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.