NSE Goes Android

The Nairobi Stock Exchange now has a free Android app. Developed by Verviant, it is rather basic (download page), but show's the the equity day’s prices changes, and summary of some announcements. Still, it's a good start, and should be a work in process, and maybe investors will be able to track their portfolio's (still empty) and drill down to read more comprehensive announcements, and bond prices too.

Nairobi Stock Exchange Android app

The Exchange probably needs to address the issue of large PDf statement that companies fax in their announcements and which the NSE scans to their site - and replace these with some basic documents that they can upload to the main and mobile site.

Another NSE geared app is the Rich app (from the Nokia Ovi Store), that is however designed for the Nokia E-7.

Rules for Kenya Internet Trading

Continuing with the pace of more regulations to strengthen the securities industry in Kenya, the capital markets authority (CMA) has availed at their website even more draft regulations for public discussion that cover internet trading, disciplinary actions, takeovers and licensing. In addition to those rules for public offers they have;

Internet trading
- Kenyan organizations or those which target Kenyan investors need CMA approval
- Source of platforms: they may own, gets from eth exchange (NSE) or use other platforms if CMA approves.
- Those who already have should re-apply – licenses are renewed annually, and are canceled automatically if one stops being stockbroker, network or exchange
- All platforms should Ensure confidentiality, safety of data (no manipulation, virus etc), back up plan, maintain audit trials Encryption and firewalls, Prevent duplication of orders
- Stockbrokers can sponsor chat rooms
- Traders to Report monthly on number of users, transaction averages, and system downtime

Disciplinary Processes
- Proposes creation of disciplinary committee that follows civil law e.g. sharing of evidence, call witnesses, cross-examination
- Committee can warn or censure firms or persons or can suspend or revoke licenses

Take-overs (intended to sort out carbacid-type deals)
- Board of company being targeted for take over must hire an independent financial adviser
- Offeror to make public announcement, if there’s unusual movement in target company share price
- No withdrawal of offers unless the CMA rejects it; also the target company has 3 weeks to decide
- If takeover fails, have to wait at least 12 months before making anther attempt - specifies format of takeover documents and reply documents to be filed with the authorities

Licensing (for securities exchanges, stockbrokers, investment advisors)
- Stockbrokers (share cap 50 million or~$670,000) to disclose their information technology, and comply with ration for overdrafts, borrowings
- Agents can only work with one stockbroker, and may not handle client funds
- Dealers (share cap 20 million or $267,000) to disclose their information technology, and comply with ratios for overdrafts, borrowings and investment portfolio liquidity
- Investment advisers (share cap 2.5 million or ~$33,000) their portfolio may not exceed Kshs 10 million ($133,000) otherwise may have to become fund manager to handle larger business
- Fund managers (share cap 10 million) and Investment banks (share cap 250 million) must also disclose their information technology, and comply with ration for overdrafts, borrowings

send comments to ceoffice@cma.or.ke

Salute to Kenyan Stockbrokers Part I

Salute to Kenyan stockbrokers, investment banks and fund managers, and the capital markets authority (CMA) for their moves to improve transparency at the NSE of late.

When the new rules were announced early this year, few doubted that licensees (especially stockbrokers would comply, but the early signs are good.
One of the milestones was for the publication of financial statements by Collective Investment Schemes, Stockbrokers, Dealers, Fund Managers and Investment Banks twice a year; and this they did, many baring their losses, some with dubious figures or cosmetic summations, and some omitted profit & loss, but which their auditors will hopefully be able to reconcile at the end of the year.

The compliance was notable in that the intermediaries were able to publish their June 2009 summarized financial accounts,

Investment Banks: 100% (missing was Juanco (now Equity IB?), while FCB Capital was only licensed in June 09)
- Stock Brokers: 100% (missing was Discount (collapsed), Bob matthew (is now KingdomSecurities), while African Alliance is now an investment bank)
- Authorized Security Depositories: 100% (all 12 are commercial banks)
- Collective Investment Schemes: 100% (all are fund managers)
- Fund Managers: 94% (missing was Aueros, while African Alliance reported as an investment bank, and amazingly CIC who were licensed in June 09 already complied)
- Investment advisories 10% they are not required by the law to report, but Dry Associates and Tsavo Securities did

The results were harsh (more on that later) as the downturn at the Nairobi Stock Exchange has had a shocking effect on these companies. But they have recognized that and started taking measure in the form of mergers, re-capitalization staff reductions. When the NSE improves, they will reap the dividends. The signs are good for frontier markets and African markets, but the Kenyan political scene is still a cause for concern for the recover of the NSE and its brokers.

Shaking up the Nairobi Investment Scene

Knocking Off Rogue Brokers

The Kenya Capital Markets Authority (CMA) has published new regulations that could knock off customer confidence in any small stockbroker still standing at the Nairobi Stock Exchange (NSE) as they have now become law.

Changes include:
- Sets minimum share capital for stockbrokers at Kshs. 50 million (~$650,000) and investment banks at 250 million (~$3.25 million) some stockbroker are investment banks in name only name
- Agents may work for one stockbroker only and may not handles client cash
- They must use International Financial Reporting Standards (IFRS)for reporting
- They must publish audited accounts and ½ year un-audited accounts in newspapers and also dispaly the same in their branches so by August 09 we should get a clearer picture of who's up or down
- They must obtain indemnity insurance
- They are to notify the CMA before appointment of executives, directors, and auditors as well as prior to branch openings/closing

Some of the proposal also affects investment funds, fund managers, and pension schemes. They were first proposed two months ago for public review and borrow a bit form existing central banks laws and are much harsher than when first formulated.

Other losers retail investors who lost their money in collapsed brokers (Nyaga, Discount, Francis Thuo etc.), it limits their potential compensation to just 50,000 shillings ($~650)

Winners - newspapers who will see an increase in quarterly advertisements from stockbrokers, investment banks, investment funds, fund managers, and pensions schemes.
- insurance companies (Stockbrokers and investment banks are to obtain professional indemnity insurance worth 5 times their daily average turnover)

How Safaricom can adapt Vodafone's investor relations

old safaricom logo incorporating vodafone

Safaricom have done a great job in terms of dealing with investor relations since its listing; they have also said there won’t be any SWAG for shareholders at their August annual general meeting (AGM).

But there are things that Vodafone can do that can enhance shareholder value beyond giving mere t-shirts and lunch boxes. As 40% owner of Safaricom, Vodafone can drive many things about investor relations. Consider that while Safaricom is considered to have too large a register with 831,000 owners, Vodafone is not too different with 551,000 shareholders - 440,000 who own less than 1,000 shares, and just 46% presumed to reside outside the UK. Despite the numbers, the Chairman's letter invites as many shareholders to attend the meeting and participate (and probably ward of any hostile resolutions)

So here are 10 things Safaricom borrow from Vodafone to enhance shareholder relations in lieu of SWAG:

1.Have an enhanced agenda and promote shareholder participation in management. Many NSE companies do the bare minimum asking shareholders to adopt accounts, approve auditors and re-elect 1/3 of directors – that means an AGM can take 15 minutes which leaves the floor open for the nonsense questions. With a ‘fatter’ agenda shareholders won’t have time to ask for trivia. Newer companies like Access Kenya, Equity, and Scangroup are more pro-active with the management of their companies. So decisions on acquisitions, fund-raising, are common on the agenda. Another examples is executive compensation: many companies ask shareholders to approve creation of employee share options plans (ESOP’s), but then leave the computation and awarding of benefits to trustees (another set of directors); at Vodafone, shareholders know and vote how much current CEO Vittorio Colao, and former CEO Arun Sarin earned, so why not let the shareholders know how much Michael Joseph and the directors earn per year per meeting etc. Can’t handle that? Uganda companies can do that. Also at Vodafone all directors retire each year, which should ensure a robust re-election session.

2. The complete 2009 Safaricom annual report will only be given to those who request it, to save costs. It will be downloaded from the website. So let’s have a interactive report so investors can choose to download video or just sections they are interested in e.g. the notice only. Same with the memo & articles

3. Promote a alternative methods for shareholders’ to enhance value. Support a dividend re investment program (DRIP). Not everyone wants an M-Pesa dividend; some may prefer to buy 100 more shares in the company instantly, while the shares are still cheap (Kshs. 3.7 or ~$0.05 per share) and a DRIP will be a useful tool that keeps cash within the company and its owners. Alternately, if feeling philanthropic, Vodafone shareholders may donate their meagre shares to a charity - and why not to a school in Kenya that was Tahidi High last night!

4. Broadcast a webcast of the AGM - this will be a showcase for safaricom’s broadband capabilities and will be enable foreign investors to participate. If not ,broadcast it on TV so people don’t have to travel to Nairobi from other towns and can watch have it from home – NTV or Citizen would cover the mid-morning event up to the 1PM news

5. Promote alternative voting ; by e-mail, by telephone, by mailing in the post; mail-in happens in Kenya, but Kenyan investors feel they have to be there, to vote which is not the case.

6. Send investors information by phone (SMS) or e-mail. Safaricom is a mobile phone company; they send trivial messages to advertise products, so why not also quarterly results by phone? And for those of us at the next level, why not Safaricom twitter ? Join @kenyaairways and @jimmykibaki (:_}) on the new media wave

7. Don’t leave everything to the share registrar: On the website, shareholders can track their shareholding, change their address, and change their dividend payment option. At the meeting have a shareholder help desk – already a common feature at bank AGM’s (Equity, NIC) but to help them transfer their shares to the bank. Online information use was a feature deployed during the IPO, but that information is sitting un-utilized in a server somewhere

8. Pre-empt shareholder questions with a FAQ. Compile a list of frequently asked questions with appropriate answers, put them on website, or hand out flyers for those who attend meetings.

9. The Vodafone site warns investors about boiler room tactics and cold callers after their shares. So why not tell shareholder which brokers are misbehaving? Which to use and not to use?

10. Vodafone governance policy calls for disclosure of any political donations (and for Safaricom if any) – it has been noted here that the company tends to have increased corporate social responsibility activities in the home areas of the sitting information minister

11. Oh, and finally Tea & coffee will be served at Vodafone AGM

Nairobi Stock Exchange Fiddles

While investors burn or run

Fresh off the appointment of a new chairman of the Capital Markets Authority, the owners of the Nairobi Stock Exchange welcomed him with another pledge to:

-Cap broker ownership of the stock exchange (NSE) at 40%
- Reinforce compliance and supervision through implementation of a risk based supervisory approach yada yada yada.....
- Deal with the findings of the PWC Forensic Report on Nyaga Stockbrokers once the report is received from the CMA i.e. they officially haven’t seen it!

So they throw the ball back to the Government (to fast track the demutualization process - and what this entails) and the CMA (new Chairman to act on the report) while investors rush back and forth like headless chicken changing brokers in search of the one honest broker left in Nairobi, while also yearning to return to the good old days when share certificates were kept in bank vaults or under mattresses.

Mark Mobius on Emerging Markets

Dr. Mark Mobius, the executive Chairman of Franklin Templeton Investments,is in Nairobi this week. He gave a talk this morning on his investment perspectives. It is especially timely considering the bear market being experience the world over and at the Nairobi Stock Exchange this year.

Some notes
- They are bargain hunters, they love cheap stocks and thus love bear markets
- Emerging markets look good for long term investors for several reasons: they are growing faster than developed countries, they have less debt, they have more reserves, inflation is coming down, they are taking up a lager share of world trade and also trading more with each other
- Bull markets are followed by bear markets which are followed by bull markets then bear......
- Bull markets last longer than bear markets, and values appreciate more during bear markets than they depreciate during bear markets. he said by their measures over the last 20 years bull markets last on average 22 months and values appreciate by 113% while bear markets on average last 6 months and values depreciate 32%
- Various FT funds are concentrated in mainly energy stocks, then banks, raw materials, communications etc.

My take: This is a time to buy Nairobi Stock Exchange Shares (NSE) , if you have the money and a long term investment perspective

EABL 2008 AGM

The 86th Annual general meeting (AGM) of East African Breweries was held on 30/10/08 at Safari Park. The actual meeting business (passing of accounts, election of directors, and approval of auditors) all took about 10 minutes. There was only one question on the accounts and the rest of the meeting was left to a myriad of shareholder questions.

Why Financial Markets Crashed: the meeting began with a talk from the former chairman of the Nairobi Stock exchange Kibuga Kariithi (Director Afrika Investment Bank). He traced a path of American economic exuberance, greedy investment bankers, sub-prime-mortgages, careless insurers which all led to a liquidity crunch and loss or confidence in the markets – eventually reached Kenya

He exhorted EABL shareholders that their company was strong, with growing sales, profits, products and almost 7 billion shillings in the bank. He said the market would remain so for a few more months, maybe with a few more bank crashes, but the fundamentals of EABL and other companies were strong and this was a time for shareholder not to panic or sell, but to consider buying more shares.

Mini-controversies
Crap Calendar: one of the goodies handed out was a (single-sheet) wall calendar. Which was not well received by several shareholders. It was called, cheap, not in keeping with the image of the company, not as good as the one which was given to distributors, eventually even the chairman had to admit that it was a poor quality item.

End for Chami?: Mr. Chami is a (small) shareholder in almost every listed company and a feature at almost all NSE-listed company AGM’s held. He unusually is the first to ask any questions and almost all directors know hi. He usually asks but occasionally hits the mark. Today he got off to a bad start giving a 5 minutes speech that led to a round of boos by shareholders. When he finally got to asking questions, he was challenged by the chairman on the accuracy and validity of his questions – and told not to waste the time of the other 700 shareholders present if he had no questions. Hope it does not spread to other meetings

Mr. Chami
Trivia some questions asked by shareholders
- Start with prayers
- More environmental plans; will consider energy savings from steam and have participated in forestry activities in Ndakaini and may look at maul when government sorts out the matter
- Unclaimed dividend: a bill has been prepared on unclaimed assets that will soon be in parliament after which companies will get guidelines on compliance
- Is Alvaro alcoholic? no it is not
- can dividend be cashed at banks?
- give more bonus shares please?
- give more dividend to long term shareholders asked by an old lady who has been a shareholder for 35 years)
- can we have cheaper AGM’s? e.g have the meetings at a venue like Kasarani Stadium and serve African foods, not expensive hotel foods that give high blood pressure!

Goodies: T-shirt, Calendar (see above), Safari Park Lunch box [with meat (big chicken slice, cake, beef & cheese sandwich) fruit (banana, apple), drinks (yoghurt, alvaro, water, orange juice)]
Lunch on the controversial calendar

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 EDIT 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

Thanksgiving Portfolio

Earlier: Thanksgiving 2006 portfolio




The Stable
Diamond Trust
Express
ICDCI
KCB
Scangroup
Sameer
Stanbic (UG)
Total
* Uchumi (suspended)

What's changed?
In: ICDCI
Out: None
Increase: Diamond Trust (rights), Scangroup
Lightened: KCB
Dividends expected: no interims
Unexpected gains/losses:
New listings not taken on: Kenya Re
Best performer: Stanbic (Ug)
Worst Performer: Total (though the dividend is assured)

Looking forward to: none really. I sat out of the Kenya Re IPO, and then didn’t really want it after the shares listed - maybe next year. Same with the Safaricom IPO which is getting dangerously close to the election, but which I expect to sit out again and instead give the money I have to some candidates (2 parliamentary, 1 civic) toward election expenses.

Lessons learnt: (i) you should not try and time trades e.g. company books for dividend close on Thursday, so you try and buy shares on Tuesday – just won’t work; think and trade long term (ii) attempts to buy low and sell high by setting a price based on yesterday’s high/low also won’t work; so think long term and don’t worry about intra-day prices

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 up 1% in the last six months while my portfolio is down 0.7% from May 2007. The actual share holdings are up about 13% but with the cash taken out from when KCB shares sold, the net position is down.

The real Safaricom EDGE

(Premium) Story in the Nation about the Cabinet being presented with a paper to approve the sale of 25% of Safaricom to the public.

This is a winning card this election year that will be foremost in the minds of investors and voters. A well managed Safaricom IPO before December could deliver more votes than needless voter expenditure or rhetoric from any leader.

Power shift: Meanwhile Bloomberg reports that - for the first time since WWII more money will be raised from European IPO’s than US ones. Stringent regulations, high costs (6.7% of IPO versus 3.3% for Europe) and the weak US$ to blame as 14 or the 15 biggest recent IPO’s were listed outside the US.

Nairobi Shares Portfolio – May 2007

Be a vulture

The Portfolio review is being done a week earlier than expected as I usually try and update six months from last review.

However, in keeping in sync with other blogger portfolios recently released by Odegle Nyang and Riba Capital, here it is:

Current portfolio
Diamond Trust
Express Kenya
Kenya Commercial Bank
Sameer Africa
Scangroup
Stanbic Uganda
Total Oil
* Uchumi (suspended)

What’s changed?
There are fewer shares and portfolio has less value than before as I sold more shares than I bought back.

In: Stanbic (Uganda), Total
Out: Crown Berger, Kenya Airways, Kengen
Increased: Diamond Trust (Rights)
Reduced: -
Dividends expected: D-Trust, Express, KCB, Scangroup, Total
Unexpected gains/losses: Express bonus share, KCB share split
New listings not taken on: Access Kenya, Mumias (Rights)
Best performer: Stanbic (Ug)
Worst Performer: Sameer Africa
Looking forward to: Kenya Airways, Safaricom IPO

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 down 10% in the last six months while my portfolio is down 13% from November 2006.

I sold Kenya Airways shares at around 120/= and for the first time my portfolio does not have KQ shares. If the price continues to drop, I expect to buy some shares in this great company in the coming days, before they announce their year end results - which should have been finalized, but may be delayed by post-Cameroon events.

Thanksgiving Portfolio

Shares I own
Crown Berger
Diamond Trust
Express Kenya
Kenya Airways
Kenya Commercial Bank
Kenya Electricity Generation Company
Sameer Africa
Scangroup
* Uchumi (suspended)

Verdict: Surprisingly little change from six months ago

Performance: The Motley Fool advises that investors should beat the share index to consider their returns a success. The NSE 20 share index is up 30% in six months while my portfolio is up about 35% from May. *(The NSE index still lists Uchumi and if I zero it from my calculations my portfolio is up only about 30% in six months)

What’s changed?
In: Scangroup
Out: Housing Finance
Reduced: KCB, Kengen
In-n-Out: Sold Sameer Africa high bought it back low
Dividends: Payments from Kenya Airways KCB, D-Trust, Crown and Kengen (not factored into my performance return)
Bonus share: Express
Best performers: Scangroup, HFCK, D-Trust
Worst: Uchumi
Risk vs. Return: Some Nyramids give 30% a month returns, but I can’t afford to take those risks
Looking forward to: Kenya Re, Diamond Trust (rights), and Safaricom

No drugs at NSE

The Nairobi Stock Exchange (NSE) through a paid statement by its chairman, Mr. Jimnah Mbaru, has responded to recent allegations that the growth of funds invested at the NSE had come from drugs or other illegal sources.

He says it's mainly from a basic shift among institutions and individuals who previouly used to invest in land and real estate but have now moved to more liquid invstements such as to equities and government securities

The increased funds come from, among others sources:
- many Kenyan parents don’t have to pay primary school fees anymore since the advent of free primary education
- better management & compliance of pension funds who before had too much real estate investments including the NSSF
- increased insurance premium collections and increased corporate retained earnings
- substantial remittances by Kenyans in the Diaspora – estimated at $750 million to $1 billion annually
- international investors
- & first time investors in stock market including over 200,000 who bought into the Kengen IPO

Shares I own

Disclosure: My stable as Snoop would call it



Crown Berger
Diamond Trust
Express
HFCK
Kenya Airways
KCB
Kengen
Sameer
Uchumi

Much Work Still to be Done

As we celebrate Jamhuri Day and Wangari Maathai’s Nobel Prize, the investment climate is not good in Kenya, as reports this weekend indicate.

1. Listing on NSE is difficult
Celtel (formerly Kencell) plans a listing on the London Stock Exchange and has no plans for a local listing in Nairobi. The Nairobi Stock Exchange is lagging in Africa – it has 49 listed companies compared to 450 in South Africa and 75 in Zimbabwe. Despite high appetite for Kenyan investors, problem is that listing costs are high and regulations too stringent according to the Sunday nation (12/12).Some of the criteria that many prominent business cite for not listing on the NSE include (i) single investor cannot own more than 25% of a corporation (ii) 6% annual transaction costs. Only 21 companies have been added since 1990.

2. Effects of crime in Nairobi
Crime affects business in a very expensive way – According to the East African (13/12) Kenyans spend 32 billion shillings annually ($400m) on private security companies - in addition to the 4.6 billion annual police. Properties like Lonrho house (270K per month) and Village Market (1.3 million p.m.) have seen their security costs double in the last few years.

This is also having a negative impact on housing with many apartments now having monthly service charges of about 10% of rents - that mostly go to security. Meanwhile high cost apartments that are very close to slums that are growing have seen their prices dip. Monthly rents in Loresho are down to 25,000 from 50,000 10 years ago (and estate agents take buyers though Kyuna and avoid Waiyaki Way which passes though Kangemi and which may change a buyer’s mind). In Langata rents are down from 20-22k to 16-18k per month for 3 bedroom maisonettes that overlook Kibera

3. South Africa poaches Kenyan tourists
Those $400 and $500 (Nairobi – Johannesburg) airfares you see in the Daily papers are not meant for you! They are targeted at luring tourists visiting Kenya to take a cheap side-trip to South Africa (fares are inclusive of three days, bed & breakfast, game drives and airport transfers)