NSE;Stocks to Watch in 2009

(The views expressed herein individual evaluations and should not be taken to mean a strong buy advisory but an indication of the likely movers and shakers of 2009)

As the year progresses several investors at the NSE are lost for words as their hard earned investments go down the drain however this is my take for 2009;

Likely Movers
Accesskenya
The enactment of the (in)famous media bill has opened a window of opportunity for investments by this company and indications are that Accesskenya is likely to launch a portal fashioned in the way of ebay to compete with others like mamamikes and find. This new window of orpotunity is likely to enhance the synergetic component and thrust the company to a higher level of profitability.
AccessKenya has been one of few star stocks at the NSE since its listing in mid last year, and for the better part of 2008.The information technology company had its share price pegged at Sh32 until May 2008, a valuation that was way above its IPO price of Sh10.Many will be watching as it flexes its muscle.

East African Breweries (EABL)
Day in day out the company continues to churn out large quantities of the famous 'imbibed froth'-beer that continues to attract new customers by the day. Despite the addition of sin tax by the Kenya Revenue Authority continually leading to substantial increase in the prices of this commodity, users continue to throng entertainment places to down the same and this will not stop any day soon.This only serves to enrich the company Earnings Before Interest and Tax (EBIT) and eventually net profitability that will affect share prices at the bourse.

Financial results released in September 2008 indicated that the giant brewer returned a pre-tax profit of Sh12.3 billion compared to Sh10.6 billion in 2007 and things are bound to get better.
EABL has maintained one of the highest dividend payout ratios among the NSE listed firms.The company will be doling out to investors an estimated total of Sh6.4 billion in dividends this year equivalent to a payout of Sh8.05 per share- representing a 10 per cent growth over last year.EABL is also turning to fully service the beverage market with the introduction of non- alcoholic drink.


CFC Stanbic
CFC-Stanbic Bank has set off to revamp its retail banking section over the next three years. This will see the bank, which is mainly considered to provide banking and financial services large corporate institutions, parastatals, non-governmental organizations, diplomatic missions and multi-nationals, open up a number of new retail branches across Kenya. In the last six month the bank has opened four new branches and its planning to open five more by the end of this year, bringing its outlets to 30 with over 40,000 clientele.
The expansion plan after the takeover/merger is likely to be well though out and planned to bring greater returns making it a good stock.

Equity Bank
The company has realize such enviable feats in recent times that the players in the banking sector are yearning for.Being Kenya’s largest retail bank, Equity, has posted an impressive growth that put its ahead of most companies in the banking league.Their expansion programme is growing and expectations are that its performance come the next quarter will still be sterling and hence a darling for most stock pickers.


Centum Investments
Centum investments has announced a 5 years strategic plans (2009-20013) that will help it raise additional capital and take advantage of the investment opportunities created by the global financial crisis. Though the amount and financial option was not detailed, the firm seeks to increase its foothold in sub-Sahara Africa has private foreign investors divest from the region. centum’s asset value has grown from Ksh.3 billion in 2004 to Ksh.8.4 billion at the end of last year with equity portfolio accounting for approximately Ksh.7.9 billion.
As the next quarter results draw closer many are watching for any surprised herein that might significantly transform its share price after the departure of its CEO earlier.

TRANScending the CENTURY in Investments

Trancentury group is a company that (started as an investment group) has risen from obscurity to uccupy the coveted pedestal in the Kenyan corporate scene. Most young entrepreneurs striving to own big corporations and sit in big board meetings where they call the shots often look back at the feats that this politically connected company has attained within a short span of time for their motivation.

Over the years Trancentury has modelled itself as an active investment unit that employs creme-dela-creme in the investment and portfolio management cycles with incredible papers to run their affairs while the directors dig deeper into their pockets to unleash the much needed investment funds. This has borne fruits for this company.

Investment Groups

It is noteworthy that one in three working Kenyans is a member of an investment group and Sh30 billion is estimated to be held by these groups, almost close to the Sh 35 billion that Safaricom hopes to raise with its IPO later this year. Indeed their popularity has extended across the borders with Kenyans abroad pooling their resources to invest in the country, with the Nairobi Stock Exchange and real estate being the most popular areas of investment.

Portfolio

TCL’s current portfolio of investments traverses rail transport, financial services and manufacturing sectors with some of its most notable investments being a stake at the Rift Valley Railways (RVR), the concessionaire for the Kenyan and Ugandan Railways system.

Growth

Trans-Century’s foray into the regional markets signals the 10 year-old firm’s hawk-eyed strategy of seeking fundamentally viable, well positioned companies with attractive growth prospects. TCL has in the last five (5) years been making waves after a series of profitable acquisitions and stock market investments that has seen the company that started as an investment club with a capital base of Sh1 billion turn into a 14.3 billion fund in a decade.

East African Cables

East African Cables marked the start of the most successful part of investing for Transcentury Company Limited (TCL). In 2003, the firm closed one of its smartest deals yet by buying 75 per cent of East African Cables, which is listed on the NSE from Naushad Merali for Sh240 million. East African Cables is today worth Sh9.9 billion, meaning the TCL stake is valued at Sh7.4 billion. TRANS-CENTURY is the controlling shareholder in the East African Cables (EACL) group, through its subsidiary company Cable Holdings Ltd.

Products manufactured by Cables include copper electrical cables for domestic as well as industrial applications, aluminum conductors and cables for power distribution and transmission over national gridlines. After the acquisition (TCL owns 75 per cent of EAC) profit after tax has increased 30 times from Sh9.3 million in 2003 to Sh284 million in 2006. Sales have increased five times from Sh428 million to Sh2 billion.

Dausung Cable

TCL already dominates the electronic components market in Kenya, through East African Cables and in Tanzania after it acquired a 51 per cent stake in Tanzania’s Daesung Cable for $2.62 million from its Korean owners.

KPLC

It also has a two (2) per cent stake in Kenya Power & Lighting Company (KPLC), which also gives its investment portfolio a significant presence in the energy sector and an overweight exposure to risks in that sector as well.

TCL’s investment in KPLC is now worth Sh447 million. Money raised from the sale of KPLC shares was used to finance the Sh630 million investment in Rift Valley Railways— the company that won a 25-year contract to run the Mombasa-Kampala railway line.

Development Bank of Kenya

Last year TCL acquired a 10 per cent stake in Development Bank of Kenya from the Commonwealth Development Corporation (CDC). Development Bank of Kenya is a leading Kenyan development finance and commercial bank that focuses on the corporate market. TRANS-CENTURY holds a significant minority equity position in this entity and has invested along side Industrial Commercial and Development Corporation (ICDC) the investment arm of the Government of Kenya.

Equity Bank

TCL holds a 1.38 per cent stake in Equity Bank.

Kewberg Cables and Braids

Transcentury Limited (TCL) is in the process of refashioning itself into a private equity fund, has turned the tide by making audacious acquisitions of Kewberg Cables & Braids, a South African firm and ABB Tanelec, which is based in Tanzania.TCL has bought 100 per cent of the shares in the South African firm and 70 per cent of the Tanzanian firm allowing it to spread ita wings to the south african market.

Kewberg Cables & Braids (Pty) Limited, which is located in Johannesburg is a leading manufacturer of instrumentation and control cables for the oil and gas, mining and power sectors.

ABB Tanelec (Tanelec)

This is the largest manufacturer of electrical distribution transformers and switchgear in East and Central Africa. The Arusha-based Tanelec distributes its products to a number of Sub-Saharan African countries including: Tanzania, Kenya, Uganda, Zambia, Mozambique and the Democratic Republic of Congo.

The ABB Group of companies operates in around 100 countries and employs about 111,000 people.

Rift Valley Railways (RVR)

TCL is the largest minority investor with a 20 per cent equity stake.

Avery East Africa Ltd
TRANS-CENTURY holds a controlling stake in Avery East Africa. This company is the leading manufacturer and distributor of a complete range of domestic and industrial, manual and electronic weighing scales, as well as video jet printers for industrial use.

Aureos Capital Limited

This is an independent private equity fund manager focused exclusively on the emerging markets. Aureos specialises in providing expansion and buyout capital for low to mid-cap businesses with prospects for strong growth and profitability across Asia Pacific, Africa and Latin America. Established in July 2001, Aureos has to date raised and managed US$570m in 24 funds worldwide. Ten of these funds have been raised since 2001, with approximately US$395m of committed capital. In addition, Aureos manages 14 funds previously sponsored and administered by CDC Group plc.
TRANS-CENTURY has invested in three Aureos funds to date. These are the Aureos East Africa Fund, Aureos China Fund and Aureos South Asia Fund.

Business Partners International (BPI)

This is a specialist investment company which has partnered with the International Finance Corporation (IFC) to provide debt and equity capital, mentorship and property management services to Small and Medium Sized Enterprises (SMEs). TRANS-CENTURY has invested in the USD 14.1 Million BPI Kenya SME Fund.

Helios Investment Partners

Helios is a US$300 million private equity fund making private equity and ‘special situations’ investments in Sub-Saharan Africa with a focus on West Africa.

Real Estate
TRANS-CENTURY invests as a primary sponsor or along side other partners in green field and existing property ventures.

Business Prospects

Kenya: Locally, massive Government electrification programmes are ongoing which has consequently seen an increase in demand for quality cables and conductors to the power utility— Kenya Power and Lighting Company (KPLC). The rural electrification programme has connected more than 120,000 people to the national grid in the past 12 months.

Tanzania: massive cabling projects are expected to begin as Tanzania Electric Supply Company (Tanesco) prepares for a major upgrade, following the pumping in of $240 million by a syndicate of local commercial banks and pension funds for the recovery of the power utility firm.

Africa: Icnreasing demand for cables and other related products.

Other investment regions

TCL has invested in Zambia, Nigeria (indirectly) and South Africa.

Business blunders

This encompass Transcentury’s investment in Castle Brewing which closed its operations in Kenya after only a few years following a bruising battle with East African Breweries. In March 2006, news had it that Transcentury Group was to buy 24.9 percent stake in the largest mortgage finance company, Housing Finance Corporation of Kenya (HFCK). This led to a price rally at the NSE that latter led to the collapse of the deal to buy the stake as CDC demanded a market valuation of the stake.

Investments philosophy

-Looking for undervalued companies with potential.

-Not looking for easy going investments.

-Commitment to the company ideals

-Good corporate governance

Kenya Diaspora Indispensable in Development

Remittance home

The Kenyan government has been courting kenyan investors abroad thanks to their pivotal role in economic recovery strategy through direct investments and economic development. Their role in development is crucial in replenishing the national coffers through their remittances.

In Kenya, it is estimated that at least $1 billion is being remitted annuallyup from about $750 million in 2005. Between 45 per cent and 65 per cent of the money is received informally and therefore not captured in official records. They are indeed the top foreign exchange earners.

IMF says that these remittances are now the single largest source of forex ahead of tourism and horticulture in Kenya and, in Sub-Saharan African (SSA) countries, the transfers exceed Official Development Assistance(ODA) from development partners.

Sub Saharan Africa (SSA)

Kenya has emerged second to Nigeria among African recipients of foreign exchange remittances with households headed by women leading beneficiaries of offshore money transfers from individuals. These diaspora kenyans are influencing the macroeconomic variables back home including the exchange rate (Impacting the shilling), inflation rate and interest rates either directly or indirectly.

In absolute terms Kenya, Nigeria, and Senegal are the largest recipients of remittances in the region. Remittances from african diaspora form a quarter of all exports for at least four countries on the continent. For Lesotho, Cape Verde, Uganda, and Comoros, for instance, remittances have since 2000 amounted on average to more than 25 per cent of export earnings. In 2005, remittances to the 34 Sub Saharan Africa (SSA) countries reporting are estimated to have been about US$6.5 billion.

In kenya, the money is largely used by relatives to fight poverty through education and health support as well as investments in real estate and shares listed at the Nairobi Stock Exchange.

Diaspora at NSE

Kenyans professionals and entrepreneurs abroad have continued to play a crucial role in investments back home and for those who wish to return latter and enjoy their hard earn savings there preferred channels of investments has been the NSE and the property market. Infact 40 percent of new home buyers are Kenyans residing abroad acording to real estate developers.

The phenomenal growth of the NSE in the last 3 years and the price rally realized at the NSE last year, 2006, and partly in 2007 has seen many diaspora kenyans also remit their savings for investments in shares and other availabe options at the Nairobi Stock Exchange. Kenya Capital Investments Group is one such investment group that has consistently blogged on their activities and investments at the NSE. As some would say the future of ivnestments therefore lies in investment groups and why not given then feats realized by Trancentury in a span of less than ten years.

SSA vis other countries

Remittance flows to SSA are relatively small, 4 per cent of total remittances to developing countries and just 33 per cent of those to India, which receives the most. In contrast, countries in Latin America and the Caribbean received 25 per cent of all remittances, as did the countries of the East Asia and Pacific region.

Private Public Partnerships (PPP)

In 2006 the mutually beneficial relationship between the Capital Markets, the Government of Kenya and the Private Sector came to the fore with the raising of approximately Kshs. 12.04 billion, through the Initial Public Offerings (IPOs) of Kenya Electricity Generating Company, Scangroup and Eveready and the sale of additional shares in Mumias Sugar Company (MSC). As a result of the IPOs, the number of Central Depository and Settlement (CDS) accounts has increased from 86,820 on February 1 2006 to 634,420 on February 14 2007, a six fold increase. These developments alongside the implementation of Automated Trading System (ATS) has spurred interest at the NSE from locals and diaspora kenyans.

Therefore...

The Kenyan Diaspora has increasingly become an important part of the Kenyan Economy. Through remittance, the Diaspora has become the leading foreign exchange earner for Kenya. This has led to concerted efforts to actively involve them in the economic transformation of Kenya through Kenya diaspora investment forums.

Future Prospects

Experts have estimated that the remittance can be increased to over 3.4 Billion dollars a year if effective investmentment strategies are put in place with the argument being that Kenyans in the Diaspora look for investments elsewhere because investing in Kenya under present conditions is very risky. The report on Kenya Diaspora Investment Forum alongside other concerted efforts ( including Kenyans Abroad Investment Fund-KAIF) to address diaspora needs should be clearly scrutinized and their recommendations implemented.

Right Time to buy ICDCI

After looking through all the companies listed at the bourse, i though it would be wise to share with you this verdict on the ICDCI counter listed in the financials and investment sector of the Nairobi Stock Exchange.
Facts:
1. Earnings: ICDCI invest in companies that are expected to shows significant increase in earnings.
2. Strategic: The company in its strategy identifies companies that are strategic and require substantial cpaital outlays.
3. Partnerships: In its investment strategy, the company normally partners with like minded companies with expertise and essential business skills. This enables the company get the requisite board advice as well as avoid 100% risk in its investments portfolio that would have far reaching implications in the long run if deals go sour.
Prudence: The company undertake due diligence and stick to prudential allocation of assets to continuously create and enhance shareholders value.
Passion: The company has a passion for excellence and integrity through proactively managing a well diversified portfolio.

Shareholders % Shareholding
Government of Kenya (ICDC) 24%
Institutions 27%
Public 49%
Associated Companies Portfolio (%) Sector
1. Nairobi Bottlers 27% Beverage
2. Kisii Bottlers 17% Beverage
2. Rift Valley Bottlers 47% Beverage
3. Mount Kenya Bottlers 28% Beverage
4. Kenya Wines Holdings Beverage
5. Kenya National properties Property
6. General Motors 17.8% Industrial-Automotive
7. Eveready Batteries EA Ltd Industrial
8. Mather and Platt (K) Ltd 35% Industrial
9. AON Minet Insurance Brokers Financial and Services
10. UAP Provincial Insurance 24% Financial and Services
11. NAS Airport Services Services
12. Wildlife Works Industria- Textile
13. Uchumi Supermarkets Retail
14. Public Equiy Investments
15. Fixed Income Securities
16. Rift valley railways

Portfolio Percentage
1. Beverage 42%
2. Property 5%
3. Industrial 16%
4. Financial/Services 21%
5. Public Equity
6. Fixed Income Securities 5%
7. Transport

Note:
ICDCI is keen on expanding its private equity portfolio and is interested in companies not listed but have a robust business model in whatever sector they operate so as to provide equity capital and prefer companies looking to expand.
Verdict:
From the foregoing and the price movements at the NSE after the split which shows a 12 months high of Kshs80 and an average price of Kshs30 the price is likely to shoot up come the new calendar year.

Just invest and watch this space for more...

Investing at Home while away from Home

I am looking for kenyans abroad who have the intention and ability to invest in the now vibrant Kenyan stock market. anyone out there????

Stock market has become the latest fad in Kenya and many rural folks young and old, men and women and rushing to cash in on this new craze.

The expected listing of new companies in the Nairobi Stock Exchange (NSE) including Kenya Re and Safaricom is expected to add an impetus to the vibrancy and ensure better returns for investors.

Anyone who is abroad and wants to channel foreign direct investments into kenya to drop me a line and lets see how far we can go this year. For financial advice, company analysis, portfolio management and many more we can always talk.

Jeff