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.

The Changing Faces of Banks in 2007

Radical changes
The banking sector has come a long way and with mergers and acquisitions in the offing as well as the emergence of near financial supermarkets the future is indeed bright for our banks.

Investors
Most investors in banks stocks have often made a kill over the last few years with splits, dividends, bonuses and price appreciations having been witnessed.

New products
The banking sector is indeed undergoing radical changes and new products are being unveiled everyday target the larger populace as oppossed to the big-mans-bank syndrome that had been evident a few years ago. Banks are now literally going to the streets to hawk their wares and sell the loans to every would be buyer with little or no requirements at all.

Interest rates and competition
Interest rates have dropped drastically as banks strive to offer cheap products to borrowers for their businesses and other needs.Competition in the banking industry is indeed evident and every new day new banks are emerging.

New Banks
Most non deposit taking institutions are now converting into microfinances and finally banks in a matter of years and the number of banks is increasing by the day.

Banking stocks
The banking stocks have continued to soar to new record highs never witnessed before as investors both local and foreign rally to buy them.

Cross border trading
These banks have even dared to cross border to other regions talk of KCB in Uganda and southern Sudan where it continues to serve its customers. Others are savouring the region for strategic partners to inject new blood inform of liquidity into the system talk of Equity and Helios deal as well as Stanbic and CFC deal.

Stock broking
Other banks are craving for a piece of the stock market pie with ventures into stockbroking. NIC failed bid for the stake of the collapsed Francis Thuo (won by renaissance capital) has seen it partner with another securities dealer. Talk about slowly getting their.

Asset Finance
Asset finance is becoming the talk of town with considerably lower interest rates charged by banks for the same. This was started by NIC bank but now adopted by NBK, KCB, Equity, Family Bank, Stanbic and the list is growing.

...and the changes go on...

Asset Finance:The New Craze in Town

What is it?
This is typically structured as a line of credit secured by a specific asset or across a combination of existing assets. It encompass using balance sheet assets (such as accounts receivable, short-term investments or inventory) to obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender. This differs from traditional financing methods, such as issuing debt or equity securities, as the company simply pledges some of its assets in exchange for a quick cash loan.
This type of financing is typically used for short-term borrowing or working capital. Companies using asset financing commonly pledge their accounts receivable, but the use of inventory assets is becoming more frequent.

NIC Bank
Every once in a while our customers require a helping hand to finance their assets. NIC Bank for example ventured into helping customers to acquire their assets with ease, whilst keeping our pricing very competitive. This augured well with the market and helped the company reap massive returns.

Asset Financing Now
Asset financing has become a major competitive ground for banks as they seek to increase their interest income-based revenue. Banks are competing on interest rates, collateral arrangements and longer repayment periods to persuade customers to take up this line of credit.
Already, asset financing is accounting for an average of 15 per cent of total interest income for banks. The industry believes potential to raise this figure exists, considering that most banks started giving asset financing more focus only in the last five years.More

Stanbic Bank
This is is a relatively new entrant in the asset financing market, having set up the department about four years ago. The company is financing 30 to 40 vehicles per month.

KCB
KCB’s recently launched Asset-Based Finance product allows customers to borrow from Sh1 million to purchase assets in a repayment period of 12 to 60 months. Borrowers are required to make a minimum deposit of 20 per cent of the value of new assets.

Asset based loans are perfect for:
-Company acquisitions and business mergers
-Management buy outs
-Financing expansion
-Turnaround finance
-Refinancing existing business loans

Why consider asset based financing for capital?
-Able to leverage sales growth today
-The lack of flexibility through regular bank financing is no longer an issue
-Revolving credit lines can be secured by your raw materials and finished goods inventory
-Access large amounts of cash that have already been invested in the infrastructure

What's in a Name?

What's in a name?
Shakespeare once asked through one of his fictional characters. Another old adage goes that a rose will still smell the same, even if it is called by another name!.

Corporate Scene
The Kenyan corporate scene has been awash with news of different facets. The stock market is recording gains with indications that it might not be infected by the electioneering fever that is slowly creeping into our country with stories of proverbial horses in the race gearing for the penultimate showdown.
MPesa phonomenal growth is traversing international borders as new of mergers and acquisitions continue to hot up.
Companies are releasing outstanding results and profitability feats accompanied by bonuses and hefty dividends. Others are running back to the market to borrow through further rights issues and bonds issues.
Trancentury is entering the private equity and investments scene with a bang leaving many coveting their unparalleled feats.
News has it that the Treasury and the Commission of Monopolies has approved the buy out of CFC Group by Stanbic Bank, paving the way for further endorsement by banking and securities regulators. Closure of the deal will usher in Kenya's largest merger and acquisition deal, M&A, which is expected to change the way local banks sell financial services to the public.
Companies are rebranding and unleashing new products as banks continue hawking loans with a new found zeal. This comes after the realization that the common man who has a bank account

Kencell-Celtel-Zain
Kuwait’s MTC Group, the majority shareholder in Celtel, has formally announced a name change for its local subsidiary —the second in seven years . Celtel Kenya joins the company’s 21 sister companies in Africa and the Middle East in adopting the brand name Zain . The latest name change for Kenya’s second mobile phone service provider comes just three years after changed its trade name from KenCell following a buyout that brought in telecommunications tycoon Mohammed Ibrahim as the principal shareholder.
In 2004, Celtel bought its 60 per cent stake in KenCell Communications for $250 million prompting the name change.

MTC Group
This is the leading telecommunications mobile provider in 21 countries across the Middle East and Africa, today announced it has re-branded to Zain which becomes the Group's corporate master brand with immediate effect. In Africa the Zain Group will continue to trade under the Celtel brand.

Zain
Four country operations in Kuwait and Bahrain, (both formerly MTC-Vodafone), Jordan (formerly Fastlink) and Sudan (formerly Mobitel) will immediately re-brand to Zain. The Group will commence operations in the Kingdom of Saudi Arabia under the Zain brand in early 2008 after being awarded the third mobile telecommunications licence in July 2007. Additionally, the Group's successful operation in Iraq, MTC Atheer, will also re-brand to Zain in the near future after recently winning an extended 15 year nationwide licence.

Of Cross Border Listing and Cross Trading (Part II)

Cross trading is the emerging trend where investors seeking to diversify their portfolio of investments would seek to venture into other markets and invest in such available options as equity, bonds, commercial papers, derivatives and other available products in that market.

East African perspective:

In East Africa for example, Investors have been craving for the stock market pie with Kenya leading the pack with several IPOs having been significantly oversubscribed with others slated for the year expected to follow the same record trend. Over the last 5 years, turnover at the NSE has grown phenomenally from Sh2.9 billion in 2002 to Sh95 billion last year while the number of CDSC accounts that have been opened have in the last 2 increased from 80,000 in 2005 to an estimated 700,000 investors to date.

Insatiable Appetite for Investments Opportunities:

The rally at the NSE has produced millionaires overnight.Take the case of EA Cables price rally that produced all times high of around Shs 1000 per share among the other shares price surge occassioned by the unprecedented news of stock splits, dividends and bonuses declared by most companies including Barclays, ICDCI, Sasini, CMC, KCB, Cables etc. It is evident that investors are hungry for other viable stock market investments as seen with the latest trend of switching to the emergent high return promising pyramid schemes that have sprouted in every corner of this country. Sadly though, most of these schemes were scams meant to defraud unsuspecting investors of their hard earned monies as seen with the widespread closures, default rates and collapse of even the seemingly big wigs of the pyramid scheme-DECI. Most investors lost their monies and statitistics available shows that this ran into hundreds of millions.

Some investors who had sold their stocks, leading to a bear run had the NSE, are now back with whatever little they managed to salvage.

Nonetheless, the oversubscription of all the IPOs from 2006 to date is a clear testament to the insatiable investment appetite in the country. The strong returns posted by Kenyan equities listed at the NSE have not gone unnoticed with international interest in the country’s markets building up in recent years latest among this is the interest receive from top Wall Street operatives.

African Stock markets:

Africa has only 15 active stock exchanges which include exchanges in South Africa, Nairobi, Uganda, Tanzania, Botswana, Nigeria, Cairo, Malawi, Mauritius, Namibia, Ghana, Zambia, Zimbabwe, Tunisia with the regions equity markets incomparable in size to other emerging markets worldwide posting a combined market capitalisation of US$39.2 billion, excluding South Africa's JSE, in 2005. The JSE which is the 16th largest exchange in the world, had a market capitalisation of US$ 566billion, accounting for 94 per cent of Sub—Saharan Africa’s total market cap. As it is, the JSE’s market cap is 14 times larger than all the other African markets combined(Business Daily).

Cross Trading, Stanbic Experience:

The continued media hype in Kenya lead many streaming to the appoitment banks and stock brokers to have a stake in the much publicizedStanbic Uganda IPO. However, after the rigorous process of filling forms and paying for the shares, Kenyan investors were the losers as they were considered for residual shares after all the local investors had gotten their share. After the meagre share allotted came the issue of share certificates that reminds us of the days NSE was still without the Central Depository system.

Dividends:

Recently, after the wait, the arrival of the Stanbic Bank Uganda’s dividend payout cheques (7%) was an excitement to many investors though this was short-lived as those who received the cheques were surprised that the dividend almost amounted to nothing after being converted to the local currency which is of higher value than that of the East african counterparts. Further, the paying of Ksh.1,000 bank charges for cheque clearance inorder to cash the cheques proved much higher than its value, especially for most investors with minimal share allocation. This made the dividen almost worthless if not useless. With some intervention, the cahrges were readjusted as follows; amount below 1000 cost ksh 100 and amounts above ksh 1000 would cost ksh 150. Read Bankelele's experience!

Cross Border Trading:

As earlier alluded, most investors who thronged dealers offices and banks to buy Stanbic had not considered the perils of investing in another currency and all associated stumbling blocks. The company and even the Ugandan Authorities had not instituted a proper dividend reinvestment program (DRIP) that would enable investors reinvest their dividends until such a latter date when cashing them would be worth the rigor.

Most investors did not understand that cross trading is normally affected by the market performance in the market concerned as well as the fluctuations in the foreign currency rates. Read more