Monthly Archives: June 2008

Safaricom @ NSE Day 8

Deals: 5,620
Turnover: Kshs 883.5 million [$14 million]
Average price 7.84
Closing 7.80 (no change)
High 7.90
Low 7.70
Last 7.90
Volume 112.6 million shares

Commentary: We are still below the 8 pivot, which is key. The pull back was very shallow and confirms underlying muscularity. Foreign buying and selling is now in balance. Courtesy of Rich.Co.Ke [NSE data vendor]

All Safaricom, all the time?
Meanwhile AKS [Rich.co.ke] has a Nairobi Star column and in February this year, started a running NSE portfolio 2008 with Equity, Access Kenya, Athi River Mining, and Sasini. This week, he retired the portfolio – cashed in a 50% gain to throw everything into Safaricom!

Mainstream blogging
stuff I used to post about and need to get back after IPO rush

Meet the bloggers: The Nairobi barcamp is now set for June 21 and is shaping up to be one of the biggest ever with a packed day planned

Meet the money: Two opportunities for bloggers to meet the e-government, BPO, and Kenya ICT Board officials on 19th and 21st of June. first come, first served

Safaricom @ NSE Day 7

Deals 10,506
Turnover Kshs. 950.9 million [$14.86 million]
Average price 7.83
Closing 7.80 (-1.27%)
High 8.05
Low 7.70
Last 7.80
Volume 122 million shares

Commentary:
Slightly more defensive session ahead of 8.00 which is now the pivot. We will cross 8.00, its a question of time. Sellers will be exhausted given the turnover
– This morning: Excluding today, total share volume has been 1.2 billion shares which is 12% of the total shares sold. Shares are moving quickly from loose hands into those of medium term Investors. 8 and around is currently the clearing price for the flippers. Crossing 8 will be bullish
– Courtesy of Rich.Co.Ke [NSE data vendor]

Safaricom @ NSE Day 6

Deals 5,624
Turnover 821 million shillings ($13 million)
Avg price 7.91
Closing price 7.90 (up 6.38%)
High 8.15
Low 7.70
Last 7.95
Shares volume 103.8 million shares

Commentary: The Bourse had a delayed start. It was a very bullish session. We are now toying with 8.00 and a break of which will project us another 10% higher- Courtesy of Rich.Co.Ke [NSE data vendor]

Lessons Learnt from Safaricom

1. Don’t invest in IPO’s! avoid the queues, time value lost, miniscule allocations, rogue broker tales, bank charges, fraudsters etc.
2. If you must invest, go for those with ‘higher’ minimum investments of Kshs. 50,000 or 100,000. e.g. Access Kenya a ‘relatively unknown’ (to wananchi) was priced at 50,000 and still ended up with 25,000 shareholders who got a reasonable allocation.
3. If advance payment is unfair for foreign investors and QII, it is also unfair for wananchi (retail investors)
4. Bank IPO loans should be banned.
Both of the above two factors destabilize the banking sector
5. We don’t need foreign investors. The local investors over-subscribed the entire allocation. The Renaissance Boss once talked about how it was not possible to invest $20 million without distorting the NSE. We are a retail, small corporate, local bourse and should accept that,
6. We don’t need the kind of foreign investors we appear to have got. African bourses need long term investors with three to five year horizons – not 3 to 5 day ones who cash in for 2 shillings.

ARM dust?
What happened at the Athi River Mining AGM last week? The vote results on the proposal to split the company into two subsidiaries appears to have only had the backing of the MD who accounted for almost all the votes for the move to be approved.

Safaricom @ NSE Day 5

Friday afternoon
Deals 4,415 with a turnover of Kshs. 1.87 billion [$29.7 million]
Avg price 7.47
Closing 7.45
High 7.65
Low 7.00
Last 7.65
Volume 250.9 million shares

Commentary: Bullish break out. Heavy Buy side demand. 8-10 range next week. Foreign Selling top 555,000,000/= [They must be near flat]
Courtesy of Rich.Co.Ke [NSE data vendor]

Refund drama
– The Central Bank directive that requires refund cheques to be banked in applicants bank accounts (not endorsed to brokers or third parties) will require many applicants to open bank accounts, just to receive their money.

It is a boost to banks, since the initial Safaricom prospectus document contained the option of applicants receiving refunds of less than 5,000 shillings ($80) to get their cash via M-pesa. However no one meets that amount as even the lowest application investor of Kshs. 10,000 is getting at least Kshs. 7,500, but which is still an amount Safaricom (instant value to mobile phone) is better able to handle and process than a bank cheque that clears after a week.

– Equity Bank applicants’ refunds are already in their accounts where they have been used to offset the IPO loans. Other banks should also state their policies on IPO loans where investors have only utilized 22% towards shares, while paying interest rates on the full 100% loan

Refunds to Bonds
Try your luck at Bonds if NSE Equities are too volatile: The second tranche of the 7 year Barclays Bank bond is available to investors up to July 9th, minimum application amount is 100,000 shillings ($1,585) at fixed or floating rates and can be traded at the NSE thereafter. (details at barclaysbond@barclays.com)

2008 Budget A to Z

Compared to the lofty 2007 Kenya budget, this one came at a serious time when the country had almost reversed gains made over the last five years, according to the Minister.

Challenges: regional disparities, poverty, youth employment low agriculture productivity, transport during crisis raised food prices, and containing inflation

Targets: 10% economic growth by 2012, Kenya to be a Middle income country by 2030, Social income reforms, develop a democratic issue-based political system and a higher quality of life

some excerpts

– Airlines: For Kenya airways: zero rate on international air travel no VAT on tickets?

Banking
– increase share capital from 250 million and 300m to 1 billion over 2 years(parliament rejected this last year) and can’t pay dividends till adequate provisions are made.
– 5 development finance institutions to be restructured, as will Postbank and the agriculture finance corporation. National bank will be privatized (further)
– CBK can penalize forex bureaus for violations
– Fate of unclaimed deposits to be decided by a task force to be formed

– BRIC China and India will keep food and oil high, but there are regional Africa opportunities

Capital markets
– NSE reporting: companies like Safaricom and kengen can publish their notices and accounts in two daily newspapers as opposed to mailing each shareholder a copy
– Insurance companies can invest 10% in any listed company – up from the previous 5% ceiling
– Annuities to publish quarterly returns
– Asset backed securities rules will be gazetted to encourage particplants
– Share capital of stockbrokers and i-banks raised to 50 million and 250 million respectively as anyone owing more than 25% barred from running the companies (3 years to comply). They must also get indemnity insurance for failure of employees
– CMA to get more power to seize assets

CDF: CDF benefits not tricked down due to poor management and there will be more accountability to reduce duplication. does that mean less funds for CDF now?

Education
– 1.56 billion towards teacher employment
– Teachers kids’ education now not a taxable benefit for employers and teachers

Energy
– NOCK (parastatal) expanded to stabilize petrol prices
– clean energy: 4 billion for geothermal, 300 million solar electricity generated to supply 74 public institutions, 200m for wind power generation
– 6.8 billion for rural electrification (to develop mini grids) which will reduce rural urban migration.

Food prices
Minister says food price beyond the control of government
– Maize imports duty free
– talks to set up a regional fertilizer factory with Uganda and Tanzania
– 744 million for agric extension programs
– zero duty on bread and rice
– duty reduced from 35 to 10% for one year on wheat imports
– no duty on insulated tankers for milk transport

Health
– more nurses to be hired
– 550 million to support guardians of HIV orphans and this will benefit 30,000 households – up from the current 2,500

Housing
– Housing bill, landlord & tenant bill coming
– 350 million to construct 200,000 low cost housing units using appropriate building technology
– 500 million for infrastructure in slums
– National housing corp: relief for buyers of their houses – up to 150,000 p.a.

ICT
– 900 million shillings to develop a business process outsourcing park in Nairobi (BPO) which may create 10,000 jobs
– 700 million towards completion of Under sea cable improve bandwidth quality, reduce costs of communications.
– Remove import duty on telecommunication equipment as well as on printers

Land
– No stamp duty transfer for land transfer by individuals to companies wholly owned by families

licensing:
– communication commission of Kenya will reduce the number of licenses offered from 300 to 16 from July 2008, Ministry of tourism reduces from 25 to 2, Mines & geology 24 to 8, Betting control 26 to 9, Forestry from 15 to 11
– Business regulatory reform commission to be created

Manufacturing
– Remove import duty on hot rolled steel (was 10%)
– New 10% tax sodium sulphate, epoxy resin) to protect local producers
– Reduce import duty on cement form 40% to 25%
– Tax on plastics: manufacturer’s can apply to get refunds of this tax get in line

Northern Kenya
– 2.9 billion shillings to the arid and semi arid areas rehabilitation through various ministries: this will include water, abattoirs, school feeding programs, rural electrification, livestock support
– also 900 million for the garissa garsen hola road (done by NYS) and for 200m improve marsabit and maralal water supplies

Parliament
– the Minister was interrupted for not sharing budget information for MP’s in good time
-The Minister later asked members of parliament and constitution office holders to pay their share of income taxes

Ports:
– Mombasa port will be expanded with 20 billion of Japanese funds to allow bigger ships
– Free port at Mombasa to be set up (like Dubai) which should create jobs for the youth

Privatizations more coming to fix budget shortfall

Railway: Government wants Rift Valley Railways to increase capacity, lay more tracks, and transfer cargo.

Retirees: No tax on all pensions for those over 65 years

Roads:
– 65 billion shillings to be spent
– Build Athi river-namanga, mau summit – kericho, Nairobi to Thika
– Register all road contractors, engineers, quantity surveyors
– Long term infrastructure bond

Security:
– More funds for police force salaries, and equipment to fight crime
– Organized crimes bill to control gangs and militia and an anti money laundering bill coming to parliament
– 2.8 billion for new housing for police and prisons staff

Shilling central bank will not be intervening to adjust exchange rates

Sin taxes: beer and alcohol to cost more

Sports & arts
– Artist and sportsmen; any tax paid abroad can be used to offset against tax in Kenya if they show evidence of payment
– National football competition in every constituency (1 million shillings per constituency for purchase of kit and balls)

Tourism: budget 26% up
– 600 million to KTB to promote Kenya
– Exempt import duty gym equipment for hotel industry

Youth employment
– Absorb NYS graduates into armed forces
– Youth enterprise fund gets another 500 million
– 465 million for free tuition in vocational colleges from January 2009
– The 900 million shilling garissa hola road will be built by NYS who will also get contracts to fix dams across country – and who will also employ local youth

Water & environment
– 26% water budget improvement
– 1 billion towards multipurpose dams (built by NYS)
– 2nd mzima springs project to supply Mombasa with water.
– program to clean up Nairobi river
– Remove import duty on garbage collection trucks

Vehicles
– motorbikes: Zero VAT to motorcycles less than 250cc
– Vehicles to be registered as soon as they arrive in the country to prevent diversion of transit vehicles to local market