Monthly Archives: September 2009

Urban Inflation Index September 2009

(i) Tracking changes in the three months since June 2009, and approximately one year and two years ago
(ii) also the job/other opportunities column is back

Gotten cheaper
Communications: leading mobile company Safaricom this week launched Super Ongea, a zoning tariff that eases congestion on the network by offering different rates from the then low 8 shillings per minute (now the high) to as low as 80 cents per minute. This they hope will ease congestion on the network and also hold on to some customers who are flocking to the cheaper new provider Yu (Essar telecom) who have very low rates. Zain and Orange have gone slow on the marketing front, and this week the Orange CEO called for an end to price wars. The new Safaricom tariff does not affect data or money transfer of which Safaricom is getting a stranglehold with m-pesa and 3G. Safaricom is big seller of mobile phones, modems, and laptop computers, going full blast in data at the expense of retail ISP’s while M-Pesa utilization has taken on a life of its own that makes Kenyans wonder how life was before mobile money transfers started three years ago.

Foreign Exchange: 1 US$ equals Kshs. 75.93 compared to 77.94 three months ago.

About the same
Fuel: A litre of petrol is Kshs 80.9 (~$4.79/gal) up 11% in 3 months, 1@% cheaper than a year ago and 10.5% above two years ago, so relatively unchanged as thin fuel margins still continue from the price drop of about a year ago that wiped off Triton

Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 120 down from 130 three months ago. Prices seem to have stabilized though and with English football season on now, bars will not be changing prices anytime soon. East African Breweries year-end results showed that beer volumes were up just 1% for Kenya

Gotten more expensive
Staple Food: Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 84, 9% cheaper than 3 months, 15% up from a year ago, and 68% up in two years ago. Already there is worry about a grain shortage in the next few months, and the country may have to import some maize while awaiting the harvest from local farmers near the end of the year

Other food item: Sugar (2 kg. Mumias pack) is Kshs. 200 up 14% in 3 months, 38% in 1 year, 33% in 2 years, though it’s hard to say if sugar shortages are genuine or artificial; the annual importation exercise is a tug of war between politicians, tax man and importers.

Electricity/utilities: this month’s bill is Kshs 1,900 compared to 1,500 from three months ago. Still I can’t complain since compared to what some residents pay . The electricity rationing seems to have ended but at a cost since the new electricity is generated from more expensive thermal sources. The clean energy planned for Kenya- wind (Turkana, kengen) and sugar (Mumias), and mini-hydro’s (KTDA) will take a while to be felt in our bills.

Water rationing is still on going and the Nairobi water company said bills would increase from July 2009 onwards by about 50%.

Opportunities
most from the daily papers this week

SME Funding/Solutions
– For software developers from Microsoft through Local innovation centres unverified
– The Esther Passaris Grant is a monthly grant for Entrepreneurs. of between Kshs. 50,000 to 100,000 unverified
– Ongoing business plan competition jitihada closes 23/9
– Toolkit for learning: the IFC SME Toolkit Kenya

Jobs
– finally a blog -related job makes the newspapers – The British high commission in Nairobi is hiring a communications support officer part of whose job will include supporting the post webmaster in developing & maintain website, including the high commissioner’s blog through regular updates and site moderation. d/l is 23/9 and applications by snail mail only.
– Central Bank of Kenya : Accountants/ Financial Analysts, Finance Officers, Network Engineer, Network Administrator, Analyst/Programmer, Assistant Director: Policy Development And Research, Assistant Director, Academic Affairs, Finance Manager (2), Assistant Finance Manager (2), Internal Audit And Risk (manager, assistant manager, officer) and other jobs. D/L 25/9
– Equity Bank: Assistant HR Manager- Training & Development, Assistant HR- Services Manager D/L 19/9
– Apprentice engineers (20) at KPLC recruitment@kplc.co.ke by 7/10
– KIPPRA jobs not online Economists in Infrastructure & Economic Services (3 positions), Senior Analyst/Analyst, Assistant Analyst, Analyst, Assistant Analyst apply to admin @ kippra.or.ke by 21/9
– Safaricom : Senior customer systems analyst , senior manager – financial systems & analysis , principal accountant – treasury planning D/L 23/9

Tenders
The Kenya Government has asked all ministries, agencies, parastatals to e-mail in soft copes of any tenders or procurement notices they advertise in the newspaper. This will be displayed at a government procurement portal.

Despite Safaricom’s controversial, no frills, AGM, Kengen, the company with the second largest shareholder register (216,000) after Safaricom, is not going to let its members go home empty handed. They have a tender at their site for
supply of agm goods & services that closes on 24/9

Travel: Emirate Airlines have launched world cup travel packages for fans wishing to attend the 2010 world cup in south Africa; these combine air travel, hotel bookings in Johannesburg, cape town & Durban, and ground transport to stadiums.

Reading the Kenya Airways Tea Leaves

excerpts from the 2009 Kenya Airways annual report

pic from airliners.net

Investor performance: – Annus horribilis – airline industry performance has been bad with over 40 airlines suspended from the IATA settlement system in the last 15 months for non payments
– Turnover of Kshs. 71.829 billion (~$945 million), and operating profit of 4.04 billion, but the year ended with a pre-tax shocking loss of 5.66 billion ($74.5 million) owing for fuel hedging. In 2008 turnover was 60.47 billion and a pre-tax profit of 6.52 billion
Have 76,703 shareholders, 35 243 who have immobilized their accounts
– KQ has become more sensitive to fuel price changes and less sensitive to currency fluctuations – a 1% increase/decrease in fuel impact the profit by 269 million ($3.5 million). Report does not mention who fuel hedge partners, but hedges ran up to December 2010
– Their investment in Tanzania’s Precision Air is good. Their 49% stake brought in 62 million in profit
– As a result of currency restrictions, KQ has 58 million ($763,000) in Seychelles that they could not repatriate, but the government there has allowed them to utilize it to procure services
– Have loans of 32 billion (with 23 billion or ~$303 million) owed to Barclays, also from ABN Amro and EXIM Bank USA – all at rates between 4.5% and 6.6%

Routes: – fly to 37 African cities, 5 Asian and 3 European destinations
– Revenue comes from Kenya (4%), Africa (46%), Middle East & Asia (22%), and Europe (29%)
– Stopped Lamu because they don’t have a plane that can land there (after they sold turbo-prop)
– Paris is back on, but KQ scrapped Nairobi – Guangzhou direct because of poor traffic. Guangzhou now served through Bangkok
– Aim to offer more night flights to Nairobi for easier connections
– Have run some enticing promotions to celebrate new routes new routes – $43 to gabarone (Botswana) and $44 to Ndola (Zambia)

Embraces new media : – website has 230,000 visits per month and sales have passed $10 million (that’s about 1% of a year sales)
– No. 7767 is an SMS alert number that passengers can use to get information of flight status, delays, cancellations etc.
– About 3% check in via web, and booking for hotel and cars is also at a good rate
– have installed wireless network for staff to serve passengers, for baggage crew, engineering teams to coordinate flights why not wi fi for passengers?
– no mention of twitter @kenyaairways

Passenger services: – Busiest passenger months are July -August (~270,000 passengers p.m.) while lowest are February (~200,000)
– On time flights have gone up as a result of a zero tolerance policy on delays
– Airline report again laments that the Jomo Kenyatta international airport (JKIA) – their hub- has not kept up with their rapid growth in passenger numbers – and transit facilities inadequate
– Report also again appeal to the Kenya government to grant transit visas to their west African passengers flying to the far east via Nairobi
– KQ bought 3 buses to ease passengers’ convenience, long walks to flights and protect them from weather
– KQ still runs Bombay Ambulance that provided discounted tickets to airlift needy patients traveling for medial operations overseas (donated 20 tickets last year)

Employee relations: pre-strike – Has 4,240 employees
– KQ sold land in Embakasi to a developer who will put up 332 houses, in which preference will be given to KQ staff
– Have 340 pilots and 850 cabin crew. Plan to hire 68 pilots this year (48 direct, 20 ab initio) and another 23 over the next 5 years to replace retiring pilots

Fleet: – KQ owns Boeing 777-200, 737-300, 737-700 aircraft
– KQ leases Boeing 737-800s and 767s, as well as Embraer 170s (paid 4.9 billion in leases in the year)
– SAAB turbo-props were sold to a European buyer in May, so now have an all jet fleet now
– Paid deposits of 1.65 billion ($21.7 million) to Boeing for the yet to fly 787 whose deliveries they expect between 2013 and 2015

Green airline: – planted 450,000 tress in Ngong forest with other corporate partners, costing KQ $220,000
– will map their carbon foot-print in 2009, though they cite a report that global aviation contributes only 2% to carbon emissions

AGM – their annual general meeting is coming up at the end of the month
-shareholders will vote for a dividend despite the (non-cash fuel hedge) loss for the year, and as is the norm this year with Kenyan listed companies, also for electronic mailing of reports or their publication of account sin the newspapers to replace expensive mailings through the post office to each shareholder
– KQ director elections are usually interesting affairs shareholders will be asked to (i) re-elect Chairman Evans Mwaniki and Denis Afande who must be re-elected each year because they are over 70 years old. (ii) Also new to the board is group finance director Alex Mbugua, and (iii) there will be a new director since a government re-shuffle will bring new transportation permanent secretary Cyrus Njiru on board as the main government representative replacing adan ali. (iv) There is also a vacancy as KLM nominee Micah Cheserem resigned during the year when he was appointed chairman of Kenya’s Capital Markets Authority.

Reading the Olympia Capital Tea Leaves

Holding company – Olympia Capital’s annual report is one of the most jumbled I have seen in a while – it has contradictory statements, dates overlap, and profit/loss amounts that may have led to some regulatory trouble in Botswana where the company was also listed.


recap
Performance: their accounts were qualified accounts by the audit firm DCDM who noted that the company did not comply with IFRS – where they should have consolidated a subsidiary (Plush – to be liquidated) in their accounts; the auditors however added that this omission did not have a material effect on the performance numbers since Olympia wrote off all related amounts

Disastrous SA investments
capping a disastrous foray into South Africa – whose dismal results the directors blame on the recession in that country
– owned 74% of Plush products limited which ceased business and will be liquidated as their bankers (Nedbank) moved in – the SA equivalent of a receivership?. Olympia wrote off Kshs. 103 million from Plush – 86 million investment and 17 million in loans
– With another company, Natural wooden products, they expected to buy (and who they lent money), but this will not materialize; they don’t expect to recover monies and have provided for it in full
– another one Natwood owes 63 million
– The report notes that Olympia provided a total of Kshs. 115 million for SA investments that have not contributed to profits since investment while the elsewhere is a note that discontinued SA operations will cost Kshs. 200 million

Investment/subsidiaries
– own 12.5% Heri investments (valued at 71.6) million and mentioned they got a good dividend, thought its unclear how much was received
– A subsidiary, Dunlop, bought a tile making plant at a cost of 54 million – but it has not been installed – and the company may have to get a third party to install or operate it – or may even have sell the plant!
– Owned 7 million worth of Safaricom shares at year end

Other
– Some directors & top shareholders have reduced their shareholding
– There are so many internal deals /within-the group based on valuations or estimated of directors
– There are no director profiles in report
– Corporate governance: Olympia created two board committees audit & nomination, and investments committee – but these did not meet during the year (this company needs a competent independent investments committee after its SA foray!)

Upcoming AGM
should be interesting to attend
– The AGM will be held on 25th September
– Auditors signed accounts on July 31, but the reports have been sent to (2,685) shareholders just two weeks before meeting
– Shareholders will be asked to approve a dividend at a critical time for the company (Olympia will pay out Kshs 4 million)
– Bad timing for the directors to ask shareholders to approve creation of an employee share option plan (ESOP), fund it, appoint trustees, issue shares etc.
– Increase share capital from 40 million to 50 million by creating 10 million new shares of 5/= each – this adds up to an additional 50, not 10 million!
– DCDM will continue as auditors.

Kengen & other Nairobi Bonds

Lots of questions abound about whether its time to invest in bonds at the Nairobi stock exchange. From late last year when Mabati Rolling Mills launched a bond, 2009 has really been the year of the bond with the clincher being the successful Kenya government infrastructure bond of February 2009.

Now ongoing now is the Kengen PIBO for which Kainvestor reviews the prospectus. It offers a 12.5% and the minimum subscription is 100,000 shillings (~$1,316)

Next expected next is a Safaricom bond, a Centum bond ( 2 billion), and more tranches from CFC Stanbic and Barclays. It’s quite a turnaround from 2007 when companies like Athi River Mining, Safaricom and Celtel Kenya (now Zain) all redeemed /repaid bond investors at a time of low-interest rates.

Track all the corporate bonds at the NSE daily bond report and these include East African development Bank, Barclays, Faulu Kenya, Mabati, PTA Bank, Athi River Mining, Sasini and CFC Stanbic

Buy bonds directly from stockbroker agents, but if still unsure of the process, consider investing through bonds funds such as those from Old Mutual Kenya and Dyer & Blair Investment Bank – Kachwanya reports that investors can even access the Kengen Bond at ½ the prescribed price – paying just Kshs 50,000 (~$650) instead of the subscription minimum of 100,000.

Stocks versus bonds? in the long run, as shown by this stockskenya thread, shares are likely to outperform bonds – even the generous 12% Kengen bond.

EDIT also on offer is Uchumi Bond 10% convertible shareholders’ debenture is on. Press reports say it was valued at 12 shillings each by KPMG and is available at a discount of 10/= to shareholders of the company. The funds raised will be used to restructure the balance sheet, which should lead to the end the receivership, and re-listing of the company’s shares at the NSE.

Uchumi Financial Results

published by Specialized Receiver Manager – September 2009

Week on Twitter (September 11)

Another re-cap of a week full of Twitter – @bankelele posts which included issues like – more innovative loans from Equity Bank, why do Kenyan companies make such large PDFs? The fibre cable has reached Mandera in remote Northern Kenya, but piped water is yet to get there, police dogs sniff grass, Zimbabwe ministers text like teenagers, how to get through to safaricom’s notoriously inaccessible customer service, mobile companies know how to keep Kenyan ministers happy, Kenyans laugh at their failings, pre-paid internet gets cheaper, another bank to list at the Nairobi stock exchange while another joins twitter, more awards for women, more jobs at the central bank of Kenya, and the UNEP toys with Kenya

– @TChenya @KumekuchaChris was just at Equity Bank; amazed they have loans for water tanks http://bit.ly/AoYg4
– This #Safaricom portal is going to be the Kenya borg http://portal.safaricom.com…
– Do cops favour their own matatus, leading to traffic jams for other motorists? http://www.coastweek.com/32…
– R/T @baldaufji #Zimbabwe minister text messages leaked http://bit.ly/2KkUIx U c the strait jacket vakuru [old man] is being given 2 wear
– The koinange family starts development of the parking lot next to kencom Nairobi
– Just registered to get my Safaricom dividend by cellphone m-pesa in November @saitonne m-pesa dividend registration ongoing around the country till 30 September, mostly at supermarkets – which one is near you?
– Cold call from a bank offering an unsecured personal loan at 24%!
– @egm_photo @jmugambi its soooo wrong for fibre cable to reach mandera before piped water!
– Gabon09 election resembles kenya08 but little concern in Kenya
– #TPF3 Tanzania is 0-2: EABL endears itself to that beer market
– (Sad to hear) R/t @estoni #samburu insecurity rife, tourist vans attacked, some travel companies are canceling Kenya safaris
– @kainvestor the most blatant on-going copy cat is ‘citi shuttle’ aping ‘citi hoppa’ with same green, same routes #thuo should do something
– (i) #shagslife a police dog from anti-stock theft unit just tracked down some stolen bales of hay to a nearby compound (ii) Hay and fencing was ‘stolen’ from farm of local MP last night. @coldtusker, this police lassie did an impressive job over many KM
– More bank for twitter @Standardbankgrp the official account for #stanbic (found at @kainvestor)
– R/t @saitonne are you stuck trying to call #Safaricom customer care 100 number? Try adding some zero’s and no’s e.g. 1000055
– R/t @kachwanya Yu to launch money transfer service on October 1. (Now where’s telkom, been almost 5 years in the making?)
– Watching morning news – #Safaricom seem to trend #CSR projects to home area of sitting communication minister
– Family bank march to listing at Nairobi stock ex @nsekenya on with plans for share split and rights issue pending approval
– you know you’re Kenyan goes viral (i) #youknowyourekenyan when you understand (and agree with) Francis atwoli (ii) #youknowyourekenyan cause your “najivunia kuwa mkenya” cap is made in china

– NHC rescinds sale of houses to 102 #madaraka estate residents (for non-payment?) while NSSF threatens to repossess some tassia-embakasi plots
– @ kainvestor how do Kenyan corporations create such huge huge PDF? E.g. quarterlies from NSE site (i) Mabati Rolling Mills half year results (large PDF) http://tinyurl.com/ldyk22 (ii) @kainvestor #KenGenPIBO information memorandum dead D link on site at http://www.kengen.co.ke/PIBO/
– Nominate an African woman achiever for a Graca Machel award http://www.civicus.org/media/Graca_Machel_Initiative_Call.pdf D/L 30/9
– R/T @gishungwa @shiroh: Central bank of Kenya is hiring http://tinyurl.com/lu6bbo
– @inexes @shiroh while standard chartered will take divas to South Africa for shopping for $1,000, family bank has week-long trip in October for business customers for $2,000
– Eh @intelligensia, plans underway to (dredge &) raise the water level of masinga dam by 1.5 metres
– New Zain Kenya unlimited pre-paid internet bundles costing $3 per day, or $30 per month
– NTV’s Rita Tinina on GoK begging UNEP for Mau Cash http://bit.ly/2m8BUu (look for a toy truck near end of vid)