Thursday, December 28, 2006

Here comes 2007

Hi fellow bloggers and visitors.I have been blogging since March 2006.Its been a wonderful experience.Thank you for enriching my experience in blogosphere .

Another year ,another chance to ask out that girl you have been eyeing, buy those stocks you want ,start a new business,visit a new country,buy a new car/house,quit a bad job/relationship................................or anything else you have been too scared to do.
A new year means a new opportunity.Because you are alive.

Have a fabulous 2007!!!!!!!!!


Here is an interesting idea. The best way of getting rid of the
questions regarding the identity of Mobitelea is through Vodafone Plc.
Someone (preferably Kenyan) should buy 100 shares in Vodafone Plc (UK listed company) and then ask the Board questions about Mobitelea-Safaricom shareholding at the next AGM(Annual General Meeting) in 2007.
The issue will be settled, quickly and cheaply without any Commissions of Inquiry and Task-forces being appointed.

By the way this idea is inspired by a story (which I cant verify). I heard that
GREENPEACE (the guys and gals who used to chain themselves to ships and trains carrying toxic waste) used it.
Several years ago, GREENPEACE needed to ask
BP Plc (the oil giant) a couple of questions about oil exploration and the Environment. They went to the management of BP but were unsatisfied with the answers they were getting.

Someone had a brainwave and decided, why not buy a couple of BP shares then ask the questions as a shareholder at the AGM.
Of course asking the questions as a shareholder had a better response for GREENPEACE.

Oh and if anyone knows more about the GREENPEACE/BP story in detail do tell.

Tuesday, December 19, 2006

RVR-Competitors better watch out

Finally, the payment was made and RVR(Rift Valley Railways) Consortium took over the Kenya Railways for the next 25 years.Other members of the consortium are: ICDCI and Transcentury Group.
Lets concentrate on
Sheltam which controls 60% of RVR.The parent company of Sheltam Pty is 50% owned by GRINDROD LTD a South African Listed firm.Which curiosly pulled out at the last minute-allowing ICDCI and Transcentury to get a stake.Grindrod Ltd hasn't lost out, through Sheltam it still has interests in RVR(but INDIRECTLY not directly)

GRINDROD LTD also owns shipping service copmanies like Ocean Africa Container Lines (Pty) Limited and ISS-Voigt Shipping. A Grindrod group company has a stake in a Local shipping Logistics and freight company.Keep in mind anytime that you import or export Goods through the port you have to go through a shipping line or agency.Local examples are like;Maersk,Diamond Shipping services,Transami and Kenya National shipping Line.If you have ever imported a used car -look at the documentation one of the above names is likely to appear somewhere.

Also, Grindrod has the funds to buy into any local shipping outfit.Pardon me but lets digress further.It costs more than Ksh80,000 to transport a 40'Foot container from Mombasa to Nairobi by road.By rail its more than 45% cheaper But under KR it may take more than 3 days to get to Nairobi.By road it will in Nairobi within 24 hours.

Why have i set out all the information above?

To put it mildly ,Grindrod/sheltam are now the most significant transport and logisics group in Kenya and more so in our landlocked neighbours that depend on the port of Kilindini.Firstly,Grindrod has the ships/shipping lines and freight companies that can facilitate ocean based transport.

Secondly,It now controls the Kenya-Uganda Railway(through RVR and Sheltam).When this rail is up and running(efficiently).It will pose a significant challenge to road based transporters.i.e. rail tends to be cheaper and safer than road transport.

Thirdly,it can easily monopolise the import/export Logistics and transportation link in the country.(In 3-5 years once the Rail system is up and running)

Wednesday, December 13, 2006

EABL- Future Strategy
Why Diageo should sell out

Let me point out that the current management in
EABL is doing a good job. This article is not meant to disparage or attack anyone. It merely offers a longer-term view (mine) of EABL's future. I am looking at the future 6 years away. EABL is doing quite well at present and the medium term outlook (3 years) is satisfactory. But I’m not so sure of the long term future

I think that the best thing to happen to
EABL would be if DIAGEO Plc sold its stake to another Brewing company.

Diageo's ownership of
EABL stops it from growing into new markets and strategic direction.

EABL has already grown as far as it can go in the East African market. As per the
latest annual report more than 60% of the Group's profit is derived from Kenya. So it’s still Kenya Breweries/UDV Kenya where the profits are concerned.

The only other ways to grow are to:
(1)-Branch into new products like soft drinks.
By the way SABMiler Plc (South African Breweries’ parent company) is one of the largest bottlers of Coca-Cola in southern Africa. It acquired Amalgamated Beverages Industries- a soft drink bottler in the past two years.
The beer market is saturated. Have you noticed how EABL keeps launching and killing brands?
Pilsner Ice came and went so did Pilsner Ice light. Now we have Whitecap Light.

(2)-Move into new markets by acquisition and expansion.
This involves setting up new subsidiaries and acquiring new companies

How Diageo affects EABL's strategic direction
DIAGEO Subsidiaries
EABL cannot expand in Africa because Diageo already has subsidiaries all over Africa to cater for those markets. For instance, in West Africa Diageo have Guinness Ghana Breweries Ltd and a joint venture to market its brands in South Africa. So Diageo has covered east, central and South Africa. Where else can EABL go?
For Diageo Africa is well covered on a group basis (with its subsidiaries), but for EABL it's boxed into East Africa.

Currently, EABL is moving Tusker into export markets but competition in the European, Asian and American markets is tough and the gains will take a while to be seen.

Diageo's strategic focus
Diageo considers itself a spirits company that happens to sell beer i.e. out of its Global Priority brands only one isn't a spirit-Guiness.
EABL considers itself a beer company that sells spirits and other beverages

Hence, Diageo may not be enthusiastic about EABL's moves into other related sectors like carbonated non-alcoholic beverages.

What if we keep the status quo?
EABL will continue earning ‘nice’ dividends and a 7-10% annual growth but nothing spectacular.(assuming they maintain their market share)

Competition will keep intensifying in the region for EABL's market. For example, Keroche and others are targeting the lower end of the market.
Carlsberg, Windhoek, Stella Artois target the upper end.

This may affect EABL's earnings.

The proposal
If EABL were bought by a pure beer company e.g.
Carlsberg. Then they can chart moves for the group's growth in the continent and beyond. For instance, Carlsberg isn't as strong in Africa like Diageo or SABMiller Plc. It would use EABL to grow in the region.

Bottom line
Unless, EABL can come up with a new long-term (7 years plus) strategy the future will be challenging. New brands in the existing market only cannibalize existing ones. At the same time competitors are slowly chipping at its market share.

Friday, December 01, 2006

Jubilee Holdings (JHL) is holding an Extraordinary General Meeting on 18th December.
The aims are to amend the Articles and Memorandum of Association.
Some of the proposed changes are:

-Allow directors of insurance firms that are not subsidiaries of JHL to sit on the Board of Jubilee Holdings (Article 75 amendment)

-Unclaimed Dividends and shares to revert to the company after 6 years and become part of its reserves. This is a smart move because if they are surrendered to CMA, it’s an outflow of cash from the company.

-To insert the following clause in Clause 3 of the Articles and Memorandum of Association:
(Extracted from Proposed Articles and Memorandum of Association)

3. (z) To act as an investment holding company and to co-ordinate the
business of any companies in which the Company is for the time being
interested, and to acquire (whether by original subscription, tender,
purchase, exchange or otherwise) the whole of or any part of the stock,
shares, debentures, debenture stocks, bonds and other securities issued
or guaranteed by any body corporate constituted or carrying on
business in any part of the world or by any government, sovereign
ruler, commissioners, public body or authority and to hold the same as
investments, and to sell, exchange, carry and dispose of the same.

(aa) To carry on the businesses of consultants, advisers, financiers,
bankers, advertising agents, brokers and to carry on management and
agency business of all kinds and generally to render services of all
kinds to others.

(bb) To carry on any other trade, business or activity whatsoever and to do
anything of any nature which can, in the opinion of the Directors of the
Company, be advantageously or conveniently carried on by the
Company in connection with, as ancillary to or independently of any
of its businesses

Click here to download Proposed Articles and Memorandum of Association
Current Articles and Memorandum of Association.

Why would Jubilee allow a competitor to sit on its Board? Altruism? Noooooooo…
I think a takeover/merger must be in the offing. The Company needs to amend the articles so that they can carry out a deal in the next 6 months. Because the AGM is not more than 6 months away .The amendments can still be done at the AGM.
If the matter/opportunity was not urgent they would wait for the AGM.

Increased Scope of business
Doesn’t the additional clause 3(Z) read like the corporate profile for
CFC Group?
Jubilee probably wants to grow like CFC group and expand into areas like Fund Management and Financial Services.

Expect a surprise from Jubilee Holdings Limited soon.

As a shareholder, i vote YES.

Tuesday, November 28, 2006


The Current issue of the East African summarizes what was in my earlier posts on the Safaricom/Mobitelea issue.


They have a better graph of the shareholder structure.

However, the graph showing the present day shareholder structure of SAFARICOM K Ltd. has an error. It shows Telkom Kenya Ltd. having a 60% stake in Safaricom and Vodafone K ltd with a 35% stake in Safaricom instead of a 40% stake.

The 87.5% stake in VKL by Vodafone Plc. and 12.5% stake by Mobitelea ventures is accurate.

The article also says that the Parliamentary Investment Committee (PIC) has summoned the Registrar of Companies and the Safaricom M.D. to explain the matter.

The following issues could thwart the PIC effort:

1.Mobitelea Ventures could be registered offshore, so no record of it may be at the Kenyan Company registry.

2.Safaricom officials may claim to only know about Safaricom Kenya Ltd. matters i.e. they are not Vodafone Plc or Vodafone K ltd employees. As such they can’t shed any light on Mobitelea or Vodafone Kenya Ltd. Shareholding.

It is akin to asking Gerald Mahinda(MD -EABL) to comment on SABMiller Plc's affairs because SABMiller Plc has a 20% stake in Kenya Breweries Ltd(an EABL subsidiary).He can't since neither he nor EABL are members of SABMiller Plc.

NB: the article is in the current Print Edition and may take a while to appear online.

Sunday, November 26, 2006


A fellow blogger Keith has mirrored part of the original post on his blog.He has also drawn a more LEGIBLE chart of the probable Shareholder structure.

CLICK here to go to TeleBusillis

Friday, November 24, 2006

My Investment style

I believe investing is a psychological game with monetary outcomes (you make profits or losses). To make money in the market (most of the time) all you have to do is take a position and wait for the price to rise. For instance, in the past 2 months you could have bought Barclays at sh250 and Jubilee Holdings at Sh180 and gotten out at Sh.600 (Barclays) and sh300 (Jubilee Holdings) now.

That’s the easy part, to get into a position you need guts/balls/confidence and to get out at a good price you need to tame fear and greed.i.e. You fear you are getting out at a lower price i.e. the price of the share may appreciate after you sell.

How do i buy a shares?
I consider the following four factors sometimes together sometimes in isolation. For instance, i recently added
Jubilee Holdings to my portfolio. I only considered the Market sentiment and the numbers when purchasing it.

The four factors are:
1. Big picture
Meaning how the Economy and the sector will grow in 5-10 years and where that company will be then. I like it if the firm's sector is growing and the firm can corner a large section of the sector.

2. Management track record
If the management/owners have a record of delivering, it definitely makes the firm appealing.

3. Market sentiment
If the market undervalues a share or ignores good prospects in a company. That's the time to get in. Because markets tend to rise over time BUT not in a straight line. Like
Kenol Kobil when it was at Sh.65

I remember when KPLC was sh.330 a share in the late nineties, then Sh.6 in 2002 and today it’s at sh.288 today.
At all those prices there were experts who could 'justify' that price with charts, Valuation models and research.

Investors who bought at sh.330 still don't have their money back (KPLC didn’t pay dividend in some years). Those who bought at sh.6 are marveling at their 'intelligence'.

Right now the market favours stocks that have low absolute price i.e. below Sh100 and low issued shares -less than 100,000,000 issued shares e.g.. Jubilee Holdings. My current style is geared towards this.

When the market changes so will I. You can never bet against the market.

Is the Balance sheet healthy? Does the Cash flow appear healthy? Is the firm's debt sustainable? I also look at metrics like
EPS, P/E ratios.

Influential Investors
These are the people who influence my thoughts on investing

-Carl Icahn- I love his tactics

-Warren Buffet-Everybody loves his style. But he is an extremist when it comes to saving his money (borderline miser). What’s the use of being a Billionaire if you can’t have a Gulfstream?

-George Soros -Famous speculator. Only guy to have ever fought against a Central Bank and won big i.e. US$2 Billion. He’s never afraid to lose.

-Richard Rainwater- Got into Cell phones in 1979 and Oil in 1998 when they were considered ‘dead’ sectors. CLICK HERE for a BUSINESSWEEK article that disparaged him but he got the last laugh.

Dr.Gakombe - Few know that he once was a shrewd investor on the NSE.I'll tell the story someday.

Thursday, November 23, 2006


CLICK here to see the chart on


This is a very very simplified Diagram(some information is left out) drawn from information obtained from the Annual reports of Vodafone Plc. as at 31st March, 2004, 2005, 2006. However, its sufficient for illustrative purporses.

Between Vodafone Plc. and Mobitelea Ventures stake in Vodafone Kenya Ltd (VKL), there may be several holding Companies and legal entities (Special Purpose Vehicles). I have ignored this in the simplified chart.
The 87.5% and 12.5% refer to the assumed eventual holdings in VKL by Vodafone Plc. and Mobitelea Ventures through the various legal entities they control.

87.5% control of VKL translates into 35% effective interest of Safricom and 12.5% of VKL translates into 5% effective interest of Safaricom.

There are three facts you must keep in mind when looking at this chart:
1. According to Safaricom, the Shareholding is 60% Telkom Kenya Ltd (TKL) and 40% Vodafone (K) Ltd which is true.

2. According to Vodafone Plc. Annual Reports, they acquired 5% indirect interest in Safaricom from Mobitelea Ventures in 2003.NOTE; they said INDIRECT INTEREST not DIRECT interest. Meaning that Mobitelea Ventures has an indirect interest in Safaricom.i.e.they don’t directly own shares in Safaricom but in another company (VKL) that owns shares in Safaricom

3. The only way to have an indirect interest in Safaricom is through Vodafone Kenya Ltd (VKL). TKL’s stake is still the same as at the time of the Original Agreement in 2000.

Shareholder agreements are legal and still stand since the agreements are between TKL and VKL, not TKL and Vodafone Plc.
The aggrieved parties are Vodafone Plc’s shareholders. TKL isn’t since it agreed a 60:40 split of Safaricom and it still has 60%. Vodafone Plc. diluted its effective interest to 35% from 40%.

Why we are barking up the wrong tree.
The transactions are between Shareholders of VKL (it’s a Private Company), Vodafone Plc and Mobitelea Ventures.TKL, Safaricom Kenya Ltd are strangers to these transactions.

Therefore only the shareholders of the involved parties VKL, Vodafone Plc and Mobitelea Ventures can answer the questions or be aggrieved.

Wednesday, November 22, 2006

Here is my two cents on the Safaricom issue.
Safaricom Shareholding as at 2000(Vodafone Plc) Press release(link to it)
Telkom Kenya
Vodafone Airtouch

Shareholding as at 31st March 2006(Vodafone Annual Report)
Telkom Kenya Ltd 60%
Vodafone Kenya Ltd 40% .Vodafone Plc **35% effective interest in Safaricom
Mobitelea Ventures ** 5% Effective Interest in Safaricom

*Vodafone Plc holds Management control as per a Shareholder Agreement.
*Vodafone Airtouch Plc changed name to Vodafone Plc.
**Vodafone Kenya Ltd assumed to hold 40% stake directly for both Vodafone Plc. and Mobitelea Ventures

Vodafone Plc Annual Report-31st March 2005. (Extract)
On 10 January 2003, under an agreement with Mobitelea Ventures Limited, the Group
completed the purchase of a 5% indirect equity stake in the Group’s Kenyan associated
undertaking, Safaricom Limited (“Safaricom”), for approximately $10 million
(£6 million), increasing the Group’s effective interest in Safaricom to 35%.”

As you can deduce from the above, the Telkom stake has been constant at 60% but the Vodafone Plc stake appears to have gone from 40% to 30% and then to 35%. It’s Vodafone giving up its Shareholding and not Telkom. So no problem/loss to us Kenyans.

Meaning that if there any questions about the ‘new’ Shareholder, Vodafone Plc and Arun Sarin
(CEO) may be a good place to start. Hope this stops the misinformed bloggers out there putting out wild theories (e.g. ColdTusker).

The other thing is that Safaricom is a Private Company i.e. pre-emption rights apply.5% of it is Carte Blanche to stick up Vodafone for a large sum. Why hasn’t the owner of this stake sold it to MTN or Cegetel after giving Vodafone an impossible offer? This is what I would do if I was Mobitelea.

The reason can only be that Mobitelea Ventures is partially owned or is known(to Vodafone) and acts in concert with Vodafone Plc in regard to Safaricom. Note: The Annual Report says Vodafone Acquired an indirect stake in Safaricom. Therefore, control must be through another legal entity i.e. Holding company.

We must be careful as a country not to act in a manner that scares away investors. See how Russia’s attempts to right past Privatization wrongs i.e. Yukos affair have affected investor outlook. Everyone is afraid to deal with ethnic Russian investors. Because you never know when the Government may slap you with millions in back taxes and take away your joint venture. Just ask BP.

Hence, what investors call Political Risk for Russia is up.Russia has Oil,Gas,Guns and the Bomb.They can stomach the risk, i dont think we can.

Sunday, November 19, 2006

Retirement Benefits Authority (RBA) -Open Day

Yesterday, i went to the RBA event.I've been going for them since last year.
There is a lot of improvment before; there used to be only 2 or so Fund managers and the rest of the exhibitors were Insurance Companies.But yesterday's mix was sort of representative of everyone.

I made by own ranking of the best stands based on two factors; how they presented info to the public and how the staff and the information given(brochures) explained the issues to me/you.
Ladies and Gentlemen...............Drum roll please...The:
Best Exhibitors
AIG Global Investments (East Africa) and Genesis Kenya Investment Managment Ltd.
I couldn't decide on one, both had good people manning the booths.The information they gave was relevant and informative ,not superfluous.I know the basics so i don't need a pamphlet defining what a pension scheme or Trustee is.

Most Improved
ICEA group i.e. they have redefined their Fund Managment and Pension scheme subsidiaries.They now have ICEA Asset Managment Ltd and ICEA Trustees Ltd.I think they will make waves in the next 12 months.

Most Notable Newcomers
Amana Capital Ltd and British American Asset Managers Ltd(BAAM).
With Amana's Personal Pension Product there's no excuse for not having a Pension.They have products with monthly contributions of less than Ksh 2,000

BAAM have similar products(mutual funds) to African Alliance but with better marketing and i would say better execution of the Mutual Fund concept.

Best Concept
ICEA Trustees Ltd.-The Trustee services are worth looking at if you have a high net worth and want to leave something for the next generation(your kids).Alternatively, you could be rich,generous and want to set up a Scholarship fund a' la
Rhodes Scholarship or Rattansi Trust.

Just read the Kenya Gazette- half of it is legal notices relating to Succession cases for Kenyans who died without wills.

What i learned
You cant touch your Pension Funds until you are 50 years old(Last year's Budget made the rule).But you can move it from one scheme to another.

Tuesday, November 14, 2006

Blog Tech Help-Lost Posts

I lost two posts that i made last week. Anybody experienced a similar problem?


I just finished reading the EVEREADY prospectus.My personal opinions are in blue below.
I'll concentrate on the qualitative factors of the company and the IPO.(i think the prospectus covered the financial details adequately).
ColdTusker has summarised the Financial details on his blog
From the prospectus:
-The Par value of the shares was Sh1,000 but a split was done(Pre-IPO) of 1000 to 1 and shares with a par value of sh1 issued.i.e. without the split the shares on offer would be less than 10 million.

-The shares for sale are offered PRO RATA by existing shareholders to the public i.e. its not only SAMEER getting the cash. ICDC, ICDCI and EVEREADY inc. will also benefit.

-The firm concentrates on selling Zinc-chloride and Carbon batteries because we are too poor to afford the latest Lithium, Ni-cd batteries and Rechargeable ones that are common in the Developed markets.

-They have lots of cases by in court brought by former staff for Health complications brought by chemicals used in the Manufacturing process and for benefits.
Most of the cases are covered by insurance so little or no risk to the firm.

-The regional battery market is price conscious and not quality driven i.e. people buy the cheapest battery, not the best.

-The biggest plus is that EVEREADY has a good distribution network that reaches all over the region.
This is what saved EABL from the Castle-South African Breweries onslaught. EABL had a good distribution network in Kenya and South African Breweries did not have one.
By all means buy the shares,they wil rise and you can make a profit.But given the over-subscription you may not get all the shares you apply for.
Long Term Outlook
Unless they change their strategy i.e. import Batteries for sale. they may not completely overcome the challenge from the 'China' batteries

Sunday, October 29, 2006

NSE 5000
The NSE breached the 5000 mark this week.How far does everyone think it wil go before it falls?
My take? At least 5500 before it corrects.
The Bull factors are still there.Click here to read about them.

Wednesday, October 18, 2006

Automated Trading on the Nairobi Stock Exchange

Is it true that the new trading system only deals in lots of 100 shares.Hence, trading of shares in lots like 235,105 is difficult and expensive.
But in multiples of 100 easy.e.g. 2000,5000....etc

Anybody out there who can tell me more?

Jubilee Holdings is likely to be a candidate for a share split /bonus.

Rationale: It has only 36 million issued shares yet it is cross listed .Remember sister company
TPSEA has 89,865,588 issued shares, ICDCI has 54,995,188 issued shares ,yet it has announced a share split.

Last bonus was 10 years ago on its 60th anniversary.Earnings cover higher than where it was the last time they had a bonus.Click
here for more details.At the same time Jubilee is cross-listed, hence it needs more shares to enable trading.

NOTE. i own a number of shares in Jubilee Holdings

Thursday, September 28, 2006

NSE 7000???

As you know i believe the NSE(Nairobi Stock Exchange) is overvalued.However, in investing you must look at different views (you could be wrong).There are several factors that could lead the market higher:
1.Demand has shifted.(higher demand higher prices)

More people are getting into the market, thus demand for shares is increasing but supply is relatively the same.New players are still getting into the market i.e. directly, via unit trusts and investment clubs.Almost everybody i know is buying or trying to buy shares.

2.Price is influencing price

'Higher prices beget higher prices' someone said(cant remember who).As prices rise people buy more shares in the hope of getting on the train of higher prices.Their purchases fuel a further price rise...and the cycle continues.Notice ARM,Mumias,NBK,NIC have been showing this kind of behaviour.

3.African Markets

In comparison with other African markets(except South Africa) our prices(NSE) are still low in terms P/E multiples.Large companies are trading at P/E of 25 and above on the Nigerian Stock market NSE still has companies under 25 so there is still a ways to go.

I think NSE will cross 5000 mark this year.
Bull markets last longer than anyone expects and crash faster and sooner than anyone does.Few expected the Dow Jones to cross 11,000 in its last recovery and the FTSE100 to cross 6,000 but they did.

Sunday, September 10, 2006


Finally, 'a la bankelele and others here is my NSE porfolio:

Sold in last 6 months
-HFCK(regret selling it)

Additions by year end
-Jubilee Holdings

Saturday, September 09, 2006

Is the NSE Overvalued?
YES and here's why
The NSE is overvalued when you compare it to ther markets in terms of P/E ratio and dividend yields.
Take the current darling of the exchange KENGEN. the whole week people have been telling me what a great buy it is at sh.37/- 34/-.The P/E is 41. the Dividend yield is 0.67% REMEMBER; that you can only make your money on the Stock Exchange in two ways :

1.The Earnings at Kengen grow at a fast rate 40% plus a year.Consequently the share price appreciates. You get Capital Gains(price rises lets say to Ksh.60)

2.The Dividend grows at a fast rate lets say 50% annually.

How likely is it that KENGEN's turnover will grow at a rate of 40% every year for the next 3 years.Remember its turnover is sh.11 Billion and Pre-Tax Profit is Sh.2.6Billion. If the Turnover grew at that rate it would be at Sh 30 Billion and profit at sh7.1 Billion in 3 years.That will be larger than EABL in turnover.
I would say highly unlikely.

Then you are left with the second option, a high price that enables you to book Capital Gains.This is what is hapening now.But at some point the price has got to stop rising.Even a good company can become over-priced.Yes, you can pay too much for something.

Now don't get me wrong i'm not against KENGEN, i used to hold its shares and will buy them again at a cheaper price. The issue is that most of the co.s listed today can only make you money if the stock prices kept rising at current rates for the next 3-5 years(and dividends at least 20% annually).Look at ARM,Bamburi,CMC,HFCK,National Bank,KCB, EA Cables........... same story.

The NSE now is a traders' market not a value investors market so application trading tactics for success is necessary.

So, If the NSE is overvalued why is it still trading at high prices?
There are two factors:
INTEREST RATES: As long as rates remain below inflation and below 10% it still makes sense to buy a stock with 3% Dividend yield and 10% capital gain.If rates go back to double digits T-Bills will be popular again.

IGNORANCE: If people have no alternative investment avenues especially Fund managers. They 'll just keep pouring money into the market regardless of the valuations.After all in the short term they make a kill on the market, in the Long Run....heck it'll be someone else's problem.

There are alot of new players in the market who are unaware that the value of your shares can go up or down.They look at the relative price from Ksh.100 to judge the value of a share.The lower the price and the more often its mentioned on news-The higher the value.
These are the people driving the prices up

NEXT WEEK i will give you an alternate view on the valuation of the NSE.

Saturday, September 02, 2006

They dont speak VISA.

I'm just back from Uganda. The country shows you what 20 years of Civil war and uncontrolled liberalisation can have on the National psyche.First of all coz of the war there are no long term established businesses. Most of the tycoons i.e. Mukwano, Wavamuno, Sudhir, Saleh...... really made their money in the past decade(with the exception of the Madhvani family).

Imagine if Kenya was at war in the past 20 years of course there would be no old time businesses & family businesses like Kenchic, Text Book Centre, Pattni Jewellers etc.Now that is downtown Kampala. It looks like Tom Mboya with exhibition stalls.Street after street is filled with buildings that are exhibitions. Imagine World Business centre on Tom Mboya replicated from Koinange street up to river road and you get the picture.

There are no large/significant indigenous enterprises, everyone is a suitcase Dubai/China importer so no one will oppose the mushrooming of such businesses.
However from the Sheraton Hotel towards the State House it looks modern a mix of Gigiri/village market and Hurlingham.

The big firms i.e. MTN,Stanbic, Shoprite are all owned by South Africans.I went into a Shoprite supermarket and apart from Farmers Choice and Del monte everything was air- freighted from South Africa.
The worst thing about the Shoprite supermarket was that i couldn't use my VISA credit card there. Then after buying on the way out i had to give my receipt to a watchman who tallied it with my shopping before i could leave the store.Can you imagine going to Nakumatt/tuskermatt/Uchumi then a watchie asks for your receipt before allowing you to go? That shows you how backward the country is.

Then i later discovered i couldn't use my card anywhere (unless it was an ATM), apparently they fear card fraud. so to use it in a hotel you have to be a guest.
If you cant use VISA in a country, then definitely regardless of what they say, they are backward.

By the way cars, land,and booze(even in a 5 star place are cheap).But electronics are way cheaper in Nairobi(i think coz of competition).Some Electronics traders dont bother going to Dubai, they source their stuff in Nairobi.

P.S. I looked at the latest Actuarial numbers and Uganda is one of the countries which as at 2004 had no indigenous Actuaries.

Friday, July 21, 2006



I have just read the SCANGROUP prospectus. The following facts worried me:

-69 million shares are being sold.The Vendor(Bharat Thakrar)gets the proceeds of 60 million shares that is Ksh.584,176,501 while SCANGROUP gets the proceeds of 9 million shares i.e. Ksh73,883,843.

So the company is to expand and retire debts on Ksh.73 million and the Vendor pockets Ksh.584 million. Thats what i call capitalism.

-The group has a long term liability of Ksh 990,000 that is not properly disclosed on Page 92 of the prospectus.
We are not told to whom the loan is owed, the duration, the terms of the loan etc.
Remember Net Profit in 2005 was Ksh 148 Million

-SCANGROUP and CFC Financial Services Ltd-Which is the Transaction Advisor, Joint underwriter and Sponsoring Stock Broker- share the same Company Secretary one, Ramesh R. Vora. Is this a conflict of interest?

-SCANGROUP has 50% of the Ad. market can it grow further? Thats the way Barclays dominates the Banking sector

Inspite of the above facts , i shall buy the shares because the market currently favours IPO's .Hopefully,I shall be able to flip them after listing for a profit.

Saturday, July 08, 2006


Did anyone read the Kenya Police tender notice in the Daily Nation on this Thursday 6th ?I did and one of the items they tendered for was :equpiment to analyse exhaust fumes to be delivered to the Vehicle Inspection Unit.

Given that a lot of senior Government officials have been talking about vehicles that smoke from their exhausts its safe to guess this is the new "Alcoblow".

But they may have to ammend the Traffic Act because the Act only outlaws visible smoke. Its silent on the chemical composition i.e. the level of nitrous oxides, particulates, CO2..etc

So if you have a smoky junk ,repair it now or you wont be able to drive it next year when the Government brings the new rules into effect.

NAKUMATT: THE IPO................sooner than you think

Nakumatt has been in the headlines for the past couple of weeks for all the wrong reasons.
I'm sure by now the owners of Nakumatt know why Charles Njonjo has big stakes in listed companies like CFC Holdings or CMC, while Total man(Biwott) has his flagship investment in a comapany(Kenya Oil Co.) which is only 20% owned by the public listed on the Nairobi Stock Exchange.

On the other hand Meralli tries to list or co-own, his major investments with influential personalities.e.g. the MD at SASINI is a former high ranking civil servant.The other rich Kenyan, Mr. A.S.M. Ndegwa of First Chartered Securities, keeps an ultra- low profile.

The reason all this men behave the way they do is that they have learnt what all rich men have known upto and before John D. Rockefeller have known- "Everybody wants to be rich but nobody likes a rich man"

Yukos learnt this the hard way when President Putin seized and sold its assets.By listing a tiny stake of their assets the large investors get thousands of small shareholders , who not only ask stupid questions at AGM's but provide protection against Governments and individuals who want to aquire their assets unfairly.

Imagine the furore if the Government attemted to shut down CFC Bank or take-over Kenya Oil. All those shareholders who rush for the free packed lunch at the AGM will be at Nation Centre protesting. The sound bites that they will be giving the TV stations won't be pleasing at all to the Governmet which is headed by elected representatives(M.Ps). Of course, no Government would proceed with an unpopular course of action. So such institutions are protected from arbitrary Government actions.

For Nakumatt, to get protection against future State actions, they need to list a sizeable stake of the firm on the Stock exchange. Failing so, you will hear more 'revelations' in another couple of years.
My bet is that the Nakumatt owners being smart ones have thought the above scenario through and will list Nakumatt in the next 36 -48 months.(i'm willing to bet on this).

Saturday, May 27, 2006


Earlier this week, I talked to a pal of mine called Prof for purposes of this blog about an issue that’s been vexing me.
Savings Accounts are they relevant today?(pole it sounds like those Primary school debate questions: "Are boys better than girls?")

Here is what he had to say.

ME: Do you need a Savings Account?

Prof: Yes and no. Remember there are two types of savings:
TYPE1, you need savings in case you loose your job or have some other disaster you can use the money.
Type 2, you need savings as capital for investments, build a house, buy a car, retire, marry a third wife, become an M.P.............etc. (or any other dream you have)
Now, I assume that you have some money sitting somewhere in a bank account (type 1 of savings). I will address type 2.

ME: So savings are: (1) Transactional purposes
(2) Investment
Prof: Ahhh... (tapping his forehead)… you are getting the drift.

ME: For long-term savings beyond a period of 1 year, is a bank account good?

Prof: You mean a savings account or fixed deposit at a bank like NIC, KCB, Barclays, Equity...etc

ME: Right

Prof: No, because they give you a stupid rate of interest and your money gets a better return elsewhere.

ME: But prof, I thought an interest rate was good, any rate.

Prof: Ha.ha.aha…(coughing almost choking on his Tusker). Your ignorance amuses me. You have never had of inflation?

ME: Well....

Prof:Inflation simply refers to the loss of value of money over time. For instance a loaf of bread cost sh.15/= 10 years ago but now costs sh.25/=.

For more about inflation look at this sites:

ME: So what has Supaloaf got to do with my bank account?

Prof: As long as you have your money in a bank account that is losing value every year, by the time you want to use your money it will no longer be of any value.

ME: I am lost prof.

Prof: Let me explain using the bread example. Assume in 1996 you had Sh.1500, which was enough to buy 100 loaves. (1500/15=100).
You kept the money in an account that earned no interest and had no bank charges (for illustrative purposes). Today in 2006 you have sh.1500 and the price of bread is sh. 25. Your money can only buy 60 loaves (1500/25=60). Unlike 100 loaves 10 years ago, a loss of 40 loaves in 10 years.

ME: I see............

Prof: Lets say you earn 5% interest on your savings Account. But annual inflation is at 14% today. You money is losing value at the rate of 9%. That is (Inflation rate-Savings rate) i.e. (14%-5%=9%)

ME: So whats the way out?

Prof: You need to invest in areas where your rate of return is higher than inflation. That’s why the NSE is rising because inflation in Kenya is at 14% but Treasury Bill rates are less than 8%.

ME: So NSE has a bubble?

Prof: That's a question for another day. Let me put it like this, If the inflation rate remained constant at 14% but the Treasury Bill rate went to 25%, I don't think the NSE index would be at 4000 and above.

ME: So inflation is part of what is driving the NSE?

Prof: Yes, but we will talk about that later. Savings Accounts right.... that’s what we were on?

Me: Yes, I wanted to know what options to take on saving.

Prof: For, long term saving (over and for 1 year) I would advise two options:
1-Money market funds. Like the ones offered by Old Mutual, African Alliance and British American. They mimic a savings Account and have a high return around 8% and you can access your money relatively fast. Plus you don't loose your PRINCIPAL amount.

2.SACCOs- Some SACCO’s offer savings products that give you a rate of 10% per annum. The only downside is that you can't access your funds for at least 6 months.

ME: So I buy unit trusts and cozy up to my SACCO?

Prof: Right, just don't buy any unit with the words BALANCED and Equity in them because this are linked with stocks. Their values will fluctuate with the stock market. When the stock market goes up- so will they. When it goes down so will the equity linked units.

Me: What about...?

Prof: Almost forgot. Before you start investing have some Savings cash float in a Real Savings Account. (Just in case you need cash in a hurry) So that you don't liquidate your long-term savings or investments in a hurry.

Me: What?

Prof: Keep looking for any investment vehicle that doesn't jeorpadise your PRINCIPAL and can give you a higher return than inflation.

Wednesday, May 24, 2006


Finally, BAT has launched a site for East Africa.Can you imagine Nigeria had a BAT site before us?
Nice site well set out. Hope they add an investor section(for their local subsidiaries) soon.

Wednesday, April 26, 2006

ABSA- Coming soon to Kenya

ABSA-(South African Banking Group) has successfully raised R3 Billion to purchase Barclays Plc Sub-saharan operations including the Kenyan operations. Read more here.
Barclays acquired the majority stake in ABSA in 2005.

Monday, April 24, 2006

Just watched Lord of War starring Nicholas Cage. Its about an arms dealer Yuri Orlov(Nicholas Cage) and his business around the world. Especially Liberia and Sierra Leone.The bad guy is loosely based on Charles Taylor. Good movie but has lots of the usual stereotypes about Africans: AIDS, ignorance, theft.......etc.

Wednesday, April 19, 2006


I called Barclaycard to enquire about an online transaction. The Customer care staff informed me that Barclaycard(in Kenya) only allows online(internet) transactions upto US$300(without contacting cardholder). Above$300 the Cardholder must be contacted for authorisation.

So theoretically your risk for any online fraud is capped at $ 300. NOTE: I said theoretically because REAL LIFE EVENTS DIFFER from the best laid plans.

Tuesday, April 04, 2006

The other day I went to my stockbroker to transact some biz (no not to buy KENGEN shares). I was surprised the queue and extra staff to handle the new IPO buyers. It struck me that the brokers are going to come out of this IPO thrice lucky:
1. They get to earn a Commission for all the shares bought through them.

2. They get to trade for 24 days on your money before handing it to KCB (receiving Bank). With a large sum of money you can do a lot e.g. Overnight Lending.

3. When the excess funds are refunded on May they can convince the “New Shareholders” to buy more shares and make more commissions

Friday, March 17, 2006

Hi People,
this space is about me and the way i see life.My views and prejudices. Plus some interesting bits about financial markets from a Kenyan perspective.