Kakuzi 2008 AGM

some excerpts

This small company meeting at the Norfolk shows the importance of having a Chairman (Dr. T R Fowkes) who knows the company well and can interact well with the shareholders. It also shows the pitfalls of having an enlightened shareholding, who can ask some uncomfortable questions of the board, when they don’t receive dividends.

Auditors: Were a hot-button issue today as shareholders questioned the level of disclosure in the financial statements, level of segment reporting e.g. on the sale of timber pole to KPLC. The Kakuzi FC said they were sold at about Kshs. 12,000 per pole (and the Chairman said that operating segments reporting will become a requirement from 2009 – IFRS 8 as will other rules, while the auditor from Pricewaterhousecoopers said it was up to the board to choose which rules to apply before the deadline). The independence of valuations (Siret Tea assets were valued by the Board) was also challenged, and the auditor basically explained that the board was responsible for the accounts (washed his hands, as one shareholder put it), while the Chairman assured shareholders that everything material was in the accounts presented and that the auditors had seen all the detailed accounts.

Dividends: No dividends for yet another year. The Chairman explained that the company had a largely paper profit (from the revaluation of biological assets), not an operational so the company could not afford dividends. The board was focused on reducing the company debt and payment of dividends was just not possible – essentially they’d have to borrow money to pay dividends. They could also try and sell more assets (but the sale of Siret Tea Estates last year generated a lot of controversy).

Crops: Kakuzi has uprooted all their coffee to be replaced with macadamia. They are also likely to uproot citrus. Meanwhile, avocado sales to France are doing well though there are no direct shipping routes.

Del Monte joint venture: The board has signed a new deal with Del Monte and will increase the acreage of pineapples. They previously had a long-running lucrative deal but which Del Monte tore up. After protracted negotiations, the joint-venture has resumed, but with terms not as super for Kakuzi.

Land: One shareholder asked about the safety of company land if the government chooses to resettle people. Chairman said most of their land had 999-year leases from the beginning of the last century.

Outlook for 2008 the Chairman said that this would be determined by four things which were being the company’s control:
– World tea prices. They were good earlier in the year, but the company could not take advantage owing to post-election violence.
– Rainfall in Nandi. There was a drought period in Q1 with production at only 61% but rains have been good in April/May.
– Avocado prices in Europe.
– The exchange rate. The Chairman believes the shilling is artificially strong and this may wipe out any gains from world tea prices.

Goodies:  Most unique so far –  a Kakuzi produce carton [with a Siret tea pack and a pineapple], also soda and bitings.

Share Portfolio: May 2008

treading water, pre-Safaricom

The Stable

Diamond Trust
Express
KCB
Scangroup
Sameer
Stanbic (UG)
Safaricom (?)
Total

What’s changed?
In: Safaricom
Out: ICDCI (Centum)
Increase: none
Lightened: KCB
Dividends expected: Diamond trust, KCB, Express, Total, Scangroup, Stanbic
Unexpected gains/losses: none
Best Performer: Stanbic (Ug), then Scangroup
Worst Performer: Express

Looking forward to: Increasing Safaricom holdings after the expected ⅓ IPO allocation, then Kenya Pipeline, Co-Op Bank (though their service is poor) and whatever other IPO comes along.

Performance Summary: The Motley Fool advises that investors should beat the share index to consider their returns a success. The NSE 20 share index is where it was six months ago: 5,153 (-0.08%), while I’m down 0.44% even after taking some cash out (chucking Centum) to meet unexpected January/February 08 payments and am still waiting for all the afore-mentioned 2007 dividends half way into the year.

Earlier portfolio summaries: – ½ a year ago November 2007 and a year ago.

Wanted NSE II

Accurate NSE data

Yesterday, I flipped through all the business news stories, and noted stock market rather flat/ with little trade activity But the 9 PM Nation news had Great News for Nation Media Group and Equity Bank whose shares jumped by 20 shillings to 356 and 15 shillings to 276 respectively. Funnily that had not caught my eye, on my phone updates, the Rich newsletter or even the KTN news. The Nation news ticker did not have the NMG share price, but it had Equity down by 1 to 259 shillings – and watching business news on Citizen TV later had Nation down by 17 shillings to 333 as did the CNBC Africa stock ticker.

It seems that since the NSE stopped updating their site on May 7, there seems to be a wide interpretation of how the days trading went. NSE Update: they now have yesterday’s prices list, and will probably follow with the company announcements made over the last two weeks

Stockbroker director info
In dealing with rogue stockbrokers, investors should be vigilant, read their statements from stockbrokers and the CDS, read newspapers, especial the Business Daily, browse stockskenya and other online forums – and visit and observe their banks and brokers.

There are warning signs given out which some heed. There are people who got out of pyramid schemes early and there are customers of Nyaga stockbrokers who observed the shady deals n their statement, complained and had their accounts “restored”. Some stayed on believing these errors, while others walked away before the fall, moving their share accounts intact.

A follow up to the where to buy shares series and following in the footsteps of great posts by Emerging Africa and Riba Capital. Many investors only came to know the director(s) of Nyaga Stockbrokers after the fall, so get to know the directors of the others before you invest

information from stockbroker websites, and Google caches

1. Afrika Investment Bank: Directors: Kibuga Kariithi, George Maina, Ken Wathome, Linus Gitahi.

2. Apex Africa: (no info online)

3. Bob Mathews: (no info online)

4. CFCFS wholly owned subsidiary of CFC and CFCFS Board of Directors comprises of Charles Njonjo – Chairman, Andrew Douglas Gregory, Sunil Sanger – MD, J.G Kiereini, Uday Jani, M. Soundararajan

5. Crossfield: Chairman-Nilesh J. Kotedia, J.T Swaley, Kumar Krishna (MD), Herbert Joseph Gore (GM)

6. Discount Securities (no info at site, but cache yields bios of directors– but which could be outdated; Chairman- William Murungu, Allan Simu, Executive Director- David Githaiga….)

7. Drummond Investment Bank (no information of directors at site, but Google cache yields bios of staff and their contacts – but which could be outdated: Ndungíu Gathinji (Chairman)….._)

8. Dyer & Blair : Has bios of key staff online: Jimnah Mbaru- Chairman, Mohammed Hassan- Joint Managing Director and Co-Chief Executive ……..)

9. Faida Investment Bank: Bob Karina (MD).

10. Kestrel Capital: Charles Field-Marsham, Founder and Director, Andre DeSimone, Executive Director.

11. Ngenye Kariuki is wholly owned by the Ngenye Kariuki family. (no info at site, but cache yields bios of staff and their contacts – but which could be outdated).

12. Reliable Securities (none), but Mr. Josephat Konzolo is the managing director.

13. Renaissance Capital: no info online but media reports have chief executive – Maina Mwangi, Terry Davidson, Mutahi Kagwe as directors

14. Solid Investments: Was previously 75% owned by Kithinji Kiragu. Other shareholders include the estates of former shareholders Mr. Cyrus Ita, a former Siakago MP and Mr. Dominic Kavuu, a former senior manager at Standard Chartered Bank (K). It will be renamed NIC Capital Securities after NIC acquired 58% for 157 million shillings in 2007.

15. Standard Investment Bank: (no info online) Media reports that Mr. Amish Gupta will be in charge after leaving Renaissance early this year.

16. Sterling Investments: Stanley Ngaine (Chairman), John E. Kirimi, Ahmed S. Ndope, David Ithanya.

17. Suntra: James H R Murigu (MD), Nguru Wachira (Chairman), George Ongaya-Okoth, David Kinyua Waweru, Mr. Fred Ngatia.

Scangroup AGM

Excerpts from the 2008 Scangroup AGM, Q & A session held today at KICC.

top issues were dividend cheques and bonus shares

Misplaced shareholder cheques: The question was posed by Mr. Shah, who’s probably the second most famous public shareholder after Mr. A W Chami and who had waited for nine months for a dividend cheque error to be corrected, and was faced with bank charges of several hundred shillings for his efforts.

In response, the company said they were working to sort out shareholder cheque and unclaimed dividends issues: 

  • Said the figure was now down to 3.2 million shillings. (which if unclaimed after a few years, will go to CMA)
  • Passed some blame on to stockbrokers who have not reconciled some accounts since the IPO
  • On cheques, they have an arrangement with their bankers (CFC), so customers could cash their cheques for free can (at the CFC upper hill branch)
  • Said electronic (EFT) payments had not been successful because a lot of information provided by shareholders was wrong.

Bonus shares: Several shareholders argued for bonus shares. Chairman replied times that – it was not the right time, they will cross that bridge when they get there, when they need to they will adjust their capital, will look at fund-raising at that time (shares were not the only avenue available)

CSR: Company is weak; Chairman replied they are doing more this year including some work with IDP’s.

A marketing company that does not market! Can the company do some advertising so it becomes well known?; CEO replied that they pitch to corporates and there’s not a marketing person in East Africa who is not aware of the company or its affiliates.

ESOP: It was good to have discussions at this AGM on the company’s employee share ownership plans (ESOP) – as CEO Bharat Thakrar explained that the board had approved for 6 million shares a per year to be availed through the ESOP to key revenue drivers and to ensure that senior managers were very well incentivized. All managers get targets, which entitles them to some options at the end of the year. The Chairman added that the shares were not free, were paid for by managers to the company and were priced on the date of acceptance i.e. market price. The report 2007 report noted that was ESOP set up under a trust deed in February 2008 but that no options have been granted so far, though shareholders have approved 15 million shares.

African ambition: Different shareholders challenged the board their ambition to be the biggest media buyer in Africa by 2010 when they (i) didn’t have the capital (ii) had dormant offices in Malawi, Mozambique, Zambia and Nigeria. The first shareholder was actually asking the company to give bonus shares/increase float (from the current 160 million shares to at least 250 million) while the CEO answered to the second – that all the offices were active, (except Nigeria) and were used for billing companies in those countries.

Cross-listing: One shareholder asked them to cross-list as their market was also Uganda and Tanzania. Chairman said it would make sense at the right time, but it was also very expensive to do.

Super sleuth: One eagle-eyed shareholder pointed out, and the company confirmed the error; that the top ten shareholders (printed in the annual report) had 66, not 50% of the company shares.

Goodies: Lunch offered, at KICC grounds, but no details.

Economic Stimulus Friday

This month US citizens get a second windfall cheque from President George W. Bush as economic stimulus cheques arrive in their mailboxes of at least $300 (~Kshs. 19,000) per person, and more for parents and guardians with children. (The first was after he pipped Al Gore to the presidency and came through with one his main campaign promises).

But they are being rewarded and banks cushioned largely because of blind/(dumb)real estate and investments decisions – buying houses & using up credit on borrowed cash of extending sub-prime finance in anticipation of even higher housing prices.

Kenyans went though a contested election and a period of post election violence, after they did their part and voted faithfully in the presidential election. 99% had no part in the election tallying or violence that followed or the stalemate that paralyzed the economy for two months.

But instead of a stimulus, we are coping with higher food, fuel, and transport prices that are only expected to get higher in the aftermath of rising oil prices, an expanded government, infrastructure repair projects, and the downturn of agricultural produce this year.

Instead of a stimulus, the Government has flatly refused to
lower petrol taxes (which may ease some of the burden on citizens and companies), and civil servants (government workers), are being asked to contribute financially to the resettlement of displaced Kenyans – a target figure has been arbitrarily set at Kshs. 30 billion ($485 million). It remains to be seen how much will be raised from citizens who were able to fork out over 80 billion shillings ($1.3 billion) in pursuit of the Safaricom IPO (and money for which the Government still holds)

So who needs a stimulus more?