Category Archives: Scangroup

Banking on Other Income

It’s crunch time in Kenya’s economy and many companies are feeling the pinch. While operations may be hurting, listed (and unlisted) companies still strive to report (increasing) profits to shareholders and they will look to unconventional, or other income opportunities to deliver by year-end:

some examples; 

East African Portland Cement: Went from a profit warning issued at their ½ year to a full-year profit increase thanks to a property revaluation exercise.

Mumias Sugar: Full-year profits were attained due to a tax credit they gained from investing in electricity co-generation.

Scangroup: Profit in the ½ year was credited to income from their investment in Government bonds.

Access Kenya: Profit growth in the ½ year was attributed to the strengthening of the US$ against the Kenya shillings – and most of their revenue is dollar-denominated.

Counting on Other Income: Going forward, other companies can also employ similar measures to plug income gaps e.g.

  • Tax breaks from listing – Safaricom.
  • Green energy – carbon credits, co-generation – Kengen, Safaricom.
  • Fibre cable/IT investment writebacks.
  • Property and investment revaluations.
  • Forex: a weak shilling is usually good for Kenya Airways and tea companies.

Pepsi to Kenya?

. Nairumour that after an absence of many years, Pepsi will re-enter the Kenyan market in the near future to resume battle with Coca Cola, possibly through their South African partners. If so, it will cap a great year for investment to the country, and that despite 2008 being a relatively tough year for investors and companies, with the post-election violence, business disruption, high fuel and energy prices, depressed consumer spending, P & P madness (pirates and politicians) collapsing stockbrokers, there was a steady flow of new investments and new products that happened this year.

Re-cap of some notable ones

Banking
– Takeovers concluded – Ecobank take over of EABS, and Stanbic merger with CFC (now CFCStanbic)
– UBA licensed (2009)
– Gulf African and First Community (Shariah banking kicks off)

Beverages
– Summit Lager a new beer from Keroche Industries
– East African Breweries launched Alvaro (malted soft drink)
– Coca Cola launched Novidia (another malted soft drink) and also started selling Minute maid
– KETEPA launched Safari Iced Tea

Communications
– WPP buys into Scangroup
– 2008 saw the launch of two new mobile operators – Orange (France Telkom) and Yu (Essar/Econet) to battle Safaricom and a re-energized Zain
– Altech buys into KDN
– A long-running fight over one(EASSY)submarine cable, gave birth to three different ones being laid to Mombasa
– Wananchi launched Zuku (TV, Broadband, Phone)

Transport, Energy & Manufacturing
– Tiger brands buying into Haco
– An investment in the Kenya Oil Refinery at Mombasa was still under battle between Libyan and Indian Investors
– Jinchuan (China) to bail out Tiomin?
– Mirambo and PD Toll to salvage the Rift Valley Railways
– Delta Airlines (USA – but postponed to 2009)
– Air Arabia started flights to Kenya

Tourism
– Libyans took over the Grand (Laico) Regency
– The Tribe opens.

Exits
– Chevron (Caltex) sold out – bought by Total
– Unilever (de-listing from the NSE)
– Roy Puffet from rift Valley Railways

Take Crash Positions

The Nairobi Stock Exchange (NSE) halted trading today for 15 minutes after the index fell by over 5%. (damn: just as I’m ready to sell some shares)

Elsewhere:

Safaricom: AKS says that pre-IPO shareholders lockout window has ended – so now can Vodafone start buying up some Safaricom shares and stem our losses?

Equihealth while other banks are sleeping, Equity Bank leads the way again this time venturing into health insurance. They have four plans starting as low as 6,700 (~$100 a year that include pre-existing conditions, HIV/AIDS, maternity, dental, eye-disease. (wow, medical insurance is a minefield, but Equity can sets its own terms in the industry and change the rules in the medical insurance industry)

The plans are;

  • Mango @ cost Kshs. 6,700 per person per family for inpatient (Kshs. 13,300 per person for in & out patient), covers up to Kshs. 75,000
  • Passion @ Kshs. 8,500 per family (Kshs. 15,100 per person for in & out patient), covers up to Kshs. 150,000
  • Melon @ Kshs. 16,000 per family Kshs. 27,600 per person for in & out patient), covers up to Kshs. 500,000
  • Apple @ Kshs. per family (Kshs. 35,700 per person for in & out patient), covers up to Kshs. 1 million

Scangroup: (Bharat Bank) As part of the sellout employee shareholders are seeking shareholder approval to sell up to 25% of their shares during the lockup period which is supposed to end in August 2009

Scangroup Sellout Part II

More details on the Scangroup sale of a controlling stake to the WPP Group (UK) are out now. The mechanics will involve:

  • Investment of Kshs. 1.325 billion [~$18.2 million] into Scangroup (with Kshs. 400 million for working capital, Kshs. 650m for acquisitions, and 30% for in-house improvements including new ‘office space’)
  • Existing shareholders approving an increase in share capital from Kshs. 180 million to 240.7 million [~$3.82 million]
  • Creation of 60.7 million new shares which will be offered to Cavendish Square Holdings (WPP subsidiary) at Kshs. 22 per share (Scangroup currently at 28.50). This will dilute existing shareholders stakes by about 8% each
  • WPP get the right to nominate two directors and are locked in until 2012
  • WPP will become the largest shareholder at 27.5% followed by MD Bharat Thakrar 20.6% and Chairman Andrew White 11.93%
  • Retail bail?; Scangroup now has about 39,000 shareholders, down from 44,000 earlier this year.

Scangroup sellout, new bank?

Scangroup takeover WPP acquires effective control over Scangroup which was listed on the NSE in 2006, by buying 27.5% of the company, but not taking over or de-listing. They also have pre-emptive rights over a chunk of CEO Bharat Thakrar (and largest shareholder) stake when his lock-up period expires in 2011. Aly Khan (Rich.co.ke) points out that the slumping NSE offers cheap company shareholding buy opportunities e.g Scangroup and Unilever Tea (going private)

More Libya: 2010 may see another bank to Kenya this time Libyan / Ugandan Tropical bank. Does Kenya need another bank really? And $19 million share capital won’t go very far these days.

Entrepreneur Opportunity: The 2008 Pioneers of Prosperity Africa Awards rewards six business leaders of Africa who serve as role models to Africa’s aspiring entrepreneurs and demonstrate business excellence, innovation, and profitability. Submissions will be accepted from Botswana, Cameroon, Cote d’Ivoire, Ghana, Kenya, Namibia, Nigeria, Rwanda, South Africa and Uganda and a total of $350,000 will be awarded to the winners. D/L 31 August 2008.