond will be listed on the Irish Stock Exchange. The Eurobond was distributed to investors in Europe (29%), United States (25%), United Kingdom (24%), Asia (18%) and the Middle East (4%). Citi, J.P. Morgan, MUFG and Standard Chartered Bank acted as Joint Lead Managers and Bookrunners for the U.S. dollar-denominated issue.
  • FSD Africa (Financial Sector Deepening Africa) and KfW Development Bank will invest £15.3 million (~$19.8 million or Kshs 2 billion) in the African Local Currency Bond Fund enabling it to step up its engagement with developmentally important industry sectors such as green energy and housing and take on investments in fragile and conflict-affected states. ALCBF is managed by Lion’s Head Global Partners (LHGP) Asset Management LLP.
  • Bonds, Loans & Sukuk Africa “the continent’s only Pan-African debt event” takes place on 13th & 14th March 2018, at the Cape Town International Convention Centre.