Sunday, November 18, 2007

Hi i have been the victim of spammers,the following posts on this blog are most affected:
-My blog from this point on
-Accesskenya IPO
-Extremly simplified Safaricom

I used to allow anonymous word verification free, comenting but from now on all comments will have a word verification and i may stop anonymous commenting in the future.
Sorry y'all but the net's changed.

PUMP PRICES-NO controls soon

Yes, the local fuel prices have gone up in the past one month.A number of journalists and the Minister of energy have been threatening that there will be fuel price controls soon. I don't see that happening.
Here's why:

1.All the fuel for local consumption i.e. crude and refined product is imported by one contract called OTS(Open Tender system). The energy ministry gets the demands for all the oil marketers in Kenya.The individual demands i.e. Total,Kenol, Shell,Triton etc is aggregated into one amount.Then the Oil firms are invited to bid for the tender. The winner then imports products for the entire industry.Thus, the entire oil retailing industry in Kenya GETS PRODUCT AT THE SAME PRICE.

2.Since, the product is at the same COST price if you introduce price controls MARGINS WILL DECLINE.

3.Local oil retailers have higher cost structures and lower volumes than Multi-national oil firms.

4.PRICE CONTROLS will severely reduce profits for local firms because of their lower sales volumes.Multinationals will face reduced profitability but will be able to maintain their market share.
In simple terms price controls will kill local firms and help the Multinationals.

Saturday, October 13, 2007


There are couple of firms in the NSE that have common ownership and management.It doesnt make sense to list them separately because the shareholders suffer double costs of extra layers of management and listing costs.

I have the following in mind:

Unilever Tea and Limuru Tea
Unilever holds the majority stake in Limuru Tea.They share top management.Limuru Tea is small(600,000 outstanding shares).Why not swap Limuru Tea's shares with Unilever and merge Limuru Tea into Unilever?

George Williamson and Kapchorua
George Williamson holds the controlling stake in Kapchorua.Save the Kapchorua minorities money and shuffle them into George Williamson.


I now see that as a nation Kenya is more tribalistic today than when MOI left in 2002.People dont talk about their political inclinations on an ideological or Economic perspective but rather on the basis of tribe or and religion. SHAME ON YOU TRIBALISTIC KENYANS.You deserve the leaders you get.

Thursday, September 27, 2007

HOW TO BECOME A BILLIONAIRE aka very very rich anywhere in the world

The Forbes 400 list just came out. For those who don’t bother this is the list of the 400 richest people in America. (Forbes also does a Global list).The big news is that US$ 1 billion is ‘too small’ to get you on the list.

On your quest to US$1 Billion the how to’s are:

Look for opportunities in Economic or Social upheavals

The Russian oligarchs-Abramovich, Deripaska, Berezovsky and their ilk come to mind. One day in the nineties the Russian communist system imploded. The system became free market and the Government privatized hundreds of industries, sectors and workers who had never heard of Wallstreet were given share in their factories.

The clever Russians made money in 2 ways:

1. Buying the Share Certificates for peanuts from the workers. Similar to how some sly characters bought Mumias Sugar shares from poor semi-literate farmers in Western Kenya for Sh 1.50 a share when the market price was Sh 7.00.

2. The cleverer ones just bought State resources from the Russian Government for a song. Just like someone wanted to buy Kenya-Re for KSH800 million 7 years ago. Don’t forget 40% of Kenya-Re was sold recently for Ksh 2.2 Billion.

Closer home the liberalization of the Economy in the early nineties provided opportunities for Kenyans to become super wealthy.

Take a risk

There is no way you will become a billionaire without taking a risk. When SAFARICOM and KENCELL(now CELTEL/ZAIN?) came to Kenya they had a hectic time looking for major dealers for airtime. Many people were skeptical, they doubted that Kenyans could buy phones at Sh 10,000 and Airtime at Sh 500(there was no Bamba 50 or Sh 250 card).

At present all the main dealer slots are filed up and you can't join the club.

Richard Rainwater took a risk in buying into the Oil sector when Oil was US$15 a barrel during the Dot-Com boom but who’s laughing now. Everyone thought he was nuts, Business Week even did a cover calling him a Dinosaur.

Grow a thick skin

On your way to the top you will face many challenges . A thick skin helps overcome all the hurdles.

Tuesday, August 28, 2007


I blogged on this issue last November.I notice its been the top content on this blog ever since.It never leaves the top 10 list.After many comments on my blog i.e. Patriotic Kenyan,Gathara and many others, i give you my final thoughts on it in a Q & A format.

How many shareholders does Safaricom K Ltd have?
Two,-Telkom(K) Ltd(60% of Safaricom) and Vodafone (K) Ltd(40% of Safaricom).

What about Mobitelea?
Mobitelea is a shareholder in Vodafone(K) Ltd which is a Private Limited Company.

What about Mobitelea's stake in Safaricom?
Its an Indirect stake, Mobitelea owns 12.5% of Vodafone(K) Ltd while Vodafone Plc holds 87.5% of Vodafone(K) Ltd.Vodafone(K) Ltd main asset is the 40% shares in Safaricom(K) Ltd.
If you take 12.5% of 40% you get the 5% indirect stake Mobitelea has in Safaricom.

How was business was done in the Third World during the 20th Century?
In those days there were no worldwide Mergers and Acquisitions firms,lawyers or clients to perform proper due dilligence and show you the ropes.Think Morgan Stanley,Citibank,PWC and lately Rennaissance.Most firms were based in the WEst and 1 or 2 Asian Capitals i.e. HongKong and Tokyo.Mumbai was the name of some exotic perfume.

If you wanted to take over a local firm or go into a joint Venture with a Third World Government,you allied yourself with a local political operative and he did the 'due dilligence' opened the right doors and he got a stake in the new firm as his Partnership contribution.

If you doubt me just look at the list of top civil servants and politicians of the 1960s Kenya and compare that with their business interests.

Why the IPO must go on
The Safaricom IPO will ignite significant foreign interest that will grow our markets and put Kenya in focus of all the top markets.The market Growth will create more jobs for everyone and grow the economy.

If we stop the IPO we can get back Mobitelea's stake
Ha, Not a chance the Mobitelea stake is parked in a private company Vodafone(K) Ltd.Government cant interfere with private property that is unconstitutional
Let me put the point across using a story:
There was once an old mzee who had 10 acres of land.He sold 4 acres to his Best Friend.The Best Friend then sold 1 Acre to a stranger the Mzee didn't like.The Mzee wanted that particular 1 Acre(that was sold to the stranger back).Do you think he got it ?

This is unfair Mobitelea's owners are getting away with free money
Life is unfair that why some people have first class degrees and are clerks while others have Certificates and are millionaires.Thats the case whether in USA or Kenya.
Apparently,this is the crux of Muthoni Wanyeki's Article in this week's East African.I respect Muthoni and she is one of the people i admire but i doubt her capacity to look at the big economic picture.
This is the best time to list Safaricom, you can never wait for the best time to do something..that time may never come.

What about the Privatization Act 2005?
It gives the Minister of Finance the power to Gazette it and decide when it shall come into effect.By the way Laws are never applied RETROSPECTIVELY.Do you know who the Minister of Finance is?
I rest my case.

Thursday, August 16, 2007

Bamburi/EAPC merger

Lafarge is a large and clever company.It has stakes in its Kenyan competitors' Athi River Mining(15%),East Africa Portland Cement (41%).Its main regional company is Bamburi Cement(63% stake).For a while,the Government has been eager to stop its ownership of competitors.It has been proposing the sale of the Lafarge stakes in EAPC and ARM, especially EAPC since only 6.3% is listed on the NSE contrary to listing requirements that 25% of a company should be listed.
Regionally Lafarge have other holdings in the region i.e.Mbeya Cement-Tanzania(62% Lafarge held) and Hima Cement-Uganda(71% Lafarge held through Bamburi).
The industry
Right now there is a construction boom in the Middle-East so Eyptians are selling their cement to their brothers in the Gulf,at the same time the high freight rates and Port efficiencies make it expensive to import cement to East Africa.For now the two factors are saving the hides of our local cement producers.
At the same time local cement demand is rising installed capacity in Kenya is at 3.3million tonnes(actual capacity is probaly 2.5-3.0 million tonnes),Annual cement demand excluding what we send to Sudan,Rwanda and Uganda is at 1.8million tonnes and rising at 10% per year.
Eastern Africa
Cement demand is rising all over the region DRC,Rwanda,South sudan, Uganda and Tanzania are all consuming more cement.So unless, we have more factories we will have a supply constraint sooner rather than later.Unless,the boom in China and the Gulf explodes and we have a glut coming our way.

The issue
The Government of Kenya wants to introduce more competition in the Kenyan cement market by forcing Lafarge to sell its stakes in EAPC and ARM.On the other hand,Lafarge sees the Eastern african region as a growing economic area and doesnt want to sell the stakes.

The Proposition
Lafarge offers to merge Bamburi and EAPC and add Mbeya and Hima Cement to the deal to create a super East african cement company to fight external competition.(think of it as an East African Breweries for cement).
win-win for both parties i.e. Lafarge consolidates its holdings in the region and Government gets a large stake in a succesful East African Cement company.

Other players
The other players in the region such as ARM,Tororo Cement and Tanga may have to consolidate in order to achieve the size and scale necesary to compete with the new entity(if it happens)

My take
We should take the offer but ask Lafarge to add their other companies likePortland Cement-Malawi and Chilanga Cement -Zambia(which owns a stake in Mbeya Cement Tanzania) to the deal.
A new company comprising of Lafarge's major interests in Kenya,Tanzania,Uganda,Zambia and Malawi would be of the size and scope necessary to face any competition and satisfy regional cement demand.

Monday, July 23, 2007

Kenya-RE Offer For Sale

The offer is open from 18th July 2007 to 31st July 2007.The share price is Ksh 9.50.Minimum application is 2000 shares.
The other salient features of the offer can be found at Coldtusker,Ka-investor,Ribacapital and Bankelele.I'll concentrate on the technical issues any other stuff can be found at the blogs above.

The Reinsurance Business

Kenya-Re reinsures insurance companies and other Reinsurers(retrocessions-where a reinsurer insures with another reinsurance company).It doesnt deal with primary insurance-thats why the man who went to court to stop the IPO lost.i.e. his contract was with United Insurance and NOT Kenya Reinsurance.

How does Kenya-Re make money?

In two ways:
1) Reinsurance business-when they make a profit its called an underwriting profit and conversely a loss in this business is called an underwriting loss

2) Investment income-they have an investment portfolio of approx. Ksh 8.9Billion as at December 2006.The returns from this portfolio form the investment income.38% of the portfolio is in Real Estate,Management is trying to reduce this to 25%. Over 50% of investment income is from real estate.

What are compulsory cessions?

Kenya-Re has compulsory cessions of 18% by law.This means that Kenyan insurance companies are obligated to give it 18% of their Reinsurance Portfolio NOT 18% of their total business
i.e. if an Insurance company writes KSH 1 Billion of Fire policies and reinsures Ksh 200 million of the policies then Kenya-Re will get 18% of the Ksh 200 million reinsurances.
The Cessions will end in 2011 or whenever Kenya-Re is fully privatised whichever comes first.

How Good are they at the Reinsurance business?
There is something called Loss ratio in the business.It is calculates as {Claims paid/Net Premiums}.Some use Gross Premiums as the denominator.Look at Page 13 of the Dyer and Blair research report and you will see the comparison of the loss ratios of Kenya-Re,Africa-Re,ZEP-Re and Gen-Re(south Africa).
I have extracted 2005 figures only.

The ratios indicate that Kenya-Re paid out 36.22% of its Net premiums in 2005 as claims while Africa-Re paid out 70.32% of its Net premiums in 2005 as claims,Zep-Re paid out 53.54% of its Net premiums in 2005 as claims.Gen-Re paid out 71.98% of its Net premiums in 2005 as claims.

On this ratio Kenya-Re appears to run a more profitable business since it pays out a lower portion of its Net Premiums as claims.
Insurance is a tricky business you can take on more claims thus growing your Gross Premiums and revenues significantly BUT you eventually pay for the increased business thru' higher claims payouts.Since, by taking more volume of business you take on riskier business.

Who are the Auditors?
Kenya-Re is a State Corporation so the Controller & Auditor-General is the Auditor.However, the Controller appointed Ernst & Young to do the audit for years 2002,2003 and 2004.KPMG were appointed the Auditors for 2005 and 2006.
For the purpose of the Offer for Sale Pricewaterhousecoopers(they will cringe coz i havent capitalised P,W and C) are the reporting Accountants.

Other Information

If you dont want to read the PROSPECTUS, you can read the SUNTRA research report its a summary of the prospectus.The Dyer and Blair research report focuses more on the OFS pricing methodolgy and industry comparison.

What about Todays article in Business Daily?
The article is a cut and paste of the salacious portions of the OFS , the ksh 150 million has been chopped from 2006 profits to cover bad debts from other reinsurers..The other debts to Directors are fully covered charges to various Assets.

Why do the Accounts figures fluctuate from the prospectus, published accounts and previous years statements?
The Accounts had the following treatments:

-The Accounts were stated from 200
4 backwards to conform with IFRS(International Financial Reporting standards).

-After the forensic audit and due dilligence for the OFS some items in the Accounts were changed.

-The reporting Accountants(PWC) had some adjustments made to the Accounts mainly to factor in Ksh 150 million which they didnt think was collectible and recognise the interest in ZEP-Re under IFRS.(Look at their report in the prospectus), this increased the Net profit in all the years 2002-2005 but reduced profits by Ksh 150 million in 2006

What do i think?
Good,strategic company.Reinsurance is a risky business you can have low claims for 10 years then one day a Tsunami,Earthquake or floods affects your claims upwards.
Most african countries dont have reinsurance companies and are hoping to set up some.For instance, Tanzania-Re was set up in the past two years.But its so devoid of technical skills that ZEP-Re has seconded staff to it.

I think the price is great and will stay above the Offer price post listing.

Saturday, July 07, 2007

Stanbic,CFC and the Budget

The past month has been very interesting in the financial world
CFC Stanbic Merger
The mechanics of this merger are in two parts:

1.CFC Holdings will take over Standard Bank of South Africa's stake(Stanbank-SA stake in Stanbic-Kenya is held through Stanbic-Africa Holdings ltd) in Stanbic Bank Kenya in Exchange for CFC Holdings shares.Simply put CFC will give Standard Bank-SA shares in the entire CFC group(CFC holdings) and get the former's shares in Stanbic Bank Kenya

2.Gambit holdings(45% stake in CFC holdings) will sell their shares in CFC Holdings to Standard Bank-SA through Stanbic Africa Holdings Ltd.

The net effect of the two transactions are that Standard Bank-SA will end up with 60% of CFC Stanbic Holdings ltd shareholding

Who has bought whom?
This deal has confused many.The facts are:
-CFC Holdings has acquired Stanbic Bank Kenya ltd.
-CFC Holdings has been acquired by Standard Bank Group of South Africa

Why does CFC Holdings want a CMA exemption?
CFC Holdings wants a Capital Markets Authority exemption because the deal seems to disadvantage the minority shareholders i.e. while Gambit holdings gets to sell its stake in CFC Holdings to Standard Bank Group.
The minority shareholders dont get this option.They can only remain with their shares in the CFC Holdings group or sell them through the market and NOT to Standard Bank if they do not like the deal.

The other merger option
The deal could also be structured in the manner TPS used to consolidate its East african operations under one group.In this case a new company would be formed and it would take over the entire assets of CFC Holdings+Stanbic Bank of Kenya.Then Shareholders of CFC Holdings would exchange their share in CFC holdings for shares in the new group.Likewise to holders of Stanbic Bank of Kenya.

The Budget
Did anyone notice the proposed amendment in the retirement laws that exempted a deceased persons retirement benefits from his/her estate?
This amendment means that if name your girlfriend as your retirement benefits beneficiary and not your wife and children.In the event of your untimely demise, the scheme trustees can pay your pension benefits to your girlfriend and your Wife/children cannot dispute it in a court of law.

Am sure in a few months this law will bring some interesting situations to light.Unless retirement scheme trustees amend the laws on nominating nominees and state who u can or cant nominate as a nominee.
My Blog: From this point on

Am sure most of you have noticed ave been AWOL from Blog world for a while.I took a break from my usual schedule and decided to find out what i can do with rest of my life.After a little thought(it seemed like a lot at the time), i changed jobs,relationships and have now refined my priorities.For my personal life it will be to look for someone who can fill a gap in my life but am in no no hurry.
For my professional life , i now do something i like and is intellectually very stimulating.

For the Blog, i will do less posts .
Once a week usually on a Friday or Saturday.There will probably be one weekly post but much longer.
On money
I have realised i have what it takes to be a multi-millionaire, so this will be my current/long term recurring goal.

Thursday, May 24, 2007

When i was away i caught up on a couple of books and DVDs(that i promised i would recommend).I would recommend them any time.The books can be found at, Book Point and Books First.Check prices at BookPoint and Bookfirst-Nakumatt before you order on AMAZON.But some books can only be found on AMAZON.Nu Metro has a weird book collection thats why it isn't here.

1.Winning Investment Habits of Warren Buffett and George Soros
Can be found at Amazon.These two guys are self-made billionaires-started with nothing and ended up US$1Billion plus.The advice boils down to this; Focus on what you are good at.Whatever you make live below your means.

2.Walking in Kenyatta Struggles
Interesting biography from the first black Governor at the Central Bank of Kenya-Duncan Ndegwa.The Ndegwa Commission of the 1970s that allowed civil servants to engage in private business, also recommended the setting up of the office of the Ombudsman.

The Ombudsman would receive complaints from the public about Civil servants.Civil Servants would also have to declare conflicts of interest.Imagine if these measures were implemented in the 70s, half the scams we've had would never have occurred.


The biography of John D Rockefeller Sr- the richest man to have ever lived.He was richer than Bill Gates even after factoring in inflation to equate the US$ then and now.
For all his wealth he had all the usual problems we all have ungrateful relatives,disappointing children and malicious rumor mongers.
This is one of the best biographies i have ever read.

1.MOBUTU-Le Roi du Zaire

Interesting documentary film capturing Mobutu's rise stay and eventual fall from power.His family ,opponents and friends are all here.
No actors just interviews and newsreels of Mobutu , Zaire and the world leaders of the time.The transformation from an idealistic young man to an old tired dictator is fascinating.

2. 24

Jack Bauer always seems to keep going and coming back just like the Energizer bunny.

3.Hustle-TV series
A group of lovable con artists.They pull DECI-like scams on their victims.Every episode is thrilling the plot leads the viewers down one path as Mickey and his pals lead the 'victim' down another.
Mickey is played in the first 2-3? seasons by that guy who was Joan's boyfriend(Brock) on girlfriends.
I think those guys who ask others to 'plant' a seed and quote some obscure bible verses, use it as a training video.

Couch Potato does great reviews on new and old favorites on TV and the big screen
Adventures of Nyangi
For the first time we have a kenyan video game.An enterprising Kenyan called Wesley and the rest of his team at Gwimgrafx Studios are the developers.I havent played it(My comp doesnt have 512MB RAM) but i saw it at Nu-Metro media store(The Junction).It retails at less than Ksh900.Compared to other PC Games in the Ksh3000-Ksh9000 range.
Buy it online here

He was also featured on Enterprise Kenya on KTN on 22ndMay.

I wish Wesley would do it in PS2(Playstation 2) format.Lots of Kenyans have Playstation consoles.A PS2 disc at sh.300 would have wider distribution.

It can now offer VOIP calls via wi-fi.I'm curious , would it work in Nairobi via KDN's butterfly network?
Kenyan Pundit says that the network is free for now(havent tried it)

Thursday, May 17, 2007


I am all for
Safaricom to have a partial listing abroad;either on the LSE(London Stock Exchange) or NYSE( New York Stock Exchange). The benefits of listing safaricom offshore are numerous, such as:
-A foreign listed stock will bring the Kenyan and East african market to the attention of investors in the Developed world and raise our profile as a country.South Africa,Egypt,Nigeria and even Malawi have their local companies like ABSA,Orascom Telecom,Telecom Egypt and United Bank for Africa-Nigeria are listed abroad.

-Investors will consider Kenya a serious and viable investment destination because by virtue of cross-listing our LOCAL COMPANY shares off-shore it means that we have locally based companies that can operate within World-class corporate Governance and Financial regulations. i.e. to cross-list on NYSE or LSE you have to adhere to UK or US listing standards.

-Cross-listing of Kenyan companies in the UK/US exchanges will provide foregn inestors and Kenyans in the diaspora a more efficient way to purchase Kenyan shares.It will probably be more liquid and efficient for them(Investors outside Kenya).

By the way lack of liquidity in our capital markets is what prevents some Foreign investors from entering them. -Cross listing will also enable local companies have more options for raising capital I am of the opinion that some Kenyan companies are large enough to cross-list abroad.For instance,KCB, First Chartered and Jubilee and Equity in the next couple of years.

How would the Sale of Safaricom shares offshore be done?

There are several methods of listing abroad.Some of the methods are:

Depository Receipts
These are negotiable finacial instruments that represent shares in a company.For instance, Vodafone PLC has Depository receipts(DR) that trade on the NYSE.the Ratio of DR to Ordinary Shares is 1:10 meaning that 1 DR represents 10 ordinary shares of Vodafone PLc.

In Safaricom's situation a block of shares in Safaricom(K) Ltd would be deposited with a local Custodian Bank which would act as an agent for the Depository Bank in London or New York Exchanges.

The Depository Bank would then issue Depository Receipts based on the Block of shares held on its behalf at the local Custodian Bank or Branch.
For example, if the shares deposited at the custodian Bank were 100,000,000(One hundred million shares) then Depository Receipts were issued in the DR:Ordinary share ratio of 1:10.
Each Depository receipt listed abroad would represent 10 ordinary shares in Safaricom(K) Ltd.
So 10 million DRs would be issued for listing on the NYSE
(Assuming the DRs are listed in the USA).
If 1 safaricom share on the NSE traded at sh35, with the US$/Ksh exchange rate at 1US$-Ksh70.One Safaricom DR would cost US$5 (1 DR is equal to 10 ordinary shares i.e. 35*10=350)

Direct Listing
Safaricom(K) Ltd could also have its primary listing on a foreign stock market e.g. LSE and the secondary listing on the NSE.The alternate could also be done- the primary listing can be on the NSE and the secondary one elsewhere.

SABMiller and Old Mutual Plc. have their primary listings on the LSE.
The drawback of having a primary listing on the LSE is that Safaricom would have to create a UK based PLc company to do this.
I favour listing on the LSE because the listing and compliance costs in the UK are lower than the USA.

I have deliberately over-simplified some explanations and left out some facts/explanations for the sake of clarity and to make the post accessible to people with a non-finacial background.

Saturday, May 12, 2007

I have blogged on a number of issues over the last 6 months.Some of them are now being debated in public ,other issues have melted into thin air and others are due to come up.
It turned out that the shareholder structure that we(you and i) hypothesised on this blog turned out to be true.The Guardian newspaper investigated Safaricom's shareholding structure and found the offshore parent of Mobitelea. has more on the saga here.

The Minister for Finance gazetted this ammendment and borrowers are soon to enjoy the benefits.

This is one Act that NEMA(National Environmental Management Authority) had to shelve.Inmplementing it would have been an enforcement nightmare .It would have requitred hundreds of Traffic police and NEMA inspectors to implement.It would also have taken out a lot of vehicles off the road.
Lack of adequate resources for enforcement are part of the problem with the new traffic rules.
I am sure it(NEMA Ammendment) will come back someday.

The report on which the MPAC post was based is now under scrutiny.Specifically the issue of whether we need a strong shillin or weak shilling.With the shilling at Ksh 67, you can be sure some exporters are crying.
I'm a weak Shilling proponent But most people are for a strong shilling.Their argument is that we import Oil , so a strong shilling will keep the cost down.Consequently,domestic inflation will also be lower as a result.
They forget that the largest component of domestic oil price is TAX.

Sunday, May 06, 2007

KQ 507
Condolences to all the family members and friends of the crew and passengers of flight KQ507.

A post for those who aren't interested in daily accounts of the NARC-Kenya and ODM soap operas.
Business Daily
Great concept, first daily business paper in the region, like the FT it has pink (or is it brown) paper. I have a soft spot for them(was once offered a position on the BD-Africa launch team, BUT was otherwise occupied and couldn’t take the gig)
I’m torn between the print and online version. The online is one of the best African business news sites. The daily paper is great but I tend to feel that they take one story and slice it into many slices in order to fill the daily content.
An example, is the shortage of Accountants story, they have carried it in various formats in several issues of the paper in the past two months.
No background interviews have been done on the story e.g. talking to Accounting firms and companies. Just sound bites from two, three people and ICPAK.

Business Daily also does lots of WSJ/Reuters wire stories that aren't relevant or you can get on Google news. Then the usual gripe about Nation Media Group newspapers- there are quite a number of spelling and grammatical mistakes in the paper.

The other gripe is that the FTSE London stocks list is never complete. Its always chopped off halfway. How can you look at FTSE stocks and NOT have SabMiller and Vodafone on the list?

They should try and do more business stories from Africa and Asia.Otherwise,you end up with a paper where 10% of the content is local and 90% can be pulled off Google.

Make it cheaper or increase the content. The FT has a heck of a lot of content ,I once had a subscription had to read part of the paper on weekends ,i couldn’t finish it in one morning(and work in the morning).
Take Bankeleles route- Add it as a Supplement in the Daily Nation and increase the price of the Daily Nation marginally.

Change editors

- i see the logic in sharing editorial control with the Daily Nation i.e. So that the stories DONT clash or conflict. Because some breaking news stories make sense to both papers. Someone has to decide which paper will carry what story.
But the Business Daily needs someone with business interest to pick the wire stories. So that they pick stories that can excite reader NOT just stories that can be picked off the net.

Daily Nation
Business news isn't as great as the EA Standard.

EA Standard
Balanced politics and business news, But NMG publications trump them in the quality of business news. The EA Standard has all the ingredients for better business journalism BUT they just cant seem to find the right recipe.

People who can only buy one paper (cant afford Business Daily)and need both business and politics buy this paper.

Kenya Times
The head of business news deserves a medal. In spite of having less resources than NMG and Standard, Kenya Times has good online content on its site. The articles also tend to be more incisive, with appropriate comments. If they got more resources, i think they can beat NMG at this game.

Business in Africa
The stories tend to have a South African slant, with a little bit from elsewhere. I find the articles academic with little value addition

The Times (UK)
Its one of the best papers around. I find it well balanced and an interesting read.You will find it engrossing even if you aren't white and believe you run the country(By country i mean the UK)

Good weeklies but Newsweek has a more international outlook. TIME is more American focused(news with an American perspective).

Articles that get you thinking,good to read. By the way they have a special subscription offer-valid until June.

Al Jazeera
News from a non-US/UK perspective. Interesting interviews of people like Gen Musharraff, Sheikh Aweys

Good for the programmes like Quest and the documentaries But with Google,RSS and other net news some of their news seems like internet feeds on your telly.

The better business news on television.

Business news is sufficient. The only problem is that the same stuff can be read in the next day's paper.

It has more extensive business news than NTV/KTN; the one of the problems is that we(Kenyan viewers) prefer to watch KTN,NTV and CITIZEN. The other is that they don’t display the market prices(NSE) properly.


Did anyone see the NAKUMATT advertisement(Daily Nation May 1,2007) in the paper?The advertisement warned Smart Card holders from disclosing their Bank account details to callers who pretended to be Nakumatt employees.It seems to be a crack in the smart card and receipts system that crooks want to exploit.

The crack
The Nakumatt till receipt indicates the following details at the bottom(if you use your SMART card):
-Name of smart card holder-Smart Points givenIf you pay by credit card/Debit card plus use your smart card, the following details will be on your till receipt
-Name of smart card holder-Smart Points given
-Full Debit/Credit card number BUT not the name on the Debit/Credit cardSo by getting hold of your receipt. Someone knows your name and the full number for your Credit/Debit card, But not your address or the CVW code of your card

What you didn't know
To use a Credit/Debit card online you DONT need to have the card physically present you just need to know the card number and its Card security code.

Card security code refers to the 3 digit numbers at the back of your credit/debit card that are on the signature strip. Take your card flip it over and look at the signature strip. You will see a series of numbers. Look for 3 digits that are together. Those three are the code.

Card companies developed this code to prevent people from using other peoples' cards online using stolen Credit/debit card information.The code forces you to physically have the card when carrying out the online transaction.Most online sites will ask you for this code in addition to the usual details when paying for an online transaction by card.

My theory
I think that someone must have found a way to obtain SMART card details. Then he calls card holders for the bank information/address and Card code.

How to protect yourself
-Destroy the portion of the receipt with your name and credit/debit card details
-Use slightly different details for your SMART card and other loyalty card programmes from your bank details. For example, put a fictitious date of birth on your loyalty programme applications. Use a different address for your Bank account and other applications.

-DONT give out your Bank Account details to anyone over the phone.-Watch your bank statements and report any suspicious transactions.

What Nakumatt should do
The counter till receipts shouldn’t display your full Credit/debit card numbers and your name. Part of the numbers should be obscured.This is what some supermarkets outside Kenya do in the UK do. Local ATMs also obscure part of your Credit card number (Pesa Point and NIC bank do so for Credit cards).

Other than the above.I am happy with the SMART card and will continue to use it.

Here are a few interesting links on the subject:

Here is a link to the Nakumatt notice on their site.

Wednesday, April 25, 2007

AccessKenya has two main offerings:
-Leased Line internet services-BROADBAND maX
-ISP VOIP telephone service called YELLO.

The other group company BLUE holds a Public data Network licence similar to KDN(Kenya Data Networks) and a LLO(Local loop operator) licence that allows it to offer CDMA services like Telkom Kenya's Wireless and Flashcom and POPOTE wireless offerings.

Who gets what
45 million new shares are being sold by the Group company.The existing shareholders(vendors) are offering 35 million existing shares for sale.The group will get Ksh 426 million from the sale while the vendors will get Ksh334 million.The directors interest in the Group before the offer is 84.6%.after the offer(assuming its fully subscribed) it will be about 44%

Adjusted Profit & other numbers
'Adjusted Profit' keeps popping up in the prospectus document.Prior to and including 2006.Accesskenya was run as a family business(Somen family).As such the remuneration structure and payments were higher than similar independently run firms.The adjusted profit is a recalculation of the payments to owners as if it were happening in a commercial 'arms length transaction'.The new figures are then used to adjust the historical profit and arrive at the adjusted profit.
No need to worry, since the directors and the other related parties have signed proper arm's length Service Agreements with the group.Details can be found on these pages 45-47 of the prospectus

The historical EPS for 31 Dec,2006 Sh.0.32,the 'adjusted EPS' for the same period is Sh.0.64.The forecast EPS for the year ended 31 Dec,2007 is sh 1.02.The historical PE for 31 Dec,2006 is 31.3 BUT the adjusted PE(after adjusting profit) for the same period is 15.6.The forecast PE based on the 2007 profit forecast is 9.8 and the Dividend yield is 3%

-The company bills in US$ or local quivalent But satellite and equipment costs are in US $ so it has limited its exposure to currency fluctuations.

-The top10 customers contribute less than 5% of revenues.The company is NOT overly dependant on one customer or group of customers.

-The Profit forecast for 2007 is conservative.i.e. it only considers the Corporate leased line business and the VOIP telephone service.It hasn't looked at new business lines such as;IT services and the move to small home office and Hi-residential markets that could have a big pay-off.

-The company hasnt made huge capital investments.IT equipment gets obsolete by the second.The higher the cost/value of your equipment the more likely it is to be obsolete and also render you incapable of switching to new technology platforms.for instance 5 years ago you had to run web applications on SUN,Oracle or Windows servers that cost millions of dollars.NOw you can run the same sapplications on New servers that run on Open source software that are cheaper(cost hudreds of thousands of Dollars) and are easily scaleable(the size of applications can be increased).

-Its Yello VOIP service has lower rates than the main competitor UUNET.

-It has a CDMA licence,so it can easily take over a competitor or merge with one e.g. Telkom Kenya ltd and offer cheaper/better wireless data services.

-It has kept its options open.i.e. they havent over invested in one type of infrastructure or model.So they can easily catch the next IT wave.

-There are too many competitors in its market.

-Technology is changing everday.Its NOT hard to see new competitors like Safaricom,CELTEL having faster data technologies for internet connection and entering the market.Think along the lines of GPRS but faster.

-Regulation-CCK has been talking about issuing Universal licences at some point in the future.This means players Telkom can start an ISP, once they have the Universal licence
Interesting Fact from the Prospectus
The cost of data transmission by fibre optic between Mombasa and Nairobi is still higher than equivalent Satellite connection.This is inspite of having the KDN and Telkom fibre optic networks connectiong the two cities.
My decision
I'lll buy, the dividend yield isn't bad and Post IPO prices will hit at least Sh 15.Profits can be made.

NOTE: Dont follow me blindly,seek advice from your Stockbroker or other relevant proffessional.

Friday, April 20, 2007

The other day i noticed quite a number of female aquitances i know are pregnant or have just given birth.It got me thinking about life and specifically old age and retirement.You may NOT believe this but as surely as you are breathing now one day you will be old and living on your pension,income or alms(depending on your state of affairs then).

About Pensions
There are two main pension scheme types:
-Defined Benefit: The employer shoulders any risk in the plan i.e. if at retirement the pension scheme assets havent made sufficient returns, the employer has to fork out the difference.
Forking out the diffefrence leads to a drop in profits.These are the legacy costs that companies like FORD and GM in the states suffer from.

The plus side of these schemes is that the benefits can be enormous(to the workers).Its also hard to value transfers in cases of shifting from one scheme to another.Government of Kenya has such a scheme But it is closed to new workers from July 2006.All new Government workers join a defined Contribution scheme.
Most private employers have shut down such schemes or converted them to defined contribution because of the risk it exposes the employer to.

In this scheme both the employer and employee contribute.But the employer has no further liability other than his contribution.Most new schemes are of this kind and the older schemes are being converted to this.Its easy to value transfers between funds in case of job changes

Why should you care?
Defined benefit schemes with some inflation protection tend to be the best.If you live 20+ years after retirement you can find yourself in a situation where what you earnn as pension is higher than your salary before retirement.The sufferer is your former employer because he has to ensure you get the actuarially set monthly payments whether or NOt the scheme returns are sufficient.

Defined Contribution- You are paid what the scheme assets make.If you have a crappy manager tough luck.Thats why scheme beneficiaries and members have yearly meetings with their managers.You are suppossed to throw out the manager if he isn't performing.

This post covers employed people.I'll do one for the unemployed and self-employed.

Tuesday, April 10, 2007


I bet you were wondering what i have on my CDS Account.

Here it is:


sales in the past4 months


Jubilee Holdings


TOTAL(my stake is much smaller)


Made a kill on Jubilee.I got in at sh.180 and sold at sh.300.Sold EVEREADY @SH.16. Sold TOTAL at a loss i.e. bought it @ sh.35-37 18 months ago.Sold at Sh34-32 .
Mumias made a loss of sh4 per share on the sale.


I'm still engaged in flipping i.e. i buy and sell shares as long as i can make 15-20% per trade after covering the transaction costs approx 4.2% when u buy and sell.These shares make up my sales.The shares in my Portfolio are LONG TERM i will hold them for at least 3 years.I'm adding more international holdings to the Portfolio(but i wont flip international shares-commissions and currency costs are too high).

NOTE: To flip, you need a good broker, coz you can trade upto 3-5 times a week.Sometimes you buy and sell the same shares in 10 days.
I can get a JSE(south africa) account.But one thing about JSE is that commissions r too high u have to deal at least Sh100,000 per transaction to make it worthwhile.JSE is more of an institutional market unlike the way NSE goes out of its way to make retail investors welcome.JSE assumes that retail guys should buy mutual funds and leave the market to the 'experts'.

US trading Accounts have better trading terms and conditions.You only need to sign a
W8-BEN(IRS form indicating you ain't a tax resident in the USA) and a few requirements and you are in business


I want to move to LSE (London Stock Exchange) but no one(online) seems to be able to accept an Account from Non-UK residents.They think you must be Pablo escobar or Osama bin Laden's Treasurer.How can a Third World resident have a share trading Account they ask? OR the money to trade?(they dont ask this question explicitly he..heh..).

Locally,Francis Drummond can introduce you to a broker registered on the LSE but you need a minimum of Ksh1,000,000.

Help wanted

Anybody knows how Kenyan residents can trade cheaply(preferrably online) on the LSE holller,email or add a comment how.Because the only solution left is for me to get fingerprinted and go to London to physically open an Account.

Tuesday, April 03, 2007

I'M BACK.....
Hi bloggers, its great to be back after a couple of weeks of doing nothing but traveling and reading a few books that i wanted to read(will do a review some time).Also watched some great DVDs.
Now on to what i do best(or love).

The market
The NSE has really gyrated around and from reading the papers all manner of experts had all kinds of answers for the Yo-Yo's.I noticed that Globalisation is here with us.i.e. We as a country can no longer afford to MANUFACTURE some products in Kenya.We don't have a low-cost base as a country.My recommendation is that the following companies should cease Manufacturing in the country coz it ain't helping their shareholders.

Given the high cost of ZInc and other raw materials, no matter how good the manufacturing plant at Nakuru is.It will never produce cheaply either on a volume or cost base to counter overseas imports. The best thing the company can do is to import all the required batteries from low cost sources and sell them over their current marketing and Distribution Network.

Otherwise, with the current strategy all i see are losses and low profits in the medium term.Since, the market for batteries is on price and quality(quality refers to lithium-ion(which aren't manufactured in Kenya)batteries NOT zinc chloride.
The other consumers who have never heard of Lithium ion are more interested in price i.e. if a battery is half EVEREADY's price then its a good battery.

We don't have the volume of tyre sales to justify a manufacturing plant.We are better off importing from elsewhere in the COMESA read EGYPT) and selling the tyres here.Apparently, this is what BRIDGESTONE had in mind before pulling out of Firestone Tyres.But local shareholders wanted to keep manufacturing here to safeguard jobs.Too bad those 'jobs' had to be axed in a recent restructuring of the tyre firm.

I also think that the YANA brand should be axed unless, its going to be positioned as an ultra cheap tyre.Imagine buying your Range Rover sport and having YANA on your sidewalls.Highly unlikely eh? you most probably will have Pirelli ZEROs or BRIDEGSTONE something on your sidewalls.
Inspite, of all the marketing i dont think YANA will ever have the Brand catchet of PIRELLI or BRIDGESTONE.
But if its cheap matatus and the rest of us can buy the YANA's and fix them on our cars.

The only thing i like is the Real Estate/Business Park is brilliant.

Tuesday, March 13, 2007


I'm thinking of dropping my Safaricom Advantage postpaid line.When i got in 2 years ago.Safcom Advantage was cheap @sh.10 per min.(before taxes to call another Safaricom line).Approx. Sh.12.60 after taxes.Dont try to call CElTEL or a landline.The bill can hit sh. 40 a minute after taxes.

Today CEltel has an innovative line of postpaid packages that enable you to fix your monthly usage and Calls to other Networks as low as Sh.16( a minute after taxes).

On Saasa tariff, Safaricom to Safaricom calls are charged as low as sh.8 a minute.While am calling a Safcom line at sh.12.60 on the tariff thats euphemistically dubbed 'ADVANTAGE'.
Then, i have to top up KSH20,000 for roaming but some post-paid subscribers on Safaricom roam for free-just a scratchcard and they r chatting,while out of the country.

Safaricom should do something for the Post-paid subcriber.We pay higher rates than post-paid subscribers/I thought it was the other way round.Coz am such a good client(thats why they let me call & pay later), i ought to get better rates than pre-paid.
If nothing happens Tarriff-wise by the end of March ,i'm moving to CELTEL.

PS. i'm on a break till end- of the month.Your weekly dose of my analysis and thoughts will be back at end-month.

Wednesday, February 28, 2007


In the Blue corner we have Barclays!! in the Red Corner we have Equity.Lets get ready to ruuuumble........... sorry got carried away, this post is on the banking sector.The best way to do it is to focus on two players everyone talks about:-Barclays Bank(BBK)-Old style bank, majority owned by Barclays Plc+ about to be taken over by ABSA-South Africa -a Barclays Plc group co.

-Equity Bank-Indigenous owned bank that has grown @ sonic the hedhog speed.EPS is up 120% last year.
Brief Stats as at January 2007
Barclays Equity

ATM's 80 105

Branches 60 42

Pre-Tax Profits in 2006 sh6.6Billion Sh1.1 Billion
Barclays Bank
-Large Bank+solid reputation
-Large wealthier customer base
-Steady dividend payout
-Large and diversified product base e.g BarclayCard credit cards,Wealth management,Trade Finance....

-Owned by Barclays Plc. so London will always guide major decisions.Compare that with Equity Bank that bought its IT software from the best vendor(according to mgt.)- INFOSYS of India.If BBK had to make a similar decision it would probably buy whatever software the Plc. uses

-Attempting to copy Equity Bank retail model.However, the clients they are going after may be sub-prime and they may not have the experience of dealing with them.NPA's may rise.By the way they're doing something similar to Equity in Ghana.

-Takeover of Barclays Africa by ABSA. I hope this doesn't distract the management of BBK from the task at hand.

Equity Bank
-Great banking model.Everyone is trying to copy it from BBK to Co-operative Bank
-Fast growing.Earnings are up 120% for 2006.A bonus offer has been given signaling further earnings growth
-Largest ATM network.equity has bought 100 ATMs read here for more.This should bring their ATMs to more than 200 at the end of that with 200 that Barclays will have at the end of 3 years.
-Aware of their market position and their competitors.So they have an awareness of where they are going and what copmetitors are upto.
-Low cost base.Equity can give you a loan of Ksh 10,000.I think the lowest Barclays can give is Ksh 50,000.Below that their(barclays) cost structure can't allow it.

-At some point the 100% growth will slow down.According to the prospectus(for the NSE listing) this will be around 2009.
-All fast growing banks have had to deal with larger NPA's at some point.Will this ever happen to Equity?
-Public perception-The public has always viewed the bank as belonging to one community.The other thing is that middle class/upper Kenyans believe that a white,hopefully) British man has to be at the back of any successful Bank.

My thoughts
I think Barclays should stick to its current clientele and try to make services better for them.E.g. Barclays had a cash/cheque deposit at Queensway that used to work. Not anymore.You have to go into the banking hall to deposit.

Barclays should try making its other services e.g Credit cards better.e.g.if you pay your card bill by cash-it takes upto 3 days to credit your Barclaycard.
I think the shift downmarket may slow Barclays' profit growth.Equity still has room to grow i.e. as they increase branches, the deposits will grow.However, at some point in the next 3 years growth will stabilise to normal levels and the management will have to consolidate the gains.At that stage is when management will be tested.
Equity has avoided the blunders of earlier Local banks i.e. depending on one group of depositors.i.e EURO Bank got most of its deposits from Parastatals.So, when politicians changed and deposits were recalled, there was no way out but down.

The other reasons why i'm confident about Equity's stability are:
-CBK supervison has greatly improved.CBK now monitors Banks much better.Before any results are given to the NSE or Public,CBK goes over them.To make sure all is prudent.
-Equity uses a 30 day period to classify loans as Bad or good.This is more conservative than the 90 days CBK regulation.(read the prospectus)

Where my money is
My money is on Equity,i think they will outperform the market in the medium term(3-5 years).i have bought it for capital gains.
Barclays is too big and if they grow bigger(from 60 branches to 120 branches),they might loose focus.I dont expect them to outperform the market in the next 3-5 years.But the dividends should remain great
Barclays is approaching the statutory limits of lending thats why dividends were low for 2006.(Earnings were retained in order to increase capital)

Barclays for the dividends, Equity for the capital gains.With the downward trend in prices it will pay to wait and add once the retail investors on the exchange panic and sell. But for equity buy at any price below sh.230/- because you get 3 shares for the price of 1(Cum-bonus).
Chill and pick Barclays at sh.60 and below.

For those who want to read more
"Understanding the Re-birth of Equity Building Society in Kenya" An interesting study of how Equity moved from an insolvent Building Society to a successful one and finally to a bank.This study was done in May 2002 but the issues raised are still relevant.

An interesting article in THE BANKER about Barclays Plc and its plan for Barclays Kenya(Found the link on Kenya Capital).Click here

Thursday, February 22, 2007

Please note that the Headline says 'Commercial failures' NOT Artistic failures.Plenty of our guys and gals have TALENT nobody can doubt. The Mceeing skills of Kantai or Abbas/kubaff are up there with Common and NAS.Nameless,Owiyo,Eric wainaina all have Talent.
Compare that with Jay-Z who continuously copies 1980s tunes and raps over them.e.g. He re-did the 80s classic 'I just died in your arms tonight ' in 2006.It was originally done sometime in the mid-eighties(cant remember when) by Cutting Crew. P-diddy covered tunes from Notorious by Duran duran.However Jay-Z is on the Forbes most Wealthy Celebrities list and no kenyan musician is on it(last time i checked).

My issue is that no kenyan musician seems to have broken into the international platinum/gold selling category like Makeba,angeline Kidjo.Plus, none of our musicians seems to be making huge profits from music.Most of their money seems to be coming from endorsements and side-gigs like being Radio-presenters.

Here's why i think they dont make the money:
1.Poor marketing and Distribution
I heard this line about the music biz that it's '99% show and 1% talent'.Just ask Britney spears.If u can sing thats great, now for the 99 %.
A typical Kenyan musician(lets call him muzik) does a song on fruity loops then sends the CD to Kiss/Capital/Easy and it gets airplay.The song's hook is catchy and its on top 10 at 10.After 2 months of continuous airplay. Muzik decides to release his album.Too bad no-one is going to buy it.We've heard his song everday on radio for two months for FREE.Why pay for it?
The enterprising listeners with TV/FM cards on their comps have recorded it off radio and are selling Bootleg Mp3s of the 'Hit'CD.

Our man Muzik's CD is priced at sh.800 (Bootlegs are selling for sh.200).Its only available at Nakumatt, that shop at the JUNCTION and some shop on Mama Ngina street.If u live outside Nairiobi- tough luck.
Predictably Muzik's CD only sells 1000 copies and he blames the pirates for killing the Local music industry.
Let me tackle the above issues:

Marketing-Muzik should never have given his tracks airplay without the CD hitting the shelves.As people hear u on radio, they can go out and buy the CD. Thats whay Jay- Z , ne-yo and the other Western musicians do.
Local musicians should set up a country-wide distribution network so that once an Album 'drops' u can buy it anywhere in Kenya.Lack of availability of a musician's Cds is a business opportunity for the 'pirates'.This distribution network is the KEY to the success of Bongo Flava in Tanzania

Pricing- Most TZ/bongo musicians sell their Cds/Casettes for about or less than sh.400.Kenyan musicians dont do Casettes they only produce CDs and retail at more than sh.700 orSh.1000 for that kind of money u can buy an R-Kelly or Beyonce on add sh.200 and ship it to Kenya.There're still Kenyans who listen to Radio Cassettes(in the 21st Century) so as a local musician you must have casettes.

The other factor is;
-Lack of commercial awareness
Local musicians do commercial endorsements but dont live the product.e.g. Most formula 1 drivers endorse the manufactures' car off-track.So u will never catch them driving anything else.e.g. Mc-laren drivers endorse Mercedes cars.A good example of this is when we had a re-launch of a new marketing drive for a soda with a contour shaped bottle.Little was heard of the soda but a lot was heard of the drinking exploits & otherwise of the musicians called to endorse it.They(musicians) shouldnt be surprised if the next re-launch of the soda sidelines them or takes a global star.

Till they shape up their marketing and distribution local music outfits may not achieve commercial success and one-hit wonders will be the norm.
P.S. am not playa-hating nameless.He's just the most recognizable Boomba musician.Since, this is the genre am referring to-had to use his pic on a critical article