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The East African : February 3rd 2014
52 FEBRUARY 1-7,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,856.15 -4.62% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 1,923.57 -33.84% USE All Share Index Uganda 1,473.59 -2.15% RSE All Share Index Rwanda 139.05 0.10% JSE All Share Index South Africa 45,072.91 -2.98% NGSE All Share Index Nigeria - 40,584.58 -3.18% What does Al-Futtaim see in ca≥-deale≥ CMC? T o most analysts in Nairobi, Al-Futtaim, the Dubai based investment group, is paying too much for its proposed takeover of CMC Motors — what with CMC having lost key franchises that generate about 30 per cent of revenues, not to mention the brand erosion the company suffered on account of shareholder wrangles. CMC, the Nairobi Securities Exchange-listed car dealer, has already lost the Land Rover Defender, Jaguar and Range Rover brands. CMC’s remaining brands are Suzuki, Maruti, Nissan Diesel, Iveco, Eicher, Ford and Volkswagen. Indeed, CMC’s market share has over the past three years been dropping. Data from the Kenya motor industry shows CMC’s stake in the new vehicle category dipped to 7.4 per cent last year from 9.8 per cent in 2012 and 12 per cent in 2011. So why is Al-Futtaim spend- ing $100 million on CMC in light of the franchise loss and falling market share? On Friday, the Dubai investor dispatched three top executives to Nairobi: Len Hunt (president automotive), Marwan Shehadeh (group director corporate development) and Yasser Alvi ture sales. For one, Al-Futtaim is the biggest secondhand car dealer in the United Arab Emirates, and also runs the country’s biggest car leasing business. Again, the company operates one of the UAE’s largest car rental businesses as well as a tractor assembly plant in Asia and is an exclusive dealer of such brands as Volvo and Honda motorcycles in the UAE. The company also sells motor spare and lubricants. But it is the used-car dealer- ship and the pre-financing arrangement that could prove a complete game-changer for the local industry. Consider this: In 2012, Kenya Al-Futtaim Group corporate development group director Marwan Shehadeh (right), automobile president Len Hunt (centre) and investment and acquisitions general manager Yasser Alvi talking about their interest in CMC Motors. Picture: PHOEBE OKALL (general manager investments & acquisitions). The three were bullish on the prospects of CMC despite the rough terrain it has traversed over the past three years. To understand the value proposition as the Dubai company sees it, a look at the inherent strengths of the two parties is necessary. Despite the franchise loss, CMC still has established clients and a dealership network that spans Kenya, Uganda and Tanzania. In effect, acquiring CMC gives Al-Futtaim access to the three markets. It is this network and clientele that AlFuttaim thinks will drive fu- registered about 80,000 vehicles of which only 15,000 were new, with the rest being used cars imported mainly from Japan, the UAE and the UK. This market presents a huge opportunity for the Dubai-based outfit, especially considering the price differential between locally assembled cars and used cars. Marrying Al-Futtaim’s wide product range and CMC’s rich network, one sees the potential. But in the short term, Al-Futtaim will need to put in money and luckily it is cash-rich. T≥ansCentu≥y to ≥educe o≥ inc≥ease stake in RVR? INVESTMENT FIRM TransCentury Ltd has stirred up the market. The problem is, no one actually knows what the firm is up to. On Thursday, the Nairobi Securities Exchange- listed company issued a cautionary notice saying that it will exercise an option that will result in a change in its 34 per cent shareholding in Rift Valley Railways (RVR). The company did not disclose whether it in- tended to reduce or increase its stake, but it is likely that either TransCentury or one of the other shareholders in RVR will be exercising preemptive rights in the railway company. Market watchers think the deal involves TransCentury and Citadel, which owns 51 per cent of RVR. Analysts at Standard Investment Bank say they believe Citadel would not easily give up control over what it considers a critical transport corridor, and think it likely that it would have pro- The firm said it will exercise an option that will result in a change in its 34pc shareholding in RVR vided TransCentury with a put option so that it could eventually consolidate its position. RVR is in line with Citadel’s strategy of buying stable, low-margin businesses. Further, they say TransCentury is stretched on the funding side as it starts to shift towards the minerals, oil and gas sector, which could give further credence to an asset sale. An exit by TransCentury would not be a sur- prise. The company’s strategy is increasingly leaning towards investment in its power and engineering divisions. Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories ID p≥oject on t≥ack UGANDA is under pressure to fast-track the issuance of identity cards to its citizens. Last week, the country’s Cabinet approved Ush138 billion ($55.6 million) in supplementary funding to scale up the project to cover more than half of the population before the end of 2015. The increased investment could also be informed by the added pressure Rwanda and Kenya — following the agreement between the three countries to have their citizens cross their common borders using IDs. Co≥≥ection In the article: Tullow Ugan- da’s chairman exits after trying stay, in last week’s edition, we incorrectly stated that Mr Graham Martin had left his position as General Counsel and become a non-executive director of Tullow Oil Uganda. It has since been brought to our attention that Mr Martin delegated the position of General Counsel but continues as Executive Director and Company Secretary.
January 27th 2014
February 10th 2014