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Satchu's Rich Wrap-Up
Wednesday 18th of October 2017

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Macro Thoughts

Home Thoughts

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Feb 2012 @FairmontMtKenya Mount Kenya Safari Club in Nanyuki (founded 1959) became a mecca for the international jet set.

We were not going as far as that; only two days’ journey in the
ox-cart to a bit of El Dorado my father had been fortunate enough to
buy in the bar of the Norfolk Hotel from a man wearing an Old Etonian
tie,” so says Elspeth Huxley’s The Flame Trees of Thika which is a
beautiful and lyrical book.

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Kirkuk redux was a bloodless offensive. Here's why
Law & Politics

The Battle of Kirkuk lasted less than 24 hours. In a lightning – and
mostly bloodless – offensive, the Iraqi Security Forces (ISF) retook
control of the North Oil Co. and North Gas Co. headquarters, the K1
military base, the Bai Hassan oil field, and two domes of the Kirkuk
oil field on Monday.

Baghdad did what it had previously said it would do: reestablish
federal authority over the key strategic assets of Kirkuk province,
which had been controlled by the Kurdish Peshmerga since the 2014
Islamic State offensive.

But why did it take only 24 hours? There are two main reasons. One,
the eternal, internal split between the Kurdistan Regional Government
(KRG), led by wily tribal schemer Masoud Barzani, and the Patriotic
Union of Kurdistan (PUK) party of the late Jalal Talabani; and two, a
brokered deal for Baghdad’s advance. The Kurdish Peshmerga described
the takeover as “a flagrant declaration of war” and vowed that Baghdad
will pay a “heavy price.” That’s largely rhetorical.

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It is time to jettison the Myanmar fairytale FT
Law & Politics

Myanmar today presents a more worrying picture than at almost any time
since the darkest days of military dictatorship. The world's attention
has rightly been focused on the Rohingya crisis and the plight of
hundreds of thousands of men, women, and children fleeing in one of
the biggest refugee exoduses since the second world war.

The worst may not be over. Humanitarian needs are far from met and
discussions have barely begun on possible refugee return or the
investigation of human rights abuses.

There is a chance that western countries may respond with targeted
sanctions. Even if formal sanctions are not imposed, international
investor interest and tourism numbers will doubtless plummet. This is
at a time when local business confidence is weak and banks unstable.
Millions of the poorest people in Asia may soon face an unbearably
bleak future.

Any economic downturn will directly threaten Myanmar’s already fragile
peace process. The country is home to approximately 20 “ethnic armed
organisations”, the largest of which is fielding more than 20,000
troops, and hundreds of local militia.

Fierce fighting has erupted at times during the past few years and
there are nearly 500,000 internally displaced people along the Thai
and Chinese borders. Economic growth alone will not lead to peace, but
without the pull of an inclusive and fast-developing economy, the
peace process will have no steam.

At the same time, almost no one is considering the long view. Just
take northern Rakhine, site of today’s violence and tomorrow’s
possible refugee return: what will it be in 10 or 15 years? A stop on
a new super-highway between China and India? Or will climate change
sink it into the sea?

Even an experienced government aided by super technocrats would
struggle to manage what Myanmar is having to manage, let alone plan
for the future.

The outside world is absolutely right to prioritise the crisis at
hand. It is equally important, though, to jettison once and for all
the Myanmar fairytale, and to appreciate that working in Myanmar means
working with a near-failed state; to redouble efforts to boost the
country’s own abilities, in particular through investments in health
and education; and, perhaps most of all, to help inject fresh thinking
about an exciting future for all.

Otherwise, the current crisis will be just the first of many to come.

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UBS Wealth Stands Pat on 20% Chance of North Korea War
Law & Politics

UBS Group AG’s wealth management unit got its in-house risk analysts
to help gauge the threat of war on the Korean peninsula, mapped out
the impact on its investments, and then decided to do nothing.

Even as North Korea’s deputy ambassador to the United Nations said a
nuclear war “may break out any moment,” the money manager dismissed it
as “saber rattling, drum beating.”

“It’s just two dogs barking at each other,” said Kelvin Tay, regional
chief investment officer at UBS Wealth Management in Singapore,
referring to the escalating rhetoric between North Korea’s leader and
U.S. President Donald Trump. “Do you seriously think Kim Jong Un is
going to fire a missile” at one of his enemies?

UBS Wealth Management is ascribing a 20 percent chance that war will
break out, Tay, who helps oversee 2.2 trillion Swiss francs ($2.2
trillion) at the unit, said in an interview, while adding that even
that figure is conservatively high.

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BREAKING: Britain's inflation rate climbs to 3%, the fastest pace since April 2012 @Brexit
International Trade

Consumer prices rose 3 percent from a year earlier, the fastest pace
since April 2012 and up from 2.9 percent in August, the Office for
National Statistics said on Tuesday in London.

The increase intensifies the squeeze on British households and may
strengthen the case for Bank of England policy makers to raise
interest rates for the first time in over a decade next month.

Inflation is a full percentage point above their 2 percent target,
meaning BOE Governor Mark Carney will have to write a public letter of
explanation should prices accelerate further this month.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1741
Dollar Index 93.56
Japan Yen 112.64
Swiss Franc 0.9794
Pound 1.3160
Aussie 0.7825
India Rupee 65.065
South Korea Won 1130.85
Brazil Real 3.1578
Egypt Pound 17.6453
South Africa Rand 13.4453

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Goldman sees geopolitics haunting oil again as uncertainty swirls @business

The oil market is grappling with intensifying geopolitical risks as
uncertainty swirls over the impact of tensions surrounding nations
such as Iraq, Iran and the U.S., according to Goldman Sachs Group Inc.

While Iraq’s government is clashing with Kurdish forces in the north
of the OPEC nation, raising the prospect of output disruptions in the
region, both sides have an incentive to keep oil flowing due to low
production costs and “high revenue” available per barrel, according to
the bank. And though the U.S. has hardened its stance against Iran,
there’s still “high uncertainty” over whether it’ll reimpose sanctions
curbing the Middle East country’s crude supply.

Oil jumped almost 3 percent over the past two sessions as weeks of
tensions following a Kurdish referendum on independence from Iraq on
Sept. 25 flared into open conflict in the oil-rich Kirkuk region.
Still, the rally fizzled on Tuesday, with prices trading little
changed, as two fields pumping a combined 275,000 barrels a day were
shut amid the violence.

“The limited market response so far is therefore consistent with the
high uncertainty on potential production disruptions, with larger
moves only likely to occur should new disruptions actually occur,”
Goldman analysts including Damien Courvalin wrote in a Oct. 17
research note.

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Statement from Dr Roselyn #Akombe who's left the @IEBCKenya. Tells @bbcworldservice she's fled for her life to US/elex won't be credible. @nkemifejika
Kenyan Economy


I expect a Political Guillotine on 26th October and the Nature of
Guillotines is that they are bloody and messy.

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KenGenKenya reports FY 2017 PAT +34.317% Earnings #KenGenfullYearresults
Kenyan Economy

Par Value:                  2.50/-
Closing Price:           8.75
Total Shares Issued:          6243873667.00
Market Capitalization:        54,633,894,586
EPS:             1.37
PE:               6.386

FY Electricity revenue 29.369b vs. 29.544b -0.592%
FY Steam revenue 5.189b vs. 6.856b -24.314%
FY Other income 882m vs. 2.210b -60.090%
FY Revenue 35.440b vs. 38.610b
FY Operating expenses [9.691b] vs. [8.948b] +8.304%
FY Steam costs [2.796b] vs. [3.167b] -11.715%
FY EBITDA 22.953b vs. 26.495b -13.369%
FY EBIT 13.709b vs. 16.271b -15.746%
FY Compensating tax – vs. [2.431b]
FY Finance costs [3.417b] vs. [3.132b] +9.100%
FY Interest income 1.242b vs. 556m +123.381%
FY Profit before tax 11.534b vs. 11.264b +2.397%
FY Profit for the year 9.057b vs. 6.743b +34.317%
Basic EPS 4.12 vs. 3.07 +34.202%
Diluted EPS 1.37 vs. 1.08 +26.852%
Total assets 377.197b vs. 367.249b +2.709%
Cash and cash equivalents as at 30th June 7.831b vs. 6.756b +15.912%
No dividend

KenGen announced FY 17 results this morning, reporting an EPS of KES
1.37, up 27% y/y
EPS grew mainly on account of a lower effective tax ( 21% vs. 40% the
year earlier) as well as reduced depreciation and amortization
expenses (-10% y/y)
Profit before tax grew a marginal 2% y/y to KES 11.5bn
Electricity revenue was flat at KES 35.4bn due to reduced energy
revenue following geothermal power evacuation constraints and hydro
challenges over drought
Steam revenue declined 24% y/y on account of lack of income from
commercial drilling services
OpEx inflated 8% y/y attributable to investment in capacity expansion.
Interest income more than doubled to KES 1.2bn following investment of
funds from the Rights Issue
Finance costs rose 9% y/y to KES 3.4bn
Profit after tax settled at KES 9.1bn (+34% y/y).


Some will be disappointed with the dividend miss. However Shareholders
are up +50% YTD, which more than compensates.
These were strong earnings.

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Nairobi All Share Bloomberg +18.07% 2017
Kenyan Economy

August 28th        173.47 (2017 High)
October 17th      157.44

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Nairobi ^NSE20 Bloomberg +12.92% 2017
Kenyan Economy

August 15th        4,114.01 (2017 High)
October 17th      3,597.85

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by Aly Khan Satchu (www.rich.co.ke)
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October 2017

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