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Normal Board - The Whole shebang
Prompt Board Next day settlement
Expert Board All you need re an Individual stock.

The Latest Daily PodCast can be found here on the Front Page of the site
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We will be hosting @KenyaBankers CEO @HabilOlaka, @KCBGroup CEO
@JoshuaOigara and NIC Bank MD John Gachora

Macro Thoughts

Home Thoughts

One of my greatest pleasures is watching and tracking elephants. I
recall turning a corner in the Masai Mara and finding myself alone
except for a herd of over 100 elephants. I have watched a documentary
about the
elephants of Kilimanjaro and I learnt that elephants mourn their dead
just like we do. They actually caress the bones of the departed and
apparently never forget.

“I’d like to go out in the front yard and shout something. “None of
this is worth it!” That’s what I’d like people to hear.” ― Raymond
Carver, Elephant And Other Stories

I thank Charles Field-Marsham for the invitation yesterday to view
@edwardburtynsky's remarkable Photography

Clay Shirky November, as always, will be Democrat vs. Republican, but
also insider vs. outsider. HRC will get all Dem insiders, Trump all
GOP outsiders.

Tough economic conditions are fuelling demands for change but
authoritarian leaders are thwarting the popular vote

This year's combination of the international commodity price crash and
the Chinese economic slowdown, alongside a bumper political season
with 16 elections in just twelve months, is proving harrowing for
Africa's democracy activists.

Although opposition parties have made breakthroughs in Cape Verde and
Nigeria, recent elections in Congo-Brazzaville, Niger, Uganda and
Zanzibar, Tanzania, point to three trends that are harmful to
political institutions and stability: (1) incumbents are circumventing
electoral technology; (2) the rise of 'illiberal democracy' and
'authoritarian developmentalism'; and (3) more marginalised opposition
parties are boycotting elections.

Taken together, these developments are likely to undermine confidence
in the ballot box among losing candidates and communities. They
increase the prospects that growing numbers of disenchanted activists
will try other strategies – such as force – to gain power.

Firstly, faith in technology as a means to prevent election rigging is
proving misplaced, partly because the technology does not always
function as intended. In the Kenyan elections of 2013, over 50% of the
electronic kits designed to verify the registered voters at polling
stations and so prevent multiple voting, failed.

Later in the process, a mobile telephone transmission system that was
intended to prevent rigging during tallying embarrassingly failed due
to a server error. No one was held to account for those failures,
which could have prompted a repeat of the violent clashes that
followed the 2007 elections (AC Vol 57 No 8, Justice in question).
Certainly, independent monitors and opposition politicians were
convinced that these technological failures were contrived by the
well-financed Jubilee coalition of President Uhuru Kenyatta and
William Ruto and their allies in the Independent Electoral and
Boundaries Commission (AC Vol 54 No 6, Credibility of the IEBC under
fire).

Hi-tech cheating
High technology can help the cheaters to disguise their rigging
tactics. The general rule is that when the two main parties are
pegging level, as they were after a day of results in Kenya in 2013,
and the electoral commission suddenly announces a massive technology
breakdown, then that is when the fix goes in. In Kenya, after the
breakdown was announced and the elections went from digital to
analogue, as the tech-savvy local observers described it, the
Kenyatta-Ruto alliance began streaking ahead.

Reverse march
The forward march of African democrats has been halted in many cases.
From the mid-1990s onwards, civic activists, journalists and
opposition parties managed to secure substantially more freedoms and
rights, helped by better communications and more pluralist political
systems. Some governments are determinedly pushing back: detaining
oppositionists, shutting down social media and, in the case of
Congo-Brazzaville, turning off the internet as well as mobiles or in
Uganda and many other states, ordering companies to block text
messages (short message service). The aim is to stop independent
reports of the elections and the tallying of results.

Given the massive cost of elections in Africa – Kenya's 2013 elections
cost over US$230 million and Congo-Kinshasa's in 2006 cost over $450
mn. – there are big questions about value for money. Those questions
have a diplomatic weight when foreign governments and organisations
are paying the bills. Frequently, the procurement of election
materials is last-minute and the choice of contractors and suppliers
opaque. Some activists argue that any Western involvement in African
elections is intrinsically suspect. Some oppositionists want
international groups to provide finance to update electoral registers
to counter the argument of some incumbent governments that they
haven't got the resources to do so.

The recent presidential election in Congo-Brazzaville typifies the
dangerous tactics of long-stay leaders. The former United Nations
Secretary General, Kofi Annan, warned of the risks at the Fifth Tana
Security Forum in Ethiopia on 25 April: 'If a leader doesn't want to
leave office… and elections are seen as being gamed to suit a leader
and he stays term after term after term, the tendency may be the only
way to get him out is through a coup or people taking to the streets.'

Conclusions

As You keep the lid on a Pressure-Cooker eventually it blows up really big.

Euro 1.1392
Dollar Index 93.39
Japan Yen 107.23
Swiss Franc 0.9634
Pound 1.4648
Aussie 0.7661
India Rupee 66.525
South Korea Won 1142.09
Brazil Real 3.4854
Egypt Pound 8.8794
South Africa Rand 14.2595

“The failure to act is triggering a further loss of investor
confidence in Abenomics and unwinding of yen weakness,” said Lee
Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ
Ltd. in London. “The BOJ had an opportunity to at least temporarily
short-circuit the yen trend but failed to act -- it has provided the
green light for further yen strength in the near-term.”

The Bloomberg Dollar Spot Index, which measures the greenback against
10 major global peers, fell 0.9 percent. The measure has declined more
than 5 percent this year.

Gold 6 month INO 1275.05 [seems to have finally left 1,250.00 behind]
http://quotes.ino.com/charting/index.html?s=FOREX_XAUUSDO&t=c&a=50&w=1&v=d6

Crude Oil 6 Month Chart INO 46.02 a Headfake
http://quotes.ino.com/charting/index.html?s=NYMEX_CL.M16.E&v=d1&t=c&a=50&w=1

Emerging Markets

Frontier Markets

Barclays Group Africa Ltd., the lender being sold by its London-based
parent, forecast that its credit-loss ratio will worsen as customers
fall behind in loan repayments and economic growth in its main South
African market deteriorates.
A continued focus on increasing revenue and managing expenses “should
improve our cost to income ratio further,” helping the lender to
maintain a return on equity, a key measure of profit, for 2016 at
levels similar to last year, Johannesburg-based Barclays Africa said
in a statement on Thursday. The company expects to maintain “low
single-digit loan growth” with the rest of its African operations
expanding faster than South Africa, it said.
Barclays Plc plans to sell down its 62 percent stake in the African
unit, formerly known as Absa, to boost capital. Bob Diamond, who ran
Barclays before his 2012 ouster during the Libor scandal, this week
confirmed that he and investors including U.S. private-equity giant
Carlyle are working together on a potential bid for the
Johannesburg-based lender.
The London-based parent company on Wednesday said that it is “pleased
with the level of indicative interest” in the African business and
that it is working closely with local management, including on the
planning for the “operational separation of the two businesses.”

Dollar versus Rand 6 Month Chart INO 14.2595
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt EGX30 Bloomberg +10.95% 2016
http://www.bloomberg.com/quote/CASE:IND

Apple falling $46bn in market cap at the opening $46bn is also more
than the total market cap of Nigerian market, which is BTW the largest
economy on the African continent.


Nigeria All Share Bloomberg -12.84% 2016
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -8.28% 2016
http://www.bloomberg.com/quote/GGSECI:IND

Mozambican security forces deployed on the streets of the capital
Maputo on Thursday after rumours of planned anti-government
demonstrations circulated on social media, witnesses said.

Several posts on social media in recent days said groups were planning
to demonstrate on Friday against government corruption, in particular
secret borrowing that could cripple the economy in one of the world's
poorest countries.

Armoured vehicles packed with police armed with automatic weapons were
deployed on major street corners in Maputo although there was no sign
of unrest, two witnesses told Reuters.

GREETINGS from the Serena Polana, Maputo. I can confirm that Maputo is
the land of wonderful and flavoursome tiger prawns.

The Architecture is also deliciously retro. By the way, the Polana was
built in 1922 and the flavour is fabulously Riviera and very swanky.
It is less than 4 hours by plane from Nairobi and surely set to be the
most of in things and places to visit.

Of course, Mozambique has popped large onto the global radar because
of gas reserves that have been discovered offshore and in the deep
sea.

This is Now

The World Bank is delaying approval of further development loans to
Mozambique pending a debt sustainability analysis to be conducted with
the International Monetary Fund, a spokesman said on Wednesday.

The IMF source said the extra borrowing had pushed Mozambique's
foreign debt to $9.64 billion, a level "very close to
unsustainability".

But scratch the surface and it will reveal a country on the edge of
drought and total economic collapse.

When the International Monetary Fund (IMF) stated in its October 2015
staff report that some Kenyan banks had been forced to increase
provisions for loan losses to the tune of Sh2.4 billion, it was the
red flag that was needed to prompt the regulator into action.

“On-site supervision efforts have intensified, and the CBK has asked
banks to reclassify some of their loans and increase provisioning for
credit losses (Sh2.4 billion),” said the IMF in the rather ominous
note about the practices of some of the institutions.

The bad loans have since increased to 6.8 per cent, according to a
banking industry report done by Cytonn Investments. From December
2014, this is an increase of more than two percentage points.

Unknown to many a customer, the directors of some of the banks have
been merely waiting for depositors to bring in money so that they can
casually wheel it out of the buildings in their car boots.

Using phrases such as “race to the top”, “rogue bankers”, “stealing
from depositors”, Dr Njoroge is out to show that his promise to ensure
that 2016 is a year of transition and increasing supervision of banks
was not empty rhetoric.

The unspoken truth is that in some of the small banks, theft of
depositors’ cash is facilitated by the loose structure of management
and the board, in which there is hardly any separation.

“As part of Kenya’s ongoing reform of its banking system, we have seen
significant spikes in NPLs and impairment charges in the financial
year 2015 results at several banks. The pace at which all of this has
happened and the fact that these are structural rather than cyclical
issues, has raised concerns about the quality of supervision in the
sector historically,” said Renaissance Capital in their most recent
report.

The provisions rose to reflect the fact that the nonperforming loans
(NPLs) had increased. In ratio terms, the NPLs jumped by two
percentage points in 2015 to 6.8 per cent from 4.7 per cent in the
previous year.

The last time that NPLs exceeded this figure was in 2008, when it
stood at 7.2 per cent

But at the centre of the problems facing the small banks is the
inability to access short-term credit from the bigger players.

On the day that Chase Bank fell (but reopened on April 27), Dr Njoroge
revealed efforts had been made to procure cash from various
institutions but nothing came of it, therefore, forcing the switch off
of the core banking system.

By the time of the closure, Chase Bank had seen Sh8 billion withdrawn
in less than 24 hours and there appeared to be no end to the
haemorrhage.

“No bank anywhere in the world can withstand a run,” said Dr Njoroge,
underlining that it was not the fundamentals of the bank that were
wrong, but the mass withdrawals that were the proximate cause of the
collapse.

But, again, Chase Bank’s chief executive Paul Njaga had asked the CBK
in a letter for a Sh10 billion facility to rescue the bank, the
regulator declined.

When asked why the CBK denied Chase Bank access to the reverse repo,
Dr Njoroge strangely dismissed the matter as a “rumour,” raising
questions as to whether the regulator did not itself contribute to the
fall of the bank.

The governor said that seven banks control 80 per cent of the
liquidity in the banking industry, thereby leaving others starved of
cash.

“There is a lot of liquidity in the market, but there is a lot of
segmentation. Seven banks control 80 per cent of the liquidity,” said
Dr Njoroge on April 15. Yet there are more than 40 commercial banks in
operation.

Many of the banks that hold significant liquidity do not have credit
lines with the small banks. Even those that do, happen to have limits
as to how much they can advance.

As governor of the CBK, Njuguna Ndung’u never wanted to rock the boat
such that not a single bank closed despite the serious weaknesses
exposed in the Press, for example, about Dubai Bank.

Prof Njuguna probably knew the problem of parallel banking was not
confined to a single institution and may, therefore, have feared
contagion should he start the fight against it.

Prof Ndung’u is expected at some point to shed light as to what had
really been going on at the supervisory level during his time as CBK
head.

The danger with parallel banking is that the owners of the deposits
and loans want to remain anonymous, but their holdings pose a risk to
the customers in the main bank. This is what happens in the case of
both Imperial and Chase banks.

At Imperial Bank, some Sh34 billion in loans had not been included in
the balance sheet while nearly Sh20 billion deposits was also missing
from the official record. This emerged after due diligence was done on
the bank by a consulting firm.

In Chase Bank, one of the directors had taken loans amounting to Sh7.9
billion and some of it was non-performing and had no collateral.

Another Sh8.7 billion had no proper documents and was considered to
be, therefore, at the risk of not being repaid. In total, the
repayment of Sh16.6 billion in loans was doubtful.

The issue of external and internal auditors has arisen as well because
they are seen as the gate-keepers.

Though auditors have defended themselves through their regulator, the
question is how an auditor can find something right in one year and
then changes their mind in another year when the management at the CBK
has changed.

The entire Tale [that has been spun] took me back to the Story of The
three wise monkeys. Together they embody the proverbial principle "see
no evil, hear no evil, speak no evil" The three monkeys are Mizaru,
covering his eyes, who sees no evil; Kikazaru, covering his ears, who
hears no evil; and Iwazaru, covering his mouth, who speaks no evil.

You have to ask yourself

What is the duty of a Board? Was there a functioning Board at Chase
Bank or even at Imperial Bank? Or Just a Mizaru, Kikazaru and Iwazaru?
Where was the Credit Committee? Dishing out 84.96% of your Core
Capital on an unsecured basis to an Insider has to surely pass through
some kind of process? Because if it didn't then as Patrick Njoroge
said Chase Bank was a ''mama mboga'' and not a Bank.

Momentarily, and I think this was why the inestimable Patrick Njoroge
held his Sunday presser not too long ago – we were facing a whole-sale
liquidation. We remain in the moment of consolidation but the Central
Bank and KCB are confirming they have the wit and wherewithal to
manage this process in an orderly and effective manner.

CBK governor Patrick Njoroge said preliminary audit by CBK shows that
the directors had awarded themselves 15-year interest-free loans under
the guise of Islamic banking.

“We have to hold these people to account, the population will not
accept that they just walk around scot-free,” said Dr Njoroge at a
briefing on Thursday.

CBK collateralised these loans to allow for the re-opening of the bank
under the management of KCB.

The prime assets forcefully seized include a business park in Karen, a
three-acre parking lot in Nairobi, some 240 acres of land on Mombasa
Road, a three-acre plot next to the German Embassy on Riverside Drive
and various high-end properties in Dubai.

Chase Bank re-opened on Wednesday after it was unexpectedly placed
under receivership on April 7 owing to liquidity problems created by a
run on deposits.

Those on the bank’s eight-member board are ousted chairman Zafrullah
Khan, suspended managing director Duncan Kabui, current chair Muthoni
Kuria and CEO Paul Njaga.

Others are lawyer Anthony Gross, businessman Rafiq Shariff, Richard
Carter, and French PE firm Amethis co-founder Laurent Demey.

Irregular insider borrowing camouflaged as Musharakah — a sharia
compliant financing used by Islamic banks — was previously classified
as ‘other assets and interest receivable’ in the balance sheet.

Chase Bank is the third Bank the Central Bank of Kenya has taken over
since Patrick Njoroge became governor last July. A fourth bank
National Bank has sent its chief executive and five senior managers on
leave while its accounts are investigated. The First overarching Point
to note is that we have now entered a new more ''rules-based'' system
of regulation. What is also clear is that we were previously in a more
permissive environment. Tier 3 Banks are finding themselves at the
Bleeding Edge of this move to a more ''rules-based'' System. Years of
resisting increased Capital requirements, has meant that these Tier 3
Banks are pirouetting their businesses on ''wafer-thin'' capital.
Recent Events [Dubai Bank, Imperial Bank, National Bank and Chase
Bank] now means Investors and Depositors are placing considerably less
credence on the accounts as presented. Then in a ''Double-Whammy'',
Depositors have embarked on a Deposit Flight to Quality further
undercutting them. Without Shareholders now stumping up bucketloads of
Capital, these Banks are in effect now ''Zombie'' Banks. The Process
of Consolidation is now market-led. I appreciate the Authorities are
keen to keep this orderly and not allow it to turn disorderly. The
important Point for the Authorities is not to provide a blanket
''Put'' Option and to erect a Firewall in the right place. The Central
Bank Governor has a fiendishly difficult Brief.

Par Value:                  1/-
Closing Price:           24.50
Total Shares Issued:          182174108.00
Market Capitalization:        4,463,265,646
EPS:             -1.63
PE:

TPS manages 15 hotels and resorts across East Africa under the Serena
brand name.

FY Sales 6.189360b vs. 6.337210b -2.333%
FY Earnings before exchange loss, interest, depreciation and taxation
551.492m vs. 782.387m -29.512%
FY Unrealised exchange loss on foreign currency loans [121.566m] vs.
[17.608m] +590.402%
FYs Net interest expense [224.232m] vs. [154.419m] +45.210%
FY Depreciation on property, plant & equipment [426.566m] vs. [426.237m] +0.077%
FY [Loss]/ profit before income tax [210.976m] vs. 220.101m -195.854%
FY [Loss]/ profit after tax [280.613m] vs. 274.419m -202.257%
Attributable to: equity holders of the company [296.571m] vs. 245.910m -220.601%
[Loss]/ earnings per share attributable to the equity holders of the
company [1.63] vs. 1.35 -220.741%
Dividend 0.25 vs. 1.35 -84.481%

Company Commentary

The Company navigated through another challenging year for the Tourism
Industry in East Africa which negatively impacted performance due to a
combination of external factors that were beyond Management's control.
During 2015 Total Arrivals at JKIA and Moi International Airport
recorded a drop of approximately 30% and 70% compared to 2012
Tourist Arrivals recorded a drop of approximately 30% in Year 2015 versus 2014
The tourism Industry remains confident that at least the second half
of 2016 should witness a reversal of fortunes in the Kenyan Tourism
Industry
Safari business segment positive from July 2016
Kenyan Coastal region will continue to record low occupancies although
improvement forecasted from November 2016
During Year 2016, Serena Hotels commenced the refurbishment of Nairobi
Serena and the extension of Kampala Serena

Conclusions

It was a tough period and TPS is pushing the rebound right out to Q4 2016.

Par Value:
Closing Price:           1.40
Total Shares Issued:          433063193.00
Market Capitalization:        606,288,470
EPS:             -2.53
PE:                 -0.553

Revenue 3.147m vs. –
Cost of sales [1.924m] vs. –
Gross profit 1.223m vs. –
Operating expenses [13.291m] vs. [2.528m] +425.752%
Share option charge [2.720m] vs. –
Share of results of associate 0.088m vs. 1.075m -91.814%
Operating loss [14.700m] vs. [1.425m] -931.579%
Loss before taxation [14.700m] vs. [1.425m] -931.579%
Loss for the period from continuing operations [14.785m] vs. [1.425m] -937.544%
Loss from the period from discontinued operations [19.400m] vs. –
Loss for the period [34.185m] vs. [1.415m] -2298.737%
EPS (US Cents) [3.58] vs. [0.40] -795.000%
Total assets 4.479m vs. 19.298m -76.790%
Total equity attributable to the equity holders if the parent 3.601m
vs. 18.921m -80.968%
Cash and cash equivalents at the end of the period 1.450m vs. 3.132m -53.704%

“For the period under review we are reporting losses of $34.2m (of
which $19.4 million relates to discontinued operations). As
shareholders will recognise, the company was greatly impacted by the
sector dynamics as well as significant bad debts within its operating
subsidiaries,” said Atlas chairman Ian Mann in statement, adding that
the market changes had forced the firm to change tack.

During the year ending June 30, 2015, Atlas reported a net loss of Sh1
billion, mainly attributed to cancelled service contracts for oil and
gas companies operating in Kenya.

In 2014, it reported a net loss of Sh147 million that was followed by
a Sh609 million loss for the half year period to December 2014.

The oil and gas logistics firm had earlier said that it faced
“increasing creditor pressure” resulting from failure by some of its
clients to settle debts and as a result decided to close its Kenyan
operations and focus all of the company’s administrative functions and
activities in Ethiopia.

Last November, Atlas announced plans to acquire East Africa Packaging
Holdings Limited, a company set up to build a bottle manufacturing
facility 45 kilometres north of Addis Ababa, Ethiopia.

Atlas owned three subsidiaries in Kenya - Ardan Logistics Kenya
Limited, Ardan (Medical Services) Limited and Ardan (Civil
Engineering).

Mr Mann however said he still exuded optimism of a turnaround
especially with its Ethiopia Business.

Nairobi All Share Bloomberg +0.59% 2016
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg -1.25% 2016
http://j.mp/ajuMHJ

Every Listed Share can be interrogated here
https://rich.co.ke/rcdata/nsestocks.php