Category Archives: Diamond Trust

Diamond Trust: Third Rights

Diamond Trust Bank is back to shareholders for some fundraising after two rights issues in 2006 and 2007.
Since venturing into  Uganda and Burundi in  2008, it has become a pan-African bank growing from assets Kshs 45 billion and Kshs 1.6 billion in profits to 2011 assets of  Kshs. 107 billion and profits of Kshs 4.3 billion. The additional  funding will be invested in Tanzanian Uganda and Burundi as well as alternative channel categories.
Like the previous issues, this one closing on Friday, August 10, is likely to exceed the full subscription. All the large investors – Aga Khan Group (AK fund for economic development fund  (owns 17%), Habib Bank (11%), Jubilee Insurance (10%), and the International Finance Corporation (IFC owns 10%) have committed to take up their rights.
The above commitments are for 51%, and with the minimum target is 60%, there’s a rump option in case other shares are not taken up but it’s expected that most of the 11, 242 shareholders will pay up (there was little trade in rights when it opened).

Contrasting Rights
Year – Nov-06 ; Nov-07 ;  Jul-12
Target (Kshs M) – 735 ; 1,600 ; 1,809
New shares (M) – 15.5 ; 23.3 ; 24.4
Price (Kshs)  – 50 ; 70 ; 74
Ratio  –  1:8 ; 1;6 ; 1;8
Budget (Kshs M) 41.6 ;  54.7 ; 57.6
 

Others
  • IFC has also provided funding of about $65 million for the bank operations.
  • All the arms of the company are profitable; Kenya profit after tax of Kshs 2.2 billion in 2011, Tanzania (own 55%) Kshs. 398 million, Uganda (own 54%) Kshs. 315 million and Burundi  (own 67%) Kshs. 31 million.
  • Diamond Trust only owns 3 of their branches in Kenya (out of 38) , and none of the 22 in Uganda, 14 in Tanzania or 4 in Burundi.
  • There’s no indication of interest to venture into Rwanda or South Sudan as with many other Kenyan banks.

2009 Kenya Bank Rankings Part II

10. Diamond Trust (2008 rank 11) : assets of 44.9 billion ($600 million) and nine month profits of 1 billion ($14.2 million). Loans (28.6 b) grew faster than deposits (33.1b), but expenses also grew faster than income. Neck and next with NIC and I&M banks with 44 and 41 billion in assets in position 11 and 12 respectively.
9. Commercial Bank of Africa (7): assets of 52 billion and nine month profits of 1.39 billion. Deposits flat (40 b) but loans (28.2 b) are up 20% this year and with GOK paper up 77%, however income and expenses are lower than 2008.

8. National Bank of Kenya (9): assets of 55.2 billion and nine profits of 1.4 billion. The bank is in great demand with a planned further divestment by GoK which may attract significant interest next year. For 2009, NBK has had a remarkable 40% growth this year, with 27% loans (12 b) and 48% in deposits (41 b)

7. Citibank Kenya (8) assets of 55.6 billion ($742 million) and nine month profit of 2.3 billion ($31 million). while embattled in the US, Citibank had a slow down in growth of loans (22.7 b) and deposits (29.7 b) compared to ‘08 but will still record a healthy +20% growth for year 2009.

6. CFC Stanbic (4) assets of 83.5 billion and nine month profits of 981 million. Bank had no growth in loans (43 b) and assets, but sitting on a load of cash – almost 16b billion (~$214 million)

5. Equity Bank (6) assets of 92.4 billion and nine month profits of 4.2 billion. Equity is still one of Kenya’s fastest growing banks though the 100% growth margins have tapered off to more manageable 30%+ for loans (55 b)and deposits (63 b) as it expands regionally in Uganda and Sudan and continues to roll out unique banking products.

4. Cooperative Bank of Kenya(5) with assets of 98 billion and nine month profits of 2.9 billion. The bank continues its 20%+ annual growth a year after listing and has diversified into investment banking. However their re-jigged executive shareholding following n ESOP is a sore point to be debated further.

3. Standard Chartered 3 with assets of 122 billion ($1.6 billion) and nine month profits of 5.2 billion ($69 million). Despite my earlier negative outlook, stanchart was a late bloomer and has come on strong: significantly, unlike other big banks, stanchart grew faster this year compared to 2008 – with 18% growth in deposit (89 b) and loans (40 b) while profits are up by 40% as income is up 23% compared to just 5% for costs while spearheading technologial products & services to their customers. Also increased investment in government securities by 77% and holds ~ Kshs. 36 billion now.

2. KCB (2) assets of 163 billion ($2.17 billion) and nine month profits of almost 5 billion ($66 million). KCB group is larger than Barclays in assets (185 b to 168 b) but has a smaller asset base than last year. In 2009 deposits (133 b) and loans (93 b) are up over 20% but profit is up just 3% – income is up 11% but expenses are up 15%, as KCB continued its expansion, opening six branches in November and also expanding in Rwanda Uganda, South Sudan and soon to Burundi. The bank also continues to weather occasional storms against it sustainability with triton and now Kenya planters coffee union.

1. Barclays Kenya (1)assets of 168 billion ($2.25 billion) and nine month profits of 6.63 billion ($88 million) . Barclays shrunk by 2% compared to growth of 17% a year ago with lower deposits (123 b) and loans (96 b) compared to a year ago but with profits ahead of last years pace, perhaps boosted by GoK securities investments which are up 23% this year.

Diamond Trust 2008 AGM

Diamond Trust (DTB) held their AGM at KICC on Friday, May 30. It was quite routine and the Chairman rapidly breezed through the vote items – annual accounts, re-election of directors, auditors’ yada, yada.

Extraordinary items were:

Expansion into East Africa: shareholders voted for the company to take up rights in DTB Uganda (probably cross 51% and making that a subsidiary) and to set up in Burundi. Questions were asked on if more capital would be called upon from Kenyan shareholders and the difficulty of expanding into an unstable, war-torn, francophone country. The Chairman answered that the funds from the last rights issued (2007) were being utilized for the expansion and they have researched and visited the country which is now a stable part of the East African community. He added that the new CEO identified for Burundi is multi-lingual as are some Kenyan staff that may join the Burundi office.

The hot button issue of the day was the various amendments to the companies’ act that would enable the company to sell shares of dormant investors. The motions targeted shareholders who have ceased to be active; i.e. forwarding address, no dividends banked or bonuses taken up, mail returned etc. for over six (6) consecutive years. The company loses a lot of money in a bid to ‘serve’ these shareholders and was making moves to clean up their share register.

Steps followed would be to:

  1. Identify the shareholders dormant for six years.
  2. Publish their names in the east African media, calling on these individuals/their relatives to step forward.
  3. For those who have not responded the company will then apply for permission to sell these shares at market rates.
  4. Proceeds of the sale will be held in trust for another three years.
  5. After this (nine dormant years) such funds not claimed will revert back to the company’s shareholders funds.

The directors stressed that they were reluctantly making these moves in a bid to be on par with other companies (including yet to list Safaricom) and it would also keep them a step ahead of the government who have already made into law that dividends unclaimed seven years will revert to the Government (CMA investor compensation fund)

Several shareholders expressed their concerns and objections, saying this was a dangerous precedent, and citing (among other reasons);

  • shareholders who were out of the county – directors said they should just forward their correct address to the registrars.
  • shareholders who had died their – dependents should contact the company.
  • shareholders whose shares had been lost to ‘rogue’ brokers – that was a matter for the regulators.
  • shareholders who had not disclosed holdings to their families, and perhaps died
    – company should only focus on unclaimed dividends, not selling shares.
  • shareholders with no bank accounts

They also came up with suggestions including DTB to:

  •  provide a beneficiary form for investors to fill out beforehand (directors’ answered that it was a company’s act matter)
  • DTB to buy more shares with unclaimed dividends for dormant shareholders (an investment decision that was very risky to the company)
  • DTB not to sell the shares which may bring lawsuits in future, but instead ring-fencing the dormant shareholders and treating them differently (the laws of Kenya require all shareholders to be served equally (Mobitelea, anyone??)

DTB’s legal adviser, lawyer George Oraro explained that shareholders had ample time (nine years) to sort out any dormant share matters and that DTB would even exceptionally consider cases where investors with were not able to sort out their affairs in time. He added that in future the CDSC (not company registrars) would be the custodians of all share accounts.

The motion was eventually passed

Goodies: Tote bag (with DTB cap, spiral notebook) lunch box (juice, water, apple, samosa, drumstick, chicken pie)

Hat tip: Coldtusker was in the house and asked some pertinent questions.

Regional diversification

Taking regional investments a step further – how are various local listed companies doing on the regional front? January 2008 showed that having a focus on Kenya alone could be an Achilles heel despite it being considered one of the strongest economies in the region. Various listed companies are making pushes in East and Central Africa – however many of these countries are all dependent on Kenyan access, hence it’s not really true diversification of political risk. In that sense, Olympia Capital, an NSE laggard may be ahead of its peers with its tangled Botswana and South African corporate moves.

here’s a recap:

  • CMC says regional sales are on target in Uganda and Tanzania (from ½ year results this week)
  • Diamond Trust has set its sights on Burundi (adding to Uganda and Tanzania) while many other banks have targeted Rwanda.
  • East Africa Cables attribute good performance to their subsidiaries in Uganda, Rwanda and Tanzania
  • KCB has subsidiaries in Uganda, Tanzania and S. Sudan (though it wrongly had the flag of Sudan on its’ annual report cover. These countries contribute less than 10% to their income and Ug had a loss of 49 million (setup costs) while Tz barely broke even with a profit of 0.2m in 2007. KCB opened in Kampala in November 07 and will open 6 more Ug branches in 2008, 4 new ones in S. Sudan in 08, and another 20 new branches in Tz over the next two years according to their annual report.
  • Kenol who after acquiring Kobil could be the first 100 billion shilling turnover company, have subsidiaries in Uganda, Tanzania, Rwanda, Zambia and Ethiopia. 80% of their sales are from Kenya, while the other countries contribute about 20%.
  • TPS East Africa acquired 8% of Serena Rwanda which includes Kigali Serena and Lake Kivu Serena. Of Serena’s 2007 sales of Kshs. 3.7 billion (~60 million), Kenya accounted for 64% and Tanzania 36%.
  • Total Oil Kenya has sister companies in Uganda, Tanzania Congo Rwanda so essentially remain a Kenyan company with 97% of their sales being local. They, however, complain in their 2007 report that other countries who should be buying from Kenya are (because of our tax regulations) buying offshore and shipping through Kenya instead.
  • Sameer Africa are looking for transporters to Somalia, DRC, Ethiopia, Rwanda, Sudan, Burundi, Mozambique, Zambia, Malawi Uganda and Tanzania for their products.

Regional banks and dueling websites

Diamond Trust Bank will this month ask their shareholders to approve:
– participation of the bank in a rights issue of their Ugandan subsidiary
– Approve expansion to Burundi (odd or smart considering that other banks have focused on Rwanda)

Dueling web sites

DTB, with a new corporate name, has a new website but they should probably map /discontinue their old site or it may give the impression that its another company that doesn’t bother to update its website.

KCB who are also going to increase their capital to support regional expansion, and cross-listing on the stock exchanges in Tanzania and Uganda, have consolidated their company to a group website, abandoning their kcb.co.ke

Also caught up in the confusion of domains between (.co.ke) and (.com) is the Safaricom IPO. The former is the official site, which applicants could use to apply online for shares. The government should have cracked down on transaction adviser – Dyer & Blair who opened the latter site and may have created some confusion. Though more active and up to date (even has a blog of sorts), the Dyer site attracted people who thought it was the official site and some confused investors have been logging in their to track their applications without realizing that it is not the official site