Last week, we established that if safaricom declares sh21 billions in profits after tax, the PE ratio would be 9.52. that emerging market
telephony has an average PE of 17.00, therefore, the fair market price would be sh5/9.52 x 17 = sh8.928 per share. I congratulate Raj Bains,
who had the first correct answer. Now, we have to survey the landscape and take some other factors into consideration. the first issue
is whether the market is bullish or bearish. Perfectly good companies will struggle to make upside progress in a bear market. a rising tide (bull
market) tends to float a lot of boats. so we need to put a bias into the model. I have a dear friend and one of the best traders I know and when folk
ask him for investment advice, he responds, "It’s a bull market, don’t you know?" Many People are disappointed because he does not say
more than that but he is signaling a key consideration. the second consideration is the set up. Do buyers have the holding power? How is
the equation between buyers and sellers? It’s not rocket science. there are hundreds of markets all over Kenya. the bourse is no different. Let’s start
with Kenya retail, that’s you and me. are we all going to be ‘scalpers’ and ‘flippers’? Most People have taken short term loans; the year has been
tricky for all of us. It’s going to get a lot better but many folk will be biased towards booking a profit and flipping the shares quickly. We also have
foreign investors? are they going to be of the same mind set? and somewhere in the background, Vodafone might be lurking in the shadows.
I know if I was Mr sarin (Vodafone head) I would be thinking I need 16 per cent to put myself in the majority and I would be happy to pay a
premium for that 16 per cent so that I am finally in a majority and in charge. and this is where investing becomes more of an art than a
science. and the final factor is we need to study the tape, that is the share price from the day it starts trading. If you really want to maximise your returns
(and for many this is a very big outsized investment), you need to know the price at all times. It is going to make a very big difference if
you sell at 7, 8 or 10. If it trades sh10.00 and you are expecting your very kind broker to remember to call you, there is a fatal flaw in
your strategy. You need to be calling him or her and saying, ‘Its trading at sh10 , please sell my shares.’
Aly-Khan Satchu
www.rich.co.ke
is the author of
Anyone Can Be Rich
Tuesday, May 20, 2008
Thursday, May 8, 2008
AccessKenya in buy-outs plan
By Nation AccessKenya shareholders on Thursday gave the firm a go-ahead to acquire more companies in the information and communication technology sector to consolidate its position in the market. Last year, the ICT company acquired Openview Business Systems and Today’s Online, an internet service provider. The much-needed approval by shareholders during their first annual general meeting since listing at the Nairobi Stock Exchange in June last year, will now allow the firm to invest Sh600 million in a number of buy-outs soon. Of the available funds, the company will spend Sh200 million in a new residential network in Nairobi and Mombasa. A further Sh100 will be injected into The East African Marine System (TEAMS) project spearheaded by the government. The project is meant to link the country to the rest of the world through a submarine fibre optic cable. The remainder, Sh300 million, will go towards strategic acquisitions as the company seeks an increased market share of its corporate IT services segment. Shareholders also allowed the AccessKenya board to increase its capital base to 500 million shares that would be used for further fundraising in case of an acquisition, share split or a bonus issue. The company currently has an authorised share capital of Sh250 million shares with just over 200 million shares issued. “This is a strategic plan to give us flexibility though we are yet to decide on what exactly to do with such shares,” noted the board’s chairman, Mr Micheal Somen. AccessKenya directors had also sought from its shareholders the right to make any acquisitions below Sh200 million, or less than 5 per cent of the company’s total market value, without the hassles of calling an extra-ordinary general meeting. “We would rather the Sh3 million spent on hosting an EGM goes to your dividends instead of tedious and expensive meetings,” said Mr Somen. He promised that all targeted acquisitions would be done above board though currently, any negotiations were secret due to ‘commercial challenges of exposing impending deals. | |
Sunday, May 4, 2008
It's all about Collective Investment
Last year (2007) Housing Finance launched a 10-year fixed interest rate mortgage initially targeting investment groups wishing to put up houses either for owner occupation or speculative business.
Written by Eleanor Kigen
April 25, 2008: There is one advertisement I like on CNN. Although I cannot remember the exact words, I find the message powerful. It talks about the impact that a collective group of people can have on the world. They can change it. Alone, it is virtually impossible.
This rings true in the financial world as well. When people come together with different ideas and each with their small savings, they can create something great. Just this week I was reading a book called The Second Bounce of the Ball.
Among its many lessons is that if you want to grow, you need to build a network with whom you can be able to achieve a lot. Collective investment vehicles are a good way for investors to bring together their monies and be able to make bigger investments with much bigger returns.
Alone, each of the investors can be able to invest in a few shares of Kenya Airways, Kenya Commercial Bank, Athi River Mining and so on. But together, they can be able to take over a company, turn it around, make money and sell the investment at a profit.
But for such a venture to work, the people who come together have to have a common goal. They have to know where they are going. They have to believe in the vision. If you belong in an investment group, you have already started the journey.
Do you meet regularly? Do you have clearly defined goals? A clearly defined strategy? Do you have regular meetings? Do you have laid out procedures for making decisions? Do you follow your decisions through?
Do you have an eye for opportunity? Do you take calculated risks? There are clearly many things that have to be taken into account in order to guarantee success of your group.
There are also some other types of collective investments that do not require your exerted effort on a day to day basis.
Sometimes as an investor though, you are looking for investments that offer you optimum returns and diversification in a certain sector, or market capitalisations, or blue chip counters.
In more advanced markets, we have exchange traded funds which give you exposure to the type of counters that you want, be it financials, blue chip counters, large market capitaliasation companies, small capitalisation companies.
In the Johannesburg Stock Exchange (JSE), we have what is called the Satrix Securities which are listed collective investment schemes which can replicate the dividend and price performance of a particular index.
The returns that accrue to you are almost the same if you had directly purchased each of the individual securities on the JSE index. On your own, trying to get exposure to the index is not only time consuming, it is costly.
The advantages of purchasing the Satrix Securities include; lower transaction costs, since the shares on the index do not change frequently it is mostly a buy and hold strategy.
Secondly, a single transactions gives you exposure to a wide range of securities and the selling price moves according to the Net Asset Value. At any time you can know how much you are worth. Some of the Satrix funds include; the Satrix 40 which includes the top 40 companies on the JSE, Top 25 listed industrial companies index, top 15 financial companies index, if you are interested in dividends, you can invest in the Satrix Dividend Plus.
The biggest disadvantage of investing in exchange traded funds is that you can never beat the market. If the market is on an upward rise, you can only make market gains and your losses will be limited to the market losses.
Ultimately, it depends on you, the investor – on your risk appetite and the kind of returns you are looking for. There are many opportunities for collective investments even including gold! If you are looking for above market gains, exchange traded funds might not be the way for you.
Written by Eleanor Kigen
April 25, 2008: There is one advertisement I like on CNN. Although I cannot remember the exact words, I find the message powerful. It talks about the impact that a collective group of people can have on the world. They can change it. Alone, it is virtually impossible.
This rings true in the financial world as well. When people come together with different ideas and each with their small savings, they can create something great. Just this week I was reading a book called The Second Bounce of the Ball.
Among its many lessons is that if you want to grow, you need to build a network with whom you can be able to achieve a lot. Collective investment vehicles are a good way for investors to bring together their monies and be able to make bigger investments with much bigger returns.
Alone, each of the investors can be able to invest in a few shares of Kenya Airways, Kenya Commercial Bank, Athi River Mining and so on. But together, they can be able to take over a company, turn it around, make money and sell the investment at a profit.
But for such a venture to work, the people who come together have to have a common goal. They have to know where they are going. They have to believe in the vision. If you belong in an investment group, you have already started the journey.
Do you meet regularly? Do you have clearly defined goals? A clearly defined strategy? Do you have regular meetings? Do you have laid out procedures for making decisions? Do you follow your decisions through?
Do you have an eye for opportunity? Do you take calculated risks? There are clearly many things that have to be taken into account in order to guarantee success of your group.
There are also some other types of collective investments that do not require your exerted effort on a day to day basis.
Sometimes as an investor though, you are looking for investments that offer you optimum returns and diversification in a certain sector, or market capitalisations, or blue chip counters.
In more advanced markets, we have exchange traded funds which give you exposure to the type of counters that you want, be it financials, blue chip counters, large market capitaliasation companies, small capitalisation companies.
In the Johannesburg Stock Exchange (JSE), we have what is called the Satrix Securities which are listed collective investment schemes which can replicate the dividend and price performance of a particular index.
The returns that accrue to you are almost the same if you had directly purchased each of the individual securities on the JSE index. On your own, trying to get exposure to the index is not only time consuming, it is costly.
The advantages of purchasing the Satrix Securities include; lower transaction costs, since the shares on the index do not change frequently it is mostly a buy and hold strategy.
Secondly, a single transactions gives you exposure to a wide range of securities and the selling price moves according to the Net Asset Value. At any time you can know how much you are worth. Some of the Satrix funds include; the Satrix 40 which includes the top 40 companies on the JSE, Top 25 listed industrial companies index, top 15 financial companies index, if you are interested in dividends, you can invest in the Satrix Dividend Plus.
The biggest disadvantage of investing in exchange traded funds is that you can never beat the market. If the market is on an upward rise, you can only make market gains and your losses will be limited to the market losses.
Ultimately, it depends on you, the investor – on your risk appetite and the kind of returns you are looking for. There are many opportunities for collective investments even including gold! If you are looking for above market gains, exchange traded funds might not be the way for you.
Saturday, April 26, 2008
Raising a Money-Savvy Child
Long before most children can add or subtract, they become aware of the concept of money. Any 4-year old knows where their parents get money - the ATM of course!
I got a friend to help me quiz some children between 5 & 6 years in his Sunday School class. 30% said they didn't know where money came from. The remaining 70% gave the following answers to the question "where does money come from?"
- Mum & Dad
- Kibaki
- From God
- The bank
- From teachers
- From the government
- The church
The life-long benefits of teaching children good money habits make it well worth the effort. Children who are not taught these lessons pay the consequences for a life-time. I find it rather interesting how some smart bankers, doctors and accountants who earned excellent grades in school still struggle financially all of their lives! Some parents don't teach children about money because they think they shouldn't talk about money with children, don't have time, or think they don't have enough money. Parents should take time to teach children about money regardless of income and should start when children are young.
Parenting is not an easy job. A lot of challenges faced within parenting such as this subject are not readily available in a parenting manual. I looked all over the place for some book I could recommend on the subject but to no avail. Over 70% of the people I spoke to about this subject said that they had been taught nothing about money and investing by their parents. The challenge then, is to teach our kids about money while having no role models on which to base these teachings.
How can you assure that your children will know the value of a shilling, understand the importance of saving, and make financial decisions once they grown up to be adults? I was introduced to a well-read, intelligent man, Pastor Muriithi Wanjau from Mavuno Church who was kind enough to share his insights, which I thought make up the perfect manual for raising financially savvy kids.
So where should parents begin? The best place to start would be for both parents to discuss their values and determine how they will create an open environment for their children to discuss money. Issues such as how children should receive money, family values and attitudes about money, how to structure learning experiences for children, how to handle effects of advertising and peer pressure must be mapped out so that when they arise, both parents can deal with them in a consistent manner.
In Sharon M. Danes and Tammy Dunrud's publication, "Teaching Children Money Habits for Life", they maintain that teaching your children about money is more than preparing them for employment or teaching them to save some of the money they earn. It includes helping them understand the positive and negative meanings of money. For example, children need to learn that while it's nice to show someone love by buying a gift, it is just as important to show love through actions and words.
Children and parents should talk about their feelings, values, attitudes and beliefs about money. This helps children understand that conflict about money occurs and needs to be discussed in the family and that compromise is often necessary.
According to Pastor Muriithi, once your child begins to ask for things, usually candy or toys from a shop, he or she is ready to be taught about the value of the shilling. Most children would be about three years by this time. Take them shopping and let the child pay for one item. For children who are not yet going to school, separate coins into piles by size and discuss their value.
Children learn mainly through indirect teaching and by observation and example; a good idea that Pastor Muriithi shared with me was his way of teaching his child. He has 3 "piggy banks" or tins labeled "GOD" "ME" "SAVINGS" in which his six year old daughter puts in her coins once she's earned them doing some odd jobs. He finds ways of giving her little tasks around the house that she can do to earn some money, so that when she wants something she knows how much work she needs to do to be able to have enough to buy it.
How should children receive money? One of the contentious issues regarding money and kids is allowance. Some children may receive money by allowances, by parents doing it out upon request, as gifts on special occasions, or by earning it. Each family appears to have a unique financial solution, in deciding whether or not to use an allowance.
I however concur with Pastor Muriithi who feels that an allowance given on request or for free is not a good idea. Children need to learn that they will never earn something for nothing in life. They need to learn early how to find ways of making money and multiplying it. When a child is given money, they do not develop creativity as far as ways of making more. He gave me an example of his friends daughters who are both teenagers (16 and 18) and through odd jobs and investing, have both saved over KShs 150,000! How may young Kenyans in their late twenties have 150,000 just sitting in the bank?
I remember pressuring my parents, when I was younger, to give me an allowance because "all" my friends were receiving an allowance. My father however never budged! I know understand why.
"The most critical age of a child's growth and development is from 1 to 7 years. The next most critical years are up to 12 years. After 12 years of age, it is difficult to instill values in children" Pastor Muriithi
By the time a child can talk and begins to ask for things, parents can begin to work on concepts such as earning, spending and saving. Earning refers to how children receive money. Spending refers to the way children decide to use their money. Saving refers to money that the children set aside for some future use.
By getting your children to carry out some odd jobs and earning some money for it, you give them a sense of freedom and recognition. Earning also teaches financial independence, the value of work, work standards and habits, how to evaluate job alternatives and the relationship of money, time, skills and energy.
Spending teaches the difference and balance between wants and needs. It gives opportunities for comparing alternatives, enables children to make decisions and take responsibility for them as well as keeping records. Parents should let their children make mistakes and learn from the consequences.
Parents should make sure their children know they've made mistakes too. Let the child know that you can't afford to buy everything you want either. This could be brought out while window shopping together. It's a good idea to also explain the bigger picture too.
For instance, going to the movies doesn't just involve the price of a movie ticket, but fuel for the car, popcorn, time and energy. This will help them be more aware when making financial decisions. Communicate. It's important for parents to talk to their children about money. Include children in family financial discussions appropriate for their age. This helps them feel valued and tells them that money is not a taboo subject.
Saving shows a child how to get what they need. It teaches planning and the concept of delayed gratification. It also teaches the interrelationship of spending and earning. It also teaches the different purposes of planned and regular saving. For instance, a six year old would have short term savings for a specific want or need put into their "ME" tin/piggy bank and regular savings, which are long term put into their "SAVINGS" tin/piggy bank. The difference between the two should be explained to the child.
Help the child set up short-term savings goals and let them know how long it will take to save a particular amount. Keep praising and encouraging your children and motivate their saving by annually matching the amount the child saves. When your child is about 7 or 8 you could open a savings account at a financial institution that accommodates children. Go with them to open the account and explain interest and how the institution works.
As the child grows older, they need to be able to pay for more and more of their material needs such pocket money for school trips, and so on. You should also teach them the concepts of borrowing and sharing. Borrowing means that the money can be obtained for use in the present but must be paid back in the future with additional cost. Sharing means both the idea of sharing what we have with the less fortunate.
As you teach your children about money, remember to continually encourage and praise them rather than criticize and rebuke. Allow them to learn by making mistakes and through successes. One important thing you must remember is to be consistent. Consistency is the key to giving kids a healthy attitude about money. So however you formulate your plan, stick with it. And remember the pay-offs; not only will your kids know their way around a bank statement, one day, they'll be able to support you in your old age :)
Baring Out The Logic Of Equity’s Growth
by: Rina Karina, 2 Apr 08
Equity Bank's total income compounded annual growth rate of 193% per annum over the last five years has astounded many. From gutter press articles, S.K. Patels and phantom employees raising alarms of an impending collapse, to parliamentarians putting forward accusations that have had no basis.
In July this year, the Central Bank of Kenya (CBK) Governor, Prof Njuguna Ndung'u advised the public that an audit of Equity Bank had been carried out and CBK was satisfied with the financial strength and stability of Equity Bank and all other banks currently operating in the market. Yet many continue to allege various improprieties against Equity.
Without a doubt Equity Bank has continued to puzzle many, and it is for this reason that we thought fit to bring to light some facts about this Bank that is making waves not only in Kenya and this continent but in the corridors of the United Nations and the rest of the world.
The bank's business model is simple: to bank the un-banked population. The original founders of Equity had the desire to create a financial services provider that would focus on low income clients and this desire was driven by the realisation that the low and medium income earners had no access to formal banking. Equity was registered under the Building Societies Act and started off as a specialist provider of mortgage financing to its members.
This however was difficult as the Company was limited by undercapitalisation and in 1993 the Central Bank of Kenya declared Equity technically insolvent. The bank's management then put together business model that would help turnaround the company - the shift from mortgage finance to microfinance and a focus on the un-banked population.
The fact of the matter is that Equity Bank's strength lies in its strategy of offering banking services and lending to a previously untapped segment of the market. The bank has high operating margins, efficiency ratio improving from 72% in 2005 through 67% in December 2006 to 60% in June 2007. This has been on the back of efficient growth leveraging the unutilized capacity of a modern and scalable IT infrastructure, ability to maintain above sector average net interest margins and minimal bad debt incidents.
Equity Bank enjoys some of the lowest cost of funds in the sector, at less than 0.78%, while the sector average is roughly about 3%. This has been driven largely by the banks aggressive non-tariff deposit mobilisation inducing nil minimum balances, absolutely no ledge fees even for cheque accounts and lowest minimum interest attracting balance of KShs 10,000. Along with this, is the presence in un-banked sections of the country where the bank can get away without paying for deposits. Equity's savings mobilisation has been its greatest success.
In order to increase outreach into remote and densely populated rural areas, Equity set up mobile banking units fitted with modern IT systems, powered by solar panels. The mobile banking units are customized pick-up trucks which carry lap-tops with information being downloaded and uploaded at the beginning and end of each day.
Equity now boasts 1.4million customers and majority of these clients are small-hold farmers, low end salaried workers and small & medium sized businesses. The bank continues to grow, opening an average of 4,000 bank accounts a day! The bank has grown its lending book at a blistering pace from only KShs 5.5 billion in December 2005 to KShs 14.6 billion by June 2007. This has been achieved through check out systems with employers, lending to SMEs and to entrepreneurial individuals whose own discipline and desire to succeed shields them from the stigma of defaulting.
Equity has redefined its credit policy, with a clear focus on enhancing internal controls to cultivate and maintain a well balanced and high quality loan portfolio. Two years ago, Equity had a problem with lack of focus on a particular niche market in the credit methodology. The Bank tried to cover many markets at the same time and found it difficult to define its typical client and staff tended to use the same commercial banking approach for all types of loans.
This has now improved. The bank has identified the following sectors: Microfinance, Corporate, Consumer, Agriculture and SME. Each business segment is headed by a sector head that is responsible for the performance of their existing sectors. However, the bank may have out grown itself and needs to recapitalise in order to be inline with the CBK capital adequacy guidelines.
The bank also requires the funds for its expansion program as well as to increase lending. We therefore envisage that the company will have to undergo an equity recapitalisation, by either carrying out a rights issue or perhaps selling a certain percentage of the bank's shares to a strategic investor.
The proposed purchase of 20% in Housing Finance (HF), Kenya's leading mortgage finance company spawns tremendous revenue opportunities, cost synergies and scale advantages. The revenue opportunities accruing to Equity Bank are thus: the opportunity to push HF's mortgage products to a section of its clientele and benefit from the resulting explosive growth in HF's business (targets are to sell mortgages to a very conservative 5% of Equity's 1.4 million customers or 70,000 accounts).
Quite an unimaginable feat against only 4,500 mortgage accounts in 30 years of HF's existence! The other revenue opportunity is to be able to lend medium term deposits to HF at a much higher interest margin than attainable from treasuries or deposits with other institutions. The resulting interest spread would accrue to Equity as marginal income on existing assets. Cost synergies that will result include shared services, debt recovery, staff and marketing efforts.
The nine key shareholders of Equity Bank, including Mr. James Njuguna Mwangi who owns 7.32% of the bank were locked in when the banks shares were listed in August 2006 and will not be able to trade their shares until August 2008.
All in all Equity is without a doubt the leader among its peer group. It offers a diverse variety of banking services, has management expertise, experience in the microfinance sector and well placed infrastructure and IT platform. The bank's short-to-medium term plans include the continued expansion of its domestic franchise through investment in additional branches and ATMs, continued innovation of services channels and the possible acquisition of other banks (considering an industry consolidation). Going forward, key challenges for the bank include: maintaining an adequate level of asset quality, particularly in light of the exponential growth in risk assets and the maintenance of its capital position.
Equity Bank's total income compounded annual growth rate of 193% per annum over the last five years has astounded many. From gutter press articles, S.K. Patels and phantom employees raising alarms of an impending collapse, to parliamentarians putting forward accusations that have had no basis.
In July this year, the Central Bank of Kenya (CBK) Governor, Prof Njuguna Ndung'u advised the public that an audit of Equity Bank had been carried out and CBK was satisfied with the financial strength and stability of Equity Bank and all other banks currently operating in the market. Yet many continue to allege various improprieties against Equity.
Without a doubt Equity Bank has continued to puzzle many, and it is for this reason that we thought fit to bring to light some facts about this Bank that is making waves not only in Kenya and this continent but in the corridors of the United Nations and the rest of the world.
The bank's business model is simple: to bank the un-banked population. The original founders of Equity had the desire to create a financial services provider that would focus on low income clients and this desire was driven by the realisation that the low and medium income earners had no access to formal banking. Equity was registered under the Building Societies Act and started off as a specialist provider of mortgage financing to its members.
This however was difficult as the Company was limited by undercapitalisation and in 1993 the Central Bank of Kenya declared Equity technically insolvent. The bank's management then put together business model that would help turnaround the company - the shift from mortgage finance to microfinance and a focus on the un-banked population.
The fact of the matter is that Equity Bank's strength lies in its strategy of offering banking services and lending to a previously untapped segment of the market. The bank has high operating margins, efficiency ratio improving from 72% in 2005 through 67% in December 2006 to 60% in June 2007. This has been on the back of efficient growth leveraging the unutilized capacity of a modern and scalable IT infrastructure, ability to maintain above sector average net interest margins and minimal bad debt incidents.
Equity Bank enjoys some of the lowest cost of funds in the sector, at less than 0.78%, while the sector average is roughly about 3%. This has been driven largely by the banks aggressive non-tariff deposit mobilisation inducing nil minimum balances, absolutely no ledge fees even for cheque accounts and lowest minimum interest attracting balance of KShs 10,000. Along with this, is the presence in un-banked sections of the country where the bank can get away without paying for deposits. Equity's savings mobilisation has been its greatest success.
In order to increase outreach into remote and densely populated rural areas, Equity set up mobile banking units fitted with modern IT systems, powered by solar panels. The mobile banking units are customized pick-up trucks which carry lap-tops with information being downloaded and uploaded at the beginning and end of each day.
Equity now boasts 1.4million customers and majority of these clients are small-hold farmers, low end salaried workers and small & medium sized businesses. The bank continues to grow, opening an average of 4,000 bank accounts a day! The bank has grown its lending book at a blistering pace from only KShs 5.5 billion in December 2005 to KShs 14.6 billion by June 2007. This has been achieved through check out systems with employers, lending to SMEs and to entrepreneurial individuals whose own discipline and desire to succeed shields them from the stigma of defaulting.
Equity has redefined its credit policy, with a clear focus on enhancing internal controls to cultivate and maintain a well balanced and high quality loan portfolio. Two years ago, Equity had a problem with lack of focus on a particular niche market in the credit methodology. The Bank tried to cover many markets at the same time and found it difficult to define its typical client and staff tended to use the same commercial banking approach for all types of loans.
This has now improved. The bank has identified the following sectors: Microfinance, Corporate, Consumer, Agriculture and SME. Each business segment is headed by a sector head that is responsible for the performance of their existing sectors. However, the bank may have out grown itself and needs to recapitalise in order to be inline with the CBK capital adequacy guidelines.
The bank also requires the funds for its expansion program as well as to increase lending. We therefore envisage that the company will have to undergo an equity recapitalisation, by either carrying out a rights issue or perhaps selling a certain percentage of the bank's shares to a strategic investor.
The proposed purchase of 20% in Housing Finance (HF), Kenya's leading mortgage finance company spawns tremendous revenue opportunities, cost synergies and scale advantages. The revenue opportunities accruing to Equity Bank are thus: the opportunity to push HF's mortgage products to a section of its clientele and benefit from the resulting explosive growth in HF's business (targets are to sell mortgages to a very conservative 5% of Equity's 1.4 million customers or 70,000 accounts).
Quite an unimaginable feat against only 4,500 mortgage accounts in 30 years of HF's existence! The other revenue opportunity is to be able to lend medium term deposits to HF at a much higher interest margin than attainable from treasuries or deposits with other institutions. The resulting interest spread would accrue to Equity as marginal income on existing assets. Cost synergies that will result include shared services, debt recovery, staff and marketing efforts.
The nine key shareholders of Equity Bank, including Mr. James Njuguna Mwangi who owns 7.32% of the bank were locked in when the banks shares were listed in August 2006 and will not be able to trade their shares until August 2008.
All in all Equity is without a doubt the leader among its peer group. It offers a diverse variety of banking services, has management expertise, experience in the microfinance sector and well placed infrastructure and IT platform. The bank's short-to-medium term plans include the continued expansion of its domestic franchise through investment in additional branches and ATMs, continued innovation of services channels and the possible acquisition of other banks (considering an industry consolidation). Going forward, key challenges for the bank include: maintaining an adequate level of asset quality, particularly in light of the exponential growth in risk assets and the maintenance of its capital position.
Wednesday, April 23, 2008
Personal Finance
Personal Finance
by: Rina Karina, 2 Apr 08
Sometime this year after I made a presentation on the stock market to some 200 or so men, I got a question from one of them asking how I could talk about investing money when a lot of Kenyan's lived from hand to mouth. He said that the average Kenyan's concern, was not stocks, bonds, etc but where their next meal would come from. His comment saddened me a great deal as it made me realise that a lot of Kenyans don't think about saving as a necessity but rather an activity carried out by the wealthy.
David Ithanya, in his book, The Winners & Losers of Capitalism; and why Africa is not winning yet, states "Africa's problem lies more in its collective attitude, collective outlook and collective mindset. It is the expectations that Africa has of itself, that are terribly low. It is Africa's collective sense of self worth and self belief, which unfortunately, sometimes seems to reside only in rhetoric."
It is important to believe that we as a nation can solve our persistent and pressing problems without the assistance of foreigners. We as a nation and as a continent must find our OWN solutions to our pressing problems. It is my firm belief that when we begin to make a difference in our thinking and personal finance, we will affect the economy of the nation.
Kanjii is a great friend of mine whose view on personal finance is refreshing in its simplicity and practicality. The reality is that successful investing is not difficult at all. It's just intimidating. You don't have to understand all the ups and downs of the Stock Exchanges in the world, the interest-rate decisions by the Central Bank, economic indicators and so forth.
All these things have significant meaning but you don't have to follow them all to invest well. All you really need is to have an understanding of several facts and be confident in yourself as you begin. Ever heard of the three baskets of success? Kanjii introduced them to me and I think they're a brilliant way to group your financial goals.
The first basket of success is the Security Basket. In this basket are finances sufficient to support your current expenses: food, rent, clothing, entertainment, fuel, and so on. You also need to keep at least 3 to 6 months of your income as "damage management" or "just in case" funds. This money needs to be in the bank or in marketable securities such as the Money Market fund or Treasury Bills that are easily and quickly accessible.
As you fill this basket, you would need to consider what your current financial situation is. Are you in debt? Do you have a car loan or a mortgage? Are you planning a wedding? Going back to school? Planning to have children? And so on... You should at least have the basic life insurance that covers you and your family in case of terminal disease, death and accident. This is very important as even though you might lose all your money in an investment, if you need medical attention, it will be taken care of. The size of your security basket will depend on your current financial needs.
The second basket of success is the Investment Basket. Making deposits into this basket should be done once the security basket is full. The investment basket will have the kinds of investments that should provide you with the money that you will need to meet the needs that you expect to have in the future.
Most people have more than one investment objective: a secure retirement is almost everyone's long term goal, more immediately pressing goals are: a down payment on a house, or a child's college education. In this basket you would have both short term and long term assets: stocks (or shares), bonds, bills, real estate, unit trusts, and so on...
You would need to calculate how much you will need to set aside in order to make these investments. The single most important thing you will need to do to ensure that this basket is filled is to live below your means! If you want to be able to invest and accumulate wealth to help yourself or others in the future, you simply cannot spend everything you earn.
All three baskets of success will be fuelled by savings... It's never too late to become disciplined about saving, but the sooner you develop the saving habit, the easier it will be to achieve your goals. You can start by creating a budget for the New Year: no successful company would establish a profit goal without estimating its operating costs in advance.
The same goes for individuals: if you want to free up enough cash to save the recommended 10 to 15% of your pay in 2007, you have to control your costs. Your number one goal should be to do a budget, keep track of your expenses for a couple of months. It's the smaller expenses like clothing, movies, phone bills and coffees that slip through the cracks and before you know it, there's not much left for savings.
Authors Thomas J. Stanley and William D. Danko in their book the Millionaire next door wrote:
How do you become wealthy? . . . It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and most of all, self-discipline.
Below are a couple of saving tips that you could use:
Savings are liquid (easily converted into cash) and are usually used for such things as emergencies, down payment on a home, or a holiday. In contrast, investing is a longer-term in nature with the individual willing to accept more short-term risk in the expectation of achieving a greater long term gain. The goal in investing is not capital preservation but rather capital appreciation.
The dream basket is the third basket of success. In this basket you would have all the things that you don't need but would love to have... a yacht, a cruise around the world, a trip to the moon, a second home, or the latest Aston Martin! It is important not to have these baskets in the wrong order...
I hope to continue increasing financial literacy and letting the public know that you can indeed create wealth! It's just like Henry Ford statement, "the man who thinks he can and the man who thinks he can't, are both right; which one are you?"
by: Rina Karina, 2 Apr 08
Sometime this year after I made a presentation on the stock market to some 200 or so men, I got a question from one of them asking how I could talk about investing money when a lot of Kenyan's lived from hand to mouth. He said that the average Kenyan's concern, was not stocks, bonds, etc but where their next meal would come from. His comment saddened me a great deal as it made me realise that a lot of Kenyans don't think about saving as a necessity but rather an activity carried out by the wealthy.
David Ithanya, in his book, The Winners & Losers of Capitalism; and why Africa is not winning yet, states "Africa's problem lies more in its collective attitude, collective outlook and collective mindset. It is the expectations that Africa has of itself, that are terribly low. It is Africa's collective sense of self worth and self belief, which unfortunately, sometimes seems to reside only in rhetoric."
It is important to believe that we as a nation can solve our persistent and pressing problems without the assistance of foreigners. We as a nation and as a continent must find our OWN solutions to our pressing problems. It is my firm belief that when we begin to make a difference in our thinking and personal finance, we will affect the economy of the nation.
Kanjii is a great friend of mine whose view on personal finance is refreshing in its simplicity and practicality. The reality is that successful investing is not difficult at all. It's just intimidating. You don't have to understand all the ups and downs of the Stock Exchanges in the world, the interest-rate decisions by the Central Bank, economic indicators and so forth.
All these things have significant meaning but you don't have to follow them all to invest well. All you really need is to have an understanding of several facts and be confident in yourself as you begin. Ever heard of the three baskets of success? Kanjii introduced them to me and I think they're a brilliant way to group your financial goals.
 |
As you fill this basket, you would need to consider what your current financial situation is. Are you in debt? Do you have a car loan or a mortgage? Are you planning a wedding? Going back to school? Planning to have children? And so on... You should at least have the basic life insurance that covers you and your family in case of terminal disease, death and accident. This is very important as even though you might lose all your money in an investment, if you need medical attention, it will be taken care of. The size of your security basket will depend on your current financial needs.
The second basket of success is the Investment Basket. Making deposits into this basket should be done once the security basket is full. The investment basket will have the kinds of investments that should provide you with the money that you will need to meet the needs that you expect to have in the future.
Most people have more than one investment objective: a secure retirement is almost everyone's long term goal, more immediately pressing goals are: a down payment on a house, or a child's college education. In this basket you would have both short term and long term assets: stocks (or shares), bonds, bills, real estate, unit trusts, and so on...
You would need to calculate how much you will need to set aside in order to make these investments. The single most important thing you will need to do to ensure that this basket is filled is to live below your means! If you want to be able to invest and accumulate wealth to help yourself or others in the future, you simply cannot spend everything you earn.
All three baskets of success will be fuelled by savings... It's never too late to become disciplined about saving, but the sooner you develop the saving habit, the easier it will be to achieve your goals. You can start by creating a budget for the New Year: no successful company would establish a profit goal without estimating its operating costs in advance.
The same goes for individuals: if you want to free up enough cash to save the recommended 10 to 15% of your pay in 2007, you have to control your costs. Your number one goal should be to do a budget, keep track of your expenses for a couple of months. It's the smaller expenses like clothing, movies, phone bills and coffees that slip through the cracks and before you know it, there's not much left for savings.
Authors Thomas J. Stanley and William D. Danko in their book the Millionaire next door wrote:
How do you become wealthy? . . . It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and most of all, self-discipline.
Below are a couple of saving tips that you could use:
- Set aside any salary increments. If for instance at the end of this year you're given a salary increment of 10%, your cost of living doesn't change and your expenses shouldn't. Save that extra money every month like you didn't have it. An easy way to do this is to sign up for an automatic investment program, such as Old Mutual or British American unit-linked savings products.
- Cut your expenses. If you can defer making big payments e.g a new car while your current one is running ok albeit old, don't.
- Try monitoring your spending for a couple of months. Keep a spreadsheet and enter your expenses every day. When you itemize your expenses, it becomes easier to see where you can cut down
Savings are liquid (easily converted into cash) and are usually used for such things as emergencies, down payment on a home, or a holiday. In contrast, investing is a longer-term in nature with the individual willing to accept more short-term risk in the expectation of achieving a greater long term gain. The goal in investing is not capital preservation but rather capital appreciation.
The dream basket is the third basket of success. In this basket you would have all the things that you don't need but would love to have... a yacht, a cruise around the world, a trip to the moon, a second home, or the latest Aston Martin! It is important not to have these baskets in the wrong order...
I hope to continue increasing financial literacy and letting the public know that you can indeed create wealth! It's just like Henry Ford statement, "the man who thinks he can and the man who thinks he can't, are both right; which one are you?"
Monday, April 21, 2008
Top EA Companies
East African Rankings
| EA Rank | African Rank | | Country | Industry | Market Value Dollar ($m) | Dollar Returns |
| 1 | 75 | East African Breweries | | Consumer Goods | 2077 | 58.59% |
| 2 | 96 | Barclays Bank | | Banks and Financial Services | 1677 | 12.18% |
| 3 | 98 | | | Banks and Financial Services | 1639 | 108.93% |
| 4 | 145 | Bamburi Cement | | Construction and Materials | 1112 | -0.32% |
| 5 | 153 | New Mauritius Hotels | | Entertainment and Leisure | 1072 | 110.45% |
| 6 | 155 | State Bank of | | Banks and Financial Services | 1056 | 105.04% |
| 7 | 167 | | | Utilities | 954 | 3.74% |
| 8 | 171 | | | Banks and Financial Services | 889 | 29.31% |
| 9 | 172 | Standard Chartered Bank | | Banks and Financial Services | 876 | 9.88% |
| 10 | 195 | Stanbic | | Banks and Financial Services | 686 | - |
| 11 | - | Equity Bank | | Banks and Financial Services | 637 | - |
| 12 | - | Illovo Sugar | | Agriculture and Raw Materials | 524 | - |
| 13 | - | | | Transportation | 458 | - |
| 14 | - | Sun Resorts | | Entertainment and Leisure | 420 | - |
| 15 | - | Nation Media Group | | Media | 363 | - |
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