Shares Portfolio November 2013

Performance: Compared to last quarter and also a year ago, the portfolio is up 50% in value from last year (excluding new investments), while the NSE 20 share index is up is up 22% since November 2012.

The Stable

Last 3 months

Barclays ↑

Bralirwa (Rwanda) ↓

Centum (ICDCI) ↑

Diamond Trust ↑

East African Portland Cement ↑

Equity Bank ↑

KCB ↑

Kenya Airways ↔

Kenya Oil ↑

Safaricom ↑

Scangroup ↓

Stanbic (Uganda) ↑

Unga ↑

Changes

In: Kenya Airways

Out: None

Increase: None

Decrease: None

Best performer: Portland Cement (up 47%), Safaricom (39%), Centum

Worst performer: Kenol (down 18%), Bralirwa (-8%)

Looking forward to Deal-making at Unga, Scangroup, MTN if they materialize.

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Improving NationHela

Despite the ease of use, and convenience of Nation Hela as an online prepaid card and as a travel card, there are few challenges that need to be tweaked to improve the user experience for National Hela users.

Card Top Up

The only reliable way of topping up the card is by physically going to a Diamond Trust Bank branch. Agents of the bank don’t handle NationHela top-up’s and surprisingly, Safaricom’s M-Pesa – which would be the ideal way for millions of Kenyans to load a card – does not work all the time. It’s a hit or miss experience, with many phone calls having to be made to Hela at Diamond Trust to trace the date/time/amount of the M-Pesa transfer – only for that to be reversed.

Account Management

For now you can request for an abbreviated statement by SMS, as well as get an SMS each time you transact with the card in Kenya.

There’s also the NationHela site, where a user should be able to view a history of transactions, and do other functions like block a stolen card. But access to the site remains a challenge – at first it looked like another bank site that only works on Internet Explorer browser and a Microsoft Windows PC combination, but no matter the device tablet, mac, or PC laptop, access to the site is a challenge – with password characters not visible, password changes not reflected, pop-up’s (that are auto-blocked on many browsers due to spam) etc.

Easy of top-up and viewing transaction history are two essential user experience challenge points that need to be addressed, for the card to get wide acceptance.

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NSE Moment: Buyouts, Vultures, Divestments

A look at recent deals at the Nairobi Securities Exchange (NSE) and other privatization and equity bids since the last update.

Divestments

Essar released a bombshell from India that they would be abandoning their investment in the old Kenya Pipeline Refineries and sell their stake back to the Kenya Government for $5 million. At the same time a Receiver Manager put up (the closed) Pan African Paper Mills up for sale, but that is likely to be complicated by links the company had with vulture funds who purchased Panpaper’s debts in the international secondary debt market. These faceless entities — basically different mutations of one group (going by the names like Noon Day Asset Management Asia and Farallon Capital Institutional Partners) — and 11 such firms own 37% of the company’s debt.The Essar fallout prompted Parliament to also look into the mystery of Orange Kenya which keeps asking for more government support even as the government loses equity in the company.Since then, the government announced that a new office will advise the government on state investments: Attorney-General Githu Muigai said the Government Transaction Advisory Services Office will guide state deals with the aim of sealing opportunities where the latter has been losing its shareholding in parastatals without monetary gain.
EDIT: Another divestment is Kenya Wine Agencies Limited (KWAL) finally exiting Uchumi after disposing of all its shares. It had 18% in 2004 and 4% in 2012. – via @NSEKenya

Done Deals

Recent M&A deals approved by the Kenya Competition Authority include:

Agri-Business: The acquisition of Juhudi Kilimo (turnover of Kshs 30 million) by Soros Economic Development Fund.
Aviation: The acquisition of Lady Lori Kenya by Ian Mbuthia Mimano, Adi Vinner and Peter Nthiga Njagi.
Education: The purchase of 60% of Safer World Investments by School Operators Limited (owners of Peponi School) (The two will have a combined turnover of Kshs 672 million or ~$8 million)
Finance & Banking: The acquisition of Francis Thuo & Partners by Equity Investment Bank.
Food: The acquisition of 66% of Coca-Cola Juices Kenya by the Coca-Cola Export Corporation.
The acquisition of Lonrho PLC by FS Africa (as part of a $280 million deal in South Africa).
The acquisition of Ma Cuisine by Harper Holdings.
Health: The acquisition of Jampharm Chemist by Viva Afya (the two have a combined turnover of Kshs. 19.5 million).
The acquisition of Ascribe Group (which has a turnover of Kshs 70 million) by Emis Group.

Deals Bubbling

Brookside Dairies have taken over Buzeki, the makers of Molo Milk, in a Kshs 1.1 billion ($13 million) deal that increases Brookside’s share of the dairy market to 44%. – EDIT GAZETTE NOTICE No. 15068 – THE TRANSFER OF BUSINESSES ACT: NOTICE is given that the furniture, fittings, fixtures and the assets and the stock being the business of manufacturing and selling of milk and milk products owned by Buzeki Dairy Limited (the “Transferor”) on the premises situated at Ganjoni, Mombasa have been sold and transferred by the Transferor to Brookside Dairy Limited who will carry on the said business of manufacturing and selling of manufacture of milk and milk products at the premises of Brookside Dairy Limited under the name and style of Brookside Dairy Limited (the “Transferee”) with effect from 1st November, 2013 (the “Completion Date”).The address of the Transferor is Post Office Box Number P. O. Box 85532-80100, Mombasa, Kenya. The address of the Transferee is Post Office Box Number P.O. Box 236–00232 Ruiru, Kenya. The Transferee is not assuming nor does it intend to assume any creditors or debtors of the Transferor incurred in connection with the purchase and business of the assets of the Transferor up to and including the Completion Date and the same shall be paid and discharged by the Transferor and likewise all debts and liabilities owing and due to the Transferor up to and including the Completion Date shall be received by the Transferor. Dated the 5th November, 2013. KIPKENDA & COMPANY ADVOCATES, Advocates for the Transferor. COULSON HARNEY ADVOCATES
Centum shareholders approved new investments in Liberty Beverages, Mvuke Power, Two Rivers Lifestyle Centre, Centum Share Services, Centum Asset Managers (who are buying Genesis Kenya) and the acquisition of 79% of Kilele Holdings.
Africa Media Venture (AMVF) a Dutch-based venture capital firm has raised its stake in a Kenyan restaurant guide website, EatOut, from 25% to 32% for Kshs 17 million ($200,000) in a transaction that values the online portal at Kshs. 220 million.
Lonrho is selling its entire stake (11%) in African airline Fastjet.
Crystal Ventures (owned by the Rwanda Patriotic Front) plan to sell their 20% stake in MTN Rwanda, in an IPO which will make MTN Rwanda the third company listed on the Rwanda Stock Exchange – after Bralirwa and Bank of Kigali.
Sameer Investments is buying out 41 million shares that Bridgestone owns in Sameer Africa – after which Sameer will own 159 million shares equivalent to 72% of the company.
Across the border, Tanzania’s Precision Air is looking for a government investment, just a year after an IPO which raised $7 million and reduced the shareholding of Kenya Airways from 49% to 35%
Unga Group will acquire Ennsvalley Bakery for Kshs 125M ($1.5 million) and also dispose of its shares in Bullpak.
EDIT: Kestrel Capital has arranged a $1.2 million private placement of convertible debentures in Stockport Exploration to local Kenyan qualified investors. Stockport is listed on the Toronto Stock Exchange and has mining interests in Nyanza Kenya where they are exploring along a prolific gold-hosting greenstone belt. Zeph Mbugua, the Chairman of TransCentury, became a director of Stockport in February this year.
EDIT: Swedfund, the Swedish state’s venture capital company, and The Africa Health fund through The Abraaj Group, a leading investor operating in global growth markets, made a $6.5 million investment in The Nairobi Women’s Hospital, a leading private healthcare provider for women and their families (men and children) in East Africa.

Shareholder Restructurings

Businessman Christopher Kirubi is acquiring an additional 32 million shares in Centum Investments (for ~$8.6 million) which will raise the stake he controls to about 30% and he has received an exemption from complying with the NSE requirement to make a takeover offer.
After listing at the NSE, I&M shareholders have done a swop to bring the company’s investor numbers past the 1,000 shareholder mark.
The WPP Group (through Cavendish) is increasing its shareholding in Scangroup from 33% to 50%. WPP, the largest advertising group in the world, is strengthening its control of Kenya and the East African market ahead of the merger of the two other advertising firms – Omnicom the No 2. in the world (owners of TBWA) and No. 3 – Publicis (of France) – which, when combined, will be larger than WPP.

De-Listing’s – Companies leaving the NSE

Access Kenya Group after their buyout by Dimension Data was approved by the Government
CMC is at the conclusion of a buyout offer from Dubai’s Al-Futtaim Group who are offering existing shareholders Kshs 13 a share, or about $90m.
The Dubai-based conglomerate, which holds lucrative distribution rights for Toyota and Honda in its home market, will help the struggling Nairobi-based automotive group expand its brands beyond its existing stable, which includes Volkswagen, Ford, Mazda and Suzuki.
R.E.A. Trading, which owns 56% of Rea Vipingo Plantations has offered to buy out all other shareholders at a price of Kshs 40 per share, representing a 43% premium. The shares that have since been suspended from trading and will be delisted from the NSE if the deal succeeds.

Stalled Deals

There was a Financial Times (FT) article on queues forming to buy up East African retailers but deal opportunities at Nakumatt and Naivas have been hampered by shareholder/family disputes that darken their buyout reputations and possibilities.

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Guide to Abu Dhabi

Getting There: There are direct flights from Nairobi to Abu Dhabi on both Kenya Airways and Etihad that cost $600-700. There’s also Qatar Air with a stop-over in Doha and Emirates Air to Dubai, but which ends with a bus ride to Abu Dhabi City (it’s about a 150KM drive, and rather too short for a jet flight).

Sunset at the Yas Marina F1 track

Prior to departure, your airline would usually have arranged for a visa in Nairobi which is emailed ahead of the trip. The costs of the visa may vary depending on who’s doing your booking, and it can sometimes be free if you pay for a full holiday package. Mine cost $82 and included (a surprise) medical insurance that covered the trip.

On arrival. Clearance from the airport would have been quite fast, but it took about 1.5 hours as most people had to have an eye scan (picture) taken first and the queue was very long. Many tourists were arriving for the Abu Dhabi Grand Prix) and there were long queues for the scan, and for a rubber stamp after from a very tired official who was taking many cigarette breaks.

Getting Around: One company operates all the taxis you see around Abu Dhabi. Their website advises passengers of their rights such to see driver’s ID, have the electronic trip meter running, have the air conditioner on in the car, and they can refuse to share the taxis with other passengers – sometimes there’s a shortage of cars at busy times, and the in-car computer advises taxi drivers to go to certain points where there are many people waiting for rides.

The computer also cautions taxi drivers if they exceed the speed limit. The city is a marvel of wide highways, with fast moving traffic, and a level of orderliness that will be shocking to Kenyans. Traffic lights are strictly observed and it’s rare to find a traffic jam in the city.

The taxi journey from the airport to the hotel was about 50 Dirhams (AED) while a trip to a mall or office will be about 20 Dirhams. If staying longer than a week, one should learn to use the city bus system. With the heat and large spread of the city, walking long distances is not feasible.

Roaming Rates

Staying in Touch: Roaming rates are atrocious so get a local SIM card such as from Qtel or Du. This can be obtained at the airport in the case of Du and a line costa AED 100 (about Kshs 2,500) for a combination of call minutes and data that can also be topped up. Also, Wi-Fi is standard at many hotels as there are a lot of intentional business visitors.

Where to Stay: There are many international hotel brands in Abu Dhabi such as Crowne Plaza, Holiday Inn, Rotanna, Ritz Carlton, Westin, Intercontinental, Hyatt, Sofitel, Fairmont, and Radisson. Some of these are located at Yas Island which overlooks the formula one track that has a race in November each year.

The National newspaper was available in the hotel lobby for all guests free every day, and most hotels have discrete bars on the top floors serve alcohol to guests. Standard rooms with bed & breakfast go for about $100-250, and this comes with the standard international breakfast buffet, along with a touch of local foods like porridge, humus, sticky rice, seaweed soup etc.

Gold Souk

Shopping & Sight-Seeing: Abu Dhabi is considered one of the more expensive cities for visitors and it will cost an equivalent of about $50-100 per day for 2 to 3 taxi rides and meals around the city. (Excluding hotel costs).

Credit cards are widely accepted in most places, except in taxis which only take cash in local currency. The UAE Dirham can be exchanged into about a dozen other currencies (Singapore, India, Euro) and the dollars (fixed at about $1 = 3.6 AED) at forex bureaus in malls and the airport.

There are a few large shopping malls (Marina mall, Abu Dhabi mall) and Souks (markets) like the gold souk that is located in the Madinat Zayed shopping centre. For transit flyers (using Abu Dhabi airport), the duty free section there is rather tiny, and pricey, compared to the selection at Dubai airport. But if you fly in with the Eihad, the national carrier, showing your boarding pass around town may entitle you to discounts at some hotels, restaurants, car rental, and recreation sites.

Practice your pit stops at Ferrari World

Sights to see include the Sheikh Zayed Grand Mosque, and lot’s of unique architectural towers. Others popular with tourists include the Corniche which is a 6 KM long park where you can cycle, jog, even swim in the heat, and another is Yas Water World. But one of the most unique sites here is Ferrari World Abu Dhabi on Yas Island where adults and kids can can spend hours on a variety of motor stuff – roller coasters, virtual reality tours of the Ferrari factory, view the history of Ferrari racing, race karts, eat, shop for merchandise, and still not cover the entire complex.

With more time, you can do other stuff like take a desert drive, boat ride (from Yas Marina), or go to other cities like Al Ain and Dubai which is about 1.5 hours max away on a ‘real’ super highway.

Odd Points: Abu Dhabi is a Muslim country, but one that’s quite moderate in terms of what’s forbidden. Still there are signs cautioning visitors to dress modestly, and not to engage in public displays of affection, or consume alcohol in public.

Also the taxi drivers who are an international mix from many countries like India, Pakistan, Philippines, Algeria etc. are the people you are most likely to have a long conversation with during a brief stay. You encounter foreigners at almost all service points – with hotels, shops, malls, restaurants all staffed by a similar mix of foreigners, that you will wonder where the local Abu Dhabi residents are!

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Guide to Khartoum

A guest post by @Wiselar

Getting There: If flying from Nairobi, you have an option of either Kenya Airways (KQ) or Ethiopian Airlines. Kenya Airways operates both a late night (23:55) and a late morning (11:00) flight from Nairobi that costs about $600. For the Ethiopian flight, you will have to connect via Addis Ababa but it’s cheaper at about $450.

I went on the night flight from Nairobi’s JKIA. KQ operates an Embraer 175 on this route (though this changes a lot) and the flight time between Nairobi and Khartoum was about 2.5 hours.

On Arrival: On arrival in Khartoum (same time zone as Nairobi) at about 3 a.m., there was little activity at the airport other than our arriving flight.

Immigration forms are readily available and must be filled in duplicate. You must also watch out for the spacing on the form as they are arranged to cater for Arabic which goes from right to left. After filling out the forms, processing at the immigration counters is pretty quick. This is followed by a security screening of carry-on luggage before going to the baggage pickup area where with several baggage carousels around, where the luggage was ready for pickup on time. Airport officials require you to have your baggage tag and they counter-check against the one on your checked-in baggage, so keep it close.

Khartoum Airport road

Sudan requires all visitors of other nationalities to register as aliens on entry to the country and this costs $40. This should ideally be done before you leave the airport but you can also do it the next day if you don’t make it the first time. Most importantly, you will not be cleared to leave Sudan if you don’t register as an alien. This can cause inconvenience you if you didn’t know about it or didn’t spare enough time, especially on the day of departure, when it can be even more difficult or confusing as most officials only speak Arabic.

Getting Around: I had arranged a pickup with the hotel but a taxi from the airport to my hotel (about 14 kilometers away) would have cost about $10. There was no traffic at this time of the day so these charges may vary. I noticed there were more private vehicles than public means around Khartoum. Still, taxis are readily available and they are not too costly, but it’s always better to ask the hotel or a host to arrange the taxi for you and pre-negotiate the rates.

In Sudan, they drive on the right side of the world as does most of the Arab world. Also, it can get very hot, and people drive around with the air-conditioner on.

Rickshaws are also a very popular mode of transport in Sudan, and some owners do some extra ‘pimping’ work on them, such as shiny rims, to make them stand out.

Staying in Touch: If you’re a Safaricom customer like I am, roaming in Khartoum is via Airtel Sudan, Khartoum. Making calls and texting worked fine as expected but it was still expensive, and data charges while roaming are exorbitant so ensure you have your data turned off to avoid accidental connection. If you have to use your phone a lot, consider buying a local SIM. There are several local providers – Sudani, Airtel, MTN – but the biggest is Sudani. I didn’t get to purchase a local SIM but I’m sure this should be easy.

Out & About: Sudanese people are generally friendly. Being a Muslim country, the weekend is on Friday and Saturday with the first day of the work week being on Sunday. The locals are pretty easygoing and not too concerned about security. This is unlike Nairobi where you always have to be on the lookout. Since it is very hot outside, there are very few people walking the streets.

There’s also little or no police presence around town. This is unlike other African cities such as Abuja where there’s quite a heavy military and police presence

Arabic is the most widely spoken language in Khartoum. Hotel staff and officials from the meeting I went to were able to do basic communication in English. A lot of signage is in both Arabic and English so it is easy to get around. All the newspapers and other publications I came across were in Arabic.

Being an Arabic country, food is eaten communally, from a central serving with smaller side dishes to accompany it. Bread and meats are common. Pork is not allowed due to religion, and mutton (goat and sheep) is the most common type of meat.

As with many other African countries, politics takes center stage in conversations and to sum it up, the Sudanese people don’t defend Al Bashir as much as Zimbabweans do Mugabe.

I had to change to the local currency of Sudanese Pounds (SDG) as most places outside hotels will not accept US Dollars. With a daily budget of $20 for meals and $40 for taxis per trip, you can make it around the city.

Outside Khartoum’s Corinthia Hotel

Where to Stay: I stayed at one of the better hotels in Khartoum – Corinthia Hotel. A similarly-classed one would be the Al Salaam Rotana. A standard room at the Corinthia went for $210 for bed and breakfast before taxes.

Shopping & Sight-Seeing: There aren’t too many shopping spots around Khartoum. I also didn’t get time to go into their famous Afra Mall. You can however get places to buy curios (usually sold by South Sudanese nationals) but with very little variety.

Places for visitors to see include the meeting point of the Blue and White Nile Rivers, which is quite a sight. I was lucky to stay at a hotel that overlooked that view. My hosts mentioned there are tourist boat rides on the expansive Nile, and I would have loved to go on one if I had more time.

Odd Points: Due to sanctions, US products have little presence here. My hosts told me they have to purchase computer software via third parties in places like Dar es Salaam and Dubai. They also prefer to use open-source software because of these restrictions which is also the reason credit cards are not accepted in Sudan.

Also, a peculiar habit I noticed was a lady alighting from the lift when a group of men got in and having to wait for the next one.

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Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Shares Portfolio November 2013

Improving NationHela

NSE Moment: Buyouts, Vultures, Divestments

Guide to Abu Dhabi

Guide to Khartoum