Uh Oh

Here we go again The Indian Ocean Newsletter reports

Just a few months after the collapse of the Nyaga Stock Broker , a large company heavily indebted to its clients, another stockbroker on the Nairobi Stock Exchange (NSE) is in turn facing financial problems

Did the unintended collaboration of Coldtusker / Business Daily unearth the firm? This comes after several recent articles in the Business Daily on the renewal of broker licenses by the Capital Markets Authority.

Plastic cheaper: KCB lowering their credit cards fees. Annual fees for the KCB card will now be was 3,000 (~$47) from 4,000, while their Visa Gold will now be 4,000 (~63) from 6,000. Card penetration remain lows, I believe Barclays are the biggest company with 81,024 cards in 2007 (double 41,019 in 2006)

Entry-level opportunities (and expiry dates)
most from the daily papers last week
- Graduate trainees at the East African Portland Cement company (15/7)
- Management trainees at Unilever Kenya (7/7)
- Management trainees at Telkom Kenya (7/7)
- Young processionals program at the World Bank (15/7)

Safariom Day 16: Deals 3,939 Turnover 270.8 million shillings [$4.23 million] Avgerage 7.44 Closing 7.40 [+ 2.07%] High 7.55 Low 7.30 Last 7.45 Volume 36.4 million shares. Commentary: A constructive session. Bouts of indigestion are to be expected but those who had to flip [over leverage] have done so by now, given the volumes we have witnessed since the IPO. [Commentary and data provided by Rich.co.ke - Nairobi Stock Exchange Authorized Data Vendor]

KCB Rights reloaded

A half year after Diamond Trust , it’s now KCB conducting a second rights issue in the span of a few years. This comes at a time when international banks raising capital are facing more scrutiny than before.

KCB are back to ask their shareholders to chip in. In June 2004 they exceeded the 2.45 billion target and this time they are set to raise 5.54 billion ($86.6 million). How else is this issue different?

What has changed?
Then ; Now
June 04 : June 08
Focus – then Kenyan expansion & rebranding ; now East African expansion, Bank ESOP
New shares 50 million ; 222.1 million [but just 22.1 million in pre-split [PS] 2007 terms]
Price 50/= ; 25/= (actually 250 PS - pre-split 25% discount each time)
Market cap 8.7 billion ; 66.4 billion
2003 PAT 486 m ; 2007 2,974 million
Ratio 1:3 ; 1:9 (1 new share for 9 owned)
Result: oversubscribed; ? (Likely to be the same)

Cost of the offer
Budget:2004 offer – 104 million ; 2008 offer – 220 million
What costs more? : CMA approval fees – up 125% (13.75m), Transaction advisor – up 103% (8.1 million), PR/advertising – up 34% (17.4 m), Printing – up 30% (15 million), Reporting accountant up 26% (3.7m)
What costs less? Legal advisor down 58% (756,000), NSE fees down 50% (250,000)

Market players changed
NSE members 17:19
In Genghis Capital (new stockbroker?), Renaissance Capital, Bob Matthews, NIC (was solid) Afrika Investment (was Ashbhu)
Out: Francis Thuo, Nyagah, Solid, Ashbhu - stockbrokers
Morphed: Faida, Kestrel Standard Suntra (from brokers to investment banks)
IPO financiers: 2004 memorandum mentioned 10 banks and two building societies offering Rights Loans ; this time no mention as share loans are a touchy subject in 2008

Shareholders: Anchor shareholders - then and now : Government of Kenya (35%:26%), NSSF (1%, 7.8%), ICDCI (4.3%, 3.5%), Sunil shah, (2.06%, 2.33%) staff pension fund (4.12%, 2.32%)

Calendar: Record date 4/6, rights start trading 23/6, last day trade rights 11/7, last date to pay for rights 18/7, new share trade 15/8, [to stave dilution, investor accounts will be credited 10 days before new shares are listed]

Investment Decision: Advice on investing in KCB rights comes from the Nairobist newsletter.

Drip Friday

This started out as a post on DRIP’s – but went on to become a ramble about other drips (leaking taps) where small/retail shareholders and their companies lose hundreds of shillings individually and collectively lose millions of shillings from the investment fund pools in a vicious circle:

(a) DRIP’s are automatic dividend reinvestment programs. They are available in advanced financial markets and enable dividend cheques to be automatically re-applied to buy shares in the company - this would be very useful for the nearly 100,000 shareholders of Eveready who got 60 shilling ($0.93) dividend cheques this year that may cost more to clear than they are worth (the amount is so small, KRA can’t get their 5% withholding tax) local alternatives/solutions - small dividend cheques can be (i) processed through DRIP’s or (ii) Companies like Scangroup now have an arrangement where dividend cheques under 10,000 shillings can be cashed over the counter at no charge to investors at any Equity Bank branch. Shame that KCB branches doesn’t allow the same for their own dividend cheques (iii) More NSE companies should push for DRIP clauses for their owners (shareholders) as vigilantly as they do on corporate issues for their own employees (ESOP’s) and the Government (unclaimed dividends).

(b) Post-Safaricom Drip
big leaks
(i) There are investors who got no shares in the IPO because their stockbrokers did not place their orders, misplaced them, or for some other unthinkable (and perhaps sinister) reason. They are now chasing refunds of idle funds that have missed many opportunities over the last three months
(ii) There are investors who got 21% allocation, but because they took bank loans for the IPO, now owe the banks more than their shares are worth (and whose price is sliding). In addition to being charged interest, they have to pay for loan statements, transfers, and other fees for many months - and most can’t sell their shares until they pay off the loans.
(iii) The banking sector whose rules on Safaricom IPO refunds seem to change every other day – from forcing people without bank accounts to open accounts to receive their money (there was no obligation going into the IPO, so why should there be coming out? to not allowing encashment of IPO cheques (a DRIP formula would have been handy here) , to specifying which banks people could encash their cheques. solution M-Pesa the cash to investors - which was a clause in the initial IPO prospectus and would have boosted Safaricom’s 2009 revenue and profits
(iv) The Capital Markets Authority has imposed a Kshs. 1,000 charge ($15) for every transfer/consolidation of shares. This fee will be borne by thousands of Safaricom investors when they eventually pay off their bank loans

(c) Companies Laws & Registrars:
(i) Stale dividends: Thanks to vague laws that don’t specify how long companies can take between the time they announce dividends and eventually pay them. It’s so long that some companies may not be able to afford the dividends they announced months ago as they are still recovering from post-election events.
(ii) Company Registrars: NSE companies complain about having too many shareholders and the cost of mailing them accounts each year. The KCB rights issue is on now and I have received five copies in the mail in the last week. So how many of KCB’s 150,000 shareholders are genuinely different? Many times the problem is borne out of IPO’s where people apply in multiple names and accounts in the hype hope of getting higher allocations. But once the euphoria dies down, and after chasing numerous refund cheques, they forget or make no effort to consolidate their accounts. This leads to them getting five smaller dividend cheques and five sets of accounts - which are very expensive for the company to mail out to every shareholder. There are also another class of (reluctant) shareholders - who sold some of their shares, but because of the minimum trade lot order amounts (100 shares minimum per trade) are now left with a balance of shares that they can’t sell, get meagre dividends for, but still get the same reports mailed out to them.
local solution/alternatives (i) Allow people to consolidate their accounts with the company registrar (but see b (iv) - the CMA has imposed an additional charge [after the Safaricom IPO] for account consolidation (ii) The NSE/a broker/or agent should set up an odd lots board where investors can sell their small lots of shares – 3, 10, or 50 shares, provided that they are liquidating the entire holding ( I hear one stock agent does this, but would like to hear from more and confirm that they do offer this service) (iii) Proactive share registrars: - who should realize they are sending out 5 bulky letters to the same address, and perhaps initiate a consolidation process with investors (iv) e-mailing of accounts & reports to shareholders: Several companies have amended their laws to allow for e-mail of information - but so far, the only one I have ever received by e-mail was from across the border (Stanbic Uganda).

So there’s a long rambling post; not meant to blame or criticize, but to inspire other ideas and debate. What are your suggestions on other ways to cut costs of serving the small investors?

Other corporates

Safaricom day 14 and 15: After just three weeks of dominating (actually killing) trade at the NSE, the company has been given a waiver to be admitted to the NSE index, punting Serena Hotels (TPSEA)

Friday: Deals 4,858 Turnover Kshs. 564 million ($8.81 million) Average 7.26 High 7.40 Low 7.20 Last 7.30 Volume 77.8 million - Strong session. Very constructive. We based out at 7.05 yesterday [v. positive on the charts because the post listing low was 6.65 and whenever got near there]. We are still witnessing some de-leveraging and therefore, sellers did scatter until half way through yesterday’s session. However, given the turnover since its listing, we must be nearer the end than the beginning of that process.

Thursday: Deals 5,342 Turnover Kshs. 410 million Average 7.29 Closing 7.25 High 7.50 Low 7.05 Last 7.20 Volume 56.2 million - Intra day low was 7.05, but we appear to be basing out. Sellers tipped their hands and chased the market down over the last three sessions. Near term, we have seen the bottom. [Commentary and data provided by Rich.co.ke - Nairobi Stock Exchange Authorized Data Vendor]

Housing drip: the Housing Finance rights issue closed today. I hope they realize their target, but they tried to time it to coincide with Safaricom refunds, with its delays in refunds and clearing cheques, then they got caught up by the KCB rights issue.

No purr? What’s up at Marshals? They have almost 100 vehicles (Kia and Peugeot - whose franchise has ended) vehicles currently at Mombasa Port that the Customs Department wants to auction. At least their former flagship branch in the city (& rumored new PM’s office) on Harambee Avenue has now become a Stanbic Branch.

Picture messaging from Safaricom

It’s been a long progression with Safaricom and picture messaging. Started out as a product for post-paid subscribers, and then was made available to pre-paid subscribers at 20 shillings each. It’s now been lowered again to a relatively affordable 5/= ($0.09) which is the same as a regular short text message (SMS)

Safaricom gets flack for its customer service especially for new offerings, but this ones seems to work well. Here are some old pictures sitting in my phone;


Military tank at Athi River railway station: (probably Ugandan-Army bound for Somalia peace-keeping)


Crocodile at Haller Park (Bamburi)
(However, during the daytime, most messages are relegated to a queues and don’t get delivered. Will try it again at night to load more from the phone archives

Safaricom Day 13
Deals 6,276 Turnover Kshs. 519.7 million [$8.12 million] Average 7.58 Closing 7.55 High 7.70 Low price 7.40 Last 7.40 Volume 68.5 million shares. Follow on selling, from yesterday. Sellers tipped their hands. Commentary and data from Rich.co.ke [N.S.E Authorised Data Vendor]

Dear Nairobi Star
Following in M’s footsteps:

To: Nairobi Star
Star life column on June 23
From: Bankelele

I read the Monday Nairobi Star (June 23 2008) which had the popular cost –saving ideas/feature piece.

However I was dismayed to note that the 'free stuff in Nairobi' in 'Star Life' column in the middle pages was lifted word-for-word and point-for-point from a blog post I did two weeks ago.

The Nairobi Star should acknowledge works that you use, and not pass it off as your own

Regards,
Bankelele (http://bankelele.blogspot.com)

Kenya Insurance 2007 Rankings

Insurance Company of East Africa Assets 19,151 million [19.15 billion or ~ $309 million] (profit of 545 million) [$8.8 million]
Kenya Reinsurance 14,710 (965 million)
Jubilee Insurance 12,459
British American Insurance 10,252 (512)
Kenindia Assurance 9,886
UAP Insurance 7,245 (888)
Old Mutual Life Assurance 6,447
CFC life -- (255 million profit)
Heritage AII 4,522 (364)
APA Insurance 4,491
Lion of Kenya Insurance 3,722 (179)
Phoenix (East Africa) Assurance 3,669 (103)
Blue Shield 3,109
Kenya Alliance 2,798
Madison Insurance 2,751
Cooperative Insurance 2,437 (140)
AIG Kenya Insurance 2,337 (217)
General Accident Insurance 2,192 (216)
Cannon Assurance 2,163 (60)
First Africa Assurance 1,781 (103)
Apollo Insurance 1,774
Geminia Insurance 1,223 (24)
Fidelity Shield 1,194 (98)
Trident Insurance 1,178 (54)
Real Insurance 1,107 (92)
Gateway Insurance 1,058
Tausi Assurance 949 (2)
Occidental Insurance 937 (63)
Mercantile Insurance 910 (34)
Standard Assurance 896 (6)
East Africa Re 872 (119)
Intra Africa Assurance 855
Corporate Insurance 809 (23)
Concord Insurance 757 (28)
Directline Assurance 730
Monarch Insurance 683 (9)
Amaco 674 (43)
Pioneer Assurance 508 (4)
Mayfair insurance 478 (-1)
Kenya Orient 443 (19)
Metropolitan Insurance 437
PACIS 220 (27)
Trinity Life Assurance 219

Nairobi Barcamp 2008

Barcamp was held on Saturday at the Jacaranda Hotel: Hash has a list of links to various re-caps from other bloggers.

Here's mine from the ½ day there

ISP's: Riyaz (of Wananchi) gave a talk on the coming changes in the ISP sector, as he talked about the various offering in the market now;
- Safariom Michael Joseph is Mr. Kenya with 10 million ‘voters’ behind him has 700MB that costs 2,000 shillings ($31.25) (Not enough), and other bundles
- Celtel has EDGE for 3,000 not well marketed. Not as good not that it has many more users
- Access Kenya Access at Home has two rates one for day (high traffic costs more) and another for night (much fewer people online, cheaper)
Wananchi offers 512K at 3,000 shared (Not dedicated which costs about 100,000 shillings – and said any ISP who promises you dedicated service at a sub-par costs is lying to consumers). They have Wimax for offices cost about 15,000, are going into cable TV (100+ channels) and will roll out to houses via cable which has higher capacity (separately they got overseas funding for their expansion so no need for a local IPO now )
- KDN have laid out more more fibre than anyone in Kenya, serve a few hotspots but the butterfly does not fly
- Orange/Telkom Kenya. They pay very good salaries to engineers and other members and will roll out data service in a big way soon. They are on CDMA which means that they require fewer base stations (50 in Nairobi to 300 for Celtel and 400 for Safaricom, and will distribute the much awaited I-phone in Kenya and the region

Riyaz mentioned the need for Africa to not miss out on the ongoing technological revolution. He said companies like KDN and Wananchi have free hosting and are ready to partner with developers – he mentioned platforms like Jahazi (a hybrid application accessible from any computer – with chat, news reader and browser) and Zunguka – and challenged Kenyans to be ready to develop application and systems to take advantage of the expected submarine cable (TEAMS) once it lands.

Other platforms/applications I learnt about include Helule, Peupe (from multiplechoices), Campus Vybe, Stockskenya, and Haiya

- Hash gave a session on blogger tips that was very engaging

- Interesting talks were given on the Kenya Internet Exchange Point which exchanges net traffic between local ISP’s (and which can be up to 90% or 50 MEGS? in peak time), the Kipsigis Heritage Foundation, Computers for Schools Kenya and Kenyan Poet talked about a local book sale company that accepted M-Pesa payments and had free delivery of books in Nairobi

- Paul Kukubo of the Kenya ICT Board talked about the Kenya Transparency Communication Infrastructure Project (KTCIP?), a partnership with the World Bank that had a grant of $1.5 million to go toward creators of local portals, content and applications (such as commodity exchanges for agriculture). Awards will be in the range of $10,000 to $20,000 each and a formal announcement wile be made later

Safariom day 12
Deals 5,091 Turnover 438,560,608 ($6.85 million) Closing 7.70 High 7.80 Low 7.55 Last 7.70 Volume 56.9 million shares. Weaker tone. Buyers pulled back and Sellers chased down. 7.35/7.50 is support. We came down on much lower volume. Data and commentary from Rich.co.ke [Free real time prices] - authorized NSE data vendor.

1000

Housekeeping


This is post number one thousand! Like Romario’s goals, some have been dubious, or forgotten, but many well received. It’s been a great 3 ½ year journey and thanks to all the people I have met, tips sent in, questions asked, frequent commenters et. al

Thank you to my sponsors - Mamamikes and Hisanet - whose support has been a helpful reward for the time put into this medium.

Great people I met this week through KBW, Skunkworks, Makutano, and thank for their time and chats (in no particular order) to AKS (of Rich.co.ke), Coldtusker, EGM, Hash, Intelligensia, Kenyan Pundit, Kirima, Mental, Nakeel, Riyaz, Shiroh Kenyan Poet, Sports Kenya, Alpha Quadrant, and all others from Barcamp, Safari Sevens, and other events this week. I'll start twittering for Afromusing next.

Safaricom Day 11
Week three kicks off with the company still accounting for over 92% of the shares volume and 75% of the cash at the NSE: Deals 6,151, Turnover Kshs. 785.2 million ($12.27 million), Average 7.82, Closing price unchanged, High 7.90, Low 7.75, Last 7.85, Volume 100.4 million shares.
Rich.co.ke commentary: Market is in equilibrium for now. Short term Investors are still supplying the market just below 8. Very well supported here. I expect a break higher, once the market absorbs the balance. I cannot believe it will be very long because of the activity we have already witnessed.

What’s next
Up next after Safaricom is the KCB rights issue whose options began trading today and whose ‘prospectus is now (PDF)

Safaricom @ NSE Day 10

Deals 5,216
Turnover 480.5 million shillings [$7.62 million],
Average 7.84, Closing 7.80, High 7.90, Low 7.70, Last 7.85
Shares volume 61.2 million shares

Commentary: Still beneath 8.00, the key pivot. On classic chart theory, the recent price is creating a triangle pattern, which normally indicates an upcoming break [either side actually]. It’s well supported at 7.80; volumes are slowing so I expect a break to the upside. [Data courtesy of Rich.Co.Ke - NSE data vendor]

That’s the final piece from Rich.Co.Ke, after a great two weeks of the new share on the Nairobi Stock Exchange, on to other things from next week. How have NSE shares fared since Safaricom was listed?

Price change since June 9

56% Safaricom
6% Athi Rive Mining
2% NMG, Access Kenya
1% Housing Finance, Equity, D-Trust, BAT, Kenol, Olympia
= Kenya Airways, Jubilee, City Trust
-1% Barclays, Kakuzi, CFC, Standard Chartered, Express
-2% KCB
- 3% CMC
-4% NIC, Kenya Re, Standard, TPSEA, Sasini
-5% Unga, NBK
-6% EA Cables, Total, Mumias, ICDCI, Scangroup, Rea Vipingo
- 7% KPLC, Crown
- 8% EABL
-9 % Kengen
-14% Sameer
- 16% Eveready

Safaricom @ NSE Day 9

Deals 5,344
Turnover Kshs. 462.6 million ($7.34 million)
Average 7.86
Closing 7.85
High 7.90
Low 7.80
Last 7.85
Volume 58.9 million shares

Commentary: Very tight range. 8.00 remains the pivot. We are still distributing shares just below that level. Crossing 8.00 will be a bullish development. 7.50 - 7.70 is strong support. Data courtesy of Rich.Co.Ke [NSE data vendor]

Kutwa Tuesday - June 18

yes it's Wednesday, but these relate to recent events

2008 Budget
- While the ICT sector was celebrating, a 25% tax on imported used computers was added on
- Wireless providers also pay a 10% tax, same as mobile companies (putting Telkom wireless on par with Safaricom and Celtel)
- Whistle blower on tax evasion may be entitled to 3% or 5% tax recovered by KRA. (but too late for David Munyakei)
- And from Tanzania; a brilliant idea that sounded dumb initially – at tax on loss making companies; It's an alternative minimum tax for companies that report tax losses for three consecutive years - and will now amount to of 0.3% of their turnover. This is targeted at companies with high turnover that engage in tax avoidance could KRA adopt that later?

CFC Stanbic: In the CFC-Stanbic merger/takeover, shareholders voiced concerns that some CFC shareholders were getting paid and walking away from the company with cash. Now three of them - Gambit, Trogon, and Jani are voluntarily winding up

IPO refunds: The Central Bank is concerned about the slow pace of Safaricom refunds (statement (PDF))
- Yet there was there option in the initial prospectus for applicants to be refunded by M-pesa; which would have been ideal for thousands of minimum applicants [who are getting refunds of about 7,900 shillings or $127]
- The CBK statement mentions that you can send a message to confirm the status of your refund e.g. "CDS#ID#R" to 4009. (my message told me my cheque which I collected last week, was ready at the broker). What it doesn’t tell you is that the message costs 15 shillings or ~ 2 Safaricom shares at the going rate

Safaricom @ NSE Day 8

Deals: 5,620
Turnover: Kshs 883.5 million [$14 million]
Average price 7.84
Closing 7.80 (no change)
High 7.90
Low 7.70
Last 7.90
Volume 112.6 million shares

Commentary: We are still below the 8 pivot, which is key. The pull back was very shallow and confirms underlying muscularity. Foreign buying and selling is now in balance. Courtesy of Rich.Co.Ke [NSE data vendor]

All Safaricom, all the time?
Meanwhile AKS [Rich.co.ke] has a Nairobi Star column and in February this year, started a running NSE portfolio 2008 with Equity, Access Kenya, Athi River Mining, and Sasini. This week, he retired the portfolio – cashed in a 50% gain to throw everything into Safaricom!

Mainstream blogging
stuff I used to post about and need to get back after IPO rush

Meet the bloggers: The Nairobi barcamp is now set for June 21 and is shaping up to be one of the biggest ever with a packed day planned

Meet the money: Two opportunities for bloggers to meet the e-government, BPO, and Kenya ICT Board officials on 19th and 21st of June. first come, first served

Safaricom @ NSE Day 7

Deals 10,506
Turnover Kshs. 950.9 million [$14.86 million]
Average price 7.83
Closing 7.80 (-1.27%)
High 8.05
Low 7.70
Last 7.80
Volume 122 million shares

Commentary:
Slightly more defensive session ahead of 8.00 which is now the pivot. We will cross 8.00, its a question of time. Sellers will be exhausted given the turnover
- This morning: Excluding today, total share volume has been 1.2 billion shares which is 12% of the total shares sold. Shares are moving quickly from loose hands into those of medium term Investors. 8 and around is currently the clearing price for the flippers. Crossing 8 will be bullish
- Courtesy of Rich.Co.Ke [NSE data vendor]

Safaricom @ NSE Day 6

Deals 5,624
Turnover 821 million shillings ($13 million)
Avg price 7.91
Closing price 7.90 (up 6.38%)
High 8.15
Low 7.70
Last 7.95
Shares volume 103.8 million shares

Commentary: The Bourse had a delayed start. It was a very bullish session. We are now toying with 8.00 and a break of which will project us another 10% higher- Courtesy of Rich.Co.Ke [NSE data vendor]

Lessons Learnt from Safaricom

1. Don’t invest in IPO’s! avoid the queues, time value lost, miniscule allocations, rogue broker tales, bank charges, fraudsters etc.
2. If you must invest, go for those with 'higher' minimum investments of Kshs. 50,000 or 100,000. e.g. Access Kenya a ‘relatively unknown’ (to wananchi) was priced at 50,000 and still ended up with 25,000 shareholders who got a reasonable allocation.
3. If advance payment is unfair for foreign investors and QII, it is also unfair for wananchi (retail investors)
4. Bank IPO loans should be banned.
Both of the above two factors destabilize the banking sector
5. We don’t need foreign investors. The local investors over-subscribed the entire allocation. The Renaissance Boss once talked about how it was not possible to invest $20 million without distorting the NSE. We are a retail, small corporate, local bourse and should accept that,
6. We don’t need the kind of foreign investors we appear to have got. African bourses need long term investors with three to five year horizons – not 3 to 5 day ones who cash in for 2 shillings.

ARM dust?
What happened at the Athi River Mining AGM last week? The vote results on the proposal to split the company into two subsidiaries appears to have only had the backing of the MD who accounted for almost all the votes for the move to be approved.

Safaricom @ NSE Day 5

Friday afternoon
Deals 4,415 with a turnover of Kshs. 1.87 billion [$29.7 million]
Avg price 7.47
Closing 7.45
High 7.65
Low 7.00
Last 7.65
Volume 250.9 million shares

Commentary: Bullish break out. Heavy Buy side demand. 8-10 range next week. Foreign Selling top 555,000,000/= [They must be near flat]
Courtesy of Rich.Co.Ke [NSE data vendor]

Refund drama
- The Central Bank directive that requires refund cheques to be banked in applicants bank accounts (not endorsed to brokers or third parties) will require many applicants to open bank accounts, just to receive their money.

It is a boost to banks, since the initial Safaricom prospectus document contained the option of applicants receiving refunds of less than 5,000 shillings ($80) to get their cash via M-pesa. However no one meets that amount as even the lowest application investor of Kshs. 10,000 is getting at least Kshs. 7,500, but which is still an amount Safaricom (instant value to mobile phone) is better able to handle and process than a bank cheque that clears after a week.

- Equity Bank applicants’ refunds are already in their accounts where they have been used to offset the IPO loans. Other banks should also state their policies on IPO loans where investors have only utilized 22% towards shares, while paying interest rates on the full 100% loan

Refunds to Bonds
Try your luck at Bonds if NSE Equities are too volatile: The second tranche of the 7 year Barclays Bank bond is available to investors up to July 9th, minimum application amount is 100,000 shillings ($1,585) at fixed or floating rates and can be traded at the NSE thereafter. (details at barclaysbond@barclays.com)

2008 Budget A to Z

Compared to the lofty 2007 Kenya budget, this one came at a serious time when the country had almost reversed gains made over the last five years, according to the Minister.

Challenges: regional disparities, poverty, youth employment low agriculture productivity, transport during crisis raised food prices, and containing inflation

Targets: 10% economic growth by 2012, Kenya to be a Middle income country by 2030, Social income reforms, develop a democratic issue-based political system and a higher quality of life

some excerpts

- Airlines: For Kenya airways: zero rate on international air travel no VAT on tickets?

Banking
- increase share capital from 250 million and 300m to 1 billion over 2 years(parliament rejected this last year) and can’t pay dividends till adequate provisions are made.
- 5 development finance institutions to be restructured, as will Postbank and the agriculture finance corporation. National bank will be privatized (further)
- CBK can penalize forex bureaus for violations
- Fate of unclaimed deposits to be decided by a task force to be formed

- BRIC China and India will keep food and oil high, but there are regional Africa opportunities

Capital markets
- NSE reporting: companies like Safaricom and kengen can publish their notices and accounts in two daily newspapers as opposed to mailing each shareholder a copy
- Insurance companies can invest 10% in any listed company – up from the previous 5% ceiling
- Annuities to publish quarterly returns
- Asset backed securities rules will be gazetted to encourage particplants
- Share capital of stockbrokers and i-banks raised to 50 million and 250 million respectively as anyone owing more than 25% barred from running the companies (3 years to comply). They must also get indemnity insurance for failure of employees
- CMA to get more power to seize assets

CDF: CDF benefits not tricked down due to poor management and there will be more accountability to reduce duplication. does that mean less funds for CDF now?

Education
- 1.56 billion towards teacher employment
- Teachers kids' education now not a taxable benefit for employers and teachers

Energy
- NOCK (parastatal) expanded to stabilize petrol prices
- clean energy: 4 billion for geothermal, 300 million solar electricity generated to supply 74 public institutions, 200m for wind power generation
- 6.8 billion for rural electrification (to develop mini grids) which will reduce rural urban migration.

Food prices
Minister says food price beyond the control of government
- Maize imports duty free
- talks to set up a regional fertilizer factory with Uganda and Tanzania
- 744 million for agric extension programs
- zero duty on bread and rice
- duty reduced from 35 to 10% for one year on wheat imports
- no duty on insulated tankers for milk transport

Health
- more nurses to be hired
- 550 million to support guardians of HIV orphans and this will benefit 30,000 households - up from the current 2,500

Housing
- Housing bill, landlord & tenant bill coming
- 350 million to construct 200,000 low cost housing units using appropriate building technology
- 500 million for infrastructure in slums
- National housing corp: relief for buyers of their houses – up to 150,000 p.a.

ICT
- 900 million shillings to develop a business process outsourcing park in Nairobi (BPO) which may create 10,000 jobs
- 700 million towards completion of Under sea cable improve bandwidth quality, reduce costs of communications.
- Remove import duty on telecommunication equipment as well as on printers

Land
- No stamp duty transfer for land transfer by individuals to companies wholly owned by families

licensing:
- communication commission of Kenya will reduce the number of licenses offered from 300 to 16 from July 2008, Ministry of tourism reduces from 25 to 2, Mines & geology 24 to 8, Betting control 26 to 9, Forestry from 15 to 11
- Business regulatory reform commission to be created

Manufacturing
- Remove import duty on hot rolled steel (was 10%)
- New 10% tax sodium sulphate, epoxy resin) to protect local producers
- Reduce import duty on cement form 40% to 25%
- Tax on plastics: manufacturer's can apply to get refunds of this tax get in line

Northern Kenya
- 2.9 billion shillings to the arid and semi arid areas rehabilitation through various ministries: this will include water, abattoirs, school feeding programs, rural electrification, livestock support
- also 900 million for the garissa garsen hola road (done by NYS) and for 200m improve marsabit and maralal water supplies

Parliament
- the Minister was interrupted for not sharing budget information for MP's in good time
-The Minister later asked members of parliament and constitution office holders to pay their share of income taxes

Ports:
- Mombasa port will be expanded with 20 billion of Japanese funds to allow bigger ships
- Free port at Mombasa to be set up (like Dubai) which should create jobs for the youth

Privatizations more coming to fix budget shortfall

Railway: Government wants Rift Valley Railways to increase capacity, lay more tracks, and transfer cargo.

Retirees: No tax on all pensions for those over 65 years

Roads:
- 65 billion shillings to be spent
- Build Athi river-namanga, mau summit – kericho, Nairobi to Thika
- Register all road contractors, engineers, quantity surveyors
- Long term infrastructure bond

Security:
- More funds for police force salaries, and equipment to fight crime
- Organized crimes bill to control gangs and militia and an anti money laundering bill coming to parliament
- 2.8 billion for new housing for police and prisons staff

Shilling central bank will not be intervening to adjust exchange rates

Sin taxes: beer and alcohol to cost more

Sports & arts
- Artist and sportsmen; any tax paid abroad can be used to offset against tax in Kenya if they show evidence of payment
- National football competition in every constituency (1 million shillings per constituency for purchase of kit and balls)

Tourism: budget 26% up
- 600 million to KTB to promote Kenya
- Exempt import duty gym equipment for hotel industry

Youth employment
- Absorb NYS graduates into armed forces
- Youth enterprise fund gets another 500 million
- 465 million for free tuition in vocational colleges from January 2009
- The 900 million shilling garissa hola road will be built by NYS who will also get contracts to fix dams across country - and who will also employ local youth

Water & environment
- 26% water budget improvement
- 1 billion towards multipurpose dams (built by NYS)
- 2nd mzima springs project to supply Mombasa with water.
- program to clean up Nairobi river
- Remove import duty on garbage collection trucks

Vehicles
- motorbikes: Zero VAT to motorcycles less than 250cc
- Vehicles to be registered as soon as they arrive in the country to prevent diversion of transit vehicles to local market

Safaricom @ NSE Day 4

Thursday 12/6 preliminary closing data
Total deals 5,233
Total turnover 967,039,104 [$15.3 million]
Avg price 7.37
High price 7.50
Low price 7.10
Last price 7.35
Shares volume 131.24 million
Commentary: Safaricom closes up 5%. 7.50 is the pivot.

Courtesy of Rich.Co.Ke [NSE data vendor]

Safaricom @ NSE Day 3

Wednesday 11/6

8,712 Safariom trades, with a turnover of Kshs. 1.27 billion ($20.4 million)
Price 7.00
High 7.10
Low 6.90
Last 7.00
Shares volume 180,879,400

Commentary: Very constructive session. Market is now underpinned at 7.00, support is 6.65. Demand side was robust today

Courtesy of Rich.Co.Ke [NSE data vendor]

Celtel Zambia:
From Bloomberg reports on day one of Celtel Zambia trading. Celtel Zambia, which sold 1.04 billion shares before listing for 640 kwacha ($0.20) apiece, climbed as much as 85 kwacha to 725 kwacha, according to Lusaka Stock Exchange data.

Safaricom @ NSE: Day 1 and Day 2

Day One
Shares Traded; 416.3 million
Value in Kenya shillings; 3.061b [Just under $50m]
Hi 13.70 [probably across the books]
Lo 6.95
[Market had 13m shares at 7 shillings on the offer at the close]
Average price 7.35.
Commentary: This is an entry rather than an exit level.

End of Day 2-Tuesday 10/06/08
Total deals 3375
Turnover 885.2 million shillings
Avg price 6.95 [closing]
High price 8.00
Low price 6.65
Last price 6.85
Shares traded 127.3 million

Rich.co.ke Commentary: It has based out at 6.65, I think. What I have noticed in Kenya is that everyone tries to get in at the bottom. So tails tend to befatter. At these levels, this is a steal on a medium term view. International Investors were heavy Sellers at around 500m shillings worth. Counterintuitively, thats a positive because they will have to own the stock [because of its market capitalisation] and will also join other Buyers, at the turnaround.

Courtesy of Aly Khan Satchu

What to do with refund cheque?

Safaricom now at 7 shillings

- Keep buying until the Vodafone stand is known
- Keep buying unless you want a 20 shilling dividend cheques
- Keep buying because Zain/Celtel is struggling (the Zain reports they have 23% less customers than a year ago)
- KCB right maybe, Housing Finance not likely

Safaricom IPO Allocation Part II

From a discussion in the skunkworks group forums: Taking up on concerns about e-government in the IPO application process, the same site now offers investors tracking their applications a chance to check how many shares they will get. (I checked and for retail investors, like me, the 22% application appears to be in order)

However the skunkworks group users raised concerns that anyone (not just applicants) could tweak ID and CDS numbers and look up other people’s applications – and beyond that - box numbers, phone numbers, e-mail, amounts applied for, where their refunds will go, etc.

update 1 [SITE TAKEN DOWN NOW - 5PM NAIROBI TIME]

update 2 CHECK BALANCES VIA PHONE SMS
There was an advert in the Saturday (7/6) newspapers, advising investors to confirm their allocations via mobile phone SMS; send an SMS with CDS and ID numbers ( "CDS___*ID ____*")to 2732 on Safaricom or Celtel [cost is Kshs. 10 per message] I tried but got an error message, i.e one of my numbers was wrong!

Update 3 CHECK BALANCES VIA PHONE SMS
There was an advert in the Sunday (8/6) newspapers, advising investors to confirm their allocations via mobile phone SMS; send an SMS with CDS and ID numbers ( "CDS___*ID ____*")to 4009 on Safaricom or Celtel [cost is free/unknown] I tried and got an answer SIX HOURS later, same balance as the e-mail - 22%

Kutwa Tuesday – Post Madaraka Day

a day late, most from the daily papers

banking:
Refund dilemma: What should banks do with Safaricom refunds of 80%? Wisest would be to take the money and accept refunds from disappointed shareholders to pre-pay their loans. It would not be wise to refuse to accept money and insist that borrowers serve their loan durations– as idle money has many employers. The middle ground would be to facilitate investors to buy more safcom or other shares, but that’s a new risk area in investment banking. Ideally there should be loans for secondary market purchases or margin trading.
Next I-bank Equity Bank to set up an investment banking subsidiary (from Ocean Newsletter)
New note Kenya needs a new bank note - denomination 3,000 or 5,000 shillings soon.

NSE talking points:
Fuel hedging?: Despite the reduced flights, its’ amazing that Kenya Airways actually reduced its fuel bill in 2008 (albeit just 1.6%) – this is at a time when other airlines are going bankrupt because of high fuel costs. Can they do it again in ’09 without having to resort to radical fuel saving measures?
- Total Oil interested in Caltex and will compete against the government for the stations
- Government and NSSF to opt out of Housing Finance rights issue
- Fresh off a profit warning, the Sameer Africa boss out; is this the reason the reason ?
- Undugu? Nation reporters in Tz still not comfortable
- The City of Nairobi is now Safaricom broadband hotspot who are selling postpaid hotspot bundles.
Equipment is a broadband modem for 6,000 ($98) and a broadband router for 35,000 ($570) shillings. Service options offered include - up to 700MB for 2,000 ($33), up to 2GB for 4,000, 5GB for 7,000, 8GB for 10,000, and up to 30GB for 30,000 ($491) , but weak customer care remains an Achilles heel for new Safaricom products


Parastatals
- Refinery Coalition Libyan and India to share equaly/ (happily?) in the Kenya Oil Refinery in Mombasa
- The Agriculture Finance Corporation (AFC) asks farmers to continue paying their loans since most of them were not affected by post-election violence
- East African Portland cement to start paying all supplier invoices by electronic financial transactions (EFT)
- Kenya Railways selling land in makupa (7 acres), kibarani (9), embakasi (10) and a building in headquarters (D/L 27/6)
- Kenya Ports Authority to set up an inland container depot (dry port) at Eldoret (seeking bidder to lease operate by 20/6)
- Kenya Re say their will put up a transit hotel at JKIA (was in their 2006 prospectus)
- The City council of Nairobi seeks land to for a new cemetery
- Education: Makerere University (Ug) to offer courses in renewable energy

12 Free Things in Nairobi

Inspired by Majonzi and the increasing cost of living here’s some free stuff you can get in Nairobi.

some of these may be out-dated, and please feel free to add any others

1. ‘Free’ books: at the Book Villa. Become a member and read as many new, best sellers, finbooks, travel non-fiction books etc.
2. ‘Free’ breakfast: at Books First/ Nakumatt buy one get one free on Sunday morning
3. ‘Free burger’: at Steers buy one get one free every Wednesday
4. Free Internet: Hotposts can be found at Mobil/Oil Libya stations, as well as Tamasha and Alfajiri and some Java restaurants
5. ‘Free pizza’: buy one get one free on Tuesday at Pizza Inn and buy one get one free on Friday at Debonairs
6. ‘Free movie meal’ (hot dog, soda, popcorn) at Nu Metro on Monday with purchase of a movie ticket
7. Free magazines/newspapers: Read the latest issues at many offices, salons/barber shops and banks, but you have to rotate to get variety.
8. ‘Free bank loans’: use your credit card carefully and pay off the full amount at the end of the month
9. Free money transfer: Safaricom's M-Pesa is great, but if concerned about cost, use the banking network to transfer money free. Just deposit money in the recipients account for them to withdraw at their local branch instantly
10. Free classified advertising: place a classified ad in the Nairobi Star newspaper; send a text message and it runs on the next day
11. ‘Free calls’: Safarciom is offering free night calls, from 9 pm till the end of June. But you have to top up your account daily, and hope that you can get through as the network can get congested
12. Free investment advice: online forums like Stockskenya, Nairobist.