Category Archives: NSE IPO

Case Digest – Kenyan Capital Markets Court Cases

Kenya’s Capital Markets Authority (CMA), has published a digest of legal cases that Authority has been involved in, and some of which were later appealed.

The 27 cases cover ten years, and most the largest share involve dealings at  Uchumi and others revolve around executives and directors of CMC, commercial banks, and a handful on rogue stockbrokers who preyed on retail investors during the heyday of the Nairobi Stock Exchange during the IPO listings of Kengen and Safaricom.

Some notable cases include, Solomon Alubala who was fined Ksh 104.8 million and barred from holding a position at a listed firm for ten years, Bernard Mwangi who attended Uchumi board meetings and sold shares while the company was performing poorly, CMA cases versus Jeremiah Kiereini and  Martin Foster, Chairman and CEO of CMC Motors, the CMA versus the Institute of Certified Public Accountants of Kenya (ICPAK) over audits done by its members at CMC, cases involving Chadwick Okumu, CFO of Uchumi, and CMA versus Jonathan Ciano, a CEO who was for a time celebrated for turning round the Uchumi. They also have a case of Alnashir Popat and Imperial Bank directors, and Munir Ahmed MD of National Bank who the CMA fined Kshs 5 million and barred from holding a position at a listed company for three years.

The cases are published in partnership with the National Council for Law Reporting who have an online database of over 124,000 court cases.

Cytonn Investors Briefing

On Thursday, November 8, the board and management of Cytonn Investment had a session with investors at the end of a weeklong series of meetings. Present at the cocktail were managers and directors of different Cytonn companies, a few hundred of the 3,500 Cytonn investors and a team from principal partner Taaleri Africa. 

Prof. Daniel Mugendi, the Cytonn Chairman, spoke of East Africa’s attractiveness to investments as he thanked the management for the growing the relationship with Talleri, which had just resulted in them investing a further Kshs 2 billion in real estate projects with Cytonn as well an interest to buy 20% of Cytonn in an IPO, which the board supported.

Cytonn has several arms including real estate, education, hospitality, asset management (Seriani and Cytonn Asset Managers are being merged next week), high yield solutions, and a diaspora office run from Washington DC. Edwin Dance, the CEO of Cytonn said that funds raised from investors (minimum Kshs 1 million) are primarily (~70%) put into the different real estate projects such as the Alma, Taraji, The Ridge, Newtown (1,000 acres) and RiverRun which are run as independent special purpose vehicles (SPV)] with their own boards and reporting structures.

Dande said Talleri was the first institutional investor to commit to Cytonn as he also saluted some of the early investors and supporters of Cytonn, including the Chairman, who came on board even as its founders were embroiled in a bitter tangle with their former employers.

Kati Salo, a risk specialist with the Taaleri Africa team said they had exited the Amara project successfully and were now back to do more investments with Cytonn and had signed with The Ridge, taking their investment to Kshs 5 billion. She added that they were impressed with the team who had also given them access to management, clients and advisors and had decided to take a stake in Cytonn in the planned listing of the company. Earlier this year, shareholders of Cytonn had approved a listing of the company, and going by the amended resolution, this may not necessarily be on the Nairobi Securities Exchange,GEMS segment.

BK Group – Bank Kigali Rights Issue and Nairobi Listing

BK Group, the holding company for Bank of Kigali, which is the leading financial institution in Rwanda, has launched a rights issue that will end with it cross-listing its shares on the Nairobi Securities Exchange (NSE).

BK Group is floating 222.22 million new shares at Rwf 270 with a target to raise Rwf 60 billion (~$70 million or Kshs 7 billion) through a rights issue in which current shareholders are eligible to buy one new share for every three they own. All the funds will go to shore up the capital of the BK Group bank and its subsidiaries. Also, 7.2 million new shares will be allocated to an employee share ownership plan (ESOP) for eligible director and employees.

Incorporated in 1966, the bank ended 2017 with assets of Rwf 727 billion (~$830 million or Kshs 84 billion) and pretax profit of Rwf 34 billion. Its subsidiaries include an internet company (TecHouse), registrar, nominee, securities, and general insurance company. It has 79 branches and 2 million customers. It has an estimated 32% share of the Rwanda bank market, ahead of BPR 13%, Cogebanque 10%, Equity 8%, KCB 7%, Ecobank 6%, and a 4% share of assets each for both GT Bank and Access. 

In 2011, the Government had offloaded 25% of its shareholding to the public as the bank listed on the Rwanda Stock Exchange. It is still the major shareholder through two organizations, the Rwanda Social Security Board (RSSB) and Agaciro Development Fund with 32.4% and 29.4% respectively. Others are the Rock Creek Group Dunross and Co Aktiebolag, Kamau Robert Wachira, RWC Frontier Markets Equity Master Fund, Frontaura Global Frontier Fund, and The Vanderbilt University – T133. After the rights issue, the top two shareholders will have 30% and 22.1% respectively with the ESOP having 0.8%. The government is not taking part but RSSB will partially participate to ensure their shareholding remains at 30% while other shareholders who don’t participate will be diluted by 25%.

The rights issue is from October 28 to November 9. It will be followed by a rump issue that will be from November 12 to 16 November in which shares not taken up in the rights issue will be offered to through a private placement to qualified institutional investors at Nairobi’s NSE.  Results will be announced a week after and the new shares admitted on the Rwanda Stock Exchange, with a cross-listing on the Nairobi Securities Exchange, on November 30. 

The target is 70% success with the 155.56 million being taken up worth Rwf 42 billion. In the event of an over-subscription, the rights issue has no green-shoe option and refunds will be done. In a statement released today, Kenya’s Capital markets Authority confirmed approval of the listing at Nairobi with an estimate that 40% of the funds will be raised through the rump issue. 

BK Group advisors are Renaissance Capital (Rwanda) as the lead transaction advisor, BK Capital – sponsoring broker and registrars, Trust Law Chambers as legal advisors, PricewaterhouseCoopers as reporting accountants, Bank of Kigali is the receiving bank and Hope Holdings are the PR & Marketing Advisors. The rights issue will cost Rwf 1.72 billion comprising Rwf 526 million transaction advisor fees and Rwf 900 million as placement commission (1.5% payment to authorized agents who are BK Capital, CDH Capital, SBG Securities, Faida Securities,  Baraka Capital, Core Securities, African Alliance Rwanda and MBEA Brokerage). Other fees are Rwf 90 million to the RSE, 39 million legal advisory and Rwf 22 million each for reporting accountants, receiving bank, sponsoring stockbroker and also for media and advertising.

$1 = Rwf  873, 1 Kshs = Rwf  8.58

EDIT Nov 23 results : Rights issue announced uptake was 43% with 104 million of the offered 222 million shares subscribed for, raising ~$31 million. And following the rump offer, by institutional investors, who oversubscribed for the shares and took up took up 136 million shares for ~$41 million, the total issue performance has been recorded at 107% and the new shares will list on Nairobi and Kigali exchanges on November 30. 

National Oil IPO?

It has been reported that the National Oil Corporation of Kenya (NOCK) may do an IPO in 2019 with a goal of raising money to buy shares in oil blocks held by Tullow in Turkana, Northern Kenya

The most recently published annual accounts of National Oil were done by the Office of the Government’s Auditor General for the year to June 2014. Surely there are more accounts in the last three years as NOCK has gone through many changes at the board and executive level as well as in auditing requirements.

For the year to June 2014, National Oil had revenue of Kshs 23.6 billion and ended with a deficit of Kshs 657 million, down from a surplus the year before of Kshs 221 million. The audit, done by KPMG for the Auditor General, attributed the loss to the company having dead stocks worth Kshs 929 million at the Kenya Petroleum Refineries which they could not access – and this was probably at the time that the refinery management was the subject of an investment dispute between India’s Essar and the Kenya government.

National Oil had assets of Kshs 9.6 billion which included exploitation in Block 14T located in Magadi Kenya. Exploration work is being funded at Block 14T by a Japan oil & gas corporation (JOGMEC) .

National Oil is wholly owned by the Government of Kenya (99% Treasury, 1% Ministry of Energy) and received capital injection of Kshs 500 million in 2009 that had not been factored in. NOCK trades in refined petroleum, does some petroleum exploration and is mandated at the vehicle for the government of Kenya to participate in the energy sector.  It had a $12 million trade finance facility with KCB to purchase stocks and NOCK had also been contracted by the Government to construct a floating oil jetty at Mombasa.

The NOCK listing would be on the Nairobi Securities Exchange and London stock exchange. Perhaps much juicier than National Oil, would be an IPO of Kenya Pipeline which had assets of Kshs 73 billion and a profit go Kshs 10 billion in 2015.

Kenya Airways marks 40 years with 40% fare sale

Kenya Airways (KQ) turns 40 today. It was incorporated on January 22, 1977, after the disbandment of East African Airways as a consequence of the collapse of the East African Community, and with some assets and staff of East African Airways was to be the national flag carrier of Kenya

The airline’s story can summed up in three phases: First, was a typical African state airline flying unprofitable routes to far-flung destinations, and with operational and management issues.

Then the early 1990’s saw a move to address the decline and a new board was formed, that was chaired by former Central Bank Governor Philip Ndegwa. It had a mandate to commercialize and privatize the airline. They hired Speedwing Consulting in February 1992 who appointed a new executive team that implemented an extensive restructuring involving fleet reduction, fare and route reviews, staff training and voluntary staff reduction.

This was followed in January 1996 by the sale of 26% to KLM  which was to see KQ grow as part of a global airline partnership. Kenya Airways was converted to a public company in March 1996 and its shares were listed on the Nairobi Stock Exchange in June 1996 in an over-subscribed IPO in which thousands of Kenyans bought shares. This reduced the government shareholding to 23%, and shares were later cross-listed in Uganda and Tanzania.

The third phase was the 2000’s decade when Kenya Airways embarked on a long expansion period under CEO Titus Naikuni, and there was a period where they greatly increased and modernized the fleet, and added almost a route every month, mainly to African capital cities. The expansion, however, came a time that the global and African airline space was becoming quite competitive at a time that KQ also faced new internal challenges. This was manifested in two years of successive record losses, strained network operations, and passenger relationships.
They airline turns 40 at a time when it has embarked on an extensive restructuring program called Operation Pride. KQ’s new chairman is celebrated former Safaricom CEO Michael Joseph who joined the board in September 2016, and who is leading the search for a new CEO. KQ has a leaner fleet of mainly new Boeing 787 Dreamliners and Embraer 190’s, staff and operations with a focus on partnerships and regaining profitability with the support of the Kenya Government.

For any airline, 40 years is a major milestone to reach, and even with the ongoing austerity moves, KQ is still celebrating the occasion with special fares for its passengers including:

  • 40% discount across its network for flights booked from January 22 to February 5, (the 1977 date after it commenced flights) for flights taken between January 22 to December 31, 2017.
  • $1,977 business class fares to Hong Kong, Paris, London, and Amsterdam.
  • Up to 50% off companion fares when one buys a business class ticket