The Latest Daily PodCast can be found here on the Front Page of the site


Macro Thoughts

Last Monday I wrote

''The most important currency to watch right now is the USDCNH [and]
It could slice through 7.00 like a hot knife through Butter.

The Offshore USDCNH market popped through 7 on Monday [sending a
shiver through Global markets - The Markets emit signals and the
Signal the market was emitting was that there was a precise
correlation coefficient between a weaker Yuan and weaker S&P 500
Futures] and closed on Friday at 7.0985. On Thursday, China set its
yuan fixing [onshore] weaker than 7 for the first time since 2008.

President Trump finally pulled the Trigger on citing China as a
currency Manipulator.

''We're in that bizarro world where you can be a currency manipulator
if you fail to manipulate your currency'' tweeted @TonyFratto

It is clear that the Chinese have been keeping the Renminbi [Yuan]
artificially high.

George Magnus writing in Bloomberg's Quint

China allowing the yuan to slide below 7 to the dollar is a watershed
moment for currency markets that's symbolically equivalent to the U.S.
and other countries abandoning the gold standard in the interwar
period, or the collapse of the postwar Bretton Woods system of fixed
exchange rates four decades ago. The implications for the global
economy are equally significant. The world’s major currencies aren’t
tethered in the way they were in
those periods, but gold and Bretton Woods both served as anchors for
the world’s monetary system, and their demise reflected the economic
and political disarray of their times. Today, the yuan is semi-pegged
to the U.S. dollar. The arrangement serves as an anchor for China’s
financial system, now the world’s largest by assets; for many currency
systems in Asia and around the world; and for U.S.-China economic and
financial relations. If that mainstay ruptures, it’s liable to set off
chain reactions inside and outside China. That’s why the loosening in
currency policy by the People’s Bank of China this week, while it may
seem unremarkable for most people, is an important development.

Late last Year, the View was

“This is all on Xi’s shoulders,” said Trey McArver, co-founder of
Beijing-based research firm Trivium China.
“Xi has personally said that he would handle relations with the United
States and at this point, he has failed. Those relations are spiraling
out of control.” [Bloomberg]

What is clear is that Xi Jinping has repelled the US Advance and this
past week's Yuan Price Action was a message delivered with finesse and
subtlety and whose import cannot be ignored.

Given that neither President Trump nor Xi Jinping have it seems any
desire to back up, the risks are skewed as follows. We should expect
more volatility in the Feedback Loop that was characterised by
Bloomberg Businessweek thus

The chaos cycle -Powell speaks -Trump tweets -China reacts -Markets freak

The Point is this the Yuan is now the Catalyst and China has signalled
it will be a shock absorber. Xi Jinping was also signalling he had
control of the Console. The direction of Travel for the Chinese
currency is therefore lower. The Yen and the Swiss franc considered
safe havens in troubled times have been in demand and Sterling was
described as ''drinking at the last chance saloon'' and closed on
Friday with its its nose just in front of 1.2000.  Gold [safe haven]
crossed $1,500.00 for the first time since April 2013. G7 Sovereign
Bonds tilted further and deeper into negative Territory. So this Bid
for Safe-haven assets has intensified and a weaker Yuan will only
intensify this impulse as it courses through the veins of the Foreign
Exchange markets. China has exerted the Power of Pull over a vast
swathe of the World over the last two decades. We can call it the the
China, Asia, EM and Frontier markets Feedback loop. This Feedback Loop
has been largely a positive one for the last two decades. With the
Yuan now in retreat [and in a precise response to Trump], this will
surely exert serious downside pressure on those countries in the
Feedback Loop.

To wit, Emerging market stocks closed down for 11 days running , 12
being an all-time record which was narrowly missed. The Purest Proxy
for the  China, Asia, EM and Frontier markets Feedback loop Phenomenon
is the South African Rand aka the ZAR. The rand was down 0.4% to
15.1121 per dollar by 12:05 p.m. in Johannesburg, its weakest level on
a closing basis since Sept. 2018. The rand is also the most volatile
currency in the world, with the one-week implied volatility climbing a
fourth day. The Rand is at risk of a further asymmetric downside move.

Home Thoughts

Buddhism was born under a giant fig tree, which, today, grows at the
center of the remote and unbeautiful town of Bodh Gaya, in India’s
destitute northeastern state of Bihar. The tree is about three crooked
blocks from the Be Happy Café and a few minutes’ walk from a used book
store where a middle-aged Krishna devotee from Iowa, named James,
works, reselling old paperbacks by Hesse and Murakami.
The sacred Bodhi Tree is surrounded by a wall and guarded by police.

Ah Sun-flower! weary of time,
Who countest the steps of the Sun:
Seeking after that sweet golden clime
Where the travellers journey is done.

Where the Youth pined away with desire,
And the pale Virgin shrouded in snow:
Arise from their graves and aspire,
Where my Sun-flower wishes to go.

I walked on the banks of the tincan banana dock and sat down under the
huge shade of a Southern Pacific locomotive to look at the sunset over
the box house hills and cry.
Jack Kerouac sat beside me on a busted rusty iron pole, companion, we
thought the same thoughts of the soul, bleak and blue and sad-eyed,
surrounded by the gnarled steel roots of trees of machinery.
The oily water on the river mirrored the red sky, sun sank on top of
final Frisco peaks, no fish in that stream, no hermit in those mounts,
just ourselves rheumy-eyed and hung-over like old bums on the
riverbank, tired and wily.
Look at the Sunflower, he said, there was a dead gray shadow against
the sky, big as a man, sitting dry on top of a pile of ancient
sawdust—
—I rushed up enchanted—it was my first sunflower, memories of Blake—my
visions—Harlem
and Hells of the Eastern rivers, bridges clanking Joes Greasy
Sandwiches, dead baby carriages, black treadless tires forgotten and
unretreaded, the poem of the riverbank, condoms & pots, steel knives,
nothing stainless, only the dank muck and the razor-sharp artifacts
passing into the past—
and the gray Sunflower poised against the sunset, crackly bleak and
dusty with the smut and smog and smoke of olden locomotives in its
eye—
corolla of bleary spikes pushed down and broken like a battered crown,
seeds fallen out of its face, soon-to-be-toothless mouth of sunny air,
sunrays obliterated on its hairy head like a dried wire spiderweb,
leaves stuck out like arms out of the stem, gestures from the sawdust
root, broke pieces of plaster fallen out of the black twigs, a dead
fly in its ear,
Unholy battered old thing you were, my sunflower O my soul, I loved you then!
The grime was no man’s grime but death and human locomotives,
all that dress of dust, that veil of darkened railroad skin, that smog
of cheek, that eyelid of black mis’ry, that sooty hand or phallus or
protuberance of artificial worse-than-dirt—industrial—modern—all that
civilization spotting your crazy golden crown—
and those blear thoughts of death and dusty loveless eyes and ends and
withered roots below, in the home-pile of sand and sawdust, rubber
dollar bills, skin of machinery, the guts and innards of the weeping
coughing car, the empty lonely tincans with their rusty tongues alack,
what more could I name, the smoked ashes of some cock cigar, the cunts
of wheelbarrows and the milky breasts of cars, wornout asses out of
chairs & sphincters of dynamos—all these
entangled in your mummied roots—and you there standing before me in
the sunset, all your glory in your form!
A perfect beauty of a sunflower! a perfect excellent lovely sunflower
existence! a sweet natural eye to the new hip moon, woke up alive and
excited grasping in the sunset shadow sunrise golden monthly breeze!
How many flies buzzed round you innocent of your grime, while you
cursed the heavens of the railroad and your flower soul?
Poor dead flower? when did you forget you were a flower? when did you
look at your skin and decide you were an impotent dirty old
locomotive? the ghost of a locomotive? the specter and shade of a once
powerful mad American locomotive?
You were never no locomotive, Sunflower, you were a sunflower!
And you Locomotive, you are a locomotive, forget me not!
So I grabbed up the skeleton thick sunflower and stuck it at my side
like a scepter,
and deliver my sermon to my soul, and Jack’s soul too, and anyone who’ll listen,
—We’re not our skin of grime, we’re not dread bleak dusty imageless
locomotives, we’re golden sunflowers inside, blessed by our own seed &
hairy naked accomplishment-bodies growing into mad black formal
sunflowers in the sunset, spied on by our own eyes under the shadow of
the mad locomotive riverbank sunset Frisco hilly tincan evening
sitdown vision.

Berkeley, 1955

Political Reflections

Zarif, in interview remarks cited by Qatar-based Al Jazeera, said the
Strait “is narrow, it will become less safe as foreign (navy) vessels
increase their presence in it”.
“The region has become a matchbox ready to ignite because America and
its allies are flooding it with weapons,” he said.

Hong Kong airport cancelled all remaining flights on Monday afternoon
after thousands of protesters flooded the main terminal of the
international aviation hub in the worst blow to the territory’s
economy since anti-government protests began more two months ago.
The move, in which protesters chanted slogans and criticised police
for violence during rallies on Sunday, came as authorities in Beijing
said the demonstrators had begun displaying “early signs of
terrorism”.
The anti-government protests, sparked by a proposed bill that would
allow extradition of suspects to mainland China for the first time,
have plunged Hong Kong into its worst political crisis since the UK
handed the former colony over to China in 1997.
Protesters turned up in force at the airport on Monday after police
fired tear gas into two subway stations and fired non-lethal rounds
directly at civilians from short range on Sunday night following
clashes with demonstrators.
Hong Kong International Airport said in a statement on Monday
afternoon that check-in services for all flights had been suspended
and all other flights had been cancelled for the rest of the day.

The Political Technologists Vladislav Surkov In his spare time Surkov
writes essays on conceptual art and lyrics for rock groups. He’s an
aficionado of gangsta rap: there’s a picture of Tupac on his desk,
next to the picture of Putin Putin’s chief ideologue and grey
cardinal, Vladislav Surkov, the ‘Kremlin demiurge’. Known also as the
‘puppetmaster who privatised the Russian political system’, Surkov is
the real genius of the Putin era. Surkov is the real genius of the
Putin era. Understand him and you understand not only contemporary
Russia but a new type of power politics, a breed of authoritarianism
far subtler than the 20th-century strains.

''a ceaseless shapeshifting which is unstoppable because its undefinable''

They repeat the great mantras of the era: The president is the
president of “stability,” the antithesis to the era of “confusion and
twilight” in the 1990s. “Stability”—the word is repeated again and
again in a myriad seemingly irrelevant contexts until it echoes and
tolls like a great bell and seems to mean everything good; anyone who
opposes the president is an enemy of the great God of “stability.”
“Effective manager,” a term quarried from Western corporate speak, is
transmuted into a term to venerate the president as the most
“effective manager” of all. “Effective” becomes the raison d’être for
everything: Stalin was an “effective manager” who had to make
sacrifices for the sake of being “effective.” The words trickle into
the streets: “Our relationship is not effective” lovers tell each
other when they break up. “Effective,” “stability”: No one can quite
define what they actually mean, and as the city transforms and surges,
everyone senses things are the very opposite of stable, and certainly
nothing is “effective,” but the way Surkov and his puppets use them
the words have taken on a life of their own and act like falling axes
over anyone who is in any way disloyal.

He is right, traditional media has been disrupted and the insurgents
can broadcast live and over the top. From feeding the hot-house
conspiracy frenzy on line (‘’a constant state of destabilised
perception’’), timely and judicious doses of Wikileaks leaks which
drained Hillary’s bona fides and her turn-out and motivated Trump’s,
what we have witnessed is something remarkable and noteworthy.

Surkov is more than just a political operator. He is an aesthete who
pens essays on modern art, an aficionado of gangsta rap who keeps a
photo of Tupac on his desk next to that of the president.
Surkov likes to invoke the new postmodern texts just translated into
Russian, the breakdown of grand narratives, the impossibility of
truth, how everything is only “simulacrum” and “simulacra” ... and
then in the next moment he says how he despises relativism and loves
conservatism, before quoting Allen Ginsberg’s “Sunflower Sutra,” in
English and by heart.

In the primitive wars of the 19th and 20th centuries it was common for
just two sides to fight. Two countries. Two groups of allies. Now four
coalitions collided. Not two against two, or three against one. No.
All against all.

In contemporary Russia, unlike the old USSR or present-day North
Korea, the stage is constantly changing: the country is a dictatorship
in the morning, a democracy at lunch, an oligarchy by suppertime,
while, backstage, oil companies are expropriated, journalists killed,
billions siphoned away. Surkov is at the centre of the show,
sponsoring nationalist skinheads one moment, backing human rights
groups the next. It's a strategy of power based on keeping any
opposition there may be constantly confused, a ceaseless
shape-shifting that is unstoppable because it's indefinable. — Peter
Pomerantsev, in "Putin's Rasputin", London Review of Books issue of 20
October 2011[8]

“Clearly, they are manipulating their currency from a trade point of
view,” Navarro told CNBC’s “Closing Bell ” on Friday. “They’re going
to, and we’re going to take strong action against them.”
Earlier this week, China allowed its currency to drop against the
dollar to a key level unseen since 2008. The Trump administration
later labeled Beijing a “currency manipulator. ” Navarro said China
was taking actions to deal with the effects of tariffs.
“China has devalued its currency by over 10% with the express purpose
of neutralizing tariffs, full stop,” Navarro said.
Last week, President Donald Trump abruptly ended a cease-fire with
China by announcing 10% tariffs on $300 billion worth of Chinese
goods, claiming China failed to buy U.S. farm goods as it promised.
The trade war continued to boil over this week as China announced it
would stop buying American agricultural products in retaliation for
Trump’s surprise tariffs threat.
Navarro said that every American farmer will be “made whole” and “will
not be hurt by China.” He also insisted that China, not U.S.
consumers, will suffer financially because of tariffs.
“China will bear virtually the entire burden of that through the
currency manipulation and by slashing prices,” he said. “China is the
one that suffers far more harm than what might be inflicted on us.”
Over the next couple of months, Navarro said White House officials
plan to have Chinese negotiators back to the U.S. for trade talks.

International Markets

Euro 1.1189
Dollar Index 97.611
Japan Yen 105.32
Swiss Franc 0.9716
Pound 1.2049
Aussie 0.6758
India Rupee 71.1665
South Korea Won 1219.555
Brazil Real 3.9849
Egypt Pound 16.59
South Africa Rand 15.2932

Commodities

Emerging Markets

Wikipedia has an article on: halcyon days and it reads thus,

From Latin Alcyone, daughter of Aeolus and wife of Ceyx. When her
husband died in a shipwreck, Alcyone threw herself into the sea
whereupon the gods transformed them both into halcyon birds
(kingfishers). When Alcyone made her nest on the beach, waves
threatened to destroy it. Aeolus restrained his winds and kept them
calm during seven days in each year, so she could lay her eggs. These
became known as the “halcyon days,” when storms do not occur. Today,
the term is used to denote a past period that is being remembered for
being happy and/or successfuL

Frontier Markets

Sub Saharan Africa

The overarching and interestingly at a time when the Rest of the World
seems to be embarked on a process of Fragmentation and Globalisation
coming apart at the seams, Africa is proudly moving counter-trend with
the African Continental Free Trade Area (AfCTA).
Of course, the Devil is in the Details of the execution and such
things can simply fall apart in a deluge of Non-Tariff Barriers but it
is a Silver Bullet particularly if we allow the free circulation of
our People who are natural Entrepreneurs

HARARE, Zimbabwe — Everywhere he looked, President Emmerson D.
Mnangagwa could see his own face.
To battle his cold, he sipped a hot drink from a mug adorned with his
own head shot. To his left, an aide wore a green shirt covered with
the same image. To his right was a large photograph of the president
as a young man. His state portrait hung from the opposite wall.
Since seizing power in a 2017 coup from his onetime mentor, Robert G.
Mugabe, Mr. Mnangagwa has gradually imposed himself on Zimbabwe — here
in Mr. Mugabe’s former offices in downtown Harare, as well as on the
country at large.
Though the new president is marketed as a clean break from Mr. Mugabe
and 37 years of autocratic rule and economic mismanagement, Mr.
Mnangagwa’s opponents now fear he is more dangerous than his
predecessor.
The number of government critics charged with “subverting a
constitutional government,” a form of treason, during Mr. Mnangagwa’s
21 months at the helm already outstrips the figure during Mr. Mugabe’s
37 years in office, according to a coalition of 22 Zimbabwean rights
watchdogs.
In between coughs and sneezes, Mr. Mnangagwa dismissed criticism of
his human rights record and highlighted his reforms.
“In every society, oppositions will make accusations,” he said in a
rare interview. “You need to deal with facts.”
Mr. Mnangagwa has already removed some constraints on foreign
investors and white farmers who lost land under Mr. Mugabe.
He has pledged to replace Mugabe-era legislation that obstructs press
freedom and the right to protest and to set up an international
inquiry into abuses by his own security forces.
“We are now in a serious movement of economic reforms and political
reforms,” Mr. Mnangagwa said.
But the difficulty for Mr. Mnangagwa is that many Zimbabweans see
little new about the 77-year-old’s presidency. Before he turned on Mr.
Mugabe, Mr. Mnangagwa was the former leader’s longtime enforcer and
later his deputy.
A guerrilla fighter during the liberation struggle against white rule,
Mr. Mnangagwa accompanied his predecessor to the negotiations that led
to the creation of Zimbabwe in 1980.
He later served as minister for state security, overseeing the
domestic intelligence service before becoming justice minister,
defense minister and finally vice president. He helped carry out much
of the legislation that he now promises to rescind.
And while Mr. Mnangagwa tends to turn to the military to keep the
population in check, in a departure from Mr. Mugabe’s reliance on the
police and informal militias, his critics say the result is the same:
a repressive government that has a dangerously low tolerance for
dissent.
“The current regime is worse than Robert Mugabe on all fronts,” said
Obert Masaraure, the head of a teachers’ union who said he had twice
been abducted and tortured by military officers since the start of the
year, before being handed over both times to the police.
“Under Robert Mugabe, I was never abducted for engaging in trade
unionism,” Mr. Masaraure added. “Under Robert Mugabe, I was never
thrown in a maximum-security prison for 16 days.”
Mr. Mnangagwa and his party won presidential and parliamentary
elections last July. But an international election monitoring team,
jointly led by the National Democratic Institute and the International
Republican Institute, two American democracy watchdogs, found that the
polls were not free and fair.
According to the team’s report, Mr. Mnangagwa’s party may have
allocated food aid and agricultural supplies in exchange for political
support in the run-up to the elections.
Mr. Mnangagwa defended the election, which he noted was peaceful, and
insisted there was no bribery during his campaign.
“We don’t give to a person because he is a particular cadre of a
particular party,” he said. “A person is given support because that
family or household is in need of food.”
Traditional leaders, who are bound by the Constitution to remain
politically independent, corralled their villagers into voting for Mr.
Mnangagwa, the election monitoring team’s report said. It also said
there were irregularities in the tabulation of the final vote.
“The elections failed to make the mark,” said Johnnie Carson, a former
United States assistant secretary of state for African affairs, who
led the delegation of election monitors. “All of these things weigh in
and create an environment that can shape the outcome of an election
long before an election day.”
The election was also immediately followed by the killing of six
protesters during a military crackdown on demonstrations against
suspected polling irregularities.
In January, the military was again deployed to dispel protests against
a fuel price hike. During the days that followed, 17 people were
killed, 16 raped, 26 abducted and more than 900 arrested, according to
the coalition of Zimbabwean rights watchdogs.
“We see him as a very insecure president,” said Roselyn Hanzi,
executive director of Zimbabwe Lawyers for Human Rights. “He’s
paranoid.”
Mr. Mnangagwa sat in his office recently for an interview next to a
shelf stocked with books by Xi Jinping, the Chinese president.
China is a major stakeholder in the Zimbabwean economy. And the 2017
coup led by Zimbabwe’s army chief at the time, Constantino Chiwenga,
and Mr. Mnangagwa came days after Mr. Chiwenga returned from a visit
to China where he met his Chinese counterpart and the Chinese defense
minister.
The president also presents himself as a corruption fighter. His
tourism minister had been arrested that week on graft charges, the
first senior casualty of a new anticorruption commission that Mr.
Mnangagwa founded in July.
He said the military was deployed in August and in January only
because the police were overwhelmed by the scale of the disturbances,
presenting his approach as the only sane response.
“My brother, I don’t know what you would have done,” he said. “We have
to protect and bring law and order in the country.”
Mr. Mnangagwa has been traveling extensively throughout Africa,
promoting and developing plans for economic reform. He wants to be
seen as a modernizer, and he portrays Zimbabwe as once again “open for
business.”
He opened a dry port for Zimbabwean trade in Namibia. He has reduced
the paperwork needed to open companies, and he loudly seeks foreign
investment in the mining, tourism, agricultural and textile
industries.
He is also calling on the United States to end a raft of American
sanctions that President Trump recently extended for another year.
Though most of the measures are targeted only at particular
individuals, such as Mr. Mnangagwa, and at certain government-owned
firms, they are a potential obstacle to loans from the World Bank and
the International Monetary Fund.
Zimbabwe exported goods worth more than $75 million to the United
States in 2018, making the United States one of its largest trading
partners. The American government says it is the largest donor of aid
to the country.
Zimbabwe is suffering from vast shortages of fuel, bank notes, water
and electricity. Drivers typically wait three hours for gasoline, and
civil servants line up all morning to receive part of their salaries
in cash.
Half of the capital Harare receives running water only once a week,
and electricity blackouts last up to 18 hours a day in many areas.
An inflation rate of more than 175 percent has put some food and
medicine beyond the reach of middle-class Zimbabweans. Shoppers
emerging from a Harare supermarket complained of a sevenfold rise in
the price of bread since this time last year.
“We can’t afford to buy groceries,” said Jonathan Tiripano, a
46-year-old window-frame manufacturer who said he had gone without
breakfast. His family had stopped buying meat, bread and milk and was
surviving mostly on vegetables and ground maize, he added. “We can’t
cope.”
People are suffering, Mr. Mnangagwa acknowledged, but he said he
expected that with time, the situation would ease.
“The economy is going to be fixed through a process,” he said. “These
things cannot be done overnight.”
Mr. Mnangagwa acknowledged that sanctions were only one cause of
Zimbabwe’s escalating economic crisis. It has been exacerbated by
decades of corruption, mismanagement and a recent austerity program
enforced by Mr. Mnangagwa’s finance minister, Mthuli Ncube, a former
economist at the University of Cambridge.
The austerity program has created Zimbabwe’s first budget surplus in
years, which would allow the government to pay off some of its debts,
which might in turn unlock more international loans. An electricity
deal was being signed with a South African energy supplier, and he was
negotiating with China to finance the renovation of the Zimbabwean
water system.
“I have said always we should not bury our heads in sand and say, Ah,
because America has put sanctions on us, the E.U. has put sanctions on
us, so we’re going to cry. No. We are saying: With the resources that
we have, let us apply ourselves using our resources and resuscitate
our economy. And this is what we’re doing.”
But outside his office, in the serpentine lines that define today’s
Harare, few believed him.
''Mugabe was better than this guy,” said Patrick Muza, a 33-year-old
minibus driver who had been standing in line for two hours for fuel,
and still had at least an hour to go.
The most recent price hike had raised the cost of gas by another 15
percent, making his business increasingly unprofitable.
“During the coup, we were happy,” Mr. Muza said. “But we didn’t
realize what was to come.”

There is a straw and camels back moment but predicting that moment is
always a Fools Errand.

Overview
Rwanda's economic growth prospects are stronger than peers', in our
view, supported by robust investment levels of about 25% of GDP.
Despite planned fiscal expansion, we expect government debt levels
will remain moderate and debt-servicing costs will remain relatively
low.
We are therefore raising our long-term sovereign credit rating on
Rwanda to 'B+' from 'B', and assigning a stable outlook.

It’s also wider than the spread for Brazil, which has a non-investment
grade rating from Moody’s, S&P Global Ratings and Fitch Ratings. The
risk premium has climbed since mid-July, when the government announced
it would increase borrowing to support Eskom.

Kenya

Par Value:                  1/-
Closing Price:           19.00
Total Shares Issued:          182174108.00
Market Capitalization:        3,461,308,052
EPS:             0.69
PE:                 27.536

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

HY Revenues 2.704836b vs. 2.684910b +0.742%
HY Profit before exchange difference, interest, depreciation, results
of associates and taxation 124.170m vs. 0.833m +14,806.363%
HY Exchange profit/ [loss] on foreign currency loans [18.358m] vs.
25.125m -173.067%
HY Net interest cost [84.905m] vs. [61.385m] +38.316%
HY Depreciation, on property, plant and equipment [233.976m] vs.
[194.763m] +20.134%
HY Loss before income tax [215.312m] vs. [231.413m] -6.958%
HY Loss after taxation [160.687m] vs. [168.610m] +4.699%
Loss per share [0.97] vs. [1.12] +13.393%
Cash and cash equivalents at end of period [346.668m] vs. [239.306m] -44.864%

Company Commentary

During the first half of the year 2019, market sentiment has continued
to indicate a consistent return of confidence from the foreign leisure
market segment to Kenya; and in deed across the wider East African
region.
The Company's (TPS Eastern Africa PLC/the Group) diversified portfolio
in East Africa recorded growth in the corporate and domestic leisure
segments, particularly during the second quarter of 2019, once
insecurity issues in Kenya receded.
Given the seasonal nature of the tourism industry in East Africa,
financial performance for the first half of 2019 should not be taken
as a basis for extrapolating a full year's forecast.
For the six-months to 30 June 2019, TPS Eastern Africa PLC recorded a
'Profit before exchange difference, interest, depreciation, results of
associates and taxation' of KShs. 124.2 million; as compared to KShs.
0.8 million for the same period last year.
For the period under review, the Group continued to effectively manage
its business strategy, including controlling operating costs in
increasingly challenging markets. Foreign exchange loans coupled with
adverse foreign exchange rates, resulted in exchange losses on debt,
as well as relatively higher net interest charges, over the same
period last year.
Depreciation increased due to the capitalisation of phase one of the
Nairobi Serena redevelopment project.
The final phase of the redevelopment of Nairobi Serena Hotel (NSH) is
substantially completed and expected to deliver once again incremental
revenue going forward.
In line with the Board's vision to reposition the Serena City Hotels
brand, NSH's progress to full completion by Q4 2019 bodes well for
future market share growth, similar to the encouraging strategic
business developments achieved through 2017 at the refurbished Kampala
Serena Hotel and the Dar es Salaam Serena Hotel.
The Group will continue to successfully progress the planned
refurbishment of its property portfolio, maintain appropriate Human
Resource Management practices and promote sound Corporate Social
Responsibility (CSR) programs that complement its long-term business
strategy. Serena Hotels CSR programs remain fully aligned to achieving
the Sustainable Development Goals (SDGs) set out by the United Nations
Development Programme. Indeed, our sustainable business practices
continue not only to complement, but indeed to enhance eco-tourism,
environmental conservation, reafforestation, education, public health;
and essentially community development across Eastern Africa.
Important feedback from our suppliers of business in traditional and
new international source markets, has been encouraging with increasing
interest in selling destination East Africa.
This backdrop will provide the impetus to optimize portfolio
performance in 2019 to the extent possible. Consequently, current
forecasts indicate a satisfactory outlook during the second half of
2019 for Serena Kenya, Serena Tanzania and Serena Uganda.
The Board and Management express their appreciation to the governments
of the East African Region for facilitating the continuous resource
allocation required to improve the business environment for
destination East Africa.
In line with the Company's policy, the Board of Directors does not
recommend the declaration of an interim dividend.

Conclusions

They always exhibit an H2 Skew.
Nairobi Serena should bounce H2 and earnings going forward.
Its a valuable but undervalued Franchise.

MY memories of the Serena start in Mombasa years back when the
managing director Mahmoud Jan Mohamed was the manager. I was then a
teenager and remember losing my heart to a girl, who would beat me at
table tennis, in a bikini. That table tennis Table is still there. The
Serena brand has always been sprinkled with a fairy dust and reminds
me of happy joyful carefree halcyon days of youth. That brand equity
was appreciated last Thursday at the Grosvenor House where The Serena
Hotels won the Best Hospitality, Travel and Tourism in Africa award at
the African Business Awards.

And now, Serena is clearly staking out a much more forward and
offensive position across the region and as you know by now, I sense
the Eastern sea board of Africa is at a tipping Point [The oil and gas
refers but just as important is the late cycle arrival of the
information century which is the entry ticket for Africa to join in
the c21st That Arrival of the Information Century is very grass roots
because anyone with an Internet enabled mobile phone has an entry
ticket and therefore, I see the expansion of the brand as timely and
riding a rising tide. The brand is established. Its got breadth, its
not a mom and pop operation. Sure, lots of folks are coming for Serena
lunch but their longevity, their ability to navigate has been proven
and their DNA make them a formidable competitor.