Grand Debate

Drip Friday

Picture messaging from Safaricom

Nairobi Barcamp 2008

1000

Safaricom @ NSE Day 10

Safaricom @ NSE Day 9

Kutwa Tuesday - June 18

Safaricom @ NSE Day 8

Safaricom @ NSE Day 7

Safaricom @ NSE Day 6

Safaricom @ NSE Day 4

Safaricom @ NSE Day 3

Safricom @ NSE: Day 1

What to do with refund cheque?

Safaricom IPO allocation

IPO daylight

Economic Stimulus Friday

Regional banks and dueling websites

IPO Guilt Part II: Rule of queues

Regional IPO Tales

IPO Tales: 13 days to go

One week gone

Safaricom IPO starts

Safaricom IPO: Prospectus Peek

Prospectus is out

but before that
- The Kenya Capital Investment Group has a nice post to guide Diaspora investors considering the Nairobi Stock Exchange (NSE) for the first time
- Which broker to use for Safaricom? Check out the Business daily on Friday March 28 for a guide to stockbrokers – the good, the bad, and the rogue. Afrika investment bank is the newest (previously was Ashbhu Securities) I-bank now.
– beyond Safaricom I Co-op bank announces plans to list, which is a great overdue addition to the NSE
– beyond Safaricom II and if the Finance Minister is by chance short in his bid to raise money from the privatization process, I’ve always maintained that he should go after another prime company; Kenya Pipeline - with pre-tax profits of Kshs. 4 billion (and EPS of 163), ripe for a split and a listing
– loans for shares: Joining equity bank in offering 100% financing is family bank, oriental and national bank so far. I may change my stance on loans for shares if I see a bank with a clear policy of loan prepayment, in case say 80% of the cash is not utilized – so an investor is not left with a loan to squander, instead of shares to sell
- Investors will be able to use pesa point ATM’s to pay for IPO shares
- Housing finance signing with Safaricom’s M-Pesa for money transfer last week shows how traditional companies like Western Union have been overtaken by changes in the banking industry.
– Writing in the Financial Standard (Tuesday) Jonathan Somen, CEO of Access Kenya (the last ICT company to be listed) calls Safaricom a good short term buy as they have performed prior to the arrival of France’s Orange (formerly Telkom Kenya) and India’s Essar (through Econet)
– Africa Alliance has opened an IPO center in Nairobi - open from 7am to 7 pm
– DYK: You have to apply to use the Kenya flag on any product? Safaricom have received permission to use it on scratch cards, the Tea Board of Kenya to display it on tea packets, and Nike International (through their lawyers) to sell it on hooded jackets!
- Pay for mail; CDS will for the first time require IPO applicants to pay Kshs. 30 for mailing each confirmed allocation.

- What do you know? The IPO's official site is inactive/inaccessible a day after going live.
- For anyone new to Safaricom here’s how they became so successful

News Bits

- Safaricom has introduced an airtime voucher worth just 20 shillings (~$0.30): what does that smaller sale unit say about the economy?
- Bargains: Safaricom has halved the price of blackberry and is also selling Samba Modems for just Kshs. 3,000 ($42)
- Air-wars: Good for Kenya Airways (KQ); Delta Airlines (US) has delayed their new service from New York to Nairobi (scheduled for June 08) to start in December owing to current market conditions. Bad for KQ; Emirates will start passenger services to the Guangzhou (China) in July 2008 four times weekly and convert to daily flights from December.
- Why would Coca Cola introduce a Fanta Lite and sell it in the same bottle & packaging at 50/= instead of 40/=

Jobs: Available at Safaricom and Google, while regulator, the Capital Markets Authority is still searching for a chief executive amidst the region’s largest ever IPO.

Apply online: For Safaricom shares, check out the Official IPO site from Citi

Bears bleed
- NSE Bears: For the second day of the Safaricom IPO era, only 3 NSE shares rise, same as on Friday, while the rest drop or are flat.
- Farewell: To Bear Stearns sold for $2 a share, down from $170 a year ago and 7% of what it was worth on Friday.

Vultures circle:
Beware of loans for shares
- Equity Bank offering up to 80% finance for the Safaricom IPO
- Fanikisha account from Transnational Bank offering 70% finance towards the IPO

edit - We've been Punk'd!
Corporate blog: A big salute to Equity for breaking another milestone - presenting the first official bank blog - here's the Equity Bank Blog. a WIP, but keep it up, stay strong, relevant, and up-to-date
Thanks JP for looking out

The financial part of the day is over with no announcement on the start of the Safaricom IPO; when it comes, should still not matter as chasing an IPO is a futile matter for a savvy retail investor. This is how it works - buy the shares after they list, not by queuing for hours around the block only to get 50 shares and 90% refund cheques.

All Kenyan IPO’s priced at less than 10 shillings have been greatly over-subscribed and this one which falls in that range could be the biggest.

So wait for the shares to list, and then buy. They may be floated at 10 shillings, and open at 25 - but have you lost anything? Not if you and 300,000 other shareholders all start off with 50 – 100 shares each. In fact you have a head start as you will have your money ready while the others wait for their refund cheques to be processed

What else to do;
- Buy through an investment club or a company if those groups get preferential allocations
- Buy other shares that may drop in price
- Marry a Safaricom employee, or better yet - get a job there and apply through the employee pool
- Use a reputable stockbroker stockbroker or bank

What not to do;
- Don’t take a loan to buy IPO shares.
- Don’t buy through multiple names/relatives/companies – you’ll have to chase a refund for each and consolidate after.
- Don't wait for the Econet option - I've being writing about their launch/imminent rollout in Kenya for as long as this blog has existed

That's what I'm doing: any other suggestions for maximum returns?


FAUX PAX
Ooops, spoke too soon - sorry Mr. Minister

Kenya sets Safaricom IPO share price at 5 shillings
NAIROBI, March 14 (Reuters) - Kenya is to offer a 25 percent stake to the public in leading mobile phone operator Safaricom at 5 shillings per share, Finance Minister Amos Kimunya said on Friday. Kimunya said the offer would open to the public on March 28 and close April 26. There will be 10 billion shares for sale. The proposed Safaricom sale may prove a key test of domestic and foreign investor confidence in east Africa's largest economy after negative effects of the post-election political crisis. (Reporting by George Obulutsa)

Still the math does not change. Assume a realistic 3 million shareholders, they can each get 3,333 shares each at a cost of 17,000 each - still means over-subscription, and that does not factor in any preferential allocations for corporates and employees, reducing the pool

All Safaricom: :
Good: An IPO from Safaricom could be the tonic that will restore investor confidence in Kenya that has been damaged the political events over the last month.
Good: Safarciom has partnered with Google to offer free email (6GB worth) to all their customers.
-but not good Have Safaricom raise their data costs? Internet browsing by phone seems to chew up airtime a lot faster these days

Air wars:
- Fly cheaper: Kenya Airways flights to Mombasa are now 3,000 shillings ($45) one way and 5,000 for roundtrips (plus tax) – about ½ of what they were a month ago
- There's a new airline on the Kisumu route, as another airline, Fly 540 has also acquired new aircraft to embark on flights to other regional African countries.

Mitigating political risks:
- There was notice in the paper by the Association of Kenya Insurers (AKI) confirming that political risks/riots are not covered in their policies. However ye members will discuss loss compensation on a case by case basis.
- But there’s a green light for some; Today’s Daily Nation has a (offline) story about the Africa Trade Insurance Agency - a World Bank subsidiary that covers political risks that has been largely dormant in Kenya until this month when corporates like Kenya Airways, Telkom and Nakumatt have been flocking to enquire about political risk cover. The story has an ominous warning that election violence could be an event that recurs every five years in Kenya in future.

Phantom exchange: Owing to a system hitch, there was no trading at the Nairobi Stock Exchange on Monday – though someone at the Standard says there were some trades. The exchange appears slightly inflated with all that’s going on around in the country.

Boycott averted: I was in the second week of my personal boycott of national broadcaster Kenya Broadcast Corporation (KBC) for shoddy programming and outright disservice to Kenyans in the post-election period. But they have won me back temporarily with their belated offer to broadcast soccer matches from the Africa Cup of Nations in Ghana. Having a variety of channels to watch is however a luxury that million in rural Kenya do not have as they only have the national broadcaster to tune to for news and entertainment.

Opportunities
Consult with Pricewaterhousecoopers: Kenya jobs include Transfer Pricing Manager, Consultant (Internal Audit) Senior Consultant (Internal Audit Services) Specialist (s) (Public Sector) , Manager (Financial & Operational Effectiveness), Consultant (s) (Financial & Operational Effectiveness), Manager (Assurance-Audit), Consultant (IT Effectiveness), Consultant (CCH TeamMate), Associate Director (Mergers and Acquisition), Analyst (M&A), Manager (M&A). Also other positions available in Uganda and Tanzania – D/L for all is 31/1.

three weeks after the ill-fated elections and three days of mass protests

The Disruptions in the work flow have been a nuisance to the country, while the violence is threatening to cut off Central Africa. But how long before President Yoweri Museveni decides to drive eastwards for another road trip eastwards to check out the situation for himself?

If ODM’s goal is to grind the country to a halt, it may take a while. With tax collections significantly down, the pending Safaricom IPO which I thought will be an election winner could turn out to be a (one time) budget lifesaver – expected to yield over 30 billion shillings in Q2 of 2008.

ODM is now specifically targeting companies linked to key government personalities like Citi Hoppa, Brookside and Equity Bank. This sounds far-fetched and could lead to retaliatory attacks (ODM personalities are also business people); it's also an extension of silent boycotts that people have undertaken on their own. E.g. people who only selling petrol to their kinsmen, while others boycott pubs or have stopped reading the Nation or Standard/KTN because of their perceived political leanings.

While George bush is trying to revive the US economy through bipartisan tax breaks, but here we have two sides who won’t even sit down with each other. If they don’t, the crisis may soon spin out of control as the race for the presidency assumes historical dimensions

cut & paste: The Central Bank has introduced business continuity guidelines for all banks. However, it seems to be an update of an IT disaster preparedness document that's a few years old, and does not mention any of the words - crowd, riot, security, cash, ATM – and only one mention of ‘police’. In short, it does not address many of the challenges banks have faced.

Insurers with hearts: Some insurance companies like pan Africa and Heritage (CFC) making exception on a case by case basis to assist business people victimized in the riots. As a rule, insurance companies have no responsibility to cover such acts

Such as Business coping: Ukwala supermarket, which was destroyed in Kisumu, lost all their financial records. They are asking suppliers & partners to provide them with statements, delivery reports, and invoices as at December 31 and not to bank any of their cheques.

But can’t please everyone: like thieves who take advantage of busy police battling rioters, some unscrupulous borrowers are also using the economic shutdown to plead with banks for delayed repayment and favorable revision of loan terms when the haven’t really been affected.

Signal of confidence: On Wednesday, Imara Holdings introduced a new fund targeting the Diaspora willing to invest in east Africa. It’s an open fund with minimum investment of 6.5 million shillings (~$100,000) and will be sold through Kenya’s ICEA

- Recognize us: Barclays have eaten humble pie for two years, but who would have through that high-street Standard Chartered would open a branch in Eastleigh?

Local Icarus: what happens when you fly too close to the sun

opportunities
- From PSD Blog; nominate a women entrepreneur to the doing business group of the World Bank.

Current open jobs
from the papers this week
- APA Insurance: unit managers, account managers. Apply to recruitement@apainsurance.com
- Safaricom: VAS Propositions Manager, Channel Development Manager, Key Accounts Executive – apply online. But for the position of chief information officer - but apply though pricewaterhousecoopers executive selection division (ESD).

It's been a very tiring day, after spending seven hours waiting to vote. Still, if I'm willing to buy shares in a crummy IPO, I should be equally tolerant of a election day that occurs every five years.

The week also included Christmas shopping and could also have included the Safaricom IPO before it was wisely put aside till mid 2008.

mini comparison

personal touch: While IPO's have arrangements for high-net worth and corporate investor that shield them from the crowds (place orders over the phone, and wire money after the IPO), Christmas shopping and elections are a duty that most people have to perform in person.

For elections, you must present your identification documents in person, and for Christmas shopping, a gift is as unique as the buyer perceives the recipient will appreciate what they have chosen. So in the voting queue or at Nakumatt on the 24th or 25th on December you're likely to meet many freinds & colleagues, or interact with a well known personality or two such as the head of the Nairobi stock exchange and a presidential candidate. It was also very touching to encounter the president daughter shopping in Nakumatt - picking out gifts, pushing a basket and queuing alone, so different from the high security entourages and preferential treatment that surrounds her folks.

Logistics: Shopping wins, IPO's second, while voting is a distant third. The electoral commission reliance on manual registers to search for voters was time consuming (see my 7 hours). This was after as a previous voter, who had verified using their online system, should have been straight forward. There was a lot more confusion with the electoral commission of Kenya station than the last time round - and even worse in parts of Langata where a leading presidential candidates name was missing from the register (others will see it as sabotage).

Early bird: It's good to be early with Christmas shopping as you can make careful decisions, shop for bargains, and a have a variety of goods to choose from that are often sold out by the time us late shoppers arrive. But with IPO's and elections, often the right decision is to wait until the middle (end of first week for IPO, or noon of election day) after the anxious early-bird crowds have been sevred and disappeared. E.g. While i spent 7 hours voting, some people queued for 20 min tops in the afternoon

Some other elections observations:
- Party observers, who were only keen to help their party members. They increased the workload of ECK official who should instead be tending to voter individual queries and problems
- ECK officials arguing in public with each other. It's understandable given the stress they are under to cope today, but bad for the image.
- The Langata snafu
- Self policing in the lines, in the absence of police or NYS officers who were absent from the poll station
- met my candidate almost alone in the queue, and later saw his big party rival who had a dozen strong media and security entourage
- EU observers walking around, but not talking /interacting/understanding voters in the queue unless there was the possibility of some violence

Summary: all in all, a tough week, with a lot of time and effort required. The Safricom IPO was taken out of the picture which was a big relief to the other two events.

Today's debate on the KISS 100 morning show was whether the Safaricom IPO should be postponed to next year.

No dates have been announced but it was (and still is) widely expected to kick off on December 10.

Those in favor of a delay rightly argue that most Kenyans struggle from December to February with holiday bills (extra food, travel, gifts) and school expenses (in addition to January fees, there are new uniform and book costs as well) and their little savings will not be available even for this much anticipated IPO

They also argue that the December 27 election will be a distraction to investors who will be out of Nairobi.

Those in favor of the IPO taking place in December that, the fewer buyers the better, since it will be over-subscribed anyway and this will just give investors a slightly better allocation. They also argue that they have saved for this and should be rewarded for their efforts at being prepared for the IPO.

Readiness factors

- The market is ready, and no marketing will be necessary for this IPO. Investors are ready to buy now, then deal with what they bought after.

- Timetable will be tight, but other countries are able to do it. Giant Indian bank ICICI's June '07 IPO ran for only four days and was over-subscribed on the first day.

- Stockbrokers say they are not, and have asked that it be delayed till next year, but they'll just pay their staff extra to work overtime during the holidays (and hire temps/interns to plug the gaps).

- Banks have abundant liquidity and will have loan packages towards the IPO to lend out the day after any announcement is made

- A local financial firm CCS Financial solutions (not to be confused with CFC Financial services) has come up with a financing product (in conjunction with ABC Bank) that will also deal with the inevitable refund cheques. (Read more at Nairobist)

- A correction: NSE Chairman Jimnah Mbaru is not contesting for the Starehe seat in the upcoming elections.

verdict: As with Kenya Re, I advise readers to by pass IPO's - but what are your views, to go ahead or not?

Turbulent 2008
- Could liquidity be drying up in the world credit markets?
- Is there any fundamentals behind the high price of oil, or is it only the fear factor?

Safaricom IPO
It appears 35% of the shares on offer may be reserved for foreigners, but they may have to pay more per share than local investors or other East African nationals.

IPO please: The necessity of a Safaricom IPO – IMF says Kenya is not paying developemtn debts

No vote
Kenyans abroad always demand the right to vote from any government in power, but without much success. The logistics are not that difficult to manage as other countries are showing;
- About two months ago, a notice appeared in the nation inviting citizens of Botswana wishing to vote in the national elections to come and register at their Nairobi high commission (Gigiri) over a three week period.
- And now the Russia federation has invited its citizens who wish to vote in the state duma elections to come and cast their vote at the Nairobi Russian embassy (Kilimani) all day on December 2 (Sunday) – and all they need are their passports!
– So maybe one day the Electoral Commission of Kenya will be able to assist the Diaspora vote

Diplomatic pass
And just this week the Kenya government has waived entry fees for spouses and children of diplomats working with the US Embassy in Kenya. Hope this is reciprocated by the US.

Strong Shilling
The dollar is the dollar and it has sunk across the board and will continue for the foreseeable future. But the Kenya shilling which is up 12.8% against the dollar is up against almost all major currencies. Using the handy CBK exchange rate tool shows the shilling up 6.6% against the pound 1.2% against the Euro, 12.8 against the (Dubai) Dirham and 6.7% up against the Yen. The shilling is also 5% up against China currency (this year) which was not even tracked by CBK a year ago. In Africa, it is up 10.9% against the SA Rand, and 8.1% & 4.3% against the Ug and Tz shillings respectively.

The impact of a strong shilling can be debated, but is there anything that can be done about it, short of cracking down on the Diaspora, (going back to currency controls) or slowing the economy?

The Central Bank has already taken a beating for the shilling.

Opportunities
most from the daily papers this week

- Africa development bank: portfolio officer, private sector development, chief communication specialist (external relations &comms), ombudsperson, senior investment officer (investments & trading room – treasury), principal (infrastructure, regional integration & trade), principal trade regulation officer (infrastructure, regional integration & trade). Apply to recruit@afdb.org, by 30/11
- Africa online: group head of HR, group head of marketing. Apply to jobs@biz-deas.biz by 7/12
- Consumers insight: associate research director, senior research manager senior research executive, HR manager, front office coordinator jobs@ciafrica.com by 30/11
- Gro FIN – SME finance: business development managers in Kenya Uganda Tanzania. Apply to hr@grofin.com by 3/12
- Hashi empex: supply & planning manager, transport & logistic mgr, sales & marketing mgr, operations mgr. apply to hr@hashiempex.com by 7/12
- Housing finance: service delivery manager, credit risk officer. Apply to esd@deloitte.co.ke
- K-Rep bank: finance manager, regional manger (coast, nyanza, western, eastern, Nairobi provinces), monitoring & evaluation officer, microfinance officer intern. Apply by 7/12 though snail mail
- KTN on-screen talent search. Email screen1@eastandard.net
- Kenya film corporation : Internal auditor, communications officer, legal officer. Apply to info@filmingkenya.com by 30/11
- Business development manager at nation media group apply to bdm@nation.co.ke by 30/11
- NOCK: fuel business cared coordinator, alternative business executive. Apply to hr@nockenya.co.ke by 13/12
- Financial advisors at Winton investment services. Apply to jobs@wintoninvestments.com

tenders
- Resellers at Africa online resellers
- Malta Guinness business distributors for east Africa breweries d/l is 20/12- International tender from Kenya Pipeline Company and Kenya petroleum refineries ltd for an LPG import, handling, import, storage bottling facility. d/l is 21/1
- International tender for modernization of number plates by the Kenya Government (Office of the Vice president and Ministry of Home Affairs) d/l is 21/12

Earlier results showed that tax collection is not profitable, but neither is dealing with the strong shilling.

The Central Bank of Kenya year ended June 2007 shows the bank recorded a 386 million shillings loss down from a 4.5 billion profit in 2006. This was largely due to a forex loss of lost 9.8 billion shillings as the shilling remained strong against the US dollar, Euro and Sterling pound.

How much currency is circulating in Kenya? 90 billion shillings ($1.34 billion), in currency up from 76 billion in June 2006.

Bank in law
You don’t start a marriage by locking out the in-laws, but that’s what’s happening with CFC Stanbic as CFC stockbrokers have suspended trades in Stanbic Uganda shares to clear up a backlog of orders.

Shares vs. Holiday vs. Election expenses
The much anticipated Safaricom IPO edges into danger zone as the IPO could be pushed back to start on December 10th, not the 3rd.

Hedge funds to Africa
There was the Equity - Helios deal announced this week.

Another prime opportunity would be for a hedge fund to invest in Transcentury

PSD blog puts the new investment interest in Africa in a historical perspective with China and other Asian countries recognizing an opportunity to stake out the long term

Hedge Funds a year ago

'Reliable sources' indicate that the Safaricom IPO will open on December 3 and close on December 14. With the elections scheduled to be after mid-December, this will allow inventors to sort out their business before they sit down and vote. Hat Tip to AKS

Taxing corruption
So Parliamentdealt another blow to the war on corruption by denying the Kenya Anti-Corruption Commission with the authority to investigate crimes that happened before it was formed (2003).

KACC as a body has aimed high (going after high profile figures - CEO's, Ministers) but mostly caught small fry leaving many Kenyans dissatisfied and who now consider the Commission to be a waste of money

But there’s another public institution - the Kenya Revenue Authority (KRA) that has achieved milestones in the war of corruption that KACC can only dream of. They have gone after untouchables, and some lawyers and MP’s have had their accounts and salaries frozen and asset seized. Now if only they could publicize this.


RICO in Kenya?

Why not legislate a tax on corruption, so if you’re named, you could lose 90% of property, leaving the accused with 10%? This is humane, but is as good as taking back everything - and bypassing court processes. Hitting Pattni with a tax bill would end 10 years of court injunction and delays and realize some significant gains in cash recovered.

Kenye Re slipping away
My strategy to bypass the IPO of Kenya Re not working as well as I thought. I placed orders at 13 shillings, only for the share to zoom. It's tempting to buy the shares at 17 or 18 and then the balance when they drop (if ever).

Unit Trust get more accessible
Market leader, Old Mutual, has lowered their minimum entry amount for unit trusts from Kshs.500,000 to Kshs. 200,000 (about $3,000). The offer runs till December 2007.

Women’s Bank: They may not have been able to get special seats in Parliament, but women can count on having their own bank when the Kenya Women's finance trust converts to a commercial bank, probably in 2008. Having a women’s only bank is a long running proposal to address some of the challenges women face as borrowers and bank customers.

KCB has diversified into asset finance, a field dominated by Barclays, Diamond Trust, CFC and market leader NIC (which was a Barclays spin-off initially)

A survey ranks Citibank as the top Kenyan bank and finds that 3 banks dominate the country.

Renaissance Capital was all set to be the next stockbroker at the Nairobi stock exchange, until Old Mutual snuck in in and doubled their bid with an astonishing ½ billion shilling ($6.5 million) offer. That leaves Renaissance to have to buy into one of the smaller stockbrokers, some of who have been patiently waiting for a big payday.

In an unprecedented move, Kenya Airways postponed it's 2007 AGM. A mail mix up is to blame, and to think how for many years shareholders heaped blame on Barclays registrars, but at least they got the mail part right. KQ this year was handle by the ambiguously named custody and registrar services

Kenya RE fraction:Retail investors are not likely to get more than 200 shares apiece.

Communications
Safaricom ball: Having pulled out the rug from the Kalonzo Musyoka side with a party takeover this week, Raila Odinga’s next move was to step in front to halt the Safaricom IPO, which most investors can’t wait to receive (and which could be a vote winner ).
- The Government has reduced the local ownership requirement in the telecommunications sector to 20% from 30% before. The 30% rule has derailed three ventures in the last three years and so far it appears the Sameer Group is the only local company to have invested more than 30% in any venture.
- Blogger Gathara points out another equally troubling aspect about the media bill.

Trade & Aid
Going to China: The Kenyan Ministry of Trade has opened a commercial office and posted a commercial attaché in Beijing, China.

CARE Cares: CARE has handed a lifeline to African farmers by turning down US Food aid.

Energy: The Olkaria geothermal plant to expand as a Mitsubishi consortium has been awarded a contract to add a 35MW plant for Kengen there

Tourism
- The Narok county council has stopped the development of Wasafiri tented camp on the outskirts of the Masai Mara but other camps are still being put up (read here)
- Fly540 to start flights to newly reopened Wajir airport, Jetlink will start international flights (probably in the region), but the Kenya wildlife services have been refused a license to offer passenger flight services.

upcoming
- Bioken a new distiller factory in Athi River
- New hotel in Gigiri
- Three hills housing estate(6,000 houses) in Mwakinye Mombasa
- New casino at Nyali Cinema Mombasa

opportunities

- Opportunities for artists from Nairobinow
- MD of the Kenya film corporation. Apply to info@filmingkenya.com by 21/8
- Transformation manager at the Kenya women’s finance trust. Details here and D/L is 30/8
- Join the Kwani sales team. Contact marketing@kwani.org
- Pan Africa Trust Fund: Chief Executive Officer, Grant Administrator, and Finance Officer. D/L is 24/8
- Business executives at the Standard / KTN

A to Zz

Applause: A clap and sympathy hug to the Kenya Re advisors, just as I am typing this at 3 a.m.; they also had to burn the midnight oil to update the prospectus and keep everything current. Still there are a few typos there and errors there

Auditors? : prospectus has statement from pricewaterhousecoopers, but not KPMG who are the Kenya Re auditors. And their statement was signed on May 28 (so was their audit/investigation reason for the delay)

Directors : or lack thereof. There’s no mention of the former managing director and finance director (how can former directors have 2.5X the loans that current directors have?). Instead there are mentions that no current directors had no unusual dealings with the company

Dividend: Kenya Re has been paying 1 shilling per share previously, but they project just Kshs. 0.25 for 2007 (out of an EPS of 0.89)

Earthquake: yesterday and evacuation of high rise buildings gave me a chance to stroll down and get a copy of the prospectus

Employees: are only 115, but they get a raw deal and have to buy a minimum of 2,000 shares like everyone else. Plus they were almost retrenched.

Fluff to ZZZZ: insurance is a boring (through lucrative) business. And a good chunk of the prospectus is taken up by narrative on the insurance sector, reinsurance sector, and how Kenya Re is supposed to make money. Association of Kenya Insures should get paid for how much of their content (a 2005 report) is used in the prospectus

Investments: Kshs. 3.3 billion in property, 615m in mortgages (doubled from 2005), 2.2 b in quoted shares (1/3 is KCB, ¼ is BAT, 1/5 is Barclays), 2.1 b in government securities

JKIA: Kenya Re has land along the passenger terminal road at the airport where it plans/hopes to put up a hotel for transit passengers.

Kenya National Assurance: an attempt to roll it (KNAC 2001) appears to be largely responsible for increase of the IPO cost by over 100 million to a budgeted Kshs. 289 million shillings. (Kengen budgeted 400m to raise 7.8 billion). Increased advertising costs (over many months) was offset by reduced printing costs

Mortgages: Kenya Re does not come to mind when you think of mortgage companies, but they do offer finance to home buyers esp. of their residential properties like Villa Franca and South C houses.

Projections: or lack thereof. I remember the Equity listing prospectus had several calculation methods to come up with the value their shares. This one is scant, but maybe they were thrown out of whack. The fact that the prospectus pegs the US$ at 73 shillings shows how many months ago it may have been synthesized.

A Qualified institutional investor: is financial institution or investment funds (expected to buy 100,000 shares minimum). So is this, like a US IPO, where an investment bank can parcel out shares to preferred select clients?

Real estate: a big investment of Kenya Re and almost half the portfolio. But not how upper hill properties are worth much less than before owing to increased availability

A Share certificate: is still an option for IPO investors here - some people still don't believe in CDS or trade their shares (buy and hold for dividends and AGM)

Valuation: see projections

Verdict: Kenya Re is Parastatal that lucky to be where it is today (it was almost sold a mere Kshs 400m song in 2002). It still operates under the notorious state corporations act and is not immune from politics and politicians, and was subject to machinations by former directors that seem to have delayed IPO. Still it’s a good Buy, but after the IPO, and when it lists on August 28.

The Kenya Re IPO opens in a week (July 18) and, it's a good time to assess the potential gains for a retail investor who subscribes.

While the prospectus is not yet out, all signs are that this will be a massive Kengen-like IPO, a quasi-monopoly with good growth prospects & profits that will stir the investment market. (I was wrong on most counts about the Eveready IPO)

But unlike Kengen, corporate and institutional investors have been allocated a good chunk of the cake, which they won't have to fight over with retail investors. So what's left for retail?

56,000 shareholders: According to reports, retail investors have been allocated a pool of 47%. That comes to 112.8 million shares of the 240 million shares offered. So 56,400 is the expected number of
retail investors [buying 2,000 shares at 9.50 each = Kshs 19,000 ($283)]. But Kengen drew many more than that and these were retail investors applying for several thousand shares (above the Kengen minimum of 5,950 shillings). And with so many pyramids schemes crashing down, those lucky to have got any cash out will hope to repeat the magic rise of Kengen on day one on listing. Plus commercial banks are still flush with cash and will probably offer more loans to buy shares.

oversubscribed = refund: budget a minimum two hours for queuing, filling out forms. IPO opens on July 18, closes on July 31. Then wait for about a month, till mid-August for results with the new shares expected to list towards month end (August 25 or September. Depending on the retail surge, one can expect between 1/3 and ½ of the shares applied for – meaning you pay Kshs. 19,000 for 2,000 shares but end
up with 700 shares worth Kshs. 6,650. This is followed by another hour visit to the stockbroker to trace the inevitable refund cheque in September.

Is it worth it? Probably, for Kenya Re. But why not sit out the Kenya Re IPO and wait for the shares to list at the end of August? The price will have changed, but if it's around 15 shillings, then you can buy as much as you want just by calling your
stockbroker and placing an order – by passing the headache of an IPO? 19,000 shillings will not earn much in any savings account, but at least the money is
available and within reach – as perhaps other share prices will drop within reach as investors cash out to buy into Kenya Re.

Still, it is insulting that some shareholders think of retail investors as emotional cattle who buy and sell on whims and don’t do any research and analysis. And
we don’t have the extra privilege granted to institutions who, this time, won’t have to pay any money until they get their share allocation confirmed.

Safaricom IPO: The calendar is on for the sale of 25% of Safaricom shares to the public and the government of Kenya (who are yielding part of their 60% ownership) have advertised for a lead transaction advisor, lead sponsoring broker, (4) co-sponsoring brokers, legal advisor, reporting accountant, PR firm, advertising consultant, receiving bank, and a share registrar for the IPO. Details at investmentsecretary@treasury.co.ke D/L is 16 July. There have been complaints about firms offering such work for free to gain prestige

Safaricom call center. The company is also seeking to outsource customer service for prepaid subscribers to an external firm (Current traffic ranges from 10,000 - 20,000 calls per day). Details from dngobia@safaricom.co.ke and D/L is 11/7

other happenings
Pipeline finance: The Kenya Pipeline Company seeking financing for the Nairobi-Mombasa and Nairobi-Western Kenya (Nakuru, Kisumu, Eldoret) segments amounting to Kshs. 7.5 billion ($107) million over the next 2 years. D/L is 31/7

Housing: The National Housing Corporation offering 890 3-bedroom flats in Langata phase II ranging from 3.9 to 4.1 million each ($55,000 - $58,000). The corporation is also selling 38 maisonettes in Kiambu phase ii at between 3.2 and 3.4 million shillings.

Barclays
- Good : The bank has hired external debt collection agents – outsourcing a time consuming tedious function.
- Not good : The only thing worse then taking a personal loan to buy shares is using a credit card to buy shares. An investor is already in the hole, and needs his shares return 30% a year, just to break even. Using a debit card may be ok though, but factor in the card fees.

Education
- New Aga Khan University campus to be set up in Nairobi
- Moi University to soon offer a masters degree in banking & finance

Media
- Desperate Housewives start next month on KTN. Hope they don’t butcher the show like they did with the Soprano’s (heavily edited, shown at 11 PM on Sunday night and often out of sequence)
- The Naiorbi Nairobi Star (new daily newspaper from KISS FM team ) hit the streets today with a lot of fanfare, but does it have legs?