KQ’s 787 dreams

What seemed like a rough year for Kenya Airways year ended last week (March 31). Half year, pre tax profits were 2.8 billion shillings ($43 million) (down from 3.4 billion) the year before. They had lost a new 737-8 aircraft in a crash, had seen fuel reach record highs ($85 a barrel in September) and were being hammered by the strong shilling. Since then we had the dispted election and resultant violence, reduced traffic to Kenya, canceled tourist bookings & flights, while fuel continued to climb ($111) a barrel yesterday.

The start of the new year also off to an unfortunate start with a further delay in Boeing 787 dreamliner program which was the center of the future fleet of KQ – they had ordered nine of the new jets, with the first schedule to arrive in 2010. The 787 was supposed to be delivered to customers last year but is yet to fly and is not expected to be delivered to customers till late next year, meaning KQ as customer No. 28 will probably not get the planes that are critical to their long-term plans until around 2012.

No calls please: Zain (Celtel parent) has successfully tested mobile roaming service on aircraft and says it will soon be available in Nigeria and 10 other countries including Kenya. I hope not, flying should remain mobile free – maybe for text, data only.

IPO Hard Choices

It’s getting very hard to stick with my avowed IPO bypass plan with Safaricom. The market is so liquid now, and may dry up later, so why not take advantage of it now? Also, I read one I-bank analysis of IPO’s in the last few years, that shows that all (except Eveready) have significantly out-performed their IPO price, and Safaricom is not Eveready! Still, reading Maishinski comments here about paying a premium, and likely refunds, there’s still great upside for capital appreciation, in a company growing at 30% a year with a likely dividend of 0.15 this year.

just when I thought I was out, they pull me back in!
More IPO

  • Banks versus Brokers Dyer & Blair have set up an IPO center on Loita St. that is open 7 days a week (weekdays 7am to 7pm). Brokers have to fight tooth and nail with commercial banks to get their IPO commissions since the banks have a much larger branch presence to earn a 1% commission on each application. That’s why stockbrokers can be found in supermarkets, cybercafés and bank halls (the latest is Drummond and Suntra brokers at Consolidated Bank) selling IPO’s to earn their 1.5% commissions. You are sometimes scared of making contact with a sales agent when you walk past a bank tent or broker desk in a movie hallway with Safaricom brochures and forms waiting.
  • What’s worse than taking an IPO loan? Paying for shares using a Barclays card (or debit card)
  • Regional: the first confirmation of an over-subscription comes the East African with a report that NSSF Uganda will get 1/3 of the shares they applied for – or about $11 million worth (out of $34 million). [1.3% of the shares on offer].
  • CFC takes the IPO to Rwanda via Fina Bank.
  • International: Wambia Capital offers US institutional investors and high net-worth individuals a chance to invest in Safaricom service only applicable to sophisticated investors for secondary market issues.
  • Boardroom dealing: Former LSK Chairman Former LSK chair makes a damning accusation about Mobitelea and its cabinet allies.

Kenya 2007 Bank Ranking: Part II

Return on Assets pre-tax profits
Oriental 12.33%
StanChart 5.37%
Imperial 4.81%
Bank of India 4.58%
Barclays 4.48%
Then Equity (4.45%), I&M, NBK, Credit

Return on Equity
StanChart 53.23%
Bank of India 40.58%
Barclays 38.73%
CBA 38.71%
KCB 38.45%
Then Coop, Imperial, Stanbic, NBK, I&M

Loans to deposits ratio
DBK 153%
K-Rep 114%
Middle East 99%
Barclays 97%
NIC 90%
Then Housing Finance, Stanbic, Bank of Africa, Imperial, I&M

Ratio of government securities to customer loans Government-friendly
NBK 284%
Habib Bank 237%
Habib AG Zurich 188%
Bank of India 156%
Baroda 85%
Then City Finance, StanChart, Equity, Credit, DBK

NPA as % of Loans
City Finance 132%
Oriental 116%
Paramount Universal 82%
NBK 70%
EABS 67%
Then Consolidated, Guardian, Transnational, Housing Finance, Southern Credit

2007 Provisions to NPA ratio prudential banks
Stanbic 33%
I&M 30%
Giro 29%
Bank of India 22%
Diamond Trust 18%
Then CFC, Prime, ABC, K-Rep, Chase

Staff Expenses good employers?
Kenya Commercial 4,813 (4.8 billion shillings)
Barclays 4,562
StanChart 2,492
Coop 2,395
NBK 1,495
Then Equity, CBA, Citibank, NIC, CFC

Staff costs/assets even better (paying) employers?
K-Rep 6%
Consolidated 5%
Transnational 5%
KCB 4%
Family Finance 4%
Then Coop, NBK, Housing Finance, Imperial

(Non-interest)/commissions as a % of Total income charge you for breathing air in their branches
Oriental 87%
EABS 61%
Baroda 60%
Family Finance 53%
Equity 53%
Then Consolidated, Coop, Paramount Universal, Bank of Africa, KCB

Placements (short term cash in December 2007) to offer as IPO loans?
CBA 9.4 billion
Equity 6.9 billion
Stanbic 5 billion
NBK 3 .9 billion
Barclays 3.1 billion
Then Citibank, NIC, KCB, Imperial, Diamond Trust

One week gone

The Safaricom IPO is one week old today

IPO briefs
– Reason #1 to have government as a shareholder = tax breaks!: Not that Safaricom needs any, but the increase in share capital to Kshs. 6 billion has been exempted from stamp duty by the Finance Minister – saving the company about 6 million shillings ($94,000)
– Across the border: From Uganda we hear that Dyer & Blair is selling the shares at shopping malls, as is Uganda Telecom, while Standard Chartered Uganda is offering margin loans of up to Ushs. 50 million to buy IPO shares (~370,000 shares) what about Tanzania?
– More finance; Equity bank give the privileged Safaricom employees up to 100% finance, while even Barclays is hawking shares at it’s 112 branches. Also add Equatorial and K-Rep to the banks offering 100% finance
– Proactive MP : from an offline story in the Nation Nyeri Town MP Ms. Murugi Mathenge and the Nyeri South DC hosted an investors briefing on the Safaricom IPO. I hope other MP’s are as enterprenual and in touch with their constituents.

Opportunities

jobs on offer
from the papers

Top government vacancies
– Communications Commission of Kenya (CCK): director general & CEO who will regulate Safaricom and the telecommunications sector
– Director general at the Kenya civil aviation authority (KCAA)

Banking
– Equity Bank business growth & development managers, credit corporate relationship managers, credit managers
– KCB: business development manager, head, facilities & property management
– Gulf African bank: legal officer, corporate relationship managers, (Nairobi, Mombasa), manager structured finance recruitment@gulfafricanbank.com by 11/4

Others
– ICT Manager at Safari Park Hotel
– East African breweries: IS lead – great lakes region, logistic manager
– Telkom Kenya Chief HR Officer.
– Program assistant at the Open society institute for eastern Africa OSIEA

blog-exclusive!: Following the outcry over the announced large (bloated), a government committee has come up with an ideal ideal cabinet for Kenya of just 16 Ministers! fit in the names

Kenya Bank Rankings for 2007

the basics

Assets
Barclays Kenya 157,928 [i.e. 158 billion shillings, ~ $2.43 billion]
Kenya Commercial 112,211
Standard Chartered 91,252
Cooperative 65,697
Equity 53,129
Citibank Kenya 47,301
National Bank of Kenya 41,414
Commercial Bank of Africa 39,509
Stanbic 34,464 *
NIC 31,396
Diamond Trust 30,313 [30.3 billion, ~$466 million]
Investment & Mortgages 29420
CFC 28,020 *
Baroda 14,709
Prime 13,862
Imperial 11,723
Housing Finance 10,414
Bank of India 10,344
EABS 9,452
Family Finance 8,569 [8.6 billion, ~$132 million]
Fina 8,089
Bank of Africa 7,657
K-Rep 7,039
Habib AG Zurich 6,206
ABC 6,143
Chase 5,754
Giro 5,611
Guardian 5,540
Southern Credit 5,306
Equatorial 4,879
Development Bank of Kenya 4,708 (4.7 billion shillings, $72 million)
Victoria 4,131
Consolidated 4,109
Habib Bank 3,845
Credit 3,358
Transnational 3,221
Fidelity 3,192
Middle East 3,097
Paramount Universal 2367
Oriental 1,695
edit Dubai 1,544
City Finance 744 million shillings (~$11 million)

Profit before tax
Barclays 7,079 million (i.e. 7 billion shillings, ~$109 million)
Standard Chartered 4,897
Kenya Commercial 3,863
Equity 2,364
Cooperative 2,287

Deposits
Barclays 109,097 million [i.e. 109 billion, ~$1.68 billion]
Kenya Commercial 85,638
Standard Chartered 73,841
Cooperative 54,775
National Bank of Kenya 34,722

Loans
Barclays 105,346 million [i.e. 105 billion, ~$1.62 billion]
Kenya Commercial 56,477
Standard Chartered 39,469
Cooperative 34,832
NIC 22,209

Source: from audited accounts for 2007
– * CFC and Stanbic merger not finalized
– Missing from the list are Gulf African, and First Family – which as Shariah Banks are treated differently, and Charterhouse and Dubaibanks